HOUSE 0° REPRESENTATIVES

RECEIVI
27 JUL 204 a
DATE:

TING:

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

Seventeenth Congress
First Regular Session

SSTPATION UNIT
Se Xx SE E
2053 SERVICE
HOUSE BILL NO.

Introduced by Representative Arthur R. Defensor, Jr.

EXPLANATORY NOTE

‘This bill creates the Jalaur Economic Corridor (JEC) in the Province of Hoilo
(the Province). The JEC shall be a customs territory in the nature of a Domestic
Industrical Zone created under the Investment and Incentives Code, It is meant to
realize to the fullest, the benefits of the Jalaur Multi-Purpose Project I (MPP 1) andl
Jalaur Multi-Purpose Project II (MPP Il). JMPP I is an existing National Irrigation
System, created uncer Republic Act No. 2651, “An Act Providing for the
Construction of the Jalaur Multi-Purpose Project in the Province of Moilo and
Governing its Operation after its Completion”. On the other hand, the JMPP Il is a
new and landmark water control and utilization project, with irrigation, potable
water supply and power generation components. It is composed of a system of
dams, canals water supply connections, power generation facilities and power
supply connections. JMPP II costs P11.213B. It will be constructed along the Jalaur
River, and the other connected rivers, in the Province. The JMPP II shall fulfill the
following objectives:

a. To fully develop and harness the resources of the Jalaur River, and
make ita foundation and focal point of development;

b. Provide irrigation, and consequently, increased agricultural
production to the beneficiary local government units;

Generate substantial electric power to supplement the power
supply in the Province and City of Iloilo;

d. Augment supply of potable water for domestic and industrial
consumption in the covered local government units and Hoilo City;

e, Flood regulation and mitigation; and

f. Develop and promote eco-tourism in the covered areas.


The JEC shall be a Domestic Industrial Zone that will include the following
municipality beneficiaries of JMPP I and JMPP II: Cabatuan, Maasin, Pototan, Mina,
Janiuay, Badiangan, Lambunao, Calinog and Bingawan. Such are the covered
municipalities because of contiguity, proximity to strategic transport facilities, like
the Iloilo International Airport, and collaborative and convergent developmental
planning currently being undertaken by them. The establishment of the JEC shall
provide an investment incentives regime fo the resource based and oriented
development of the region, with water control and utilization, through the JMPPL
and JMPP II, as the frontline strategy. The JEC is intended as a food security hub of
the country, as well as, a primary eco-tourism destination. The relationship among
the covered local government units shall be founded on convergence, based on the
National Convergence Initiative of the government, and the common attribute of
being beneficiaries of the JMPP I and JMPP Il. The JEC, as a Domestic Industrial
Zone, shall be a commercial, financial, and investment center, however, focus shall
be on its being an agro-industrial and tourism/recreational zone. Development
shall be pursued primarily by the attraction of legitimate and serious investors,
through, inter alia (a) the strategic location of the JEC, being at the center of the
country; (b) the existing and potential transportation facilities, such as, the Hoilo
International Airport (c) skilled and experienced human resource in agriculture;
(d) the JMPP II, as a stable source of power, water for irrigation and domestic and
industrial consumption; and (e) the enjoyment of registered enterprises of the fiscal
and non-fiscal incentives.

The JECA is created based on the principle that local government units may
group themselves, consolidate, or coordinate their efforts, services and resources for
$ commonly beneficial to them, as declared in the Local Government Code

The Jalaur Economic Corridor Authority JECA) is created as an
institutional body for the formulation and implementation of the JEC Development
Program, While it is mandated to register and regulate the enterprises in the JEC,
formulate common investment promotion activities and harmonize investment
programs and policies, it shall not interfere with the exercise of the covered local
government units of their powers under the Local Government Code of 1991. It is
meant to be a locally sensitive, hands-on and low finance investment promotion
body that will harness the full potential of the region, and make it a globally
competitive food security and eco-tourism hub.

The JEC is a resource based and oriented approach, with water control and
utilization as the main strategy, that will provide a focused developmental thrust to
the Province of Iloilo, as well as, the whole country.

HUR R. DEFENSOR, JR



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

Seventeenth Congress

First Regular Session,
2003

HOUSE BILL. NO.

Introduced by Representative Arthur R. Defensor, Jr.

AN ACT ESTABLISHING THE JALAUR ECONOMIC CORRIDOR

CHAPTER I

TT.

1 Section 1, Short Title, - This Act shall be known as the “Jalaur Economic
2 Corridor Act”

4 CHAPTER II

6 DECLARATION OF POLICY

7

8 Section 2, Declaration of Policy. - ‘The following policies of the State are hereby
9 established:

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ul (a) ‘The State shall pursue a resource based and oriented approach to
12 development;

13

4 (b) Food security and tourism shall be prioritized to provide a focused
15 and deliberate developmental thrust to the economy;

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\7 (©) The role of the private sector, and its partnership with the
1 government, is indispensable in the pursuit of food security and
19 tourism;

20
at (a) Water is the primary resource of the country, and its control and
2 utilization is crucial in ensuring the availability and accessibility of
23 food, as well as, in the promotion of an ecologically sustainable
24 tourism industry; and

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(e) Local government units may group themselves, consolidate, or
coordinate their efforts, services and resources for purposes
commonly beneficial to them,

CHAPTER LL
JALAUR ECONOMIC CORRIDOR

Section 3, Jalaur Donwstic Industrial Zone, - In accordance with the foregoing,
declared policy, there is hereby established a Domestic Industrial Zone, as defined
under the Investment and Incentives Code, to be known as the Jalaur Economic
Corridor, hereinafter known as the JEC, which shall cover the entire area embraced
by the Municipalities of Cabatuan, Maasin, Pototan, Mina, Janiuay, Badiangan,
Lambunao, Calinog and Bingawan in the Province of Lloilo,

Section 4. Governing Principles. - The JEC shall be established and operated
under the following principles:

(a) ‘The establishment of the JEC shall provide an economic framework
for the resource based and oriented development of the region,
with water control and utilization, through the JMPP Il, as the
frontline strategy. The JEC shall be the food security hub of the
country, as well as, primary eco-tourism destination;

(b) The relationship among the covered local government units shall be
founded on convergence, based on the National Convergence
Initiative of the government, and the common attribute of being
beneficiaries of the JMPP I;

(©) The JEC, in the character of a Domestic Industrial Zone, shall be a
commercial, financial, and investment center, but pursuant of the
resource based and oriented approach, focus shall be on it being an
agro-industrial and tourism, recreational center; and

(a) Development shall be pursued primarily by the attraction of
legitimate and serious investors, through, inter alia: (i) the strategie
location of the JEC, being ‘at the center of the country; (ii) the
existing and potential transportation facilities, such as, the Hoilo
International Airport, which is of international standards; (iii)
skilled and experienced human resource in agriculture; (iv) the
JMPP i, as a stable source of power, water for irrigation and
domestic and industrial consumption; (v) and the enjoyment of
registered enterprise of the fiscal incentives.



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Section 5. Creation of the Jalaur Corridor Authority. - A body to be known as
the Jalaur Economic Corridor Authority (JECA) is hereby created to act as the policy
and program formulation body of the JEC, pursuant to the principles under Section 4
of this Act, and as an Investment Promotion Agency as defined by the Investment
and Incentives Code.

Section 6, Powers and Functions of the Jalaur Economic Corridor Authority, ~ The
JECA shall have the following functions:

(a) Act as the Institutional body mandated to formulate and
implement the JEC Development Program, which shall be
consistent with the Regional Development Plan, and the
corresponding Investment Priority Plan (IPP), which shall serve as
the list of industries, services and other economic activities that
shall be eligible for incentives under this Act;

(v) Register the enterprises in the JEC, and regulate them in so far as
consistent with Republic Act No, 7160;

(©) Develop the JEC as a globally competitive food security and eco-
tourism hub of the country;

(a) Review, identify and recommended priority infrastructut
for implementation;

project

(Fe

nulate common investment promotion activities;

(0) Harmonize in the covered local government units, such programs,
policies, rules and “regulations affecting investment, incentives,
customs, immigration, leasing, privatization, and other matters
necessarily related thereto;

(g) Perform such other functions as may be authe
objectives of this Act,

ed to achieve the

Section 7. Composition of the Jalaur Economie Corridor Authority The members
of the JECA are as follows: ;

(a) The Chairman of the National Economic Development Authority,
who shall serve as chairman, and presiding officer;

(b) Secretary of the Department of Agriculture;

(©) Secretary of the Department of Tourism;


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(a) Secretary of the Department Trade and Industry;

(©) Governor of the Province of lloilo;

(The nine (9) Municipal Mayors of the covered municipalities; and
(g) A Representative from the private sector.

‘The Representative from the private sector shall be appointed by unanimous
vote of the rest of the members of the JECA , to serve for a term of the three (3)
years, in case of vacancy, the appointed successor shall only serve the unexpired
portion of the term, Within fifteen days after this Act shall have taken effect, the
JECA shall convene to appoint the Representative from the private sector.

Section 8. Manager, Secretariat and Staff. The Representative from the private
sector shall serve as the Manager of the JECA, who shall ensure a policy and
program integration and coordination approach of the development of the JEC, and
who shall exercise the following functions:

(a) Oversight in the implementation of the JEC Development Program;

(b) Obtain the participation partner
public or private sectors;

, domestic or foreign, from the

(©) Obtain the participation, support and assistance of relevant
government agencies and instrumentalities in the formulation and
implementation of the JEC Development Program;

(a) Represent the JECA in dealings with offices, agencies and
instrumentalities of the government, as well as, in dealings with
persons and entities from the private sector, whether foreign or
domestic; ancl,

(ec) Such other functions, as may be necessary in the implementation of
the JEC Development Program, as may be assigned by the JECA,

‘The JECA shall have a Secretariat, with the Provincial Development and
Planning Coordinator, as the JECA Secretary, complemented by the Municipal
Development and Planning Coordinators of the covered municipalities. The JECA
staff shall include personnel assigned from the DTI, the Province and the covered
municipalities. Immediately after this Act shall have taken effect, the DTI, the
Province, and the covered municipalities, shall make such assignment of personnel
to the JECA. The DTI shall assign personnel to the JECA, sufficient for the
administration of registration, grant of incentives to investors/locators, and such
other related functions. The Province shall assign a Provincial Development and
Planning Coordinator to the JECA, and such other personnel, sufficient to provide



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staff support. The member municipalities shall likewise assign a Municipal
Development Planning Coordinator, and such other personnel to complement the
staff.

‘The Priovince shall provide an office space for the JECA in the Hoilo
Provincial Capitol.

The JECA shall formulate rules for the conduct of its business.
Section 8. Investment Priorities Plan. - The JECA, upon consultation with the

DTI shall formulate a focused IPP, which shall be valid for a period of three (3)
years,

In the listing of the activity in the IPP, the following shall be complied with:

(a) The activity shall be consistent with the JEC Development Plan;
(b) The activity shall satisfy the following:

(1) Substantial amount of Investments;

(2) Considerate generation of employment;

(3) Use of modern or new technology; or

(4) Iretallation of adequate environmental protection
systems.

Provitted, That items (b) (1) and (b) (4) above shall be present in all activities,
and the threshold amount of investments and employment generation required for
a specific activity shall be subject to a periodic review taking into consideration
international standards and/or other indicators.

Section 9. Qualifications of a Registered Enterprise. - To qualify for registration
and be entitled to avail of the incentives under this Act, an applicant must be
engaged in an activity listed in the IPP and must satisfy the following:

a. He is a citizen of the Philippines, in case the applicant is a natural
person, or in case of @ corporation or partnership or any other
association, regardless of nationality, it must be organized and/or
registered and existing under Philippine laws, and that it must
comply with all the qualifications provided under the Act:
Provided, however, that for the purposes of this Act, and any law
to the contrary notwithstanding, a natural born ASEAN citizen or a
corporation — effectively controlled by ASEAN citizens, or a


corporation organized in any ASEAN country shall be considered
as a Philippine investor: Provided, further, that the investment is
made in an activity where the Constitution does not specifically
require Filipino participation;

b. The activity it will engage in is not within the activities reserved by
the Constitution to Philippine citizens or corporations owned and
controlled by Philippine citizens;

c. Tt will infuse new investments. For this purpose “new
investments” shall mean a new enterprise infusing new
investments and undertaking new activity. However, an enterprise
with an existing operation may be qualified for registration if it will
undertake new activity. Further, an existing enterprise
undertaking the same activity that shall infuse additional
investments of at least fifty percent (50%) of its present actual
investments, shall be cleemed to be “new investments”, but only to
the extent of such additional investments; and

d. If the applicant is engaged. or proposes to engage in undertakings
or activities aside from the listed in the IPP, it shall install an
accounting system adequate to identify the investments, revenues,
costs, and profits or losses of each registered activity undertaken by
the enterprise separately from the aggregate investment, revenues,
cost and profits or losses of the whole enterprise, or to establish a

separate corporation for each registered activity if the JECA should

require to facilitate proper implementation of this Act.

Section 10. Fiscal incentives, - Establishments and enterprises registered with,
and Operating in, the JECA, may avail of the following incentives, whenever
applicable, to the extent of their registered activity:

(a) Income Tax Holiday (ITH) for a period of eight (8) years
‘Thereafter, fifty percent (50%) reduction from corporate income tax
for a period of seventeen (17) years;

(b) Value-Added Tax (VAT), and Customs Duty treatment on
importation of capital equipment, as follows:

(1) Exemption from customs duty on importation of
capital equipment, including consignment thereof,
subject to the pertinent provision of the Investment
and Incentives Code; and,

(2) Refund of VAT on importation of capital equipment



Reppe

200

Notwithstanding (a), ITH for a period of fifteen (15) years, and thereafter, five
percent (5%) tax on Gross Income Tax Earned (GIE), in lieu of all national taxes, and
such other incentives, may be granted by the President, upon the recommendation of
the JECA,

Section 11, Non-Fiscal incentives. Registered enterprises shall be entitled to the
following non-fiscal incentives:

a, Time-bond Processing of Requirements for Doing Business. - All
application for permits, licenses, ‘authorization and other
requirements necessary for doing business, including application
for renewals thereof, shall be acted upon by the JECA, or any
government agency concerned within ten (10) working days from
official acceptance thereof, otherwise, the same be considered
automatically approved. For this purpose, the JECA, or any
government agency concerned, shall be mandated to post in theit
respective offices, the procedural process, documentation
requirements and the imposable fees to be paid to facilitate the
processing of the application;

b. Simplification of Customs and Internal Revenue Procedures. =
Importation of equipment, spare parts, raw materials and supplies,
export of processed products by registered enterprises shall be
undertaken under the simplified procedure of the Bureau of
Customs pursuant to the investment and Incentives Code; and,

c. Reduction and harmonization of Documentary Requirements Submitted
to Government Agencies, - Reduction and harmonization of related
documentary requirements submitted to the JECA shall be
accordance with the guidelines formulated by the Board of
Investments pursuant to the Investment and Incentives Code.

Section 12. Incpme Tax-Based Incentives. - On availing the income tax-
related incentives, the Bureau of Internal Revenue (BIR) shall require a registered
enterprise to secure a certificate of eligibility from JECA, and attach the same to its
income Tax Return (ITR) or Annual information Return (AIR), whichever is
applicable, Thereafter, the registered enterprise shall file its claim with the JECA for
validation. The IPA shall endorse the result of its validation to the BIR after one year
from the filing of a claim for ITH by the registered enterprise.

Failure to secure and attach the certification to the ITR or AIR, and/or file the
ITH availment for validation by the JECA shall cause the forfeiture of the ITH
availment for the taxable period.

Section 13. Fifty Percent (50%) Reduction from Corporate Income Tux. — In
computing the net taxable income for this incentive, the enterprise may be entitled to


deduct the following expenses, in addition to ordinary and necessary business
expenses allowed under the National Internal Revenue Code 1997, as amended
(NIRC):

a. Enhanced Net Operating Loss Carry-Over (NOLCO) - The net
operating loss of the registered activity during the first five (5)
years from the start of commercial operation, which had not been
previously offset as deduction from gross income may be carried
over as deduction from gross income for the next five (5)
consecutive taxable years immediately following the year of such
loss;

b, Accelerated Depreciation ~ Plant, machinery, and equipment that are
reasonably needed and actually used for the production and
transport of goods and services, may be depreciated using a rate
not exceeding twice the rate, which would have been used had the
annual allowance been computed in accordance with the rules and
regulations prescribed by the Secretary of Finance abnd the
provisions of the NIRC;

©. Double Deduction for Training Expenses ~ Expenses incurred for local
training given to employees for the development of skills,
identified as necessary by the appropriate government agencies
and approved by the JECA, may be claimed as deduction from
gross income to the extent of two hundred (200%) percent of the
actual amount of expenses incurred: Provided, that the training
expense shall be deductible on the taxable year the said training
expenses were incurred: Provided, further, that the JECA shall
issue the corresponding certificate of entitlement for its incentive
upon filling of an application, otherwise, the training incentive
shall be deemed waived; and,

d. Double Deduction for Research and Development ~ Expenses incurred
for research and development conducted in the Philippines relating
to the business shall entitle the registered enterprise to a special
deduction from taxable income equivalent to two hundred (200%)
percent -of the total expenses, over and above the allowable
ordinary and business deductions for said expenses under the
NIRC, as amended, Provided, that the expenses for research and
development shall be deductible from gross income on the taxable
year the said research and development expenses were incurred,
Provided, further, that the JECA shall issue the corresponding
certificate of entitlement for this incentive upon filling of an
application, otherwise, the research and development incentive
shall be deemed waived.



Section 14. Five Percent (5%) Tax on GIE. - In computing the tolal five
percent (5%) tax rate to be imposed, GIE shall refer to gross sales or gross revenues
derived from the business activity, net of sales discounts, sales returns and
allowances and minus cost of goods sold/cost of services or direct costs, but before
any deduction is made for administrative, marketing, selling expenses or incidental
losses during a given taxable period.

‘The 5% tax on GIE shall be paid and remitted by registered enterprises
located inside the JEC in accordance with the following sharing allocation:

1% to the National Government
2% to the Province of Hoilo where the project is located.
2% to the municipality where the project is located

Section 15, VAT and Customs Duties Exemption on Capital Equipment. ~
In the importation of capital equipment, including consignment thereof, the
registered enterprises may be exempted to the extent of one hundred percent (100%)
of the VAT and customs duties provided that the following conditions are complied
with:

a, The capital equipment is directly and/or reasonably needed, and
will be used exclusively in the registered activity of the registered
enterprise, unless prior approval of the JECA is secured for the part
time utilization of said equipment in a non-registered activity to
maximize usage thereof, or the proportionate taxes and duties are
paid on a specific equipment and machinery being permanently
used for non-registered activities, and they are not manufactured
domestically in sufficient quantity, of comparable quality and at
reasonable prices; andl,

b. The approval of the JECA was obtained by the registered enterprise
for the importation of such machinery, equipment and spare parts,

Approval of the JECA must be secured before any sale, transfer or disposi
of the imported capital equipment is made: Provided, that, if such sale, transfer or
disposition is made within the first five (5) years from date of importation, any of the
following conditions must be present:

i, If made to another enterprise enjoying tax and duty exemption on
imported capital equipment;

ii, If made to another enterprise, upon payment of any taxes and
duties due on the net book value of the capital equipment to be
sold;


iii,  Exportation of capital equipment, machinery, spare parts or source
documents or those required for pollution abatement and control;
or

iv, For reasons of proven technical obsolescence.

When the aforementioned sale, transfer or disposition is made under any
of the conditions provided for in the foregoing paragraphs other than paragraph
(ii), the registered export enterprise shall not pay the taxes and duties waived on
such items: Provided, further, that if the registered enterprise sells, transfer or
disposes the aforementioned imported items without prior approval within five (6)
years from the date of importation, the registered enterprise and the vendee,
transferee, or assignee shall be solidarily liable to pay twice the amount of the tax
and duty exemption given it: Provided, finally, that even if the sale, transfer or
disposition of the capital equipment is approved after five (5) years from the date of
importation, the registered enterprise is still liable to pay the taxes and duties basecl
on the net book value of the capital equipment if it has violated any of its registration
terms and conditions, Otherwise, it shall no longer be subject to the payment of the
taxes and duties waived thereon.

Section 16. VAT Refund Mechanism on Importation of Capital Equipment and/or
Raw Materials, - The VAT paid on imported capital equipment and/or raw materials
may be refunded provided that the imported items are used exclusively by the
registered enterprise pursuant to its registered activity,

In order to facilitate the immediate processing, clearance and release of VA’
refund as provided in this Act, a Trust Liability Account (TLA) is hereby authorized
to be established in the Bureau of Treasury. All VAT payments pertaining, to the
mportation of registered enterprises of capital equipment or raw materials shall be
deposited in the TLA for the purpose of funding valid VAT refund claims. ‘The
claims for VAT refund shall be made by the registered enterprise to the Department
of Finance - One Stop Shop Tax Credit and Duty Drawback Center which, in turn,
will process, approve and release the VAT refund

A registered enterprise shall file a claim for VAT refund within one (1) year
from the date of actual exportation. All amounts paid but no longer allowed for
refund shall immediately accrue to the general fund of the National Government.

All applications for VAT refund shall be processed and acted upon within
thirty (30) days after submission of complete documents. The refund shall be in a
form of cash or managers/cashiers check payable to the registered export enterprise.

In cases of dispute under the VAT refund mechanism provided in this section,
the pertinent provisions of the NIRC, and the Tariff and Customs Code of the
Philippines, as amended, shall apply.


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Section 17. JECA Fund. - There is hereby created the JECA Fund, which shall
be funded by Province of Hoilo and the covered municipalities. The Province of
Hoilo and the covered municipalities shall allot a portion of revenue generated from
registered enterprises; in the case of the municipalities, from revenue collected from
registered enterprises in their jurisdiction, to contribute to the JECA Fund. The
proportion of contribution, based on a percentage of revenue collected from
registered enterprises by the respective local government units, shall be as
determined by the JECA, and approved by the Sangguniang Panlalawigan of the
Province.

The JECA Fund shall be for the operation of the JECA and the JECA
Secretariat and for JEC investment promotion activities, The JECA shall formulate
rules for the appropriation and disbursement of the JECA Fund.

Section 18. Registration and Incentive Administration Procedure. = ‘The JECA,
consistent with the Investment and Incentives Code, and other issuances of the
Board of Investments, shall formulate rules to govern the registration of enterprises
and the administration of incentives,

Section 19. Initial Capitalization. - At the initial stage of the JECA, and until
such time that the JECA Fund is established, the National Government shall make an
annual appropriation of three hundred thousand pesos, for the operating expenses
of JECA,

Section 20. Repealing Clause, ~ All laws, executive orders or issuances, or any
parts thereof which are inconsistent herewith are hereby repealed or amended
accordingly.

Section 21. Exclusivity Clause. - The provisions of this Act only apply to the
JEC and JECA, and are without prejudice to the Investment and Incentives Code,
and other general investment laws.

Section 22, Suppletory Clause. - ‘The provisions of the Investment and
Incentives Code and other general investment laws apply to the JEC and JECA, in so
far as they promote the objectives of this Act.

Section 23, Separability Clause. - The provisions of this Act are hereby
declared separable, and in the event any provision is declared unconstitutional, the
other provisions which are not affected, shall remain in force and effect.

Section 24. Effectivity Clause. - This Act shall take effect upon its publication
in at least one (1) newspaper of general circulation.

Approved