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

EIGHTEENTH (18) CONGRESS
First Regular Session

3654
House Bill No.

Introduced by Hon. Romeo M. Jalosjos Jr.

ee

EXPLANATORY NOTE

This bill seeks to amend Republic Act No. 7916, otherwise known as “The Special
Economic Zone Act of 1995”, as amended by Republic Act No. 8748, “An Act Amending
Republic Act No. 7916, otherwise known as The Special Economic Zone Act of 1995”.

‘The 1987 Philippine Constitution declares that the State shall develop a self-reliant and

national economy. Further, it is the policy of the State to encourage and promote

the establishment and development of economic areas in the country as a means to achieve and

enjoy a sound and balanced industrial, economic, and social development, so that territorial

and political subdivisions of the State can attain meaningful local autonomy. It also recognizes

the indispensable role of the private sector, encourages private enterprise, and provides
incentives to prioritized investment sectors.

Republic Act No. 7916 or The Special Economic Zone Act of 1995 was enacted on
February 21, 1995. Since its enactment, the Philippine Economic Zone Authority (PEZA) has
become one of the leading Investments Promotions Agencies (IPAs) in the Philippines and its
registered economic zones have been the preferred destination of foreign investors that intend
to locate in the country. The PEZA is one of the government agencies that contributes to the
economic development in the countryside due to a number of economic zones that were
proclaimed in the entire country that are now bustling provinces and metropolis.

As of 2018, the PEZA has a total of 4,341 operating enterprises located in 395 economic
zones including Information Technology (IT) Parks/Centers. PEZA has brought in a total of
3.755 Trillion approved investments, generated US$760.479 billion exports and created
1,400,000 employment opportunities for our countrymen. PEZA exports contribute 63% of the
country’s total commodity export and 80% of total Philippines service export and account for
16% of GDP. However, although economic gains have been achieved with RA 7916, there is
‘a need to update such law in order to maximize the investments in the economic zones and
result in more significant gains for the Filipinos and the country at large, especially the less
developed areas in the countryside.

This bill seeks to amend Republic Act No. 7916 in order to strengthen the PEZA by
providing the following: (1) additional powers and functions of the authority to be more pro-
active and responsive to the demands of the local and international business markets; (2)

1


establishment of a globally competitive and conducive investment climate and facility; (3)
competitive and appropriate incentives package in order to attract more investors to the
countryside (4) creation of opportunities for more investment portfolios; (5) increased financial
capability of the designated authority; (6) reduced import dependence by empowering,
capacitating and incenti izing domestic enterprises, farmers, fishermen and every Filipino to
participate in completing the supply chain, maximizing production of quality products and
export manufacturing capability and (7) more empowered and capable LGUs that are self-
reliant, self-sustaining and resource-generating to enjoy social progress, peace and prosperity
as experienced by model-LGU hosts of existing economic zones.

The amendment of Republic Act No. 7916 is also mandated by Administrative Order
No. 18 which directed the PEZA to accelerate rural progress through robust development of
special economic zones in the countryside. This was also prompted by the recommendation of
the Cabinet Cluster on environment and disaster management to enhance the incentives and
the dispersion of economic activities outside Metro Manila to reduce its population density in
support of the government efforts toward an earthquake and natural disaster-resilient
Philippines.

REP. ROMEO M. JALOSJOS, JR.
Representative
First District of Zamboanga del Norte


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

EIGHTEENTH (18%) CONGRESS
First Regular Session

House Bill No. 3654

Introduced by Hon. Romeo M. Jalosjos Jr.

ee

AN ACT STRENGTHENING THE ROLES AND
FUNCTIONS OF THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) TO
ACCELERATE COUNTRYSIDE DEVELOPMENT THROUGH ROBUST
(CREATION OF SPECIAL ECONOMIC ZONES IN RURAL AND NEW GROWTH
AREAS, ENHANCING THE INCENTIVES THEREOF AND AMENDING FOR THIS
PURPOSE, REPUBLIC ACT NO. 7916, OTHERWISE KNOWN AS “THE SPECIAL
ECONOMIC ZONE ACT OF 1995, AS AMENDED BY RA 8748”

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

SECTION 1. Section 3 of Republic Act No. 7916 is hereby amended to read as follows:
"SEC. 3. Purposes, Intents and Objectives. — It is the purpose, intent and objective of this Act:

(a) To establish the legal framework and mechanisms for the integration, coordination,
planning and monitoring of special economic zones, industrial estates / parks, export
processing zones and other economic zones IN ORDER TO FULLY
INDUSTRIALIZE AND DEVELOP THE PHILIPPINES INTO A GREEN,
CLIMATE-RESILIENT AND REGIONAL ECONOMY THAT WILL
ATTRACT EXPORT-ORIENTED INDUSTRIES, AS WELL AS STRATEGIC
DOMESTIC-ORIENTED INDUSTRIES;

(b)x xx

()xxx

(d)x xx

(xxx

() xxx


(G)_TO MINIMIZE IMPORT DEPENDENCE, MAXIMIZE EXPORTATION,
PRODUCTION, AND MANUFACTURING CAPABILITY OF FILIPINOS AND
COMPLETE THE SUPPLY CHAIN;

(2) TO EMPOWER AND CAPACITATE THE PEOPLE AND THE LOCAL
GOVERNMENT UNITS (LGUs) THROUGH THE ESTABLISHMENT OF
SPECIAL ECONOMIC ZONES AS ECONOMIC DRIVERS TO GROW SMART
TOWNS, DIGITAL CITIES AND NEW METROPOLITAN AREAS IN EVERY
REGION, MAKING THE LGUs SELF-RELIANT, SELF-SUSTAINING AND
RESOURCE-GENERATING;

@ TO FACILITATE THE CONSTRUCTION OF MORE LOGISTICS HUBS,
INTERNATIONAL AIRPORTS AND SEAPORTS AND PROVIDE
MULTIMODAL MEANS OF TRANSPORTATION IN EVERY REGION,
ADDRESS THE PUBLIC WORKS INFRASTRUCTURE, ENHANCE THE
INFORMATION TECHNOLOGY (IT) INFRASTRUCTURE, RESEARCH AND
DEVELOPMENT (R & D) AND KNOWLEDGE PROCESS INFRASTRUCTURE
AND PROMOTE AFFORDABLE, HIGH QUALITY, COMPETITIVE UTILITIES
AND RENEWABLE SOURCES OF ENERGY, IN PARTNERSHIP WITH OTHER
GOVERNMENT AGENCIES, PRIVATE AND INTERNATIONAL
INSTITUTIONS;

(J) TO UTILIZE THE VAST AND IDLE PUBLIC LANDS, RESTORE THE BASIC

INDUSTRIES TO ENSURE FOOD SECURITY AND SUSTAINABILITY,
ATTRACT STRATEGIC INDUSTRIES THAT ARE BADLY NEEDED TO
FULLY INDUSTRIALIZE THE COUNTRY, AND ENCOURAGE BIG-TICKET
INDUSTRIES THAT PROVIDE AT LEAST A BILLION DOLLAR
CAPITALIZATION, OR MORE THAN 5,000 JOBS CREATED, OR TRANSFER
OF PIONEER TECHNOLOGY AND DEVELOP AT LEAST 50 HECTARES OF
LAND IN THE COUNTRYSIDE.

(K) TO MATCH THE PROFESSIONAL, VOCATIONAL AND TECHNICAL
SKILLS TRAINING PROGRAM IN HIGHER EDUCATION AND TRAINING
(CENTERS IN EVERY REGION, TRANSFORMING THE FILIPINOS AS MULTI-
KNOWLEDGE AND SKILLED WORKERS, A RICH HUMAN CAPITAL AND AS
WORLD-CLASS WORKERS;

SECTION 2. Section 4 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 4. Definition of Terms. — For purposes of this Act, the following definitions shall
apply to the following terms:

(a) "Special Economic Zones (SEZ)" — hereinafter referred to as the ECOZONES, are selected
areas with highly developed or which have the potential to be developed into TOWNSHIPS
INTEGRATING THE INDUSTRIAL, COMMERCIAL, MEDICAL/HEALTH,
EUCATIONAL, RECREATIONAL AND RESIDENTIAL COMPONENTS. AN
ECOZONE MAY BE CLASSIFIED INTO DIFFERENT TYPES DEPENDING ON ITS
LAND/MARINE POTENTIALS AND RESOURCESON IT SUCH AS:

jw AGRO-FORESTRY;
(ii) | AGRO-INDUSTRIAL;


(iii) AQUAMARINE;

(iv) AVIATION AND AEROSPACE PARKS;

(vy) CREATIVE INDUSTRIES;

(vi) DEFENSE AND INDUSTRISL COMPLEX;

(vii) DOMESTIC ECOZONES;

(viii) ECO-INDUSTRIAL PARKS;

(ix) EXPORT PROCESSING ZONES (EPZs);

(&) FREE TRADE ZONES;

(xi) HALAL AND FOOD PRODUCTION HUBS;

(xii) INFORMATION AND TECHNOLOGY (IT) PARKS AND/OR
CENTERS;

(xiii) ISLAND CITIES;

(xiv) KNOWLEDGE, INNOVATION, AND SCIENCE AND TECHNOLOGY
PARKS;

(xv) LOGISTICS HUB;

MINERAL PROCESSING ECOZONES

ii) RENEWABLE ENERGY ECOZONES;

an RETIREMENT, TOURISM AND MEDICAL TOURISM ECOZONES

(xix) OTHER TYPES AS MAY BE DETERMINED BY PEZA

(b) x x x
()xx x
@xx x

(E) BASIC INDUSTRIES — ARE INDUSTRIES THAT CATER TO THE BASIC
NEEDS OF THE FILIPINOS SUCH AS BUT NOT LIMITED TO FOOD,
AGRICULTURE, STEEL, WOOD AND OTHER HOUSING AND CONSTRUCTION
MATERIALS, UTILITIES SUCH AS POWER, WATER AND SOURCES OF
RENEWABLE ENERGY, INDUSTRIES INTO CLOTHING, GARMENTS AND
TEXTILE, AUTOMOBILE, RAILWAYS AVIATION AND OTHER AIR, WATER,
AND LAND VEHICLES; HEALTH AND MEDICAL; AND COMMUNICATIONS
AND TECHNOLOGY;

(F) STRATEGIC INDUSTRIES — REFERS TO PIONEERING TECHNOLOGIES
AND THOSE PRIORITY ACTIVITIES AND INDUSTRIES THAT ARE BEING
DEVELOPED TO MODERNIZE AND INDUSTRIALIZE, ATTRACT MORE
INVESTMENTS, GENERATE EMPLOYMENT, UPGRADE POSITION IN THE
GLOBAL VALUE CHAIN AND SUSTAIN MANUFACTURING RESURGENCE
TOWARDS ECONOMIC TRANSFORMATION. THESE INDUSTRIES INCLUDE
BUT NOT LIMITED TO THE FOLLOWING: MANUFACTURING,
SEMICONDUCTORS, ELECTRONICS, INFORMATION TECHNOLOGY-
BUSINESS PROCESS MANAGEMENT (IT-BPM), ASSEMBLY, REFINERY,
PROCESSING, PETRO-CHEMICAL, TOURISM AND MEDICAL TOURISM,
DEFENSE, LOGISTICS, SOURCES OF RENEWABLE ENERGY, INNOVATION, R
& D ACTIVITY, INVESTMENTS IN ENVIRONMENTAL PROTECTION SYSTEMS
AND ROHQs, AND OTHERS THAT WILL MAKE THE PHILIPPINES AS A
REGIONAL HUB.


(G) BIG-TICKET INDUSTRIES — REFER TO LOCATOR INDUSTRIES THAT
WILL INVEST AT LEAST ONE BILLION DOLLAR CAPITALIZATION OR
(CREATE MORE THAN 5,000 JOBS OR ENGAGE IN PIONEER TECHNOLOGY,
AND TO ECOZONE DEVELOPERS THAT WILL ESTABLISH ECOZONES IN
THE COUNTRYSIDE WITH AN AREA OF AT LEAST 50 HECTARES.

(H) COUNTRYSIDE - REFERS TO RURAL AND LESS DEVELOPED AREAS
OUTSIDE METRO MANILA-CITIES AND HIGHLY URBANIZED GROWTH
CENTERS.”
(D INDIRECT-EXPORTERS/DOMESTIC ENTERPRISES-REFER TO SUPPLIERS
OF EXPORTERS WHICH ARE LOCATED INSIDE THE ECONOMIC ZONES
SECTION 3. Section 5 of Republic Act No. 7916 is hereby amended to read as follows:
“SEC. 5, Establishment of ECOZONES. — To ensure the viability and geographical dispersal
of ECOZONES through a system of prioritization, the following areas are initially identified
as ECOZONES, subject to the criteria specified in Section 6:

(a)x xx

XXX

(mm) x x x
‘These areas shall be developed through any of the following schemes:
i. Private initiative;
ii, Local government initiative with the assistance of the national government, and
iii, National government initiative.
‘The metes and bounds of each ECOZONE are to be delineated and more particularly
described in a DESIGNATION TO BE ISSUED UPON APPROVAL OF THE PEZA
BOARD OF DIRECTORS, upon the recommendation of the HOST LGUs, which shall be
established under this Act, in coordination with the municipal and / or city council, National
Land Use Coordinating Committee and / or the Regional Land Use Committee. “J
SECTION 4. Section 6 of Republic Act No. 7916 is hereby amended to read as follows:
“SEC. 6. Criteria for the Establishment of Other ECOZONES. — In addition to the
ECOZONES identified in Section 5 of this Act, other areas may be established as
ECOZONES in a DESIGNATION TO BE ISSUED BY THE PEZA BOARD OF

DIRECTORS subject to the evaluation and recommendation of the PEZA, based on a
detailed feasibility and engineering study which must conform to the following criteria:


(a) The proposed area must be identified as a regional growth center in the Medium-Term
Philippine Development Plan or by the Regional Development Council,

(b) The existence of required infrastructure in the proposed ECOZONE, such as
roads, railways, telephones, ports, airports, etc., and the suitability and capacity of the
proposed site to absorb such improvements,

(c) The availability of water source and electric power supply for use of the
ECOZONE AND HIGH SPEED FIBER-OPTIC TELECOMMUNICATION
BACKBONE AND HIGH-SPEED INTERNATIONAL GATEWAY FACILITY
OR WIDE AREA NETWORK (WAN) OR ANY HIGH SPEED DATA
TELECOMMUNICATION SYSTEM THAT MAY BE AVAILABLE IN THE
FUTURE, FOR IT PARKS/CENTERS,

(d) The extent of vacant lands available for industrial and commercial development
and future expansion of the ECOZONE as well as of lands adjacent to the ECOZONE
available for development of residential areas for the ECOZONE workers;

(€) The availability of skilled, semi-skilled and non-skilled trainable labor force in and
around the ECOZONE;

( The area must have a significant incremental advantage over the existing economic
zones and its potential profitability can be established;

(g) The area must be strategically located AND ESTABLISHED IN HAZARD
AND DISASTER RESILIENT AREAS; and

(h) The area must be situated where controls can easily be established to curtail
smuggling activities.

Other areas which do not meet the foregoing criteria may be established as
ECOZONES: Provided, That the said area shall be developed only through local
government and/or private sector initiative under any of the schemes allowed in
Republic Act No. 6957 (the build-operate-transfer law), and without any financial
exposure on the part of the national government: Provided, further, That the area can
be easily secured to curtail smuggling activities: Provided, finally, That after five (5)
years the area must have attained a substantial degree of development, the indicators
‘of which shall be formulated by the PEZA.”

SECTION 5. Section 8 of Republic Act No. 7916 is hereby amended to read as follows:
“SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. — The

ECOZONE shall be managed and operated by the PEZA as separate ADMINISTRATIVE
AND customs territory.


SECTION 6. Section 11 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 11. The Philippine Economic Zone Authority (PEZA) Board. ~ There is hereby
created a body corporate to be known as the Philippine Economic Zone Authority (PEZA)
UNDER THE OFFICE OF THE PRESIDENT. The Board shall have a director general
with the rank of department SECRETARY who shall be appointed by the President AND
SHALL HAVE A TERM OF SIX (6) YEARS, UNLESS RENEWED, OR REMOVED
FOR A CAUSE. The director general shall be at least forty (40) years of age, 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 director general shall be assisted by FOUR (4) deputy director generals each for policy,
planning AND PROGRAMS; FINANCE AND administration; ENTERPRISE operations
‘AND INCENTIVES MANAGEMENT, AND SPECIAL ECONOMIC ZONE
DESIGNING, RESEARCH AND MARKETING who shall be appointed by the PEZA
Board, upon the recommendation of the director general. The deputy directors general shall
be at least thirty-five (35) years old, with proven probity and integrity, and a degree holder in
any of the following fields: economics, business, public administration, law, management or
their equivalent. THE DIRECTOR GENERAL SHALL ALSO SIT AS MEMBER OF
THE BOARD OF DIRECTORS OF THE NATIONAL ECONOMIC DEVELOPMENT
AUTHORITY (NEDA) AND THE TECHNICAL EDUCATION AND SKILLS
DEVELOPMENT AUTHORITY.

"The Board shall be composed of TWENTY (20) members as follows: the Director General
of the Philippine Economic Zone Authority as CHAIRMAN, the undersecretaries of the
Department of Finance, the Department of Labor and Employment, the Department of
Interior and Local Government, the Department of Environment and Natural Resources, the
Department of Agriculture, the Department of Public Works and Highways, the Department
of Science and Technology, the Department of Energy, THE DEPARTMENT OF TRADE
AND INDUSTRY, THE DEPARTMENT OF TOURISM, THE DEPARTMENT OF
‘TRANSPORTATION, THE DEPARTMENT OF INFORMATION AND
COMMUNICATIONS TECHNOLOGY, THE DEPARTMENT OF NATIONAL
DEFENSE, the Deputy Director General of the National Economic and Development
Authority, THE DEPUTY DIRECTOR GENERAL OF TECHNICAL EDUCATION
'AND SKILLS DEVELOPMENT AUTHORITY, THE VICE CHAIRPERSON OF THE
‘COMMISSION OF HIGHER EDUCATION, one (1) representative from the investors /
business sector in the ECOZONE, ONE (1) REPRESENTATIVE FROM THE LABOR
SECTOR IN THE ECOZONE AND ONE (1) REPRESENTATIVE FROM THE
UNION OF LOCAL AUTHORITIES OF THE PHILIPPINES (ULAP);"

‘The existing Export Processing Zone Authority (EPZA) created under Presidential Decree
No. 66 shall evolve into the PEZ.A in accordance with the guidelines and regulations set forth
in an executive order issued for this purpose.

ONLY NON-EX OFFICIO members of the Board shall receive a per diem of not less than
the amount equivalent to the representation and transportation allowances of the members of
the Board and / or as may be determined by the Department of Budget and Management:
Provided, however, That per diems collected per month does not exceed the equivalent of
four (4) meetings.


SECTION 7. Section 12 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 12. Functions and Powers of PEZA Board. ~ The Philippine Economic Zone Authority
(PEZA) Board shall have the following functions and powers:

(a) Set the general policies on the establishment and operations of the ECOZONES, industrial
estates, export processing zones, free trade zones, and the like;

(b) Review proposals for the establishment of SPECIAL ECONOMIC ZONES AS
DEFINED UNDER SECTION 2 OF THIS ACT, AND based on the set criteria under
Section 6 and DESIGNATE the establishment of the ECOZONES, industrial estates, export
processing zones, IT PARKS AND/OR CENTERS, free trade zones and the like.
Thereafter, it shall facilitate and assist in the organization of said entities;

(c) Regulate and undertake the establishment, operation and maintenance of utilities, other
services and infrastructure in the ECOZONE, such as heat, light and power, water supply,
telecommunication, transport, toll roads and bridges, port services, etc., and to fix just,
reasonable and competitive rates, charges and fees therefore. FOR THIS PURPOSE, THE
PEZA BOARD SHALL EXERCISE EXCLUSIVE JURISDICTION AS THE
REGULATOR OF UTILITIES INSIDE THE ECOZONES AND SHALL HAVE THE
AUTHORITY TO ISSUE FRANCHISE OVER POWER, WATER,
COMMUNICATION AND OTHER UTILITIES IN THE ECOZONES;

(d) Approve the annual budget of the PEZA and the ECOZONE development plans;

(e) Issue rules and regulations to implement the provisions of this Act in so far as its power
and functions are concerned;

(f) Exercise its powers and functions as provided for in this Act; and

(g) Render annual reports to the President and the Congress.”

SECTION 8. Section 13 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 13. General Powers and Functions of the Authority. — The PEZA shall have the
following powers and functions:

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

(b) To register, regulate, GRANT INCENTIVES UNDER SECTION 10 OF THIS ACT
and supervise the enterprises in the ECOZONE in an efficient and decentralized manner;

(©) To coordinate with local government units and exercise general supervision over the
development, plans, activities and operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;

9


(d) In coordination with local government units concerned and appropriate agencies, to
construct, acquire, own, lease, operate and maintain on its own or through contract, franchise,
license, bulk purchase from the private sector and build-operate-transfer scheme or joint
venture, adequate facilities and infrastructure, such as light and power systems, water supply
and distribution systems, telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the operation and development of the
ECOZONE;

{(€)] (2) TO EXCLUSIVELY ENFORCE AND ADMINISTER THE PROVISIONS OF
‘THE NATIONAL BUILDING CODE OF THE PHILIPPINES AND THE FIRE CODE
OF THE PHILIPPINES WITHIN THE TERRITORIAL JURISDICTION OF THE
ECOZONES;

(F) TO ISSUE SPECIAL REGULATIONS FOR THE BENEFIT OF PARTICULAR
INDUSTRIES, DESIGNED TO IMPROVE EASE OF DOING BUSINESS,
DECREASE COST OF DOING BUSINESS AND LOWER BUREAUCRATIC
BURDENS OF INVESTING AND DOING BUSINESS WITHIN THE ECOZONES;
PROVIDED THAT, SUCH SPECIAL REGULATIONS SHALL NOT BE CONTRARY
TO EXISTING LAWS;

(G) TO SUPPORT THE OPERATIONS OF REGISTERED ENTERPRISES BY
SUBSIDIZING THE COST OF POWER, WATER AND OTHER UTILITIES
INCLUDING THE FREE USE OF LAND IN THE PUBLIC ECOZONES, SUBJECT
TO A CRITERIA TO BE APPROVED BY THE PEZA BOARD OF DIRECTORS
AND THE APPROVAL OF THE PRESIDENT OF THE PHILIPPINES. THE
CRITERIA FOR THE GRANT OF SUBSIDY WILL INCLUDE AMONG OTHERS
THE AMOUNT OF INVESTMENTS AND EMPLOYMENT GENERATION AND
WILL BE PERFORMANCE-BASED, TARGETED, TRANSPARENT AND
TIMEBOUND.

[(e)] (ED To create, operate and/or contract to operate such agencies and functional units or
offices of the authority as it may deem necessary;

[(®)] (@) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise
dispose of personal or real property; sue and be sued; and otherwise carry out its duties and
functions as provided for in this Act;

[(g)] (8) To coordinate the formulation and preparation of the development plans of the
different entities mentioned above;

[(h)] (K) To coordinate with the National Economic Development Authority (NEDA), the

rent of Trade and Industry (DTI), the Department of Science and Technology
(DOST), and the local government units and appropriate government agencies for policy and
program formulation and implementation; and

[(d] (L) To monitor and evaluate the development and requirements of entities in subsection
(a) and recommend to the local government units or other appropriate authorities the location,
incentives, basic services, utilities and infrastructure required or to be made available for said
entities.

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(M) TO INTEGRATE COMMERICAL, RESIDENTIAL AREAS, TRAINING,
EDUCATIONAL AND MEDICAL FACILITIES AND SERVICES TOWARDS
TOWNSHIPS IN PUBLIC ECONOMIC ZONES WHICH CAN BE REPLICATED IN
DEVELOPING PRIVATE ECONOMIC ZONES;

(N) TO ESTABLISH AND DEVELOP A SPECIAL ECONOMIC ZONE INSITUTE
(SEZ INSTITUTE) IN EVERY REGION TO SERVE AS A RELATIONSHIP
MANAGER AMONG THE INDUSTRY, THE ACADEME (HIGHER EDUCATION
INSTITUTIONS) AND THE LOCAL STAKEHOLDERS IN BUILDING A JOINT AND
INTEGRATED CAPACITIES IN RESEARCH, INSTRUCTION AND SOCIO-
CULTURAL DEVELOPMENT SERVICE THAT SHALL FORMULATE A
GLOBALLY COMPETITIVE BUT LOCALLY-POSITIONED STRATEGY IN
GENERATING INVESTMENT, EXPORT AND EMPLOYMENT FOR AND IN
EVERY PROVINCE.

THE SEZ INSTITUTE SHALL EXERCISE COORDINATION, COLLABORATION
AND COOPERATION AMONG PARTNERS AND STAKEHOLDERS IN CRAFTING
‘A HARMONIZED AND HOLISTIC POLICIES AND PROGRAMS THAT SHALL
‘ADDRESS THE FACTORS WHICH ATTRACT THE INTEREST OF INVESTORS
AND SECURE A COMPETITIVE DIRECTION OF EXPORT-ORIENTED
INDUSTRIES, SUCH AS RESEARCH-AND-DEVELOPMENT SERVICE (R&D
SERVICE), INDUSTRY-RESPONSIVE KNOWLEDGE MANAGEMENT SERVICE,
INDUSTRY-EMPLOYABLE HUMAN RESOURCES, COMPREHENSIVE
LITERATURE ON SUPPLY VALUE CHAIN, INTERNATIONAL MARKETING
PORTFOLIO, AND OTHER RELEVANT INITIATIVES.

THE SEZ INSTITUTE SHALL BE ESTABLISHED AS AN ORGANIC AND
REGULAR FIELD OFFICE OF PEZA IN EVERY REGION WHOSE
ORGANIZATIONAL STRUCTURE AND STAFF COMPLEMENT SHOULD
REFLECT THE ESSENTIALS OF INVESTMENT PROMOTION AND ECOZONE
‘ADMINISTRATION IN THE CONTEXT OF KNOWLEDGE ECONOMY. THE
MAJOR STAFF UNITS OF THE INSTITUTE SHALL INCLUDE RESEARCH
MANAGEMENT UNIT, INSTRUCTION MANAGEMENT UNIT, AND SOCIO-
CULTURAL DEVELOPMENT SERVICE UNIT, AMONG OTHERS.

(O) 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

(P) TO BE VESTED WITH OTHER POWERS ENJOYED OR EXERCISED BY
OTHER ECONOMIC ZONE AND/OR FREE PORT ZONE AUTHORITIES.”

SECTION 9. Section 14 of Republic Act No. 7916 is hereby amended to read as follows:
“SEC. 14. Powers and Functions of the Director General. ~ The director general shall be the
overall coordinator of the policies, plans and programs of the ECOZONES. As such, he shall
provide overall supervision over and general direction to the development and operations of
these ECOZONES. He shall determine the structure and the staffing pattern and personnel

i


complement of the PEZA and establish regional offices, when necessary, subject to the
approval of the PEZA Board.

In addition, he shall have the following specific powers and responsibilities:

(a) To safeguard all the lands, buildings, records, monies, credits and other properties and
rights of the ECOZONES;

(b) To ensure that all revenues of the ECOZONE are collected and applied in accordance
with its budget;

(©) TO RECOMMEND TO THE PEZA BOARD THE DESIGNATION OF SEZs IN
ACCORDANCE WITH SET POLICIES AND STANDARDS;

{()] @) To ensure that the investors/firms and employees of the ECOZONES are properly
discharging their respective duties;

{(@)] (E) To give such information and recommend such measures to the Board, as he shall
deem advantageous to the ECOZONE;

[©] ) To submit to the Board, the ongoing and proposed projects, work and financial
program, annual budget of receipts, and expenditures of the ECOZONE;

[()] (G) To represent the ECOZONE in all its business matters and sign on its behalf after
approval of the Board, all its bonds, borrowings, contracts, agreements and obligations made
in accordance with this Act;

[(g)] (ED To acquire jurisdiction, as he may deem proper, over the protests, complaints, and
claims of the residents and enterprises in the ECOZONE concerning administrative matters;

[(h)] (1) To recommend to the Board the grant, approval, refusal, amendment or termination
of the ECOZONE franchises, licenses, permits, contracts, and agreements in accordance with
the policies set by the Board;

{@] () To EXERCISE EMINENT DOMAIN AND POLICE POWER, INCLUDING,
BUT NOT LIMITED TO, require owners of houses, buildings or other structures
constructed without the necessary permit whether constructed on public or private lands, to
remove or demolish such houses, buildings, structures within sixty (60) days after notice and
upon failure of such owner to remove or demolish such house, building our structure within
said period, the director general or his authorized representative may summarily cause its
removal or demolition at the expense of the owner, any existing law, decree, executive order
and other issuances or part thereof to the contrary notwithstanding;

[G)] (K) To take such emergency measures as may be necessary to avoid fires, floods and
mitigate the effects of storms and other natural or public calamities,

[(k)] (L) To prepare and make out plans for the physical and economic development of the

ECOZONE, including zoning and land subdivision, and issue such rules and regulations
which shall be submitted to the Board for its approval; and

12


[()] (Mf) To perform such other duties and exercises such powers as may be prescribed by the
Board, and to implement the policies, rules and regulations set by the PEZA.”

SECTION 10. Section 16 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 16. Personnel. — The PEZA Board of Directors shall provide for an organization and
staff of officers and employees of the PEZA, and upon recommendation of the director
general with the approval of the PRESIDENT OF THE PHILIPPINES, appoint and fix the
remunerations and other emoluments: Provided, That the Board shall have exclusive and final
authority to promote, transfer, assign and reassign officers of the PEZA, any provision of
existing law to the contrary notwithstanding: Provided, further, That the director general may
carry out removal of such officers and employees.

All positions in the PEZA shall be governed by a compensation, position classification
system and qualification standards approved by the director general with the concurrence of
the Board of Directors based on a comprehensive job analysis and audit of actual duties and
responsibilities. The compensation plan shall be comparable with the prevailing
compensation plans in the Subic Bay Metropolitan Authority (SBMA), Clark Development
Corporation (CDC), Bases Conversion and Development Authority (BCDA) and the private
sector and shall be subject to the periodic review by the Board no more than once every two
(2) years without prejudice to yearly merit reviews or increases based on productivity and
profitability. The PEZA shall therefore be exempt from existing laws, rules and regulations
on compensation, position classification and qualification standards. It shall however
endeavor to make its systems conform as closely as possible with the principles under
Republic Act No. 6758. PROVIDED, FURTHER, AS A GOVERNMENT
INSTRUMENTALITY THAT REMITS DIVIDENDS TO THE NATIONAL
GOVERNMENT, THE PEZA SHALL BE UNDER THE GOVERNANCE
COMMISSION FOR GOVERNMENT OWNED AND CONTROLLED
CORPORATIONS.

‘The PEZA officers and employees including all Members of the Board shall not engage
directly or indirectly in partisan activities or take part in any election, except to vote.

No officer or employee of the PEZA subject to Civil Service laws and regulations shall be
removed or suspended except for cause, as provided by law.”

SECTION 11. Section 23 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 23. Fiscal Incentives. - REGISTERED ENTERPRISES OPERATING WITHIN
‘THE ECOZONES SHALL BE ENTITLED TO THE FOLLOWING INCENTIVES ON
A PER PROJECT BASIS AND SUBJECT TO CONTINUING COMPLIANCE OF THE
‘TERMS AND CONDITIONS OF PEZA:

(A) INCENTIVE PACKAGE TO ECOZONE REGISTERED ENTERPRISES
INCLUDING INDIRECT-EXPORTERS CLASSIFIED AS BASIC, STRATEGIC
AND BIG-TICKET INDUSTRIES SHALL ENJOY THE FOLLOWING
INCENTIVES:

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1, INCOME TAX HOLIDAY FOR TEN (10) YEARS FOR PIONEER
PROJECTS AND SIX (6) YEARS FOR NON-PIONEER PROJECTS.
ENTERPRISES THAT WILL LOCATE AND OPERATE IN THE RURAL
AREAS PARTICULARLY THOSE CLASSIFIED UNDER 3®, 4 AND 5”
(CLASS MUNICIPALITIES MAY BE GRANTED BY THE PEZA BOARD
ADDITIONAL INCOME TAX HOLIDAY FOR BIG-TICKET
INDUSTRIES.

2. AFTER THE ENJOYMENT OF THE ITH, ENTERPRISES SHALL BE
GRANTED A SPECIAL PREFERRED TAX RATE OF 7% GROSS
INCOME EARNED (GIE) IN LIEU OF ALL NATIONAL AND LOCAL
TAXES PROVIDED THAT, ENTERPRISES HAVE THE OPTION TO
IMMEDIATELY ENJOY THE 7% GIE INSTEAD OF THE ITH;

3. TAX AND DUTY FREE IMPORTATION OF RAW MATERIALS,
CAPITAL EQUIPMENT, SPARE PARTS AND OTHER SUPPLIES
RELATED TO THE REGISTERED ACTIVITY;

4. ZERO-VAT FOR LOCAL PURCHASES INCLUDING BILLS ON
UTILITIES;

5. ECOZONE EXPORT ORIENTED ENTERPRISES MUST MEET THE
FOLLOWING MINIMUM EXPORT REQUIREMENTS TO CONTINUE
ENJOYMENT OF THE AFORESAID INCENTIVES:

i, BASIC INDUSTRIES -30%
il STRATEGIC INDUSTRIES -50%
BIG-TICKET INDUSTRIES -70%

(B) ALLOWABLE DEDUCTIONS FOR BOTH EXPORTERS AND
INDIRECT EXPORTERS ENTERPRISES — BOTH THE EXPORTERS
AND INDIRECT EXPORTERS ENTERPRISES SHALL BE GRANTED
THE FOLLOWING ALLOWABLE DEDUCTIONS:

1. UP TO 50% ADDITIONAL DEDUCTION ON LABOR EXPENSES
FROM INCREASE OF DIRECT LOCAL EMPLOYMENT;

2. UP TO 100% ADDITIONAL DEDUCTION ON TRAININGS
CONDUCTED;

THE FOREGOING INCENTIVES SHALL BE REVIEWED BY THE PEZA BOARD
NO MORE THAN EVERY SIX (6) YEARS DEPENDING ON THE ECONOMIC
CONDITIONS OF THE REGIONS.

Furthermore, tax credits for exporters using local materials as Inputs shall enjoy the same
benefits provided for in the Export Development Act of 1994.”

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SECTION 12. Section 24 of Republic Act No. 7916 is hereby amended to read as follows:

“SEC. 24. Exemption from National and Local Taxes AND FEES- Except for real property
taxes on land owned by developers, no taxes AND FEES, local and national, shall be
imposed on REGISTERED ENTERPRISES operating within the ECOZONE. LOCAL
TAXES SHALL INCLUDE THE MAYOR’S PERMIT AND OTHER CHARGES,
PERMITS AND IMPOSITIONS BY THE LOCAL GOVERNMENT UNITS. In licu
thereof, A SPECIAL TAX RATE NOT EXCEEDING SEVEN percent (7%) of the gross
income eamed by all REGISTERED enterprises within the ECOZONE shall be paid and
remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the REGISTERED
ENTERPRISES to the treasurer’ office of the municipality or city where the enterprise is
located;

(©) ONE PERCENT (1%) WHICH SHALL BE DIRECTLY REMITTED BY THE
REGISTERED ENTERPRISES TO THE TREASURER’S OFFICE OF THE
PROVINCE OF THE MUNICIPALITY OR COMPONENT CITY WHERE THE
ENTERPRISE IS LOCATED EXCEPT THOSE LOCATED IN HIGHLY
URBANIZED CITIES; AND

(D) ONE PERCENT (1%) WHICH SHALL BE REMITTED TO PEZA.”

REGISTERED ENTERPRISES UNDER THE ITH REGIME SHALL ALSO BE
EXEMPT FROM PAYING LOCAL GOVERNMENT TAXES INCLUDING
MAYOR’S PERMIT AND OTHER CHARGES, PERMITS AND IMPOSITION BY
THE LOCAL GOVERNMENT UNITS. HOWEVER, REGISTERED ENTERPRISES
SHALL PAY REAL PROPERTY TAXES FOR THEIR BUILDINGS, MACHINERY
AND EQUIPMENT DURING THE TIME THAT THEY ARE UNDER THE ITH.

SECTION 13. Non-Impairment of Contract Permits/ Licenses. - All existing contracts,
permits and licenses duly granted by the PEZA before the date of effectivity of this Act, shall
remain valid, and unimpaired, shall be cured, and shall be recognized by the Government.

SECTION 14. Transitory Clause. ~ The current officials shall remain in office until
appointed by the appropriate authority.

SECTION. 15. Repealing Clause. - All laws, decrees, executive orders, rules and regulations
r parts thereof, inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SECTION 16. Separability Clause. - Any portion or provision of this Act that may be

declared unconstitutional shall not have the effect of nullifying other portions or provisions
hereof as such remaining provisions can still subsist and be given effect.

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SECTION 17. Effectivity. - This Act shall take effect after fifteen (15) days following its
complete publication in the Official Gazette or in two (2) newspapers of general circulation
whichever is earlier.

Approved.

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