Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

$01

HOUSE BILL NO.

Introduced by REP. PROSPERO A. PICHAY, JR.

EXPLANATORY NOTE

Central to the government's economic agenda is economic dynamism and
competitiveness with increased investments, business opportunities, and job
generation.But with-competition_posed-by-neighboring-countries-with lower production
costs, especially in the export industry, the journey toward this goal will travel at a slow
pace.

For instance, China has been edging its Asian neighbors in enticing foreign
investors, particularly for their export industry, due to its increasing number and
magnitude of economic zones with low production costs. In so doing, it has been
displacing our own export industry thereby causing shrinking businesses and job losses.
To gain back a steady footing in the export industry, we need to bring the battle to the
countryside where there are lower costs of production and vast natural and human
capital. To more effectively achieve this, we need to establish more economic zones in
favorable geographic positions such as Surigao del Sur.

Surigao del Sur, being strategically situated along the boarder area, allowing for
easy transit of goods, having sufficient road networks and sea and air transportation
infrastructure, and being blessed with raw materials and human capital at varying levels
of skills and trades, is surely a viable location for a special economic zone.

The proposed Surigao del Sur economic, mining zone and freeport will not only
contribute to the development of their province, but also concomitantly contribute to
regional and national development as the capital, technological, and knowledge
spillovers of the ecozone will filter throughout the country thereby helping attain the
government's agenda of economic dynamism and competitiveness.

In view of the foregoing, the passage of this measure is earnestly sought.

PROSPI A. PICHAY, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 904

Introduced by: HON. PROSPERO A. PICHAY, JR.

AN ACT
ESTABLISHING THE SURIGAO DEL SUR SPECIAL ECONOMIC ZONE AND
FREEPORT IN THE MUNICIPALITIES OF CARRASCAL, CANTILAN,
MADRID, CARMEN, AND LANUZA, PROVINCE OF SURIGAO DEL SUR AND
PROVIDING FUNDS THEREFOR

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

CHAPTER |
GENERAL PROVISIONS

SECTION 1. Short Title. - This Act shall be known as the “Surigao del
Sur Special Economic Zone and Freeport Act.”

SECTION 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 Il
CREATION OF THE ECONOMIC ZONE AND FREEPORT

SECTION 3. Creation of the Surigao del Sur Special Economic Zone
and Freeport. - In accordance with the foregoing declared policy and subject to
the concurrence of the affected Local Government Units (LGUs) of Surigao del
Sur, there is hereby established a Special Economic Zone and Freeport,
hereinafter referred to as the Surigao del Sur Ecozone. The Surigao del Sur
Ecozone shall cover the entire area embraced by the Municipalities of Carrascal,


Cantilan, Carmen, and Lanuza in the Province of Surigao del Sur. The specific
metes and bounds of the Surigao del Sur 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.

SECTION 4. Creation of the Surigao del Sur Special Economic Zone
and Freeport Authority. - There is hereby created a body corporate to be
known as the “Surigao del Sur Special Economic Zone and Freeport Authority”
hereinafter referred to as the SDSEZA, which shall manage and operate the
Surigao de! Sur Ecozone, in accordance with the provisions of this Act.

It shall be organized within one hundred eighty (180) days after the
effectivity of this Act.

SECTION 5. Governing Principles. - The Surigao del Sur Special
Economic Zone and Freeport shall be managed and operated by the Surigao del
Sur Special Economic Zone and Freeport Authority hereinafter referred to as
SDSEZA, created under Section 4 of this Act, under the following principles:

a) Within the framework and limitations of the Constitution and applicable
provisions of the Local Government Code, the Surigao del Sur 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;

b)

The Surigao del Sur Ecozone shall be equipped with transportation,
telecommunications and other facilities needed to attract legitimate and
productive investments, generate linkage industries and employment
opportunities for the people of the Municipalities of Carrascal, Cantilan,
Madrid, Carmen, and Lanuza and its neighboring towns and cities;

ic)

The Surigao del Sur Ecozone may establish 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 Philippine Economic Zone Authority (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 Surigao del Sur Ecozone, either
by themselves or in a joint venture with Filipinos in any sector of industry,
international trade and commerce within the Surigao del Sur Ecozone;

e)

The Surigao del Sur 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 shall be subject to


customs duties and taxes under the Customs and Tariff Code and other
relevant tax laws of the Philippines;

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

g) Goods manufactured by a Surigao del Sur 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 SDSEZA 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 allowed to sell their products
locally;

h) The defense of the Surigao del Sur Ecozone and the security of its
perimeter fence shall be the responsibility of the national government in
coordination with the SDSEZA and the LGUs

Section 6. Capitalization. - The SDSEZA shall have an authorized
capital stock of Fifty Billion (50,000,000,000) no par shares at 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 LGUs embracing the Surigao del
Sur Special Economic Zone and Freeport. The Board of Directors of the SDSEZA
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
SDSEZA 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 SDSEZA.

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

SECTION 7. Principal Office of SDSEZA. - The SDSEZA shall maintain
its principal office in the Municipality of Cantilan, but it may establish branches
within the Philippines as may be necessary for the proper conduct of its business.

SECTION 8. Powers and Functions of the SDSEZA. - The SDSEZA


shall have the following powers and functions:

a)

b)

)

2)

dq)

e)

t+)

h)

)

To operate, administer, manage and develop the Surigao del Sur Ecozone
according to the principles and provisions set forth in this Act;

To register, regulate and supervise the enterprises in the Surigao del Sur
Ecozone in an efficient and decentralized manner, subject to existing laws;

To coordinate with LGUs and exercise general supervision over the
development plans, activities and operations of the Surigao del Sur
Ecozone;

To regulate and undertake the establishment, construction, operation and
maintenance of public utilities, other services, and infrastructure in the
Surigao del Sur Ecozone such as 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 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, franchises, licenses, bulk purchase from the private
sector or permits under any of the schemes allowed in Republic Act No.
6957, otherwise known as the Build-Operate-Transfer Law, as amended,
or joint venture, adequate facilities and infrastructure required or needed
for the operation and development of the Surigao del Sur Ecozone, in
coordination with the appropriate national and local government authorities
and in conformity with applicable laws thereon;

To approve plans, programs and projects of the Surigao del Sur Ecozone
pursuant to Chapter II, Section 3 of this Act, to be submitted to the
Regional Development Council for inclusion and inputs to the overall
regional development plan;

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

To raise or borrow, within the limitation 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 this 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 assets;


i) To protect, preserve, maintain and develop the forests, beaches, coral and
coral reefs, and maintain ecological balance within the Surigao del Sur
Ecozone. Notwithstanding the authority of the SDSEZA 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 SDSEZA;

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

kK)

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 certificates of origin for products manufactured or processed in
the Surigao del Sur Ecozone in accordance with prevailing rules of origin

and the pertinent regulations of the PEZA, the DTI 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
Surigao del Sur 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 Surigao del Sur Ecozone in the establishment of such one-stop shops:

n) To provide internal security to the Surigao del Sur Ecozone in coordination
with the National government and affected LGU. For this purpose, the
SDSEZA shall provide and establish its own internal security and
firefighting forces or hire others to provide the same. Military forces to be
assigned by the National Government for national defense purposes shall
not interfere in the internal affairs of the Surigao del Sur 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 purposes, objectives and policies
of this Act; and

)

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

SECTION 9. Board of Directors of the SDSEZAB. - The powers of the
SDSEZA 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
SDSEZA;

b) Four (4) members consisting of:

1) The Governor or a representative from the provincial Government of
Surigao del Sur;

2)

One of the mayors of the municipalities covered by the ecozone;

3)

One (1) representative from the investors’ group;

4)

One (1) representative from among the workers stationed in the
Surigao del Sur Ecozone.

The Vice-Chairperson shall be selected from among the members of the Board.

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 the 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, their replacement shall serve only the unexpired portion of the
respective terms.

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, except the ex-officio members, shall each
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 not 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.

SECTION 10. Organization and Personnel. - The Board of Directors of
the SDSEZA shall provide for its organization and staff. The Board shall appoint
and fix the remuneration and other emoluments of its officers 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 SDSEZA, any provision of existing law to the


contrary notwithstanding. The Chairperson-Administrator shall execute the
decisions of the Board.

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

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

SECTION 11. Powers and Duties of the Chairperson-Administrator. -
The Chairperson-Administrator shall have the following powers and duties:

To direct and manage the affairs of the SDSEZA in accordance with the
policies of the Board;

To establish the internal organization of the SDSEZA under such
conditions that the Board may prescribe;

b)

°)

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

d)

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 Surigao del
‘Sur Ecozone;

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

9) 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 Surigao del Sur Ecozone; and

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

SECTION 12. Legal Counsel. —- The SDSEZA 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 SDSEZA may
engage the services of an outside counsel either on a case to case or on a fixed
retainer basis.


CHAPTER Ill
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS

SECTION 13. Investor's 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 eighteen (18) years old;
b) Must not have been convicted by final judgment of a crime involving moral

turpitude;

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

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

e) Must establish by verifiable and credible evidence one’s financial capability
and capacity

As a holder of an investor's visa, an alien shall be entitled to reside in the
Philippines while the investment subsists. For this purpose, the alien should
submit an annual report, in the form duly prescribed for the purpose, to prove that
the investment in the country subsists. Should said alien withdraw the
investments from the Philippines, then the investor's visa issued 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 (Bl) and the Department of Labor and Employment (DOLE),
respectively; Provided, That the BI and the DOLE shall implement the measures
to expedite the processing of such visas and permits for workers in the Surigao
del Sur Ecozone and coordinate with the SDSEZA for the purpose of improving
ease of doing business.

SECTION 14. Fiscal Incentives. — Registered enterprises operating
within the Surigao del Sur 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 SDSEZA may impose its own conditions not
otherwise prohibited by this Act: Provided further, That the SDSEZA 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.

SECTION 15. Imposition of a Tax Rate of Five Percent (5%) on Gross
Income Earned. - No taxes, local and national, shall be imposed on business


establishments operating within the Surigao del Sur 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 a
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 SDSEZA shall have the authority to grant income tax holiday and net
operating loss carry over subject to Section 17 of this Act and conditions as it
may have imposed pursuant to Section 14 of this Act.

SECTION 16. 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 SDSEZA 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 Surigao del Sur Ecozone to
facilitate payment of taxes on goods entering the Philippine customs
territory: Provided further, That notwithstanding the limitations in this Act,
the SDSEZA 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 Surigao del Sur Ecozone, the SDSEZA
shall comply with the provisions of Republic Act No. 10708, otherwise
known as “The Tax Incentives Management and Transparency Act
(TIMTA)’ and its implementing rules and regulations.

SECTION 17. 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. The industries exempted from this provision shall be
determined by the SDSEZA, in consultation with other government agencies.

SECTION 18. Sequential Availment of Incentives. - Registered
enterprises may enjoy the income tax holiday (ITH) granted by the SDSEZA prior
to the availment of the five percent (5%) final tax on gross income earned
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 Surigao del Sur Ecozone until the expiration of the incentives
with such other investment promotion agencies.

SECTION 19. Extension of Period 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 SDSEZA may
extend the period of validity of the incentives extended to such registered
enterprise.

SECTION 20. Banking Rules and Regulations. - Banks and financial
institutions to be established in the Surigao del Sur Ecozone shall be under the
supervision of the BSP and subject to existing banking laws, rules and
regulations.

SECTION 21. Remittanc: In_the case of foreign investments, a duly
registered entity or enterprise within the Surigao del Sur 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 IV
NATIONAL GOVERNMENT AND OTHER ENTITIES.

SECTION 22. Supervision and Control. - For purposes of policy
direction and coordination, the SDSEZA shall be under the direct supervision and
control of the Office of the President of the Philippines.

SECTION 23. Development Goals for the Surigao de! Sur Ecozone. —
The SDSEZA shall determine the development goals for the Surigao del Sur
Ecozone within the framework of national development plans, policies and goals.
The Chairperson-Administrator shall, upon the approval by the Board submit the
Surigao del Sur Ecozone plans, programs and projects to the Regional
Development Council for inclusion and inputs to the overall regional development
plan.

SECTION 24, Relationship with Local Government Units. — Except as
herein provided, the LGUs comprising the Surigao del Sur Ecozone shall retain
their basic autonomy and identity. The Municipalities of Carrascal, Cantilan,
Madrid, Carmen, and Lanuza , Province of Surigao del Sur, shall operate and
function in accordance with the framework of the 1987 Constitution, Local
Government Code of 1991, and this Act.

In case of any conflict between the SDSEZA and the LGUs and the
National Government on matters affecting the Surigao del Sur Ecozone, other
than national defense and security matters, the decision of the SDSEZA shall
prevail.

10


SECTION 25. Interpretation/Construction. — The powers, authorities and
functions that are vested in the SDSEZA 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 SFSEZA, 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.

SECTION 26. Audit. - The Commission on Audit shall appoint a full-time
auditor in the SDSEZA or may assign such number of personnel as may be
necessary in the performance of their functions.

CHAPTER V
MISCELLANEOUS —___

SECTION 27. Applicability. - Insofar as these are consistent with the
provisions of this Act, the provisions of Sections 30 to 41 of Republic Act No.
7916 shall likewise apply to the Surigao del Sur Ecozone.

SECTION 28. Implementing Rules and Regulations. — The DTI, DOF
and the National Economic Development Authority (NEDA) shall formulate the
implementing rules and regulations of this 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.

SECTION 29. Separability Clause. — If any provision of this Act shall be
held unconstitutional or invalid, the other provisions not otherwise effected shall
remain in full force and effect.

SECTION 30. Repealing Clause. - All laws, executive orders or
issuances or any part thereof, which are inconsistent herewith, are hereby
repealed or amended accordingly.

SECTION 31. Effectivity. - This Act shall take effect fifteen (15) days
after its publication in the Official Gazette or in a newspaper of general
circulation.

Approved.

1