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H. No. 14295
S. No. 1061

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Begun and held in Metro Manila, on Monday, the twenty-fifth

day of July, nineteen hundred and ninety-four.

[Republic Act No. 7916

AN ACT PROVIDING FOR THE LEGAL FRAMEWORK

AND MECHANISMS FOR THE CREATION,
OPERATION, ADMINISTRATION, AND
COORDINATION OF SPECIAL ECONOMIC ZONES
IN THE PHILIPPINES, CREATING FOR THIS
PURPOSE, THE PHILIPPINE ECONOMIC ZONE
AUTHORITY (PEZA), AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the

Philippines in Congress assembled:

CHAPTER I

Purposes AND Objectives; Establishment

AND Nature of Special Economic Zones;
Coordination with other Similar Schemes

Section l. Title. - This Act shall be known and cited as

"The Special Economic Zone Act of 1995."
5-3^

Sec. 2. Declaration of Policy. - It is the declared policy

of the government to translate into practical realities the following
State policies and mandates in the 1987 Constitution, namely:

(a) "The State recognizes the indispensable role of the

private sector, encourages private enterprise, and provides
incentives to needed investments." (Sec. 20, Art. II)

(b) "The State shall promote the preferential use of Filipino

labor, domestic materials and locally produced goods, and adopt
measures that help make them competitive." (Sec. 12, Art. XII)

In pursuance of these policies, the government shall actively

encourage, promote, induce and accelerate a sound and balanced
industrial, economic and social development of the country in
order to provide jobs to the people especially those in the rural
areas, increase their productivity and their individual and family
income, and thereby improve the level and quality of their living
condition through the establishment, among others, of special
economic zones in suitable and strategic locations in the country
and through measures that shall effectively attract legitimate and
productive foreign investments.

Sec. 3. Purposes, Intents and Objectives. - It is the

purpose, intent and objective of this Act:

(a) To establish the legal framework and mechanisms for

the integration, coordination, planning and monitoring of special
economic zones, industrial estates/parks, export processing zones
and other economic zones;

(b) To transform selected areas in the country into highly

developed agro-industrial, industrial, commercial, tourist, banking,
investment, and financial centers, where highly trained workers
and efficient services will be available to commercial enterprises;

(c) To promote the flow of investors, both foreign and

local, into special economic zones which would generate
employment opportunities and establish backward and forward
linkages among industries in and around the economic zones;

(d) To stimulate the repatriation of Filipino capital by

providing attractive climate and incentives for business activity;
 Zlc}

(e) To promote financial and industrial cooperation

between the Philippines and industrialized countries through
technology-intensive industries that will modernize the country’s
industrial sector and improve productivity levels by utilizing new
technological and managerial know-how, and

(f) To vest the special economic zones on certain areas

thereof with the status of a separate customs territory within the
framework of the Constitution and the national sovereignty and
territorial integrity of the Philippines.

Sec. 4. Definition of Terms. - For purposes of this Act,

the following definitions shall apply to the following terms:

(a) "Special economic zones (SEZ)" - hereinafter referred

to as the ECOZONES, are selected areas with highly developed
or which have the potential to be developed into agro-industrial,
industrial, tourist/recreational, commercial, banking, investment
and financial centers. An ECOZONE may contain any or all of
the following: industrial estates (lEs), export processing zones
(EPZs), free trade zones, and tourist/recreational centers.

(b) "Industrial estate (IE)" - refers to a tract of land

subdivided and developed according to a comprehensive plan
under a unified continuous management and with provisions for
basic infrastructure and utilities, with or without pre-built
standard factory buildings and community facilities for the use of
the community of industries.

(c) "Export processing zone (EPZ)" - a specialized

industrial estate located physically and/or administratively outside
customs territory, predominantly oriented to export production.
Enterprises located in export processing zones are allowed to
import capital equipment and raw materials free from duties,
taxes and other import restrictions.

(d) "Free trade zone" - an isolated policed area adjacent to

a port of entry (as a seaport) and/or airport where imported
goods may be unloaded for immediate transshipment or stored,
repacked, sorted, mixed, or otherwise manipulated without being
subject to import duties. However, movement of these imported
goods from the free-trade area to a non-free-trade area in the
country shall be subject to import duties.
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Enterprises within the zone are granted preferential tax

treatment and immigration laws are more lenient.

Sec. 5. Establishment of ECOZONES. - To ensure the

viability and geographic dispersal of ECOZONES through a
system of prioritization, the following areas are initially identified
as ECOZONES, subject to the criteria specified in Section 6:

(a) So much as may be necessary of that portion of

Morong, Hermosa, Dinalupihan, Orani, Samal, and Abucay in the
Province of Bataan;

(b) So much as may be necessary of that portion of the

municipalities of Ibaan, Rosario, Taysan, San Jose, San Juan, and
cities of Lipa and Batangas;

(c) So much as may be necessary of that portion of the City

of Cagayan de Oro in the Province of Misamis Oriental;

(d) So much as may be necessary of that portion of the City

of Iligan in the Province of Lanao del Norte;

(e) So much as may be necessary of that portion of the

Province of Saranggani;

(f) So much as may be necessary of that portion of the City

of Laoag in the Province of Ilocos Norte;

(g) So much as may be necessary of that portion of Davao

City and Samal Island in the Province of Davao del Norte;

(h) So much as may be necessary of that portion of

Oroquieta City in the Province of Misamis Occidental;

(i) So much as may be necessary of that portion of Tubalan

Cove, Malita in the Province of Davao del Sur;

(j) So much as may be necessary of that portion of Baler,

Dinalungan and Casiguran including its territorial waters and
islets and its immediate environs in the Province of Aurora;

(k) So much as may be necessary of that portion of cities of

Naga and Iriga in the Province of Camarines Sur, Legaspi and
Tabaco in the Province of Albay, and Sorsogon in the Province of
Sorsogon;

(l) So much as may be necessary of that portion of Batan

Island in the Province of Batanes;

(m) So much as may be necessary of that portion of Lapu-

lapu in the Island of Mactan, and the municipalities of Balamban
and Pinamungahan and the cities of Cebu and Toledo and the
Province of Cebu, including its territorial waters and islets and its
immediate environs;

(n) So much as may be necessary of that portion of

Tacloban City;

(o) So much as may be necessary of that portion of the

Municipality of Barugo in the Province of Leyte;

(p) So much as may be necessary of that portion of the

Municipality of Buenavista in the Province of Guimaras;

(q) So much as may be necessary of that portion of the

municipalities of San Jose de Buenavista, Hamtic, Sibalom, and
Culasi in the Province of Antique;

(r) So much as may be necessary of that portion of the

municipalities of Catarman, Bobon and San Jose in the Province
of Northern Samar, the Island of Samar;

(s) So much as may be necessary of that portion of the

Municipality of Ternate and its immediate environs in the
Province of Cavite;

(t) So much as may be necessary of that portion of Polloc,

Parang in the Province of Maguindanao;

(u) So much as may be necessary of that portion of the

Municipality of Boac in the Province of Marinduque;

(v) So much as may be necessary of that portion of the

Municipality of Pitogo in the Province of Zamboanga del Sur;

(w) So much as may be necessary of that portion of

2lf%

Dipolog City-Manukan Corridor in the Province of Zamboanga

del Norte;

(x) So much as may be necessary of that portion of

Mambajao, Camiguin Province;

(y) So much as may be necessary of that portion of Infanta,

Real, Polillo, Alabat, Atimonan, Mauban, Tiaong, Pagbilao,
Mulanay, Tagkawayan, and Dingalan Bay in the Province of
Quezon;

(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 islets and its immediate environs;

(aa) So much as maybe necessary of that portion of Roxas

City including its territorial waters and islets and its immediate
environs in the Province of Capiz;

(bb) So much as may be necessary of that portion of San

Jacinto, San Fabian, Mangaldan, Lingayen, Sual, Dagupan,
Alaminos, Manaoag, Binmaley in the Province of Pangasinan;

(cc) So much as may be necessary of that portion of the

autonomous region;

(dd) So much as may be necessary of that portion of

Masinloc, Candelaria, and Sta. Cruz in the Province of Zambales;

(ee) So much as may be necessary of that portion of the

Palawan Island;

(ff) So much as may be necessary of that portion of

General Santos City in South Cotabato and its immediate
environs;

(gg) So much as may be necessary of that portion of

Dumaguete City and Negros Oriental, including its territorial
waters and islets and its immediate environs;

(hh) So much as may be necessary of that portion of the

Province of Ilocos Sur;
 m

(ii) So much as may be necessary of that portion of the

Province of La Union;

Gj) So much as may be necessary of that portion of the

Province of Laguna, including its territorial waters and its
immediate environs;

(kk) So much as may be necessary of that portion of the

Province of Rizal;

(11) All existing export processing zones and government-

owned industrial estates; and

(mm) Any private industrial estate which shall voluntarily

apply for conversion into an ECOZONE.

These areas shall be developed through any of the followmg

schemes:

(i) Private initiative;

(ii) Local government initiative with the assistance of the

national government; and

(iii) National government initiative.

The metes and bounds of each ECOZONE are to be

delineated and more particularly described in a proclamation to
be issued by the President of the Philippines, upon the
recommendation of the Philippine Economic Zone Authority
(PEZA), which shall be established under this Act, in
coordination with the municipal and/or city council. National
Land Use Coordinating Committee and/or the Regional Land
Use Committee.

Sec. 6. Criteria for the Establishment of Other ECOZONES.

- In addition to the ECOZONES identified in Section 5 of this
Act, other areas may be established as ECOZONES in a
proclamation to be issued by the President of the Philippines
subject to the evaluation and recommendation of the PEZA,
based on a detailed feasibility and engineering study which must
conform to the following criteria:
 (a) The proposed area must be identified as a regional
growth center in the Medium-Term Philippme Development Plan
or by the Regional Development Council;

(b) The existence of required infrastructure in the

proposed ECOZONE, such as roads, railways, telephones, ports,
airports, etc., and the suitability and capacity of the proposed site
to absorb such improvements;

(c) The availability of water source and electric power

supply for use of the ECOZONE;

(d) The extent of vacant lands available for industrial and

commercial development and future expansion of the ECOZONE
as well as of lands adjacent to the ECOZONE available for
development of residential areas for the ECOZONE workers;

(e) The availability of skilled, semi-skilled and non-skilled

trainable labor force in and around the ECOZONE;

(f) The area must have a significant incremental advantage

over the existing economic zones and its potential profitability can
be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be

established to curtail smuggling activities.

Other areas which do not meet the foregoing criteria may

be established as ECOZONES; Provided, That the said area shall
be developed only through local government and/or private sector
initiative under any of the schemes allowed in Republic Act No.
6957 (the build-operate-transfer law), and without any financial
exposure on the part of the national government: Provided,
further, That the area can be easily secured to curtail smuggling
activities: Provided, finally. That after five (5) years the area must
have attained a substantial degree of development, the indicators
of which shall be formulated by the PEZA.

Sec. 7. ECOZONE to be a Decentralized Agro-Industrial,

Industrial, Commercial/Trading Tourist, Investment and Financial
Community. - Within the framework of the Constitution, the
 Hi3

interest of national sovereignty and territorial integrity of the

Republic, the ECOZONE shall be developed, as much as
possible, into a decentralized, self-reliant and self-sustaining
industrial, commercial/trading, agro-industrial, tourist, banking,
financial and investment center with minimum government
intervention. Each ECOZONE shall be provided with
transportation, telecommunications, and other facilities needed to
generate linkage with industries and employment opportunities for
its own inhabitants and those of nearby towns and cities.

The ECOZONE shall administer itself on economic,

financial, industrial, tourism development and such other matters
within the exclusive competence of the national government.

The ECOZONE may establish mutually beneficial

economic relations with other entities within the country, or,
subject to the administrative guidance of the Department of
Foreign Affairs and/or the Department of Trade and Industry,
with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in

whatever proportion may set up enterprises in the ECOZONE,
either by themselves or in joint venture with Filipinos in any sector
of industry, international trade and commerce within the
ECOZONE. Their assets, profits and other legitimate interests
shall be protected: Provided, That the ECOZONE through the
PEZA may require a minimum investment for any ECOZONE
enterprise in freely convertible currencies: Provided, further. That
the new investment shall fall under the priorities, thrusts and
limits provided for in this Act.

Sec. 8. ECOZONE to be Operated and Managed as

Separate Customs Territory. - The ECOZONES shall be
managed and operated by the PEZA as separate customs
territory.

The PEZA is hereby vested with the authority to issue

certificates of origin for products manufactured or processed in
each ECOZONE in accordance with the prevailing rules of origin,
and the pertinent regulations of the Department of Trade and
Industry and/or the Department of Finance.
Sec. 9. Defense and Security. - The defense of the
ECOZONE and the security of its perimeter fence shall be the
 10

responsibility of the national government in coordination with the

PEZA. Military forces sent by the national government for the
purpose of defense shall not interfere in the internal affairs of any
of the ECOZONE and expenditure for these military forces shall
be borne by the national government. The PEZA may provide
and establish the ECOZONES’ internal security and firefighting
forces.

SEC. 10. Immigration. - Any investor within the

ECOZONE whose initial investment shall not be less than One
hundred fifty thousand dollars ($150,000), his/her spouse and
dependent children under twenty-one (21) years of age shall be
granted permanent resident status within the ECOZONE. They
shall have freedom of ingress and egress to and from the
ECOZONE without any need of special authorization from the
Bureau of Immigration.

The PEZA shall issue working visas renewable every two

(2) years to foreign executives and other aliens, possessing highly-
technical skills which no Filipino within the ECOZONE possesses,
as certified by the Department of Labor and Employment. The
names of aliens granted permanent resident status and working
visas by the PEZA shall be reported to the Bureau of Immigration
within thirty (30) days after issuance thereof.

CHAPTER II

Governing Structures

Sec. 11. The Philippine Economic Zone Authority (PEZA)

Board. - There is hereby created a body corporate to be known
as the Philippine Economic Zone Authority (PEZA) attached to
the Department of Trade and Industry. The Board shall have a
director general with the rank of a department undersecretary
who shall be appointed by the President. The director general
shall be at least forty (40) years of age, of proven probity and
integrity, and with a degree in economics, business, public
administration, law, management or its equivalent.

The director general shall be assisted by three (3) deputy

directors general each for policy and planning, administration and
operations, who shall be appointed by the PEZA Board, upon the
recommendation of the director general. The deputy directors
 2^

11

general shall be at least thirty-five (35) years old, with proven

probity and integrity and with a degree in economics, business,
public administration, law, management or its equivalent. They
must have career executive service eligibility.

The Board shall be composed of the director general as ex

officio chairman with eight (8) members as follows: the
Secretaries or their representatives of the Department of Trade
and Industry, the Department of Finance, the Department of
Labor and Employment, the Department of the Interior and Local
Government, the National Economic and Development Authority,
and the Bangko Sentral ng Pilipinas, one (1) representative from
the labor sector, and one (1) representative from the
investors/business sector in the ECOZONE.

The existing Export Processing Zone Authority (EPZA)

created under Presidential Decree No. 66 shall evolve into the
PE2LA in accordance with the guidelines and regulations set forth
in an executive order issued for this purpose.

Members of the Board shall receive a per diem of not less

than the amount equivalent to the representation and
transportation allowances of the members of the Board and/or as
may be determined by the Department of Budget and
Management: Provided, however, That the per diem collected per
month does not exceed the equivalent of four (4) meetings.

Sec. 12. Functions and Powers of PEZA Board. - The

Philippine Economic Zone Authority (PEZA) Board shall have
the following functions and powers:

(a) Set the general policies on the establishment and

operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;

(b) Review proposals for the establishment of

ECOZONES based on the set criteria under Section 6 and
endorse to the President the establishment of the ECOZONES,
industrial estates, export processing zones, free trade zones and
the like. Thereafter, it shall facilitate and assist in the
organization of said entities;

(c) Regulate and undertake the establishment, operation

and maintenance of utilities, other services and infrastructure in
 12

the ECOZONE, such as heat, light and power, water supply,

telecommunications, transport, toll roads and bridges, port
services, etc., and to fix just, reasonable and competitive rates,
fares, charges and fees therefor;

(d) Approve the annual budget of the PEZA and the

ECOZONE development plans;

(e) Issue rules and regtilations to implement the provisions

of this Act insofar as its powers and functions are concerned;

(f) Exercise its powers and functions as provided for in this

Act; and

(g) Render annual reports to the President and the

Congress.

Sec. 13. General Powers and Functions of the Authority. -

The PE21A shall have the following powers and functions:

(a) To operate, administer, manage and develop the

ECOZONE according to the principles and provisions set forth in
this Act;

(b) To register, regulate and supervise the enterprises in

the ECOZONE in an efficient and decentralized manner;

(c) To coordinate with local government units and exercise

general supervision over the development, plans, activities and
operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;

(d) In coordination with local government units concerned

and appropriate agencies, to construct, acquire, own, lease,
operate and maintain on its own or through contract, franchise,
license, bulk purchase from the private sector and build-operate-
transfer scheme or joint venture, adequate facilities and
infrastructure, such as light and power systems, water supply and
distribution systems, telecommunications and transportation,
buildings, structures, warehouses, roads, bridges, ports and other
facilities for the operation and development of the ECOZONE;

(e) To create, operate and/or contract to operate such

 Uj(i

13

agencies and functional units or offices of the authority as it may

deem necessary;

(f) To adopt, alter and use a corporate seal; make

contracts, lease, own or otherwise dispose of personal or real
property, sue and be sued; and otherwise carry out its duties and
functions as provided for in this Act;

(g) To coordinate the formulation and preparation of the

development plans of the different entities mentioned above;

(h) To coordinate with the National Economic and

Development Authority (NEDA), the Department of Trade and
Industry (DTI), the Department of Science and Technology
(DOST), and the local government units and appropriate
government agencies for policy and program formulation and
implementation; and

(i) To monitor and evaluate the development and

requirements of entities in subsection (a) and recommend to the
local government units or other appropriate authorities the
location, incentives, basic services, utilities and infrastructure
required or to be made available for said entities.

SEC. 14. Powers and Functions of the Director General. -

The director general, shall be the overall coordinator of the
policies, plans and programs of the ECOZONES. As such, he
shall provide overall supervision over and general direction to the
development and operations of these ECOZONES. He shall
determine the structure and the staffing pattern and personnel
complement of the PEZIA and establish regional offices, when
necessary, subject to the approval of the PEZA Board.

In addition, he shall have the following specific powers and

responsibilities:

(a) To safeguard all the lands, buildings, records, monies,

credits and other properties and rights of the ECOZONE;

(b) To ensure that all revenues of the ECOZONE are

collected and applied in accordance with its budget;

(c) To ensure that the investors/firms and employees of the

ECOZONES are properly discharging their respective duties;
^50

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(d) To give such information and recommend such

measures to the Board, as he shall deem advantageous to the
ECOZONE;

(e) To submit to the Board, the ongoing and proposed

projects, work and financial program, annual budget of receipts,
and expenditures of the ECOZONE;

(f) To represent the ECOZONE in all its business matters

and sign on its behalf after approval of the Board, all its bonds,
borrowings, contracts, agreements and obligations made in
accordance with this Act;

(g) To acquire jurisdiction, as he may deem proper, over

the protests, complaints, and claims of the residents and
enterprises in the ECOZONE concerning administrative matters;

(h) To recommend to the Board the grant, approval,

refusal, amendment or termination of the ECOZONE franchises,
licenses, permits, contracts, and agreements in accordance with
the policies set by the Board;

(i) To require owners of houses, buildings or other

structures constructed without the necessary permit whether
constructed on public or private lands, to remove or demolish
such houses, buildings, structures within sixty (60) days after
notice and upon failure of such owner to remove or demolish
such house, building or structure within said period, the director
general or his authorized representative may summarily cause its
removal or demolition at the expense of the owner, any existing
law, decree, executive order and other issuances or part thereof to
the contrary notwithstanding'

(j) To take such emergency measures as may be necessary

to avoid fires, floods and mitigate the effects of storms and other
natural or public calamities;

(k) To prepare and make out plans for the physical and
economic development of the ECOZONE, including zoning and
land subdivision, and issue such rules and regulations which shall
be submitted to the Board for its approval; and

(l) To perform such other duties and exercise such powers

 15

as may be prescribed by the Board, and to implement the policies,

rules and regulations set by the PEZA.

Sec. 15. Administration of Each ECOZONE. - Each

ECOZONE shall be organized, administered, managed and
operated by the ECOZONE executive committee composed of
the following:

(a) The administrator who shall be appointed by the PEZA

Board upon recommendation of the director general; and

(b) One (1) deputy administrator to be appointed by the

Board upon recommendation of the director general.

An ECOZONE advisory body shall be created with the

following members:

(1) The president of the association of investors in the

ECOZONE;

(2) The governor of the province where the ECOZONE is

located;

(3) The mayor/s of the municipality/ies or city/ies where

the ECOZONE is located;

(4) The president of an accredited labor union in the

ECOZONE;

(5) The representative of the business sector in the

periphery of the ECOZONE; and

(6) The representative of the PEZA.

The ECOZONE advisory body shall have the following

functions:

(i) Advise the ECOZONE management on matters

pertaining to policy initiatives; and

(ii) Assist the ECOZONE management in settling

problems arising between labor and any enterprise in the
ECOZONE.
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SEC. 16. Salary and Other Emoluments. - The salary of

the director general shall be in accordance with the revised
compensation and position classification system.

Sec. 17. Investigation and Inquiries. - Upon a written

formal complaint made under oath, which on its face provides
reasonable basis to believe that some anomaly or irregularity
might have been committed, the PEZA or the administrator of the
ECOZONE concerned, shall have the power to inquire into the
conduct of firms or employees of the ECOZONE and to conduct
investigations, and for that purpose may subpoena witnesses,
administer oaths, and compel the production of books, papers,
and other evidences: Provided, That to arrive at the truth, the
investigator(s) may grant immunity from prosecution to any
person whose testimony or whose possessions of documents or
other evidence is necessary or convenient to determine the truth
in any investigation conducted by him or under the authority of
the PEZA or the administrator of the ECOZONE concerned.

Sec. 18. Prohibition Against Holding Any Other Office. -

The director general, deputy directors general, administrators,
officials and staff or assistants of the PEZA shall not hold any
other office or employment within or outside the PEZA during
their tenure. They shall not, during their tenure, directly or
indirectly, practice any profession, participate in any business, or
be financially interested in any contract wdth, or in any franchise,
or special privilege granted by the PE21A or national government,
or any subdivision, agency, or instrumentality thereof, including
any government-owned or -controlled corporation, or its
subsidiary.

Sec. 19. Disbursement of Funds. - No money shall be

paid out of the funds of any ECOZONE except in pursuance of
the budget as formulated and approved by the PEZA.

Sec. 20. Full Disclosure of Financial and Business Interests.

— Every member of the Board of the PEZA, the director general,
the deputy directors general, and their staff shall, upon •
assumption of office, make full disclosure of their financial and
business interests.
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CHAPTER III

Operations within the Ecozone

Sec. 21. Development Strategy of the ECOZONE. - The

strategy and priority of development of each ECOZONE
established pursuant to this Act shall be formulated by the PEZA,
in coordination with the Department of Trade and Industry and
the National Economic and Development Authority: Provided,
That such development strategy is consistent with the priorities of
the national government as outlined in the medium-term
Philippine development plan.

It shall be the policy of the government and the PEZA to

encourage and provide incentives and facilitate private sector
participation in the construction and operation of public utilities
and infrastructure in the ECOZONE, using any of the schemes
allowed in Republic Act No. 6957 (the build-operate-transfer law).

Sec. 22. Survey of Resources. - The PEZA shall, in

coordination with appropriate authorities and neighboring cities
and municipalities, immediately conduct a survey of the physical,
natural assets and potentialities of the ECOZONE areas under its
jurisdiction.

Sec. 23. Fiscal Incentives. - Business establishments

operating within the ECOZONES shall be entitled to the fiscal
incentives as provided for under Presidential Decree No. 66, the
law creating the Export Processing Zone Authority, or those
provided under Book VI of Executive Order No. 226, otherwise
known as the Omnibus Investment Code of 1987.

Furthermore, tax credits for exporters using local materials

as inputs shall enjoy the same benefits provided for in the Export
Development Act of 1994.

Sec. 24. Exemption from Taxes Under the National Internal

Revenue Code. - Any provision of existing laws, rules and
regulations to the contrary notwithstanding, no taxes, local and
national, shall be imposed on business establishments operating
within the ECOZONE. In lieu of paying taxes, five percent (5%)
of the gross income earned by all businesses and enterprises
within the ECOZONE shall be remitted to the national
 18

government. This five percent (5%) shall be shared and

distributed as follows:

(a) Three percent (3%) to the national government;

(b) One percent (1%) to the local government units

affected by the declaration of the ECOZONE in proportion to
their population, land area, and equal sharing factors; and

(c) One percent (1%) for the establishment of a

development fund to be utilized for the development of
municipalities outside and contiguous to each ECOZONE:
Provided, however. That the respective share of the affected local
government units shall be determined on the basis of the following
formula:

(1) Population - fifty percent (50%);

(2) Land area - twenty-five percent (25%); and

(3) Equal sharing - twenty-five percent (25%).

Sec. 25. Applicable National Taxes. - All income derived

by persons and all service establishments in the ECOZONE shall
be subject to taxes under the National Internal Revenue Code.

Sec. 26. Domestic Sales. - Goods manufactured by an

ECOZONE enterprise shall be made available for immediate
retail sales in the domestic market, subject to payment of
corresponding taxes on the raw materials and other regulations
that may be adopted by the Board of the PEZA.

However, in order to protect the domestic industry, there

shall be a negative list of industries that will be drawn up by the
PEZA. Enterprises engaged in the industries included in the
negative list shall not be allowed to sell their products locally.
Said negative list shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade

and Industry and the Bureau of Customs, shall jointly issue the
necessary implementing rules and guidelines for the effective
implementation of this section.

Sec. 27. Applicability of Banking Laws and Regulations. -

Existing banking laws and Bangko Sentral ng Pilipinas (BSP) rules
 19

and regulations shall apply to banks and financial institutions to be

established in the ECOZONE and to other ECOZONE-
registered enterprises. Among other pertinent regulations, these
include those governing foreign exchange and other current
account transactions (trade and non-trade), local and foreign
borrowings, foreign investments, establishment and operation of
local and foreign banks, foreign currency deposit units, offshore
banking units and other financial institutions under the
supervision of the BSP.

Sec. 28. After Tax Profits. - Without prior Bangko Sentral

approval, after tax profits and other earnings of foreign
investments in enterprises in the ECOZONE may be remitted
outward in the equivalent foreign exchange through any of the
banks licensed by the Bangko Sentral ng Pilipinas in the
ECOZONE: Provided, however, That such foreign investments in
said enterprises have been previously registered with the Bangko
Sentral.

Sec. 29. Eminent Domain. - The areas comprising an

ECOZONE may be expanded or reduced when necessary. For
this purpose, the government shall have the power to acquire,
either by purchase, negotiation or condemnation proceedings, any
private lands within or adjacent to the ECOZONE for:

(a) Consolidation of lands for zone development purposes;

(b) Acquisition of right of way to the ECOZONE; and

(c) The protection of watershed areas and natural assets

valuable to the prosperity of the ECOZONE.

Sec. 30. Leases of Lands and Buildings. - Lands and

buildings in each ECOZONE may be leased to foreign investors
for a period not exceeding fifty (50) years, renewable once for a
period of not more than twenty-five (25) years, as provided for
under Republic Act No. 7652, otherwise known as the Investors’
Lease Act. The leasehold right acquired under long-term
contracts may be sold, transferred or assigned, subject to the
conditions set forth under Republic Act No. 7652.

Sec. 31. Land Conversion. - Agricultural lands may be

converted for residential, commercial, industrial and other non-
36 Cp

20

agricultural purposes, subject to the conditions set forth under

Republic Act No. 6657 and other existing laws.

Sec. 32. Shipping and Shipping Register. - Private

shipping and related business including private container
terminals may operate freely in the ECOZONE, subject only to
such minimum reasonable regulations of local application which
the PEZA may prescribe.

The PEZA shall, in coordination with the Department of

Transportation and Communications, maintain a shipping register
for each ECOZONE as a business register of convenience for
ocean-going vessels and issue related certification.

Ships of all sizes, descriptions and nationalities shall enjoy

access to the ports of the ECOZONE, subject only to such
reasonable requirement as may be prescribed by the PEZA in
coordination with the appropriate agencies of the national
government.

Sec. 33. Protection of Environment. - The PEZA, in

coordination with the appropriate agencies, shall take concrete
and appropriate steps and enact the proper measures for the
protection of the local environment.

Sec. 34. Termination of Business. - Investors in the

ECOZONE who desire to terminate business or operations shall
comply with such requirements and procedures which the PEZA
shall set, particularly those relating to the clearing of debts. The
assets of the closed enterprises can be transferred and the funds
can be remitted out of the ECOZONE subject to the rules,
guidelines and procedures prescribed jointly by the Bangko Sentral
ng Pilipinas, the Department of Finance and the PEZA.

Sec. 35. Registration of Business Enterprises. - Business

enterprises within a designated ECOZONE shall register with the
PEZA to avail of all incentives and benefits provided for in this
Act.

Sec. 36. One Stop Shop Center. - The PEZA shall

establish a one stop shop center for the purpose of facilitating the
registration of new enterprises in the ECOZONE. Thus, all
appropriate government agencies that are involved in registering,
licensing or issuing permits to investors shall assign their
 21

representatives to the ECOZONE to attend to investors

requirements.

CHAPTER IV

Industrial Harmony in the Ecozones

Sec. 37. Labor and Management Relations. - Except as

otherwise provided in this Act, labor and management relations in
the ECOZONE shall be governed by the existing Labor Code of
the Philippines. Employees and personnel in the ECOZONE
enterprises shall receive salaries and benefits and shall enjoy
working conditions not less than those provided under the
Philippine Labor Code and other relevant laws, issuances, rules
and regulations of the Philippine government and the Department
of Labor and Employment.

Sec. 38. Promotion of Industrial Peace. - In the pursuit of

industrial harmony in the ECOZONE, a tripartite body composed
of one (1) representative each from the Department of Labor and
Employment, labor sector and business and industry sectors shall
be created in order to formulate a mechanism under a social pact
for the enhancement and preservation of industrial peace in the
ECOZONE within thirty (30) days after the effectivity of this Act.

SEC. 39. Master Employment Contracts. - The PEZA, in

coordination with the Department of Labor and Employment,
shall prescribe a master employment contract for all ECOZONE
enterprise staff members and workers, the terms of which provide
salaries and benefits not less than those provided under this Act,
the Philippine Labor Code, as amended, and other relevant
issuances of the national government.

Sec. 40. Percentage of Foreign Nationals. - Employment

of foreign nationals hired by ECOZONE enterprises in a
supervisory, technieal or advisory capacity shall not exceed five
percent (5%) of its workforce without the express authorization of
the Secretary of Labor and Employment.

Sec. 41. Migrant Worker. - The PEZA, in coordination

with the Department of Labor and Employment, shall promulgate
appropriate measures and programs leading to the expansion of
the services of the ECOZONE to help the local governments of
nearby areas meet the needs of the migrant workers.
 22

Sec. 42. Incentive Scheme. — An additional deduction

equivalent to one-half (1/2) of the value of training expenses
incurred in developing skilled or unskilled labor or for managerial
or other management development programs incurred by
enterprises in the ECOZONE can be deducted from the national
government’s share of three percent (3%) as provided in Section
24.

The PEZA, the Department of Labor and Employment, and

the Department of Finance shall jointly make a review of the
incentive scheme provided in this section every two (2) years or
when circumstances so warrant.

CHAPTER V

National Government and Other Entities

Sec. 43. Relationship with the Regional Development

Council. - The PEZA shall determine the development goals
for the ECOZONE within the framework of national development
plans, policies and goals, and the administrator shall, upon
approval by the PEZA Board, submit the ECOZONE plans,
programs and projects to the regional development council for
inclusion in and as inputs to the overall regional development
plan.
J

Sec. 44. Relationship with the Local Government Units. —

Except as herein provided, the local government units comprising
the ECOZONE shall retain their basic autonomy and identity.
The cities shall be governed by their respective charters and the
municipalities shall operate and function in accordance with
Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.

Sec. 45. Relationship of PEZA to Privately-Owned Industrial

Estates. - Privately-owned industrial estates shall retain their
autonomy and independence and shall be monitored by the PEZA
for the implementation of incentives.

Sec. 46. Transfer of Resources. - The relevant functions

of the Board of Investments over industrial estates and agri-export
processing estates shall be transferred to the PEZA. The
resources of government-owned industrial estates and similar
 23

bodies, except the Bases Conversion Development Authority and

those areas identified under Republic Act No. 7227, are hereby
transferred to the PEZA as the holding agency. They are hereby
detached from their mother agencies and attached to the PEZA
for policy, program and operational supervision.

The Boards of the affected government-owned industrial

estates shall be phased out and only the management level and an
appropriate number of persoimel shall be retained.

Government personnel whose services are not retained by

the PEZA or any government office within the ECOZONE shall
be entitled to separation pay and such retirement and other
benefits they are entitled to under the laws then in force at the
time of their separation: Provided, That in no case shall the
separation pay be less than one and one-fourth (1 1/4) month of
every year of service.

CHAPTER VI

Miscellaneous Provisions

Sec. 47. Appropriation. - Upon the effectivity of this

Act, all funds of the former Export Processing Zone Authority
(EPZA) shall be transferred to the newly-created Philippine
Economic Zone Authority. Thereafter, any sum as may be
necessary to augment its capital outlay shall be included in the
General Appropriations Act to be treated as an equity of the
national govermnent.

Additional funding shall come from the following:

(a) The annual subsidies, appropriations and/or other

assets of the exports processing zone, and the industrial estates
and other economic areas that have been absorbed/transferred to
the TE.ZA as mandated in this Act;

(b) The proceeds from the rent of lands, buildings, and

other properties of the ECOZONES concerned;

(c) The proceeds from fees, charges and other revenue-

generatmg instruments which the PEZA is authorized to impose
and collect under this Act;
 24

(d) The proceeds from bonds which the PEZA is

authorized to float both domestic and abroad; and

(e) The advance rentals, license fees, and other charges

which the PEZA is authorized to impose under this Act and which
an investor is willing to advance payment for.

Sec. 48. Applicability of National Laws. - National laws

shall prevail vis-a-vis EC02DNE rules, regulations and standards,
unless there is a clear intent in this Act or other Acts of Congress
to vest the ECOZONE specific powers and privileges not
otherwise allowed under existing laws.

Sec. 49. Authority of the President to Advance Initial

Funding. - Subject to existing laws, the President of the
Philippines is hereby authorized to advance out of the savings of
the Office of the President such funds as may be necessary to
effect the organization of an ECOZONE which shall be
reimbursed by the PEZA at reasonable terms and conditions.

Sec. 50. Non-applicability on Areas Covered by Republic Act

No. 7227. - This Act shall not be applicable to economic zones
and areas already created or to be created under Republic Act
No. 7227 or other special laws, and governed by authorities
constituted pursuant thereto.

Any provision of this Act which provides benefits or

privileges less than those granted or imposes obligations or
burdens more onerous to special economic zones created or to be
created under special laws shall not apply to them.

Sec. 51. Ipso-Facto Clause. - All privileges, benefits,

advantages or exemptions granted to special economic zones
under Republic Act No. 7227, shall ipso-facto be accorded to
special economic zones already created or to be created under this
Act. The free port status shall not be vested upon the new special
economic zones.

Sec. 52. Separability Clause. - The provisions of this Act

arc hereby declared separable, and in the event one or more of
such provisions or part thereof are declared uniionstitutional;;such
declaration of unconstitutionality shall not affect the validity of the
other provisions thereof.
 X/

25

Sec. 53. Interpretation/Construction. - The powers,

authorities and functions that are vested in the Philippine
Economic Zone Authority (PEZA) and the ECOZONES
concerned are intended to establish decentralization of
governmental functions and authority as well as an efficient and
effective working relationship between the ECOZONE, the
central government and the local government units.

Sec. 54. Repealing Clause. - All laws, acts, presidential

decrees, executive orders, proclamations and/or administrative
regulations which are inconsistent with the provisions of this Act,
are hereby amended, modified, superseded or repealed
accordingly.

Sec. 55. Implementing Rules and Regulations. - The

Department of Trade and Industry, the National Economic and
Development Authority, the Department of Finance, the Bureau
of Customs, the Department of Agrarian Reform, the Department
of the Interior and Local Government, the Philippine Economic
2kme Authority, and the representatives from the technical staff of
the Committee on Economic Affairs of both Houses of Congress
shall formulate the implementing rules and regulations of this Act
within ninety (90) days after its approval. Such rules and
regulations shall take effect fifteen (15) days after their
publication in a newspaper of general circulation in the
Philippines.

Sec. 56. Transitory Provision. - Prior to the effectivity of

the implementing rules and regulations of this Act, the provisions
of Presidential Decree No. 66, as amended, and its implementing
rules and regulations shall remain in force.

Sec. 57. Effectivity. - This Act shall take effect upon its
approval.

Approved,

EDGARpOa. ANGARA )SE DE VENEC^, JR.

President of the Senate Speaker of the nouse
of Representatives
2C1
26

This Act which is a consolidation of House Bill No. 14295

and Senate Bill No. 1061 was finally passed by the House of
Representatives and the Senate on February 21, 1995.

EDGARDQ-Er-TtBrfrfl^GAN Camilo L. SAbio

Secretary of the Senate Secretary General
House of Representatives

Approved: FEB 2 4 1995

' FIDEL V, RAMOS

President of the Philippines