RA 7916 - The Special Economic Zone Act of 1995
RA 7916 - The Special Economic Zone Act of 1995
RA 7916 - The Special Economic Zone Act of 1995
AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND (d) To stimulate the repatriation of Filipino capital by providing
MECHANISMS FOR THE CREATION, OPERATON, attractive climate and incentives for business activity;
ADMINISTRATION, AND COORDINATION OF SPECIAL
ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS (e) To promote financial and industrial cooperation between the
PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORITY Philippines and industrialized countries through technology-intensive
(PEZA), AND FOR OTHER PURPOSES. industries that will modernize the country’s industrial sector and
Be it enacted by the Senate and House of Representatives of the improve productivity levels by utilizing new technological and
Philippines in Congress assembled: managerial know-how; and
CHAPTER I (f) To vest the special economic zones on certain areas thereof with
the status of a separate customs territory within the framework of the
PURPOSES AND OBJECTIVES: ESTABLISHMENT Constitution and the national sovereignty and territorial integrity of
AND NATURE OF SPECIAL ECONOMIC ZONES; the Philippines.
COORDINATION WITH OTHER SIMILAR SCHEMES
SEC. 4. Definition of Terms. – For purposes of this Act, the following
SEC. 1. Title. – This act shall be known and cited as "The Special definitions shall apply to the following terms:
Economic Zone Act of 1995."
(a) "Special Economic Zones (SEZ)" – hereinafter referred to as the
SEC. 2. Declaration of Policy. – It is the declared policy of the ECOZONES, are selected areas with highly developed or which
government to translate into practical realities the following State have the potential to be developed into agro-industrial, Industrial
policies and mandates in the 1987 Constitution, namely: tourist/recreational, commercial, banking, investment and financial
centers. An ECOZONE may contain any or all of the following:
(a) "The State recognizes the indispensible role of the private sector, Industrial Estates (IEs), Export Processing Zones (EPZs), Free
encourages private enterprise, and provides incentives to needed Trade Zones, and Tourist/Recreational Centers.
investments." (Sec. 20, Art II)
(b) "Industrial Estate (IE)" – refers to a tract of land subdivided and
(b) "The State shall promote the preferential use of Filipino labor, developed according to a comprehensive plan under a unified
domestic materials and locally produced goods and adopt measures continuous management and with provisions for basic infrastructure
that help make them competitive." (Sec. 12, Art XII) and utilities, with or without pre-built standard factory buildings and
community facilities for the use of the community of industries.
In pursuance of these policies, the government shall actively
encourage, promote, induce and accelerate a sound and balanced (c) "Export Processing Zone (EPZ)" – a specialized industrial estate
industrial, economic and social development of the country in order located physically and/or administratively outside customs territory,
to provide jobs to the people specially those in the rural areas, predominantly oriented to export production. Enterprises located in
increase their productivity and their individual and family income, and export processing zones are allowed to import capital equipment and
thereby improve the level and quality of their living condition through raw materials free from duties, taxes and other import restrictions.
the establishment, among others, of special economic zones in
suitable and strategic locations in the country and through measures (d)"Free Trade Zone" - an isolated policed area adjacent to a port of
that shall effectively attract legitimate and productive foreign entry (as a seaport) and/or airport where imported goods may be
investments. unloaded for immediate transshipment or stored, repacked, sorted,
mixed, or otherwise manipulated without being subject to import
SEC. 3. Purposes, Intents and Objectives. – It is the purpose, intent duties. However, movement of these imported goods from the free-
and objective of this Act: trade area to a non-free-trade area in the country shall be subject to
import duties.
(a) To establish the legal framework and mechanisms for the Enterprises within the zone are granted preferential tax treatment
integration, coordination, planning and monitoring of special and immigration laws are more lenient.
(c) So much as may be necessary of that portion of the City of (u) So much as may be necessary of that portion of the Municipality
Cagayan de Oro in the Province of Misamis Oriental; of Boac in the Province of Marinduque;
(d) So much as may be necessary of that portion of the City of Iligan (v) So much of may be necessary of that portion of the Municipality
in the Province of Lanao del Norte; of Pitogo in the Province of Zamboanga del Sur;
(e) So much as may be necessary of that portion of the Province of (w) So much as may be necessary of that portion of Dipolog City-
Saranggani; Manukan Corridor in the Province of Zamboanga del Norte;
(f) So much as may be necessary of that portion of the City of Laoag (x) So much as may be necessary of that portion of Mambajao,
in the Province of Ilocos Norte; Camiguin Province;
(g) So much as may be necessary of that portion of Davao City and (y) So much as may be necessary of that portion of Infanta, Real,
Samal Island in the Province of Davao del Norte; Polillo, Alabat, Atimonan, Mauban, Tiaong, Pagbilao, Mulanay,
Tagkawayan, and Dingalan Bay in the Province of Quezon;
(h) So much as may be necessary of that portion of Oroquieta City in
the Province of Misamis Occidental; (z) So much as may be necessary of that portion of Butuan City and
the Province of Agusan del Norte, including its territorial waters and
(i) So much as may be necessary of that portion of Tubalan Cove, islets and its immediate environs;
Malita in the Province of Davao del Sur;
(aa) So much as may be necessary of that portion of Roxas City
(j) So much as may be necessary of that portion of Baler, including its territorial waters and islets and its immediate environs in
Dinalungan and Casiguran including its territorial waters and islets the Province of Capiz;
and its immediate environs in the Province of Aurora;
(bb) So much as may be necessary of that portion of San Jacinto,
(k) So much as may be necessary of that portion of cities of Naga San Fabian, Mangaldan, Lingayen, Sual, Dagupan, Alaminos,
and Iriga in the Province of Camarines Sur, Legaspi and Tabaco in Manaoag, Binmaley in the Province of Pangasinan;
the Province of Albay, and Sorsogon in the Province of Sorsogon;
(cc) So much as may be necessary of that portion of the
(l) So much as may be necessary of that portion of Bataan Island in autonomous region;
the Province of Batanes;
(dd) So much as may be necessary of that portion of Masinloc,
(m) So much as may be necessary of that portion of Lapu-lapu in the Candelaria and Sta. Cruz in the Province of Zambales;
Island of Mactan, and the municipalities of Balamban and
Pinamungahan and the cities of Cebu and Toledo and the Province (ee)So much as may be necessary of that portion of the Palawan
of Cebu, including its territorial waters and islets and its immediate Island;
environs;
(ff) So much as may be necessary of that portion of General Santos
(n) So much as may be necessary of that portion of Tacloban City; City in South Cotabato and its immediate environs;
(gg) So much as may be necessary of that portion of Dumaguete
(o) So much as may be necessary of that portion of the Municipality City and Negros Oriental, including its territorial waters and islets
of Barugo in the Province of Leyte; and its immediate environs;
(p) So much as may be necessary of that portion of the Municipality (hh)So much as may be necessary of that portion of the Province of
of Buenavista in the Province of Guimaras; Ilocos Sur;
(kk) So much as may be necessary of that portion of the Province of (h) The area must be situated where controls can easily be
Rizal; established to curtail smuggling activities.
(ll) All existing export processing zones and government-owned Other areas which do not meet the foregoing criteria may be
industrial estates; and established as ECOZONES: Provided, That the said area shall be
developed only through local government and/or private sector
(mm) Any private industrial estate which shall voluntarily apply for initiative under any of the schemes allowed in Republic Act No. 6957
conversion into an ECOZONE. (the build-operate-transfer law), and without any financial exposure
on the part of the national government: Provided, further, That the
These areas shall be developed through any of the following area can be easily secured to curtail smuggling activities: Provided,
schemes: finally, That after five (5) years the area must have attained a
substantial degree of development, the indicators of which shall be
i. Private initiative; formulated by the PEZA.
ii. Local government initiative with the assistance of the national SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial,
government; and Commercial / Trading, Tourist, Investment and Financial Community.
- Within the framework of the Constitution, the interest of national
iii. National government initiative. sovereignty and territorial integrity of the Republic, ECOZONE shall
be developed, as much as possible, into a decentralized, self-reliant
The metes and bounds of each ECOZONE are to be delineated and and self-sustaining industrial,commercial/trading, agro-industrial,
more particularly described in a proclamation to be issued by the tourist, banking, financial and investment center with minimum
President of the Philippines, upon the recommendation of the government intervention. Each ECOZONE shall be provided with
Philippine Economic Zone Authority (PEZA), which shall be transportation, telecommunications, and other facilities needed to
established under this Act, in coordination with the municipal and / or generate linkage with industries and employment opportunities for its
city council, National Land Use Coordinating Committee and / or the own inhabitants and those of nearby towns and cities.
Regional Land Use Committee.
The ECOZONE shall administer itself on economic, financial,
SEC. 6. Criteria for the Establishment of Other ECOZONES. – In industrial, tourism development and such other matters within the
addition to the ECOZONES identified in Section 5 of this Act, other exclusive competence of the national government.
areas may be established as ECOZONES in a proclamation to be
issued by the President of the Philippines subject to the evaluation The ECOZONE may establish mutually beneficial economic relations
and recommendation of the PEZA, based on a detailed feasibility with other entities within the country, or, subject to the administrative
and engineering study which must conform to the following criteria: guidance of the Department of Foreign Affairs and/or the Department
of Trade and Industry, with foreign entities or enterprises.
(a) The proposed area must be identified as a regional growth center
in the Medium-Term Philippine Development Plan or by the Regional Foreign citizens and companies owned by non-Filipinos in whatever
Development Council; proportion may set up enterprises in the ECOZONE, either by
themselves or in joint venture with Filipinos in any sector of industry,
(b) The existence of required infrastructure in the proposed international trade and commerce within the ECOZONE. Their
ECOZONE, such as roads, railways, telephones, ports, airports, etc., assets, profits and other legitimate interests shall be protected:
and the suitability and capacity of the proposed site to absorb such Provided, That the ECOZONE through the PEZA may require a
improvements; minimum investment for any ECOZONE enterprises in freely
convertible currencies: Provided, further, That the new investment
(c) The availability of water source and electric power supply for use shall fall under the priorities, thrusts and limits provided for in the Act.
of the ECOZONE;
SEC. 8. ECOZONE to be Operated and Managed as Separate
(d) The extent of vacant lands available for industrial and commercial Customs Territory. – The ECOZONE shall be managed and
development and future expansion of the ECOZONE as well as of operated by the PEZA as separate customs territory.
lands adjacent to the ECOZONE available for development of
residential areas for the ECOZONE workers; The PEZA is hereby vested with the authority to issue certificate of
(e) The availability of skilled, semi-skilled and non-skilled trainable origin for products manufactured or processed in each ECOZONE in
labor force in and around the ECOZONE; accordance with the prevailing rules or origin, and the pertinent
(c) To coordinate with local government units and exercise general (d) To give such information and recommend such measures to the
supervision over the development, plans, activities and operations of Board, as he shall deem advantageous to the ECOZONE;
the ECOZONES, industrial estates, export processing zones, free
trade zones, and the like; (e) To submit to the Board, the ongoing and proposed projects, work
and financial program, annual budget of receipts, and expenditures
(d) In coordination with local government units concerned and of the ECOZONE;
appropriate agencies, to construct, acquire, own, lease, operate and
maintain on its own or through contract, franchise, license, bulk (f) To represent the ECOZONE in all its business matters and sign
purchase from the private sector and build-operate-transfer scheme on its behalf after approval of the Board, all its bonds, borrowings,
or joint venture, adequate facilities and infrastructure, such as light contracts, agreements and obligations made in accordance with this
and power systems, water supply and distribution systems, Act;
telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the (g) To acquire jurisdiction, as he may deem proper, over the
operation and development of the ECOZONE; protests, complaints, and claims of the residents and enterprises in
the ECOZONE concerning administrative matters;
(e) To create, operate and/or contract to operate such agencies and
functional units or offices of the authority as it may deem necessary; (h) To recommend to the Board the grant, approval, refusal,
amendment or termination of the ECOZONE franchises, licenses,
(f) To adopt, alter and use a corporate seal; make contracts, lease, permits, contracts, and agreements in accordance with the policies
own or otherwise dispose of personal or real property; sue and be set by the Board;
sued; and otherwise carry out its duties and functions as provided for
in this Act; (i) To require owners of houses, buildings or other structures
constructed without the necessary permit whether constructed on
(g) To coordinate the formulation and preparation of the public or private lands, to remove or demolish such houses,
development plans of the different entities mentioned above; buildings, structures within sixty (60) days after notice and upon
failure of such owner to remove or demolish such house, building our
(h) To coordinate with the National Economic Development Authority structure within said period, the director general or his authorized
(NEDA), the Department of Trade and Industry (DTI), the representative may summarily cause its removal or demolition at the
Department of Science and Technology (DOST), and the local expense of the owner, any existing law, decree, executive order and
government units and appropriate government agencies for policy other issuances or part thereof to the contrary notwithstanding;
and program formulation and implementation; and
(j) To take such emergency measures as may be necessary to avoid
(i) To monitor and evaluate the development and requirements of fires, floods and mitigate the effects of storms and other natural or
entities in subsection (a) and recommend to the local government public calamities;
units or other appropriate authorities the location, incentives, basic
services, utilities and infrastructure required or to be made available (k) To prepare and make out plans for the physical and economic
for said entities. development of the ECOZONE, including zoning and land
subdivision, and issue such rules and regulations which shall be
SEC. 14. Powers and Functions of the Director General. – The submitted to the Board for its approval; and
director general shall be the overall coordinator of the policies, plans
and programs of the ECOZONES. As such, he shall provide overall (l) To perform such other duties and exercises such powers as may
supervision over and general direction to the development and be prescribed by the Board, and to implement the policies, rules and
operations of these ECOZONES. He shall determine the structure regulations set by the PEZA.
and the staffing pattern and personnel complement of the PEZA and
establish regional offices, when necessary, subject to the approval of SEC. 15. Administration of Each ECOZONE. – Except for privately-
the PEZA Board. owned, managed or operated ECOZONES, each ECOZONE shall
be organized, administered, managed and operated by the
In addition, he shall have the following specific powers and ECOZONE executive committee composed of the following:
responsibilities:
(a) The administrator who shall be appointed by the PEZA Board
(a) To safeguard all the lands, buildings, records, monies, credits upon recommendation of the director general; and
and other properties and rights of the ECOZONES;
(b) One (1) deputy administrator to be appointed by the Board upon
(b) To ensure that all revenues of the ECOZONE are collected and recommendation of the director general.
applied in accordance with its budget;
2. The governor of the province where the ECOZONE is located; SEC. 17. Investigation and Inquiries. – Upon a written formal
complaint made under oath, which on its face provides reasonable
3. The mayor/s of the municipality/ies or city/ies where the basis to believe that some anomaly or irregularity might have been
ECOZONE is located; committed, the PEZA or the administrator of the ECOZONE
concerned, shall have the power to inquire into the conduct of firms
4. The president of an accredited labor union in the ECOZONE; or employees of the ECOZONE and to conduct investigations, and
for that purpose may subpoena witnesses, administer oaths, and
5. The representative of the business sector in the periphery of the compel the production of books, papers, and other evidences:
ECOZONE; and Provided, That to arrive at the truth, the investigator(s) may grant
immunity from prosecution to any person whose testimony or whose
6. The representative of the PEZA. possessions of documents or other evidence is necessary or
convenient to determine the truth in any investigation conducted by
The ECOZONE advisory body shall have the following functions: him or under the authority of the PEZA or the administrator of the
ECOZONE concerned.
i. Advise the ECOZONE management on matters pertaining to policy
initiatives; and SEC. 18. Prohibition Against Holding Any Other Office. – The
director general, deputy director general, administrators, officials and
ii.Assist the ECOZONE management in setting problems arising staff or assistants of the PEZA shall not hold any other office or
between labor and any enterprise in the ECOZONE. employment within or outside the PEZA during their tenure. They
shall not, during their tenure, directly or indirectly, practice any
Privately-owned ECOZONES shall retain autonomy and profession, participate in any business, or be financially interested in
independence but shall be monitored by the PEZA for the any contract with, or in any franchise, or special privilege granted by
implementation of incentives and operations for adherence to the the PEZA or national government, or any subdivision, agency, or
law. instrumentality thereof, including any government-owned-controlled
corporation, or its subsidiary.
SEC. 16. Personnel. – The PEZA Board of Directors shall provide for
an organization and staff of officers and employees of the PEZA, SEC. 19. Disbursement of Funds. – No money shall be paid out of
and upon recommendation of the director general with the approval the funds of any ECOZONE except in pursuance of the budget as
of the Secretary of the Department of Trade and Industry, appoint formulated and approved by the PEZA.
and fix the remunerations and other emoluments: Provided, That the
Board shall have exclusive and final authority to promote, transfer, SEC. 20. Full Disclosure of Financial and Business Interests. –
assign and reassign officers of the PEZA, any provision of existing Every member of the Board of the PEZA, the director general, the
law to the contrary notwithstanding: Provided, further, That the deputy directors general, and their staff shall, upon assumption of
director general may carry out removal of such officers and office, make full disclosure of their financial and business Interests.
employees.
CHAPTER III
All positions in the PEZA shall be governed by a compensation,
position classification system and qualification standards approved OPERATIONS WITHIN THE ECOZONE
by the director general with the concurrence of the Board of
Directors based on a comprehensive job analysis and audit of actual SEC. 21. Development Strategy of the ECOZONE. - The strategy
duties and responsibilities. The compensation plan shall be and priority of development of each ECOZONE established pursuant
comparable with the prevailing compensation plans in the Subic Bay to this Act shall be formulated by the PEZA, in coordination with the
Metropolitan Authority (SBMA), Clark Development Corporation Department of Trade and Industry and the National Economic and
(BCDA) and the private sector and shall be subject to the periodic Development Authority; Provided, That such development strategy is
review by the Board no more than once every two (2) years without consistent with the priorities of the national government as outlined
prejudice to yearly merit reviews or increases based on productivity in the medium-term Philippine development plan.
and profitability. The PEZA shall therefore be exempt from existing
laws, rules and regulations on compensation, position classification It shall be the policy of the government and the PEZA to encourage
and qualification standards. It shall however endeavor to make its and provide Incentives and facilitate private sector participation in
systems conform as closely as possible with the principles under the construction and operation of public utilities and infrastructure in
Republic Act No. 6758. the ECOZONE, using any of the schemes allowed in Republic Act
The PEZA officers and employees including all Members of the No. 6957 (the build-operate-transfer law).
Board shall not engage directly or indirectly in partisan activities or
take part in any election, except to vote.
SEC. 35. Registration of Business Enterprises. - Business The PEZA, the Department of Labor and Employment, and the
enterprises within a designated ECOZONE shall register with the Department of Finance shall jointly make a review of the incentive
PEZA to avail of all incentives and benefits provided for in this Act. scheme provided In this section every two (2) years or when
circumstances so warrant.
SEC. 36. One Stop Shop Center. - The PEZA shall establish a one
stop shop center for the purpose of facilitating the registration of new CHAPTER V
enterprises in the ECOZONE. Thus, all appropriate government
agencies that are Involved In registering, licensing or issuing permits NATIONAL GOVERNMENT AND OTHER ENTITIES
to investors shall assign their representatives to the ECOZONE to
attend to Investor’s requirements. SEC. 43. Relationship with the Regional Development Council. - The
PEZA shall determine the development goals for the ECOZONE
CHAPTER IV within the framework of national development plans, policies and
goals, and the administrator shall, upon approval by the PEZA
INDUSTRIAL HARMONY IN THE ECOZONES Board, submit the ECOZONE plans, programs and projects to the
regional development council for inclusion in and as inputs to the
SEC. 37. Labor and Management Relations. - Except as otherwise overall regional development plan.
provided in this Act, labor and management relations in the
ECOZONE shall be governed by the existing Labor Code of the SEC. 44. Relationship with the Local Government Units. - Except as
Philippines. Employees and personnel in the ECOZONE enterprises herein provided, the local government units comprising the
shall receive salaries and benefits and shall enjoy working conditions ECOZONE shall retain their basic autonomy and identity. The cities
not less than those provided under the Philippine Labor Code and shall be governed by their respective charters and the municipalities
other relevant laws, issuances, rules and regulations of the shall operate and function In accordance with Republic Act No.
Philippine government and the Department of Labor and 7160, otherwise known as the Local Government Code of 1991.
Employment.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial
SEC. 38. Promotion of Industrial Peace. - In the pursuit of Industrial Estates. – Privately-owned industrial estates shall retain their
harmony in the ECOZONE, a tripartite body composed of one (1) autonomy and independence and shall be monitored by the PEZA
representative each from the Department of Labor and Employment, for the implementation of incentives.
labor sector and business and industry sectors shall be created In
order to formulate a mechanism under a social pact for the SEC. 46. Transfer of Resources. - The relevant functions of the
enhancement and preservation of industrial peace in the ECOZONE Board of Investments over industrial estates and agri-export
within thirty (30) days after the effectivity of this Act. processing estates shall be transferred to the PEZA. The resources
of government-owned Industrial estates and similar bodies except
SEC. 39. Master Employment Contracts. - The PEZA, in the Bases Conversion Development Authority and those areas
coordination with the Department of Tabor and Employment, shall identified under Republic Act No. 7227, are hereby transferred to the
prescribe a master employment contract for all ECOZONE enterprise PEZA as the holding agency. They are hereby detached from their
staff members and workers, the terms of which provide salaries and mother agencies and attached to the PEZA for policy, program and
benefits not less than those provided under this Act, the Philippine operational supervision.
Labor Code, as amended, and other relevant issuances of the
national government.
SEC. 47. Appropriation. - Upon the effectivity of this Act, all funds of SEC. 53. Interpretation / Construction. - The powers, authorities and
the former Export Processing Zone Authority (EPZA) shall be functions that are vested In the Philippine Economic Zone Authority
transferred to the newly-created Philippine Economic Zone Authority, (PEZA) and the ECOZONES concerned are intended to establish
Thereafter, any sum as may be necessary to augment its capital decentralization of governmental functions and authority as well as
outlay shall be Included In the General Appropriations Act to be an efficient and effective working relationship between the
treated as an equity of the national government. ECOZONE, the central government and the local government units.
Additional funding shall come from the following: SEC. 54. Repealing Clause. - All laws, acts, presidential decrees,
executive orders, proclamations and / or administrative regulations
(a) The annual subsidies, appropriations and/or other assets of the which are inconsistent with the provisions of this Act, are hereby
exports processing zone, and the industrial estates and other amended, modified, superseded or repealed accordingly.
economic areas that have been absorbed/transferred to the PEZA
as mandate in this Act; SEC. 55. Implementing Rules and Regulations. - The Department of
Trade and Industry, the National Economic and Development
(b) The proceeds from the rent of lands, buildings, and other Authority, the Department of Finance, the Bureau of Customs, the
properties of the ECOZONES concerned; Department of Agrarian Reform, the Department of Interior and local
Government, the Philippine Economic Zone Authority, and the
(c) The proceeds from fees, charges and other revenue-generatlng representatives from the technical staff of the Committee on
Instruments which the PEZA is authorized to impose and collect Economic Affairs of both Houses of Congress shall formulate the
under this Act, implementing rules and regulations of this Act within ninety (90) days
after its approval. Such rules and regulations shall take effect fifteen
(d) The proceeds from bonds which the PEZA authorized to float (15) days after their publication in a newspaper of general circulation
both domestic and abroad; and in the Philippines.
(e) The advance rentals, license fees, and other charges which the SEC. 56. Transitory Provisions. - Prior to the effectivity of the
PEZA is authorized to impose under this Act and which an investor is implementing rules and regulations of this Act, the provisions of
willing to advance payment for. Presidential Decree No. 66, as amended, and its implementing rules
and regulations shall remain in force.
SEC. 48. Applicability of National Laws. - National laws shall prevail
vis-a- vis ECOZONE rules, regulations and standards, unless there SEC. 57. Effectivity- This Act shall take effect upon its approval.
is a clear intent in this Act or other Acts of Congress to vest the
ECOZONE specific power and privileges not otherwise allowed
under existing laws.