Republic of the Philippines
HOUSE OF REPRESENTATIVE:
Quezon City

NINETEENTH CONGRESS
First Regular Session

2592

House Bill No.

Introduced by: REPRESENTATIVE RONALD V. SINGSON

EXPLANATORY NOTE

The Philippines is seen as one of the most vibrant economies in the Southeast Asian
region, and is expected to grow robustly in the coming years. Vital to its economic agenda is
economic dynamism and competitiveness. Conversely, the country lags behind its peers in terms
of inflows of foreign investments, which makes it harder to provide business opportunities and
create job opportunities.

The increasing competitive environment of the global market merits the creation of
economic zones. However, in order to reap the full benefits of economic zones, various parts of
the country must be promoted as alternative areas for investments.

This bill seeks to establish a special economic zone which shall cover a particular area
located in the Municipalities of San Juan and Cabugao, Province of Ilocos Sur, which shall be
managed and operated by the Ilocos Sur Special Economic Zone Authority (ISSEZA).

The creation of the llocos Sur Special Economic Zone is based on the idea that economic
opportunities initiated by the government attract investments and tourists, while generating
employment. In turn, boosted productivity and increased income are expected to raise the
quality of life of the local residents

Moreover, the proposed llocos Sur Special Economic Zone will not only contribute to the
development of the 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.

OE. (GSON


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
First Regular Session

No. 2092

House Bill No.

Introduced by: REPRESENTATIVE RONALD V. SINGSON

AN ACT
ESTABLISHING A SPECIAL ECONOMIC ZONE IN A PORTION OF THE
SALOMAGUE COVE AND IN THE MUNICIPALITIES OF SAN JUAN AND CABUGAO,
PROVINCE OF ILOCOS SUR, CREATING FOR THE PURPOSE THE ILOCOS SUR
SPECIAL ECONOMIC ZONE AUTHORITY, AND APPROPRIATING FUNDS
THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
CHAPTER 1
GENERAL PROVISIONS

SECTION 1. Short Title. — This Act shall be known as the “llocos Sur 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, enhance productivity, and increase individual and family incomes, thereby
enhancing the quality of life of the Filipino people.


CHAPTER I
CREATION OF THE ECONOMIC ZONE

SEC. 3. Creation of the locos Sur Special Economic Zone. — In accordance
with the foregoing declared policy and subject to the concurrence of the concemed local
government units (LGUs) of Ilocos Sur, there is hereby established a special economic zone,
hereinafter referred to as the Ilocos Sur Special Economic Zone or Ilocos Sur Ecozone. The
llocos Sur Ecozone shall cover a particular area located in the Municipalities of San Juan and
Cabugao, Province of ilocos Sur, the specific metes and bounds of which shall be more
particularly defined in a presidential proctamation that shall be issued for this
purposeProvided, That the lands embraced therein shall be contiguous to one another.

SEC. 4, Creation of the locos Sur Special Economic Zone Authority. - There
is hereby created a body corporate to be known as the locos Sur Special Economic Zone
Authority, hereinafter referred to as the ISSEZA, which shall manage and operate the Ilocos
Sur Ecozone, in accordance with the provisions of this Act. The corporate life of the ISSEZA 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. 5. Governing Principles. - The ISSEZA shall manage and operate the
llocos Sur Ecozone, under the following principles:

a) Within the framework and limitations of the Constitution and applicable provisions of
Republic Act No. 7160, or the Local Government Code, as amended, the locos 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 locos 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
San Juan and Cabugao and those in neighboring towns and cities;


¢) The Ilocos 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, the Philippine Economic Zone
Authority (PEZA), and the Department of Trade and Industry (DTI), with foreign
entities or enterprises;

d) Foreign citizens and companies owned by non-Filipinos in whatever proportion may
set up enterprises in the Ilocos Sur Ecozone, either by themselves or in a joint
venture with Filipinos in any sector of industry, international trade and commerce
within the llocos Sur Ecozone;

e)

The tlocos 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 subject to Title XIII of the
National Intemal Revenue Code, as amended. However, exportation or removal of
goods from the territory of the locos Sur Ecozone to the other parts of the Philippine
territory shall be subject to customs duties and taxes under Republic Act No. 10863,
otherwise known as the “Customs Modernization and Tariff Act” and other relevant tax
laws of the Philippines;

f) The areas comprising the llocos Sur Ecozone may be expanded or reduced when
necessary through a presidential proclamation issued for the said purpose. For this
purpose, the ISSEZA, 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 Ilocos Sur Ecozone for the following purposes: (1)
consolidation of lands for zone development; (2) acquisition of right of way to the
llocos Sur Ecozone; and (3) the protection of watershed areas and natural assets
valuable to the prosperity of the llocos Sur Ecozone;

g) Goods manufactured by an Ilocos 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 ISSEZA together with the PEZA, the Bureau of Customs, the Bureau of
Intemal Revenue, and the DTI. However, in order to protect domestic industries, a


Negative List of industries shall be drawn up and regularly updated by the PEZA.
Enterprises engaged in industries included in such Negative List shall not be allowed to
sell their products locally; and

h)

The defense of the !locos Sur Ecozone and the security of its perimeter fence shall be
the responsibility of the national government in coordination with the ISSEZA and the
concerned LGUs.

SEC. 6. Development Goals of the Ilocos Sur Ecozone. - The |SSEZA shall
determine the development goals of the Ilocos Sur Ecozone within the framework of national
development plans, policies, and goals. The Chairperson-Administrator shall, upon approval
by the Board of the ISSEZA, submit the Ilocos Sur Ecozone plans, programs, and projects
to the Regional Development Council for inclusion in the regional development pian.

SEC. 7. Capitalization. - The |SSEZA shall have an authorized capital stock of
two billion (2,000,000,000) no par shares with a minimum issue of Ten pesos (Php10.00) each,
the majority shares of which shall be subscribed and paid for by the national government
and the LGUs embracing the Ilocos Sur Ecozone. The Board of Directors of the ISSEZA 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 ISSEZA 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 ISSEZA.

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

SEC. 8. Principal Office of the ISSEZA. - The ISSEZA shall maintain its principal
office in the Municipality of Cabugao, Province of Ilocos Sur, but it may establish liaison offices
within the Philippines as may be necessary for the proper conduct of its business.

SEC. 9. Powers and Functions of the ISSEZA. — The ISSEZA shall have the
following powers and functions:

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


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

c) To coordinate with LGUs and exercise general supervision over the
development plans, activities, and operations of the llocos Sur Ecozone;

d

To regulate and undertake the establishment, construction, operation, and
maintenance of public utilities, other services, and infrastructure in the
llocos 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;

e)

To construct, acquire, own, lease, operate, and maintain on its own or
through contracts, franchise, licenses, bulk purchase from the private sector
or permits under any of the schemes allowed in Republic Act No. 6957,
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 Ilocos Sur 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 llocos Sur Ecozone to be
submitted to the Regional Development Council for inclusion in the regional

development plan;


9) To operate on its own, either directly or through licenses to others,
recreational and sports facilities, other tourism-related activities, including
gaming activities such as horse racing, dog racing, casinos, internet and
interactive gaming and other games of chance, and others under priorities
and standards set by the ISSEZA;

h) To raise or borrow, within the limitation provided by law, and subject to the approval 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, corals
and coral reefs, and maintain ecological balance within the llocos
Sur Ecozone. Notwithstanding the power of the ISSEZA to create rules for
such 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 ISSEZA;

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

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


1) Toissue certificates of origin for products manufactured or processed in the
llocos Sur Ecozone in accordance with prevailing rules of origin and
the pertinent regulations of the PEZA, the DTI, and 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 llocos
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
ISSEZA in the establishment of such one-stop shops;

n) To ensure that the area covered by the llocos Sur Ecozone is secure at all
times: Provided, That the Armed Forces of the Philippines (AFP) or the
Philippine National Police (PNP) shall not interfere in the internal affairs of
the ISSEZA except to provide the necessary security and defense, or law
enforcement assistance, as the case may be: Provided, finally, That
expenses of the AFP or the PNP in the Ilocos Sur Ecozone 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 by this Act, as well as those that shall enable it to.
carry out, implement and accomplish the purposes, objectives, and policies
of set forth in 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 purposes,
objectives, and policies provided herein.


SEC. 10. Board of Directors of the ISSEZA. — The powers of the ISSEZA 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) A Chairperson, who shall at the same time be the administrator of
the ISSEZA;

b) A Vice-Chairperson who shall be elected from among the members
of the Board of Directors;

c) Members consisting of:

1) The Governor of the Province of Ilocos Sur or a duly-
authorized representative from the Provincial
Government of Ilocos Sur;

2) The mayors of the municipalities covered by the
ecozone;

3) One (1) representative from the investors’ group; and

4) One (1) representative from among the workers in the
locos Sur Ecozone.

‘The Governor or the Governor's duly authorized representative and the mayors
of the municipalities within the ecozone shall serve as ex officio members of the Board,
whose terms in the Board shall correspond to their terms as elected officials.

The Chairperson-Administrator and the members of the Board, except for the
representatives of the investors and workers groups and 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 replacements shall serve only the
unexpired portion of the respective terms. No person shall be appointed as a member of the
Board unless the person is 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 allowance at rates to be determined by the Department of Budget and Management
in accordance with existing rules and regulations: Provided, however, That the total per diem


allowance collected each month shall not exceed the equivalent of four (4) meetings unless
and until the President of the Philippines has fixed a higher rate for the per diem allowance
for the members of the Board, such allowance shall not be more than Ten thousand pesos
(Php10,000.00) for every Board meeting

SEC. 11. Organization and Personnel. - The Board of Directors of the ISSEZA
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 ISSEZA, 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 ISSEZA, 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 ISSEZA, shall be removed or suspended except for
cause, as provided by civil service rules and regulations.

SEC. 12. Powers and Duties of the Chairperson-Administrator. - The
Chairperson-Administrator shall have the following powers and duties:

a) To direct and manage the affairs of the ISSEZA in accordance with the policies of
the Board;

b) To establish the intemal organization of the ISSEZA under such conditions that the
Board may prescri

©) 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)  Tosubmit to the Board for its approval, policies, systems, procedures, rules, and
regulations that are essential to the operation of the Ilocos 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 llocos Sur Ecozone; and

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

SEC. 13. Legal Counsel. — The |SSEZA shall have its own internal legal counsel
who shall be under the supervision of the Government Corporate Counsel. When the
exigencies of business and operations demand it, the ISSEZA may engage the services of an
outside counsel either on a case to case or on a fixed retainer basis.

CHAPTER II
INCENTIVES TO ECOZONE ENTERPRISES AND INVESTORS

SEC. 14. Investors Visa. - Any foreign national who invests an amount of Two
hundred thousand US dollars (US$200,000.00) in a registered enterprise, either in cash or
equipment, 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 of age;

b) Must not have been convicted by final judgment of a crime involving moral turpitude;

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

d) Must not have been confined in an institution for any mental disorder or disability;
and

) Must be financially capable as borne out by credible and verifiable evidence.

With an investors visa, an alien shall be entitled to reside in the Philippines while
the investment subsists. The alien investor shall submit an annual report, in the form duly
prescribed for the purpose, to prove that the investment in the country subsists. Should said
alien investor withdraw the investments from the Philippines, then the investor's visa issued to
‘said alien shall automatically expire and 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 Bl and the DOLE shall implement measures to expedite the processing of
such visas and permits for workers in the llocos Sur Ecozone and coordinate closely with the
ISSEZA to facilitate the conduct of business operations.

SEC. 15. Fiscal Incentives. —Registered enterprises of the Ilocos Sur
cozone may be entitled to pertinent fiscal incentives granted under Title XIII (Tax
Incentives) of the National Internal Revenue Code, as amended.

SEC. 16. Imposition of a Tax Rate of Five Percent (5%) on Gross Income
Earned. — No taxes, local and national, shall be imosed on business establishments
operating within the Ilocos Sur Ecozone, including income tax, withholding tax, donor's tax,
percentage tax, and documentary stamp. In lieu thereof, 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 schedule:

a) Two per centum (2%) to the National Government;

b) One per centum (1%) to the Province of Ilocos Sur,

c) Point-five per centum (.5%) to the treasurer's office of the Municipality or City where
the enterprise is located;

d) One point five per centum (1.5%) to the Authority of the llocos Sur Economic Zone

SEC. 17. Banking Rules and Regulations. — Banks and financial institutions to
be established in the llocos Sur Ecozone shall be under the supervision of the BSP and subject
to existing banking laws, rules and regulations,

SEC. 18. Remittances. — In the case of foreign investments, a duly registered
entity or enterprise within the llocos Sur Ecozone shall have the right to remit earnings to its
investors 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” as amended.


CHAPTER IV
NATIONAL GOVERNMENT AND OTHER ENTITIES

SEC. 19. Supervision and Control. - - For purposes of policy direction
and coordination, the ISSEZA shail be under the direct control and supervision of the Office of the
President of the Philippines.

SEC. 20. Relationship with Local Government Units. - Except as herein
provided, the LGUs comprising the llocos Sur Ecozone shall retain their basic autonomy and
identity. The Municipalities of San Juan and Cabugao, Province of llocos Sur, shall operate and
function in accordance with the framework of the Constitution, the Local Government Code of
1991, as amended, and this Act.

In case of any conflict among the ISSEZA, the LGUs and the national government
‘on matters affecting the llocos Sur Ecozone, other than national defense and security matters,
the decision of the ISSEZA shall prevail.

SEC. 21. Audit. - The Commission on Audit shall appoint a full-time auditor for
the ISSEZA and may assign such number of personnel as may be necessary to assist the auditor
in the performance of the auditor's functions.

CHAPTER V
MISCELLANEOUS

SEC. 22. Interpretation and Construction. - The powers, authorities and
functions that are vested in the ISSEZA 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 promotion of an
efficient and effective working relationship among the ISSEZA, the national government and the
LGUs. Any interpretation of this Act shall consider such intentions. In the event of conflict of


interpretation and provided intentions cannot be harmonized, the provisions of this Act shall be
construed in favor of the interpretation that shall protect national security.

SEC. 23. Applicability Clause. - Insofar as they 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

llocos Sur Ecozone.

SEC. 24. Implementing Rules and Regulations. — Within sixty (60) days from
the effectivity of this Act, the DTI shall, in coordination with the DOF and the National Economic
and Development Authority, formulate rules and regulations for the effective implementation of
the provisions of this Act.

SEC. 25. Separability Clause. - If any provision of this Act shall be held
unconstitutional or invalid, the other provisions not otherwise affected shall remain in full force
and effect.

SEC. 26. Repealing Clause. - All laws, executive orders or issuances or any part
thereof, which are inconsistent herewith, are hereby repealed or amended accordingly.

SEC. 27. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,