Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City Metro Manila

EIGHTEENTH CONGRESS,
First Regular Session

HOUSE BILL NO. 3239

Introduced by JANICE Z. SALIMBANGON

EXPLANATORY NOTE

This bill seeks for the creation of a special economic zone in the 4" District of Cebu
Province. A special economic zone is a responsive tool in eradicating poverty. It is a venue
where people can do business, constituents get employed, government income is generated and
progress and development will be achieved. The existence of a special economic zone will
undoubtedly redound to the benefit of the people in areas where they operate. Aside from giving
the people the opportunity to earn a living, a special economic zone is a sound revenue
generating measure for local government.

Of the entire province of Cebu, it is the 4" district that is best suited for the
establishment of the said special economic zone. The district has all the economic factors and
qualifications required of a viable economic zone. It has the widest stretch of flat land, a very
rich land resource. It has a seaport in almost all of its component municipalities and city. It is
likewise capable of producing literate, educated, and skilled workers.

The creation of a special economic development zone in the district is likewise a tool
to decongest the growing population in the highly urbanized areas of Cebu. Highly urbanized
areas in Cebu have already experienced severe and heavy traffic due to the migration of people
in order to secure a better employment. With the creation of a special economic zone in the 4"
District of Cebu, professionals and other qualified individuals living within the area and its
neighboring municipalities would not anymore seek for employment elsewhere.

In view of the foregoing considerations, the immediate consideration and approval of
this bill is highly recommended.

Wee,
JANICE Z. SCLIMBANGON


Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City, Metro Manila

EIGHTEENTH CONGRESS,
First Regular Session

2 3239
HOUSE BILL NO.

Introduced by JANICE Z. SALIMBANGON

AN ACT
ESTABLISHING THE SPECIAL ECONOMIC ZONE IN THE
4™ DISTRICT OF CEBU PROVINCE, CREATING FOR THIS PURPOSE.
THE 4™ DISTRICT SPECIAL ECONOMIC ZONE AUTHORITY,
APPROPRIATING FUNDS THEREFOR,
AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in the
Congress assembled:

CHAPTER I
GENERAL PROVISIONS

SECTION 1. Short Title- This act shall be known as the “Cebu 4" District Special
Economic Zone Act.”

SEC. 2. Declaration of Policy.- It is declared the policy of the state to encourage,
promote, and accelerate the sound and balanced industrial, economic and social development
of the country. The establishment of special economic zones shall attract legitimate and
productive foreign investments in strategic locations in the country. It shall generate
employment and increase productivity and individual, as well as family incomes thereby
enhancing the quality of life of the Filipino people.

CHAPTER II
GOVERNING STRUCTURES

SEC. 3. Creation of the Cebu 4% District Special Economic Zone Authority.-There is
hereby created a body corporate to be known as the “Cebu 4" District Special Economic Zone
Authority” hereinafter referred to as the CEZA, which shall manage and operate the Cebu 4"
District Ecozone, in accordance with the provisions of this act. This corporate franchise shall
expire in fifty (50) years counted from the first year after the effectivity of this act. Unless
otherwise extended by Congress. It shall be organized within one hundred eighty (180) days
after the effectivity of this Act.


SEC. 4. Capitalization- The CEZA shall have an authorized capital stock of Two
Billion (2,000,000,000) no par shares with a minimum issue of Ten Pesos (P10.00) each. The
majority shares of which shall be subscribed and paid for by the National Government and the
Local Government Units (LGUs) embracing the Cebu 4" District Ecozone. The Board of
Directions of the CEZA may, with the written concurrence of the Secretary of Finance, sell
shares, representing not more than forty per centum (40%) of the capital stock of the CEZA to
the general public under such policy as the Board and the Secretary of Finance may determine.
The National Government and the LGUs shall in no case own less than sixty per centum (60%)
of the total issued and outstanding capital of the CEZA.

The amount necessary to subscribe and pay for the shares of the National Government
to the capital stock of the CEZA shall be included in the Annual General Appropriations Act.
For LGUs, the funds shall be taken from their internal revenue allotment and other local funds.

SEC. 5. Principal Office of the CEZA.- the CEZA shall maintain its principal at
Medellin, Cebu, but it may establish branches within the Philippines as may be necessary for
the proper conduct of its business.

SEC. 6. Powers and Functions of the CEZA.- The CEZA shall have the following
powers and Functions:

a) To operate, administer, manage and develop the Cebu 4" District Ecozone according
to the principles and provisions set forth in this Act.

db)

To register, regulate and supervise the enterprises in the Cebu 4" District Ecozone in
an efficient and decentralized manner, subject to existing laws.

©) To coordinate with LGUs and exercise general provision over the development plans,
activities and operations of the Cebu 4th District Ecozone.

d) To regulate and undertake the establishment, construction, operation and maintenance
of public utilities, other services, and infrastructure in the Cebu 4" District Ecozone
such as, but not limited to heat, light and power, shipping, barging. Stevedoring, cargo
handling, hauling, warehousing, storage of cargo, port services or concessions, piers,
wharves, bulkheads, bulk terminals, mooring areas, storage areas, roads,
telecommunications transport, bridges, terminals, conveyors, water supply and storage,
sewerage, drainage, airport operations in coordination with the Civil Aviation Authority
of the Philippines (CAAP), and such other services or concessions or infrastructure
necessary or incidental to the accomplishment of the objectives of this Act;

©)

To construct, acquire, own, lease, operate and maintain on its own or through contracts,
franchise, license, 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), or joint venture, adequate facilities and infrastructure required or needed for
the operation and development of the Cebu 4" District Ecozone, in coordination with
appropriate national and local government authorities and in conformity with applicable
laws thereon;


f) To approve plans, programs and projects of the Cebu 4" District Ecozone to be
submitted to the Regional Development Council for inclusion and inputs to the overall
regional development plan;

g) To operate on its own, either directly or through license to others, tourism-related
activities, including games, amusements, recreational and sports facilities;

h) To raise or borrow, within the limitations provided by law, and subject to the approval
or opinion of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), as the case
may be, adequate and necessary funds from local or foreign sources, to finance its
projects and programs under this Act and for tis purpose, to issue bonds, promissory
notes and other forms of securities, and to secure the same by a guarantee, pledge,
mortgage, deed of trust or an assignment of all or part of its property or asset;

i) To protect, preserve, maintain and develop the forests, beaches, coral and coral reefs,
and maintain ecological balance within the Cebu 4" District Ecozone. Notwithstanding
the Authority of the CEZA to create rules for such purpose, the rules and regulations of
the Department of Environment and Natural Resources (DENR) and other government
agencies involved in the above functions shall be implemented by the CEZA;

j) To create, operate and/or contract to operate such functional units or offices of the
CEZA as it may deem necessary;

k) To adopt, alter and use a corporate seal, contract, lease, buy, acquire, own or otherwise
dispose of personal and/or real property of whatever nature; sue and be sued; and
otherwise carry out its functions and duties as provided for in this Act;

}) To issue certificate of origin for products manufactured or processed in the Cebu 4"
District Ecozone in accordance with prevailing rules of origin and the pertinent
regulations of the Philippine Economic Zone Authority (PEZA), the Department of
Trade and Industry (DT!) and/or the Department of Finance (DOF);

m) To establish one-stop shops for the issuance of all necessary permits, clearances,
licenses, and other similar certifications to conduct such activities intended to improve
the ease of doing business within the Cebu 4" District Ecozone, in coordination with
government agencies having jurisdiction over activities therein. Provided, that all
government agencies are directed to provide and extend utmost and full cooperation to
the Cebu 4" District Ecozone in the establishment of such one-stop shops;

n)

To provide internal security to the Cebu 4" District Ecozone in coordination with the
National government and affected LGU. For this purpose, the CEZA shall provide and
establish its own internal security and firefighting forces or hire others to provide the
same. Military forces sent by the national government for the purpose of defense shall
not interfere in the internal affairs of the Cebu 4" District Ecozone and expenditures
for these military forces shall be borne by the National Government;

0) To exercise such powers as may be essential. Necessary or incidental to the powers
granted to it hereunder, as well as those that shall enable it to carry out, implement and
accomplish the purpose, objectives and policies of this Act; and


p) To issue rules and regulations consistent with the provisions of this Act as may be
necessary to accomplish and implement the purpose, objectives and policies provided
herein.

SEC. 7. Board of Directors of the CEZA.- The powers of the CEZA shall be vested in
and exercised by a Board of Directors, hereinafter referred to as the Board, which shall be
composed of the following:

a) The chairperson, who shall at the same time be the administrator of the CEZA
b) A Vice-Chairperson, who shall come from among the members of the Board;
©) Members consisting of,
1) The Governor or his/her representative from the Provincial Government of
Cebu;
2) The Mayors of the Municipalities covered by the ecozone;
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 in the Cebu 4 District
Ecozone.

The representative from the Provincial Government and the mayors of the
municipalities covered by the ecozone shall serve as ex-officio members of the Board, whose
term in the Board corresponds to their term as elected officials.

The chairperson and members of the Board, except the ex-officio members, shall be
appointed by the President of the Philippines to serve for a term of six (6) years. Unless sooner
separated from service due to death, voluntary resignation or removal for cause. In case of
death, resignation or removal for cause, the replacement shall serve only the unexpired portion
of the term.

The chairperson of the Board must be a Filipino citizen, of good moral 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 working experience preferably in the field of management or public
administration

The members of the Board shall receive per diem at rates to be determined by the
Department of Budget and Management (DBM) in accordance with existing rules and
regulations: Provided, however, that the total per diem collected each month shall exceed the
equivalent per diem for four (4) meetings. Unless and until the President of the Philippines has
fixed a higher per diem for the members of the Board, such per diem shall not be more than ten
thousand pesos (P10,000.00) for every Board meeting.

SEC. 8. Powers and Duties of the Chairperson-Administrator~ the Chairperson-
Administration shall have the following powers and duties:
a) To direct and manage the affairs of the CEZA in accordance with the policies of the
Board;

b) To establish the internal organization of the CEZA under such conditions that the
Board may prescribe;


©

To submit an annual budget and necessary supplemental budget to the Board for its
approval;

4) To submit within thirty (30) days after the close of each fiscal year an annual report
to the Board and such other reports as may be required;

e)

To submit to the Board for its approval, policies, systems, procedures, rules and
regulations that are essential to the operation of the Cebu 4" District Ecozone;

f) To recommend to the Board the renumeration and other emoluments of its officers
and employees in accordance with existing laws on compensation and position
classification;

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 Cebu 4" District Ecozone; and

h

To perform such other duties as may be assigned to him by the Board or which are
necessary or incidental to his office.

SEC. 9. Organization and Personnel.- the Board of Directors of the CEZA shall
provide for its organization and staff. The Board shall appoint and fix the enumeration and
other emoluments of its offices and employees in accordance with existing laws on
compensation and position classification. The Board shall have exclusive and final authority to
promote, transfer, assign, reassign or remove officers of the CEZA, any provision of existing
law to the contrary notwithstanding. The chairperson-administrator may carry out removal of
such officers and employees.

The officers and employees of the CEZA, including all members of the Board, shall not
engage directly or indirectly in partisan activities nor take part in any election, except to vote.

No officer or employee of the CEZA, subject to civil service laws and regulations, shall
be removed or suspended except for cause, as provided by law.

SEC. 10. Legal Counsel The CEZA shall have its own internal legal counsel under
the supervision of the government corporate counsel. When the exigencies of its businesses
and operations demand it, the CEZA may engage the services of an outside counsel either on a
case to case or on a fixed retainer basis.

SEC. 11. Legal Office.-The CEZA shall have and maintain its own internal legal office,
appropriate in number under the supervision of the Government Corporate Counsel. When the
exigencies of its businesses and operations demand, the CEZA may engage the services of an
outside counsel either on a case to case or a fixed retainer basis.

CHAPTER III
CREATION OF THE ECONOMIC ZONE,

SEC. 12. Creation of the Cebu #* District Special Economic Zone.- in accordance
with the foregoing declared policy and subject to the concurrence of the concemed local
government units of the 4" District of Cebu affected by the Zone, there is hereby established a


Special Economic Zone, hereinafter referred to as the Cebu 4" District Ecozone. The Cebu 4"
District Ecozone shall cover the entire area of Curva and Tindog in the Municipality of
Medellin Province of Cebu. The specific metes and bounds of the Cebu 4" District Ecozone
shall be more particularly defined in a presidential proclamation that shall be issued for this
purpose; Provided, that the lands embraced therein shall be public lands and contiguous to one

another.

SEC. 14. Governing Principles - The Cebu 4" District Special Economic Zone shall
be managed and operated by the Cebu 4" District Special Economic Zone Authority hereinafter
referred to as the CEZA, created under Section 3 of this Act, under the following principles:

a) Within the framework and limitations of the Constitution and applicable provisions

b)

c

d

©

)

of the Local Government Code, the Cebu 4" District Ecozone shall be developed
into and operated as a decentralized, self reliant and self-sustaining industrial,
commercial/trading, agro-industrial, tourist, banking, financial and investment
center with suitable residential areas.

The Cebu 4" District Ecozone shall be provided with transportation,
telecommunications and other facilities needed to attract legitimate and productive
investments, generate linkage industries and employment opportunities for the
people of Cebu and its neighboring towns and cities;

The Cebu 4" District Ecozone may establish a mutually beneficial economic
relations with other entities or enterprises within the country or, subject to the
administrative guidance of the Department of Foreign Affairs (DFA), the PEZA,
and/or the Department of Trade and Industry (DTI), with foreign entities or
enterprises;

Foreign citizens and companies owned by non-Filipinos in whatever proportion
may set up enterprises in the Cebu 4" District Ecozone, either by themselves or in
a joint venture with Filipinos in any sector of industry, international trade and
commerce within the Cebu 4" District Ecozone;

‘The Cebu 4" District Ecozone shall be managed and operated as a separate customs
territory thereby ensuring the free flow or movement of goods and capital within,
into and out of its territory, and shall likewise provide incentives such as tax and
duty-free importations of raw materials, capital and equipment to registered
enterprises located therein. However, exportation or removal of goods from the
territory of the Cebu 4" District Ecozone to the other parts of the Philippine territory
shall be subject to customs duties and taxes under the Customs and Tariff Code and
other relevant tax laws of the Philippines;

The areas comprising the Cebu 4" District Ecozone may be expanded or reduced
when necessary. For this purpose, the CEZA, in consultation with the LGUs, shall
have the power to acquire either by purchase, negotiation or condemnation
proceedings, any private land within or adjacent to the Cebu 4" District Ecozone
for the following purpose: (1) consolidation of lands for zone development, (2)
acquisition of right of way to the Cebu 4" District Ecozone; and (3) the protection
of watershed areas and natural assets valuable to the prosperity of the Cebu 4"
District Ecozone;


2) Goods manufactured by a Cebu 4% District Ecozone enterprise shall be made
available for immediate retail sale in the domestic market, subject to the payment
of corresponding taxes on raw materials and other regulations that may be
formulated by the CEZA together with the PEZA, the Bureau of Customs (BOC)
and the DTI. However, in order to protect domestic industries, a negative list of
industries shall be drawn up and regularly updated by PEZA enterprises engaged in
industries included in such negative list shall not be liable to sell their products
locally;

h) The defense of the Cebu 4" District Ecozone and the security of its perimeter fence
shall be the responsibility of the national government in coordination with the
CEZA and the LGUs.

CHAPTER 1V
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS,

SEC. 14. Investors Visa, — Any foreign national who invests an amount of two hundred
thousand US dollars (US$200,000.00), either in cash and/or equipment, in a registered
enterprise shall be entitled to an investor's visa: Provided, That the foreign national has the
following qualifications:

a) Must be at least 18 years of age;

b) Must not have been convicted by final judgement of a crime involving moral

turpitude;

c) Must not be afflicted with any loathsome, dangerous or contagious disease;

d) Must not have been institutionalized for any mental disorder or disability; and

¢) Must establish by verifiable and credible evidence his financial capability and

capacity.

Asa holder of investor’s visa, an alien shall be entitled to reside in the Philippines while
his investment subsists. For this purpose, the alien should submit an annual report, in the form
duly prescribed for the purpose, to prove that he has maintained his investment in the country.
Should said alien withdraw his investments from the Philippines, then the investor’s visa to
said alien shall automatically expire and/or be withdrawn.

The authority to issue visas and work permits shall remain with the Bureau of
Immigration (BI) and the Department of Labor and Employment (DOLE), respectively:
Provided, that the BI and the DOLE shall implement measures to expedite the processing of
such visas and permits for workers in the Cebu 4" District Ecozone and coordinate with the
CEZA for the purpose of improving ease of doing business.

Sec. 15. Fiscal Incentives. — Registered enterprises operating within the Cebu 4"
District Ecozone may be entitled to the existing pertinent fiscal incentives as provided for under
Republic Act No. 7916, as amended by Republic Act No. 8748, also known as the Special
Economic Zone Act of 1995, or those provided under Executive Order No. 226, as amended,
otherwise known as the Omnibus Investment Code of 1987; and/or those that may be further
granted as the need and necessity arises by the appropriate government department, agency or
office: Provided, That in the administration, implementation and monitoring of incentives, the
CEZA may impose its own conditions not otherwise prohibited by this ACT: Provided, further,
‘That the CEZA shall not be limited to the conditions provided under Republic Act No. 7916,
Republic Act No. 8748 or any other related issuance, rule or regulation.


Sec. 16. Imposition of Tax Rate of Five Percent (5%) on Gross Income Earned — No
taxes, local and national, shall be imposed on business establishments operating within the
Cebu 4" District Ecozone, including income, withholding, donor's, percentage, and
documentary stamp taxes. In lieu thereof, and subject to Section 18 of this Act, said business
establishments shall pay five percent (5%) final tax on their gross income earned: Provided,
That the proceeds from such final tax shall be shared by instrumentalities of the government in
accordance with the following percentages:

a) Three per centum (3%) to the National Government;
b) Two per centum (2%) shall be directly remitted by the business establishments to
the treasurer's office of the municipality or city where the enterprise is located.

The CEZA shall have the authority to grant income tax holiday and net operating loss
carry Over subject to Section 18 of this Act and conditions as it may have imposed pursuant to
Section 15 of this act.

SEC. 17. Administration, Implementation and Monitoring of Incentives. — For the
proper administration, implementation, and monitoring of tax incentives provided under this
law, the following are herein mandated:

(a) The CEZA shall be responsible for the administration, management, enforcement
and implementation of the incentives granted to registered enterprises: Provided,
that the BOC shall set up and establish a customs controlled area outside the gate
of the Cebu 4" District Ecozone to facilitate payment of taxes on goods entering the
Philippine customs territory: Provided further, That notwithstanding the limitations
of this Act, the CEZA and BOC may coordinate and jointly implement measures on
border protection; and

(b) In the interest of enhancing transparency in the management and accounting of tax
incentives in the Cebu 4 District Ecozone, the CEZA shall comply with the
provisions of Republic Act No. 10708, otherwise known as the “The Tax Incentives
Management and Transparency Act (TIMTA)” and its implementing rules and
regulations.

SEC. 18. Duration of Incentives. — Fiscal incentives under this Act shall be terminated
after a cumulative period of twenty (20) years from date of registration or start of commercial
operation, whichever is applicable, except that it could be extended with regard to industries
deemed indispensable to national development and interest.

SEC. 19. Sequential Availment of Incentives. — Registered enterprises may enjoy the
income tax holiday (ITH) granted by the CEZA prior to the availment of the five percent (5%)
final tax on gross income earned incentive: Provided, That in the event a registered enterprise
elects to avail of the final tax incentive, such registered enterprise shall be barred from availing
the ITH incentive.

Registered enterprises, if eligible, may register for incentives with other investment
promotion agencies: Provided, That registered enterprises electing to avail of the incentives of
other promotion agencies shall not be able to avail of the incentives of the Cebu 4" District
Ecozone until the expiration of the incentives with such other investment promotion agencies.


SEC. 20. Extension of Period of Availment. — In the event that a registered enterprise
has suffered cessation or suspension of operations due to force majeure, which has impaired its
viability or profitability, the CEZA may extend the period of validity of the incentives extended
to such registered enterprise.

SEC. 21. Banking Rules and Regulations. — Banks and financial institutions to be
established in the Cebu 4" District Ecozone shall be under the supervision of the Bangko
Sentral ng Pilipinas (BSP) and subject to existing banking laws, rules and regulations.

SEC. 22. Remittances. ~ In the case of foreign investments, a duly registered entity or
enterprise within the Cebu 4" District Ecozone shall have the right to remit earnings from the
investment in the currency in which the investment was originally made and at the exchange
rate prevailing at the time of remittance, subject to the provisions of Republic Act No. 7653,
otherwise known as “The New Central Bank Act”.

CHAPTER V
NATIONAL GOVERNMENT AND OTHER ENTITIES.

SEC. 23. Supervision and Control. ~ For the purposes of policy direction and
coordination, the CEZA shall be under the direct control and supervision of the Office of the
President of the Philippines.

SEC. 24. Regional Development Council. — The CEZA shall determine the
development goals for the Cebu 4" District Ecozone within the framework of national
development plans, policies and goals. The Chairperson & administrative shall, upon approval
by the Board, submit the Cebu 4" District Ecozone plans, programs and projects to the Regional
Development Council for inclusion and inputs to the overall regional development plan.

SEC. 25. Relationship with Local Government Units. — Except as herein provided, the
LGUs comprising the Cebu 4" District Ecozone shall retain their basic autonomy and identity.
The Municipality of Medellin, Cebu shall operate and function in accordance with the
framework of the 1987 Constitution, Local Government Code of 1991, and Republic Act No.
7898, as amended by Republic Act No. 10349, applicable provisions of the Local Government
Code, and this Act.

In case of any conflict between the CEZA and the LGUs and the National Government
‘on matters affecting the Cebu 4" District Ecozone, other than national defense and security
matters, the decision of the CEZA shall prevail.

SEC. 26. Interpretation/Construction. The powers, authorities and functions that are
vested in the CEZA are intended to establish national self-sufficiency and self-reliance in the
advancement of and protection of the national integrity, enhancement of national security,
decentralization of governmental functions and authority, and promote an efficient and
effective working relationship among the CEZA, the National Government and the LGUs. Any
interpretation of this Act shall consider such intentions. In the event of conflict of interpretation
and provided the intentions cannot be harmonized, the provisions of this Act shall be construed
in favor of an interpretation that would tend to protect national security.


SEC. 27. Audit.- The Commission on Audit shall appoint a full — time auditor in the
CEZA or may assign such number of personnel as may be necessary in the performance of
their functions

CHAPTER VI
MISCELLANEOUS

SEC. 28. Implementing Rules and Regulations. ~ The DTI, DOF and the National
Economic Development Authority (NEDA) shall formulate the implementing rules and
regulations of the Act within ninety (90) days after its approval. Such rules and regulations
shall take effect fifteen (15) days after its publication in a newspaper of general circulation in
the Philippines.

SEC. 29. Applicability Clause. — Insofar as these are consistent with the provisions of
this Act, the provisions of Sections 30 to 41 of Republic Act No. 7916, otherwise known as
“The Special Economic Zone Act of 1995”, as amended, shall likewise apply to the Cebu 4"
District Ecozone,

SEC. 30. Separability Clause. ~ All laws, executive orders or issuances or any part
thereof, which are inconsistent herewith, are hereby repealed or amended accordingly.

SEC. 31. Repealing Clause — All laws, executive orders or issuances or any part hereof,
which are inconsistent herewith, are hereby repealed or amended accordingly.

SEC. 32. Effectivity Clause. - This Act shall take effect after fifteen (15) days
following its complete publication in the Official Gazette or in two (2) newspapers of general
circulation whichever is earlier.

Approved,