FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Second Regular Session 
SENATj: 
S.B. No. 2::$38 
Introduced by Senator Lacson 
EXPLANATORY NOTE 
'11 
i\UG 16 ["'3:53 
In recognition of the need to modernize the Armed Forces of the Philippines 
(AFP), Congress enacted Republic Act No. 7898, otherwise known as the AFP 
Modernization Act on February 23, 1995. The law envisioned, among others, to develop 
the Armed Forces of the Philippines' capability to a level where it can effectively and 
fully perform its constitutional mandate to uphold the sovereignty and preserve the 
patrimony of the Republic of the Philippines. 
Section 7 of the said law mandated the submission of a modernization program 
for the AFP by the President, upon the recommendation of the Secretaries of National 
Defense and Budget and Management, to be approved through a Joint Resolution by 
the Senate and House of Representatives. Thus, on December 19, 1996, Joint 
Resolution No. 28 entitled, "Joint Resolution Expressing The Approval By Both Houses 
Of Congress Of The AFP Modernization Program, Pursuant To Republic Act No. 7898, 
Otherwise Known As "The AFP Modernization Act, "was approved. 
Pursuant to Section 6 of RA No. 7898 in relation to Joint Resolution No. 28, the 
AFP Modernization Program will expire by December of this year. After almost fifteen 
years, the AFP still lacks the needed weapons and equipment in order to fulfill its 
mandate as enshrined in the 1987 Constitution. In order to finish the modernization 
program with concrete results, there is a need to extend said program for another 15 
years. 
However, certain provisions of RA 7898 and the AFP Modernization Program 
also need to be adjusted to make them more responsive to a continuously changing 
international and regional security environment. The law was based on the assumption 
that counter insurgency operations or threats to the State's internal security will no 
longer be the prime responsibility of the AFP. It was crafted in order to address the 
country's defense against threats to its external security. To date, counter insurgency 
responsibility is still principally lodged with the AFP as mandated by Republic Act No. 
8551 otherwise known as the "Philippine National Police Reform and Reorganization 
Act of 1998". The country continues to be beleaguered by one of the longest communist 
insurgencies in the world, secessionist movements in the South, and terrorist 
organizations that continue to wreak havoc on the country and our people. 
It is therefore imperative and vital to enact a new piece of legislation that would 
amend RA 7898 in order to adjust it to current situation. The revised AFP Modernization 
Program shall be focused and directed initially towards addressing the internal security 
threats to the country and then developing it towards having an AFP organization with a 
shifting capability to meet both internal and external security threats. 


In light of the foregoing, the early passage of this bill is earnestly requested. 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Second Regular Session 
SEN A.J...f 
S.B. No. 
;c!~38 
Introduced by Senator Laeson 
AN ACT 
'11 
IIUG i6 P3 :53 
AMENDING REPUBLIC ACT NO. 7898, OTHERWISE KNOWN AS THE AFP 
MODERNIZATION ACT, AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION ONE. Section 4 (e) of Republic Act No. 7898, otherwise known as the 
AFP Modernization Act, is hereby amended to read as follows: 
"(e) Doctrines development. - [fhe transition of the AFP from an internal 
security-oriented force to an external security-oriented force requires 
the review, evaluation and validation of its present set of doctrines for 
the purpose of formalizing such doctrines. Towards this end, t] The 
Department of National Defense and the [general headquarters,] 
AFP, 
shall 
be 
responsible 
for 
the 
generation, 
evaluation, 
consolidation and formalization of doctrines; the conduct of periodic 
review and validation of doctrines through field application, testing 
and exercises; and the dissemination of approved doctrines at all 
levels of command. 
The Secretary of National Defense shall formulate guidelines to 
implement this section in accordance with the objectives of the 
modernization program enumerated in the preceding section." 
Sec. 2. Section 6 of the same Act is hereby amended to read as follows: 
"Sec. 
6. Period 
of Implementation. -
The 
REVISED AFP 
[m]Modernization [p]Program under this Act shall be implemented over a 
period of fifteen (15) years EFFECTIVE UPON THE DATE OF THE 
APPROVAL OF THIS ACT: Provided, however, That payments for 
amortization of outstanding multi-year contract obligations incurred under 
the "REVISED AFP Modernization Act" may extend beyond this period." 
Sec. 3. Section 7 of the same Act is hereby amended to read as follows: 
"Sec. 
7. Submission of the REVISED AFP Modernization 
Program. - (a) Within [ninety (90)] SIXTY (60) days from the effectivity of 
this Act, the President, upon the recommendation of the Secretaries of 
National Defense and Budget and Management, shall submit the 
REVISED AFP [m]Modernization [p]Program as provided for in this Act to 
Congress for its consideration and approval in a [j]Joint [r]Resolution of 
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the House of Representatives and the Senate. The [pJProgram shall 
indicate or show inter alia: 
(1) The size and shape of the AFP in terms of personnel, equipment, 
and facilities during the various phases of the modernization 
program; 
(2) The modernization projects under it, including the major weapon 
and non-weapon equipment and technology acquisitions sought by 
the respective services and units of the AFP, any major 
infrastructure construction or improvement to be made and the 
particular objective(s) and component(s) under Sections 3 and 4, 
respectively, of this Act to which such intended acquisition, 
construction or improvements belongs; and 
(3) The priorities, schedules as well as estimated average cost of each 
modernization project or upgrading to be undertaken. 
PROVIDED, 
THAT 
THE 
FIRST 
FIVE 
(5) 
YEARS 
OF 
THE 
IMPLEMENTATION OF THE PROGRAM SHALL BE SUBSTANTIALLY 
FOCUSED AND DIRECTED INITIALLY TOWARDS ADDRESSING THE 
INTERNAL SECURITY THREATS TO THE COUNTRY, UNLESS THE 
NATIONAL SECURITY SITUATION, AS 
DETERMINED BY THE 
NATIONAL SECURITY COUNCIL, REQUIRES A SHIFT TOWARDS 
MEETING THE THREATS TO ITS EXTERNAL SECURITY: PROVIDED, 
FURTHER, THAT THE FOLLOWING FIVE (5) YEARS OF THE 
PROGRAM SHALL BE DEVOTED TOWARDS THE DEVELOPMENT 
OF THE AFP WITH THE SHIFTING CAPABILITY TO MEET INTERNAL 
AND EXTERNAL SECURITY THREATS: PROVIDED, FINALLY, THAT 
THE FINAL FIVE (5) YEARS OF THE PROGRAM SHALL BE GEARED 
TOWARDS THE DEVELOPMENT OF A HIGHLY MODERNIZED 
ARMED FORCES TO MEET EXTERNAL SECURITY THREATS TO THE 
COUNTRY. 
(b) 
In 
the 
event 
Congress 
approves 
the 
REVISED 
AFP 
[mJModernization [p]Program, the [j]Joint [r]Resolution shall be the basis 
for subsequent executive and legislative actions to implement the AFP 
[m]Modernization [p]Program from year to year until its complete and full 
realization." 
Sec. 4. Section 8 of the same Act is hereby amended to read as follows: 
"Sec. 8. 
Appropriations for the REVISED AFP Modernization 
Program. 
-
The 
annual 
appropriations for the 
REVISED AFP 
[m]Modernization [p]Program shall include the amounts necessary to 
support the funding requirements for all modernization projects approved 
by Congress under the preceding section[.]: PROVIDED, THAT 
UNDISBURSED AMOUNTS AT THE END OF ANY YEAR SHALL BE 
CARRIED OVER TO THE SUCCEEDING YEAR." 
The funds to be appropriated by Congress under this Act shall be 
treated as a distinct and separate budget item from the regular 
appropriation for the Department of National Defense (DND) and the AFP 
and shall be administered by the Secretary of National Defense. 
[The proposed program shall be based on a ceiling, for the first five 
(5) years, of Fifty billion pesos (P50,OOO,OOO,OOO.OO): provided, that 
2 


thereafter, this amount may be increased commensurate to the increase 
in the Gross National Product (GNP).]" 
Sec. 5. Section 11 of the same Act is hereby amended to read as follows: 
"Sec. 11. 
AFP Modernization Act Trust Fund. - There is hereby 
created a trust fund, to be known as the AFP Modernization Act Trust 
Fund. Said trust fund, which shall be used exclusively for the AFP 
modernization program INCLUDING ALL NECESSARY EXPENSES TO 
IMPLEMENT THE 
PROCUREMENT OF EQUIPMENT SUCH AS 
EXPENSES FOR PRE-QUALIFICATION AND POST-QUALIFICATION 
STAGES, but not to include salaries and allowances, shall be funded out 
of the following: 
(a) Appropriations for the AFP [m]Modernization [p]Program; 
(b) The proceeds from the sale[, lease or joint development] of military 
reservations, as may be authorized by Congress, PURSUANT TO 
THE PROVISIONS OF EXISTING LAWS AND REGULATIONS 
GOVERNING SALES OF GOVERNMENT PROPERTIES, including 
such immovable and other facilities as may be found therein, not 
OTHERWISE covered by the Bases Conversion Development 
Authority, as provided for in Republic Act No. 7227, AS AMENDED; 
(C) THE PROCEEDS FROM THE LEASE OR JOINT DEVELOPMENT 
OF MILITARY RESERVATIONS, AS MAY BE AUTHORIZED BY 
THE 
PRESIDENT, 
PURSUANT 
TO 
THE 
PROVISIONS 
OF 
EXISTING LAWS AND REGULATIONS GOVERNING LEASE OR 
JOINT 
DEVELOPMENT 
OF 
GOVERNMENT 
PROPERTIES, 
INCLUDING SUCH IMMOVABLES AND OTHER FACILITIES AS 
MAY BE FOUND THEREIN, NOT SPECIFICALLY ENUMERATED 
UNDER REPUBLIC ACT NO. 7227, AS AMENDED; 
[(c)l (D) Shares of the AFP from the proceeds of the sale of military 
camps provided for under Republic Act No. 7227, AS 
AMENDED, AS WELL AS THE PROCEEDS FROM THE 
LEASE ANDIOR JOINT VENTURE AGREEMENTS AND SUCH 
OTHER DISPOSITIONS PERTAINING TO THE SAME CAMPS; 
(E) 
THE 
PROCEEDS 
DERIVED 
FROM 
PUBLIC-PRIVATE 
PARTNERSHIPS ENTERED INTO BY THE DEPARTMENT OF 
NATIONAL DEFENSE OR THE ARMED FORCES OF THE 
PHILIPPINES, AS MAY BE AUTHORIZED BY THE PRESIDENT, 
PURSUANT TO THE PROVISIONS OF EXISTING LAWS AND 
REGULATIONS; 
[(d)] (F) Proceeds from the sale of the products of the [g]Government 
[a]Arsenal ANDIOR, IN CASE OF JOINT VENTURE, ALL 
INCOMES EARNED FROM THE EQUITY SHARE OF THE 
GOVERNMENT ARSENAL FROM THE JOINT VENTURE; 
[(e)] 
(G) The 
proceeds 
from 
the 
disposal 
of 
excess 
and/or 
uneconomically repairable equipment and other movable assets 
of the AFP and the government arsenal; 
[(f)] (H) Funds from budgetary surplus, if any, as may be authorized by 
Congress subject to the provisions of Section 8 of this Act; [and] 
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(I) 
DONATIONS 
COMING 
FROM 
LOCAL 
AND 
FOREIGN 
SOURCES, SPECIFICALLY EARMARKED TO BE USED FOR 
THE AFP MODERNIZATION PROGRAM; 
(J) 
THIRTY-FIVE 
PERCENT 
(35%) 
OF 
THE 
NATIONAL 
GOVERNMENT'S SHARE IN THE MALAMPAYA OIL AND GAS 
EXPLORATION AND SUCH OTHER SIMILAR OR RELATED 
EXPLORATIONS FOR ENERGY; AND 
[(g)] (K) 
All interest income of the trust funds. 
[The trust fund] NOTWITHSTANDING THE PROVISIONS OF 
REPUBLIC ACT NO. 7227, OTHERWISE KNOWN AS THE BASES 
CONVERSION AND DEVELOPMENT ACT OF 1992, AS AMENDED, 
OTHER EXISTING LAWS, AND PRESIDENTIAL ISSUANCES TO THE 
CONTRARY, FUNDS FROM THE FOREGOING SOURCES SHALL BE 
DEPOSITED DIRECTLY WITH THE AFP MODERNIZATION TRUST 
FUND, WHICH shall be administered by the Secretary of National 
Defense in accordance with existing government auditing rules and 
regulations. THE DEPARTMENT OF NATIONAL DEFENSE SHALL 
CONDUCT PERIODIC STUDIES ON HOW TO MAXIMIZE THE 
UTILIZATION OF THE TRUST FUND AND HOW ADDITIONAL 
REVENUES 
CAN 
BE 
GENERATED 
TO 
FUND 
THE 
AFP 
MODERNIZATION PROGRAM. 
Sec. 6. Section 12 of the same Act is hereby amended to read as follows: 
"Sec. 12. 
Modernization of the Government Arsenal. -
The 
modernization of the government arsenal, for the development of 
production 
capabilities 
to 
enhance 
self-sufficiency 
in 
defense 
requirements, shall be part of the AFP modernization program. The 
government arsenal shall be effectively utilized in the production of basic 
weapons, ammunition and other munitions for the use of the AFP, [and] 
the Philippine National Police (PNP) AND OTHER UNIFORMED 
GOVERNMENT AGENCIES, and for the sale and export of products in 
excess of [AFP/PNP] THE requirements OF THE AFP, PNP AND 
OTHER UNIFORMED GOVERNMENT AGENCIES. The government 
arsenal may use such production facilities as it may own or be provided 
with under this Act or as it may arrange, under jOint venture, co-production 
or similar agreements with local and foreign entities. THE PRESENT SITE 
OF THE GOVERNMENT ARSENAL, AS DEFINED BY PRESIDENTIAL 
PROCLAMATION NUMBER 361-A DATED 7 MARCH 1968, IS HEREBY 
DECLARED A DEFENSE INDUSTRIAL ECONOMIC ZONE WITH 
INVESTMENTS THEREAT ENTITLED TO SUCH TAX PRIVILEGES 
AND OTHER APPROPRIATE INCENTIVES THAT ARE ALLOWED 
UNDER REPUBLIC ACT NO. 7042, AS AMENDED, AND OTHER 
EXISTING LAWS. 
Sec. 7. Section 14 of the same Act is hereby amended to read as follows: 
"Sec. 14. 
AFP Procurement System. -
The DND-AFP shall 
strengthen its systems and procedures for equipment acquisition, taking 
into account new requirements under the AFP modernization program. 
Contract negotiations and equipment acquisition shall be treated as two 
sequential but separate steps, each requiring the separate decision of the 
4 


Secretary of National Defense. The decision making process for 
equipment acquisition shall start at the appropriate service command and 
submitted to the AFP Weapons Systems Board, while contract negotiation 
shall start at general headquarters AFP level. In its system and 
procedures for equipment acquisition, the provisions of Presidential 
Decree No. 1594, as amended, and other applicable laws shall apply. 
UPON PRIOR APPROVAL BY THE PRESIDENT OF THE 
PHILIPPINES, AND WHEN THE PROCUREMENT FOR USE BY THE 
AFP INVOLVES MAJOR DEFENSE EQUIPMENT IN ACCORDANCE 
WITH THE DEFENSE SYSTEM OF MANAGEMENT, WHEN THE 
EQUIPMENT 
OR 
MATERIAL REQUIRED 
IS 
NOT AVAILABLE 
LOCALLY, AND THE SECRETARY OF NATIONAL DEFENSE HAS 
DETERMINED THAT THE INTERESTS OF THE COUNTRY SHALL BE 
PROTECTED 
BY 
NEGOTIATING 
DIRECTLY 
WITH 
A 
MANUFACTURER 
OR 
AN 
INSTRUMENTALITY 
OF 
ANOTHER 
COUNTRY WITH WHICH THE PHILIPPINES HAS ENTERED INTO A 
DEFENSE 
COOPERATION 
AGREEMENT 
OR 
OTHERWISE 
MAINTAINS DIPLOMATIC RELATIONS, THE PROCUREMENT BY THE 
ARMED FORCES OF THE PHILIPPINES OF THE EQUIPMENT 
ABOVEMENTIONED 
SHALL 
BE 
EXEMPTED 
FROM 
THE 
REQUIREMENT OF PUBLIC BIDDING UNDER REPUBLIC ACT NO. 
9184: PROVIDED, HOWEVER, THAT THE PERFORMANCE BY THE 
SUPPLIER OF ITS OBLIGATIONS UNDER THE PROCUREMENT 
CONTRACT SHALL BE COVERED BY A PERFORMANCE SECURITY 
IN ACCORDANCE WITH SECTION 39 OF REPUBLIC ACT NO. 9184: 
PROVIDED, FINALLY, THAT MAJOR DEFENSE EQUIPMENT SHALL 
REFER TO AIRCRAFTS, VESSELS, TANKS, ARMORED VEHICLES, 
COMMUNICATION EQUIPMENT AND HIGH-POWERED FIREARMS. 
Sec. 8. Section 16 of the Same Act is hereby amended to read as follows: 
"Sec. 16. 
[Annual] Reports. - [Not later than the end of the first 
quarter of the succeeding year:] 
(a) NOT LATER THAN THE END OF THE FIRST QUARTER OF THE 
SUCCEEDING YEAR, [T]the Secretary of National Defense shall 
submit to the President and Congress an annual report on the 
status of the AFP Modernization Act Trust Fund, as provided for in 
Section 11 of this Act; 
(b) The Chief of Staff, AFP, shall submit to the President and 
Congress QUARTERLY, through the Secretary of National 
Defense, a[n annual] report containing the progress of the 
implementation of the modernization program under this Act to 
include the AFP modernization activities implemented prior to the 
approval of this Act." 
Sec. 9. There will be a new section inserted after Section 16 of the same Act 
which shall now become the new Section 17 which shall read as: 
"SEC. 17. EXEMPTION FROM FEES, TAXES, DUTIES AND 
ASSESSMENTS. -
ALL PROJECTS, UNDERTAKINGS, ACTIVITIES 
AND PROGRAMS UNDER THIS ACT SHALL BE EXEMPT FROM AND 
ALL FEES, TAXES, DUTIES AND ASSESSMENTS IMPOSED ANDIOR 
5 


REQUIRED 
BY 
GOVERNMENTAL 
AND 
NON-GOVERNMENTAL 
AGENCIES, BODIES ANDIOR ENTITIES." 
Sec. 10. The succeeding sections of the same Act are hereby amended and 
renumbered accordingly. 
Sec. 11. Repealing Clause. - All laws, executive orders, rules and regulations 
inconsistent with or contrary to this Act, are hereby deemed accordingly repealed or 
amended. 
Sec. 12. Separability Clause. - If, for any reason, any section or provision of 
this Act is declared unconstitutional or invalid, the other sections or provisions not 
affected thereby shall remain in full force and effect. 
Sec. 13. Effectivity Clause. - This Act shall take effect after fifteen (15) days from 
its publication in at least two (2) newspapers of national circulation. 
Approved, 
6