Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

H.B.No,_ 099

Introduced by HONORABLE JUAN EDGARDO “SONNY” M. ANGARA

EXPLANATORY NOTE

The last decades of the 20" century saw rapid advances in our knowledge of life and its
mechanisms that have given rise to a new set of practical tools and techniques collectively
referred to as biotechnology. Biotechnology, in tum, developed for the world novel products
such as safer, more effective pharmaceuticals, less capital-intensive crops and less polluting
industrial and agricultural production systems. In this century, with concerns about climate
change, non-renewable energy sources, dwindling fresh water supply, increasing population
and environmental protection on one hand, and new discoveries in biology on the other, these
factors are expected to greatly increase the number of technologies developed based on
biological systems. Thus, the 21* century has been hailed the biotech century.

The world biotechnology industry is a multibillion industry. Investment in medical
biotechnology alone is estimated at US$200 billion whereas investment in agricultural
biotechnology was worth US$67 billion in 2003. The start of the 21" century indicates the
coming convergence of agriculture and medicine with pharmaceuticals being produced by
genetically engineered plants and the greater acceptance of herbal medicine. The biotech
century will further see the integration of agriculture and industry especially in energy
production. Enzyme-based processing of agricultural produce and its by-products are being
developed to produce biofuels, plastics and other products. It is predicted that this will
eventually comprise the largest sector of the biotechnology industry.

As early as 1979, the Philippine government has invested in biotechnology with the?
establishment of the National Institute of Biotechnology and Microbiology (BIOTECH), now
known as the National Institute of Molecular Biology and Biotechnology at UP Los Bajios. This
institute has been replicated in four other campuses of the University of the Philippines System,
In mid-1980s, the Department of Science and Technology identified biotechnology as a priority
investment area and developed the UPLB science park for business incubation. The
Department of Agriculture two years ago organized its leading research centers — Philippine
Rice Research Institute, Philippine Carabao Center, and National Fisheries Research Institute
into a network of biotechnology research centers for crops, livestock and aquatic resources,
respectively. Still these investments have not sufficiently fostered the growth of a biotechnology
industry as what was previously envisioned in the establishment of the BIOTECH at UP Los
Bajos.

The US, Canada, Australia and several EU countries, as well as Singapore, Malaysia,
China, India and Taiwan, have put in place a policy environment that encourages bioindustry
development. These policies include support for high quality research, support to rapidly
develop research results into marketable products/services, support for start-up companies, and
other incentives for industry to develop/adopt new technologies. Large and competitive grants
are provided for high quality research work in research institutions. Huge grants are also
Provided for industry-public collaborations to fast-track technology development. Guarantee
funds for venture capital investing in biotechnology have been provided. Science


parks/bioincubators were established to provide infrastructure, technical, administrative,
marketing and legal support for start-up companies. Technology transfer from public research
institution is encouraged. For example, the US passed the Bayh-Doyle Act in 1980 which was
credited with stimulating significant growth in university-industry technology transfer and
research collaborations. France encourages scientists to become entrepreneurs by allowing
them to leave their post for a maximum of 6 years and awards a maximum of 15% of capital in
the creation of a start-up. Protection of intellectual property rights further encouraged technology
development and biotechnology companies are graded according to their patent portfolios. In
Malaysia and Singapore, foreign companies are encouraged to locate in their countries;
whereas Canada requires foreign companies doing business within the country to establish
R&D units,

In the Philippines, we need to put in place the appropriate policy environment to promote
bioindustry development. Biodiversity, our greatest resource, remains untapped. While we
continue to train scientists, lack of local employment lead them either to other occupations or to
foreign shores. The cumbersome government accounting and auditing procedures often results
in poor fund utilization in public research institutions and stifles scientific creativity. industry-
academe collaborations in technology development are few. Many policies encourage individual
rather than multidisciplinary achievements, yet biotechnology requires amultidisciplinary
approach. Government funds for research cannot be committed for terms longer than one year
yet technology and product development may take years. Venture capital for biotechnology is
virtually non-existent. The present bioprospecting policy is biased against a Filipino start-up and
favors well-capitalized foreign companies. Many scientists are not familiar with intellectual
property rights protection. Although biotechnology investment is highly profitable, it is also very
risky with a long gestation period, hence, private sector investments in biotechnology R&D is
low.

The proposed legislation intends to address the weaknesses of our system to enable the
country to develop a biotechnology-based industry. The private sector is given, incentives to
invest in biotechnology R&D by allowing the total R&D cost and prices of shares of stocks in
biotech companies as tax deductible. Majority of the government's investments in biotechnology
R&D is awarded through a government corporation so as to lessen the burden of an unwieldy
accounting and auditing system

JUAN EDGAR)
Representative
Lone District, Province of Aurora

“SONNY” M. ANGARA


FIFTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES —_)
First Regular Session )

H. B, No.

Introduced by Honorable JUAN EDGARDO “SONNY” M. ANGARA

AN ACT
PROMOTING THE GROWTH OF A BIOTECHNOLOGY INDUSTRY IN THE
PHILIPPINES AND THE CREATION OF WEALTH FROM BIODIVERSITY

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

SECTION. 1. Short Title. — This Act shall be known as the “Biotechnology Industry
Development Act of 2010.”

SEC. 2. Declaration of Policy. ~ It is hereby declared the policy of the State to fully
recognize that biotechnology is a powerful tool in the creation of wealth from human capital as
well as from biodiversity

SEC. 3. Objective. - The Act aims to put in place a policy environment for the
continuing generation and application of biological knowledge and promote the sustainable
growth of a biotechnology-based industry.

SEC. 4. Definition of Terms. — As used in this Act, the following terms shall be taken to

mean as follows:
(a) “Biodiversity” refers to the variability among living organisms from all sources,
including, terrestrial, marine, and other aquatic ecosystems, and the ecological

complexes of which they are part, such as diversity within species, between
species and of ecosystems;

(b)  “Bioindustry” or “biotechnology-based industry” consists of companies
involved in research, development, manufacture and sale of materials such as
cell cultures, catalysts, genetic materials, immune response materials,
biochemicals, enzymes, proteins, bioactive molecules, genetically engineered
organisms, and equipment specifically used in biological and genetic research. It
also includes service organizations performing consulting, testing, processing,
and storage of such products;

(©) “Biotechnology” refers to a set of tools and procedures involving living
organisms or parts thereof that produces a product or service;

(d) “Start-up” refers to a newly established biotech company for profit.


CHAPTER II
THE PHILIPPINE BIOINDUSTRY R&D CENTER

SEC. 5. The Philippine Bioindustry Research and Development Center. — To ensure

the continued availability of suitable yet innovative and competitive bio-based technologies, a

Philippine Bioindustry Research and Development (R&D) Center (hereafter the “Center’) shall

be established.

SEC. 6. Functions of the Center. The Center shall perform the following functions:

(a)
(b)

()
(d)

(e)

Develop and market competitive, biologically-based technologies and products;
Hamess Philippine biodiversity in developing competitive products for the world
market;

Conduct contract research and provide technical services to the public;

Manage a Biotechnology Research Fund that will support off-Center research
and development relevant to its corporate objectives as well as support a
research fellowship and training program;

Establish state of the art facilities for research and study.

SEC. 7. Powers of the Center. - To enable the Center to carry out its functions, it shall
have the following powers

fa)

(b)
(0)

(e)

)

To own, hold, plan and construct buildings and other facilities as may be
necessary or proper to attain its purposes and objectives;
To enter into, make and execute contracts and agreements of any kind or nature;
To borrow money and obtain loans from all sources, whether local or foreign and
whether government or private, in order to finance its research programs and its
capital and operating expenditures;

To invest in, purchase or otherwise acquire, own, hold, use, lease, mortgage,
pledge, encumber, sell, assign, convey, exchange, or otherwise deal in real
and/or personal properties of whatever kind and nature, or any interest therein,
including shares of stock, bonds, notes, securities and other evidences of
indebtedness of natural or juridical persons, whether domestic or foreign and
whether government or private;

To conduct bioprospecting activities: Provided, That in conducting these
activities, it shall be exempted from the fees and requirements of Republic Act
No, 9147, otherwise known as The Wildlife Resources Conservation and
Protection Act;

To acquire or obtain from any governmental authority, whether national or local,
foreign or domestic, or from any person, corporation, partnership, association or
other entity, such charters, franchises, licenses, rights, privileges, assistance,
financial or otherwise, and concessions as are conducive to and necessary or
proper for the attainment of its purposes and objectives;


(9)

(h)

10)

(k)

To receive and acquire from any person, government and other private entity,
whether foreign or domestic, grants, donations and contributions consisting of
such properties, real or personal, including funds and valuable effects or things,
as may be useful, necessary or proper to carry out its purposes and objectives
and to administer the same in accordance with the terms of such grants,
donations and contributions, consistent with its purposes and objectives;

To establish new corporations solely, in partnership, or in consortium with other
entities; .

To exercise all the powers of a corporation under the general corporation law,
insofar as such powers are not inconsistent with the provisions of this Act; and
To exercise such other powers and functions and perform such other acts as
may be necessary, proper or incidental to the attainment of its purpose and
objectives.

SEC. 8. Composition of the Board of Directors. — The Center shall have a corporate
structure and be governed by a Board of Directors (hereafter the “Board") composed of:

(a)

(b)
©
@)

The Secretary of the Department of Trade and Industry (DTI) as the ex-officio
Chairperson;

The President of the Center;

Three (3) business leaders;

Two (2) respected scientists, in any one the relevant fields of molecular biology,
biotechnology, genetics, biochemistry, chemistry or chemical/bioprocess
engineering

Initially, the members of the Board shall be selected by the Chairperson based on a set
of criteria to be determined and from nominations submitted by the Biotechnology Coalition of
the Philippines (BCP), Chamber of Herbal Industries of the Philippines, Inc. (CHIPI), and
Philippine Food Processors and Exporters Organization Inc. (PhilFoodex)

‘SEC. 9. Functions of the Board of Directors. - The Board shall exercise the following
powers and functions:

(a)

(b)

©

To define and approve the programs, plans, policies, procedures and guidelines
for the Center in accordance with its purposes and objectives, and to control the
management, operation and administration of the Center;

To approve the Center's organizational structure, staffing pattern, operating and
capital expenditure, and financial budgets, prepared in accordance with the
corporate plan of the Center; .

To approve salary ranges, benefits, privileges, bonuses, and other terms and
conditions of service for all officers and employees of the Institute, upon
recommendation of the President;

To appoint, transfer, promote, suspend, remove or otherwise discipline any
subordinate officer or employee of the Center, upon recommendation of the
President;


(e) To create such committee or committees and appoint the members thereof, as
may be necessary or proper for the management of the Center or for the
attainment of its purposes and objectives;

(To determine the research priorities of the Center consistent with the framework
of its purposes and objectives; and

(a) To exercise such other powers and functions and perform such other acts as
may be necessary or proper for the attainment of the purposes and objectives of
the Institute.

SEC. 10. President and Other Officers. — The Center shall be headed by a President
who shall be appointed by the Board. He/she shall serve at the pleasure of the Board of
Directors.

The President shall be assisted by a Vice-President and such other Program Managers
as the Board may determine to carry out the purposes and objectives of the Center.

SEC. 11. Powers, Functions and Duties of the President. - The President shall be

directly responsible to the Board, and shall have the following powers, functions and duties:

(a) To exercise over-all supervision and direction over the implementation of all
research, development and marketing programs of the Center, and in general, to
supervise and direct the management, operation and administration of the
Center;

(b) To draft a program of operation for the implementation of all activities necessary
to attain the objectives of the Center subject to the approval of the Board;

(c) To execute contracts, incur obligations, acquire and dispose of assets and
deliver documents on behalf of the Center within the limits of the authority
delegated to him by the Board;

(d) To implement and enforce policies, decisions, orders, rules and regulations
adopted by the Board; and

(e) To exercise such other powers and functions and perform such other duties as
may be authorized or assigned by the Board.

SEC. 12. Ownership of the Center. — The Center shall exist as a government-owned
and controlled corporation for a maximum period of ten (10) years from the effectivity of this Act,
after which time it shall be sold off to the private sector: Provided, however, That in the event
the Center becomes profitable earlier than the ten (10) year period provided, it shall be sold off
to the private sector despite the period not having lapsed. .

SEC. 13. Scientific Manpower. — To enable the Center to retain its scientific staff, it
shall offer salaries at rates competitive with other countries. Upon the privatization of the Center,
fifteen percent (15%) of the shares shall be awarded to the scientific staff that has been with the
Center for at least five (5) years and has produced at least one patented technology or eight (8)


articles published in scientific journals cited in the Institute for Scientific Information (ISI) Journal
Citation Report.

SEC. 14. Initial Operations. - The BCP is hereby designated to draft a Program of
Operations for the Center. The Secretary of the DTI is hereby authorized to provide a grant of
Three Million Pesos (P3,000,000.00) to enable the BCP to carry out this function.

SEC. 15. Funding - The amount of Five Hundred Million Pesos (P500,000,000.00) shall

be released to cover the operation of the Center for ten (10) years.

CHAPTER III
THE BIOTECHNOLOGY GUARANTEE FUND

SEC. 16. The Biotechnology Guarantee Fund. — A Biotechnology Guarantee Fund in
the amount of Five Hundred Million Pesos (P500,000,000.00) is hereby established to provide
guarantee for venture capital invested in biotechnology companies.

CHAPTER IV
INCENTIVES FOR BIOTECH COMPANIES AND COMPANY START-UPS

SEC. 17. A biotech company shall, for a period of five (5) years from the time it is subject
to corporate income tax, deduct the funds expended in R&D within the country from its taxable
income, Biotech companies can also avail of the incentives granted to companies registered as
Barangay Micro Business Enterprises (BMBEs) in accordance with Republic Act No. 9178; or
registered with the Philippine Economic Zone Authority (PEZA) in accordance with Republic Act
No, 7916 or Board of Investments (BO!) in accordance with Executive Order No. 226, otherwise
known as the Omnibus Investments Code of 1987, as amended. After the income tax holidays
provided by such instruments have expired, the R&D expenditures of the biotech companies
can then be used as tax deduction

SEC. 18. A biotech company shall be allowed to purchase equipment, materials and
articles abroad, as may be necessary or proper to carry out its powers and functions and attain
its purposes and objectives, and shall be exempt from the payment of any and all forms of
taxes, duties, fees and charges imposed by any governmental authority, whether national or
local, on any and all such importation of equipment, materials, articles and services: Provided
however, that the same are not available locally on favorable terms.

SEC. 19. Shareholders of new locally-based biotechnology companies shall be able to
claim as tax credit the amount paid for the shares in the same taxable year.

SEC. 20. Scientists in public institutions are hereby allowed up to five (5) years leave of
absence to establish a biotech start-up based on technologies they themselves developed.

5


SEC. 24, In order to encourage top executives and technology investors to participate in
the operation of biotech companies and R&D activities and to share their achievements, new
shares issued by a biotech company to top executives and technology investors (in return for
their knowledge and technology) shall be excluded from the amount of their consolidated
income or corporate income of the current year for taxation purposes: Provided, however, That
if the title to the aforesaid shares is transferred with or without consideration, or distributed as
estate, the total purchase price or the market value of the shares at the time of transfer as a gift
or distribution as estate shall be deemed income generated in that taxable year and such
income less the acquisition cost shall be reported in the relevant income tax return.

SEC. 22. Subject to the approval of the Department of Agriculture, the Agricultural
Competitiveness Enhancement Fund can be used as financial grants for technology start-ups
with agriculture- and aquaculture-related products and services for seed capital and for
subsequent expansion.

CHAPTER V
MISCELLANEOUS PROVISIONS

SEC. 23. Repealing Clause. The pertinent provisions of Republic Act No, 9147,
otherwise known as The Wildlife Resources Conservation and Protection Act; and all other
laws, presidential decrees or issuances, executive orders, presidential proclamations, rules and
regulations or parts thereof inconsistent with the provisions of this Act, are hereby repealed,
modified or amended accordingly.

SEC. 24. Separability Clause. |f any provision of this Act is declared unconstitutional,
the same shall not affect the validity and effectivity of the other provisions hereof.

SEC. 25. Effectivity. This Act shall take effect fifteen (15) days after its publication in at
least two (2) newspapers of general circulation.

Approved,