,S>tltllh 
(1ll/!t;, ".I t\[dh·,nbr~ 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'13 
JUL,..4 Al0:2 8 
SENATE 
S. No. 
466 
Introduced by Senator Ralph G. Recto\i, ' 
Explanatory Note 
Mandated to be the protector of the people and the state, the Anned Forces of the 
Philippines has always committed itself in adhering to national policy regarding the 
improvement of its capability. Republic Act No. 7898, otherwise known as the "AFP 
Modernization Act", as amended by Republic Act No. 10349, establishing the "Revised 
AFP Modernization Program" signaled a turning point in efforts to bring the military to a 
higher level of effectiveness and competence to defend the sovereignty and patrimony of 
the Filipino people. 
The modernization program provides the AFP with the gnidance to gauge its 
progress in enhancing its capabilities. It also serves as a blueprint on how the armed 
forces can better and more effectively address both internal and external security 
challenges. In the past years however, prioritization and focus were given to modernizing 
the internal security capabilities leaving behind external security. 
The recent re-emergence of territorial threats particularly in the West Philippine 
Sea brought along the'realization that capabilities to respond to external threats must also 
be given priority. Hence, a gradual shift from internal to external security as the focus of 
the modernization program is being undertaken. 
A closer look at the past implementation of the AFP modernization program 
however, reveals that it has gone through a slow pace. Regular review of its 
accomplishment shows that the slow implementation was due to the lack of funds coming 
from the national government. While the law provides for a ceiling for annual 
appropriations for the program, in reality, only a small fraction of it was provided. 
In order to augment the limited appropriations for the AFP modernization 
program, other sources of funds were identified. One among these other sources is the 
Malampaya Natural Gas to Power Project (MNGP) which has an aggregate government 
share amounting to P94.44l Billion as of February 2012. Such amount can be tapped to 
substantially support the P75 Billion funding requirements of the AFP modernization 
program, for the acquisition of 39 projects intended to boost the armed forces' 
capabilities in the next five years, which includes acquisition of communications 
equipmflnt, lead-in fighter trainer jets, closed air support aircraft, long-range patrol 
aircraft, radar systems and engineering equipment, among others. 
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In fact, in 2011, President Aquino himself has authorized the release of P5.32 
Billion Malampaya Fund to beef up the AFP's territorial defense capabilities, including 
the purchase of a USS Hamilton-class cutter for the Philippine Navy. 
Along this line, this bill seeks to include the Malampaya Natural Gas to Power 
Project as one 'of the fund sources for the AFP Modernization Act Trust Fund. Under this 
proposed law, thirty percent (30%) of the annual net government share from the 


Malampaya proceeds will be eannarked for the implementation of the revised AFP 
modernization program. 
Furthermore, to make the disbursement of the Malampaya Fund transparent and 
free from discretion and abuse, the bill also mandates that its allocation to augment the 
AFP Modernization Act Trust Fund should be clearly provided for in the General 
Appropriations Act. 
In view of the foregoing, the approval of the bill is earnestly sought. 
o 


, . 
.§tn!lt~ 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
nfJH';'f ltf HI? ~~1,ttfrbit\l 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'13 
JUL -4 
J\1O :28 
SENATE 
S.No. 466 
Introduced by Senator Ralph G. Recto 
I 
AN ACT 
PROVID~NG 
ADDITIONAL 
FUNDS 
FOR 
THE 
REVISED 
AFP 
MODERNIZATION 
PROGRAM, 
EARMARKING 
THE 
NATIONAL 
GOVERNMENT SHARE IN THE MALAMPAYA NATURAL GAS TO POWER 
(MNGP) PROJECT FOR SUCH PURPOSE, THEREBY AMENDING REPUBLIC 
ACT NO. 7898, AS AMENDED BY REPUBLIC ACT NO. 10349 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. Section 11 of Republic Act No. 7898, otherwise known as the 
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"AFP Modernization Act", as amended by Republic Act No. 10349, establishing the 
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"Revised AFP Modernization Program", is hereby further amended to read as follows: 
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"Sec. 11. The Revised AFP Modernization Act Trust Fund. - There is 
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hereby created a trust fund, to be known as the Revised AFP Modernization Act Trust 
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Fund. Said trust fund, which shall be used exclusively for the AFP modernization 
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program, including all necessary expenses to implement the procurement of equipment 
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such as expenses for pre-selection and post-qualification stages, but not to include 
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salaries and allowances, shall be funded out of the following: 
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"(a) xxx; 
11 
"(b) xxx; 
12 
"(c) xxx; 
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"(d) xxx; 
14 
"(e) xxx; 
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"(f) xxx; 
16 
"(g) xxx; 


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"(h) XXX; 
"0) xxx; 
"0) xxx. AND 
(K)THIRTY 
PERCENT 
(30%) 
OF 
THE 
ANNUAL 
NATIONAL 
GOVERNMENT 
SHARE 
IN 
THE 
MALAMPAYA NATURAL GAS TO POWER (MNGP) 
PROJECT AND SUCH OTHER SIMILAR OR RELATED 
EXPLORATIONS 
FOR 
ENERGY, 
AS 
MAY 
BE 
APPROVED BY THE PRESIDENT: PROVIDED, THAT 
THE AMOUNTS HEREIN ALLOCATED SHALL BE 
INCLUDED IN THE GENERAL APPROPRIATIONS 
ACT: PROVIDED, FURTHER, THAT WHEN THE 
REVISED 
AFP 
MODERNIZATION 
PROGRAM 
EXPIRES, THE AFOREMENTIONED COLLECTION 
SHALL ACCRUE TO THE GENERAL FUND. 
"Funds from the foregoing sources, regardless of income source, shall be 
directly deposited to a special account in the general fund created specifically for the 
Revised AFP Modernization Program. The corresponding allotment and cash allocation 
I 
shall be Tleased to the AFP subject to the submission of a special bu~get. Thereafter, the 
cash allocation shall be transferred to the Revised AFP Modernization Trust Fund which 
shall be administered by the Secretary of National Defense in accordance with the 
existing government budgeting and auditing rules and regulations. The DND shall 
conduct periodic studies on how to maximize the utilization of the trust fund and how 
additional revenues can be generated to fund the Revised AFP Modernization Program." 
Sec. 2. Implementing Rules and Regulations. - Within sixty (60) days from the 
,effectivity of this Act, the Department of Energy, the Department of National Defense, 
the Department of Finance and the Department of Budget and Management shall provide 
the necessary rules and regulations for the proper disposition of the said funds and the 
effective implementation of this Act. 


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Sec. 3. Repealing Clause. - All laws, decrees, issuances, rules, and regulations or 
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parts thereof inconsistent with the provisions of this Act are hereby repealed, amended or 
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modified accordingly. 
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Sec. 4. Separability Clause. - If, for any reason, any section or provision of this 
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Act is declared unconstitutional or invalid, the other sections or provisions not affected 
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thereby shall remain in full force and effect. 
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Sec. 5. Effectivity. - The Act shall take effect fifteen (15) days following its 
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publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
mksbc