Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House BiliNo.__1810

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
PROMOTING THE GROWTH OF A_ BIOTECHNOLOGY
INDUSTRY IN THE PHILIPPINES AND FOR OTHER PURPOSES

EXPLANATORY NOTE

The last decades of the 20" century saw rapid advances in our knowledge
and understanding of biotechnology. This, in turn, led to the development of
novel products such as safer, more effective pharmaceuticals, less capital-
intensive crops and less polluting industrial and agricultural production systems.
With growing concerns about climate change, non-renewable energy sources,
dwindling fresh water supply, increasing population and environmental
protection, biotechnology has become an important component in scientific
research and technology

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 Bafios. This institute has been replicated in four other
campuses of the University of the Philippines System. In the mid-I980s, 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 BIOTECH was initially set up.


Countries like the United States, Canada, Australia, several European
Union members, as well as Singapore, Malaysia, China, India and Taiwan, have
all put in place a policy environment that encourages bio-industry development
These policies include support for high quality research, incentives 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 also been provided.

In view of these, there is a need in the Philippines to put in place the
appropriate policy environment to promote bio-industry development.
Biodiversity which is 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 scarce. Many policies encourage individual rather
than multidisciplinary achievements, yet biotechnology requires a
multidisciplinary 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 bio-prospecting 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.

Due to the aforementioned reasons cited above, the expeditious passage
of this bill is earnestly requested.

wo, med
DIOSDADO up! AL ARROYO GLORIA MACAPAGAL ARROYO

Second District, Camarines Sur econd District, Pampanga


Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

FIFTEENTH CONGRESS
First Regular Session

810

House Bill No.

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
PROMOTING THE GROWTH OF A_ BIOTECHNOLOGY
INDUSTRY IN THE PHILIPPINES AND FOR OTHER PURPOSES:

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

CHAPTER I
TITLE, DECLARATION OF POLICY AND OBJECTIVES

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

io-Industry

SECTION 2. Declaration of Policy. -It is hereby declared to be the policy of
the State to fully recognize the special role of biotechnology plays as a tool in the
creation of wealth from human capital and biodiversity.

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

SECTION 4. Definition of Terms. — As used in this Act, the following terms
shall be construed 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) _ “Bio-industry” 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, bio-chemicals,
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;

(c) “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 I
THE PHILIPPINE BIO-INDUSTRY R&D CENTER

Section 5. The Philippine Bio-industry Research and Development
Center. - To ensure the continued availability of suitable yet innovative and
competitive bio-based technologies, a Philippine Bio-industry Research and
Development (R&D) Center (hereafter the “Center’) is hereby established.

SECTION 6. Functions of the Center. — The Center shall be charged with
the following functions:

(a) Develop and market competitive, biologically-based
technologies and products;

(b) Hamess Philippine biodiversity in developing
competitive products for the world market:

(c) Conduct contract research and provide technical
services to the public;

(d) Manage a Biotechnology Research Fund that will
support off-Center research and development relevant to its

te


corporate objectives as well as support a research fellowship and
training program;

(e) Establish state of the art facilities for research and
study.

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

(a) To own, hold, plan and construct buildings and other
facilities as may be necessary or proper to attain its purposes and
objectives;

(b) To enter into, make and execute contracts and
agreements of any kind or nature that are in furtherance of its
purposes;

(c) | 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;

(d) 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;

(e) To conduct bio-prospecting 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;

(g) To receive and acquire from any person, government
and other private entity, whether foreign or domestic, grants,
donations and contributions consisting of such properties, red 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;

(h) 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

(i) 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.

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

(b) The President of the Center;
(ce) Three (3) business leaders;

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

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). The members of the Board shall serve for a
period of one (1) year unless re-appointed by the Chairperson.

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

(a) 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;

(b) 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;

(c) 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 of the Center;

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

(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;

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

(9) 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.

SECTION 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.

SECTION 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,
tules 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.

SECTION 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.

SECTION 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 (IS)
Journal Citation Report.

SECTION 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

SECTION 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 Il
THE BIOTECHNOLOGY GUARANTEE FUND

SECTION 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

SECTION 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 of Board of Investments (BOI) 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.

SECTION 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.

SECTION 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.

SECTION 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.

SECTION 21. 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.

SECTION 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

SECTION 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.

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

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

‘Approved,