SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES: )
Second Regular Session )

HOUSE ou ay ies

Introduced by:
HON. RAMON C. NOLASCO.

EXPLANATORY NOTE

‘The Cagayan Economic Zone Authority (CEZA) is a government-owned and controlled
corporation created by Republic Act No. 7922, otherwise known as the “Cagayan Special
Economic Zone Act of 1995.” Its mandate is to manage and supervise the development of the
Cagayan Special Economic Zone and Freeport (CSEZFP).

The CSEZEFP is envisioned to be a self-sustaining Freeport that would likewise serve
neighboring markets in the Far East — China, Hong Kong, Taiwan, Japan, South Korea as well as
the Russian Far East — and as a gateway to the West Coast of North America and the South
Pacific. The developments being undertaken within CSEZFP are also aimed at maximizing its
potential as a hub for industrial, commercial, financial and investment ventures, eco-tourism,
recreational and leisure activities. All these correspond to the six areas of development
identified in the CEZA Medium Term Development formulated in the last decade, ‘These areas
are: seaport development, airport development, agro-industrial development, tourism and eco-
tourism development, community support, and information technology development.

With the development of the Cagayan North Intemational Airport in the municipality of
Lal-lo, air travel is expected to escalate both for tourism and trade purposes, particularly as the
new airport can also serve as a transit point for aircrafts operating out of Hong Kong.
Rehabilitation efforts will be undertaken in Port Irene in the municipality of Santa Ana, to
upgrade and modernize its capacity to be able to accommodate bigger and wider vessels coming
from and going to other Asian markets. These infrastructure development projects will hopefully
open the way for other sustainable economic activities.

Needless to say, the strategic location of CSEZEP as well as the tax and fiscal incentives
provided for form a highly attractive incentive package thus making the CSEZFP the ideal
choice for foreign investors. There is therefore a need not only to expand the geographical
coverage of the CSEZFP, which shall be henceforth renamed the GREATER CAGAYAN
ADVANCED SPECIAL ECONOMIC ZONE AND FREEPORT, or GCASEZEP, but also to
strengthen the administrative, management and supervisory capabilities of the Cagayan
Economic Zone Authority itself, to enable its leadership to adapt and respond to emerging
challenges, and to serve as the groundwork for more dynamic and robust economic activities that _
will also cater to the needs not only of the province of Cagayan, but of the neighboring provinces
and regions as well.

The approval of this measure is therefore earnestly sought.

Me

HON. ION G/NOLASCO,
1 Distriet/Cagayan



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SEVENTEENTH CONGRESS OF THE. )
REPUBLIC OF THE PHILIPPINES)
Second Regular Session )

HOUSE OF REPRESENTATIVES
H.B. No. _7919

Introduced by:
HON. RAMON C. NOLASCO

AN ACT
AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NO. 7922, OTHERWISE
KNOWN AS THE “CAGAYAN SPECIAL ECONOMIC ZONE ACT OF 1995”,
PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
SECTION 1. Section 3 of RA 7922 is hereby amended to read as follows:

“SEC. 3. The GREATER Cagayan ADVANCED Special Economic Zone
and Freeport. ~ In accordance with the foregoing declared policy, there is hereby
established a special economic zone and free port, to be known as the GREATER
Cagayan ADVANCED Special Economic Zone and Freeport, hereinafter known
as the Zone, which shall cover the [entire] FOLLOWING areaS [embraced by]:
(a) the ENTIRE Municipality of Santa Ana, PROVINCE OF CAGAYAN;

(b) SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF,
INCLUDING THE [and] islands of Fuga, Barit, and Mabbag. AND — THE
BARANGAYS OF PUNTA, SAN ANTONIO, MINANGA AND CENTRO,
[in] the Municipality of Aparri, Province of Cagayan;

(ce) SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF,
INCLUDING THE BARANGAYS OF BAUA, SAN JOSE, STA. CRUZ,
AND AMONITAN, THE MUNICIPALITY OF GONZAGA, PROVINCE
OF CAGAYAN;

(d)SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF,

INCLUDING THE BARANGAYS OF MAGAPIT, DAGUPAN, STA.


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MARIA AND SAN MARIANO, THE MUNICIPALITY OF LAL-LO,
PROVINCE OF CAGAY AN;

(©) SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF,
INCLUDING THE BARANGAYS OF TAGGAT NORTE, TAGGAT SUR,
CENTRO, AND MAGDALENA, THE MUNICIPALITY OF CLAVERIA,
PROVINCE OF CAGAYAN;

(f) SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF THE
MUNICIPALITIES OF BAGGAO, ALCALA, — GATTARAN,
CAMALANIUGAN, BUGUEY AND STA. TERESITA UNDER THE
FIRST CONGRESSIONAL DISTRICT, THE PROVINCE OF CAGAYAN;
AND

(g) SO MUCH AS MAY BE NECESSARY OF THAT PORTION OF THE
MUNICIPALITIES OF PIAT, RIZAL, STO. NINO, LASAM,
ALLACAPAN, BALLESTEROS, ABULUG, PAMPLONA, SANCHEZ
MIRA, STA. PRAXEDES AND CALAYAN UNDER THE SECOND
CONGRESSIONAL DISTRICT, THE PROVINCE OF CAGAYAN.

HOWEVER, THE TERRITORIAL COVERAGE OF THE

CAGAYAN ECONOMIC ZONE (CEZA) IN THE PROVINCE OF CAGAYAN

MAY BE EXPANDED BY VIRTUE OF A PROCLAMATION OF THE

PRESIDENT OF THE PHILIPPINES SUBJECT TO THE EVALUATION AND

RECOMMENDATION OF THE CEZA, BASED ON A DETAILED

FEASIBILITY AND ENGINEERING STUDY WHICH MUST CONFORM TO

THE CRITERIA ENUMERATED UNDER SEC. 6 OF REPUBLIC ACT NO.

7916, OR THE ‘SPECIAL ECONOMIC ZONE ACT OF 1995’, AS AMENDED

BY REPUBLIC ACT NO. 8748.”

SECTION 2. Section 4 of RA 7922 is hereby amended to read as follows:

“SEC. 4. Governing Principles. ~The GREATER Cagayan ADVANCED
[Special] Economic Zone and Freeport shall be managed and operated under the

following principles:


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(a) Under the framework and limitations of the Constitution and the
applicable provisions of the Local Government Code, the Zone shall be
developed into and operated as a self-sustaining industrial, commercial,
financial, investment, and tourismv/recreational center and free port with
suitable retirementresidential areas, in order to create employment
opportunities in and around the Zone, and to effectively encourage and

attract legitimate and productive foreign investments therein;

(b) _ Business establishments operating within the Zone shall be entitled
to existing fiscal incentives as provided for under Presidential Decree No.
66, the law creating the Export Processing Zone Authority (EPZA), or
those provided under Book VI of Executive Order No. 226, otherwise
known as the Omnibus Investments Code of 1987;

(c) Any provisions of existing law, rules or regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed on business
establishments operating within the Zone. In licu of paying taxes, said
business establishments shall pay and remit to the national government
five per centum (5%) of their gross income, to be divided as follows:

(1) Two per centum (2%) shall accrue to the general fund of the
national government;

(2) One per centum (1%) to the Province of Cagayan;

(3) One-half per centum (14%) to be shared by the municipalities
affected by the declaration of the Zone in proportion to their
income from business activities within the Zone; and,

(4) One and one-half per centum (1 %%) to the Cagayan Economic
Zone Authority which shall be created under this Act;

(d) Existing banking laws and Bangko Sentral ng Pilipinas (BSP) rules
and regulations shall apply on foreign exchange and other current
account transactions (trade and non-trade), local and foreign

borrowings, foreign investments, establishment and operation of local


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and foreign banks, foreign currency deposit units, offshore banking
units and other financial institutions under the supervision of the BSP;
PROVIDED, HOWEVER, THAT CEZA, IN COORDINATION
WITH THE BANGKO SENTRAL NG PILIPINAS MAY ADOPT
MORE LIBERAL RULES TO ATTRACT OFFSHORE BANKING,
FINANCIAL SERVICES, OR TRADING INSTITUTIONS TO
OPERATE IN THE ZONE; PROVIDED, FURTHER, THAT SUCH
RULES WILL BE APPLICABLE TO OFFSHORE BANKING,
FINANCIAL SERVICES OR TRADING _ INSTITUTIONS
OPERATING WITHIN THE ZONE ONLY;

(¢) Any foreign investor who establishes a business enterprise within the
Zone and who maintains capital investment of not less than one
hundred fifty thousand United States dollars (US$150,000.00) shall be
granted, along with his or her spouse, dependents, and unmarried

children below twenty-one (21) years of age, a permanent resident

status within the Zone. The responsibility and authority to grant such
permanent resident status is hereby delegated to the Cagayan
Economic Zone Authority referred to in Section 5 of this Act.

Such foreign investor and his or her spouse, dependents, and
unmarried children below the age of twenty-one (21) years, shall have
the freedom of ingress and egress to and from the Zone without need
of any special authorization from the Bureau of Immigration.

Likewise, the Cagayan Economic Zone Authority shall issue
working visas renewable every two (2) years to foreign executives and
foreign technicians with highly specialized skills which no Filipino
possesses, as certified by the Department of Labor and Employment.

The names of foreigners granted permanent resident status and

working visas by the Cagayan Economic Zone Authority shall be


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reported to the Bureau of Immigration within thirty (30) days from
such grant.

The foregoing is without prejudice to a foreigner acquiring
permanent resident status in the Philippines in accordance with
applicable immigration, retirement, and other related laws; and,

(f) Except as otherwise provided herein, the local government units totally
embraced within the Zone shall retain and maintain their basic autonomy
and identity. The Municipalit{yJIES of BAGGAO, ALCALA,
GATTARAN, LAL-LO, CAMALANIUGAN, BUGUEY, STA.
TERESITA, GONZAGA, Santa Ana, Aparri, PIAT, RIZAL, STO.NINO,
LASAM, ALLACAPAN, BALLESTEROS, ABULUG, PAMPLONA,
SANCHEZ MIRA, STA. PRAXEDES, CLAVERIA AND CALAYAN
ISLAND shall operate and function in accordance with Republic Act No.
7160, otherwise known as the Local Government Code of 1991, insofar as
the areas within their respective jurisdictions covered in this Act are

concerned.”

SECTION. 3. Section 6 of RA 7922 is hereby amended to read as follows:

“SEC. 6. Powers and Functions of the Cagayan Economic Zone Authority.

~ The Cagayan Economic Zone Authority shall have the following powers and

functions:

(a) To adopt, alter, use a corporate seal; to contract, lease, buy, sell,
acquire, own and dispose movable and immovable as well as personal
and real property of whatever nature (including but not limited to
shares of stock or participation in private corporations or in limited
partnerships, or in joint ventures with limited liability), bonds,
precious metals in bullions, ingots and easily convertible foreign
exchange; to sue and be sued in order to carry out its duties,

responsibilities, privileges, powers and functions as granted and


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provided for in this Act; and to exercise the power of eminent domain
for public use and public purpose;

(b) Within the limitation provided by law, 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 purpose to issue bonds,
promissory notes, and other form 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;

(c) To approve, accept, accredit and allow any local or foreign business,
enterprise or investment in the Zone subject only to such rules and
regulations as CEZ.A may promulgate from time to time in conformity
with the provisions of this Act and the limitations provided in the
Constitution;

(d) To authorize or undertake, on its own or through others, [and] regulate,
AND CHARGE THE APPROPRIATE SERVICE FEES FOR the
establishment, operation and maintenance of public utilities, services,
and infrastructure in the Zone such as shipping, SHIP BUILDING,
SHIP REGISTRY AND OTHER RELATED ACTIVITIES, barging,
stevedoring, cargo handling, hauling, warehousing, storage of cargo,
port services or concessions, piers, wharves, bulkheads, bulk terminals
mooring areas, storage areas, roads, bridges, terminals, conveyors,
water supply and storage, sewerage, drainage, airport operations in
coordination with the Civil Aeronautics Board, PUBLIC
TELECOMMUNICATIONS IN COORDINATION WITH THE
NATIONAL TELECOMMUNICATIONS COMMISSION, and such
other services or concessions or infrastructure necessary or incidental
to the accomplishment of the objectives of this Act: Provided,
however, That the private investors in the Zone shall be given priority

in the awarding of contracts, franchises, licenses, or permits for the


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establishment, operation and maintenance of utilities, services and
infrastructure in the Zone;

(©) To construct, acquire, own, lease, operate and maintain on its own or
through others by virtue of contracts, franchises, licenses or permits
under the build-operate-transfer scheme or under a joint venture with
the private sector any or all of the public utilities and infrastructure
required or needed in the Zone in coordination with appropriate
national and local government authorities and in conformity with
applicable laws thereon;

(£) To operate on its own, either directly or through a subsidiary entity, or
license to others, tourism-related activities, including games,
amusements, recreation, and sports facilities, such as horse racing, dog
racing, gambling casinos, golf courses, and others, under priorities and
standards set by the CEZ.A;

(g) TO ADOPT AND IMPLEMENT POLICIES ON
ENVIRONMENTAL PROTECTION, INCLUDING BUT NOT
LIMITED [T]to. THE protectION, _preserv[e] ATION,
mainte[ainJNANCE and developMENT OF [the] virgin forests,
beaches, coral and coral reefs, AND MINERALS AND MINERAL
DEPOSITS, INCLUDING PRECIOUS METALS within the Zone.
The virgin forest within the Zone [will] SHALL be proclaimed as a
national park and [will] SHALL be covered by a permanent total log
ban; PROVIDED, THAT|F]for this purpose, the rules and regulations
of the Department of Environment and Natural Resources and other
government agencies involved in the above functions shall be
implemented by the CEZA, INCLUDING THE ISSUANCE OF
ENVIRONMENTAL COMPLIANCE CERTIFICATES,
CLEARANCES, PERMITS, PATENTS AND LEASHOLD RIGHTS

OVER GOVERNMENT LANDS AND MINING, DRILLING AND


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TIMBER LICENSES, AND SUCH OTHER ISSUANCES TO
BUSINESSES AND INDUSTRIES OPERATING WITHIN THE
ZONE;

(h)To adopt, implement and enforce reasonable measures and standards to
control pollution within the Zone;

(i) To provide security for the Zone in coordination with the national and
local governments. For this purpose, CEZA may establish and
maintain its own security force and firefighting capability or hire
others to provide the same;

To form, establish, organize and maintain subsidiary corporations, as its
business and operations may require, whether under the laws of the
Philippines or not;

(K)TO PROVIDE, IN COORDINATION WITH THE DEPARTMENT
OF TOURISM, INCENTIVES TO TOURISM-RELATED
BUSINESSES OPERATING WITHIN THE ZONE, SUCH AS BUT
NOT LIMITED TO DUTY-FREE BUYING PRIVILEGES FOR
NON-ZONE RESIDENTS;

[(k)] (L) To issue rules and regulations consistent with the provisions of
this Act as may be necessary to implement and accomplish the
purposes, objectives and policies herein provided;

(M) TO IMPOSE FINES AND PENALTIES FOR VIOLATIONS OF
THIS ACT, THE RULES AND REGULATIONS TO BE
ESTABLISHED BY THE CEZA OR ANY OTHER LAW THAT
THE CEZA IS MANDATED TO ENFORCE; and,

[@] (N) 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.

SECTION. 4. Section 7 of RA 7922 is hereby amended to read as follows:


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“SEC. 7. Board of Directors of CEZA. ~ The powers of the Cagayan
Economic Zone Authority shall be vested in and exercised by a Board of
Directors, hereinafter referred to as the Board, which shall be composed of fifteen
(15) members, to wit:

(a) The Secretary of Trade and Industry who shall serve as an ex officio
chairman of the Board of Directors [and four (4) other representatives
of the national government};

(b) THE ADMINISTRATOR AND CEO OF CEZA AS EX OFFICIO
VICE CHAIRMAN;

(©) FIVE (5) OTHER REPRESENTATIVES OF THE NATIONAL
GOVERNMENT AS EX OFFICIO MEMBERS;

(@) [The mayors of the Municipality of Apari and the Municipality of
Santa Ana, Province of Cagayan,] TWO (2) MAYORS TO
REPRESENT THE FIRST CONGRESSIONAL DISTRICT, AND
TWO (2) MAYORS TO REPRESENT THE SECOND
CONGRESSIONAL DISTRICT, ALL as ex officio voting members;
PROVIDED, THAT, THE MAYORS SHALL TAKE TURNS, BY
DRAWING OF LOTS, TO SERVE IN THE BOARD
ALTERNATELY FOR ONE (1) YEAR;

(e) Two (2) representatives of labor from among the workers in the
Cagayan Special Economic Zone;

(£) [Four (4)] TWO (2) representatives from the business and investment
sectors in the Zonef, two (2) of whom must come from the investors in
the Municipality of Santa Ana and the other two (2) must come from
the investors in the islands of Fuga, Barit, and Mabbag in the
Municipality of AparriJ;_ PROVIDED, THAT, EACH
REPRESENTATIVE SHALL COME FROM EACH OF THE
CONGRESSIONAL DISTRICT;

XXX


1 SECTION. 5. Section 9 of RA 7922 is hereby amended to read as follows:

2 “SEC. 9. Capitalization. - The Cagayan Economic Zone Authority shall
3 have an authorized capital stock of two billion (2,000,000,000) no par shares with
4 a minimum issue of value of Ten pesos (P10.00) each. The national government
5 shall initially subscribe and fully pay three hundred million (300,000,000) shares
6 of such capital stock. The initial amount necessary to subscribe and pay for the
7 shares of stock shall be included in the General Appropriations Act of the year
8 following its enactment into law and thereafter. The Board of Directors of CEZA
9 may, from time to time and with the written concurrence of the Secretary of
10 Finance, increase the issue value of the shares representing the capital stock of the
11 Cagayan Economic Zone Authority. The Board of Directors of CEZA, with the
12 written concurrence of the Secretary of Finance, may sell shares representing not
13 more than forty per centum (40%) of the capital stock of the CEZA to the general
14 public with such annual dividend policy as the Board and the Secretary of Finance
15 may determine. The national government shall in no case own less than sixty per
16 centum (60%) of the total issued and outstanding capital stock of the CEZA.
7 ALL UNOCCUPIED GOVERNMENT-OWNED LANDS FALLING
18 WITHIN ITS JURISDICTION SHALL ALSO BE INCLUDED AS PART OF
19 THE EQUITY OF CEZA AND MAY BE DISPOSED OF ONLY BY CEZA;
20 PROVIDED, THAT IN CASE OF ABSOLUTE SALE OR CONVEYANCE,
21 CEZA SHALL SEEK THE APPROVAL OF THE OFFICE OF THE
22 PRESIDENT.”

23 SECTION 6. Section 11 of RA 7922 is hereby amended to read as follows:

24 “SEC. I[1]2. Relationship with the Municipalities [of Santa Ana and
25 Aparri] COVERED BY THE EXPANSION OF CEZA. ~ In case of any conflict
26 between the Cagayan Economic Zone Authority and the municipalities [of Santa
27 ‘Ana and Aparri] COVERED BY THE EXPANSION OF CEZA UNDER SEC. 3
28 OF THIS ACT on matters affecting the Cagayan Special Economic Zone other

29 than in defense and security matters, the decision of the municipality/ies shall prevail.


»
1 SECTION 7. A new Section 15 is hereby inserted to read as follows and the subsequent

2. sections shall be renumbered accordingly:

3 “SEC. 15. INJUNCTIONS, RESTRAINING ORDERS AND OTHER
4 INTERLOCUTORY ORDERS. - NO INJUNCTIONS, RESTRAINING
5 ORDERS AND OTHER INTERLOCUTORY ORDERS WHICH SEEK TO
6 STOP OR INTERRUPT ANY CONTRACT ENTERED INTO OR ANY
7 PROJECT BEING UNDERTAKEN BY CEZA MAY BE ISSUED BY ANY
8 COURT OF LAW OR ANY QUASI-JUDICIAL BODY EXCEPT BY THE
9 SUPREME COURT OF THE PHILIPPINES.”

10 SECTION. 8 Separability Clause. — If any provision of this Act shall be declared
11 unconstitutional or invalid, the other provisions not otherwise affected shall remain in full force
12 and effect.

13 SECTION 9. Repealing Clause. — All laws, executive orders or issuances, or any parts thereof
14 which are inconsistent herewith are hereby repealed or amended accordingly.

15 SECTION 10. Effectivity Clause. ~ This Act shall take effect upon its publication in at least two
16 (2) newspapers of general circulation.

17 Approved.