I 
THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
SEP 22 P 4 .Lz 2 
OF THE PHILIPPINES 
) 
Second Regular Session 
) 
SENATE 
S. BILL NO. 21.33 
Introduced by Senator Ralph G. Recto 
EXPLANATORY NOTE 
This bill seeks the establishment of a special economic zone and free port in the Island 
Garden City of Samal, Province of Davao del Norte. 
Poverty of majority of Filipinos is an issue of national concern, which the government 
should immediately address. If government wants to minimize, if not eradicate poverty and 
hasten economic recovery of the country, it should enact measures to encourage the infusion 
of foreign investments to generate employment for our people thereby improving theit quality 
of life. 
'The establishment of an economic zone in the Island Garden City of1 Samal is 
proffered as a vehicle that would contribute to the =gent national effort of curbing poverty. 
As proposed, the zone will be a self-sustaining industrial, commercial, towist/recreational, 
banldng, investment and financial center, introducing attractive features of free port 
commerce similar to IHongkong, Singapore and Labuan, Malaysia. Customs duty and tariff- 
fiee trade of imported goods, preferential tax treatment for operators, lenient &migration 
laws and other forms of incentives characterize the business climate within the economic zone 
to encourage potential foreign investors. 
Likewise, the Samal Island Special Economic Zone and Free Port ,Authority 
(SISEZFA) is also created to oversee the operation and management of the economic zone. 
The pToposed measure once enacted into law will bolster the realitation of thelcounq's 
&earn of becoming the "Economic Miracle of Asia." 


THIRTEENTH CONGRESS OF THE REPUBLIC 
Second Regular Session 
) 
1 
) 
OF THE PHILIPPINES 
I 
SENATE 
S. BILL NO. 
Introduced by Senator Ralph G. Recto 
AN ACT 
ESTABLISHING A SPECIAL ECONOMIC ZONE AND FREE PORT IN THE 
ISLAND GARDEN CITY OF SAMAL, PROVINCE OF DAVAO DEL NORTE, 
CREATING FOR THIS PURPOSE THE SAMAL ISLAND SPECIAL ECONOMIC 
ZONE 
AND 
FREE 
PORT 
AUTHORITY, 
APPROPRIATING 
1 FUNDS 
THEREFOR AND FOR OTHER PURPOSES 
Be in enacted 6_y the Senate and House of Representatives ofthe Phil@pines in Congress assembled:.! 
SECTION 1. Short Title. - This Act shall be known as the “Samal Island Special 
Economic Zone and Free Port Act of 2005.” 
SEC. 2. Declaration ojl’ohy. - It is hereby declared the policy of the State to actively 
encourage, promote, induce and accelerate a sound and balanced industrial, economic and 
social developinent of the count~y in order to provide jobs to the people especially those in 
the rural ai‘eas, increase productivity and individual family income, and thercby &prove the 
level and quality of living condition through the establislunent, among others, of special 
economic zones in suitable and strategic locations in the countty and through measures that 
will attract legitimate and productive foreign investments. 
SEC. 3. Creation ofthe Samal Island Special Economic Zone and Free Port - In accordance 
with the foregoing declared policy, there is hereby established a Special Economic Zone and 
Free Port in the Island Garden City of Samal in the Province of Davao del Norte to !be known 
as the Samal Island Special Econoinic Zone and Free Port, hereinafter referred to as Samal 
Island ECOZONE. The specific metes and bounds of the Samal Island Special Economic 
Zone and Free Port shall be more particularly defined in a presidential proclamatiofl that s h d  
be issued for this purpose. 
SEC. 4. Goverrziig P~~m$les. - The Samal Island Special Economic Zone andl Free Port 
shall be managed and operated by the Samal Island Special Economic Zone and (Free Port 
Authority, herein referred to as the SISEZFA, to be created under Section 6 of this Act, under 
the following principles: 
a. 
Within the framework and limitations of the Constitution 2nd lapplicable 
provisions of the Local Government Code, the Samal Island ECOZONE 
shall be developed into and operated as a decentralized, self-reliant and self- 
sustaining industrial, coimercial/trading, agro-industrial, tourist, banking, 
fmancial and investment center with suitable residential areas. 
The Samal Island ECOZONE shall be povided with transportation, 
telecommu’hications and other facilities needed to attract legitimate and 
productive investments, generate linkage industries and employment 
b. 


3 
opportunities for the people of the Island Garden City of Samal md its 
neighboring towns and cities. 
The Samal Island ECOZONE may establish a mutually ibeneficial 
economic relation with other entities or enterprises within the countty or, 
subject to the administrative guidance of the Department of Foreign Affairs 
(DFA), the Pldppine Economic Zone Authority (PEZA) and/or the 
Department of Trade and Indusuy (DTI), with forcign entities or 
enterprises. 
C. 
d. 
Foreign citizens and companies owned by non-Filipinos in I whatever 
proportion may set up enterprises in the Samal Island ECOZONE, either 
by themselves or in a joint venture with Filipinos in any sector of industry, 
international trade and commerce within the Samal Island ECOZONE. 
The Samal Island ECOZONE shall be managed and operated as,'a separate 
customs territory ensuring free flow or movement of goods and capital 
within, into and exported out of Samal Island ECOZONE, as well as 
provide incentives such as tax and duty-free importations of raxvlmaterials, 
capital and equipment. However, exportation or removal of goods from the 
territoiy of the Samal Island ECOZONE to the other parts of the 
Philippine territory shall be subject to customs duties and taxes bnder the 
Customs and Tariff Code and other relevant tax laws of the Phhppines. 
The areas comprising the Samal Island ECOZONE may be expanded or 
reduced when necessary. For this purpose, the SISEZFA, in consultation 
with the local government units, shall have the power to acquire: either by 
purchase, negotiation or condemnation proceedings, any private lands 
within or adjacent to the Samal Island ECOZONE for the  following 
purposes: (1) consolidation of lands for zone development; (2) acquisition 
of right of way to the Samal Island ECOZONE; and (3) the pro,tection of 
watershed areas and natural assets valuable to the prosperity of the Sainal 
Island ECOZONE. 
Goods manufactured by a S a i d  Island ECOZONE enteipise shall be 
made available for immediate retd sale in the domestic market, subject to 
the payment of corresponding taxes on raw materials and other regulations 
that may be formulated by the STSEZFA together with the PEZA, the 
Bureau of Customs and the DTI. However, in order to protect the 
domestic industty, there shall be a negative List of industries *at will be 
drawn up and regularly updated by PEZA. Enterprises engaged in 
industries included in such negative list shall not be allowed to' sell their 
products locally. 
The defense of the Samal Island ECOZONE and the secuhy of its 
perimeter fence shall be the responsibility of the national government in 
coordination with the Samal Island ECOZONE and the local government 
units. 
e. 
f. 
€7 
11. 
SEC. 5. Imdvef. - The investors and business enterprises within the Samal Island 
Special Economic Zone and Free Port shall be entitled to the following incentives. : 
a. 
Resident Jfatm and Vka. Ally foreign investor who establishes a business 
enterprise witkin the Samal Island ECOZONE and who maintains a capital investment of not 
less than one linnhed 6fty thousand United States dollars ($150,000.00) shall be granted, 
along with his or her spouse, dependents, and unmarried children below twenty-one1 (21) years 
of age, permanent resident status within the Samal Island ECOZONE and freedomlof ingress 
and egress to and from the Samal Island ECOZONE without any need of any special 


4 
authorization from the Bueau of Immigration. Working visas renewable every two (2) yeas 
s h d  be issued to foreign executives and foreign technicians with highly specidzed sldlls, 
which no Filipitlo possesses, as certified by the Departmeiit of Labor and Employment 
(DOLE):). 
The foregoing is without prejudice to a foreigner acquiring permanent resident status 
in the Phihppines in accordance with the applicable immigration, retirement and other related 
laws. 
b. 
Fiscal Incentiues. Business establishments with1 the Samal Island 
ECOZONE shall be entitled to the existing fiscal incentives as provided for under Republic 
Act No. 7916, otherwise known as the “Special Economic Zone Act of 1995,” as amended by 
M 8147. 
C. 
Taxation. Except for real property taxes on land owned by developers, no 
taxes, local and national, shall be imposed on business establishments operating .mithm the 
Samal Island ECOZONE. In lieu thereof, five percent (50/0) of the gross income !earned by 
all business enterprises within the Samal Island ECOZONE-shall be paid and remitted as 
follows: 
(i) 
Three percent (3%) to the National Government; 
I 
(ii) 
Two petcent PE YO), which s h d  be dkectly remitted by the 
business establishments to the treasurer’s office of the City. 
All persons and service establishments in the Samal Island ECOZONE shall be 
subject to national and local taxes under the National Internal Revenue Code, as amended by 
M 8424, and the Local Government Code. 
d. 
Bankiflg Rwh mid Reguhfiom. Existing banking laws and rules/regbations of 
the Bangko Sentrd ng PiLpirzas (DSP) shall apply to banks and financial institutions to be 
established in the Samal Island ECOZONE. 
Among other pertinent regulations, these 
include those governing foreign exchange and other current account transactions (trade and 
non-trade), local and foreign borrowings, foreign investments, establishment and operation of 
local and foreign banks, foreign currency deposit units, offshore banking units and other 
financial institutions under the supervision of the BSP. 
e. 
I’m@ 
Remittance. Without prior BSP approval, after tax profits ‘and other 
earllings of foreign investments in enterprises in the Samal Island ECOZONE may be 
remitted outward in the equivalent foreign exchange through any of the banks licensed by the 
BSP in the Sand Island ECOZONE: Provided, however, That such foreign investments in said 
enterprises have been previously registered with the BSP. 
SEC. 6. Creation ofthe Sanzal Island Special Economic Zone and Free Port Author@. - There 
is hereby created a body corporate to be lmown as the “Samal Island Special Economic Zone 
and Free Port Authority” hereinafter referred to as the SISEZFA, which shall manage and 
operate the Samal Island ECOZONE, in accordance with the provision of this Act. This 
corporate franchise shall expire in fifty (50) years counted from the k s t  year! after the 
effectivity of this Act, unless othelwise extended by Congress. It shall be organized w i t h  
one hundred eighty (180) days after the effectivity of this Act. 
SEC. 7. Piincipal Oj% - The Samal Island Special Economic Zone and ]Free Port 
Authority shall maintain its principal office in Samal district but it may establish brzinches and 
agencies within the Philippines and abroad as may be necessary for the proper corrduct of its 
business. 


5 
SEC. 8. Powers and FwdonJ- o j  the Saea1 Idand Special Emnomie Zone and Fne Port 
Autbot+y, - The Samal Island Special Economic Zone and Free Port Authority s h d  have the 
following functions: 
a1 
To operate, administer, manage and develop the Samal Island 
ECOZONE according to the ptinciples and provisions set forth 
in this Act; 
b.) 
To recoinmend to the President the issuance of a proclamation to 
fuc and d e h t  the site of the Samal Ishid ECOZONE; 
To register, regulate and supervise the enterprises in the Samal 
Island ECOZONE in an efficient and decentralize? manner, 
subject to existing laws; 
To coordinate with local government units and exercise general 
supervision over the development plans, activities and' operation 
of ecozones; 
c.1 
d.) 
i.) 
To regulate and undertake the establishmeht, operation and 
maintenance of utilities, other services and infrastnicmre in the 
Samal Island ECOZONE such as but not hmited to heat, light 
and power, water supply, telecommunications, transport, toll 
roads and bridges, port services, etc. and to fur just, reasonable 
and competldve rates, fares, charges and prices thereof; ' 
To constmct, acquire, own, lease, operate and maintain pn its own 
or through contracts, franchise, licenses, bulk purchase from the 
private sector or permits under any of the schemes allowed in 
Republic Act No. 6957 (the Build-Operate-Transfer Law, as 
amended by RA 7718), or joint venture, adequate facilities and 
infrastructure required or needed for the operation and 
development of the Samal Island ECOZONE, in coordination 
with the appropriate national and local government authorities 
and in conformity with applicable laws thereon; 
To operate on its own, either directly or indkctly or ihough a 
subsidiary entity, or license to other tourism,relatedi activities, 
includmg games, amusements, recreational and aport facilities; 
Subject to the approval of the President and the Monepry Board 
of the Baiigko Sentral ng Pilipinas, upon the recommendation of 
the Department of Finance (DOF), to raise or borrow adequate 
and necessary funds from local or foreign sources to finance its 
projects and programs under this Act and for that ptupose, to 
issue bonds, promissoqr notes and other forma or secmities, and 
to secure the same by a guarantee, pledge, mortgage, deed of tmst 
or an assignment of all or part of its property or assets; ! 
To provide security for the Samal Island ECOZONE in 
coordination with the national and local g0veinments.l Military 
forces sent by the national government for the purpose bf defense 
shall not interfere in the internal affairs of the ecozone and 
expenditures for these d t a r y  forces shall be borne by the 
national government. 
For tlss purpose, the SISEZFA may 


6 
establish and maintain its secwity forces and firefighting capability 
or hire others to provide the same; 
To protect, preseme, inaintain and develop the virgin forests, 
beaches, coral and coral reefs and maintain ecological balance 
within the Samal Island ECOZONE; 
To create, operate and/or contract to operate such agencies and 
functional units or offices of the SISEZFA as it may deem 
necessary; 
To adopt, alter and use a corporate seal; make contracts, leases, 
own, or otherwise dispose of personal or real property; 8ue and be 
sued; and otheiTvise carry out its functions and duties as provided 
for in this Act; 
Ill.) 
To issue certificates of origin for products manufactured or 
processed in the Samal Island ECOZONE in accordance with the 
prevailing rules of origki, and the pertinent regulatiqns of the 
PEZA, DTI and/or the Department of Finance (DOFJ. 
To issue working visas renewable every two (2) years for foreign 
executives and foreign technicians with highly specialized skills 
whch no Filipinos possesses, as certified by the Department of 
Labor and Employment POLE); 
To report to thc Bureau of Immigration the names of the 
foreigners who have been granted permanent resident status and 
working visas within thirty (30) days after issuance of such grant; 
PJ 
To exercise such powers as maybe essential, necessiuy or 
incidental to the powers granted to it hereunder, as well as those 
that shall enable it to carry out, implement and accomplish the 
purposes, objectives and policies of this Act; and 
To issue rules and regulations consistent with the provisions of 
this Act as maybe necessary to accomplish and Lnplement the 
purpose, objectives and policies provided herein. 
9.) 
SEC. 9. Nan-Profit Charter OJthf Samal Island Special Ecommic Zone and Free Part A u h &  
- The SISEZFA shall be a non-profit institution and shall devote the use of its returns from 
capital investments as well as excess revenues from its operations for the development, 
improvement, maintenance and other related expenditares of the SISEZFA to pay its 
indebtedness and obligations and in hrtherance and effective implementation of lthe policy 
provided for in this Act. In consonance with this, the SISEZFA is hereby declared exempt 
from the payment of all taxes, duties, fees, imposts, charges, costs and seivice fees & any court 
or adininistmtive proceedings in which it may be a party. 
'The foregoing exemptions may, however, be entirely or partially lifted by thk President 
of the Philippines upon the recommendation of the Secretary of Finance, got earlie:r than five 
(5) years from the effectivity of this Act, if the President shall find the SISEZFA to be self- 
sustaining and ffiiancially capable by then to pay such taxes, custom duties, fees~and other 
charges after providing for debt service requkements of the SISEZFA and of its projected 
capital and operating expenclitwes. 
SEC. 10. Board ofDirectors ofthe Samal Island Special Ecanomic'Zom and Free PartAuthari& 
- The powers of the SISEZFA shaU be vested in and exercised by a Bowd of!Directors, 
hereinafter referxed to as the Board, which shall be composed of the following: 


7 
The Chakman, who shall at the same titne be the admmistcator of the 
SISEZFA; 
A Vice-chairman, who shall come from among the members of the Board; 
Membexs consisting oE 
(1) The Congressional Representative of the district covering the site of the 
(2) The Mayor of the Island Garden City of Samal; 
(3) One (1) representative from the domestic investors; 
(4) One (1) representative from the foreign investors; and 
(5) One (1) representative from the workers working iri the Samal Island 
Samal Island ECOZONE; 
ECOZONE. 
The Congressional representative and the City Mayor shall serve as ex-ojiiu members 
of the Board, whose term in the Board corresponds to their term as elected officials.. 
The Chairman and members of the Board, except the ex-@& members, shall be 
appointed by the President of the Pldippines to serve for a term of six (6) years, unless sooner 
removed for cause or dies or resigns voluntarily. In case of death, resignation or removal for 
cause, the replacement shall seme only the unused portion of the term. 
Except for the representative of the business and labor sectors, no person shall be 
appointed by the President of the Philippines as a member of the Board unless he is a Filipino 
citizen, of good motd character, of proven probity and integrity, and a degree-holder in any of 
the following fields: economics, business, public administration, law, management or their 
equivalent, and with at least ten (10) years relevant worldng experience preferably in the field 
of management or public administcation. 
The members of the Board shall each receive per diem at rates to be detetmined by 
the Department of Budget and Management in accordance with existing rules and regulations: 
I’mvided, bowever; That the total per diem collected each month shall not exceed the lequivalent 
per diein for four (4) meetings. Unless and until the President of the Puppines bas f=ed a 
hgher per diem for the members of the Board, such per diem shall not be more than ten 
thousand pesos (D10,OOO.OO) for every Board meeting. 
SEC. 11. Powers aad Duties afthe Cbairmarz-Ad~zinislrator. - The Chairman-Administrator 
shall have the following powers and duties: 
(4 
To direct and manage’ the affairs of the SISEZFA in accordance with the 
policies of the Board; 
To establish the internal organlation of the SISEZFA under such 
conditions that the Board may prescribe; 
To submit an annual budget and necessaiy suppletnental budget to the 
Board for its approval; 
To submit w i h  thirty (30) days after the close of each fiscal year an 
annual report to the Board and such other reports as may be required; 
To submit to the Board for its approval policies, systems, procedures, 
rules and regulations that are essential to the operation of the Samal Island 
ECOZONE, 
To create a mechanism in coordination with relevant agencies for the 
promotion of industrial peace, the protection of the environment, and the 
advancement of the quality of life in the Samal Island ECOZONE; and 
@) 
(4 
(d) 
(e) 
0 


8 
k) 
To perform such other duties as may be assigned to hun by the Board or 
which are necessaiy or incidental to lus office. 
SEC. 12. Persomi - The Board of Directors of the SISEZFA shall provide for an 
organization and staff of its officers and employees. Upon recommendation of the Chairman- 
Administrator with the approval of the Secretary of the DTI, the Board shall appoint and fm 
the remuneration and other emoluments: Provided, That the Board shall b.ave exclusive and 
final authority to promote, transfer, assign or reassign officers of the SISEZFA, anyiprovision 
of existing laws to the conutary notwithstanding: lbvided, further, that the chairman- 
administrator may carry out removal of such offices and employees. 
The officers and employees of the SISEZFA, including all members of the Board, 
shall not engage directly or indkectly in partisan activities nor take part in any election except 
to vote. 
No officer or employee of the SISEZFA, subject to the Civil Service'laws and 
regulations, shall be removed or suspended except for cause, as provided by law. 
SEC. 13. Applicability Clause. - The provisions of Sections 30 to 42 of Republic Act 
No. 7916, as amended, on leases of lands and buildings, land conversion, shipping and 
shipping register, protection of environment, termination of business, registration of business 
enterptise, one-stop shop center and on indusa-ial harmony in ecozones, shall apply to the 
Samal Island ECOZONE. 
SEC. 14. Captali~atin. The Samal Island Special Economic Zone and 'Free Port 
Authority shall have an authorized capital stock of Two Billion (l'2,000,000,000) no par shares 
with a minimum issue value of Ten Pesos (PlO.00) each. The initial amount of Tw$ Hundred 
and Fifty Million Pesos (C'250,000,0OO) shall be sourced from the national govermnent and 
from the share of the Province of Davao del Norte. 
The amount necessay to subscribe and pay for the shares of stock shall be included in 
the General Appropriations Act of the year following the enactment into law and .thereafter. 
The Board of Directors of the SISEZFA may, from time to time and with the written 
concurrence of tlie Secretary of Finance, sell shares representing not more than forty percent 
(40%) of the capital stock of SISEZFA to the general public with such annual dividend policy 
as the Board and Secretary of Finance may determine. The national governtnent shall in no 
case own less than sixty percent (60%) of the total issued and outstandjng capital stock of the 
SISEZFA. 
SEC. 15. Szpenisiun and Courdiiadon of Development Plans. - For purposes I o f  policy 
direction and coordination, the Samal Island Special Economic Zone and Free Port shall be 
under the direct control and supervision of the Office of the President. 
SEC. 16. Relationship with the Regional Developmext Council. - The Samal Island Special 
Economic Zone and Free Port Authority shall determine the development goals for18the 
Samal 
Island ECOZONE within the framework of national development plans, policies and goals. 
The Administrator shall, upon approval by the Board, submit the Sainal Island ECOZONE 
plans, programs and projects to the Regional Development Council for inclusion and inputs 
for the overall regional development plan. 
SEC. 17. ReLafionsbip mih Local Guvcrizmeru! Ut&. - Except as herein provided, the local 
government u n i t s  comprising the Samal Island ECOZONE shall retain their basic 'autonomy 
and identity. The Island Garden City of Samal s h d  operate and function in accordance with 
the Local Government Code of 1991. In case of any conflict between the SISEZFA and tlie 
Province of Davao del Norte on matters affecting the Samal Island ECOZONE bther than 
defense and security inatters, the decision of die SISEZFA shall prevd. 
' 


9 
SEC. 18. Intetpretatiot2/Const~ctzo~z. 
- The powers, authorities and functions that are 
vested in the SISEZFA are intended to establish decenealization of government' functions 
and authority and promote an efficient and effective worldug relationship between ,the Samal 
Island ECOZONE, the central government and the local government units. 
SEC. 19. Azddiag. - The Commission on Audit shall appoint a representative who 
shall be a Eull tine auditor of the SISEZFA and assign such number of personnel as may be 
necessary to assist said representative in the performance of his/her duties. The salaries and 
emoluments of the assigned auditor and personnel shall be -io accordance with pettitlent laws, 
rules and regulations. 
SEC. 20. Separabzh& Chse. - If any provisions of this Act shall be held 
unconstitutional or invalid, the other provisions not othenuise affected shall remain in full 
force and effect. 
SEC. 21. Repeahng Chse. - All laws, executive orders or issuances, or !any puts 
thereof, which are inconsistent herewith are hereby repealed and amended accordingly 
SEC. 22. EJectivig, CLazse. - This Act shall take effect upon its publication in at least 
one (1) newspaper of general circulation. 
Approved,