Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
First Regular Session

i, 3255

House Bill No,

EXPLANATORY NOTE

The 1987 Philippine Constitution recognizes the indispensable role of the
private sector and encourages private enterprise by providing incentives to the
needed investments in attaining industrialization and full employment. Hence, private
sector participation is vital in the generation, promotion, utilization and adaptation of
science, technology, and innovation to pursue national development and progress.

Consequently, Republic Act No. 11293, otherwise known as the “Philippine
Innovation Act” was enacted to acknowledge innovation as a vital component of the
country’s development policies to promote the competitiveness of micro, small, and
medium enterprises (MSMEs) to achieve inclusive and sustainable economic
development.

The government shall then have the responsibility to formulate, among others,
the appropriate mechanics to guide and manage the transfer of appropriate industrial
technology in the country. As it is, manufacturing industries are the prime generator
of employment, income, inter-industry and inter-sectoral linkages, firm productivity,
and technological development among all other sectors to the economy.

This representation strongly believed that the Philippine manufacturing sector
needs to seize the opportunities from the transformation to the Fourth Industrial
Revolution through the adoption of new technologies, processes, products, services,
and business models arising from the Fourth Industrial Revolution to be globally
competitive.

The establishment of Fourth Industrial Revolution will rapidly spur the
development of new production techniques and business models that would
transform global production systems which can disrupt operations and greatly affect
the competitiveness of the country’s manufacturing sector.

The Department of Trade and Industry (DTI) has crafted the Inclusive
Innovation Industrial Strategy (I3S) as the country’s new industrial strategy to grow
globally competitive and innovative industries.

In support of such strategy, this bill shall provide a performance-based,
targeted, time-bound, and transparent fiscal and non-fiscal support to facilitate the


adjustment to the Fourth Industrial Revolution and secure the revitalization and
transformation of the country's manufacturing sector, stimulate innovation, expand
research and development, and accelerate research commercialization activities,
attract investments in emerging industries and industry clusters, and encourage
global value chain upgrading. _

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In view of the foregoing, the passage of this bill is amesty Gought for.

LEX ANTHONY CRIS A. COLADA
Party List, AAMBIS-OWA

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
First Regular Session

House Bill No.__ 3255

Introduced by Rep. LEX ANTHONY CRIS A. COLADA

AN ACT
INSTITUTIONALIZING THE SECURING MANUFACTURING REVITALIZATION
AND TRANSFORMATION (SMaRT) PROGRAM IN THE PHILIPPINES

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 “Securing
Manufacturing Revitalization and Transformation (SMaRT) Program of the
Philippines.”

SEC. 2. Declaration of Policy. It shall be a national policy of the State to
promote inclusive and sustainable industrialization through the country’s Inclusive
Innovation Industrial Strategy (13S) to grow globally competitive and innovative
industries. Towards this end, the State shall:

(a)Pursue an innovation-centered and science and_ technology-based
industrialization as the primary engine for rapid, sustained, and inclusive
growth, job creation, and poverty reduction;

(b) Stimulate the development of Micro, Small, and Medium Enterprises (MSMEs)
and innovative start-ups;

(c) Deepen the country's participation in global value chains through addressing
gaps and establishing linkages in industry supply and value chains;
Attract strategic investments in high-technology, high-value, and high spill-
over industries and industry clusters;

(d) Formulate fiscal and non-fiscal incentive programs to effectively encourage
industry-led innovation projects and accelerate transformation to Fourth
Industrial Revolution.

SEC. 3. Definition of Terms. As used in its Act, the following terms are defined
as follows:

(a) ‘Participant’ refers to any individual, partnership, cooperative, corporation, or
other entity engaged in the manufacture of goods incorporated, organized,
and existing under Philippine laws;


(b) ‘Fourth Industrial Revolution” refers to the fourth industrial and technological
transformation of global production systems as a result of the emergence of
technological breakthroughs in cyber-physical systems;

(c) "Global Value Chain’ refers to the global geographic fragmentation of
activities involved in the production, supply, distribution, and post-sale
activities;

Innovation refers to the creation of new ideas that results in the development
of new or improved policies, products, and processes, which are then spread
or transferred across the market;

(d) ‘Innovative Product’ refers to a manufactured good that is new or significantly
improved, such as improvements in technical specifications, component
materials, software in the product, user friendliness or other functional
characteristics;

(e) “innovative Process’ refers to a new or significantly improved production or
delivery method through changes in techniques, equipment and/or software;

(f) “Research and Development’ refers to any activity which is a systematic,
intensive study directed toward greater knowledge or understanding of the
subject studied; a systematic study directed specifically toward applying new
knowledge to meet a recognized need; or a systematic application of
knowledge towards the production of useful materials, devices, and systems
or methods, including design, development, and improvement of prototypes
and new processes to meet specific requirements.

SEC. 4. The Role of the Department of Trade and Industry (DTI). - The
Department of Trade and Industry, as the primary government agency in charge in
the coordination, promotion, facilitation and regulation in all Philippine industries and
investment activities, shall perform the following:

(1) Oversee the activation, implementation, and monitoring of the SMaRT
Program:

(2)Faciltate the regular conduct of industry-specific researches, technology
reviews, and market studies to support the implementation of the Program;

(3) Coordinate industrial innovation efforts with relevant government agencies
and instrumentalities;

(4) Submit the annual report on the performance of the SMaRT Program to the
Office of the President (OP); and

(5) Perform such other acts as may be necessary or incidental to the exercise of

its functions and powers and the discharge of its duties under this Act.

SEC. 5. Eligibility and Qualifications of Participants. - The DT! shall establish
the application and selection process of the Participants. The Participants shall
possess all of the following qualifications, and such other criteria as may be required
by DTI


(1) Duly registered sole proprietorship, partnership, cooperative, or corporation
with at least 40% equity held by Filipinos, operating under existing laws in the
Philippines; In operation for at least 5 years;

(2) Not a recipient of, or have previously received, any government funding for
the same approved expenses or project.

(3) Furthermore, the following factors must be considered in the approval of the
application and the provision of the level of fiscal support to the Participant:

(a) Substantial amount of investment:

(b) Level of technology;

(c) Innovation, research and development;

(d) Impact on the industry's value and/or supply chain linkage;

(e) Employment contribution;

(f) Sustainability of the activity;

(g) Spill-over and multiplier effects;

(h) Geographic location and impact on industrial development in rural areas;
and

{i) Other economic impact of the investment plan for the activity

SEC. 6. Priority Industries in Innovative Manufacturing. ~ The following
industries shall be prioritized in the provision of fiscal under this Act:

(1) Next Generation Vehicles;

(2) Advanced Machinery and Equipment;

(3) Nanotechnology:

(4) Clean Technology;

(5) Digital Health;

(6) Intelligent Electronics;

(7) Advanced Agriculture; and

(8) Synthetic Biology and Advanced Materials;

The DTI may include additional industries as it deems necessary taking into
consideration other government strategies, innovation priorities, and relevant laws:
Provided, That the utilization, adoption, generation, and commercialization of
intellectual property registered in the Philippines on these industries shall be likewise
prioritized in the application and selection process.

SEC. 7. Establishment of a SMaRT Grant Fund. - There is hereby created a
SMaRT Grant Fund under the supervision of the DTI to provide full or partial cost
subsidy to any of the following activities:

(1) Conduct of firm innovation assessments such as, but not limited to, quality
and operational management systems studies and Fourth Industrial
Revolution readiness assessments;

(2) Upskill and/or reskill of workforce through human resource development and
training programs;


(3) Application for intellectual property and industrial design research;

(4) Conduct of testing activities and/or establishment of shared testing facilities
for international standards conformance, certification, and accreditation.

Provided, That the activity must lead to the generation, adoption, or utilization of
innovative products and innovative processes arising from the Fourth Industrial
Revolution.

SEC. 8, Establishment of the SMaRT Credit Fund. - The DTI, in
coordination with the Bangko Sentral ng Pilipinas (BSP), Land Bank of the
Philippines (LBP), and the Development Bank of the Philippines (OBP), shall
establish a SMaRT Credit Fund. It shall consist of loans and other financing activities
for the purposes of generating and scaling up innovation in the manufacturing sector
in accordance with this Act: Provided, That the loans benefiting agri-business
enterprises shall be considered as part of the compliance with the credit quota
requirement of Republic Act No. 10000, otherwise known as the “The Agri-Agra
Reform Credit Act of 2009": Provided, further, That the loans benefitting the
Participants shall be considered as part of the compliance with the credit quota
requirement of Republic Act No. 11293 otherwise known as the “Philippine
Innovation Act”.

The following activities may be eligible for the SMaRT Credit Fund: Provided,
That the activity must lead to the generation, adoption, or utilization of innovative
products and innovative processes arising from the Fourth Industrial Revolution.

(1) Manufacture of innovative products;

(2) Deepening of its participation in its industry's global value chain through
upgrading into other high-value manufacturing activities that will fill in supply
and value chain gaps in the country;

(3) Acquisition of new and advanced industrial machinery and infrastructure and
integration of new software and hardware technologies such as, but not
limited to, Blockchain, Artificial Intelligence, Cloud Technology, Robotics,
Intelligence-of- Things (loT), Augmented Reality/Virtual Reality, Drone
Technology, Additive Manufacturing; and

(4) Conduct of research and development activities.

SEC. 9. Establishment of a SMaRT Venture Fund. There is hereby created a
SMaRT Venture Fund under the DTI to be administered in coordination with the
National Development Company (NDC). The SMaRT Venture Fund shall be used to
match investments by selected investors to Participants, subject to Sections 5 and 6
of this Act.


The NDC and DTI shall jointly develop and issue the appropriate rules and
regulations for the selection of investors and the effective management and
utilization of the SMaRT Venture Fund,

SEC. 10. No Double Availment of Incentives. - Registered Participants shall
not be allowed to register their activity under any other program granting incentives
provided for by other special laws

SEC. 11. Monitoring and Compliance. - The innovative transformation
progress of each Participant, among other deliverables and commitments, shall be
subject to a strictly monitored periodic audit.

The DTI may limit availment of support as it may deem necessary: Provided,
That failure to comply with and violation of any of the provisions of this Act shall be
subject to cancellation, suspension, forfeiture of support, fines and such other
applicable penalties as may be allowed or prescribed by existing and applicable
laws, rules and regulations.

SEC. 12. Appropriations, - The DTI shall be provided with the following
initial funds to be drawn from the national government for the for the initial
implementation of the following programs:

(1) The amount of Five billion pesos (P5,000,000,000.00) shall be allocated
for the establishment of SMaRT Grant Fund;

(2) The amount of Ten Billion Pesos (P10,000,000,000.00) shall be allocated
for the establishment SMaRT Credit Program; and

(3) The amount of Fifteen Billion Pesos (P15,000,000,000.00) shalt be
allocated for the establishment SMaRT Venture Fund

Appropriations for the succeeding years shall be included in the General
Appropriation Act.

SEC. 13. Implementing Rules and Regulations. - The DTI, in coordination
with BOI, NDC, BSP, DOF, DBM and other concerned government agencies shall
promulgate the rules and regulations to implement the objectives and provisions of
this Act.

SEC. 14, Separability Clause. If any provision of this Act is declared invalid
or unconstitutional, the other provisions not affected thereby shall remain valid and
subsisting.

SEC. 15. Repealing Clause. All laws, decrees, orders, rules and regulation,
or other issuances or parts thereof inconsistent with the provisions of this Act are
hereby revoked, repealed, amended or modified accordingly.

SEC. 16. Effectivity. This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least one (1) national newspaper
of general circulation.

Approved,