Laws & Executive Issuances: Foreign Investment (1900-2014)

LAWS & EXECUTIVE ISSUANCES
(1900-2014)
FOREIGN INVESTMENT
ISBN: 978-621-8014-01-5
Republic of the Philippines
House of Representatives
Quezon City, Metro Manila
foreword
foreign investments constute a

significant channel of resources that
expand the potenals for growth of
the naonal economy both in the short
and long term.
Laws, rules and regulaons impacng on the kind, magnitude,
form and sustainability of foreign investments require more incisive
study not only to address concerns on levelling the playing field
for investments and other economic acvity as well as the need
for clarity, consistency and flexibility of regulatory regimes but, as
importantly, the imperave for strategic adaptability in the context
of radically changing naonal and global economic condions
and relaons, and the swi pace of technological advancements
affecng all arenas of human acvity.
In sum, the thrust of policy making – principally of legislaon
on foreign investment - must now be directed toward securing the
fundamentals of economic survival for our people in the short term
and of equitable inclusive growth for the naon in the long term.
This compendium of Philippine laws and execuve issuances
on foreign investment, part of the connuing legislave publicaon
program iniated by the Office of the Secretary General with our
full support, is intended to serve as reference material for legislators
and other praconers in the field of public policy to help enable
them to discover more effecve means of strengthening policy
support and regulatory mechanisms on foreign investments so as
to ulmately render the same as authenc resource channels for
naonal development.
This publicaon will also be helpful to students, researchers,
the general public and even those engaged in the arena of foreign
investment themselves as it can provide them a historical or
evoluonary perspecve on Philippine laws and regulaons on the
subject.
Laws and execuve issuances craed from the American
period to the Commonwealth era, the Japanese occupaon up to
the country’s independence from American rule to date covering the
period 1913 to 2014 are brought together in this compendium. The
reader will see laws that are denominated as Acts, Commonwealth
Acts, Presidenal Decrees, Batas Pambansa and Republic Acts
indicang their enactment in various eras of our legislave history,
as well as Execuve Orders which exemplify presidenal issuances
and other execuve regulaons implemenng pernent laws.
This is the sixth book in our series of topical compilaons of
laws produced by the Office of the Secretary General, a most useful
and commendable program of legislave documentaon which
indisputably enriches the terrain of legislave policy-making in the
country.
I acknowledge and commend the strategic iniaves and
reless efforts of the House Secretary General, Dr. Marilyn B.
Barua-Yap in the publicaon of this compendium with the support
of the staff of the Legislave Informaon Resource Management
Department consisng of the Legislave Library Service and the
Archives and Museum Management Service headed by Deputy
Secretary General Edgardo Pangilinan.
FELICIANO BELMONTE, JR.

Speaker
prefatory remarks
we are grateful for the support of our Honorable Speaker

Feliciano Belmonte, Jr. to our connuing legislave publicaon
program bannered by the series of topical compilaons of laws and
related execuve issuances. More than his support, we appreciate
the fact that he recognizes the immense public value we can create
with so lile in funding resource.
This compendium is solid proof that every cent wisely
invested in a relevant instuonal project can count and make a
difference in the arena of public service. It is an unreming wish,
however, that more funds can be made available to increase the
number of copies we can produce so as to afford every legislator, at
the very least, a copy of every compendium produced.
The need for publishing compilaons of laws and execuve
issuances on specific areas of policy even with the availability of
texts of each of these laws and issuances in our library and in our
archives cannot be overstated.
Our goal is to make these laws and related execuve issuances
more readily and swily accessible to the scholars, academicians,
researchers and policy specialists whose studies enrich the policy
resource stream of the country. Through swi and ready access,
more me is made available for informed scruny; and analysis can
be swier, broader and more incisive. In addion, we also provide
a comprehensive panorama of the evoluon of policy acons on
a parcular policy area to ensure more intelligent appreciaon of
policy iniaves in their respecve socio-polical and historical
contexts.
This publicaon is also important in these mes when there
is yet no instuonal arm in the House of Representaves Secretariat
that could respond to the need for an instuonal publicaons
machinery that is enabled to connually put out to the Filipino public
and the world the wealth of our legislave informaon materials in
the House of Representaves.
I will say this again and again, the House’s legislave
informaon materials constute an immense trove of documented
instuonal memory that should not be neglected (as it has been for
decades) because these capture, across history, how the men and
women who served in the Philippine legislature grappled with the
challenge of craing laws responsive to the conngent and enduring
needs and aspiraons of the naon and the Filipino people.
This compendium of laws and execuve issuances, the sixth
in our series of topical compilaons, is as relevant as it is mely
today with the concern for raonalizing and increasing foreign
investments having reached the pitch of inving prospects for
amending the economic provisions of the Constuon.
To our legislators, past and present, and the Filipino people
who must be awakened, me and again, to the need for securing
their democracy under the sovereignty of the law, this publicaon
is humbly offered.
ATTY. MARILYN B. BARUA-YAP, DPA

Secretary General
LEGISLATIVE MEASURES
TABLE OF CONTENTS
LAWS AND EXECUTIVE ISSUANCES ON
FOREIGN INVESTMENT
Part I
PUBLIC LAWS PAGE
ACT NO. 1303 5

AN ACT GRANTING TO MARTIN M. LEVERING A FRANCHISE
TO INSTALL, OPERATE, AND MAINTAIN AN ELECTRIC LIGHT,
HEAT, AND POWER SUPPLY SYSTEM IN THE MUNICIPALITY
OF CEBU, PROVINCE OF CEBU
ACT NO. 1459 11

AN ACT PROVIDING FOR THE FORMATION AND ORGANIZATION
OF CORPORATIONS, DEFINING THEIR POWERS, FIXING THE
DUTIES OF DIRECTORS, AND OTHER OFFICERS THEREOF,
DECLARING THE RIGHTS AND LIABILITIES OF SHAREHOLDERS
AND MEMBERS, PRESCRIBING THE CONDITIONS UNDER
WHICH SUCH CORPORATIONS MAY TRANSACT BUSINESS,
AND REPEALING CERTAIN ARTICLES OF THE CODE OF
COMMERCE AND ALL LAWS OR PARTS OF LAWS IN CONFLICT
OR INCONSISTENT WITH THIS ACT
ACT NO. 1790 16

AN ACT TO CONFIRM CERTAIN RIGHTS AND FRANCHISES
OF THE BANCO ESPAÑOL-FILIPINO AND TO AMEND ITS
STATUTES
i
LAWS AND EXECUTIVE ISSUANCES ON FOREIGN INVESTMENT
PUBLIC LAWS PAGE
ACT NO. 2384 21

AN ACT GRANTING TO THE MARCONI WIRELESS TELEGRAPH
COMPANY OF AMERICA A FRANCHISE TO CONSTRUCT,
MAINTAIN, AND OPERATE IN THE PHILIPPINE ISLANDS
A STATION FOR THE RECEPTION AND TRANSMISSION OF
WIRELESS LONG DISTANCE MESSAGES
ACT NO. 2719 25

AN ACT TO PROVIDE FOR THE LEASING AND DEVELOPMENT
OF COAL LANDS IN THE PHILIPPINE ISLANDS
ACT NO. 2720 32

AN ACT AUTHORIZING GEORGE H. FAIRCHILD TO ORGANIZE
A CORPORATION UNDER THE LAWS OF THE PHILIPPINE
ISLANDS, OR OF THE UNITED STATES OF AMERICA OR OF
ANY STATE THEREOF, WITH POWERS TO ACQUIRE AND HOLD
FOR A PERIOD NOT TO EXCEED THIRTY YEARS CERTAIN
LANDS SITUATED WITH THE PROVINCE OF MINDORO AND
TO CONSTRUCT AND OPERATE AN IRIGATION AND DRAINAGE
SYSTEM THEREON
ACT NO. 2721 36

AN ACT TO AUTHORIZE THE DIRECTOR OF FORESTRY
TO LEASE OR GRANT PERMITS FOR THE USE OF FOREST
LANDS FOR SAWMILS AND TIMBER DEPOTS, AND FOR THE
CONSTRUCTION OF HOTELS, SANATORIA, RESIDENCES,
CAMPS, FISHPONDS, PASTURES, OR OTHER LAWFUL USES
ACT NO. 2742 37

AN ACT TO GUARANTEE AN INTEREST OR PROFIT TO ANY
CAPITAL INVESTED IN THE ESTABLISHMENT OF A PULP AND
PAPER FACTORY IN THE PHILIPPINE ISLANDS
ii
PUBLIC LAWS PAGE
ACT NO. 2975 39

AN ACT AUTHORIZING CERTAIN FOREIGN CORPORATIONS
TO HOLD IN LEASE PUBLIC LANDS FOR WHICH APPLICATION
WAS MADE BY THEM AFTER FEBRUARY EIGHT, NINETEEN
HUNDRED AND EIGHTEN AND BEFORE NOVEMBER TWNETY-
NINTH, NINTEEN HUNDRED AND NINTEEN, UNDER CERTAIN
CONDITIONS
ACT NO. 3495 42

AN ACT GRANTING TO THE ROBERT DOLLAR COMPANY, A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS
OF THE STATE OF CALIFORNIA, UNITED STATES OF AMERICA,
A FRANCHISE TO CONSTRUCT, MAINTAIN, AND OPERATE IN
THE PHILIPPINE ISLANDS STATIONS FOR THE RECEPTION
AND TRANSMISSION OF WIRELESS LONG DISTANCE AND
PRESCRIBING THE CONDITION OF THE SAME
ACT NO. 3513 48

AN ACT GRANTING TO THE “MACKAY RADIO AND TELEGRAPH
COMPANY OF CALIFORNIA,” UNITED STATES OF AMERICA, A
FRANCHISE TO CONSTRUCT, MAINTAIN, AND OPERATE IN THE
PHILIPPINE ISLANDS STATIONS FOR THE RECEPTION AND
TRANSMISSION OF WIRELESS LONG DISTANCE MESSAGES,
AND PRESCRIBING THE CONDITIONS OF THE SAME
ACT NO. 3518 54

AN ACT AMENDING THE CORPORATION LAW, ACT NUMBERED
FOURTEEN HUNDRED AND FIFTY-NINE, AS AMENDED, AND
FOR OTHER PURPOSES
ACT NO. 3520 56

AN ACT REGULATING FOREIGN BANKING CORPORATIONS
DOING BUSINESS IN THE PHILIPPINE ISLANDS
iii
PUBLIC LAWS PAGE
ACT NO. 3546 59

AN ACT EXCLUDING NATIONAL BANKS ORGANIZED UNDER
THE LAWS OF THE UNITED STATES FROM THE PROHIBITION
OF USING THE WORD “NATIONAL” AS A PORTION OF THEIR
NAME OR TITLE
ACT NO. 3590 60

AN ACT AMENDING SECTION TEN OF ACT NUMBERED THREE
THOUSAND FIVE HUNDRED AND THIRTEEN GRANTING TO THE
MACKAY RADIO AND TELEGRAPH COMPANY OF CALIFORNIA
A FRANCHISE TO CONSTRUCT, MAINTAIN AND OPERATE IN
THE PHILIPPINE ISLANDS STATIONS FOR THE RECEPTION AND
TRANSMISSION OF WIRELESS, LONG DISTANCE MESSAGES
AND PRESCRIBING THE CONDITIONS OF THE SAME
COMMONWEALTH ACTS PAGE
COMMONWEALTH ACT NO. 108 63

AN ACT TO PUNISH ACTS OF EVASION OF THE LAWS ON THE
NATIONALIZATION OF CERTAIN RIGHTS, FRANCHISES OR
PRIVILEGES
COMMONWEALTH ACT NO. 613 65

AN ACT TO CONTROL AND REGULATE THE IMMIGRATION OF
ALIENS INTO THE PHILIPPINES
REPUBLIC ACTS PAGE
REPUBLIC ACT NO. 503 71

AN ACT TO AMEND CERTAIN SECTIONS OF COMMONWEALTH
ACT NUMBERED SIX HUNDRED AND THIRTEEN, OTHERWISE
KNOWN AS THE PHILIPPINE IMMIGRATION ACT OF 1940

AN ACT GRANTING MR. A. J. WILLS A TEMPORARY PERMIT TO
CONSTRUCT, MAINTAIN AND OPERATE RADIO BROADCASTING
STATION OR STATIONS IN THE PHILIPPINES
iv
REPUBLIC ACTS PAGE

AN ACT GRANTING TO “THE EASTERN EXTENSION
AUSTRALASIA AND CHINA TELEGRAPH COMPANY LIMITED”
AND ITS PERMITTED ASSIGNS, A FRANCHISE TO LAND,
CONSTRUCT, MAINTAIN AND OPERATE AT MANILA IN
THE PHILIPPINES A SUBMARINE TELEGRAPH CABLE
CONNECTING MANILA WITH HONGKONG AND PRESCRIBING
THE CONDITIONS OF THE SAME

AN ACT TO REGULATE THE RETAIL BUSINESS

AN ACT AUTHORIZING THE PRESIDENT OF THE PHILIPPINES
TO ENTER INTO A REVISED AGREEMENT WITH THE PRESIDENT
OF THE UNITED STATES ON THE BASIS OF THE FINAL ACT
OF NEGOTIATIONS RELATIVE TO THE REVISION OF THE
1946 TRADE AGREEMENT BETWEEN THE REPUBLIC OF THE
PHILIPPINES AND THE UNITED STATES OF AMERICA, WHICH
WAS SIGNED AT WASHINGTON, D.C. ON DECEMBER 15, 1954

AN ACT TO FACILITATE THE ENTRY INTO THE PHILIPPINES
AS INTERNATIONAL TRADERS OF NATIONAL OF THE UNITED
STATES

AN ACT GRANTING THE EDWARD J. NELL COMPANY AND/
OR ITS SISTER COMPANY, THE AIRCON, INC., A TEMPORARY
PERMIT TO CONSTRUCT, MAINTAIN AND OPERATE PRIVATE
FIXED POINT-TO-POINT AND LAND BASED AND LAND MOBILE
RADIO STATIONS FOR THE RECETION AND TRANSMISSION OF
RADIO COMMUNICATIONS WITHIN THE PHILIPPINES
v
REPUBLIC ACTS PAGE

AN ACT GRANTING MR. A. J. WILLS A TEMPORARY PERMIT
TO CONSTRUCT, MAINTAIN AND OPERATE TELEVISION
STATIONS, AMENDING FOR THE PURPOSE THE TITLE
AND SECTION ONE OF REPUBLIC ACT NUMBERED SEVEN
HUNDRED SIXTY-SEVEN

AN ACT GRANTING MR. WASHINGTON BRODITH A FRANCHISE
TO CONSTRUCT, MAINTAIN AND OPERATE A RADIO
BROADCASTING STATION IN THE MUNICIPALITY OF GINGOOG,
PROVINCE OF MISAMIS ORIENTAL, PHILIPPINES

AN ACT AUTHORIZING AND APPROVING THE TRANSFER
OF THE TEMPORARY PERMIT GRANTED TO MR. A. J. WILLS
BY REPUBLIC ACT NUMBERED SEVEN HUNDRED SIXTY-
SEVEN, AS AMENDED, IN FAVOR OF THE BLUE NETWORK,
INCORPORATED

AN ACT GRANTING ROBERT O. PHILLIPS A FRANCHISE TO
ESTABLISH, MAINTAIN AND OPERATE A HYDROFOIL FERRY
SERVICE WITHIN MANILA BAY INCLUDING WATERS ALONG
CORREGIDOR, BATAAN, CAVITE, ZAMBALES AND OTHER
NEIGHBORING BAY AREAS

ANACTTO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS
FOR ITS CREATION, AND GOVERN ITS INCIDENTS

AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT
NUMBERED EIGHT HUNDRED EIGHT, ENTITLED “AN ACT
GRANTING TO ‘THE EASTERN EXTENSION AUSTRALASIA AND
CHINA TELEGRAPH COMPANY LIMITED’ AND ITS PERMITTED
vi
REPUBLIC ACTS PAGE
ASSIGNS, A FRANCHISE TO LAND, CONSTRUCT, MAINTAIN,

AND OPERATE AT MANILA IN THE PHILIPPINES A SUBMARINE
TELEGRAPH CABLE CONNECTING MANILA WITH HONGKONG
AND PRESCRIBING THE CONDITIONS OF THE SAME”

OF INTERNATIONAL TRADERS AND INVESTORS OF FOREIGN
NATIONALITY, AMENDING FOR THE PURPOSE SUBPARAGRAPH
(d) OF SECTION NINE OF COMMONWEALTH ACT NUMBERED
SIX HUNDRED THIRTEEN, OTHERWISE KNOWN AS THE
PHILIPPINE IMMIGRATION ACT OF 1940, AS AMENDED BY
REPUBLIC ACT NUMBERED FIVE HUNDRED AND THREE

AN ACT TO REQUIRE THAT THE MAKING OF INVESTMENTS
AND THE DOING OF BUSINESS WITHIN THE PHILIPPINES
BY FOREIGNERS OR BUSINESS ORGANIZATIONS OWNED IN
WHOLE OR IN PART BY FOREIGNERS SHOULD CONTRIBUTE
TO THE SOUND AND BALANCED DEVELOPMENT OF THE
NATIONAL ECONOMY ON A SELF-SUSTAINING BASIS, AND
FOR OTHER PURPOSES

AN ACT MAKING MARIVELES, PROVINCE OF BATAAN, A PORT
OF ENTRY BY AMENDING SECTION SEVEN HUNDRED ONE
OF THE TARIFF AND CUSTOMS CODE OF THE PHILIPPINES,
AS AMENDED, PROVIDING FOR THE ESTABLISHMENT,
OPERATION AND MAINTENANCE OF A FOREIGN TRADE ZONE
THEREIN; CREATING A FOREIGN TRADE ZONE AUTHORITY;
AND AUTHORIZING THE APPROPRIATION OF THE NECESSARY
FUNDS THEREFOR

AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE
THE PROCEDURES FOR REGISTERING ENTERPRISES DOING
BUSINESS IN THE PHILIPPINES, AND FOR OTHER PURPOSES
vii
REPUBLIC ACTS PAGE
° IMPLEMENTING RULES AND REGULATIONS OF RA 7042

AS AMENDED BY REPUBLIC ACT NO. 8179
° RELATED LAWS:
EO 11 s. 1998
EO 95 s. 2002
EO 139 s. 2002
EO 286 s. 2000
EO 362 s. 1996
EO 389 s. 2004
EO 584 s. 2006

AN ACT ACCELERATING THE CONVERSION OF MILITARY
RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING
THE BASES CONVERSION AND DEVELOPMENT AUTHORITY
FOR THE PURPOSE, PROVIDING FUNDS THEREFORE AND FOR
OTHER PURPOSES
° RULES AND REGULATIONS IMPLEMENTING THE
PROVISIONS RELATIVE TO THE SUBIC SPECIAL
ECONOMIC AND FREEPORT ZONE AND THE SUBIC BAY
METROPOLITAN AUTHORITY UNDER REPUBLIC ACT NO.
7227, OTHERWISE KNOWN AS THE “BASES CONVERSION
AND DEVELOPMENT ACT OF 1992”
° RELATED LAWS:
EO 55 s. 2001
EO 97 s. 1993
EO 97-A s. 1993

AN ACT GRANTING TAX AND DUTY EXEMPTION AND TAX
CREDIT ON CAPITAL EQUIPMENT
viii
REPUBLIC ACTS PAGE

AN ACT INCREASING THE PENALTIES FOR TAX EVASION,
AMENDING FOR THIS PURPOSE THE PERTINENT SECTIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED

AN ACT ALLOWING THE LONG-TERM LEASE OF PRIVATE
LANDS BY FOREIGN INVESTORS
IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC

ACT NO. 7652, OTHERWISE KNOWN AS THE “INVESTORS’
LEASE ACT”

AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT
NO. 6957, ENTITLED “AN ACT AUTHORIZING THE FINANCING,
CONSTRUCTION, OPERATION AND MAINTENANCE OF
INFRASTRUCTURE PROJECTS BY THE PRIVATE SECTOR, AND
FOR OTHER PURPOSES”

AN ACT LIBERALIZING THE ENTRYAND SCOPE OF OPERATIONS
OF FOREIGN BANKS IN THE PHILIPPINES AND FOR OTHER
PURPOSES

AN ACT TO AMEND ARTICLE 7 (13) OF EXECUTIVE ORDER NO.
226, OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS
CODE OF 1987

AN ACT CREATING A SPECIAL ECONOMIC ZONE AND FREE
PORT IN THE CITY OF ZAMBOANGA CREATING FOR THIS
PURPOSE THE ZAMBOANGA CITY SPECIAL ECONOMIC ZONE
AUTHORITY, APPROPRIATING FUNDS THEREFORE, AND FOR
OTHER PURPOSES
ix
REPUBLIC ACTS PAGE

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

AN ACT AMENDING ARTICLE 39, TITLE III OF EXECUTIVE
ORDER NO. 226, OTHERWISE KNOWN AS THE OMNIBUS
INVESTMENTS CODE OF 1987, AS AMENDED, AND FOR OTHER
PURPOSES

AN ACT GRANTING LEGAL RESIDENCE STATUS TO CERTAIN
ALIENS THROUGH A SOCIAL INTEGRATION PROGRAM IN THE
PHILIPPINES UNDER CERTAIN CONDITIONS

AN ACT ESTABLISHING A SPECIAL ECONOMIC ZONE AND
FREE PORT IN THE MUNICIPALITY OF SANTA ANA AND THE
NEIGHBORING ISLANDS IN THE MUNICIPALITY OF APARRI,
PROVINCE OF CAGAYAN, PROVIDING FUNDS THEREFOR, AND
FOR OTHER PURPOSES
° CUSTOMS ADMINISTRATIVE ORDER NO. 9-2003
RULES AND REGULATIONS GOVERNING CUSTOMS
OPERATIONS IN CAGAYAN SPECIAL ECONOMIC ZONE
AND FREEPORT

AN ACT TO FURTHER LIBERALIZE FOREIGN INVESTMENTS,
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7042, AND
FOR OTHER PURPOSES
x
REPUBLIC ACTS PAGE
° RELATED LAWS:
EO 11 s. 1998
EO 139 s. 2002
EO 286 s. 2000
EO 389 s. 2004
EO 584 s. 2006

AN ACT LIBERALIZING THE PHILIPPINE INVESTMENT HOUSE
INDUSTRY, AMENDING CERTAIN SECTIONS OF PRESIDENTIAL
DECREE NO. 129, AS AMENDED, OTHERWISE KNOWN AS THE
INVESTMENT HOUSES LAW
° RELATED LAW:
PD 129

AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND
LICENSING REQUIREMENTS OF REGIONAL OR AREA
HEADQUARTERS, REGIONAL OPERATING HEADQUARTERS,
AND REGIONAL WAREHOUSES OF MULTINATIONAL
COMPANIES, AMENDING FOR THE PURPOSE CERTAIN
PROVISIONS OF EXECUTIVE ORDER NO. 226, OTHERWISE
KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987
° RULES AND REGULATIONS IMPLEMENTING REPUBLIC
ACT NO. 8756 AMENDING BOOKS III & IV OF EXECUTIVE
INVESTMENTS CODE, AS AMENDED
° RELATED LAW:
EO 226 s. 1987
xi
REPUBLIC ACTS PAGE

AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS,
REPEALING FOR THE PURPOSE REALING FOR THE PURPOSE
REPUBLIC ACT NO. 1180, AS AMENDED, AND FOR OTHER
PURPOSES

AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN
TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES, FINES,
PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO,
INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING
WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS
CREATED UNDER PROCLAMATION NO. 163, SERIES OF 1993;
PROCLAMATION NO. 216, SERIES OF 1993; PROCLAMATION NO.
420, SERIES OF 1994; AND PROCLAMATION NO, 984, SERIES OF
1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT NO. 7227,
AS AMENDED, AND FOR OTHER PURPOSES

AN ACT CONVERTING THE BATAAN ECONOMIC ZONE
LOCATED IN THE MUNICIPALITY OF MARIVELES PROVINCE
OF BATAAN, INTO THE FREEPORT AREA OF BATAAN (FAB),
CREATING FOR THIS PURPOSE THE AUTHORITY OF THE
FREEPORT AREA OF BATAAN (AFAB), APPROPRIATING FUNDS
THEREFOR AND FOR OTHER PURPOSES
xii
EXECUTIVE ISSUANCES
Part II
EXECUTIVE ISSUANCES
PRESIDENTIAL DECREES PAGE
PRESIDENTIAL DECREE NO. 66 429

CREATING THE EXPORT PROCESSING ZONE AUTHORITY AND
REVISING REPUBLIC ACT NO. 5490

GOVERNING THE ESTABLISHMENT, OPERATION AND
REGULATION OF INVESTMENT HOUSES

FIXING A MAXIMUM PERIOD FOR THE DURATION OF LEASES
OR PRIVATE LANDS TO ALIENS

AUTHORIZING THE ISSUANCE OF SPECIAL INVESTORS
RESIDENT VISAS TO ALIENS AND FOR OTHER PURPOSES

FURTHER AMENDING PRESIDENTIAL DECREE NO. 66 DATED
NOVEMBER 20, 1972, CREATING THE EXPORT PROCESSING
ZONE AUTHORITY

A DECREE TO REVISE, AMEND AND CODIFY THE INVESTMENT,
AGRICULTURAL AND EXPORT INCENTIVES ACTS TO BE
KNOWN AS THE OMNIBUS INVESTMENTS CODE

AN ACT ALLOWING AN INCREASE IN FOREIGN EQUITY
PARTICIPATION IN PREFERRED AREAS OF INVESTMENT AND
FOR OTHER PURPOSES
xiii
PRESIDENTIAL DECREES PAGE

FURTHER AMENDING PRESIDENTIAL DECREE NO. 1623
ENTITLED "AUTHORIZING THE ISSUANCE OF SPECIAL
INVESTORS RESIDENT VISAS TO ALIENS AND FOR OTHER
PURPOSES," AS AMENDED
EXECUTIVE ORDERS PAGE
EXECUTIVE ORDER NO. 11 s. 1998 477

APPROVING THE THIRD REGULAR FOREIGN INVESTMENTS
NEGATIVE LIST

ESTABLISHING AN INTERNATIONAL NETWORK OF HONORARY
INVESTMENT AND TRADE REPRESENTATIVES TO ASSIST THE
DEPARTMENT OF TRADE AND INDUSTRY IN PROMOTING THE
PHILIPPINES GLOBALLY

OPENING THE SUB-PORT OF CLARK SPECIAL ECONOMIC ZONE
AS A PRINCIPAL PORT OF ENTRY TO BE KNOWN AS THE PORT
OF CLARK INTERNATIONAL AIRPORT, PURSUANT TO SECTION
702 OF THE TARIFF AND CUSTOMS CODE OF THE PHILIPPINES,
AS AMENDED, IN RELATION TO THE BASES CONVERSION AND
DEVELOPMENT ACT OF 1992

GRANTING INCENTIVES TO FOREIGN INVESTMENT IN
TOURIST-RELATED PROJECTS AND TOURIST ESTABLISHMENTS
AND FOR OTHER PURPOSES

AMENDING EXECUTIVE ORDER NO. 286 (S. 2000) ENTITLED
“PROMULGATING THE FOURTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST”
xiv
EXECUTIVE ISSUANCES

CLARIFYING THE TAX AND DUTY FREE INCENTIVE WITHIN
THE SUBIC SPECIAL ECONOMIC ZONE PURSUANT TO
REPUBLIC ACT NO. 7227 (1992)
EXECUTIVE ORDER NO. 97-A s. 1993 502

FURTHER CLARIFYING THE TAX AND DUTY-FREE PRIVILEGE
WITHIN THE SUBIC SPECIAL ECONOMIC AND FREE PORT
ZONE

SIMPLIFYING THE PROCEDURES ON PHILIPPINE GOVERNMENT
APPROVAL OF PROJECTS/INVESTMENTS IN THE PHILIPPINES
FOR PURPOSES OF OVERSEAS PRIVATE INVESTMENT
CORPORATION (OPIC) POLITICAL RISKS INSURANCE
COVERAGE AND FOR OTHER PURPOSES

PROMULGATING THE FIFTH REGULAR FOREIGN INVESTMENT
NEGATIVE LIST

PROVIDING FOR THE ACTIVATION OF THE CENTRAL EAST
ASIA GROWTH CIRCLE PROGRAM AS AN ECONOMIC AND
DIPLOMATIC INITIATIVE AND FOR OTHER PURPOSES

ABOLISHING THE COUNCIL FOR INVESTMENTS IN TRADE,
INDUSTRY, TOURISM, AGRICULTURE, NATURAL RESOURCES,
TRANSPORTATION, COMMUNICATIONS AND SERVICES AND
REFOCUSING AND STRENGTHENING THE INVESTMENT ONE-
STOP ACTION CENTER
xv

AMENDING EXECUTIVE ORDER NO. 155 ABOLISHING THE
COUNCIL FOR INVESTMENTS IN TRADE, INDUSTRY, TOURISM,
AGRICULTURE, NATURAL RESOURCES, TRANSPORTATION,
COMMUNICATIONS AND SERVICES AND REFOCUSING AND
STRENGTHENING THE INVESTMENT ONE-STOP ACTION
CENTER AND CREATING THE POSITION OF INVESTMENT
OMBUDSMAN

FIRST REGULAR FOREIGN INVESTMENT NEGATIVE LIST

CREATION OF A PHILIPPINE COORDINATING COMMITTEE
TO STUDY THE FEASIBILITY OF THE JAPAN-PHILIPPINES
ECONOMIC PARTNERSHIP AGREEMENT

AMENDING EXECUTIVE ORDER NO. 180 TO RENAME
THE QUICK RESPONSE ONE STOP ACTION CENTER FOR
INVESTMENTS (QROSACI) AND TO DELINEATE THE OFFICE
OF THE INVESTMENT OMBUDSMAN AS AN OFFICE ATTACHED
TO THE DEPARTMENT OF TRADE AND INDUSTRY AND FOR
OTHER PURPOSES

THE OMNIBUS INVESTMENTS CODE OF 1987

AMENDING EXECUTIVE ORDER NO. 182 WHICH PROMULGATES
THE FIRST REGULAR FOREIGN INVESTMENT NEGATIVE LIST
SPECIFICALLY “LIST A” OF ANNEX A

GOVERNING THE ADMISSION AND STAY OF FOREIGN
NATIONALS IN THE SUBIC BAY FREEPORT ZONE AS
TEMPORARY VISITORS
xvi
EXECUTIVE ISSUANCES

PROMULGATING THE FOURTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST

AUTHORIZING THE PAYMENT OF REASONABLE INCENTIVE
FEES TO FOREIGN BANKS, INVESTMENT BANKS AND OTHER
FINANCIAL INSTITUTIONS PARTICIPATING IN THE DEBT-TO-
EQUITY CONVERSION PROGRAM AND/OR THE PRIVATIZATION
SCHEME OF THE PHILIPPINE GOVERNMENT AND PROVIDING
FUNDS THEREFOR

CREATING THE INVESTMENT EXPRESS LANE OFFICE UNDER
THE OFFICE OF THE PRESIDENT AND TRANSFERRING THE
ADMINISTRATIVE SUPERVISION OF THE INVESTMENT
O M B U D S M A N TO T H E E C O N O M I C C O O R D I N AT I N G
COUNCIL

PROMULGATING THESE GUIDELINES TO GOVERN THE
REVIEW BY GOVERNMENT AGENCIES CONCERNED OF
SERVICE AGREEMENTS BETWEEN LOCAL PETROLEUM
CONCESSIONAIRES AND FOREIGN OIL EXPLORATION
COMPANIES

SECOND REGULAR FOREIGN INVESTMENT NEGATIVE LIST

PROMULGATING THE SIXTH REGULAR FOREIGN INVESTMENT
NEGATIVE LIST

DIRECTING DEPARTMENT, BUREAUS, OFFICES AND OTHER
AGENCIES IN THE EXECUTIVE BRANCH, INCLUDING
GOVERNMENT – OWNED AND CONTROLLED CORPORATIONS
TO SIMPLIFY RULES AND REGULATIONS AND REDUCE
REPORTORIAL REQUIREMENTS TO FACILITATE DOING
BUSINESS AND ENCOURAGE MORE INVESTMENTS IN THE
COUNTRY
xvii

CREATING A PERMANENT PHILIPPINE COMMITTEE FOR
THE JOINT PHILIPPINE-ROMANIAN ECONOMIC AND TRADE
COMMISSION

NATIONALS IN THE CLARK SPECIAL ECONOMIC ZONE AS
TEMPORARY VISITORS

PROMULGATING THE SEVENTH REGULAR FOREIGN

R AT I O N A L I Z I N G T H E TA X P R I V I L E G E C O V E R I N G
IMPORTATIONS BY REGISTERED ENTERPRISES WITHIN
THE SUBIC SPECIAL ECONOMIC ZONE, AND FOR OTHER
PURPOSES

DIRECTING ALL HEADS OF DEPARTMENTS, BUREAUS,
OFFICES, AGENCIES, AND THE INSTRUMENTALITIES OF THE
GOVERNMENT TO SUPPORT THE POWER INFRASTRUCTURE
REQUIREMENTS AND THE INVESTMENT OF HANJIN HEAVY
INDUSTRIES AND CONSTRUCTION-PHILIPPINES, INC. IN SUBIC
AND IN MINDANAO
APPENDIX: List of Law Amendments 655
INDEX 659
xviii
Part I
Legislative Measures
2
LEGISLATIVE MEASURES – PUBLIC ACTS
PUBLIC ACTS
3
4
ACT NO. 1303
AN ACT GRANTING TO MARTIN M. LEVERING A FRANCHISE

TO INSTALL, OPERATE, AND MAINTAIN AN ELECTRIC
LIGHT, HEAT, AND POWER SUPPLY SYSTEM IN THE
MUNICIPALITY OF CEBU, PROVINCE OF CEBU
By authority of the United States, be it enacted by the Philippine

Commission, that:
SECTION 1. There is hereby granted to Martin M. Levering,

a citizen of the United States, the right, privilege, and authority, for
a period of thirty-five years from and after the passage of this Act, to
erect, construct, maintain, and operate in, along, and over any and
all streets, thoroughfares, and public places within the boundaries of
the municipality of Cebu, poles, wires, and all necessary apparatus
and appurtenances for the transmission and distribution of electric
currents for electric power heat, and light, and for any other purpose
for which electricity may be used and to furnish electric power, heat,
and light within said municipality of Cebu, for municipal, domestic,
or manufacturing uses and for any other use to which electricity
may be put, and to charge and collect tolls, rates, and compensation
for such power, heat, light and use: Provided, That such tolls, rates,
and compensation shall always be subject to regulation by Act of the
Philippine Commission or its successors.
SEC. 2. The poles erected by the grantee shall be of such

height as to support wires strung thereon at a distance of at least
twenty feet above the ground, shall not be of such crooked and
ungainly appearance as to disfigure the streets, and shall be placed
in accordance with a plan which must have been approved by the
municipal authorities; and said grantee shall supply electric power,
heat, and light to any applicant for the same within fifteen days
after the date of his application, and, as between applicant and other
like applicants in the order of the date of his application up to the
limit of the capacity of the plant of said grantee, to be determined by
the provincial supervisor on the application of such person or said
grantee; and should the demand for electric power, heat, and light
5
at any time increase beyond the capacity of the plant of said grantee
to supply the same, the capacity of said plant shall be increased to
meet such demand, if the Philippine Commission or its successors
shall so direct: Provided, That the point at which the electric power,
heat, or light is to supplied is not more than eighty meters from the
lines or wires maintained by said grantee.
SEC. 3. All apparatus and appurtenances used by the grantee

shall be modern and first class in every respect, and said wires shall
be insulated and carefully connected and fastened so as not to come
in direct contact with any object through which a “ground” could
be formed, and shall be stretched so as not to interfere with the
free and unobstructed use of said streets and alleys: Provided, That
the grantee herein shall, whenever the Philippine Commission or
its successors may so direct, place said wires in underground pipes
or conduits at his own expense and without any cost or damage to
municipality of Cebu.
SEC. 4. Whenever it shall be necessary in the erection of said

poles to take up any portion of the sidewalks or dig up the ground
in or near the sides or the corners of the streets or thoroughfares,
then the said grantee shall, after said poles are erected, without
delay, replace said sidewalk and property in a neat, workmanlike
manner and remove from said sidewalks, streets, or thoroughfares
all rubbish, sand, and dirt or other material which may have been
placed there, taken up, or dug up in the erection or construction of
said poles, and shall put such sidewalk, street, or thoroughfare in as
good a condition as it was before it was taken up or disturbed.
SEC. 5. Whenever any person has obtained permission to use

any of the streets of the municipality for the purpose of removing
any building or in the prosecution of any municipal work or for any
other cause whatsoever, making it necessary to raise or remove any
of said wires which may obstruct the removal of said building or
hinder the prosecution of said work, the said grantee, upon forty-
eight hours’ notice from the municipal council of the municipality of
Cebu, shall raise or remove any of said wires which may hinder the
prosecution of such work or obstruct the removal of said building so
as to allow the free and unobstructed passage of said building and the
6
free and unobstructed prosecution of said work. Such notice shall be

a duly adopted resolution of the municipal council, in writing, and
served upon said grantee or his duly authorized representative or
agent by any person competent to be a witness in a civil action; and
in case of the refusal or failure of said grantee to comply with such
notice, the municipal president, with the approval of the municipal
council first had, shall raise or remove such wires at the expense of
said grantee, for the purpose aforesaid.
SEC. 6. Said grantee covenants hereby to indemnify the said

municipality of Cebu for any injury arising from any casualty or
accident to person or property by reason of the construction under
this franchise or of any neglect or omission to keep the said poles
and wires in a safe condition, and for all valid claims against said
municipality for damages caused by said wires or electric currents
conducted thereby.
SEC. 7. Said grantee shall file his acceptance of the conditions

of this franchise with the Secretary of Commerce and Police within
thirty days from the date hereof, and shall commence work within
six months from the date of filing such acceptance, and shall
complete the system and have the same in operation within eighteen
months from the date such acceptance is filed and shall thereafter
maintain a first-class electric light, heat, and power service, and in
consideration of the franchise hereby granted shall pay quarterly
into the provincial treasury of Cebu, to be divided equally between
the municipality of Cebu and the Province of Cebu, one per centum
of the gross earnings of the enterprise during the first ten years,
and two per centum during the following twenty-five years, of the
life of this franchise.
SEC. 8. At the time of filing the acceptance mentioned in

the last preceding section, the grantee shall deposit in the Insular
Treasury one thousand pesos, Philippine currency, as an earnest of
the good faith of his application, and within six months thereafter
shall deposit in the Insular Treasury the additional sum of nine
thousand pesos, Philippine currency, as a guarantee of the faithful
performance of the conditions mentioned in this section, and in
case said deposit of nine thousand pesos, Philippine currency is not
7
made within six months after the date of filing said acceptance the
sum of one thousand pesos already deposited shall be forfeited to
the municipality of Cebu. In case, after the deposit of said sum of
nine thousand pesos, the work to be done under this franchise is not
begun within the time specified, or is not completed within the time
provided, both said deposits may be forfeited at the option of the
Governor-General, and be divided equally between the municipality
of Cebu and the Province of Cebu as liquidated damages for the
breach of the contract involved in the acceptance of this franchise,
and this franchise shall become null and void. In case of the fulfilment
of the conditions by this section provided, both said deposits of one
thousand and nine thousand pesos shall be returned by the Insular
Treasurer to the grantee upon proper certificate of the provincial
supervisor of Cebu of the fulfilment of said conditions: Provided,
That if work shall begun by the grantee within the time specified
the funds deposited may be returned to the grantee as the work
progresses, in monthly or quarterly instalments in the discretion of
the municipal authorities, in the proportion which the work done
bears to be done: Provided further, That the Insular Treasurer may
accept duly executed and satisfactory fidelity bonds of a fidelity
company in lieu of the cash deposits by this section required.
SEC. 9. The municipality of Cebu shall have the privilege,

without compensation, of using the poles of the grantee for the
purpose of installing, maintaining, and operating a telephone or
fire and police alarm system, but the wires of such telephone or
fire and police alarm system shall be placed and stretched in such
manner as to cause no interference with or damage to the wires of
the electric service of the grantee.
SEC. 10. This franchise is granted with the understanding

and upon the conditions that it shall be subject to amendment,
alteration, or repeal by the Congress of the United States as
provided in section seventy-four of the Act of Congress approved
July first, nineteen hundred and two, entitled “An Act temporarily
to provide for the administration of the affairs of civil government in
the Philippine Islands, and for other purposes,” and that it shall be
subject, in all respects, to the limitations upon corporations and the
granting of franchises contained in said Act of Congress, and that
8
all lands or rights of use or occupation of lands secured by virtue

of this franchise shall revert upon its termination to the Insular,
provincial, or municipal government by which such lands were
respectively granted.
SEC. 11. The grantee of this franchise is forbidden to issue

stock or bonds under this franchise except in exchange for actual
cash or for property at a fair valuation equal to the par value of
the stock or bonds so issued. Neither shall said grantee declare any
stock or bond dividend.
SEC. 12. The books of the grantee shall always be open to the
inspection of the provincial treasurer or a deputy designated by him
for the purpose, and it shall be the duty of the grantee to submit
to the provincial treasurer quarterly reports in duplicate showing
the gross receipts and the net receipts for the quarter past and the
general condition of the business, one of which shall be forwarded
by the provincial treasurer to the Insular Auditor, who shall keep
the same on file.
SEC. 13. Nothing in this franchise shall be construed to

interfere with the rights of the municipal, provincial, or Insular
government to assess and collect any business or income tax upon
the business of the grantee.
SEC. 14. The grantee herein may sell, lease, give, grant,
convey, or assign this franchise and all property and rights acquired
thereunder to any person, company, or corporation competent to
conduct the business authorized thereby, but no title to this franchise
or to the property or rights acquired thereunder shall pass by sale,
lease, grant, conveyance, transfer, or assignment to the vendee,
done, transferee, lesse, or assignee, or be enjoyed by him until he
shall have filed in the office of the Secretary of Commerce and Police
an agreement in writing agreeing to comply with all the terms and
conditions imposed on the grantee by the franchise and accepting
the said franchise subject to all its existing terms and conditions.
9
SEC. 15. The municipal council of the municipality of Cebu,

after hearing the grantee, shall have the power, with the approval
of the Governor-General, to declare the forfeiture of this franchise
for failure to comply with any terms and conditions thereof unless
such failure shall have been directly or primarily caused by the act
of God, the public enemy, or force majeure. Against such declaration
of forfeiture the grantee may apply to any court of competent
jurisdiction for such relief as to him may seem proper, but if no such
application is made within sixty days after the forfeiture has been
declared by the municipality and approved by the Governor-General
the right to apply to the courts shall be considered waived.
SEC. 16. Wherever in this franchise the term grantee is used,

it shall be held and understood to stand for and represent Martin
M. Levering, said grantee, his representatives, successors, and
assigns.
SEC. 17. The public good requiring the speedy enactment of

this bill, the passage of the same is hereby expedited in accordance
with section two of “An Act prescribing the order of procedure by the
Commission in the enactment of laws,” passed September twenty-
sixth, nineteen hundred.
SEC. 18. This Act shall take effect on its passage.
ENACTED, February 24, 1905.
10
ACT NO. 1459
AN ACT PROVIDING FOR THE FORMATION AND ORGANIZATION

OF CORPORATIONS, DEFINING THEIR POWERS, FIXING
THE DUTIES OF DIRECTORS, AND OTHER OFFICERS
THEREOF, DECLARING THE RIGHTS AND LIABILITIES
OF SHAREHOLDERS AND MEMBERS, PRESCRIBING THE
CONDITIONS UNDER WHICH SUCH CORPORATIONS
MAY TRANSACT BUSINESS, AND REPEALING CERTAIN
ARTICLES OF THE CODE OF COMMERCE AND ALL LAWS
OR PARTS OF LAWS IN CONFLICT OR INCONSISTENT
WITH THIS ACT

Commission, that:
CHAPTER I. – GENERAL PROVISIONS AS TO

CORPORATIONS.
XXX XXX XXX
FOREIGN CORPORATIONS.
SEC. 68. No foreign corporation or corporation formed,

organized, or existing under any laws other than those of the
Philippine Islands shall be permitted to transact business in the
Philippine Islands until after it shall have obtained a license for
that purpose from the Chief of the Division of Archives, Patents,
Copyrights, and Trade-Marks of the Executive Bureau upon order
of the Secretary of Finance and Justice in case of banks, savings and
loan banks, trust corporations, and banking institutions of all kinds,
and upon order of the Secretary of Commerce and Police in case of
all other foreign corporations. No order for a license shall be issued
by either of said secretaries except upon a statement under oath of
the managing agent of the corporation, showing to the satisfaction
of the proper Secretary that the corporation is solvent and in sound
11
financial conditions, and setting forth the resources and liabilities

of the corporation within sixty days of the date of presenting the
statement, as follows:
(1) The name of the corporation;
(2) The purpose for which it was organized;
(3) The location of its principal or home office;
(4) The capital stock of the corporation and the amount

thereof actually subscribed and paid into the treasury on the ___
(Here insert date, month, year)_____;
(5) The net assets of the corporation over and above all
debts, liabilities, obligations, and claims outstanding against it on
the ____(Here insert date, month, year)_____;
(6) The name of an agent residing in the Philippine Islands

authorized by the corporation to accept service of summons and
process in all legal proceedings against the corporation and of all
notices affecting the corporation:
PROVIDED, HOWEVER, That the Secretary of Finance

and Justice or the Secretary of Commerce and Police, as the case
may be, before ordering that a license be issued in the case of any
particular corporation, may require further evidence of the solvency
and fair dealings of the corporation if in his judgment such further
information is essential.
Upon filing in the Division of Archives, Patents, Copyrights,

and Trade Marks of the Executive Bureau the said statement, a
certified copy of its charter and the order of the Secretary of Finance
and Justice or of the Secretary of Commerce and Police, as the case
may be, for the issuance of a license, the Chief of the said Division
shall issue to the foreign corporation as directed in the order a
license to do business in the Philippine Islands, and for the issuance
of said license the Chief of the said Division shall collect a fee of fifty
pesos: PROVIDED, HOWEVER, That the Secretary of Finance and
12
Justice or the Secretary of Commerce and Police, as the case may

be, may issue to any foreign commercial corporation transacting
business in the Philippine Islands at the time of the passage of this
Act and continuously in the Philippine Islands for more than three
years prior thereto a license to do business in the Philippine Islands
without requiring the statement prescribed by this section, but the
license to so transact business shall be secured and the fee paid
therefor by such corporation.
SEC. 69. No foreign corporation or corporation formed,

organized, or existing under any laws other than those of the
Philippine Islands shall be permitted to transact business in the
Philippine Islands or maintain by itself of assignee any suit for the
recovery of any debt, claim, or demand whatever, unless it shall
have the license prescribed in the section immediately preceding.
Any officer, director, or agent of the corporation or any person
transacting business for any foreign corporation not having the
license prescribed shall be punished by imprisonment for not less
than six months nor more than two years or by a fine of not less
than two hundred pesos nor more than one thousand pesos, or by
both such imprisonment and fine, in the discretion of the court.
SEC. 70. Every foreign corporation and every corporation

not formed, organized, or existing under the laws of the Philippine
Islands but transacting business in the Islands at the time of the
passage of this Act shall be allowed six months from its passage in
which to secure the license, present the statement, and make the
deposits required.
SEC. 71. The Secretary of Finance and Justice or the Secretary

of Commerce and Police, as the case may be, by and with the
approval of the Governor-General, may revoke the license to transact
business in the Philippine Islands of any corporation not formed,
organized, or existing under the laws of the Philippine Islands,
should such Secretary and the Governor-General find the condition
of the corporation to be one of insolvency or that its continuance
in business will involve probable loss to those transacting business
with it, and after such revocation it shall be unlawful for any such
corporation to transact business in the Philippine Islands unless its
13
license is renewed or reissued. In case of revocation of license the

Attorney-General shall take such proceedings as may be proper to
protect creditors and the public.
SEC. 72. Summons and legal process served upon the agent
designated to accept service thereof in the statement required to
be filed by section sixty-eight of this Act shall give jurisdiction to
the courts over the corporation filing said statement, and service
of notices on such agent shall be as binding upon the corporation
which he represents as if made upon the corporation itself.
Should the authority of such agent to accept service of

summons and legal process on the corporation or notice to it be
revoked, or should such agent become mentally incompetent or
otherwise unable to accept service while exercising such authority, it
shall be the duty of the corporation to promptly name and designate
another agent upon whom service of summons and process in legal
proceedings against the corporation and of notices affecting he
corporation may be made and to file wit the Chief of the Division of
Archives, Patents, Copyrights, and Trade-Marks of the Executive
Bureau a duly authenticated nomination of such agent.
Should there be no person authorized by the corporation upon

whom service of summons, process, and all legal notices may be
made, service of summons, process, and legal notices may be made
upon the Secretary of Finance and Justice in the case of banks,
savings and loan banks, trust corporations, and other banking
institutions, and upon the Secretary of Commerce and Police in the
case of all other foreign corporations, and such service shall be as
effective as if made upon the corporation or upon its duly authorized
agent. In case of service for the corporation upon the Secretary of
Finance and Justice or Secretary of Commerce and Police, as the
case may be, the proper Secretary shall register and transmit by
mail to the president or the secretary or clerk of the corporation at
its home office or principal office a copy, duly certified by him, of
the summons, process, or notice. The sending of such copy of the
summons, process, or notice shall be a necessary part of the service
and shall complete the service. The registry receipt of mailing shall
be conclusive evidence of the sending. All costs necessarily incurred
14
by the proper Secretary for the making and the mailing and sending
of a copy of the summons, process or notice to the president or the
secretary or clerk of the corporation at its home office or principal
office shall be paid in advance by the party at whose instance the
service is made.
SEC. 73. Any foreign corporation or corporation not formed,

organized, or existing under the laws of the Philippine Islands and
lawfully doing business in the Islands shall be bound by all laws,
rules, and regulations applicable to domestic corporations of the
same class, save and except such only as provide for the creation,
formation, organization, or dissolution of corporations or such as
fix the relations, liabilities, responsibilities, or duties of members,
stock holders, or officers of corporation to each other or to the
corporation: PROVIDED, HOWEVER, That nothing in this section
contained shall be construed or deemed to impair any rights that
are secured or protected by the Treaty of Peace between the United
States and Spain, signed at the city of Paris on December tenth,
eighteen hundred and ninety-eight.
XXX XXX XXX
SEC. 192. This Act shall take effect on April first, nineteen
hundred and six.
ENACTED, March 1, 1906.
15
ACT NO. 1790
AN ACT TO CONFIRM CERTAIN RIGHTS AND FRANCHISES

OF THE BANCO ESPAÑOL-FILIPINO AND TO AMEND
ITS STATUTES
Whereas the Banco Español is a bank incorporated under

a charter granted by the Kingdom of Spain conferring certain
privileges and rights upon the bank, and especially that of the
exclusive right of issuing and circulating notes of the bank to an
amount equal to three times its capital stock, which was authorized
to be three millions of pesos, equivalent to one million five hundred
thousand dollars American currency; and
Whereas the bank has a paid-in capital of one million

five hundred thousand pesos and claims to have in addition an
unimpaired surplus of nine hundred thousand pesos; and
Whereas the bank has issued, and has now in circulation,

its circulating notes amounting substantially to one million five
hundred thousand pesos; and
Whereas the authorities of the bank contend that under the

American sovereignty, by reason of the guaranty of the Treaty of
Paris, they may exercise the same exclusive privilege with respect to
circulating notes which was given them under the Spanish charter,
and , therefore, that they may increase their capital stock to three
million pesos and issue notes to the amount of nine million pesos;
and
Whereas the representatives of the bank contend that the

Philippine government has violated the exclusive right of the bank
above set forth in issuing so-called silver certificates secured by a
deposit of similar pesos in the Treasury of the Islands; and
Whereas the Philippine Government, while recognizing as

valid the present circulation, has heretofore denied the right of the
Philippine Bank under its charter to issue notes equal to three times
16
its capital stock, on the ground that such note-issuing franchise

was an exercise of sovereign power which was not transmitted or
guaranteed by the Treaty of Paris, and has, therefore, imposed a
prohibitory tax of twelve per centum on any notes issued beyond the
actual paid-in capital stock of the bank, because of its belief that the
certain payment or redemption of such notes will not be properly
secured under the provisions of the Spanish charter; and
Whereas the bank now threatens to test in court the validity

of its franchise and the validity of the prohibitory tax, and relies
upon the action of the Congress of the United States in confirming a
similar charter granted to the Bank of Porto Rico; and
Whereas the Philippine government has no objection to the

issue of circulating notes by this bank to the extent permitted by the
Spanish charter, provided only that it shall not be exclusive, and
that proper provision shall be made for securing the redemption or
payment of such notes: Now, therefore,

Commission, that:
SECTION 1. By way of compromise of the questions arising

between the Banco Español-Filipino and the Philippine Government
in respect to its charter, and the rights already conferred thereby,
the Philippine Government, by virtue of the general powers
conferred upon it under section seventy-four and other sections
of the Act of Congress of July first, nineteen hundred and two,
does hereby amend and confirm the Spanish charter of the Banco
Español-Filipino as the same is hereinafter set forth: Provided,
however, That nothing in this Act shall affect the validity of acts
done and rights and causes of action which have arisen under the
existing statues of said bank in its relation with individuals, firms,
corporations, and associations in the conduct of the banking business
except that validity is hereby given to all acts heretofore performed
by the bank which would otherwise be legal, and whose validity
might be questioned by reason of the failure of the bank to comply
with its statues in regard to the participation of the Government
in the management of the bank: And provided further, That the
17
charter and statutes of the bank hereinafter set forth by way of

amendment and confirmation shall not take effect until the same
shall be duly and in legal form accepted by the proper authorities of
the bank representing the corporation.
ARTICLES OF INCORPORATION OF THE

BANCO ESPAÑOL-FILIPINO
TITLE I. – Name, constitution, title, objects, domicile, and

duration of the corporation
ARTICLE I.
That the Banco Español-Filipino, founded in eighteen

hundred and fifty-one by a joint stock company duly authorized
to transact business, and reorganized by virtue of Royal Decree of
February seventh, eighteen hundred and ninety-six, shall hereafter
be governed by these Articles of Incorporation.
XXX XXX XXX
TITLE II. – Concerning capital stocks and shares.
ARTICLE XXIII.
Stock in the bank may be held by persons and corporations

without regard to domicile, and officers and directors may be chosen
without regard to nationality, except that a majority of the board of
directors shall be made up of citizens of the United States or of the
Philippine Islands; but money in current account and securities and
other articles of value deposited in the bank which is the property
of foreigners, shall not be subject to attachments, confiscation or
seizure because of war between their respective nations, except
as such processes would lie in the ordinary course of law against
citizens of the United States or of the Philippine Islands.
XXX XXX XXX
18
TITLE VII. – General provisions.
ARTICLE LXI
That the Government of the Philippine Islands renounces all

rights which it may have derived under Spanish law to appoint the
governor and other officers of the bank or to interfere in any way
with its administration, except to make examination of its solvency
and supervise its conduct in the interest of the public in the same
manner as such examination and supervision are or may be exercised
over national banks in the United States and as prescribed by the
laws of the Philippine Islands.
ARTICLE LXII.
That the Government of the Philippine Islands renounces all

right and title derived from Spanish law and existing statutes of
the bank to a loan of any money to the Treasury of the Philippine
Islands.
XXX XXX XXX
ARTICLE LXVI
That nothing in this Act shall be held to prevent the exercise

by the Governor-General and the Treasurer of the Philippine Islands
of the powers conferred upon them by Act Numbered Five hundred
and fifty-six of the Philippine Commission, enacted December ninth,
nineteen hundred and two, or such amendments of that Act as may
have been enacted or as may hereafter be enacted.
SEC. 2. The public good requiring the speedy enactment of

this bill, the passage of the same is hereby expedited in accordance
with section two of “An Act prescribing the order of procedure by the
Commission in the enactment of laws,” passed September twenty-
sixth, nineteen hundred.
SEC. 3. This Act shall take effect upon the filing with the
Executive Secretary by the general board of directors of the Banco
19
Español-Filipino of the written acceptance by the bank of the

provisions hereof.
ENACTED, October 12, 1907.
20
ACT NO. 2384
AN ACT GRANTING TO THE MARCONI WIRELESS TELEGRAPH

COMPANY OF AMERICA A FRANCHISE TO CONSTRUCT,
A STATION FOR THE RECEPTION AND TRANSMISSION
OF WIRELESS LONG DISTANCE MESSAGES

Legislature, that:
SECTION 1. There is hereby granted and conceded to the

Marconi Wireless Telegraph Company of America, a corporation
organized under the laws of the State of New Jersey in the United
States of America, its successors or assigns, the right and privilege
of constructing, maintaining, and operating in the Philippine
Islands at such places as the said company may select, subject to the
approval of the Secretary of Commerce and Police, a station for the
reception and the transmission of wireless long distance messages,
which station may consist of two plants comprising a receiving
station and a sending station.
SEC. 2. The Governor-General of the Philippine Islands

shall have the power and authority to permit the location of the
said stations or of either of them on the public domain upon such
terms as he may prescribe, but no lands greater in extent than one
hundred and fifty hectares shall be assigned or appropriated for the
use of either of said stations.
SEC. 3. This grant and concession shall continue for a period

of fifty years and is made upon the express condition that the same
shall be void unless the construction of said stations is begun within
two years from the date of approval of this Act and is completed
within four years from said date.
SEC. 4. The said company shall not engage in domestic

business in the Philippine Islands without further special assent of
the Philippine Legislature, it being understood that the purpose of
21
this franchise is to secure to the said company the right to conduct the
business of long distance wireless communication with Singapore,
Hongkong, Shanghai, the islands of Japan and Hawaii, and such
other distant points without the Philippines Islands as the interests
of the company and of trade and commerce may justify.
SEC. 5. A special right is reserved to the Government of the

United States in time of war, insurrection, or domestic trouble to
take over and operate the said stations upon the order and direction
of the Secretary of War of the United States, the United States
Government paying and compensating the said company for the use
of said stations during the period that they shall be so operated by
the Government.
A similar right is hereby reserved to the Government of the

Philippine Islands under similar circumstances and upon similar
conditions upon the order and direction of the Governor-General.
SEC. 6. The right is hereby reserved to the Government

of the Philippine Islands, through the Board of Public Utility
Commissioners or such other board, commission or officer as may be
thereunto duly authorized, to fix the maximum rates to be charged
by the said company, its successors or assigns, but in no case shall
said maximum rates exceed two-thirds of the present existing rates
or any future rates which may be established by any cable company
for the same service.
SEC. 7. The grantee, its successors or assigns, shall keep a

separate account of the gross receipts of the business transacted by
it in the Philippine Islands and shall furnish to the Insular Auditor
and the Insular Treasurer a copy of such account not later than the
thirty-first day of January of each year for the preceding year. For
the purpose of auditing accounts so rendered to the Insular Auditor
and Insular Treasurer all for the books and accounts of the grantee,
its successors or assigns, so far as they relate to the business
transacted in the Philippine Islands, shall be kept in the Philippine
Islands, and shall be subject to the official inspection of the Insular
Auditor, or his authorized representatives, and in the absence of
fraud or mistake the audit and approval by the Insular Auditor
22
of the accounts so rendered to him and to the Insular Treasurer

shall be final and conclusive evidence as to the amount of said gross
receipts.
SEC. 8. The grantee, its successors or assigns, shall be liable

to pay the same taxes on their real estate, buildings, and personal
property, exclusive of the franchise, as other persons or corporations
are now or hereafter may be required by law to pay. The grantee, its
successors or assigns, shall further pay the Insular Treasurer each
year, within ten days after the audit and approval of the accounts
as prescribed in section seven of this Act, one per centum of all
gross receipts for business transaction under this franchise by said
grantee, its successors or assigns, in the Philippine Islands, and
the said percentage shall be in lieu of all taxes on the franchise or
earnings thereof.
SEC. 9. The grantee, its successors or assigns, shall hold the

Insular, provincial, and municipal governments of the Philippine
Islands harmless from all claims, accounts, demands, or actions
arising out of accidents or injuries, whether to property or to persons
caused by the construction or operation of the stations for the
reception and the transmission of wireless long distance messages
of said grantee, its successors or assigns.
SEC. 10. The grantee, its successors or assigns, shall so

construct and operate its wireless station or stations as not to
interfere with the operation of the local radio stations maintained
and operated in the Philippine Islands.
SEC. 11. No private property shall be taken for any purpose

by the grantee of this franchise, its successors or assigns, without
proper condemnation proceedings and just compensation paid
or tendered therefor, and any authority to take and occupy land
contained herein shall not authorize the taking, use, or occupation
of any land except such as is required for the actual necessary
purposes for which the franchise is granted. All lands or rights of
use and occupation of lands granted to the grantee, its successors
or assigns, shall, upon the termination of this franchise or upon
its revocation or repeal, revert to the Insular Government or the
23
provincial or municipal government to which such lands or the right

to use and occupy them belonged at the time the grant thereof or the
right to use or occupy the same was conceded to the grantee herein,
its successors, or assigns. The grantee, its successors or assigns,
shall not issue stock or bonds except in exchange for actual cash or
for property at a fair valuation equal to the par value of the stock or
bonds issued, and said grantee, its successors or assigns, shall not
declare any stock or bond dividend. The grantee, its successors or
assigns, shall not use, employ, or contract for the labor of persons
claimed or alleged to be held in involuntary servitude. This
franchise is granted subject to amendment, alteration, or repeal by
the Congress of the United States.
SEC. 12. The grantee herein, its successors or assigns, shall

be subject to the corporation laws of the Philippine Islands now
existing or hereafter enacted.
SEC. 13. This Act shall not take effect until it shall have been
expressly approved by the Secretary of War, and the grantee shall
have bound himself and subscribed to the following clause in favor
of the Government of the Philippine Islands:
“The grantee, his administrators, agents, assigns, and

successors state in writing that they are informed of the message of
the President of the United States addressed to the Filipino people
and communicated to said people by the Governor-General of the
Philippine Islands on the sixth day of October, nineteen hundred
and thirteen, and of the reply message of the Philippine Assembly
made in the name of the Filipino people and approved and sent
on October sixteenth, nineteen hundred and thirteen; that said
grantee, his administrators, agents, assigns, and successors bind
themselves not to do anything by means of contributions in cash
or otherwise, against the policy of the Government of the United
States and the aspirations of the Filipino people set forth in said
messages, whether under the pretext of vested interests or under
any other pretext.”
ENACTED, February 28, 1914.
24
ACT NO. 2719
AN ACT TO PROVIDE FOR THE LEASING AND DEVELOPMENT

OF COAL LANDS IN THE PHILIPPINE ISLANDS
Be it enacted by the Senate and House of Representatives of the

Philippines in Legislature assembled and by the authority of
the same:
SECTION 1. Coal-bearing lands of the public domain in the

Philippine Islands shall not be disposed of in any manner except as
provided in this Act.
The Government shall be understood to reserve its right

to any coal deposits on land of the public domain reserved for
provincial, municipal or school purposes, or granted in any manner
to provinces or municipalities, or the usufruct of which has been
granted to private corporations, and likewise on lands of the public
domain or granted under the provisions of the Public Land Act, if at
the time of the disposition thereof the Government was not aware of
the existence of such coal deposits.
SEC. 2. Any unreserved, unappropriated coal-bearing public

land may be leased by the Secretary of Agriculture and Natural
Resources in blocks or tracts of not less than four hundred nor more
than twelve hundred hectares each in such manner as may, in the
opinion of the Secretary of Agriculture and Natural Resources, allow
the economic exploitation of the coal. The lease may be granted to
any person above the age of twenty-one years who is a citizen of the
Philippine Islands or of the United States, or to any association of
such persons, or to any corporation organized under the laws of the
Philippine Islands: Provided, That a majority of the stock of such
corporation shall at all times be owned and held by citizens of the
United States or the Philippine Islands: And provided further, That
any person, association, or corporation qualified to become a lessee
under this Act, and owning any located or patented claim to any
coal lands in the Philippine Islands, may, within one year from the
passage of this Act, enter into an arrangement with the Secretary
25
of Agriculture and Natural Resources whereby such claim shall be

fully relinquished to the Government as a condition precedent to
acquiring a lease under the provisions of this Act, said owner, in
consideration of such relinquishment, being given the preference
in applications for leasing contiguous tracts. The Department
Secretaries, acting jointly , are authorized to pay a compensation in
exchange for such relinquishment if they see fit.
SEC. 3. Leases under the provisions of this Act shall be issued

upon publication, in the manner and subject to the rules prescribed
by the Secretary of Agriculture and Natural Resources, for periods
of not more than fifty years each, subject to renewal on such terms
and conditions as may be authorized by law at the time of such
renewal, and no such lease shall be assigned or sublet except with
the consent of the Secretary of Agriculture and Natural Resources,
and in this case only to persons and associations of persons or
corporations having the qualifications required of lessees. Every
lease shall contain a clause by which the lessee shall bind himself
to comply with the rules and regulations issued by the Secretary
of Agriculture and Natural Resources for the purpose of insuring
the exercise of reasonable diligence, skill and care in the operation
of said property and for the prevention of undue waste, together
with such other rules and regulations as the said Secretary may
make for the protection of the interests of the Government and for
the promotion of the public welfare. For the privilege of mining,
extracting, and disposing of the coal in the lands covered by his
lease, the lessee shall pay to the Government of the Philippine
Islands, through the Collector of Internal Revenue, such royalties
as may be specified in the lease, which shall not be less than ten
centavos per ton of one thousand and sixteen kilos, said royalties to
be due and payable at the end of each month succeeding that of the
shipment of the coal from the mine, and an annual rental, payable
in advance on the date of the approval of the lease and thereafter
at the beginning of each year, on the lands covered by such lease,
at the rate of two pesos and fifty centavos per hectare for the first
year and five pesos per hectare for each and every year thereafter
during the continuance of the lease: Provided, That such rental for
any year shall be credited against the royalties as they accrue for
that year.
26
SEC. 4. Any person, association, or corporation holding a

lease of coal lands under this Act may, with the approval of the
Secretary of Agriculture and Natural Resources through the same
procedure and upon the same terms and conditions as in the case
of an original lease under this Act, secure a further or new lease
covering additional lands contiguous to those embraced in the
original lease, but in no event shall the total area embraced in such
original and new leases exceed in the aggregate twelve hundred
hectares: Provided, That upon satisfactory showing by the lessee
that all of the workable deposits of coal within the limits of the land
leased will be exhausted or removed within three years thereafter,
the Secretary of Agriculture and Natural Resources may, within his
discretion, lease to such lessee an additional tract of land or coal
deposits, which, including the coal area remaining in the original
lease, shall not exceed twelve hundred hectares, through the same
procedure and subject to the same requirements as in case of the
original lease.
SEC. 5. Subject to the approval of the Secretary of Agriculture

and Natural Resources, lessees holding under leases small blocks or
areas may consolidate their said leases or holdings so as to include
in a single holding a total of not to exceed twelve hundred hectares,
provided all lessees have at the time of such consolidation complied
individually with all their obligations towards the Government.
SEC. 6. Each lease shall be for such leasing block or tract

of land as may be offered or applied for, not exceeding in area
twelve hundred hectares of land, and no person, association, or
corporation, except as hereinafter provided, shall be permitted to
take or hold any interest as a stockholder or otherwise in more than
one such lease under this Act, and any interest held in violation
of this proviso shall be forfeited to the Government by appropriate
proceedings instituted by the Attorney-General for that purpose in
any court of competent jurisdiction, except that any such ownership
and interest hereby forbidden which may be acquired by descent,
will, judgment, or decree may be held for two years, and not longer,
after its acquisition.
27
SEC. 7. Any person who shall purchase, acquire, or hold

any interest in two or more such leases, except as herein provided,
or who shall knowingly purchase, acquire, or hold any stock in a
corporation having an interest in two or more such leases, or who
shall knowingly sell or transfer to one disqualified to purchase, or,
except as in this Act specifically provided, disqualified to acquire,
any such interest, shall be deemed guilty of a felony, and upon
conviction shall be punished by imprisonment for not more than
three years and by a fine not exceeding two thousand pesos: Provided,
That any such ownership and interest hereby forbidden which may
be acquired by descent, will, judgment, or decree may be held two
years after its acquisition and not longer, and in case of minority or
other disability, during such minority or disability and for two years
after majority has been reached or the disability disappeared.
SEC. 8. Any director, trustee, officer, or agent of any corporation

holding any interest in such a lease, who shall, on behalf of such
corporation, act in the purchase of any interest in another lease, or
who shall knowingly act on behalf of such corporation in the sale or
transfer of any such interest in any lease held by such corporation
to any corporation or individual holding any interest in any such a
lease, except as herein provided, shall be guilty of a felony and shall
be subject to imprisonment for a term of not exceeding three years
and a fine of not exceeding two thousand pesos.
SEC. 9. If any of the lands or deposits leased under the

provisions of this Act shall be subleased, trusteed, possessed,
or controlled by any device permanently, temporarily, directly,
indirectly, tacitly, or in any manner whatsoever, so that they form
part of or are in anywise controlled by any combination in the form
of an unlawful trust, with consent of lessee, or form the subject of
any contract or conspiracy in restraint of trade in the mining or
selling of coal, entered into by the lessee, or of any holding of such
lands by any individual, partnership, association, corporation, or
control, in excess of twelve hundred hectares, the lease thereof shall
be forfeited by appropriate court proceedings.
SEC. 10. That in order to provide for the supply of strictly

local and domestic needs for fuel the Secretary of Agriculture and
28
Natural Resources may, under such rules and regulations as he may

prescribe in advance, issue to any applicant qualified under section
two of this Act a limited license or permit granting the right to
prospect for, mine and dispose of coal belonging to the Government
on specified tracts not to exceed four hectares to any one person
or association of persons in any one coal field for a period of not
exceeding ten years, on such conditions not inconsistent with this
Act as in his opinion will safeguard the public interest, without
payment of royalty for the coal mined or for the land occupied, if
he, in his discretion, consider this necessary: Provided, That the
acquisition or holding of a lease under the preceding sections of this
Act shall be no bar to the acquisition, holding or operating under the
limited license in this section permitted. And the holding of such a
license shall be no bar to the acquisition or holding of such a lease
or interest therein.
SEC. 11. Any lease, entry, location, occupation, or use

permitted under this Act shall reserve to the Government the right
to grant or use such easements in, over, through or upon the land
leased, entered, located, occupied, or used as may be necessary or
appropriate to the working of the same or other coal lands under
Government permit, and for other purposes: Provided, That the
Secretary of Agriculture and Natural Resources in his discretion, in
making any lease under this Act, may reserve to the Government
the right to lease, sell, or otherwise dispose of the surface of the
lands embraced within such lease uner existing law or laws in so far
as said surface is not necessary for use by the lessee in extracting
and removing the deposits of coal therein. If such reservation is
made, it shall be so determined before the offering of such lease.
The Secretary of Agriculture and Natural Resources, during the life
of the lease is authorized to issue such permits for easements herein
provided to be reserved, and to permit the use of such other public
lands as may be necessary for the construction and maintenance
of coal bunkers or other works incident to the mining or treatment
of coal, which lands may be occupied and used jointly or severally
by lessees or permittees, as may b determined by the Secretary of
Agriculture and Natural Resources.
29
SEC. 12. Any such lease may be forfeited and canceled by

appropriate proceeding in a court of competent jurisdiction whenever
the lessee fails to comply with any provision of the lase or of general
regulations promulgated under this Act; and the lease may provide
for the enforcement of other appropriate remedies for breach of
specified conditions thereof.
SEC. 13. Any lessee under this Act may exercise the right of
eminent domains for the purpose of acquiring such right of way as
may be necessary in connection with the operations contemplated
by said lease.
SEC. 14. The Government of the Philippine Islands,

recognizing the relation of the coal resources of the country to its
general welfare, reserves the right to work and exploit coal mines
itself or organize and promote coal mining corporations by becoming
either exclusive or majority stock holder therein and in such
enterprises shall not be bound by any provision in this or other laws
restricting holdings either territorially or otherwise.
SEC. 15. Effective upon the passage of this Act there shall
be assessed and collected by the Collector of Internal Revenue,
an annual tax of two thousand pesos on each block or tract of four
hundred hectares, or fraction thereof, of coal lands owned by any
person, firm, association, or corporation, and a tax of four centavos
per ton of one thousand and sixteen kilos on each ton of coal extracted
therefrom, said taxes to be payable at the same time, in the same
manner and under the same conditions as provided in section three
hereof for the payment of rentals and royalties. The taxes herein
provided shall be in lieu of all other taxes of whatever nature. In
case of delinquency in the payment of either said annual tax or
specific tax continuing for sixty days from the time when the same
may be due or payable, the same remedies for enforcement of this
section, by sale of the lands, or otherwise, may be pursued as in the
ordinary procedure for nonpayment of land taxes.
SEC. 16. All statements, representations, or reports required,

unless otherwise specified, by the Secretary of Agriculture and
30
Natural Resources under this Act, shall be upon oath and in such
form and upon such blanks as the Secretary of Agriculture and
Natural Resources may specify, and any person making false oath
representation, or report shall be subject to punishment as for
perjury.
SEC. 17. The Secretary of Agriculture and Natural Resources

is authorized to prescribe the necessary and proper rules and
regulations and to do any and all things necessary to carry out and
accomplish the purposes of this Act; and under his immediate and
direct control, the Bureau of Lands shall have charge of the survey,
registration, and administration of said lands, and the Bureau of
Science of the geological work.
SEC. 18. The sum of thirty thousand pesos is hereby

appropriated, out of any funds in the Insular Treasury not
otherwise appropriated, to the end that the Secretary of Agriculture
and Natural Resources may have the Director of Lands proceed
to the survey and legal subdivision of all coal-bearing lands of the
public domain and the determination of the ownership thereof, in
accordance with section sixty-one of the Public Land Act.
SEC. 19. Act Numbered Eleven hundred and twenty-eight and

all Acts and parts of Acts in conflict herewith are hereby repealed.
SEC. 20. This Act shall take effect on its approval by the
President of the United States.
APPROVED, May 14, 1917.
31
ACT NO. 2720
AN ACT AUTHORIZING GEORGE H. FAIRCHILD TO ORGANIZE

A CORPORATION UNDER THE LAWS OF THE PHILIPPINE
ISLANDS, OR OF THE UNITED STATES OF AMERICA OR
OF ANY STATE THEREOF, WITH POWERS TO ACQUIRE
AND HOLD FOR A PERIOD NOT TO EXCEED THIRTY
YEARS CERTAIN LANDS SITUATED WITH THE PROVINCE
OF MINDORO AND TO CONSTRUCT AND OPERATE AN
IRIGATION AND DRAINAGE SYSTEM THEREON

the same:
SECTION 1. For the purpose of preparing ad placing in

condition for immediate cultivation and plantations hereinafter
specified, and thereby facilitate the sale thereof in small lots or
parcels, the franchise granted by this Act is hereby granted to
George H. Fairchild, subject to the conditions therein prescribed.
SEC. 2. Within six months from the date this Act takes effect,
George H. Fairchild is authorized to organize a corporation under
the laws of the Philippine Islands or of the United States or of any
State thereof, and with citizens of any of the said countries; and
said corporation, any provision of existing laws to the contrary
notwithstanding, shall have the right to possess, acquire, and hold
for a period not to exceed thirty years from the date this Act takes
effect the lands situated within the limits of the so-called San Jose
Estate, as described in Certificate of Title No. 16 of the Registry
of Property of the Province of Mindoro and in Sale Certificate No.
2, issued the fourth day of January, nineteen hundred and ten, by
the Director of Lands of the Philippine Islands, and not exceeding
twenty-three thousand hectares or such portion thereof as shall not
have been alienated, sold, or disposed of on the date this Act takes
effect. Within the period of thirty years from the date this Act takes
effect, the grantee shall sell said lands to any such persons, firms,
or corporations as may, under the provisions of section seven of this
32
Act, own the same, in tracts not exceeding four hundred hectares to
a single purchaser; and any part of said lands remaining unsold at
the expiration of the said period of thirty years shall revert to, and
become the property of, the Government of the Philippine Islands
The corporation so organized shall be authorized to acquire,

construct, maintain, and operate an irrigation and drainage system
within the said lands, in order to provide the same with their own
irrigation system, and shall have the right, to that end, to take,
use, and develop the waters of the Busuanga and Lumitao Rivers,
provided that no prejudice is thereby occasioned to vested rights.
In any event, the construction, maintenance, and operation of
the irrigation and drainage system shall at all times be subject to
the laws of the Philippine Islands governing the construction and
maintenance of irrigation canals.
SEC. 3. Said corporation shall not be authorized to engage

in agriculture, shall be subject, so long as engaged in the public
service, to the laws and regulations to which other public-service
corporations are subject, and shall pay annually to the Province of
Mindoro one-half of one per cent of its gross earnings from such
public service, and shall further pay all taxes imposed by law. It
shall likewise be subject to all the provisions of the Corporation
Law of the Philippine Islands, in so far as said provisions are not
inconsistent with the special provisions of this Act.
SEC. 4. The grantee, George H. Fairchild, or the corporation

by him organized in accordance with this Act, shall be obligated to
prepare and break the lands mentioned in section two of this Act,
to construct the irrigation system mentioned in said section, and to
subdivide said lands into lots or parcels not exceeding four hundred
hectares, such preparation, breaking, and irrigation of the lands to
be made in such portions each year that at the expiration of the
period of thirty years mentioned in said section two of this Act all
of such lands, or of the portions, suitable for cultivation, shall be
prepared, broken, and irrigated.
SEC. 5. Each year the grantee shall offer for sale the portion
of the land or portions already broken, irrigated, and prepared for
33
cultivation: Provided, however, That only such portion or portions

may be sold whose original purchase price shall have been fully
paid to the government, and any other portions the sale whereof
shall be authorized by the Director of Lands in consideration of
partial payments made: Provided further, That in no case shall any
portion of land be sold before being broken, irrigated, and placed in
condition for cultivation, unless the selling price of the same shall
have been approved by the Secretary of Agriculture and Natural
Resources, or by the Governor-General in the event of appeal by the
grantee from an adverse decision of the Secretary of Agriculture
and Natural Resources: And provided, finally, That if, after five
consecutive years from the date when said portion or portions
already broken, irrigated, and prepared shall have been offered for
sale, the same shall not have been sold by reason of excessive price
thereof, then the Secretary of Agriculture and Natural Resources
may revise and reconsider said price, reducing same, if necessary,
provided, however, that the price thus fixed by said Secretary shall
not be less than the price of the land, plus the actual cost of the
improvements and a reasonable interest on the capital invested
therein. The decision of the said Secretary reducing the price of the
lands, as herein provided, shall likewise be subject to appeal to the
Governor-General, whose decision shall be final and binding upon
all concerned.
SEC. 6. After thirty years from the date this Act takes
effect, the irrigation system referred to in section two of said Act
shall revert to, and become the property of, the Government of the
Philippine Islands.
SEC. 7. The franchise granted by this Act shall not be alienated

or transferred without the consent of the Governor-General, upon
the recommendation of the Secretary of Agriculture and Natural
Resources; but in no case shall such alienation or transfer, or the
sales provided for in this Act, be made to others than citizens of the
Philippine Islands or of the United States, or a corporation by them
organized.
SEC. 8. Within six months from and after this Act takes effect,
the grantee shall file with the Governor-General his acceptance in
34
writing of this franchise and of all the conditions thereof, together

with an abandonment and transfer to the Government of the
Philippine Islands of the leasehold right in three hundred and
thirty-four thousand eight hundred and seventy-two (334,872)
square meters of tidelands, now held by a corporation known as The
Mindoro Company under a contract executed on the thirtieth day
of April, nineteen hundred and eleven, by Director of Lands, with
the approval of the Secretary of the Interior, with one Edward L.
Poole, by virtue of which contract the Government of the Philippine
Islands granted to the said Edward L. Poole a ninety-nine year
lease of three hundred and eighty-four thousand eight hundred
and seventy-two (384,872) square meters of tide-lands situated on
the shores of Mangarin Bay and Mindoro Strait, in the township of
San José, Province of Mindoro, which said lease, by means of due
and legal assignment, has become the property of said The Mindoro
Company.
The acceptance of the abandonment of said lease, in whole or

in part, shall be optional with the Governor-General.
SEC. 9. Whenever and wherever the word “grantee” is used

in this Act, it shall be understood to mean “George H. Fairchild,” his
representatives, successors, or assigns.
SEC. 10. Any violation of the conditions imposed by this Act

shall be sufficient cause for canceling the franchise, by means of a
proceeding to be instituted by the Attorney-General in the name and
as the representative of the Government of the Philippine Islands,
in the Court of First Instance of Manila, upon which jurisdiction is
hereby conferred.
SEC. 11. This Act shall take effect as soon as it shall have
been approved by the President of the United States, or when six
months shall have expired after its transmittal to the said President
without the later having disapproved it.
35
ACT NO. 2721
AN ACT TO AUTHORIZE THE DIRECTOR OF FORESTRY TO

LEASE OR GRANT PERMITS FOR THE USE OF FOREST
LANDS FOR SAWMILS AND TIMBER DEPOTS, AND
FOR THE CONSTRUCTION OF HOTELS, SANATORIA,
RESIDENCES, CAMPS, FISHPONDS, PASTURES, OR
OTHER LAWFUL USES

the same:
SECTION 1. The Director of Forestry, with the approval of

the Secretary of Agriculture and Natural Resources, may, upon
such terms as he may deem reasonable, lease or grant permits
for the use of forest lands for the establishment of sawmills and
timber depots, and for the construction of hotels, sanatoria, bathing
establishments, residences, or for camps, fishponds, pastures for
large or small cattle, or other lawful purposes, as herein provided, to
any person or association of persons duly incorporated, for a period
not to exceed twenty years; and not more than ten hectares in area,
except so far as fishponds and cattle pastures are concerned, for
which the maximum area shall be two hundred hectares.
The Secretary of Agriculture and Natural Resources may grant

free rights of way through any public land to enable the persons
interested to get access to the land mentioned in this section.
SEC. 2. This Act shall take effect upon its approval by the
President of the United States: Provided, That upon the approval
of this Act by the Governor-General, it shall be by him forthwith
transmitted to the President of the United States, and he shall
approve or disapprove the same within six months from and after its
enactment and submission for his approval and if not disapproved
within such time it shall become a law the same as if it had been
specifically approved, in accordance with the provisions of section
nine of the Jones Act.
36
ACT NO. 2742
AN ACT TO GUARANTEE AN INTEREST OR PROFIT TO ANY

CAPITAL INVESTED IN THE ESTABLISHMENT OF A PULP
AND PAPER FACTORY IN THE PHILIPPINE ISLANDS

the same:
SECTION 1. With a view to aiding in the establishment and

operation of a pulp and paper factory in the Philippine Islands, the
Secretary of Commerce and Communications is hereby authorized
to guarantee an interest or profit of not to exceed four per centum
per annum upon any capital actually invested by the first person or
corporation for said purpose, within the term of one year from and
after the date on which this Act shall take effect.
SEC. 2. The guarantee referred to in the preceding section

shall be granted under such conditions as the Secretary of Commerce
and Communications may prescribe, including the following:
That the applicant shall be a citizen of the Philippine Islands

or of the United States, and if it be a corporation that it be organized
by Philippine or American citizens, or both and in accordance with
laws of the Philippine Islands.
That the duration of the guarantee shall not exceed a term of

three years which, in the discretion of the Secretary of Commerce
and Communications, may be extended for another three: Provided,
That as soon as the earnings of such person or corporation shall
amount to a sum the average whereof shall be in excess of four per
centum per annum, such person or corporation shall refund the
excess to the Insular Government until all sums advanced by the
same during the term of the guarantee shall be paid.
That the guarantee provided for by this Act shall only be

paid commencing with the first day on which the factory shall be
completely equipped and begin operation.
37
That the guarantee shall be granted only if the factory

established shall, in the opinion of the Secretary of Commerce
and Communications, be modern and adequate for the making of
paper pulp and the manufacture of paper from raw materials of the
Philippine Islands.
SEC. 3. The Secretary of Commerce and Communications is

hereby authorized to require of the person or corporation applying
for the benefits of this Act the necessary bonds and securities to
assure the Government of the exact and faithful compliance of the
terms of the guarantee.
SEC. 4. There are hereby appropriated, out of any funds in the

Insular Treasury not otherwise appropriated, the necessary sums to
be paid yearly until the termination of the obligation on the part of
the Government, but the same shall not be set up on the books of
the Insular Auditor until made available by warrant on the Insular
Treasury issued by the Governor-General, on the recommendation
of the Secretary of Commerce and Communications.
SEC. 5. This Act shall take effect on its approval.
APPROVED, February 18, 1918.
38
ACT NO. 2975
AN ACT AUTHORIZING CERTAIN FOREIGN CORPORATIONS

TO HOLD IN LEASE PUBLIC LANDS FOR WHICH
APPLICATION WAS MADE BY THEM AFTER FEBRUARY
EIGHT, NINETEEN HUNDRED AND EIGHTEN AND BEFORE
NOVEMBER TWNETY-NINTH, NINTEEN HUNDRED AND
NINTEEN, UNDER CERTAIN CONDITIONS

the same:
SECTION 1. The Secretary of Agriculture and Natural

Resources is hereby authorized to take action in accordance with the
existing Public Land Law upon applications for leases of agricultural
public lands filed by corporations totally or partly composed of foreign
citizens, after February eighth, nineteen hundred and eighteen, and
before November twenty-ninth, nineteen hundred and nineteen,
provided such applications comply with the following requisites:
First. That the corporation be authorized to hold real estate

in the Philippine Islands; that the land for which application is made
by it be necessary for the accomplishment of the purposes for which
it was created and exceeded in no case one thousand and twenty-
four hectares; and that said corporation, or any of the members
thereof be not in any manner interested in any other corporation
engaged in agriculture, forest industry, or mining.
Second. That the application for lease be filed in the form

and under the conditions prescribed by the laws in force at the time
it was filed.
Third. That after filing the application, the corporation have

made improvements worth not less than ten thousand pesos on the
land applied for.
Fourth. That the applicant have not, in its organization

or capitalization, or in any other manner, violated the laws of
39
the Philippine Islands or any order, regulation or instruction of

the Department of Agriculture and Natural Resources and of the
bureaus or offices under its jurisdiction; and
Fifth. That the land applied for be not more suitable

for forestry than for agricultural purposes, nor included in any
reservation or proposed reservation for any public purpose.
SEC. 2. It shall be the duty of the Secretary of Agriculture

and Natural Resources, before granting the application of any of the
corporations above-mentioned, to require of the same a statement
duly signed and sworn to by its president, manager or administrator,
to the effect that it and all and each of its members possess and have
complied with the requirements of the preceding section; to order an
investigation, if he deem it necessary, in order to ascertain the truth
of such statement; and to require of the petitioning corporation the
payment of all pecuniary liabilities which it may through its acts
have incurred towards the Government of the Philippine Islands or
any of its dependencies.
SEC. 3. Upon compliance with the formalities prescribed in

this Act, the Secretary of Agriculture and Natural Resources shall
grant the lease applied for in accordance with the existing Public
Land law, and the petitioning corporation shall then be authorized
to hold the land applied for as lessee thereof for a period of time
deemed just and equitable by said Secretary to compensate it for the
investments made for improvements thereon, which period shall in
no case exceed that fixed for leases in said Public Land Law.
SEC. 4. Any corporation composed totally or partly of foreign

citizens which has made application to purchase under the old
Public Land Act before November twenty-ninth, nineteen hundred
and nineteen, may request that said application be considered as an
application for lease on the date of its filing; and upon compliance
with the requirements and conditions of sections one and two of this
Act, the Secretary of Agriculture and Natural Resources may grant
the lease applied for, subject to all the restrictions and limitations
prescribed in this Act.
40
41
ACT NO. 3495
AN ACT GRANTING TO THE ROBERT DOLLAR COMPANY, A

CORPORATION ORGANIZED AND EXISTING UNDER
THE LAWS OF THE STATE OF CALIFORNIA, UNITED
STATES OF AMERICA, A FRANCHISE TO CONSTRUCT,
STATIONS FOR THE RECEPTION AND TRANSMISSION
OF WIRELESS LONG DISTANCE AND PRESCRIBING THE
CONDITION OF THE SAME

the same:
SECTION 1. There is hereby granted to the “Robert Dollar

Company,” its successors or assigns, hereinafter referred to as
the “grantee,” a franchise to construct, maintain, and operate
in the Philippine Islands at such places as the said grantee may
select, subject to the approval of the Secretary of Commerce and
Communications, stations for the transmission and reception of
wireless messages for the following purpose:
(a) The sending of commercial wireless telegraphic messages

from points within the Philippine Islands to points exterior thereto,
including airplanes, airships, and vessels, even though such
airplanes, airships, or vessels be located within the territorial limits
of the Philippine Islands, and the receiving of commercial wireless
messages from such exterior points.
Each station may consist of two plants, a sending station and

a receiving station.
SEC. 2. Subject to the limitations and procedure prescribed

by law, the grantee is authorized to exercise the right of eminent
domain, in so far as may be reasonably necessary to further the
establishment and efficient maintenance and operation of its radio
stations and connecting them one to another, and, with the prior
42
approval of the Governor-General, the grantee is authorized to

construct and maintain its works of public utility and service over
and across public property of the United States, including streets,
highways, squares, and reservations, and other similar property of
the Government of the Philippine Islands and its branches.

of fifty years from the date the said stations shall be put in operation,
and is made upon the express condition that the same shall be void
unless the construction of at least one station be begun within one
year from the date of the approval of this Act and be completed
within two years from said date.
SEC. 4. With the exception of the privileges of transmitting

and receiving wireless communications to or from points exterior
to the Philippine Islands as hereinbefore granted, all wireless
communication between points or stations within the Philippine
Islands is expressly reserved to the Government of the Philippine
Islands.
SEC. 5. This franchise shall not take effect nor shall any
powers thereunder be exercised by the grantee until the Governor-
General shall have allotted to the grantee the frequencies and wave
lengths to be used thereunder and determined the stations to and
from which each such frequency and wave length may be used, and
issued to the grantee a license for such use.
The Governor-General on reasonable notice to the grantee,

may at any time change or cancel or modify in whole or in part any
or all of the allotments of frequencies or wave lengths hereunder
as well as any license issued hereunder to use such frequencies or
wave length to and from any or all stations to and from which they
may be used. He may take such action (a) whenever in his judgment
such frequencies and wave lengths have been used or there is
danger that they will be used by the grantee to impair or stifle,
competition or to obtain a monopoly in electrical communication, or
to secure unreasonable rates for such communication, or otherwise
to violate the laws or public policy of these Islands; (b) whenever in
his judgment the public interest of these Islands require that such
43
frequencies or wave lengths should be used for other purposes than

those of the grantee, either by the Government of the Philippine
Islands or by other individuals or corporations licensed by it; (c)
whenever in his judgment for any reason the public interests of
these Islands so require.
The Governor-General is authorized to appoint, employ or

make use of such boards or commissions or agents as in his discretion
he may select, to investigate and determine the facts upon which he
may act as aforesaid, and such boards, commissions, and agents
shall have the right by compulsory process of subpoena, to summon
witnesses, administer oaths, and take evidence.
SEC. 6. The stations of the grantee shall be so constructed and

operated that a minimum of interference will result and the wave
lengths selected with a view to avoiding interference with existing
stations and to permit of the expansion of the grantee’s services.

United States, in time of war, insurrection, or domestic trouble, to
of any authorized department of the Government of the United
States, the United States Government paying and compensating
the grantee for the use of said stations during the period when they
shall be so operated by the said Government.

Philippine Islands, under similar circumstances and upon similar
conditions, upon the order and direction of the Governor-General.
SEC. 8. The right is hereby reserved to the Government

of the Philippine Islands, thru the Public Service Commission or
such other officer as may be thereunto duly authorized, to fix the
maximum and minimum rates to be charged by the grantee.
SEC. 9. The grantee shall keep a separate account of the gross

receipts of the business transacted by it in the Philippine Islands,
and shall furnish to the Insular Auditor and the Insular Treasurer
44
a copy of such account not later than the thirty-first day of January
of each year for the preceding year. For the purpose of auditing
accounts so rendered to the Insular Auditor and Insular Treasurer,
all of the books and accounts of the grantee, or duplicates thereof,
so far as they relate to the business transacted in the Philippine
Islands, shall be kept in the Philippine Islands, and shall be subject
to the official inspection of the Insular Auditor or his authorized
representatives, and the audit and approval of such accounts shall
be final and conclusive evidence as to the amount of said gross
receipts, except that the grantee shall have the right to appeal
to the courts of the Philippine Islands and the Supreme Court of
the United States, under the terms and conditions provided in the
laws of the Philippine Islands and the Act of Congress of August
29, 1916, and the words “gross receipts” are herein defined as
the total receipts from sources within the Philippine Islands, less
proportionate amounts belonging to connecting lines or stations.
SEC. 10. The grantee shall be liable to pay the same taxes
on its real estate, buildings, and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter
may be required by law to pay. The grantee shall further pay to
the Insular Treasurer each year, within ten days after the audit
and approval of the accounts as prescribed in section nine of this
Act, one and one-half per centum of all gross receipts from business
transacted under this franchise by the said grantee in the Philippine
Islands.
SEC. 11. The grantee shall hold the insular, provincial, and
municipal governments of the Philippine Islands, harmless from
all claims, accounts, demands, or actions arising out of accidents or
injuries, whether to property or to persons, caused by the construction
or operation of the station for reception and transmission of wireless
message of the grantee.

by the grantee of this franchise without proper condemnation
proceedings and just compensation paid or tendered therefor, and
any authority to take and occupy land contained herein shall not
45
apply to the taking, use, or occupation of any land except such as is

required for the actual necessary purposes for which this franchise
is granted.
SEC. 13. The grantee shall be subject to the corporation laws

of the Philippine Islands now existing or hereafter enacted.
SEC. 14. The grantee shall not issue stock or bonds except in
exchange for actual cash or for property at a fair valuation equal to
the par value of the stock or bonds so issued, and shall not declare
stock or bond dividends.
SEC. 15. It shall be unlawful for the grantee to use, employ,

or contract for the labor of persons held in involuntary servitude.
SEC. 16. The franchise hereby granted shall be subject to

amendment, alteration, or repeal by the Congress of the United
States, and the rights to use and occupy public property and places
hereby granted shall revert to the respective governments, upon
the termination of this franchise, by such repeal or by forfeiture or
expiration in due course. Unless earlier terminated by any such
repeal or forfeiture, or extended, the franchise and rights hereby
granted shall terminate by expiration of time fifty years after the
date of the acceptance of this Act by the grantee.
SEC. 17. As a condition of the granting of this franchise,

the grantee shall execute a bond in favor of the Government of the
Philippine Islands, in the sum of fifty thousand pesos, in a form
and with sureties satisfactory to the Secretary of Commerce and
Communications, conditioned upon the faithful performance of the
grantee’s obligations hereunder during the first three years of the
life of this franchise. If, after three years from the date of acceptance
of this franchise, the grantee shall have fulfilled said obligations or
so soon thereafter as the grantee shall have fulfilled the same, the
bond aforesaid shall be cancelled by the Secretary of Commerce and
Communications.
SEC. 18. Acceptance of this franchise shall be given in writing

within six months after approval of this Act. When so accepted
46
by the grantee and upon the approval of the bond aforesaid by the
Secretary of Commerce and Communications the grantee shall be
empowered to exercise the privileges granted hereby.
SEC. 19. The grantee shall not lease, transfer, grant the
usufruct of, sell, or assign this franchise nor the rights and privileges
acquired thereunder to any person, firm, company, corporation, or
other commercial or legal entity nor shall merge with any other
company or corporation organized for the same purpose, without the
approval of the Philippine Legislature. Any corporation to which
this franchise may be sold, transferred, or assigned, shall be subject
to the corporation laws of the Philippine Islands now existing or
hereafter enacted, and any person, firm, company, corporation,
or other commercial or legal entity to which this franchise is sold,
transferred or assigned shall be subject to all the conditions, terms,
restrictions, and limitations of this franchise as fully and completely
and to the same extent as if the franchise had been originally granted
to the said person, firm, company corporation, or other commercial
or legal entity.
SEC. 20. The term Public Service Commission, as herein

used, means said commission as from time to time constituted or
any other governmental body as from time to time constituted,
hereafter created in place of or in succession to said Public Service
Commission.
SEC. 21. This franchise shall not be interpreted to mean an

authorization to the grantee to engage in radio telephony.

exclusive grant of the privileges herein provided for.
APPROVED, December 8, 1928.
47
ACT NO. 3513
AN ACT GRANTING TO THE “MACKAY RADIO AND TELEGRAPH

COMPANY OF CALIFORNIA,” UNITED STATES OF
AMERICA, A FRANCHISE TO CONSTRUCT, MAINTAIN,
AND OPERATE IN THE PHILIPPINE ISLANDS STATIONS
FOR THE RECEPTION AND TRANSMISSION OF WIRELESS
LONG DISTANCE MESSAGES, AND PRESCRIBING THE
CONDITIONS OF THE SAME

the same:
SECTION 1. There is hereby granted to the “Mackay Radio

and Telegraph Company of California,” its successors or assigns,
hereinafter referred to as the “grantee,” a franchise to construct,
maintain and operate in the Philippine Islands at such places as the
said grantee may select, subject to the approval of the Secretary of
Commerce and Communications, stations for the transmission and
reception of wireless messages for the following purpose:
(a) The sending of commercial wireless telegraphic messages

from points within the Philippine Islands to points exterior thereto,
including airplanes, airships and vessels, even though such
airplanes, airships or vessels be located within the territorial limits
of the Philippine Islands, and the receiving of commercial wireless
messages from such exterior points.
Each station may consist of two plants, a sending station and

a receiving station.
SEC. 2. Subject to the limitations and procedure prescribed

by law, the grantee is authorized to exercise the right of eminent
domain, in so far as may be reasonably necessary to further the
establishment and efficient maintenance and operation of its radio
stations and connecting them one to another, and, with the prior
approval of the Governor-General, the grantee is authorized to
48
construct and maintain its works of public utility and service over
and across public property of the United States, including streets,
highways, squares, and reservations, and other similar property of
the Government of the Philippine Islands and its branches.

of fifty years from the date the said stations shall be put in operation,
and is made upon the express condition that the same shall be void
unless the construction of at least one station be begun within one
year from the date of the approval of this Act and be completed
within two years from said date.
SEC. 4. With the exception of the privileges of transmitting

and receiving wireless communications to or from points exterior
to the Philippine Islands as hereinbefore granted, all wireless
communication between points or stations within the Philippine
Islands is expressly reserved to the Government of the Philippine
Islands.
SEC. 5. This franchise shall not take effect nor shall any
powers thereunder be exercised by the grantee until the Governor-
General shall have allotted to the grantee the frequencies and wave
lengths to be used thereunder and determined the stations to and
from which each such frequency and wave length may be used, and
issued to the grantee a license for such use.
The Governor-General on reasonable notice to the grantee,

may at any time change or cancel or modify in whole or in part any
or all of the allotments of frequencies or wave lengths hereunder
as well as any license issued hereunder to use such frequencies or
wave lengths to and from any or all stations to and from which they
may be used. He may take such action (a) whenever in his judgment
such frequencies and wave lengths have been used or there is
danger that they will be used by the grantee to impair electrical
communication or stifle competition or to obtain a monopoly in
electrical communication, or to secure unreasonable rates for such
communication, or otherwise to violate the laws or public policy of
these Islands; (b) whenever in his judgment the public interest of
these Islands requires that such frequencies or wave lengths should
49
be used for other purposes than those of the grantee, either by the
Government of the Philippine Islands or by other individuals or
corporations licensed by it; (c) whenever in his judgment for any
reason the public interests of these Islands so require.
The Governor-General is authorized to appoint, employ or

make use of such boards, commissions, or agents as in his discretion
he may select, to investigate, and determine the facts upon which
he may act as aforesaid, and such boards, commissions and agents
shall have the right by compulsory process of subpoena, to summon
witnesses, administer oaths and take evidence.
SEC. 6. The stations of the grantee shall be so constructed and

operated that a minimum of interference will result and the wave
SEC.7. A special right is reserved to the Government of the

United States, in time of war, insurrection, or domestic trouble, to
of any authorized department of the Government of the United
States, the United States Government paying and compensating
the grantee for the use of said stations during the period when they
shall be so operated by the said Government.

Philippine Islands, under similar circumstances and upon similar
conditions, upon the order and direction of the Governor-General.
SEC. 8. The right is hereby reserved to the Government of

the Philippine Islands, through the Public Service Commission or
such other officer as may be thereunto duly authorized, to fix the
maximum and minimum rates to be charged by the grantee.
SEC. 9. The grantee shall keep a separate account of the gross

receipts of the business transacted by it in the Philippine Islands,
and shall furnish to the Insular Auditor and the Insular Treasurer
a copy of such account not later than the thirty-first day of January
50
of each year for the preceding year. For the purpose of auditing
accounts so rendered to the Insular Auditor and Insular Treasurer,
all of the books and accounts of the grantee, or duplicates thereof,
so far as they relate to the business transacted in the Philippine
Islands, shall be kept in the Philippine Islands, and shall be subject
to the official inspection of the Insular Auditor or his authorized
representatives, and the audit and approval of such accounts shall
be final and conclusive evidence as to the amount of said gross
receipts, except that the grantee shall have the right to appeal
to the courts of the Philippine Islands and the Supreme Court of
the United States, under the terms and conditions provided in the
laws of the Philippine Islands and the Act of Congress of August
twenty-ninth, nineteen hundred and sixteen, and the words “gross
receipts” are herein defined as the total receipts from sources within
the Philippine Islands, less proportionate amounts belonging to
connecting lines or stations.
SEC. 10. The grantee shall be liable to pay the same taxes
on its real estate, buildings, and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter
may be required by law to pay. The grantee shall further pay to
the Insular Treasurer each year, within ten days after the audit
and approval of the accounts as prescribed in section nine of this
Act, one and one-half per centum of all gross receipts from business
transacted under this franchise by the said grantee in the Philippine
Islands.
SEC. 11. The grantee shall hold the insular, provincial, and
municipal governments of the Philippine Islands, harmless from
all claims, accounts, demands, or actions arising out of accidents or
injuries, whether to property or to persons, caused by the construction
or operation of the station for reception and transmission of wireless
message of the grantee.

by the grantee of this franchise without proper condemnation
proceedings and just compensation paid or tendered therefor, and
any authority to take and occupy land contained herein shall not
51
apply to the taking, use, or occupation of any land except such as is

required for the actual necessary purposes for which this franchise
is granted.
SEC. 13. The grantee shall be subject to the corporation laws

of the Philippine Islands now existing or hereafter enacted.
SEC. 14. The grantee shall not issue stock or bonds except in
exchange for actual cash or for property at a fair valuation equal to
the par value of the stock or bonds so issued, and shall not declare
stock or bond dividends.


amendment, alteration, or repeal by the Congress of the United
States, and the rights to use and occupy public property and places
hereby granted shall revert to the respective government, upon
the termination of this franchise, by such repeal or by forfeiture or
expiration in due course.
Unless earlier terminated by any such repeal or forfeiture, or

extended, the franchise and rights hereby granted shall terminate
by expiration of time fifty years after the date of the acceptance of
this Act by the grantee.
SEC. 17. As a condition of the granting of this franchise,

the grantee shall execute a bond in favor of the Government of the
Philippine Islands, in the sum of fifty thousand pesos, in a form
and with sureties satisfactory to the Secretary of Commerce and
of this franchise, the grantee shall have fulfilled said obligations or
so soon thereafter as the grantee shall have fulfilled the same, the
bond aforesaid shall be cancelled by the Secretary of Commerce and
Communications.
52

within six months after approval of this Act. When so accepted
by the grantee and upon the approval of the bond aforesaid by the
Secretary of Commerce and Communications the grantee shall be
empowered to exercise the privileges granted hereby.
usufruct of, sell or assign this franchise nor the rights and privileges
acquired thereunder to any person, firm, company, corporation or
other commercial or legal entity, nor merge with any other company
or corporation organized for the same purpose, without the approval
of the Philippine Legislature first had. Any corporation to which
this franchise may be sold, transferred, or assigned, shall be subject
to the corporation laws of the Philippine Islands now existing or
hereafter enacted, and any person, firm, company, corporation or
other commercial or legal entity to which this franchise is sold,
transferred, or assigned shall be subject to all the conditions, terms,
restrictions and limitations of this franchise as fully and completely
to the said person, firm, company, corporation or other commercial
or legal entity.
SEC. 20. The term Public Service Commission, as herein

used, means said commission as from time to time constituted or
any other governmental body as from time to time constituted,
hereafter created in place of or in succession to said Public Service
Commission.

authorization to the grantee to engage in radio telephony.

53
ACT NO. 3518
AN ACT AMENDING THE CORPORATION LAW, ACT NUMBERED

FOURTEEN HUNDRED AND FIFTY-NINE, AS AMENDED,

the same;
XXX XXX XXX
SEC. 3. The first paragraph of section six and subparagraphs

two, seven, and eight thereof are hereby amended to read as
follows:
“SEC. 6. Five or more persons, not exceeding fifteen, a majority

of whom are residents of the Philippine Islands, may form a private
corporation for any lawful purpose or purposes by filing with the
Bureau of Commerce and Industry articles of incorporation duly
executed and acknowledged before a notary public, setting forth:
“(2) The purpose or purposes for which the corporation is

formed: Provided, however, That no corporation hereafter formed for
the purpose of engaging in the business of transportation, by land
or by water, or of maintaining a telephone, telegraph, or wireless
communication system, shall, except as otherwise provided by law,
exercise any powers other than those necessary or incidental to the
accomplishment of its said purpose. The restriction herein provided
shall also apply to foreign corporations hereafter licensed to do
business in the Philippine Islands.
XXX XXX XXX
SEC. 22. Nothing in this Act contained shall be construed

either to modify, amend, or repeal any of the provisions of Act
Numbered Thirty-two hundred and forty-seven, entitled “An Act
to prohibit monopolies and combinations in restraint of trade,” or
54
of Act Numbered Twenty-eight hundred and seventy-four, entitled

“An Act to amend and compile the laws relative to lands of the public
domain, and for other purposes.”
SEC. 23. All the provisions of this Act which do not conflict
with any of the provisions of the Act of Congress of July 1, 1902,
entitled “The Philippine Bill – An Act temporarily to provide for the
administration of the affairs of civil government in the Philippine
Islands, and for other purposes,” of the Act of Congress approved
on August 29, 1916, entitled “An Act to declare the purpose of the
people of the United States as to the future political status of the
people of the Philippine Islands, and to provide a more autonomous
government for those Islands,” or any other Act of Congress, shall
take effect upon approval of this Act by the Governor-General, and
the remainder thereof shall take effect upon its approval, by the
Congress of the United States, and upon such approval the provisions
of this Act shall be applicable to all corporations now or hereafter
organized under the Corporation Law, and to all franchises, rights,
and privileges heretofore granted by the Philippine Legislature.
SEC. 24. This Act shall take effect upon its approval.
APPROVED by the Governor-General on December 3, 1928,

and by the Congress of the United States on March 1, 1929.
55
ACT NO. 3520
AN ACT REGULATING FOREIGN BANKING CORPORATIONS

DOING BUSINESS IN THE PHILIPPINE ISLANDS

the same:
SECTION 1. No foreign banking corporation which accepts

deposits payable in the Philippine Islands shall be permitted to do
business in the Philippine Islands unless it has at all times within
the Philippine Islands or on deposit outside the Philippine Islands,
with a trustee to be designated by the Bank Commissioner, an
amount of assets equal to at least ninety per cent of its deposits
payable within the Philippine Islands. However, in order to permit
the temporary investment abroad of idle funds for which there
is no safe investment outlet in the Philippine Islands, the Bank
Commissioner may, with the approval of the Secretary of Finance,
suspend for limited periods the operation of the foregoing provisions
of this section. Residents and citizens of the Philippine Islands who
are creditors of a foreign banking corporation doing business in the
Philippine Islands shall have preferential rights to the assets which
such banking corporation has in the Philippine Islands or on deposit
with a trustee as hereinabove provided.
SEC. 2. The total liabilities to a branch of a foreign banking

corporation doing business in the Philippine Islands of any person, or
of any company, corporation or firm for money borrowed, including
the liabilities of the company or firm the liabilities of the several
members thereof, shall not exceed an amount to be determined as
follows:
Five per cent of its average deposits payable within the

Philippine Islands during the preceding calendar year, plus fifteen
per cent of the amount due by such banch to the home office and
branches outside the Philippine Islands after deducting from such
amount sums due such branch from the home office and outside
56
branches: Provided, however, That additional liabilities may

be incurred by a borrower up to five per cent of the said average
deposits and fifteen per cent of the said net amount due to the home
office and branches outside the Philippine Islands, provided such
additional liabilities are secured by shipping documents, warehouse
receipts, or other similar documents, transferring or securing title
covering readily marketable, non-perishable staples, when such
staples are fully covered by insurance, and when such staples have
a market value equal to at least one hundred twenty-five per cent of
such additional liabilities. The discount of bills of exchange drawn
in good faith against actually existing values, and the discount
of commercial and business paper actually owned by the person
negotiating the same, shall not be considered as money borrowed
within the meaning of this section.
The net amount due the home office and branches outside the
Philippine Islands shall not be reduced during the life of any loan if
by such reduction such loan would become illegal.
Nothing in this Act shall be considered as restricting in any

manner loans made by a branch of a foreign banking corporation
operating within the Philippine Islands for account of its home office
or branches outside the Islands.
During the first year of the existence of a branch of a foreign

banking corporation commencing business in the Philippine Islands
after the date when this Act shall take effect, the Bank Commissioner,
with the approval of the Secretary of Finance, shall determine the
maximum amount which may be loaned to any one borrower.
SEC. 3. In the case of a foreign banking corporation having

more than one branch or agency in the Philippine Islands, the Bank
Commissioner shall proceed as follows in order to ascertain whether
the provisions of this law are being complied with:
The accounts of all such branches or agencies shall be

consolidated and treated as though they were the accounts of a
single branch. If it is then found that no loan exceeds the limitation
prescribed in this Act, and that the said branches and agencies
57
thus treated as a whole are observing the other restrictions and

provisions of this law, the Bank Commissioner shall consider this
law as having been complied with as fully as though each branch or
agency were individually complying with it in every respect.
SEC. 4. Only such foreign banking corporations as receive

deposits payable in the Philippine Islands shall be subject to the
provisions of this Act.
SEC. 5. All acts or parts of acts inconsistent with the provisions

of this Act are hereby repealed.
SEC. 6. This Act shall become effective on August first,

nineteen hundred and thirty.
58
ACT NO. 3546
AN ACT EXCLUDING NATIONAL BANKS ORGANIZED UNDER

THE LAWS OF THE UNITED STATES FROM THE
PROHIBITION OF USING THE WORD “NATIONAL” AS A
PORTION OF THEIR NAME OR TITLE

the same:
SECTION 1. Any law or part of a law heretofore enacted

prohibiting the use of the word “national” by any bank corporation,
firm or partnership shall not apply to any national bank organized
under the laws of the United States, the name of which is so
distinctive that it could not reasonably be confused with the
Philippine National Bank.
APPROVED, November 22, 1929.
59
ACT NO. 3590
AN ACT AMENDING SECTION TEN OF ACT NUMBERED THREE

THOUSAND FIVE HUNDRED AND THIRTEEN GRANTING
TO THE MACKAY RADIO AND TELEGRAPH COMPANY OF
CALIFORNIA A FRANCHISE TO CONSTRUCT, MAINTAIN
AND OPERATE IN THE PHILIPPINE ISLANDS STATIONS
FOR THE RECEPTION AND TRANSMISSION OF WIRELESS,
LONG DISTANCE MESSAGES AND PRESCRIBING THE
CONDITIONS OF THE SAME

the same:
SECTION 1. Section ten of Act Numbered Three thousand

five hundred and thirteen is hereby amended to read as follows:
“SEC. 10. The grantee shall be liable to pay the same taxes
on its real property, exclusive of the franchise, as other persons or
corporations are now or hereafter may be required by law to pay.
The grantee shall further pay to the Insular Treasurer each year,
within ten days after the audit and approval of the accounts as
prescribed in section nine of this Act, one and one-half per centum of
all gross receipts from business transacted under this franchise by
the said grantee in the Philippine Islands, and the said percentage
shall be in lieu of all taxes on the franchise or earnings thereof.”
60
LEGISLATIVE MEASURES – COMMONWEALTH ACTS
COMMONWEALTH ACTS
61
62
COMMONWEALTH ACT NO. 108
AN ACT TO PUNISH ACTS OF EVASION OF THE LAWS ON THE

NATIONALIZATION OF CERTAIN RIGHTS, FRANCHISES
OR PRIVILEGES
Be it enacted by the National Assembly of the Philippines:
SECTION 1. In all cases in which any constitutional or

legal provision requires Philippine or United States citizenship
as requisite for the exercise or enjoyment of a right, franchise or
privilege, any citizen of the Philippines or the United States who
allows his name or citizenship to be used for the purpose of evading
such provision, and any alien or foreigner profiting thereby, shall be
punished by imprisonment for not less than two nor more than ten
years and by a fine of not less than two thousand nor more than ten
thousand pesos.
The fact that the citizen of the Philippines or of the United

States charged with a violation of this Act had, at the time of
the acquisition of his holdings in the corporations or associations
referred to in section two of this Act, no real or personal property,
credit or other assets the value of which shall at least be equivalent
to said holdings, shall be admissible as circumstantial evidence of a
violation of this Act.
SEC. 2. In all cases in which a constitutional or legal provision

requires that, in order that a corporation or association may exercise
or enjoy a right, franchise or privilege, not less than a certain per
centum of its capital must be owned by citizens of the Philippines or
the United States, or both, it shall be unlawful to falsely simulate
the existence of such minimum of stock or capital as owned by such
citizens of the Philippines or the United States or both, for the
purpose of evading said provision. The president or manager and
directors or trustees of corporations or associations convicted of a
violation of this section shall be punished by imprisonment for not
less than two nor more than ten years, and by a fine of not less than
63
two thousand nor more than ten thousand pesos.
SEC. 3. Any corporation or association violating any of the

provisions of this Act shall, upon proper court proceedings, be
dissolved.
APPROVED, October 30, 1936.
64
COMMONWEALTH ACT NO. 613
AN ACT TO CONTROL AND REGULATE THE IMMIGRATION OF

ALIENS INTO THE PHILIPPINES
Be it enacted by the National Assembly of the Philippines:
SECTION 1. This Act shall be known as “The Philippine

Immigration Act of 1940.”
XXX XXX XXX
NONIMMIGRANTS
SEC. 9. Aliens departing from any place outside the Philippines,

destined for the Philippines, who are otherwise admissible and who
qualify within one of the following categories, may be admitted as
nonimmigrants:
(a) A temporary visitor coming for business or for pleasure

or for reasons of health;
(b) A person in transit to a destination outside the

Philippines;
(c) A seaman serving as such on a vessel arriving at a port

of the Philippines and seeking to enter temporarily and solely in the
pursuit of his calling as a seaman;
(d) A person seeking to enter the Philippines solely to carry

on trade between the Philippines and the foreign state of which he
is a national, his wife, and his unmarried children under twenty-one
years of age, if accompanying or following to join him, subject to the
condition that citizens of the Philippines under similar conditions
are accorded like privileges in the foreign state of which such person
is a national;
65
(e) A person previously lawfully admitted into the Philippines

for permanent residence, who is returning from a temporary visit
abroad to an unrelinquished residence in the Philippines; and
(f) A student having means sufficient for his education and

support in the Philippines, who is at least fifteen years of age and
who seeks to enter the Philippines temporarily and solely for the
purpose of study at a school or other institution of learning approved
for such alien students by the Commissioner of Immigration.
DOCUMENTATION OF NONIMMIGRANTS
SEC. 10. Nonimmigrants must present for admission into the

Philippines unexpired passports or official documents in the nature
of passports or official documents in the nature of passports issued
by the governments of the countries to which they owe allegiance
or other travel documents showing their origin and identity as
prescribed by regulations, and valid passport visas granted by
consular officers, except that such documents shall not be required
of the following aliens:
(a) A child qualifying as a nonimmigrant, born subsequent

to the issuance of the passport visa of an accompanying parent, the
visa not having expired;
(b) A seaman qualifying as such under section 9(c) of this

Act; and
(c) A returning resident, as referred to in section nine hereof,

presenting a Reentry Permit as provided for in section twenty-two
of this Act.
SEC. 11. The form and manner of applying for a passport visa
and the form and validity of such passport visa shall be established
by regulations.
SEC. 12. A passport visa shall not be granted to an applicant

who fails to establish satisfactorily his nonimmigrant status or
66
whose entry into the Philippines would be contrary to the public

safety.
XXX XXX XXX
GENERAL RESERVATIONS
SEC. 54. Notwithstanding the provisions of this Act, pending

the final and complete withdrawal of the sovereignty of the United
States over the Philippines:
(a) The term “alien” shall not include a citizen of the United
States of America, nor an Indian of the United States, nor other
person owing permanent allegiance to the United States.
XXX XXX XXX
(i) With reference to section forty-seven of this Act, granting

the President of the Philippines power to reduce passport visa fees
for nonimmigrants, or to abolish them altogether, as a reciprocal
measure, for nationals of countries which grant similar concessions
to Philippine citizens, such power shall be exercised only by the
Secretary of State of the United States acting under the authority
granted him by Executive Order No. 5427 of August 20, 1930 of
the President of the United States, entitled “Waiver or Reduction of
Application and Visa Fees for Nonimmigrants.”
XXX XXX XXX
APPROVED, August 26, 1940.
67
REPUBLIC ACTS
70
LEGISLATIVE MEASURES – REPUBLIC ACTS
REPUBLIC ACT NO. 503
AN ACT TO AMEND CERTAIN SECTIONS OF COMMONWEALTH

ACT NUMBERED SIX HUNDRED AND THIRTEEN,
OTHERWISE KNOWN AS THE PHILIPPINE IMMIGRATION
ACT OF 1940

Philippines in Congress assembled:
XXX XXX XXX
SEC. 3. Section nine of Commonwealth Act Numbered Six

hundred and thirteen is hereby amended to read as follows:
“SEC. 9. Aliens departing from any place outside the

Philippines, who are otherwise admissible and who qualify within
one of the following categories may be admitted as nonimmigrants:
XXX XXX XXX
“(d) An alien entitled to enter the Philippines solely to carry

on trade between the Philippines and the foreign state of which he
is a national under and in pursuance of the provisions of a treaty
of commerce and navigation, and his wife, and unmarried children
under twenty-one years of age, if accompanying or following to join
him;
“(e) An accredited official of a foreign government recognized

by the Government of the Philippines, his family, attendants,
servants, and employees;
“(f) A student, having means sufficient for his education and

support in the Philippines, who is at least eighteen years of age and
who seeks to enter the Philippines temporarily and solely for the
purpose of taking up a course of study higher than high school at a
university, seminary, academy, college or school approved for such
alien students by the Commissioner of Immigration;
71
“(g) An alien coming to prearranged employment for whom

the issuance of a visa has been authorized in accordance with section
twenty of this Act, and his wife, and his unmarried children under
twenty-one years of age, if accompanying him or if following to join
him within a period of six months from the date of his admission
into the Philippines as a nonimmigrant under this paragraph;
“An alien who is admitted as a nonimmigrant cannot remain

in the Philippines permanently. To obtain permanent admission, a
nonimmigrant alien must depart voluntarily to some foreign country
and procure from the appropriate Philippine consul the proper visa
and there after undergo examination by the officers of the Bureau
of Immigration at a Philippine port of entry for determination of his
admissibility in accordance with the requirements of this Act.”
SEC. 4. Section ten of the same Act is hereby amended to

read as follows:
“SEC. 10. Nonimmigrants must present for admission into

the Philippines unexpired passports or official documents in the
nature of passports issued by the governments of the countries to
which they owe allegiance or other travel documents showing their
origin and identity as prescribed by regulations, and valid passport
visas granted by diplomatic or consular officers, except that such
documents shall not be required of the following aliens: (a) A child
qualifying as a nonimmigrant, born subsequent to the issuance of
the passport visa of an accompanying parent, the visa not having
expired; and (b) A seaman qualifying as such under section 9 (c) of
this Act.”
XXX XXX XXX
SEC. 19. Section 54 of the same Act is hereby repealed.
APPROVED, June 12, 1950.
72

TO CONSTRUCT, MAINTAIN AND OPERATE RADIO
BROADCASTING STATION OR STATIONS IN THE
PHILIPPINES

SECTION 1. There is hereby granted to Mr. A. J. Wills,

hereinafter referred to as the “grantee”, a temporary permit to
construct, maintain and operate in the Philippines, at such places
as the said grantee may select, subject to approval of the Secretary
of Public Works and Communications, radio broadcasting station or
stations: Provided, That the holder of the temporary permit herein
granted shall start the operation thereof within one and a half years
from the approval of said temporary permit. Failure to comply with
this requirement shall ipso facto cancel and void the temporary
permit.
SEC. 2. This Temporary permit shall continue to be in force

during the time that the Government has not established similar
service at the places selected by the grantee.
SEC. 3. (a) This temporary permit shall not take effect nor
shall any powers thereunder be exercised by the grantee until the
Secretary of Public Works and Communications shall have allotted to
the grantee the frequencies and wave lengths to be used thereunder
and determined the stations to and from which each such frequency
and wave length may be used, and issued to the grantee a license
for such use.
(b) The Secretary of Public Works and Communications,

on reasonable notice to the grantee, may at any time change, or
cancel, or modify, in whole or in part, any or all of the allotments of
frequencies or wave lengths to be used. He may take such action: (1)
whenever in his judgment such frequencies and wave lengths have
73
been used, or there is danger that they will be used by the grantee to
impair electrical communication, or stifle competition, or to obtain
a monopoly in electrical communication, or to secure unreasonable
rates for such communication, or otherwise to violate the laws or
public policy of the Republic of the Philippines; (2) whenever in his
judgment the public interests of the Philippines require that such
frequencies or wave lengths should be used for other purposes than
those of the grantee, either by the Government of the Philippines or
by other individuals or corporations licensed by it; (3) whenever in
his judgment for any reason the public interests of the Philippines
so require.
(c) The Secretary of Public Works and Communications is

authorized to appoint, employ or may use of such boards, commissions,
or agents as in his discretion he may select, to investigate, and
determine the facts upon which he may act as aforesaid, and such
boards, commissions or agents shall have the right by compulsory
process of sub-poena, to summon witnesses, administer oaths, and
take evidence.
SEC. 4. The stations of the grantee shall be so constructed

and operated as to effect a minimum of interference with the wave

Republic of the Philippines, in time of war, insurrection, or public
disorder to take over and operate the said stations upon the order
and direction of the President of the Philippines.
SEC. 6. The right is hereby reserved to the Government of the

Philippines, through the Public Service Commission, or such other
office as may be thereunto duly authorized, to fix the maximum and
minimum rates to be charged by the grantee.
SEC. 7. (a) The grantee shall be liable to pay the same taxes
on its real estate, buildings, and personal property, exclusive of
the temporary permit, as other persons or corporations are now or
hereafter may be required by law to pay.
74
(b) The grantee shall further be liable to pay all other

taxes under the national Internal Revenue Code by reason of this
temporary permit.
SEC. 8. The grantee shall hold the National, provincial and

municipal governments of the Philippines harmless from all claims,
accounts, demands, or actions arising out of accidents or injuries,
whether to property or to persons, caused by the construction or
operation of the stations of the grantee.

by the grantee without proper condemnation proceedings and just
compensation paid or tendered therefor, and any authority to take
and occupy land contained herein shall not apply to the taking, use,
or occupation of any land except such as is required for the actual
necessary purposes for which this temporary permit is granted.

or contract, for the labor of persons held involuntary servitude.
SEC. 11. The temporary permit hereby granted shall be

subject to amendment, alteration, or repeal by the Congress of the
Philippines, and the right to use occupy public property and places
hereby granted shall revert to the respective governments, upon the
termination of this temporary permit, by repeal or by forfeiture, or
expiration in due course.
SEC. 12. As a condition of the granting of this temporary

permit the grantee shall execute a bond in favor of the Government
of the Philippines, in the sum of five thousand pesos, in form and
with sureties satisfactory to the Secretary of Public Works and
life of this temporary permit. If, after three years from the date of
acceptance of this temporary permit, the grantee shall have fulfilled
said obligations or soon thereafter as the grantee shall have fulfilled
the same, the bond aforesaid shall be cancelled by the Secretary of
Public Works and Communications.
75
SEC. 13. Acceptance of this temporary permit shall be given

in writing within six months after approval of this Act. When so
accepted by the grantee and upon the approval of the bond aforesaid
by the Secretary of Public Works and Communications the grantee
shall be empowered to exercise the privileges granted thereby.
usufruct of, sell or assign this temporary permit nor the rights
and privileges acquired thereunder to any person, firm, company,
corporation or other commercial or legal entity, nor merge with any
company or corporation organized for the same purpose, without
the approval of the Congress of the Philippines first had. Any
corporation to which this temporary permit may be sold, transferred,
or assigned, shall be subject to the corporation laws of the Philippines
now existing or which may hereafter be enacted, and any person,
firm, company, corporation or other commercial or legal entity to
which this temporary permit is sold, transferred, or assigned shall
be subject to all the conditions, terms, restrictions and limitations
of this temporary permit as fully and completely and to the same
extent as if the temporary permit has been originally granted to
the said person, firm, company, corporation or other commercial or
legal entity.
SEC. 15. This temporary permit shall not be interpreted to

mean an exclusive grant of the privileges herein provided for.
SEC. 16. The grantee shall not require any previous

censorship of any speech, play or other matter to be broadcast from
its stations; but if any such speech, play or other matter should
constitute a violation of the law or infringement of a private right,
the grantee shall be free from any liability, civil or criminal, for such
speech, play or other matter: Provided, That the grantee, during
any broadcast shall cut off from the air the speech, play or other
matter being broadcast if the tendency thereof is to propose and/or
incite treason, rebellion or sedition, or the language used therein or
the theme thereof is indecent or immoral, and willful failure to do so
shall constitute a valid cause for the cancellation of its permit.
76
77
AN ACT GRANTING TO “THE EASTERN EXTENSION

AUSTRALASIA AND CHINA TELEGRAPH COMPANY
LIMITED” AND ITS PERMITTED ASSIGNS, A FRANCHISE
TO LAND, CONSTRUCT, MAINTAIN AND OPERATE AT
MANILA IN THE PHILIPPINES A SUBMARINE TELEGRAPH
CABLE CONNECTING MANILA WITH HONGKONG AND
PRESCRIBING THE CONDITIONS OF THE SAME

SECTION 1. There is hereby granted to “The Eastern

Extension Australasia and China Telegraph Co. Ltd.” Its successors
and assigns, hereinafter referred to as the “Grantee”, a franchise
to land, construct, maintain and operate at Manila, Philippines, at
such places as the said Grantee may select, subject to the approval
of the Secretary of Public Works and Communications, a submarine
cable connecting with Hongkong, together with a cable house and
station for the transmission and reception of submarine telegraph
cable messages for the following purposes:
The sending of telegraph messages by submarine cable from

Manila to points exterior to the Philippines, and the receiving
at Manila of telegraph messages from such exterior points by
submarine cable.
SEC. 2. Subject to the limitations and procedures prescribed

by law, the Grantee is authorized to acquire by way of lease only
such property as may be actually necessary for the establishment
and efficient maintenance and operation of its cable and station,
and, with the prior approval of the President of the Republic of the
Philippines, to construct and maintain its works and service over
and across streets and foreshore lands of the Philippines.

Philippines, in time of war, insurrection, or domestic trouble, to
78
take over and operate the said cable and station upon the order
and direction of the President of the Philippines, the Philippine
Government paying to the Grantee the net proceeds of the operation
of said cable and station during the period when they shall be so
operated by the said Government.
SEC. 4. The rates to be charged by the Grantee for telegraph

messages transmitting the aforesaid cable shall be reasonable
and shall be established in conformity with the provisions of the
International Telecommunications Convention (Atlantic City 1947)
and of the Telegraph Regulations (Cairo 1938) and any subsequent
revisions thereof.
SEC. 5. The business of the Grantee shall be conducted

in conformity with the provisions of the aforesaid International
Telecommunication Convention and Regulations.
SEC. 6. The Grantee is authorized to undertake the collection

at its own offices in Manila of submarine telegraph cable messages
handed in by the public for transmission over its cable, and to deliver
direct to the public all submarine telegraph cable messages received
over its cable destined to Manila.
For the convenience of the public, collection and delivery may

also be effected by means of the telephone or other means conducive
to the efficient handling of traffic.
SEC. 7. The Grantee shall keep a separate account of the gross

earnings from submarine telegraph cable messages originating in
the Philippines, and shall furnish to the General Auditing Office,
or its successor a copy of such account not later than the thirty-first
day of January of each year for the preceding year. For the purpose
of auditing accounts so rendered, all of the books and accounts of the
Grantee, or duplicates thereof, so far as they relate to submarine
telegraph cable messages originating in the Philippines, shall be kept
in the Philippines, and shall be subject to the official inspection of
the Auditor General or his authorized representatives, and the audit
and approval of such accounts shall be final and conclusive evidence
as to the amount of said gross earnings, except that the Grantee
79
shall have the right to appeal to the courts of the Philippines under
the terms and conditions provided in the laws of the Philippines.
SEC. 8. In consideration of the franchise and rights hereby

granted, the Grantee shall pay to the Republic of the Philippines
during the life of this franchise a tax of five per cent of the gross
earnings derived by the Grantee from its operation under this
franchise and which originate in the Philippines. Such tax shall be
due and payable annually, within ten (10) days after the audit and
approval of the accounts as prescribed in section seven of this Act,
and shall be in lieu of all taxes of any kind, nature or description,
levied, established or collected by any municipal, provincial or
Republic authority except that the Grantee shall pay the tax on its
real property in conformity with existing law.
SEC. 9. The Grantee shall hold the National, provincial, and

municipal governments of the Philippines, harmless from all claims,
operation of the cable and station for transmission and reception of
submarine telegraph cable messages of the Grantee.
SEC. 10. The Grantee shall be subject to the corporation laws

of the Philippines now existing or hereafter enacted.
SEC. 11. It shall be unlawful for the Grantee to use, employ,


amendment, alteration, or repeal by the Congress of the Philippines,
and the rights to use and occupy public property and places hereby
granted shall revert to the Government, upon the termination of
this franchise by such repeal, or by forfeiture or expiration in due
course.
Unless earlier terminated by any such repeal or forfeiture, or

extended, the franchise and rights hereby granted shall terminate
by expiration of time fifty years after the date of acceptance of this
Act by the Grantee.
80
SEC. 13. As a condition of the granting of this franchise

the Grantee shall execute a bond in favor of the Government of
the Philippines, in the sum of fifty thousand pesos, in a form and
Grantee’s obligations hereunder during the first three years of the
life of this franchise. If, after three years from date of acceptance
of this franchise, the Grantee shall have fulfilled said obligations or
so soon thereafter as the Grantee shall have fulfilled the same, the
bond aforesaid shall be cancelled by the Secretary of Public Works
and Communications.

within six months after approval of this Act. When so accepted by
the Grantee and upon the approval of the bond aforesaid by the
Secretary of Public Works and Communications, the Grantee shall
be empowered to exercise the privileges granted thereby.
SEC. 15. The Grantee shall not lease, transfer, grant the
acquired thereunder to any person, firm, company, corporation
or other commercial or legal entity, nor merge with any other
the approval of the Philippine Congress first had. Any corporation
to which this franchise may be sold, transferred, or assigned shall
be subject to the corporation laws of the Philippines now existing
or hereafter enacted, and any person, firm, company, corporation
transferred, or assigned shall be subject to all the conditions, terms,
to the said person, firm, company, corporation or other commercial
or legal entity.

81
AN ACT TO REGULATE THE RETAIL BUSINESS

SECTION 1. No person who is not a citizen of the Philippines,

and no association, partnership, or corporation the capital of which is
not wholly owned by citizens of the Philippines, shall engage directly
or indirectly in the retail business: Provided, That a person who is
not a citizen of the Philippines, or an association, partnership, or
corporation not wholly owned by citizens of the Philippines, which
is actually engaged in the said business on May, fifteen, nineteen
hundred and fifty-four, shall be entitled to continue to engage
therein, unless its license is forfeited in accordance herewith, until
his death or voluntary retirement from said business, in the case
of a natural person, and for a period of ten years from the date
of the approval of this Act or until the expiration of the term of
the association or partnership or of the corporate existence of the
corporation, whichever event comes first, in the case of juridical
persons. Failure to renew a license to engage in retail business shall
be considered voluntary retirement.
Nothing contained in this Act shall in any way impair or

abridge whatever rights may be granted to citizens and juridical
entities of the United States of America under the Executive
Agreement signed on July fourth, nineteen hundred and forty-six,
between that country and the Republic of the Philippines.
The license of any person who is not a citizen of the Philippines

and of any association, partnership or corporation not wholly owned
by citizens of the Philippines to engage in retail business, shall be
forfeited for any violation of any provision of laws on nationalization,
economic control, weights and measures, and labor and other laws
relating to trade, commerce and industry.
No license shall be issued to any person who is not a citizen of
82
the Philippines and to any association, partnership or corporation

not wholly owned by citizens of the Philippines, actually engaged in
the retail business, to establish or open additional stores or branches
for retail business.
SEC. 2. Every person who is not a citizen of the Philippines

and every association, partnership or corporation not wholly owned
by citizens of the Philippines, engaged in the retail business, shall,
within ninety days after the approval of this Act and within the first
fifteen days of January every year thereafter, present for registration
with the municipal or city treasurer a verified statement containing
the names, addresses, and nationality of the owners, partners or
stockholders, the nature of the retail business it is engaged in,
the amount of its assets and liabilities, the names of its principal
officials, and such other related data as may be required by the
Secretary of Commerce and Industry.
SEC. 3. In case of death of a person who is not a citizen of the

Philippines and who is entitled to engage in retail business under
the provisions of this Act, his or her heir, administrator or executor
is entitled to continue with such retail business only for the purpose
of liquidation for a period of not more than six months after such
death.
SEC. 4. As used in this Act, the term “retail business” shall

mean any act, occupation or calling of habitually selling direct to the
general public merchandise, commodities or goods for consumption,
but shall not include:
(a) a manufacturer, processor, laborer, or worker selling to

the general public the products manufactured, processed or produced
by him if his capital does not exceed five thousand pesos, or
(b) a farmer or agriculturist selling the project of his farm.
SEC. 5. Every license to engage in retail business issued in favor

of any citizen of the Philippines or of any association, partnership
or corporation wholly owned by citizens of the Philippines shall be
conclusive evidence of the ownership by such citizen, association,
83
partnership or corporation of the business for which the license was

issued, except as against the Government or the State.
SEC. 6. Any violation of this Act shall be punished by

imprisonment for not less than three years and not more than five
years and by a fine of not less than three thousand pesos and not more
than five thousand pesos. In the case of associations, partnerships
or corporations, the penalty shall be imposed upon its partners,
president, directors, managers, and other officers responsible for the
violation. If the offender is not a citizen of the Philippines, he shall
be deported immediately after service of sentence. If the offender
is a public officer or employee, he shall, in addition to the penalty
prescribed herein, be dismissed from the public service, perpetually
disenfranchised, and perpetually disqualified from holding any
public office.
84
AN ACT AUTHORIZING THE PRESIDENT OF THE PHILIPPINES

TO ENTER INTO A REVISED AGREEMENT WITH THE
PRESIDENT OF THE UNITED STATES ON THE BASIS
OF THE FINAL ACT OF NEGOTIATIONS RELATIVE
TO THE REVISION OF THE 1946 TRADE AGREEMENT
BETWEEN THE REPUBLIC OF THE PHILIPPINES AND
THE UNITED STATES OF AMERICA, WHICH WAS SIGNED
AT WASHINGTON, D.C. ON DECEMBER 15, 1954
WHEREAS, the existing Trade Agreement between the

Philippines and the United States is embodied in the enabling
legislation approved respectively by the two countries, namely:
Commonwealth Act No. 733 on the part of the Philippines and
Public Law 371, 79th Congress, on that of the United States:
WHEREAS, pursuant to Republic Act No. 1137 of the

Philippines and Public Law 474, 83rd Congress, of the United
States, the free trade period provided for in Article I of the Trade
Agreement, which was to have terminated on July 3, 1954, was
extended for eighteen months, i.e., from July 4, 1954 to December
31, 1955, which extension was agreed upon and approved in order
to permit consultations between the two countries with a view to
securing a mutually satisfactory modification or revision of the
aforesaid Agreement;
WHEREAS, as a result of mutual efforts and consultations,

the Philippine Economic Mission and the United States Delegation
concluded and signed on December 15, 1954 at Washington, D.C., the
Final Act of Negotiations embodying their joint recommendations for
the revision of the 1946 Trade Agreement between the Philippines
and the United States;
WHEREAS, the full text of the Final Act, as corrected, is as

follows:
85
FINAL ACT OF NEGOTIATIONS RELATIVE TO REVISION

OF THE 1946 TRADE AGREEMENT BETWEEN THE UNITED
STATES OF AMERICA AND THE REPUBLIC OF THE
PHILIPPINES
The Delegations of the Governments of the United States

of America and of the Republic of the Philippines have concluded
negotiations in Washington this day relative to amendment of the
1946 Trade Agreement (hereinafter referred to as the Agreement)
between the United States of America and the Republic of the
Philippines signed at Manila, July 4th, 1946.
As a result of the discussions which have taken place, the

two Delegations have agreed to recommend to their respective
Governments for consideration the following proposed revisions in
the Agreement:
REVISION OF PREAMBLE
As amended, the Preamble would read as follows:
The President of the United States of America and the

President of the Republic of the Philippines, mindful of the close
economic ties between the people of the United States and the people
of the Philippines during many years of intimate political relations,
and desiring to enter into an agreement in keeping with their long
friendship, which will be mutually beneficial to the two peoples and
will strengthen the economy of the Philippines so as to enable that
Republic to contribute more effectively to the peace and prosperity
of the free world, have agreed to the following Articles:
REVISION OF ARTICLE I
1. In Paragraph 1 change date of “July 3, 1954” to read

“December 31, 1955”, in accordance with Public Law 474 of the 83rd
Congress of the United States of America, and Philippine Republic
Act No. 1137 of June 16, 1954.
86
2. Amend Paragraph 2 so as to provide acceleration of the

application of the Philippine duties on imports from the United
States and deceleration of the application of United States duties
on imports from the Philippines, during the period January 1, 1956,
to July 3, 1947, according to the schedule specified, with complete
elimination of such preferences to be accomplished by July 4, 1974.
3. The Philippine Government, in addition to the duties

provided for herein, will be authorized to impose a tax on imports
to replace the exchange tax currently in effect. Such tax on imports
would be temporary and on a declining basis; it would begin at a
level no higher than the current exchange tax.
As amended, Article I would read as follows:
ARTICLE I
1. The ordinary customs duty to be collected on United

States articles as defined in Subparagraph (e) of Paragraph I of
the Protocol, which during the following portions of the period from
January 1, 1956, to July 3, 1974, both dates inclusive, are entered,
or withdrawn from warehouse, in the Philippines for consumption,
shall be determined by applying the following percentages of the
Philippine duty as defined in Subparagraph (h) of Paragraph 1 of
the Protocol.
(a) During the period from January 1, 1956, to December 31,

1958, both dates inclusive, twenty-five per centum.
(b) During the period from January 1, 1959, to December 31,

1961, both dates inclusive, fifty per centum.
(c) During the period from January 1, 1962, to December 31,

1964, both dates inclusive, seventy-five per centum.
(d) During the period from January 1, 1965, to December 31,

1973, both dates inclusive, ninety per centum.
87
(e) During the period from January 1, 1974, to July 3, 1974,

both dates inclusive, one hundred per centum.
2. The ordinary customs duty to be collected on Philippine

articles as defined in Subparagraph (f) of Paragraph 1 of the
Protocol, other than those specified in the Schedule to Paragraph 2
of Article II, which during such portions of such period are entered,
or withdrawn from warehouse, in the United States for consumption,
shall be determined by applying the following percentages of the
United States duty as defined in Subparagraph (g) of Paragraph 1
of the Protocol:
(a) During the period from January 1, 1956, to December 31,

1958, both dates inclusive, five per centum.
(b) During the period from January 1, 1959, to December 31,

1961, both dates inclusive, ten per centum.
(c) During the period from January 1, 1962, to December 31,

1964, both dates inclusive, twenty per centum.
(d) During the period from January 1, 1965, to December 31,

1967, both dates inclusive, forty per centum.
(e) During the period from January 1, 1968, to December 31,

1970, both dates inclusive, sixty per centum.
(f) During the period from January 1, 1971, to December 31,

1973, both dates inclusive, eighty per centum.
(g) During the period from January 1, 1974, to July 3, 1974,

both dates inclusive, one hundred per centum.
3. Customs duties on United States articles, and on Philippine

articles, other than ordinary customs duties, shall be determined
without regard to the provisions of Paragraphs 1 and 2 of this
Article, but shall be subject to the provisions of Paragraph 4 of this
Article.
88
4. With respect to United States articles imported into the

Philippines, and with respect to Philippine articles imported into
the United States, no duty on or in connection with importation
shall be collected or paid in an amount in excess of the duty imposed
with respect to like articles which are the product of any other
foreign country, or collected or paid in any amount if the duty is not
imposed with respect to such like articles. As used in this Paragraph,
the term “duty” includes taxes, fees, charges, or exactions, imposed
on or in connection with importation, but does not include internal
taxes or ordinary customs duties.
5. With respect to products of United States which do not

come within the definition of United States articles, imported into
the Philippines, no duty on or in connection with importation shall
be collected or paid in an amount in excess of the duty imposed with
respect to like articles which are the product of any other foreign
country, or collected or paid in any amount if the duty is not imposed
with respect to such like articles which are the product of any other
foreign country. As used in this Paragraph the term “duty” includes
taxes, fees, charges, or exactions, imposed on or in connection with
importation, but does not include internal taxes.
6. With respect to products of the Philippines, which do not

come within the definition of Philippine articles, imported into the
United States, no duty on or in connection with importation shall
be collected or paid in an amount in excess of the duty imposed
with respect to like articles which are the product of any other
foreign country (except Cuba), or collected or paid in any amount
if the duty is not imposed with respect to such like articles which
are the product of any other foreign country (except Cuba). As used
in this Paragraph the term “duty” includes taxes, fees, charges, or
exactions, imposed on or in connection with importation, but does
not include internal taxes.
7. Notwithstanding the provisions of Paragraph 1 of this

Article, the Philippines shall impose a temporary special import
tax, in lieu of the present tax on the sale of foreign exchange on
any article or product imported or brought into the Philippines,
89
irrespective of source; provided that such special levy is applied in a

non-discriminatory manner pursuant to Paragraphs 4 and 5 of this
Article, that the initial tax is at a rate no higher than the present rate
of the foreign exchange tax, and that the tax shall be progressively
reduced at a rate no less rapid than that specified in the following
Schedule. If, as a result of applying this Schedule, the total revenue
from Philippine customs duties and from the special import tax on
goods coming from the United States is less in any calendar year
than the proceeds from the exchange tax on such goods during the
calendar year 1955, no reduction need be made in the special import
tax for the next succeeding calendar year, and, if necessary to restore
revenues collected on the importation of the United States goods to
the level of the exchange tax on such goods in calendar year 1955,
the Philippines may increase the rate for such succeeding calendar
year to any previous level provided for in this Schedule which is
considered to be necessary to restore such revenues to the amount
collected from the exchange tax on United States goods in calendar
year 1955. Rates for the special import levy in subsequent years
shall be fixed in accordance with the schedules specified in this
Article, except as the Philippine Government may determine that
higher rates are necessary to maintain the above-mentioned level of
revenues from the importation of United States goods. In this event,
such rate shall be determined by the Philippine Government, after
consultation with the United States Government, at a level of the
Schedule calculated to cover any anticipated deficiency arising from
the operation of this provision.
SCHEDULE FOR REDUCING SPECIAL IMPORT TAX
(a) After December 31, 1956, ninety per centum.
(b) After December 31, 1957, eighty per centum.
(c) After December 31, 1958, seventy per centum.
(d) After December 31, 1959, sixty per centum.
(e) After December 31, 1960, fifty per centum.
90
(f) After December 31, 1961, forty per centum.
(g) After December 31, 1962, thirty per centum.
(h) After December 31, 1963, twenty per centum.
(i) After December 31, 1964, ten per centum.
(j) On and after January 1, 1966, nil.
REVISED ARTICLE II
1. Amend Paragraph 1 so as to delete nice and remove cigars,

scrap tobacco, coconut oil and buttons of pearl or shell from the
application of the absolute quota provisions. Also provide that the
present absolute quotas on Philippine raw and refined sugars shall
be without prejudice to any increases which the United States
Congress might allocate to the Philippines in the future.
2. Amend Paragraph 2 so as to provide for a diminishing duty-

free quota on cigars, scrap tobacco, coconut oil and buttons of pearl
or shell, such duty-free quota to be reduced at fixed percentages
somewhat different from the 5 per cent annual reductions provided
in the Agreement. The articles subject to the tariff quota shall no
longer be subject to absolute quotas.
3. Delete Paragraphs 3 and 4 concerning the allocation by the

Philippines of quotas.
As amended, Article II would read as follows:
ARTICLE II
1. During the period from January 1, 1956, to December 31,

1973, both dates inclusive, the total amount of the articles falling
within one of the classes specified in Items A and A-1 of the Schedule
to this Paragraph, which are Philippine articles as defined in
Subparagraph (f) of Paragraph 1 of the Protocol, and which, in any
calendar year, may be entered, or withdrawn from the warehouse,
91
in the United States for consumption, shall not exceed the amounts
specified in such Schedule as to each class of articles. During the
period from January 1, 1956, to December 31, 1873, both dates
inclusive, the total amount of the articles falling within the class
specified in Item B of the Schedule to this Paragraph which are the
product of the Philippines, and which, in any calendar year, may
be entered, or withdrawn from warehouse, in the United States for
consumption, shall not exceed the amount specified in such Schedule
as to such class of articles. During the period from January 1, 1974,
to July 3, 1974, both dates inclusive, the total amounts referred to in
the preceding sentences of this Paragraph shall not exceed one-half
of the amount specified in such Schedule with respect to each class
of articles, respectively. The establishment herein of the limitations
on the amounts of Philippine raw and refined sugar that may be
entered, or withdrawn from warehouse, in the United States for
consumption, shall be without prejudice to any increases which the
Congress of the United States might allocate to the Philippines in
the future. The following Schedule to Paragraph 1 shall constitute
an integral part thereof:
SCHEDULE OF ABSOLUTE QUOTAS
Item Classes of Articles Amounts
A Sugars 952,000 short tons
A-1 of which not to exceed may be refined sugars, meaning

“direct consumption sugar” as defined in Section 101 of the Sugar
Act of 1948, as amended, of the United States which is set forth in
part as Annex I to this Agreement. 56,000 short tons
B Cordage, including yarns, twines (including binding

twine described in Paragraph 1622 of the Tariff Act of 1930 of
the United States, as amended, which is set forth as Annex II
to this Agreement), cords, cordage, rope, and cable, tarred or
untarred, wholly or in chief value of manila (abaca) or other
hard fiber. 6,000,000 lbs.
92
2. Philippine articles as defined in Subparagraph (f) of

Paragraph 1 of the Protocol falling within one of the classes specified
in the items included in the Schedule to this Paragraph, which
during the following portions of the period from January 1, 1956, to
December 31, 1973, both dates inclusive, are entered, or withdrawn
from warehouse, in the United States for consumption, shall be free
of ordinary customs duty, in quantities determined by applying the
following percentages to the amounts specified in such Schedule as
to each such class of articles:
(a) During each of the calendar years 1956 to 1958, inclusive,

ninety-five per centum.
(b) During each of the calendar years 1959 to 1961, inclusive,

ninety per centum.
(c) During each of the calendar years 1962 to 1964, inclusive,

eighty per centum.
(d) During each of the calendar years 1965 to 1967, inclusive,

sixty per centum.
(e) During each of the calendar years 1968 to 1970, inclusive,

forty per centum.
(f) During each of the calendar years 1971 to 1973, inclusive,

twenty per centum.
(g) On and after January 1, 1974, nil.
The following Schedule to Paragraph 2 shall constitute an

integral part thereof:
93
SCHEDULE OF TARIFF QUOTAS
Item Classes of Articles Amounts
A Cigars (exclusive of cigarettes, cheroots of all kinds, and

paper cigars and cigarettes, including wrappers). 200,000,000 cigars
B Scrap tobacco, and stemmed and unstemmed filler

tobacco described in Paragraph 602 of the Tariff Act of 1930 of the
United States, as amended, which is set forth as Annex III to this
Agreement. 6,500,000 lbs.
C Coconut oil 200,000 long tons
D Buttons of pearl or shell 850,000 gross
The quantities shown in the Schedule to this Paragraph

represent base quantities for the purposes of computing the tariff-
free quota and are not absolute quotas. Any such Philippine article
so entered, or withdrawn from warehouse, in excess of the duty-free
quota provided in this Paragraph shall be subject to one hundred
per centum of the United States duty as defined in Subparagraph
(g) of Paragraph 1 of the Protocol.
REVISION OF ARTICLE III
Amend Article III to provide that the authority to impose new

quantitative restrictions be reciprocal and to provide for application
of quantitative restriction for balance of payments reasons.
As amended, Article III would read as follows:
ARTICLE III
1. Except as otherwise provided in Article II or in Paragraph 2 of

this Article, neither country shall impose restrictions or prohibitions
on the importation of any article of the other country, or on the
exportation of any article to the territories of the other country,
unless the importation of the like article of, or the exportation
94
of the like article to, all third countries is similarly restricted or

prohibited. If either country imposes quantitative restrictions on the
importation or exportation of any article in which the other country
has an important interest and if it makes allotments to any third
country, it shall afford such other country a share proportionate to
the amount of the article, by quantity or value, supplied by or to
it during a previous representative period, due consideration being
given to any special factors affecting the trade in such article.
2 (a) Notwithstanding the provisions of Paragraph 1 of this

Article, with respect to quotas on United States articles as defined
in Subparagraph (e) of Paragraph 1 of the Protocol or with respect
to quotas on Philippine articles as defined in Subparagraph (f) of
Paragraph 1 of the Protocol (other than the articles for which quotas
are provided in Paragraph 1 of Article II) a quota may be established
only if
(1) The President of the country desiring to impose the

quota, after investigation, finds and proclaims that, as the result
of preferential treatment accorded pursuant to this Agreement,
any article of the other country is being imported in such increased
quantities and under such conditions as to cause or threaten serious
injury to domestic producers of like or directly competitive articles;
or
(2) The President of the country desiring to impose the quota

finds that such action is necessary to forestall the imminent threat
of, or to stop, a serious decline in its monetary reserves, or, in the
event its monetary reserves are very low, to achieve a reasonable
rate of increase in its reserves.
(b) Any quota imposed for any twelve-month period under

(a) (1) above for the purpose of protecting domestic industry shall
not be less than the amount determined by the President of the
importing country as the total amount of the articles of such class
which, during the twelve months preceding entry into effect of the
quota, was entered, or withdrawn from warehouse, for consumption,
after deduction of the amount by which he finds domestic production
can be increased during the twelve-month period of the quota; or if
95
the quota is established for any period other than a twelve-month

period, it shall not be less than a proportionate amount.
(c) Each Party agrees not to apply restrictions so as to prevent

unreasonably the importation of any description of goods in minimum
commercial quantities, the exclusion of which would seriously impair
regular channels of trade, or restrictions which would prevent the
importation of commercial samples or prevent compliance with
patent, trade mark, copyright, or similar procedures.
(d) Any quota established pursuant to this Paragraph shall not

continue in effect longer than necessary to achieve the purposes for
its imposition, at which time the President of the country imposing
the quota, following investigation, shall find and proclaim that the
conditions which gave rise to the establishment of such quota no
longer exist.
3. Either country taking action pursuant to the provisions of

this Article shall give notice to the other country as far in advance
as may be practicable, and shall afford it an opportunity to consult
in respect of the proposed action. It is understood that this right of
consultation does not imply that the consent of the other country to
the establishment of the quota is needed in order for the quota to be
put into effect.
REVISION OF ARTICLE IV
1. Amend the Article to delete provisions in Paragraph 3

prohibiting the imposition of an export by the United States on
articles exported to the Philippines, or by the Philippines on articles
exported to the United States.
2. Redesignate Paragraphs 4, 5 and 6, as Paragraphs 3, 4 and

5.
As amended, Article IV would read as follows:
96
ARTICLE IV
1. With respect to articles which are products of the United

States coming into the Philippines, or with respect to articles
manufactured in the Philippines wholly or in part from such articles,
no internal tax shall be
(a) Collected or paid in an amount in excess of the internal

tax imposed with respect to like articles which are the product of the
Philippines, or collected or paid in any amount if the internal tax is
not imposed with respect to such like articles;
(b) Collected or paid in an amount in excess of the internal

tax imposed with respect to like articles which are the product of
any other foreign country, or collected or paid in any amount if the
internal tax is not imposed with respect to such like articles.
Where an internal tax is imposed with respect to an article

which is the product of a foreign country to compensate for an
internal tax imposed (1) with respect to a like article which is the
product of the Philippines, or (2) with respect to materials used in the
production of a like article which is the product of the Philippines,
if the amount of the internal tax which is collected and paid with
respect to the article which is the product of the United States is
not in excess of that permitted by Paragraph 1 (b) of Article IV such
collection and payment shall not be regarded as in violation of the
first sentence of this Paragraph.
2. With respect to articles which are products of the

Philippines coming into the United States, or with respect to
articles manufactured in the United States wholly or in part from
such articles, no internal tax shall be
(a) Collected or paid in an amount in excess of the internal tax

imposed with respect to like articles which are the product of the
United States, or collected or paid in any amount if the internal tax
is not imposed with respect to such like articles;
97
(b) Collected or paid in an amount in excess of the internal

tax imposed with respect to like articles which are the product of
any other foreign country, or collected or paid in any amount if the
internal tax is not imposed with respect to such like articles.
Where an internal tax is imposed with respect to an article

which is the product of a foreign country to compensate for an
internal tax imposed (1) with respect to a like article which is the
product of the United States, or (2) with respect to materials used
in the production of a like article which is the product of the United
States, if the amount of the internal tax which is collected and paid
with respect to the article which is the product of the Philippines
is not in excess of that permitted by Paragraph 2 (b) of Article IV
such collection and payment shall not be regarded as in violation
of the first sentence of this Paragraph. This Paragraph shall not
apply to the taxes imposed under Sections 4591, 4812, or 4831 of the
Internal Revenue Code of the United States which are set forth in
part as Annexes IV, V, and VI to this Agreement.
3. No processing tax or other internal tax shall be imposed

or collected in the United States or in the Philippines with respect
to articles coming into such country for the official use of the
Government of the Philippines or of the United States, respectively,
or any department or agency thereof.
4. No processing tax or other internal tax shall be imposed or

collected in the United States with respect to manila (abaca) fiber
not dressed or manufactured in any matter.
5. The United States will not reduce the preference of two

cents per pound provided in Section 4513 of the Internal Revenue
Code of the United States (relating to processing taxes on coconut
oil, etc.), which is set forth as Annex VII to this Agreement, with
respect to articles “wholly the production of the Philippine Islands”
or articles “produced wholly from materials the growth or protection
of the Philippine Islands”; except that it may suspend the provisions
of Section 4511 (b) of the Internal Revenue Code of the United States
during any period as to which the President of the United States,
98
after consultation with the President of the Philippines, finds that

adequate supplies of neither copra nor coconut oil, the product of
the Philippines, are readily available for processing in the United
States.
NEW ARTICLE V
1. Delete all of old Article V relating to currency and

exchange.
2. Delete all of old Articles VI regarding immigration, which

is obsolete.
3. Insert a new Article to be designated as Article V, to provide

that the Republic of the Philippines will implement Public Law 419
of the 83rd Congress of the United States of America regarding
the establishment of treaty merchant status for aliens of the two
countries.
The new Article V would read as follows:
ARTICLE V
The Republic of the Philippines will take the necessary

legislative and executive actions, prior to or at the time of the
approval of this Agreement, to enact and implement legislation
similar to that already enacted by the Congress of the United States
as Public Law 419, 83rd Congress, Chapter 323, 2nd Session, to
facilitate the entry of Philippine traders.
NEW ARTICLE VI
1. Amend the old Article VII so as to provide for mutualization

of rights which either Party accords to the other.
2. Redesignate the Article as “Article VI.” The new Article VI

would read as follows:
99
ARTICLE VI
1. The disposition, exploitation, development, and utilization

of all agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum and other mineral oils, all forces
and sources of potential energy, and other natural resources of
either Party, and the operation of public utilities, shall, if open to
any person, be open to citizens of the other Party and to all forms
of business enterprise owned or controlled, directly or indirectly, by
citizens of such other Party in the same manner as to and under
the same conditions imposed upon citizens or corporations or
associations owned or controlled by citizens of the Party granting
the right.
2. The rights provided for in Paragraph 1 may be exercised,

in the case of citizens of the Philippines with respect to natural
resources in the United States which are subject to Federal control
or regulations, only through the medium of a corporation organized
under the laws of the United States or one of the States thereof and
likewise, in the case of citizens of the United States with respect
to natural resources in the public domain in the Philippines, only
through the medium of a corporation organized under the laws of the
Philippines and at least 60% of the capital stock of which is owned or
controlled by citizens of the United States. This provision, however,
does not affect the right of citizens of the United States to acquire
or own private agricultural lands in the Philippines or citizens of
the Philippines to acquire or own land in the United States which
is subject to the jurisdiction of the United States and not within the
jurisdiction of any State and which is not within the public domain.
The Philippines reserves the right to dispose of its public lands in
small quantities on especially favorable terms exclusively to actual
settlers or other users who are its own citizens. The United States
reserves the right to dispose of its public lands in small quantities
on especially favorable terms exclusively to actual settlers or other
users who are its own citizens or aliens who have declared their
intention to become citizens. Each Party reserves the right to
limit the extent to which aliens may engage in fishing or engage
in enterprises which furnish communications services and air or
water transport. The United States also reserves the right to limit
100
the extent to which aliens may own land in its outlaying territories
and possessions, but the Philippines will extend to American
Nationals who are residents of any of those outlaying territories and
possessions only the same rights, with respect to ownership of lands,
which are granted therein to citizens of the Philippines. The rights
provided for in this Paragraph shall not, however, be exercised by
either Party so as to derogate from the rights previously acquired
by citizens or corporations or associations owned or controlled by
citizens of the other Party.
3. The United States of America reserves the rights of the

several States of the United States to limit the extent to which citizens
or corporations or associations owned or controlled by citizens of the
Philippines may engage in the activities specified in this Article. The
Republic of the Philippines reserves the power to deny any of the
rights specified in this Article to citizens of the United States who
are citizens of States, or to corporations or associations at least 60%
of whose capital stock or capital is owned or controlled by citizens
of States, which deny like rights to citizens of the Philippines,
or to corporations or associations which are owned or controlled
by citizens of the Philippines. The exercise of this reservation on
the part of the Philippines shall not affect that any State of the
United States of America should in the future impose restrictions
which would deny to citizens or corporations or associations owned
or controlled by citizens of the Philippines the right to continue to
engage in activities in which they were engaged therein at the time
of the imposition of such restrictions, the Republic of the Philippines
shall be free to apply like limitations to the citizens or corporations
or associations owned or controlled by citizens of such States.
NEW ARTICLE VII
1. Old Article VII revised, becomes Article VI.
2. New Article VII provides for reciprocal non-discrimination

of either Party against the citizens or enterprises of the other with
respect to engaging in business activities.
101
New Article VII would read as follows:
ARTICLE VII
1. The Republic of the Philippines and the United States of

America each agrees not to discriminate in any manner, with respect
to their engaging in business activities, against the citizens or any
form of business enterprise owned or controlled by citizens of the
other and that new limitations imposed by either Party upon the
extent to which aliens are accorded national treatment with respect
to carrying on business activities within its territories, shall not be
applied as against enterprises owned or controlled by citizens of the
other Party which are engaged in such activities therein at the time
such new limitations are adopted, nor shall such new limitations be
applied to American citizens or corporations or associations owned
or controlled by American citizens whose States do not impose like
limitations on citizens or corporations or associations owned or
controlled by citizens of the Republic of the Philippines.
2. The United States of America reserves the rights of the

several States of the United States to limit the extent to which citizens
or corporations or associations owned or controlled by citizens of the
Philippines may engage in any business activities. The Republic of
the Philippines reserves the power to deny any rights to engage in
business activities to citizens of the United States who are citizens
of States, or to corporations or associations at least 60% of the
capital stock or capital of which is owned or controlled by citizens
of States, which deny like rights to citizens of the Philippines or
to corporations or associations owned or controlled by citizens of
the Philippines. The exercise of this reservation on the part of the
Philippines shall not affect previously acquired rights, provided that
in the event that any State of the United States of America should
in the future impose restrictions which would deny to citizens or
corporations or associations owned or controlled by citizens of the
Philippines the right to continue to engage in business activities
in which they were engaged therein at the time of the imposition
of such restrictions, the Republic of the Philippines shall be free to
apply like limitations to the citizens or corporations or associations
owned or controlled by citizens of such States.”
102
NEW ARTICLE VIII
1. Old Article VIII, as amended, is redesignated Article IX.
2. Insert a new Article with respect to Security Exceptions.

The new Article VIII would read as follows:
ARTICLE VIII
Nothing in this Agreement shall be construed:
(1) to require either Party to furnish any information the

disclosure of which it considers contrary to its essential security
interests; or
(2) to prevent either Party from taking any action which it

considers necessary for the protection of its essential security
interests
(a) relating to fissionable materials or the materials from

which they are derived;
(b) relating to the traffic in arms, ammunition and implements

of war and to such traffic in other goods and materials as is carried
on directly or indirectly for the purpose of supplying a military
establishment;
(c) taken in time of war or other emergency in international

relations; or
(3) to prevent either Party from taking any action in

pursuance of its obligations under the United Nations Charter for
the maintenance of International peace and security.
NEW ARTICLE IX
1. Amend the old Article VIII by deleting the last clause

of Paragraph 1, which is now obsolete; by deleting the portion of
Paragraph 2 relating to allocation in the Philippines of United States
103
quotas on Philippine articles, retaining only the first sentence of the

Paragraph; and by deleting all of Paragraph 3, which is probably
obsolete and which is irrelevant to the general subject of the
Agreement.
2. Redesignate the Article as “Article IX”.
The new Article IX would read as follows:
ARTICLE IX
1. Upon the taking effect of this Agreement the provisions

thereof placing the obligations on the United States: (a) if in effect
as laws of the United States at the time this Agreement takes effect,
shall continue in effect as laws of the United States during the
effectiveness of the Agreement; or (b) if not so in effect at the time
the Agreement takes effect, shall take effect and continue in effect as
laws of the United States during the effectiveness of the Agreement.
The Philippines will continue in effect as laws of the Philippines,
during the effectiveness of this Agreement, the provisions thereof
placing obligations on the Philippines.
2. The United States and the Philippines will promptly enact,

and shall keep in effect during the effectiveness of this Agreement,
such legislation as may be necessary to supplement the laws of
the United States and the Philippines, respectively, referred to
in Paragraph 1 of this Article, and to implement the provisions of
such laws and the provisions of this agreement between the United
States of America and the Philippines, respectively.
NEW ARTICLE X
1. Amend the old Article IX by adding a provision for

consultation not later than July 1, 1971, as to joint problems which
may arise in anticipation of the termination of the Agreement.
2. Redesignate the Article as “Article X.”
104
The new Article X would read as follows:
ARTICLE X
The United States and the Philippines agree to consult with

each other with respect to any questions as to the interpretation
or the application of this Agreement, concerning which either
Government may make representations to the other. Not later than
July 1, 1971, the United States and the Philippines agree to consult
with each other as to joint problems which may arise as a result or
in anticipation of the termination of this Agreement.
NEW ARTICLE XI
1. Amend the old Article X to delete Paragraphs 1 and 3, which

are obsolete, and Paragraph 4, the substance of which in part has
been incorporated in a new Article (Article VII).
2. Redesignate the Article as Article XI.
Article XI would read as follows:
ARTICLE XI
1. This Agreement shall have no effect after July 3, 1974. It

may be determined by either the United States or the Philippines
at any time, upon not less than five years’ written notice. If the
President of the United States or the President of the Philippines
determines and proclaims that the other country has adopted or
applied measures or practices which would operate to nullify or
impair any right or obligation provided for in this Agreement, then
the Agreement may be terminated upon not less than six months’
written notice.
2. This Agreement, which revises and replaces the agreement

between the United States of America and the Republic of
the Philippines concerning trade and related matters during
a transitional period following the institution of Philippine
105
Independence, signed at Manila on July 4, 1946, shall enter into

force on January 1, 1956.
In recommending to their respective Governments the

foregoing revisions as the basis of an agreement amending the Trade
Agreement of July 4, 1946, the two Delegations will also recommend
that, following consideration of the recommendations, negotiations
be resumed looking toward the early conclusion of an agreement.
In witness whereof the Chairmen of the Delegations of the

United States of America and the Republic of the Philippines hereby
sign these proceedings in the English language.
Done in duplicate at Washington, this 15th day of December,

one thousand nine hundred and fifty-four.
FOR THE DELEGATION OF THE UNITED STATES OF

AMERICA: FOR THE PHILIPPINE ECONOMIC MISSION:
AMENDMENT TO PROTOCOL OF THE AGREEMENT
1. Amend Paragraph 1 of the Protocol to include additional

description of the terms “United States article” and “Philippine
article”, at the end of Subparagraphs (e) and (f), respectively.
As amended, Subparagraphs (e) and (f) would read as

follows:
(e) The term “United States article” means an article which

is the product of the United States, unless in the case of an article
produced with the use of materials imported into the United States
from any foreign country (except the Philippines) the aggregate
value of such imported materials at the time of importation into the
United States was more than twenty per centum of the value of the
article imported into the Philippines, the value of such article to be
determined in accordance with, and as of the time provided by, the
customs laws of the Philippines in effect at the time of importation
of such article. As used in this Subparagraph the term “value” when
used in reference to a material imported into the United States,
includes the value of the material ascertained under the customs
106
laws of the United States in effect at the time of importation into the
United States, and, if not included in such value, the cost of bringing
the material to the United States, but does not include the cost of
landing it at the port of importation, or customs duties collected
in the United States. For the purposes of this Subparagraph any
imported material, used in the production of an article in the United
States, shall be considered as having been used in the production of
an article subsequently produced in the United States, which is the
product of a chain of production in the United States in the course
of which an article, which is the product of one stage of the chain,
is used by its producer or another person, in a subsequent stage of
the chain, as a material in the production of another article. It is
understood that “United States articles” do not lose their status as
such, for the purpose of Philippine tariff preferences, by reason of
being imported into the Philippines from a country other than the
United States or from an insular possession of the United States or
by way of or via such a country or insular possession.
(f) The term “Philippine article” means an article which

is the product of the Philippines unless, in the case of an article
produced with the use of materials imported into the Philippines
from any foreign country (except the United States) the aggregate
value of such imported materials at the time of importation into the
Philippines was more than twenty per centum of the value of the
article imported into the United States, the value of such article
to be determined in accordance with, and as of the time provided
by, the customs laws of the United States in effect at the time of
importation of such article. As used in this Subparagraph the term
“value”, when used in reference to a material imported into the
Philippines, includes the value of the material ascertained under the
customs laws of the Philippines in effect at the time of importation
into the Philippines, and, if not included in such value, the cost
of bringing the material to the Philippines, but does not include
the cost of landing it at the port of importation, or customs duties
collected in the Philippines. For the purposes of this Subparagraph
any imported material, used in the production of an article in
the Philippines, shall be considered as having been used in the
production of an article subsequently produced in the Philippines,
which is the product of a chain of production in the Philippines in
107
the course of which an article, which is the product of one stage of

the chain, is used by its producer or another person, in a subsequent
stage of the chain, as a material in the production of another article.
It is understood that “Philippine articles” do not lose their status as
such, for the purpose of United States tariff preferences, by reason
of being imported into the United States from a country other than
the Philippines or from an insular possession of the United States
or by way of or via such a country or insular possession.”
WHEREAS, under the terms of the Final Act, in order that

the recommendations for the revision of the 1946 Trade Agreement
shall take effect and be binding between the two countries, it is
essential and necessary that an agreement be concluded between
the Philippines and the United States with the said Final Act as the
basis thereof; Now, Therefore,
SECTION 1. Authorization To Enter Into A Revised Agreement.

The President of the Philippines, at any time prior to January 1, 1956,
is hereby authorized to enter into an agreement with the President
of the United States for the revision of the 1946 Trade Agreement
between the Philippines and the United States on the basis of the
Final Act of Negotiations, which was signed at Washington, D.C. on
December 15, 1954.
SEC. 2. Modification of Text of Revised Agreement. The text

of the revised agreement, which is embodied in the Final Act and
set forth in the fourth paragraph of the enabling clauses of this Act,
may be modified before such agreement is signed, but only
(A) To the extent necessary
(1) For correction of minor errors,
(2) For correction of references to or Pro Forma Insertion of

Cited Laws; and/or
(B) If such modifications are merely changes in style or form.
SEC. 3. Proclamation of Revised Agreement. If the revised
108
agreement has been entered into prior to January 1, 1956, the

President of the Philippines shall so proclaim, and such agreement
shall be effective in, and binding on, the Philippines in accordance
with the terms thereof.
SEC. 4. Date of Effectivity. This Act shall take effect upon its
approval.
109

AS INTERNATIONAL TRADERS OF NATIONAL OF THE
UNITED STATES

SECTION 1. Upon a basis of reciprocity, a national of the

United States and the spouse and children of any such national,
if accompanying or following to join him, may, if otherwise eligible
for a visa and if otherwise admissible under Commonwealth Act
Numbered Six hundred thirteen, otherwise known as the Philippine
Immigration Act of Nineteen hundred and forty, as amended, be
considered to be classifiable as a non-immigrant under section nine
(d) of said Act if entering (a) solely to carry on substantial trade
principally between the Philippines and the United States, or (b)
solely to develop and direct the operations of an enterprise in which
he has invested, or of an enterprise in which he is actively in the
process of investing, a substantial amount of capital.
110
AN ACT GRANTING THE EDWARD J. NELL COMPANY AND/OR

ITS SISTER COMPANY, THE AIRCON, INC., A TEMPORARY
PERMIT TO CONSTRUCT, MAINTAIN AND OPERATE
PRIVATE FIXED POINT-TO-POINT AND LAND BASED AND
LAND MOBILE RADIO STATIONS FOR THE RECETION
AND TRANSMISSION OF RADIO COMMUNICATIONS
WITHIN THE PHILIPPINES

SECTION 1. There is hereby granted to the Edward J.

Nell Company and/or its sister company, the AIRCON, Inc., their
successors or assigns, a temporary permit to construct, maintain
and operate in the Philippines, at Manila and at such places as the
said company may select, subject to the approval of the Secretary
of Public Works and Communications, private fixed point-to-point
and land based and land mobile radio stations for the reception
and transmission of wireless messages on radiotelegraphy or
radiotelephony, each station to be provided with a radio transmitting
apparatus and a radio receiving apparatus.
SEC. 2. This temporary permit shall continue to be in force

during the time that the Government has not established similar
service at the places selected by the grantee, and is granted upon the
express condition that the same shall be void unless the construction
or installation of said stations be begun within one year from the
date of approval of this Act and be completed within two years from
said date.
SEC. 3. The grantee, is successors or assigns, shall not engage

in domestic business of telecommunications in the Philippines
without further special assent of the Congress of the Philippines,
its being understood that the purpose of this temporary permit is to
secure to the grantee the right to construct, install, maintain, and
operate private fixed point-to-point and land based and land mobile
111
radio stations in such places within the Philippines as the interest

of the grantee may justify.
SEC. 4. No fees shall be charged by the grantee as the radio

stations that may be established by virtue of this Act shall engage
in communications regarding the grantee’s business only.
SEC. 5. The grantee, its successors, or assigns, shall so

construct and operate its radio stations as not to interfere with the
operation of other radio stations maintained and operated in the
Philippines.
SEC. 6. The grantee, its successors or assigns, shall hold

the National, provincial, city and municipal government of the
Philippines harmless from all claims, accounts, demands, or actions
arising out of accidents or injuries, whether to property or to persons,
caused by the construction or operation of its radio stations.
SEC. 7. The grantee, its successors or assigns, shall be subject

to the corporation laws of the Philippines now existing or hereafter
enacted.
SEC. 8. The grantee, its successors or assigns, is authorized

to operate its private fixed point-to-point and land based and land
mobile radio stations in the medium frequency, high frequency, and
very high frequency that may be assigned to it by the Secretary of
Public Works and Communications.
SEC. 9. The grantee shall not lease, transfer, grant the usufruct
of, sell or assign this temporary permit, nor the rights or privileges
other commercial or legal entity, nor merge with any other person,
the approval of the Congress of the Philippines first hand. Any
corporation to which this temporary permit may be sold, to which
this temporary permit may be sold, transferred, or assigned, shall
112
or other commercial or legal entity to which this temporary permit

is sold, transferred, or assigned shall be subject to all conditions,
terms, restrictions and limitations of this temporary permit as fully
and completely and to the same extent as if the temporary permit
had been originally granted to the said person, firm, company,
corporation or other commercial or legal entity.
SEC. 10. A special right is hereby reserved to the President

of the Philippines in time of war, insurrection, public peril,
emergency, calamity or disaster to cause the closing of the grantee’s
radio stations or to authorize the temporary use or possession
thereof by any department of the Government upon payment of just
compensation.
SEC. 11. This temporary permit shall be subject to

amendment, alteration, or repeal by the Congress of the Philippines
when the public interest so requires, and shall not be interpreted as
an exclusive grant of the privilege herein provided for.
113

TO CONSTRUCT, MAINTAIN AND OPERATE TELEVISION
STATIONS, AMENDING FOR THE PURPOSE THE TITLE
AND SECTION ONE OF REPUBLIC ACT NUMBERED
SEVEN HUNDRED SIXTY-SEVEN

SECTION 1. Section one of Republic Act Numbered Seven

hundred sixty-seven is hereby amended to read as follows:
“Section 1. There is hereby granted to Mr. A. J. Wills,

hereinafter referred to as the “grantee” a temporary permit to
construct, maintain and operate in the Philippines, at such places
as the said grantee may select, subject to the approval of the
Secretary of Public Works and Communications, radio broadcasting
stations and television stations: Provided, That the holder of the
temporary permit herein granted shall start the operation of radio
broadcasting stations within three years from the approval of this
amendatory Act, and shall start the operation of television stations
not later than December thirty-one, nineteen hundred sixty. Failure
to comply with this requirement shall ipso facto cancel and avoid
the temporary permit.”
SEC. 2. The title of the same Act is hereby amended to read

as follows:
“An Act granting Mr. A. J. Wills a temporary permit to

construct, maintain and operate radio broadcasting stations and
television stations in the Philippines.”
114
AN ACT GRANTING MR. WASHINGTON BRODITH A FRANCHISE

TO CONSTRUCT, MAINTAIN AND OPERATE A RADIO
BROADCASTING STATION IN THE MUNICIPALITY
OF GINGOOG, PROVINCE OF MISAMIS ORIENTAL,
PHILIPPINES

SECTION 1. Subject to the provision of the Constitution,

as well as Act Numbered Three thousand eight hundred forty-
six, entitled “An Act providing for the regulation of radio stations
and radio communications in the Philippine Islands, and for other
purposes”; Act Numbered Three thousand nine hundred ninety-
seven, known as the Radio Broadcasting Law; Commonwealth Act
Numbered One hundred forty-six, known as the Public Service Act,
and their amendments, and other applicable laws, not inconsistent
with this Act, Mr. Washington Brodith is hereby granted a franchise
to construct, maintain and operate a radio broadcasting station
in the Municipality of Gingoog, Province of Misamis Oriental,
Philippines.
SEC. 2. This franchise shall continue for a period of twenty-

five years from the date the said station shall be put in operation,
and is granted upon the express condition that the same shall be void
unless the construction of said station be begun within six months
from the date of approval of this Act and be completed within two
years from said date.
SEC. 3. This franchise is likewise made upon the express

condition that the grantee shall contribute to the public welfare,
shall assist in the functions of public information and education,
shall conform to the ethics of honest enterprise and shall not use
his station for the dissemination of deliberately false information or
willful misrepresentation, or to the detriment of the public health,
or to incite, encourage or assist in subversive or treasonable acts.
115
SEC. 4. The grantee’s radio broadcasting station shall not

be put in actual operation until the Secretary of Public Works and
Communications shall have allotted to the grantee the frequencies
and wave lengths to be used under this franchise and issued to the
grantee a license for such use.

of the Philippines in time of war, rebellion, public peril or other
national emergency and when public safety requires, to cause the
closing of the grantee’s radio station or to authorize the use or
possession thereof by any department of the Government without
compensation to the grantee for the use of said station during the
continuance of the national emergency.
SEC. 6. The grantee shall be liable to pay the same taxes,

unless exempted therefrom, on his real estate, buildings, and
personal property, exclusive of the franchise, as other persons or
corporations are now or hereafter may be required by law to pay.
The grantee shall further be liable to pay all other taxes under
the National Internal Revenue Code by reason of this franchise.
SEC. 7. The grantee shall hold the national, provincial and

municipal governments of the Philippines harmless from all claims
operation of his station.

amendment, alteration or repeal by the Congress of the Philippines
when the public interest so requires.
SEC. 9. As a condition to the granting of this franchise,

the grantee shall execute a bond in favor of the Government of
the Philippines in the sum of fifty thousand pesos, in form and
116
of this franchise, the grantee shall have fulfilled said obligations, or

as soon thereafter as the grantee shall have fulfilled the same, the
bond aforesaid shall be cancelled by the Secretary of Public Works
and Communications.

within six months after approval of this Act. When so accepted by
the grantee and upon the approval of the bond aforesaid by the
Secretary of Public Works and Communications the grantee shall
be empowered to exercise the privileges granted thereby.
other commercial or legal entity, nor merge with any other person,
company or corporation organized for the same purpose, without the
approval of the Congress of the Philippines first had. Any corporation
to which this franchise may be sold, transferred or assigned shall
transferred or assigned shall be subject to all conditions, terms,
to said person, firm, company, corporation or other commercial or
legal entity.
SEC. 12. The grantee shall not require any previous

censorship of any speech, play or other matter to be broadcast from
his station ; but if any such speech, play or other matter should
constitute a violation of the law or infringement of a private right,
the grantee shall be free from any liability, civil or criminal, for such
speech, play or other matter: Provided, That the grantee, during any
broadcast, shall cut off from the air the speech, play or other matter
being broadcast if the tendency thereof is to propose and/or incite
treason, rebellion or sedition, or the language used therein or the
theme thereof is indecent or immoral, and willful failure to do so
shall constitute a valid cause for the cancellation of this franchise.
117
SEC. 13. This franchise shall not be interpreted as an exclusive

grant of the privileges herein provided for.
ENACTED, without Executive Approval, June 19, 1960.
118
AN ACT AUTHORIZING AND APPROVING THE TRANSFER

OF THE TEMPORARY PERMIT GRANTED TO MR. A. J.
WILLS BY REPUBLIC ACT NUMBERED SEVEN HUNDRED
SIXTY-SEVEN, AS AMENDED, IN FAVOR OF THE BLUE
NETWORK, INCORPORATED

SECTION 1. The transfer of the temporary permit granted

to Mr. A. J. Wills by Republic Act Numbered Seven hundred sixty-
seven, as amended, in favor of the Blue Network, Inc., together
with all the rights and privileges of, including any channel and/or
frequency assignments and permits that may have been granted
to, the former is hereby authorized and approved: Provided, That
the transferee complies with all the requirements and conditions
under which the temporary permit was granted to Mr. A. J. Wills by
Republic Act Numbered Seven hundred sixty-seven, otherwise this
transfer shall be void.
ENACTED, without Executive Approval, June 19, 1960.
119
AN ACT GRANTING ROBERT O. PHILLIPS A FRANCHISE TO

ESTABLISH, MAINTAIN AND OPERATE A HYDROFOIL
FERRY SERVICE WITHIN MANILA BAY INCLUDING
WATERS ALONG CORREGIDOR, BATAAN, CAVITE,
ZAMBALES AND OTHER NEIGHBORING BAY AREAS

SECTION 1. Subject to the conditions established in this Act

and to the provisions of the Constitution, there is hereby granted to
Robert O. Phillips, for a period of twenty-five years from the approval
of this Act, the right, privilege and authority to establish, maintain
and operate a hydrofoil ferry service for passengers within Manila
Bay including the waterways along Corregidor, Bataan, Bulacan,
Batangas, Pampanga, Mindoro, Lubang Island, Cavite, Zambales,
Iloilo, Bacolod, Ozamiz, Iligan, Cagayan, Pagadian, Cotabato,
Zamboanga and Basilan.

of the Philippines in time of war, rebellion, public peril, calamity,
or disaster to authorize the temporary use and operation of the
grantee’s water transportation facilities by any department of the
government upon payment of just compensation.
SEC. 3. In the event of any competing individuals, associations

or corporations receiving from the Congress of the Philippines a
similar franchise in which there shall be any term or terms more
favorable than those herein granted or tending to place the herein
grantee at any disadvantage, then such term or terms shall ipso
facto become a part of the terms hereof and shall operate equally
in favor of the grantee as in the case of said competing individuals,
associations or corporations.
SEC. 4. Whenever in this franchise the term “grantee” is used,

it shall be held and understood to mean and represent Robert O.
Phillips, his representatives, successors or assigns.
120
SEC. 5. This franchise shall be subject to amendment

alteration or repeal by the Congress of the Philippines when the
public interest so requires.
SEC. 6. The rates to be charged by the grantee shall be subject

to the approval of the Public Service Commission.
121
AN ACT TO DEFINE CONDOMINIUM, ESTABLISH

REQUIREMENTS FOR ITS CREATION, AND GOVERN
ITS INCIDENTS

SECTION. 1. The short title of this Act shall be “The

Condominium Act”.
SEC. 2. A condominium is an interest in real property

consisting of separate interest in a unit in a residential, industrial or
commercial building and an undivided interest in common, directly
or indirectly, in the land on which it is located and in other common
areas of the building. A condominium may include, in addition, a
separate interest in other portions of such real property. Title to
the common areas, including the land, or the appurtenant interests
in such areas, may be held by a corporation specially formed for
the purpose (hereinafter known as the “condominium corporation”)
in which the holders of separate interest shall automatically be
members or shareholders, to the exclusion of others, in proportion
to the appurtenant interest of their respective units in the common
areas.
The real right in condominium may be ownership or any other

interest in real property recognized by law, on property in the Civil
Code and other pertinent laws.
SEC. 3. As used in this Act, unless the context otherwise

requires:
(a) “Condominium” means a condominium as defined in the

next preceding section.
(b) “Unit” means a part of the condominium project intended

for any type of independent use or ownership, including one or more
122
rooms or spaces located in one or more floors (or part or parts of

floors) in a building or buildings and such accessories as may be
appended thereto.
(c) “Project” means the entire parcel of real property divided

or to be divided in condominiums, including all structures thereon,
(d) “Common areas” means the entire project excepting all

units separately granted or held or reserved.
(e) “To divide” real property means to divide the ownership

thereof or other interest therein by conveying one or more
condominiums therein but less than the whole thereof.
SEC. 4. The provisions of this Act shall apply to property

divided or to be divided into condominiums only if there shall be
recorded in the Register of Deeds of the province or city in which the
property lies and duly annotated in the corresponding certificate
of title of the land, if the latter had been patented or registered
under either the Land Registration or Cadastral Acts, an enabling
or master deed which shall contain, among others, the following:
(a) Description of the land on which the building or buildings

and improvements are or are to be located;
(b) Description of the building or buildings, stating the number

of stories and basements, the number of units and their accessories,
if any;
(c) Description of the common areas and facilities;
(d) A statement of the exact nature of the interest acquired

or to be acquired by the purchaser in the separate units and in
the common areas of the condominium project. Where title to or
the appurtenant interests in the common areas is or is to be held
by a condominium corporation, a statement to this effect shall be
included;
123
(e) Statement of the purposes for which the building or

buildings and each of the units are intended or restricted as to use;
(f) A certificate of the registered owner of the property, if

he is other than those executing the master deed, as well as of all
registered holders of any lien or encumbrance on the property, that
they consent to the registration of the deed;
(g) The following plans shall be appended to the deed as

integral parts thereof:
(1) A survey plan of the land included in the project, unless

a survey plan of the same property had previously bee filed in said
office;
(2) A diagrammatic floor plan of the building or buildings

in the project, in sufficient detail to identify each unit, its relative
location and approximate dimensions;
(h) Any reasonable restriction not contrary to law, morals

or public policy regarding the right of any condominium owner to
alienate or dispose of his condominium.
The enabling or master deed may be amended or revoked upon

registration of an instrument executed by the registered owner or
owners of the property and consented to by all registered holders of
any lien or encumbrance on the land or building or portion thereof.
The term “registered owner” shall include the registered owners of
condominiums in the project. Until registration of a revocation, the
provisions of this Act shall continue to apply to such property.
SEC. 5. Any transfer or conveyance of a unit or an apartment,

office or store or other space therein, shall include the transfer or
conveyance of the undivided interests in the common areas or, in a
proper case, the membership or shareholdings in the condominium
corporation: Provided, however, That where the common areas in the
condominium project are owned by the owners of separate units as
co-owners thereof, no condominium unit therein shall be conveyed or
transferred to persons other than Filipino citizens, or corporations
124
at least sixty percent of the capital stock of which belong to Filipino

citizens, except in cases of hereditary succession. Where the common
areas in a condominium project are held by a corporation, no transfer
or conveyance of a unit shall be valid if the concomitant transfer
of the appurtenant membership or stockholding in the corporation
will cause the alien interest in such corporation to exceed the limits
imposed by existing laws.
SEC. 6. Unless otherwise expressly provided in the enabling

or master deed or the declaration of restrictions, the incidents of a
condominium grant are as follows:
(a) The boundary of the unit granted are the interior surfaces
of the perimeter walls, floors, ceilings, windows and doors thereof.
The following are not part of the unit bearing walls, columns, floors,
roofs, foundations and other common structural elements of the
building; lobbies, stairways, hallways, and other areas of common
use, elevator equipment and shafts, central heating, central
refrigeration and central air-conditioning equipment, reservoirs,
tanks, pumps and other central services and facilities, pipes,
ducts, flues, chutes, conduits, wires and other utility installations,
wherever located, except the outlets thereof when located within
the unit.
(b) There shall pass with the unit, as an appurtenance thereof,

an exclusive easement for the use of the air space encompassed by
the boundaries of the unit as it exists at any particular time and as
the unit may lawfully be altered or reconstructed from time to time.
Such easement shall be automatically terminated in any air space
upon destruction of the unit as to render it untenable.
(c) Unless otherwise, provided, the common areas are held in

common by the holders of units, in equal shares, one for each unit.
(d) A non-exclusive easement for ingress, egress and support

through the common areas is appurtenant to each unit and the
common areas are subject to such easements.
125
(e) Each condominium owner shall have the exclusive right to

paint, repaint, tile, wax, paper or otherwise refinish and decorate
the inner surfaces of the walls, ceilings, floors, windows and doors
bounding his own unit.
(f) Each condominium owner shall have the exclusive right

to mortgage, pledge or encumber his condominium and to have the
same appraised independently of the other condominiums but any
obligation incurred by such condominium owner is personal to him.
(g) Each condominium owner has also the absolute right to

sell or dispose of his condominium unless the master deed contains
a requirement that the property be first offered to the condominium
owners within a reasonable period of time before the same is offered
to outside parties;
SEC. 7. Except as provided in the following section, the

common areas shall remain undivided, and there shall be no judicial
partition thereof.
SEC. 8. Where several persons own condominiums in a

condominium project, an action may be brought by one or more such
persons for partition thereof by sale of the entire project, as if the
owners of all of the condominiums in such project were co-owners
of the entire project in the same proportion as their interests in the
common areas: Provided, however, That a partition shall be made
only upon a showing:
(a) That three years after damage or destruction to the project

which renders material part thereof unit for its use prior thereto,
the project has not been rebuilt or repaired substantially to its state
prior to its damage or destruction, or
(b) That damage or destruction to the project has rendered

one-half or more of the units therein untenantable and that
condominium owners holding in aggregate more than thirty percent
interest in the common areas are opposed to repair or restoration of
the project; or
126
(c) That the project has been in existence in excess of fifty

years, that it is obsolete and uneconomic, and that condominium
owners holding in aggregate more than fifty percent interest in the
common areas are opposed to repair or restoration or remodeling or
modernizing of the project; or
(d) That the project or a material part thereof has been

condemned or expropriated and that the project is no longer viable,
or that the condominium owners holding in aggregate more than
seventy percent interest in the common areas are opposed to
continuation of the condominium regime after expropriation or
condemnation of a material portion thereof; or
(e) That the conditions for such partition by sale set forth in
the declaration of restrictions, duly registered in accordance with
the terms of this Act, have been met.
SEC. 9. The owner of a project shall, prior to the conveyance

of any condominium therein, register a declaration of restrictions
relating to such project, which restrictions shall constitute a lien
upon each condominium in the project, and shall insure to and bind
all condominium owners in the project. Such liens, unless otherwise
provided, may be enforced by any condominium owner in the project
or by the management body of such project. The Register of Deeds
shall enter and annotate the declaration of restrictions upon the
certificate of title covering the land included within the project, if
the land is patented or registered under the Land Registration or
Cadastral Acts.
The declaration of restrictions shall provide for the management

of the project by anyone of the following management bodies: a
condominium corporation, an association of the condominium
owners, a board of governors elected by condominium owners, or a
management agent elected by the owners or by the board named in
the declaration. It shall also provide for voting majorities quorums,
notices, meeting date, and other rules governing such body or
bodies.
127
Such declaration of restrictions, among other things, may also

provide:
(a) As to any such management body;
(1) For the powers thereof, including power to enforce the

provisions of the declarations of restrictions;
(2) For maintenance of insurance policies, insuring

condominium owners against loss by fire, casualty, liability,
workmen’s compensation and other insurable risks, and for bonding
of the members of any management body;
(3) Provisions for maintenance, utility, gardening and other

services benefiting the common areas, for the employment of
personnel necessary for the operation of the building, and legal,
accounting and other professional and technical services;
(4) For purchase of materials, supplies and the like needed by

the common areas;
(5) For payment of taxes and special assessments which would

be a lien upon the entire project or common areas, and for discharge
of any lien or encumbrance levied against the entire project or the
common areas;
(6) For reconstruction of any portion or portions of any damage

to or destruction of the project;
(7) The manner for delegation of its powers;
(8) For entry by its officers and agents into any unit when
necessary in connection with the maintenance or construction for
which such body is responsible;
(9) For a power of attorney to the management body to sell

the entire project for the benefit of all of the owners thereof when
partition of the project may be authorized under Section 8 of this
Act, which said power shall be binding upon all of the condominium
128
owners regardless of whether they assume the obligations of the

restrictions or not.
(b) The manner and procedure for amending such restrictions:

Provided, That the vote of not less than a majority in interest of the
owners is obtained.
(c) For independent audit of the accounts of the management

body;
(d) For reasonable assessments to meet authorized

expenditures, each condominium unit to be assessed separately for
its share of such expenses in proportion (unless otherwise provided)
to its owners fractional interest in any common areas;
(e) For the subordination of the liens securing such assessments

to other liens either generally or specifically described;
(f) For conditions, other than those provided for in Sections

eight and thirteen of this Act, upon which partition of the project
and dissolution of the condominium corporation may be made. Such
right to partition or dissolution may be conditioned upon failure
of the condominium owners to rebuild within a certain period or
upon specified inadequacy of insurance proceeds, or upon specified
percentage of damage to the building, or upon a decision of an
arbitrator, or upon any other reasonable condition.
SEC. 10. Whenever the common areas in a condominium

project are held by a condominium corporation, such corporation
shall constitute the management body of the project. The corporate
purposes of such a corporation shall be limited to the holding of
the common areas, either in ownership or any other interest in
real property recognized by law, to the management of the project,
and to such other purposes as may be necessary, incidental or
convenient to the accomplishment of said purposes. The articles of
incorporation or by-laws of the corporation shall not contain any
provision contrary to or inconsistent with the provisions of this Act,
the enabling or master deed, or the declaration of restrictions of
the project. Membership in a condominium corporation, regardless
129
of whether it is a stock or non-stock corporation, shall not be

transferable separately from the condominium unit of which it is an
appurtenance. When a member or stockholder ceases to own a unit
in the project in which the condominium corporation owns or holds
the common areas, he shall automatically cease to be a member or
stockholder of the condominium corporation.
SEC. 11. The term of a condominium corporation shall be

co-terminus with the duration of the condominium project, the
provisions of the Corporation Law to the contrary notwithstanding.
SEC. 12. In case of involuntary dissolution of a condominium

corporation for any of the causes provided by law, the common
areas owned or held by the corporation shall, by way of liquidation,
be transferred pro-indiviso and in proportion to their interest in
the corporation to the members or stockholders thereof, subject
to the superior rights of the corporation creditors. Such transfer
or conveyance shall be deemed to be a full liquidation of the
interest of such members or stockholders in the corporation. After
such transfer or conveyance, the provisions of this Act governing
undivided co-ownership of, or undivided interest in, the common
areas in condominium projects shall fully apply.
SEC. 13. Until the enabling or the master deed of the project
in which the condominium corporation owns or holds the common
area is revoked, the corporation shall not be voluntarily dissolved
through an action for dissolution under Rule 104 of the Rules of
Court except upon a showing:
(a) That three years after damage or destruction to the project

in which the corporation owns or holds the common areas, which
damage or destruction renders a material part thereof unfit for
its use prior thereto, the project has not been rebuilt or repaired
substantially to its state prior to its damage or destruction; or
(b) That damage or destruction to the project has rendered

one-half or more of the units therein untenantable and that more
than thirty percent of the members of the corporation, if non-stock,
or the shareholders representing more than thirty percent of the
130
capital stock entitled to vote, if a stock corporation, are opposed to

the repair or reconstruction of the project, or
(c) That the project has been in existence in excess of fifty

years, that it is obsolete and uneconomical, and that more than
fifty percent of the members of the corporation, if non-stock, or the
stockholders representing more than fifty percent of the capital stock
entitled to vote, if a stock corporation, are opposed to the repair or
restoration or remodeling or modernizing of the project; or
(d) That the project or a material part thereof has been

condemned or expropriated and that the project is no longer viable,
or that the members holding in aggregate more than seventy
percent interest in the corporation, if non-stock, or the stockholders
representing more than seventy percent of the capital stock entitled
to vote, if a stock corporation, are opposed to the continuation of
the condominium regime after expropriation or condemnation of a
material portion thereof; or
(e) That the conditions for such a dissolution set forth in the
declaration of restrictions of the project in which the corporation
owns of holds the common areas, have been met.
SEC. 14. The condominium corporation may also be dissolved

by the affirmative vote of all the stockholders or members thereof at
a general or special meeting duly called for the purpose: Provided,
That all the requirements of Section sixty-two of the Corporation
Law are complied with.
SEC. 15. Unless otherwise provided for in the declaration

of restrictions upon voluntary dissolution of a condominium
corporation in accordance with the provisions of Sections thirteen
and fourteen of this Act, the corporation shall be deemed to hold a
power of attorney from all the members or stockholders to sell and
dispose of their separate interests in the project and liquidation of
the corporation shall be effected by a sale of the entire project as if
the corporation owned the whole thereof, subject to the rights of the
corporate and of individual condominium creditors.
131
SEC. 16. A condominium corporation shall not, during

its existence, sell, exchange, lease or otherwise dispose of the
common areas owned or held by it in the condominium project
unless authorized by the affirmative vote of all the stockholders or
members.
SEC. 17. Any provision of the Corporation Law to the contrary

notwithstanding, the by-laws of a condominium corporation shall
provide that a stockholder or member shall not be entitled to
demand payment of his shares or interest in those cases where such
right is granted under the Corporation Law unless he consents to
sell his separate interest in the project to the corporation or to any
purchaser of the corporation’s choice who shall also buy from the
corporation the dissenting member or stockholder’s interest. In case
of disagreement as to price, the procedure set forth in the appropriate
provision of the Corporation Law for valuation of shares shall be
followed. The corporation shall have two years within which to pay
for the shares or furnish a purchaser of its choice from the time of
award. All expenses incurred in the liquidation of the interest of the
dissenting member or stockholder shall be borne by him.
SEC. 18. Upon registration of an instrument conveying a

condominium, the Register of Deeds shall, upon payment of the
proper fees, enter and annotate the conveyance on the certificate
of title covering the land included within the project and the
transferee shall be entitled to the issuance of a “condominium
owner’s” copy of the pertinent portion of such certificate of title.
Said “condominium owner’s” copy need not reproduce the ownership
status or series of transactions in force or annotated with respect
to other condominiums in the project. A copy of the description of
the land, a brief description of the condominium conveyed, name
and personal circumstances of the condominium owner would be
sufficient for purposes of the “condominium owner’s” copy of the
certificate of title. No conveyance of condominiums or part thereof,
subsequent to the original conveyance thereof from the owner of
the project, shall be registered unless accompanied by a certificate
of the management body of the project that such conveyance is in
accordance with the provisions of the declaration of restrictions of
such project.
132
In cases of condominium projects registered under the

provisions of the Spanish Mortgage Law or Act 3344, as amended,
the registration of the deed of conveyance of a condominium shall be
sufficient if the Register of Deeds shall keep the original or signed
copy thereof, together with the certificate of the management
body of the project, and return a copy of the deed of conveyance
to the condominium owner duly acknowledge and stamped by the
Register of Deeds in the same manner as in the case of registration
of conveyances of real property under said laws.
SEC. 19. Where the enabling or master deed provides that

the land included within a condominium project are to be owned
in common by the condominium owners therein, the Register of
Deeds may, at the request of all the condominium owners and upon
surrender of all their “condominium owner’s” copies, cancel the
certificates of title of the property and issue a new one in the name
of said condominium owners as pro-indiviso co-owners thereof.
SEC. 20. An assessment upon any condominium made in

accordance with a duly registered declaration of restrictions shall
be an obligation of the owner thereof at the time the assessment
is made. The amount of any such assessment plus any other
charges thereon, such as interest, costs (including attorney’s fees)
and penalties, as such may be provided for in the declaration of
restrictions, shall be and become a lien upon the condominium
assessed when the management body causes a notice of assessment
to be registered with the Register of Deeds of the city or province
where such condominium project is located. The notice shall state
the amount of such assessment and such other charges thereon a
may be authorized by the declaration of restrictions, a description of
the condominium, unit against which same has been assessed, and
the name of the registered owner thereof. Such notice shall be signed
by an authorized representative of the management body or as
otherwise provided in the declaration of restrictions. Upon payment
of said assessment and charges or other satisfaction thereof, the
management body shall cause to be registered a release of the lien.
Such lien shall be superior to all other liens registered

subsequent to the registration of said notice of assessment except
133
real property tax liens and except that the declaration of restrictions
may provide for the subordination thereof to any other liens and
encumbrances.
Such liens may be enforced in the same manner provided for

by law for the judicial or extra-judicial foreclosure of mortgages
of real property. Unless otherwise provided for in the declaration
of restrictions, the management body shall have power to bid at
foreclosure sale. The condominium owner shall have the same right
of redemption as in cases of judicial or extra-judicial foreclosure of
mortgages.
SEC. 21. No labor performed or services or materials furnished

with the consent of or at the request of a condominium owner or
his agent or his contractor or subcontractor, shall be the basis of
a lien against the condominium of any other condominium owner,
unless such other owners have expressly consented to or requested
the performance of such labor or furnishing of such materials or
services. Such express consent shall be deemed to have been
given by the owner of any condominium in the case of emergency
repairs of his condominium unit. Labor performed or services or
materials furnished for the common areas, if duly authorized by
the management body provided for in a declaration of restrictions
governing the property, shall be deemed to be performed or furnished
with the express consent of each condominium owner. The owner of
any condominium may remove his condominium from a lien against
two or more condominiums or any part thereof by payment to the
holder of the lien of the fraction of the total sum secured by such lien
which is attributable to his condominium unit.
SEC. 22. Unless otherwise provided for by the declaration of

restrictions, the management body, provided for herein, may acquire
and hold, for the benefit of the condominium owners, tangible and
intangible personal property and may dispose of the same by sale
or otherwise; and the beneficial interest in such personal property
shall be owned by the condominium owners in the same proportion
as their respective interests in the common areas. A transfer of
a condominium shall transfer to the transferee ownership of the
transferor’s beneficial interest in such personal property.
134
SEC. 23. Where, in an action for partition of a condominium

project or for the dissolution of condominium corporation on
the ground that the project or a material part thereof has been
condemned or expropriated, the Court finds that the conditions
provided for in this Act or in the declaration of restrictions have
not been met, the Court may decree a reorganization of the project,
declaring which portion or portions of the project shall continue as a
condominium project, the owners thereof, and the respective rights
of said remaining owners and the just compensation, if any, that
a condominium owner may be entitled to due to deprivation of his
property. Upon receipt of a copy of the decree, the Register of Deeds
shall enter and annotate the same on the pertinent certificate of
title.
SEC. 24. Any deed, declaration or plan for a condominium

project shall be liberally construed to facilitate the operation of the
project, and its provisions shall be presumed to be independent and
severable.
SEC. 25. Whenever real property has been divided into

condominiums, each condominium separately owned shall be
separately assessed, for purposes of real property taxation and
other tax purposes, to the owners thereof and the tax on each such
condominium shall constitute a lien solely thereon.
SEC. 26. All Acts or parts of Acts in conflict or inconsistent

with this Act are hereby amended insofar as condominium and its
incidents are concerned.
135
AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC

ACT NUMBERED EIGHT HUNDRED EIGHT, ENTITLED
“AN ACT GRANTING TO ‘THE EASTERN EXTENSION
AUSTRALASIA AND CHINA TELEGRAPH COMPANY
LIMITED’ AND ITS PERMITTED ASSIGNS, A FRANCHISE
TO LAND, CONSTRUCT, MAINTAIN, AND OPERATE AT
MANILA IN THE PHILIPPINES A SUBMARINE TELEGRAPH
CABLE CONNECTING MANILA WITH HONGKONG AND
PRESCRIBING THE CONDITIONS OF THE SAME”

SECTION 1. Section one of Republic Act Numbered Eight

hundred eight is hereby amended as follows:
“SECTION. 1. There is hereby granted to “The Eastern

Extension Australasia and China Telegraph Company, Ltd.” its
successors and assigns, hereinafter referred to as the “Grantee” a
franchise to land, construct, maintain, and operate telecommunication
systems by cable, or any other means now known to science or which
in the future may be developed for the reception and transmission
of messages between any point in the Philippines to points exterior
thereto, including airplanes, airships or vessels even though such
airplanes, airships or vessels may be located within territorial limits
of the Philippines.”
SEC. 2. Section four of the same Act is hereby amended to

read as follows:
“SEC. 4. The rates to be charged by the grantee for services

provided through the aforesaid telecommunication systems shall be
reasonable and shall be established in conformity with the provisions
of the International Telecommunication Convention (MONTREAUX
1965) and of the Telephone Telegraph Regulations (GENEVA 1958)
and any subsequent revisions thereof.”
136
SEC. 3. Section six of the same Act is hereby amended to read

as follows:
“SEC. 6. The grantee is authorized to undertake the operations

authorized under Section one at its own offices in the Philippines.”
“For the convenience of the public, collection and delivery may

also be effected by means of the telephone or other means conducive
to the efficient handling of traffic.”
SEC. 4. Section seven of the same Act is hereby amended to

read as follows:
“SEC. 7. The grantee shall keep a separate account of the

gross earnings from its communication services originating in the
Philippines and shall furnish to the General Auditing Office, or
its successor a copy of such account not later than the thirty-first
of January of each year for the preceding year. For the purpose
of auditing accounts so rendered, all of the books and accounts of
the grantee, or duplicate thereof, so far as they relate to services
originating in the Philippines, shall be kept in the Philippines, and
shall be kept in the Philippines, and shall be subject to the official
inspection of the Auditor General or his authorized representatives,
and the audit and approval of such accounts shall be final and
conclusive evidence as to the amount of said gross earnings, except
that the grantee shall have the right to appeal to court of the
Philippines under the terms and conditions provided in the laws of
the Philippines.”
137

OF INTERNATIONAL TRADERS AND INVESTORS
OF FOREIGN NATIONALITY, AMENDING FOR THE
PURPOSE SUBPARAGRAPH (d) OF SECTION NINE OF
COMMONWEALTH ACT NUMBERED SIX HUNDRED
THIRTEEN, OTHERWISE KNOWN AS THE PHILIPPINE
IMMIGRATION ACT OF 1940, AS AMENDED BY REPUBLIC
ACT NUMBERED FIVE HUNDRED AND THREE

SECTION 1. Subparagraph (d) of the first paragraph of

Section nine of Commonwealth Act Numbered Six hundred thirteen,
otherwise known as the Philippine Immigration Act of 1940, as
amended, is hereby further amended so as to read as follows:
“(d) An alien entitled to enter the Philippines under and in

pursuance of the provisions of a treaty of commerce and navigation
(1) solely to carry on substantial trade principally between the
Philippines and the foreign state of which he is a national or (2)
solely to develop and direct the operations of an enterprise in which,
in accordance with the Constitution and the laws of the Philippines
he has invested or of an enterprise in which he is actively in the
process of investing, a substantial amount of capital; and his wife,
and his unmarried children under twenty-one years of age, if
accompanying or following to join him, subject to the condition that
citizens of the Philippines are accorded like privileges in the foreign
state of which such alien is a national.”
SEC. 2. The provisions of Republic Act Numbered One

thousand three hundred and ninety-three and other laws, part of
laws or rules and regulations inconsistent with the provisions of
this Act are hereby repealed.

138
AN ACT TO REQUIRE THAT THE MAKING OF INVESTMENTS

AND THE DOING OF BUSINESS WITHIN THE PHILIPPINES
BY FOREIGNERS OR BUSINESS ORGANIZATIONS
OWNED IN WHOLE OR IN PART BY FOREIGNERS
SHOULD CONTRIBUTE TO THE SOUND AND BALANCED
DEVELOPMENT OF THE NATIONAL ECONOMY ON A
SELF-SUSTAINING BASIS, AND FOR OTHER PURPOSES

SECTION 1. Definitions and scope of this Act. – (1) As used in

this Act, the term “investment” shall mean equity participation in
any enterprise formed, organized or existing under the laws of the
Philippines; and the phrase “doing business” shall include soliciting
orders, purchases, service contracts, opening offices, whether
called “liaison” offices or branches; appointing representatives
or distributors who are domiciled in the Philippines or who in
any calendar year stay in the Philippines for a period or periods
totaling one hundred eighty days or more; participating in the
management, supervision or control of any domestic business firm,
entity or corporation in the Philippines; and any other act or acts
that imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works,
or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and
object of the business organization.
(2) This Act shall not apply to banking institutions which

are governed and regulated by the General Banking Act and other
laws.
SEC. 2. Permitted Investments. – (1) Without need of prior

authority anyone not a Philippine national as that term is defined
in Section three of the Investment Incentives Act, and not otherwise
disqualified by law, may invest:
139
(a) In any enterprise registered under the Investment

Incentives Act, to the extent that the total investment of non-
Philippine nationals therein would not affect its status as a
registered enterprise under that law;
(b) In any enterprise not registered under the Investment

Incentives Act, to the extent that the total investment of non-
Philippine nationals therein shall not exceed thirty percent of the
outstanding capital of that enterprise, unless existing law forbids
any non-Philippine ownership in the enterprise or limits ownership
by non-Philippine nationals to a percentage smaller than thirty per
cent.
(2) Within thirty days after notice of the investment received

by it, the enterprise in which any investment is made by a non-
Philippine national shall register the same with the Board of
Investments for purposes of record. Investments made in the form
of foreign exchange or other assets actually transferred to the
Philippines shall also be registered with the Central Bank. The
Board shall assess and appraise the value of such assets other than
foreign exchange.
SEC. 3. Permissible Investments. – If an investment by a

non-Philippine national in an enterprise not registered under the
Investment Incentives Act is such that the total participation by
non-Philippine nationals in the outstanding capital thereof shall
exceed thirty per cent, the enterprise must obtain prior authority
from the Board of Investments, which authority shall be granted
unless the proposed investment
(a) Would conflict with existing constitutional provisions and

laws regulating the degree of required ownership by Philippine
nationals in the enterprise; or
(b) Would pose a clear and present danger of promoting

monopolies or combinations in restraint of trade; or
(c) Would be made in an enterprise engaged in an area

adequately being exploited by Philippine nationals; or
140
(d) Would conflict or be inconsistent with the Investments

Priorities Plan in force at the time the investment is sought to be
made; or
(e) Would not contribute to the sound and balanced development

of the national economy on a self-sustaining basis.
Investments made in the form of foreign exchange or other

assets actually transferred to the Philippines shall also be registered
with the Central Bank. The Board shall assess and appraise the
value of such assets other than foreign exchange.
SEC. 4. Licenses to do business. – No alien, and no firm,

association, partnership, corporation or any other form of business
organization formed, organized, chartered or existing under any
laws other than those of the Philippines, or which is not a Philippine
national, or more than thirty per cent of the outstanding capital of
which is owned or controlled by aliens shall do business or engage in
any economic activity in the Philippines, or be registered, licensed,
or permitted by the Securities and Exchange Commission or by any
other bureaus, office, agency, political subdivision or instrumentality
of the government, to do business, or engage in any economic activity
in the Philippines, without first securing a written certificate from
the Board of Investments to the effect:
(1) That the operation or activity of such alien, firm, association,

partnership, corporation or other form of business organization is
not inconsistent with the Investments Priorities Plan;
(2) That such business or economic activity will contribute to

the sound and balanced development of the national economy on a
self-sustaining basis;
(3) That such business or economic activity by the applicant

would not conflict with the Constitution or laws of the Philippines;
(4) That the field of business or economic activity is not one

that is being adequately exploited by Philippine nationals; and
141
(5) That the entry of applicant therein will not pose a clear
and present danger of promoting monopolies or combinations in
restraint of trade.
Upon granting said certificate, the Board shall impose

the following requirements on the alien or the firm, association,
partnership, corporation or other form of business organization that
is not organized or existing under the laws of the Philippines -
(1) To appoint a citizen of the Philippines, of legal age, good

moral character and reputation, and sound financial standing, as
resident agent, who shall be authorized to accept summons and
other legal process in behalf of the applicant;
(2) To establish an office in the Philippines and to notify the

Securities and Exchange Commission in writing of the applicant’s
exact address and of every contemplated transfer thereof or of the
opening of new offices, at least fifteen days before the same are to be
effected; and once effected, not later than ten days afterwards;
(3) To bring assets into the Philippines to constitute the capital

of the office or offices, of such kind and value as the Board may deem
necessary to protect those who may deal with the applicant, and to
maintain that capital unimpaired during the period it does business
in the Philippines;
(4) To present prior proof that citizens of the Philippines and

corporations or other business organizations organized or existing
under the laws of the Philippines are allowed to do business in
the contrary or individual state within a federal country of which
applicant is a citizen or in which it is domiciled: Provided, however,
That if the state or country of domicile of the applicant imposes on,
or requires of, Philippine nationals other conditions, requirements
or restrictions besides those set forth in this Act, the Board of
Investments shall impose the said other conditions, requirements
or restrictions on the applicant if, in its judgment, the imposition
thereof shall foster the sound and balanced development of the
national economy on a self-sustaining basis;
142
(5) To submit to the Securities and Exchange Commission

certified copies of applicant’s charter and by-laws and all amendments
thereto, if any, with their translation into an official language within
twenty days after their adoption or after the grant of the prescribed
certificate by the Board of Investments; and annually, of applicant’s
financial statements showing all assets, liabilities, and networth
and results of operations, setting out separately those pertaining to
the branch office;
(6) To keep a complete set of accounting records with the resident

agent, which shall fully and faithfully reflect all transactions within
the Philippines, and to permit inspection thereof by the Securities
and Exchange Commission, the Bureau of Internal Revenue, the
Board of Investments and, if a corporation, by the officers mentioned
in Section fifty-four of the Corporation Law;
(7) To give priority to resident creditors as against non-resident

creditors and owners or stockholders in the distribution of assets
within the Philippines upon insolvency, dissolution or revocation of
the license;
(8) To give the Securities and Exchange Commission at least

six months advance notice in writing of applicants’ intention to stop
doing business within the Philippines; and to give such public notice
thereof as the Securities and Exchange Commission may require
for the protection of resident creditors and others dealing with the
applicant; and
(9) Not to terminate any franchise, licensing or other agreement

that applicant may have with a resident of the Philippines,
authorizing the latter to assemble, manufacture or sell within
the Philippines the products of the applicant, except for violation
thereof or other just cause and upon payment of compensation and
reimbursement of investment and other expenses incurred by the
licensee in developing a market for the said products: Provided,
however, That in case of disagreement, the amount of compensation
or reimbursement shall be determined by the court where the
licensee is domiciled or has its principal office who shall require
143
the applicant to file a bond in such amount as, in its opinion, is

sufficient for this purpose.
The above requirement shall be in addition to those set

forth in the Corporation Law, as amended, for licensing foreign
corporations and a violation of any of these requirements shall be
sufficient cause to cancel a license or permit issued pursuant to this
Act: Provided, however, That this section shall not apply to aliens
or foreign firms, associations partnerships, corporations or other
forms of business organization not organized or existing under the
laws of the Philippines who may lawfully have been licensed to
do business in the Philippines prior to the effectivity of this Act;
Provided, further, That where the issuance of said license has been
irregular or contrary to law, any person adversely affected thereby
may file an action with the Court of First Instance where said alien
or foreign business organizations resides or has its principal office
to cancel the said license. In such cases, no injunction shall issue
without notice and hearing; and appeals and other proceedings for
review shall be filed directly with the Supreme Court.
SEC. 5. Mergers and Consolidations. – The provisions of this

Act shall apply to any merger, consolidation, syndicate or any other
combination of firms, associations, partnerships or other forms of
business organization that will result in ownership or control by
persons or entities that are not Philippine nationals of more than
thirty per cent of the capital of whatever organization results from
the merger, consolidation, syndicate or other combination.
SEC. 6. Local Government Action. – No agency, instrumentality

or political subdivision of the Government shall take any action in
conflict with or which will nullify the provisions of this Act, or any
certificate or authority granted thereunder.
SEC. 7. Publication and Posting of Notices. – Immediately

after the filing of any application under this Act, the Secretary of
the Board of Investments shall publish the same at the expense of
the applicant once a week for three consecutive weeks in the Official
Gazette and in one of the newspapers of general circulation in the
144
province or city where the applicant has its principal office and
post copies of said application in conspicuous places, in the office
of the Board of Investments or in the building where said office is
located, setting forth in such copies the name of the applicant, the
business in which it is engaged or proposes to engage or invest, and
such other data and information as may be required by the Board
of Investments. No approval or certificate shall be valid without the
publication and posting of notices as herein provided.
SEC. 8. Judicial Relief. – From any decision of the Board

of Investments under this Act, or from the failure of the Board of
Investments to act on any application within sixty days from the
date of final publication of the application, the applicant or any
person adversely affected thereby may seek judicial relief in the
Court of First Instance of Manila.
SEC. 9. Rules and Regulations. – The Board of Investments

shall promulgate such rules and regulations as may be necessary
to enforce the intent and provisions of this Act. The rules and
regulations shall take effect thirty days after their publication in
the Official Gazette and in two (2) newspapers of general circulation
in the Philippines.
SEC. 10. Penal Clause. – Any violation of this Act or of the

requirements for a license to do business within the Philippines
shall be punished with a fine of not less than ten thousand pesos
and not more than twenty-five thousand pesos and imprisonment
of not less than five years and not more than ten years. If the
violation is committed by a corporation or association, the penalty
shall be imposed upon the president, director or directors, manager,
managing partner, or other official thereof responsible for such
violation. Any alien violating or responsible for the violation of this
Act shall, upon completion of the service of sentence, be deported
without any further proceedings on the part of the Deportation
Board. Any government official or employee who aids, abets or
connives with any person in violating this Act shall, in addition
to the penalty which may be imposed upon him as a principal, be
perpetually disqualified from holding any public office.
145
SEC. 11. Separability Clause. – If any part or section of this

Act is declared unconstitutional for any reason, whatsoever, such
declaration shall not in any way affect the other parts or sections of
this Act.
SEC. 12. Repealing Clause. – All laws or parts of laws

inconsistent herewith are hereby repealed or modified accordingly.
SEC. 13. Appropriation. – The sum of one million pesos or so

much thereof as may be necessary, out of any funds in the National
Treasury not otherwise appropriated, is hereby authorized to be
appropriated to carry out the provisions of this Act.
SEC. 14. Effectivity. – This Act shall take effect upon

approval.
ENACTED without Executive approval, September 30, 1968.
146
AN ACT MAKING MARIVELES, PROVINCE OF BATAAN, A PORT

OF ENTRY BY AMENDING SECTION SEVEN HUNDRED
ONE OF THE TARIFF AND CUSTOMS CODE OF THE
PHILIPPINES, AS AMENDED, PROVIDING FOR THE
ESTABLISHMENT, OPERATION AND MAINTENANCE
OF A FOREIGN TRADE ZONE THEREIN; CREATING A
FOREIGN TRADE ZONE AUTHORITY; AND AUTHORIZING
THE APPROPRIATION OF THE NECESSARY FUNDS
THEREFOR

SECTION 1. Declaration of Policy. – It is hereby declared to be

the policy of the government to stimulate, expedite, encourage and
promote foreign commerce as a means of making the Philippines
a vital center of international trade, of strengthening our foreign
exchange position, of hastening industrialization, of overcoming
domestic unemployment, of accelerating the development of the
country and of insuring the economic security of all the people as
provided in the Constitution.
SEC. 2. Mariveles Port: establishment of foreign trade zone

therein: admission of foreign and domestic merchandise. – To attain
the above policy, Mariveles, Province of Bataan, is hereby made a
principal port of entry by further amending section seven hundred
one of Republic Act Numbered Nineteen hundred thirty-seven,
otherwise known as the Tariff and Customs Code of the Philippines,
as amended, to read as follows:
“701. Collection Districts and Ports of Entry therefor. –

For administrative purposes, the Philippines shall be divided
into as many collection districts as there are at present existing,
the respective limits of which may be changed from time to time
by the Commissioner of the Bureau of Customs, upon approval
of the department head. The principal ports of entry for the
147
respective collection districts shall be Manila, Sual, Tabaco, Cebu,

Pulupandan, Sia-in, Iloilo, Davao, Legaspi, Zamboanga, Jolo, Aparri,
Jose Panganiban, Cagayan, Tacloban, San Fernando, Hinigaran,
Dumaguete City, San Jose, Maasin, Maao, Iligan City, Batangas,
Bulatay, Supang, Virac, Cabugao, Gaang, Dagupan City, Bislig,
Catbalogan, Surigao and Mariveles.”
There is hereby established in the Mariveles Port a foreign

trade zone herein referred to as the Zone. Foreign and domestic
merchandise of every description, except such as is prohibited
by law, may, without being subject to the customs and internal
revenue laws and regulations of the Philippines, except as otherwise
provided in this Act, be brought into the Zone and may be stored,
sold, exhibited, broken up, repacked, assembled, distributed, sorted,
graded, cleaned, mixed with foreign or domestic merchandise, or
otherwise manipulated, or be manufactured except as otherwise
provided in this Act, and be exported, destroyed or sent into customs
territory of the Philippines therefrom, in the original package or
otherwise, under the following terms and conditions:
(1) When foreign merchandise is sent from the Zone into the
customs territory of the Philippines, it shall be subject to the laws
and regulations of the Philippines affecting imported merchandise;
(2) Whenever the privilege shall be requested and there has

been no manipulation or manufacture effecting a change in tariff
classification, the Commissioner of Customs, shall take under
supervision any lot or part of a lot of foreign merchandise in the
Zone, cause it to be appraised and taxes determined and duties
liquidated thereon. Merchandise so taken under supervision may
be stored, manipulated, or manufactured under the supervision
and regulation prescribed by the Secretary of Finance, and
whether mixed or manufactured with domestic merchandise or not
may, under regulation prescribed by the Secretary of Finance, be
exported or destroyed, or may be sent in customs territory upon the
payment of such liquidated duties and determined taxes thereon.
If merchandise so taken under supervision has been manipulated
or manufactured, such duties and taxes shall be payable on the
quantity of such foreign merchandise used in the manipulation,
148
or manufacture of the entered article. Allowance shall be made

for recoverable and irrevocable waste; and if recoverable waste is
sent into customs territory, it shall be dutiable and taxable in its
condition and quantity and at its weight at the time of entry. Where
two or more products result from the manipulation or manufacture
of merchandise in the Zone; the liquidated duties and determined
taxes shall be distributed to several products in accordance with
their relative value at the time of separation with the due allowances
for waste as provided for above;
(3) Subject to such regulations respecting identity and the

safeguarding of the revenue as the Secretary of Finance may deem
necessary, articles, the growth, product, or manufacture of the
Philippines, on which all internal revenue taxes have been paid, if
subject thereto, and articles previously imported on which duty and/
or tax has been paid, or which have been admitted free of duty and
tax, may be taken into the Zone from the customs territory of the
Philippines, placed under the supervision of the Commissioner, and
whether or not they have been combined with or made part, while
in said Zone, of other articles, may be brought back thereto free of
quotas, duty, or tax;
(4) If in the opinion of the Secretary of Finance their identity

has been lost, such articles not be entitled to free entry by reason
of non-compliance with the requirements made hereunder by the
Secretary of Finance shall be treated when they re-enter customs
territory of the Philippines as foreign merchandise under the
provisions of the customs, tariff and internal revenue laws in force
at the time;
(5) Under the rules and regulations of the Secretary of

Finance, articles which have been taken into the Zone from customs
territory for the sole purpose of exportation, destruction (except
destruction of distilled spirits, wines and fermented liquors), or
storage shall be construed to be exported for the purpose of –
“(a) the draw-back warehousing and bonding, or any other

provisions of the Customs and Tariff Code of the Philippines, as
amended, and the regulations thereunder; and
149
“(b) the statutes and bonds exacted for the payment of

drawback, refund, or exception from liability for internal revenue
taxes and for purpose of the internal revenue laws generally and the
regulations thereunder. Such a transfer may also be considered an
exportation for the purpose of other laws and regulations in so far as
offices or agencies charged with the enforcement of those laws deem
it advisable. Such articles may not be returned to customs territory
for domestic consumption except where such return is in the public
interest.
(6) Articles produced or manufactured in the Zone and

exported therefrom shall on subsequent importation into the
customs territory of the Philippines be subject to the import laws
applicable to like articles manufactured in a foreign country except
that articles produced or manufactured in the Zone exclusively with
the use of domestic merchandise, the identity of which has been
maintained in accordance with the second condition of this section,
may, on such importation, be entered as Filipino goods returned.
SEC. 3. Creation of a Foreign Trade Zone Authority. – A

Foreign Trade Zone Authority, hereafter referred to as Authority
is hereby created to be composed of a Chairman and four members
who shall be appointed for a term of six years by the President,
with the consent of the Commission on Appointments: Provided,
That the terms of office of the first appointees shall be fixed as
follows: the Chairman shall be for six years, two members shall be
for four years, and the last two members shall be for two years:
Provided, further, That upon the expiration of his term, a member
shall serve as such until his successor shall have been appointed
and qualified: Provided, finally, That no vacancy shall be filled
except for the unexpired portion of any term. The Authority shall
hold its office in Mariveles.
No person shall be appointed as Chairman or member of

the Foreign Trade Zone Authority unless he is a citizen of the
Philippines, of good moral character and of unquestionable integrity
and responsibility, and of recognized competence in customs
administration, taxation, economics, commerce, and industry.
150
The Chairman shall receive a salary of twenty-four thousand

pesos per annum, and each member shall receive a salary of twenty
thousand pesos per annum.
SEC. 4. Powers and Duties. – The Foreign Trade Zone

Authority shall have the following powers and duties:
(a) To fix and delimit the site of the Zone which shall at all
times remain to be owned by the Government, and which shall
have a contiguous and adequate area with well defined and policed
boundaries, with adequate enclosures to segregate the Zone from
the customs territory for protection of revenues, together with
suitable provisions for ingress and egress of persons, conveyance,
vessels and merchandise sufficient for the purpose of this Act;
(b) To determine and regulate the enterprises to be established

within the port in order not to adversely affect the operations of
existing domestic industries outside the Zone, and to operate the
Zone as a public utility wherein all the rates and charges for all
services or privileges within the Zone shall be fair and reasonable,
and the Authority shall afford all who may apply for the use of the
Zone and its facilities and appurtenances uniform treatment under
like conditions subject to such treaties or commercial conventions as
are not enforced or may hereafter be made by the Philippines with
any foreign government from time to time;
(c) To direct the management, operation and maintenance

of the Zone and to provide necessary facilities and appurtenances
thereof;
(d) Upon application to grant, under uniform and reasonable

rates and regulations made thereunder, permit to persons, firms,
corporations or associations the use of the Zone and its facilities,
the privilege to erect such buildings and other structures within
the Zone as will meet their particular requirements: Provided, That
such permission shall not constitute a vested right as against the
government, nor interfere with the regulation of the Authority, nor
151
interfere with or complicate the revocation of the grant: Provided,

further, That such permits shall not be granted on terms that
conflict with the public use of the Zone as set forth in this Act;
(e) To authorize expenditures out of its net operating income

but not in excess of two hundred fifty thousand pesos, in addition to
its annual appropriations;
(f) To issue such rules and regulations not inconsistent

with the provisions of this Act or the rules and regulations of the
Secretary of Finance made hereunder and as may be necessary to
carry out the provisions of this Act;
(g) To appoint, fix remunerations, and remove for cause all

officers and employees; and
(h) To exercise all the powers necessary to attain the purpose

for which it is organized and for which this Act is enacted.
SEC. 5. Assignment of customs officers and guards. – The

Secretary of Finance shall assign to the Zone the necessary customs
officers and guards to protect the revenue and provide for the
admission of foreign merchandise into customs territory.
SEC. 6. Vessels subject to Philippine laws. – Vessels entering

or leaving the Zone shall be subject to the operation of all laws of the
Philippines, except as otherwise provided in this Act, and vessels
leaving the Zone and arriving in customs territory of the Philippines
shall be subject to such regulations to protect the revenue as may be
prescribed by the Secretary of Finance.
SEC. 7. Annual Report. – The Authority shall submit, within

ten days from the opening of the regular session of Congress, an
annual report to the Presiding Officers of both Houses, containing
the details of the operation and fiscal condition of the Zone and
transmit copies of said report to all members of Congress.
152
SEC. 8. Promulgation of rules and regulations by the Secretary

of Finance. – The Secretary of Finance shall prescribe within six
months from the effectivity of this Act such rules and regulations as
may be necessary to carry out this Act.
SEC. 9. Penalties. – Any person violating any provision of this

Act or any of the rules and regulations promulgated under Section
four hereof, shall suffer the penalty of imprisonment of not less than
five years nor more than ten years and fine of not less than five
thousand pesos nor more than ten thousand pesos and, in addition,
such violation shall ipso facto constitute a valid ground for the
revocation of all privileges, permits and authorization granted to
such person under this Act: Provided, however, That if the offender
is a corporation, firm, partnership or association, the penalty shall
be imposed upon the guilty officer or officers as the case may be of the
corporation, firm or association, and if such guilty officer or officers
be alien or aliens, in addition to the penalties herein prescribed, he
or they shall be deported without further proceedings on the part of
the Deportation Board.
Any officer or employee of the Government who by himself or

through his agent, acting under his discretion and authority, shall
connive, abet, or tolerate the violation of the provisions of this Act
or any rules and regulations promulgated under Section four hereof
or who fails to report within thirty days any violation thereof to the
fiscal or chief of police in the place where the Zone is located shall
suffer the penalties prescribed in the preceding paragraph including
perpetual disqualification to hold public office.
The foregoing penalties shall be without prejudice to the

assessment and collection of such taxes and duties as may be due on
the foreign-made articles or merchandise which have been landed
in the Zone and have not been re-shipped to a foreign port at the
time of the revocation of the authority of the offender to operate
within the Zone. In the event such taxes and duties shall not for any
reason be paid upon demand by the Collector of Customs of the port
within whose collection district the Zone is located, the foreign-made
articles or merchandise of the offender remaining within such Zone
at the time of revocation of its authority to operate therein, including
153
its physical plants, machinery and equipment therein, shall, after

due notice and hearing, be forfeited in favor of the Government and
may be disposed of by the Government in the manner and for such
purpose as it may so desire.
SEC. 10. Appropriations. – To carry out the purposes of this

Act, there is hereby authorized to be appropriated, out of any funds
in the National Treasury not otherwise appropriated, the sum of two
hundred fifty thousand pesos for the fiscal year nineteen hundred
sixty-nine.
SEC. 11. Effectivity. – This Act shall take effect upon its
approval.
154
AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE

THE PROCEDURES FOR REGISTERING ENTERPRISES
DOING BUSINESS IN THE PHILIPPINES, AND FOR
OTHER PURPOSES

SECTION 1. Title. – This Act shall be known as the, “Foreign

Investments Act of 1991”.
SEC. 2. Declaration of Policy. – It is the policy of the State to

attract, promote and welcome productive investments from foreign
individuals, partnerships, corporations, and governments, including
their political subdivisions, in activities which significantly contribute
to national industrialization and socioeconomic development to
the extent that foreign investment is allowed in such activity by
the Constitution and relevant laws. Foreign investments shall be
encouraged in enterprises that significantly expand livelihood and
employment opportunities for Filipinos; enhance economic value of
farm products; promote the welfare of Filipino consumers; expand
the scope, quality and volume of exports and their access to foreign
markets; and/or transfer relevant technologies in agriculture,
industry and support services. Foreign investments shall be
welcome as a supplement to Filipino capital and technology in those
enterprises serving mainly the domestic market.
As a general rule, there are no restrictions on extent of foreign

ownership of export enterprises. In domestic market enterprises,
foreigners can invest as much as one hundred percent (100%)
equity except in areas included in the negative list. Foreign owned
firms catering mainly to the domestic market shall be encouraged
to undertake measures that will gradually increase Filipino
participation in their businesses by taking in Filipino partners,
electing Filipinos to the board of directors, implementing transfer
155
of technology to Filipinos, generating more employment for the

economy and enhancing skills of Filipino workers.
SEC. 3. Definitions. – As used in this Act:
a) The term “Philippine national” shall mean a citizen of the

Philippines or a domestic partnership or association wholly owned
by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty (60%) of the fund will accrue
to the benefit of the Philippine nationals: Provided, That where
a corporation and its non-Filipino stockholders own stocks in a
Securities and Exchange Commission (SEC) registered enterprise,
at least sixty percent (60%) of the capital stocks outstanding and
entitled to vote of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of both corporations must be
citizens of the Philippines, in order that the corporations shall be
considered a Philippine national;
b) The term “investment” shall mean equity participation

in any enterprise organized or existing under the laws of the
Philippines;
c) The term “foreign investment” shall mean as equity

investment made by a non-Philippine national in the form of foreign
exchange and/or other assets actually transferred to the Philippines
and duly registered with the Central Bank which shall assess and
appraise the value of such assets other than foreign exchange;
d) The praise “doing business” shall include soliciting orders,

service contracts, opening offices, whether called “liaison” offices or
branches; appointing representatives or distributors domiciled in
the Philippines or who in any calendar year stay in the country for
a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any
156
domestic business, firm, entity or corporation in the Philippines; and

any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or
of the purpose and object of the business organization: Provided,
however, That the phrase “doing business: shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or
officer to represent its interests in such corporation; nor appointing
a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account;
e) The term “export enterprise” shall mean an enterprise

wherein a manufacturer, processor or service (including tourism)
enterprise exports sixty percent (60%) or more of its output, or
wherein a trader purchases products domestically and exports sixty
percent (60%) or more of such purchases;
f) The term “domestic market enterprise” shall mean an

enterprise which produces goods for sale, or renders services to the
domestic market entirely or if exporting a portion of its output fails
to consistently export at least sixty percent (60%) thereof; and
g) The term “Foreign Investments Negative List” or “Negative

List” shall mean a list of areas of economic activity whose foreign
ownership is limited to a maximum of forty percent (40%) of the
equity capital of the enterprise engaged therein.
SEC. 4. Scope. – This Act shall not apply to banking and other
financial institutions which are governed and regulated by the
General Banking Act and other laws under the supervision of the
Central Bank.
SEC. 5. Registration of Investments of Non-Philippine Nationals.

– Without need of prior approval, a non-Philippine national, as that
term is defined in Section 3 a), and not otherwise disqualified by law
may upon registration with the Securities and Exchange Commission
157
(SEC), or with the Bureau of Trade Regulation and Consumer

Protection (BTRCP) of the Department of Trade and Industry in the
case of single proprietorships, do business as defined in Section 3
(d) of this Act or invest in a domestic enterprise up to one hundred
percent (100%) of its capital, unless participation of non-Philippine
nationals in the enterprise is prohibited or limited to a smaller
percentage by existing law and/or limited to a smaller percentage
by existing law and/or under the provisions of this Act. The SEC
or BTRCP, as the case may be, shall not impose any limitations on
the extent of foreign ownership in an enterprise additional to those
provided in this Act: Provided, however, That any enterprise seeking
to avail of incentives under the Omnibus Investment Code of 1987
must apply for registration with the Board of Investments (BOI),
which shall process such application for registration in accordance
with the criteria for evaluation prescribed in said Code: Provided,
finally, That a non-Philippine national intending to engage in the
same line of business as an existing joint venture in his application
for registration with SEC. During the transitory period as provided
in Section 15 hereof, SEC shall disallow registration of the applying
non-Philippine national if the existing joint venture enterprise,
particularly the Filipino partners therein, can reasonably prove they
are capable to make the investment needed for they are competing
applicant. Upon effectivity of this Act, SEC shall effect registration
of any enterprise applying under this Act within fifteen (15) days
upon submission of completed requirements.
SEC. 6. Foreign Investments in Export Enterprises. – Foreign

investment in export enterprises whose products and services do
not fall within Lists A and B of the Foreign Investment Negative
List provided under Section 8 hereof is allowed up to one hundred
percent (100%) ownership.
Export enterprises which are non-Philippine nationals shall

register with BOI and submit the reports that may be required
to ensure continuing compliance of the export enterprise with its
export requirement. BOI shall advise SEC or BTRCP, as the case
may be, of any export enterprise that fails to meet the export ratio
requirement. The SEC or BTRCP shall thereupon order the non-
complying export enterprise to reduce its sales to the domestic
158
market to not more than forty percent (40%) of its total production;
failure to comply with such SEC or BTRCP order, without justifiable
reason, shall subject the enterprise to cancellation of SEC or BTRCP
registration, and/or the penalties provided in Section 14 hereof.
SEC. 7. Foreign Investments in Domestic Market Enterprises.

– Non-Philippine nationals may own up to one hundred percent
(100%) of domestic market enterprises unless foreign ownership
therein is prohibited or limited by existing law or the Foreign
Investment Negative List under Section 8 hereof.
A domestic market enterprise may change its status to export

enterprise if over a three (3) year period it consistently exports in
each year thereof sixty per cent (60%) or more of its output.
SEC. 8. List of Investment Areas Reserved to Philippine

Nationals (Foreign Investment Negative List). – The Foreign
Investment Negative List shall have three (3) component lists: A,
B, and C:
a) List A shall enumerate the areas of activities reserved to

Philippine nationals by mandate of the Constitution and specific
laws.
b) List B shall contain the areas of activities and enterprises

pursuant to law:
1) Which are defense-related activities, requiring prior

clearance and authorization from Department of National Defense
(DND) to engage in such activity, such as the manufacture,
repair, storage and/or distribution of firearms, ammunition,
lethal weapons, military ordinance, explosives, pyrotechnics and
similar materials; unless such manufacturing or repair activity is
specifically authorized, with a substantial export component, to a
non-Philippine national by the Secretary of National Defense; or
2) Which have implications on public health and morals, such

as the manufacture and distribution of dangerous drugs; all forms
159
of gambling; nightclubs, bars, beerhouses, dance halls; sauna and

steambath houses and massage clinics.
Small and medium-sized domestic market enterprises with

paid-in equity capital less than the equivalent of five hundred
thousand US dollars (US$500,000) are reserved to Philippine
nationals, unless they involve advanced technology as determined
by the Department of Science and Technology. Export enterprises
which utilize raw materials from depleting natural resources, with
paid-in equity capital of less than the equivalent of five hundred
thousand US dollars (US$500,000) are likewise reserved to
Philippine nationals.
Amendments to List B may be made upon recommendation of

the Secretary of National Defense, or the Secretary of Health, or the
Secretary of Education, Culture and Sports, indorsed by the NEDA,
or upon recommendation motu propio of NEDA, approved by the
President, and promulgated by Presidential Proclamation.
c) List C shall contain the areas of investment in which existing

enterprises already serve adequately the needs of the economy and
the consumer and do not require further foreign investments, as
determined by NEDA applying the criteria provided in Section
9 of this Act, approved by the President and promulgated in a
Presidential Proclamation.
The Transitory Foreign Investment Negative List established

in Sec. 15 hereof shall be replaced at the end of the transitory
period by the first Regular Negative List to be formulated and
recommended by the NEDA, following the process and criteria
provided in Section 8 and 9 of this Act. The first Regular Negative
List shall be published not later than sixty (60) days before the end
of the transitory period provided in said section, and shall become
immediately effective at the end of the transitory period. Subsequent
Foreign Investment Negative Lists shall become effective fifteen (15)
days after publication in two (2) newspapers of general circulation in
the Philippines: Provided, however, That each Foreign Investment
Negative List shall be prospective in operation and shall in no way
affect foreign investments existing on the date of its publication.
160
Amendments to List B and C after promulgation and

publication of the first Regular Foreign Investment Negative List at
the end of the transitory period shall not be made more often than
once every two (2) years.
SEC. 9. Determination of Areas of Investment for Inclusion in

List C of the Foreign Investment Negative List. – Upon petition by
a Philippine national engage therein, an area of investment may
be recommended by NEDA for inclusion in List C of the Foreign
Investment Negative List upon determining that it complies with
all the following criteria:
a) The industry is controlled by firms owned at least sixty

percent (60%) by Filipinos;
b) Industry capacity is ample to meet domestic demand;
c) Sufficient competition exists within the industry;
d) Industry products comply with Philippine standards of

health and safety or, in the absence of such, with international
standards, and are reasonably competitive in quality with similar
products in the same price range imported into the country;
e) Quantitative restrictions are not applied on imports of

directly competing products;
f) The leading firms of the industry substantially comply

with environmental standards; and
g) The prices of industry products are reasonable.
The petition shall be subjected to a public hearing at which

affected parties will have the opportunity to show whether the
petitioner industry adequately serves the economy and the consumer,
in general, and meets the above stated criteria in particular.
NEDA may delegate evaluation of the petition and conduct of the
public hearing to any government agency having cognizance of the
petitioner industry. The delegated agency shall make its evaluation
161
report and recommendations to NEDA which retains the right

and sole responsibility to determine whether to recommend to the
President to promulgate the area of investment in List C of the
Negative List. An industry or area of investment included in List C
of the Negative List by Presidential Proclamation shall remain in
the said List C for two (2) years, without prejudice to re-inclusion
upon new petition, and due process.
SEC. 10. Strategic Industries. – Within eighteen (18) months

after the effectivity of this Act, the NEDA Board shall formulate
and publish a list of industries strategic to the development of the
economy. The list shall specify, as a matter of policy and not as a
legal requirement, the desired equity participation by Government
and/or private Filipino investors in each strategic industry. Said list
of strategic industries, as well as the corresponding desired equity
participation of government and/or private Filipino investors,
may be amended by NEDA to reflect changes in economic needs
and policy directions of Government. The amended list of strategic
industries shall be published concurrently with publication of the
Foreign Investment Negative List.
The term “strategic industries” shall mean industries that are

characterized by all of the following:
a) Crucial to the accelerated industrialization of the

country,
b) Require massive capital investments to achieve economies

of scale for efficient operations;
c) Require highly specialized or advanced technology which

necessitates technology transfer and proven production techniques
in operations;
d) Characterized by strong backward and forward linkages

with most industries existing in the country, and
e) Generate substantial foreign exchange savings through

import substitution and collateral foreign exchange earnings through
162
export of part of the output that will result with the establishment,
expansion or development of the industry.
SEC. 11. Compliance with Environmental Standards. – All

industrial enterprises regardless of nationality of ownership shall
comply with existing rules and regulations to protect and conserve
the environment and meet applicable environmental standards.
SEC. 12. Consistent Government Action. – No agency,

instrumentality or political subdivision of the Government shall
take any action on conflict with or which will nullify the provisions
of this Act, or any certificate or authority granted hereunder.
SEC. 13. Implementing Rules and Regulations. – NEDA,

in consultation with BOI, SEC and other government agencies
concerned, shall issue the rules and regulations to implement this
Act within one hundred and twenty (120) days after its effectivity.
A copy of such rules and regulations shall be furnished the Congress
of the Republic of the Philippines.
SEC. 14. Administrative Sanctions. – A person who violates

any provision of this Act or of the terms and conditions of registration
or of the rules and regulations issued pursuant thereto, or aids or
abets in any manner any violation shall be subject to a fine not
exceeding One hundred thousand pesos (P100,000).
If the offense is committed by a juridical entity, it shall be

subject to a fine in an amount not exceeding ½ of 1% of total paid-
in capital but not more than Five million pesos (P5,000,000). The
president and/or officials responsible therefor shall also be subject
to a fine not exceeding Two hundred thousand pesos (P200,000).
In addition to the foregoing, any person, firm or juridical

entity involved shall be subject to forfeiture of all benefits granted
under this Act.
SEC shall have the power to impose administrative sanctions

as provided herein for any violation of this Act or its implementing
rules and regulations.
163
SEC. 15. Transitory Provisions. – Prior to effectivity of the

implementing rules and regulations of this Act, the provisions of
Book II of Executive Order 226 and its implementing rules and
regulations shall remain in force.
During the initial transitory period of thirty-six (36) months

after issuance of the Rules and Regulations to implement this Act,
the Transitory Foreign Investment Negative List shall consist of
the following:
A. List A:
1. All areas of investment in which foreign ownership is

limited by mandate of Constitution and specific laws.
B. List B:
1. Manufacture, repair, storage and/or distribution of

firearms, ammunitions, lethal weapons, military ordinance,
explosives, pyrotechnics and similar materials required by law to be
licensed by and under the continuing regulation of the Department
of National Defense; unless such manufacturing or repair activity
is specifically authorized with a substantial export component, to a
non-Philippine national by the Secretary of National Defense;
2. Manufacture and distribution of dangerous drugs; all

forms of gambling; nightclubs, bars, beerhouses, dance halls; sauna
and steam bathhouses, massage clinic and other like activities
regulated by law because of risks they may pose to public health
and morals;
3. Small and medium-size domestic market enterprises with

paid-in equity capital or less than the equivalent of US$500,000,
unless they involve advanced technology as determined by the
Department of Science and Technology, and
4. Export enterprises which utilize raw materials from

depleting natural resources, and with paid-in equity capital of less
than the equivalent US$500,000.
164
C. List C:
1. Import and wholesale activities not integrated with

production or manufacture of goods;
2. Services requiring a license or specific authorization, and

subject to continuing regulations by national government agencies
other than BOI and SEC which at the time of effectivity of this Act
are restricted to Philippine nationals by existing administrative
regulations and practice of the regulatory agencies concerned:
Provided, That after effectivity of this Act, no other services shall
be additionally subjected to such restrictions on nationality of
ownership by the corresponding regulatory agencies, and such
restrictions once removed shall not be reimposed; and
3. Enterprises owned in the majority by a foreign licensor and/

or its affiliates for the assembly, processing or manufacture of goods
for the domestic market which are being produced by a Philippine
national as of the date of effectivity of this Act under a technology,
know-how and/or brand name license from such licensor during the
term of the license agreement: Provided, That, the license is duly
registered with the Central Bank and/or the Technology Transfer
Board and is operatively in force as of the date of effectivity of this
Act.
NEDA shall make the enumeration as appropriate of the areas

of the investment covered in this Transitory Foreign Investment
Negative List and publish the Negative List in full at the same
time as, or prior to, the publication of the rules and regulations to
implement this Act.
The areas of investment contained in List C above shall be

reserved to Philippine nationals only during the transitory period.
The inclusion of any of them in the regular Negative List will
require determination by NEDA after due public hearings that such
inclusion is warranted under the criteria set forth in Section 8 and
9 hereof.
165
SEC. 16. Repealing Clause. – Articles forty-four (44) to fifty-

six (56) of Book II of Executive Order No. 226 are hereby repealed.
All other laws or parts of laws inconsistent with the provisions

of this Act are hereby repealed or modified accordingly.
SEC. 17. Separability. – If any part or section of this Act

is declared unconstitutional for any reason whatsoever, such
declaration shall not in any way affect the other parts or sections of
this Act.
SEC. 18. Effectivity. – This Act shall take effect fifteen (15)
days after approval and publication in two (2) newspapers of general
circulation in the Philippines.
166
IMPLEMENTING RULES AND REGULATIONS OF RA 7042

AS AMENDED BY REPUBLIC ACT NO. 8179
RULE I. DEFINITIONS
SECTION. DEFINITION OF TERMS. – For the purposes of these

Rules and Regulations.
a. Act shall refer to Republic Act 7042 entitled “An Act to Promote
Foreign Investments, Prescribe the Procedures for Registering
Enterprises Doing business in the Philippines, and for other
Purposes”, also known as the Foreign Investments Act of 1991,
as amended.
b. Philippine national shall mean a citizen of the Philippines or a

domestic partnership or association wholly owned by the citizens
of the Philippines; or a corporation organized under the laws
of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held
by citizens of the Philippines; or a corporation organized abroad
and registered as doing business in the Philippines under the
Corporation Code of which 100% of the capital stock outstanding
and entitled to vote is wholly owned by Filipinos or a trustee of
funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least
sixty percent (60%) of the fund will accrue to the benefits of the
Philippine nationals: Provided, that where a corporation and its
non-Filipino stockholders own stocks in Securities and Exchange
Commission (SEC) registered enterprise, at least sixty (60%)
percent of the members of the Board of Directors of each of
both corporation must be citizens of the Philippines, in order that
the corporation shall be considered a Philippine national. The
control test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation

shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally
entitled to vote are considered.
167
For stocks to be deemed owned and held by Philippine citizens

or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks,
coupled with appropriate voting rights is essential. Thus, stocks,
the voting rights of which have been assigned or transferred
to aliens cannot be considered held by Philippine citizens or
Philippine nationals.
Individuals or juridical entities not meeting the aforementioned

qualifications are considered as non-Philippine nationals.
c. Foreign corporation shall mean one which is formed, organized

or existing under laws other than those of the Philippines.
Branch office of a foreign company carries out the business

activities of the head office and derives income from the host
country.
Representative or liaison office deals directly with the clients

of the parent company but does not derive income from the host
country and is fully subsidized by its head office. It undertakes
activities such as but not limited to information dissemination and
promotion of the company’s products as well as quality control of
products.
d. Investment shall mean equity participation in any enterprise

organized or existing under the laws of the Philippines. It includes
both original and additional investments, whether made directly
as in stock subscription, or indirectly through the transfer of equity
from one investor to another as in stock purchase. Ownership
of bonds (including income bonds), debentures, notes or other
evidences of indebtedness does not qualify as investments.
The purchase of stock options or stock warrants is not an

investment until the holder thereof exercises his option and
actually acquires stock from the corporation.
e. Foreign investment shall mean an equity investment made by

a non-Philippine national; Provided, however, that for purposes
of determining foreign ownership, peso investments made by
non-Philippine nationals shall be considered; Provided, further,
168
That only foreign investments in the form of foreign exchange

and/or other assets actually transferred to the Philippines and
duly registered with the Central Bank (CB) and profits derived
therefrom can be repatriated; and Rule VIII, Section 6 of these
Rules and Regulations, Existing Foreign Investments shall mean
an equity investments made by a non-Philippine national duly
registered with the SEC or the Bureau of Trade Regulation and
Consumer Protection (BTRCP) in the form of foreign exchange
and/or other assets transferred to the Philippines.
f. Doing Business shall include soliciting orders, service contracts,

opening offices, whether liaison offices or branches; appointing
representatives or distributors, operating under full control of
the foreign corporation, domiciled in the Philippines or who in
any calendar years stay in the country for a period or periods
totaling one hundred eighty (180) days or more; participating
in the management, supervision or control of any domestic
business, firm, entity or corporation in the Philippines; and
any other acts or acts that comply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the
functions normally incident to and in progressive prosecution of
commercial gain or of the purpose and object of the business
organization. The following acts shall not be deemed “doing
business” in the Philippines:
(1) Mere investment as a shareholder by a foreign entity in

domestic corporation duly registered to do business, and/or
the exercise of rights as such investor;
(2) Having a nominee director or officer to represent its interest

in such corporation;
(3) Appointing a representative or distributor domiciled in the

Philippines which transacts business in the representative’s
or distributor’s own name and account;
(4) The publication of a general advertisement through any print

or broadcast media;
169
(5) Maintaining a stock of goods in the Philippines solely for the

purpose of having the same processed by another entity in
the Philippines;
(6) Consignment by a foreign entity of equipment with a local

company to be used in the processing of products for
export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract

of sale which are not on a continuing basis, such as installing
in the Philippines machinery it has manufactured or exported
to the Philippines, servicing the same, training domestic
workers to operate it, and similar incidental services.
g. Export enterprise shall mean an enterprise wherein a

manufacturer, processor or service (including tourism) enterprise
exports sixty percent (60%) or more of its output, or wherein a
trader purchases products domestically and exports sixty percent
(60%) or more of such purchases.
h. Exports shall mean the volume or the Philippine port F.O.B. peso
value, determined from invoices, bills of lading, inward letters of
credit, loading certificates, and other commercial documents, of
products exported directly by an export enterprise or the value of
services including tourism sold by service-oriented enterprise to
non-resident foreigners or the net selling price of export products
sold by an export enterprise to another export enterprise that
subsequently exports the same; Provided, that sales of export
products to another export enterprise shall only be deemed
exports when actually exported by the latter, as evidenced
by loading certificates or similar commercial documents; and
Provided, finally, that without actual exportation, the following
shall be considered constructively exported for purposes of the
Act: (1) sales of products to bonded manufacturing warehouses
of export enterprises; (2) sales of products to export processing
zone enterprises; (3) sales of products to export enterprises
operating bonded trading warehouses supplying raw materials
used in the manufacture of export products; and (4) sales of
products to foreign military bases, diplomatic missions and other
170
agencies and/or instrumentalities granted tax immunities of locally

manufactured, assembled or repacked products whether paid
for in foreign currency or pesos funded from inwardly remitted
foreign currency.
Sales of locally manufactured or assembled goods for household

and personal use to Filipinos abroad and other non-residents
of the Philippines as well as returning overseas Filipinos under
the Internal Export Program of the Government and paid for
in convertible foreign currency inwardly remitted through the
Philippine banking system shall also be considered exports.
i. Output shall refer to the export enterprise’s total sales in a

taxable year. The term sales shall refer to the value in case of
heterogeneous products and volume in case of homogeneous
products.
Heterogeneous products shall refer to products of different kinds

and characteristics as well as to those of the same kind but with
various categories using different units of measurement.
Homogeneous products shall refer to products of the same kind

or category using a common unit of measurement.
j. Export ratio shall refer to:
(1) the percentage share of the volume or peso value of

goods exported to the total volume or value of goods sold
in any taxable year if the export enterprise is engaged in
manufacturing or processing;
(2) the percentage share of the peso value of services sold

to foreigners to total earnings or receipts from the sale of its
services from all sources in any taxable year if the export
enterprise is service-oriented; Value of services sold shall
refer to the peso value of all services rendered by an export
enterprise to foreigners that are paid for in foreign currency
and/or pesos funded from inwardly remitted foreign currency
as properly documented by the export enterprise; or
171
(3) the percentage share of the volume or peso value of goods

exported to the total volume or value of goods purchased
domestically in any taxable year if the export enterprise is
engaged in merchandise trading.
k. Domestic market enterprise shall mean an enterprise which

produces goods for sale, or renders services or otherwise
engages in any business in the Philippines.
l. Joint Venture shall mean two or more entities, whether natural

or juridical, one of which must be a Philippine national, combining
their property, money, efforts, skills or knowledge to carry out a
single business enterprise for profit, which is duly registered with
the SEC as a corporation or partnership.
m. Substantial Partner shall mean an individual or a firm who owns

enough shares to be entitled to at least one (1) seat from the
Board of Directors of a corporation, or in the case of partnership,
any partner.
n. Dangerous Drugs as defined under Republic Act 6425 or the

Dangerous Drugs Act, as amended, refers to either:
(1) “Prohibited drug” which includes opium and its active

components and derivatives, such as heroin and morphine;
coca leaf and its derivatives, principally cocaine; alpha and
beta eucaine; hallucinogenic drugs, such as mescaline,
lysergic and dicthlylamide (LSD) and other substances
producing similar effects; Indian hemp and its derivatives; all
preparations made from any of the foregoing; and other drugs
and chemical preparations whether natural or synthetic, with
the physiological effects of a narcotic or hallucinogenic drug;
or
(2) “Regulated drug” which includes, unless authorized by

the Department of Health (DOH) and in accordance with
the Dangerous Drugs Board, self-inducing sedatives, such
as secobarbital, phenobarbital, barbital, amobarbital or any
other drug which contains a salt or a derivative of barbituric
acid; any salt, isomer, or salt of an isomer, of amphetamine
such as Benzedrine or Dexedrine, or any drug which
172
produces a physiological action similar to amphetamine; and

hypnotic drugs, such as methaqualone, nitrazepan or any
other compound producing similar physiological effects.
o. Advanced Technology refers to a higher degree or form of

technology than what is domestically available and needed for the
development of certain industries as subject to guidelines of the
Department of Science and Technology (DOST). Its introduction
into the country through foreign investments under the terms
and conditions of the Act must be linked to its appropriateness
and adaptability to local conditions with a view towards eventual
transfer and applicability including the upgrading of the indigenous
technology available.
p. Paid-in Equity Capital shall mean the total investment in a

business that has been paid-in in a corporation or partnership
or invested in a single proprietorship, which may be in cash or
in property. It shall also refer to inward remittance or assigned
capital in the case of foreign corporations.
q. Foreign Investment Negative List (FINL) or Negative List shall

mean a list of areas of economic activity whose foreign ownership
is limited to a maximum of forty percent (40%) of the outstanding
capital stock in the case of a corporation or capital in the case of
a partnership.
r. NEDA Board shall refer to the body constituted as such under

Executive Order No. 230 entitled “Reorganizing the National
Economic and Development Authority” and in which reside the
powers and functions of the Authority.
s. NEDA shall refer to the NEDA Secretariat, which is the body

constituted as such under Executive Order No. 230 and which
serves as the research and technical support arm and the
Secretariat of the NEDA Board.
t. SEC shall refer to the Securities and Exchange Commission.
u. BTRCP shall refer to the Bureau of Trade Regulation and

Consumer Protection as represented by the provincial offices of
the Department of Trade and Industry (DTI).
173
v. BOI shall refer to the Board of Investments.
w. Technology Transfer Board shall refer to the Bureau of Patents,

Trademarks and Technology Transfer (BPTTT).
x. Former natural born Filipinos shall mean those who have

lost Philippine citizenship but were previously citizens of the
Philippines falling in either of the following categories: (a) from
birth without having to perform any act to acquire or perfect
their Philippine citizenship; or (b) by having elected Philippine
citizenship upon reaching the age of majority, if born before
January 17, 1973, of Filipino mothers.
y. Transferee of private land shall mean a person to whom the

ownership rights of private land is transferred through either
voluntary or involuntary sale, devise or donation. Involuntary
sales shall include sales on tax delinquency, foreclosures and
executions of judgment.
z. Direct employees shall mean Filipino personnel hired and

engaged under the control and supervision of the applicant
investor/employer in the production of goods or performance
of services. Excluded from this definition are personnel hired
as casual, seasonal, learner, apprentice or any employee of
subcontractor or those under fixed term employment.
aa. Start of commercial operations shall mean the date when a

particular enterprise actually begins production of the product
for commercial purposes or commercial harvest in the case of
agricultural activities. In the case of service oriented activities,
the date when the enterprise begins catering or servicing its
clients on a commercial basis. In the case of export traders and
service exporters, the date when the initial export shipment in
commercial quantity has been made or initial performance of
service as borne out by the appropriate supporting documents.
174
RULE II. SCOPE
SECTION 1. COVERAGE. The Act covers all investment areas or areas of

economic activity except banking and other financial institutions which are
governed and regulated by the General Banking Act and other laws under
the supervision of the CB.
RULE III. BASIC GUIDELINES
SECTION 1. The Act covers restrictions pertaining to foreign equity

participation only. All other regulations governing foreign investments
remain in force.
SECTION 2. MONITOIRNG OF COMPLIANCE WITH EQUITY

PARTICIPATION REQUIREMENTS. The SEC or BTRCP, as applicable,
shall monitor the compliance with the equity requirements of the Act.
RULE IV. REGISTRATION OF INVESTMENTS OF

NON-PHILIPPINE NATIONALS
SECTION 1. QUALIFICATIONS
a. Any non-Philippine national may do business or invest in a

domestic enterprise up to one hundred percent (100%) of its
capital provided:
(1) it is investing in a domestic market enterprise in areas outside

the FINL; or
(2) it is investing in an export enterprise whose products and

services do not fall within Lists A and B (except for defense-
related activities, which may be approved pursuant to Section
8(b)(1) of the Act) of the FINL.
Provided further that, as required by existing laws, the country

or state of the applicant must also allow Filipino citizens and
corporations to do business therein.
b. Non-Philippine nationals qualified to do business per paragraph

(a) above, but who will engage in more than one investment area,
one or more of which is the FINL, may be registered under the
175
Act. However, said non-Philippine national will not be allowed to

engage in the investment areas which are in the FINL.
c. Existing enterprises, which are non-Philippine nationals at the

time of effectivity of the Act and which intend to increase the
percentage of foreign equity participation under the Act, beyond
that previously authorized by SEC, shall be governed by the
qualifications in item (a) above. Thus, existing enterprises shall
be allowed to increase the percentage share of foreign equity
participation beyond current equity holdings only if their existing
investment area is not in the FINL. Similarly, existing enterprises
engaged in more than one (1) investment area shall be allowed
to increase percentage of foreign equity participation if none of
the investment areas they are engaged in is in the FINL.
Existing Foreign corporations shall be allowed to increase capital

even if their existing investment area is in the FINL.
Transfer of ownership from one foreign company to another shall

be allowed even if the enterprise is engaged in an area in the
FINL as long as there is the percentage share of foreign equity.
SECTION 2. APPLICATION FOR REGISTRATION
a. Filing of Application. Applications for registration shall be filed

with the SEC in the case of foreign corporations and domestic
corporation or partnerships which are non-Philippine nationals.
In the case of single proprietorships, applications for Metro
Manila shall be filed with the BTRCP or the DTI-National Capital
Region. In the provinces, applications may be filed with the
extension offices of the SEC for corporations/partnerships and
the provincial offices of the DTI for sole proprietorships.
b. Pre-processing of Documents. Pre-processing of documents

shall be undertaken to assist the investor in determining the
completeness of his documents. All applications are considered
officially accepted only upon submission of complete documents
to either the SEC or BTRCP. Applications for clearances
from the Department of National Defense (DND) or Philippine
National Police (PNP) for defense-related activities, or the DOST
176
for investments involving advanced technology shall be decided

upon by said agencies within fifteen (15) working days.
c. Approval. Within fifteen (15) working days from official acceptance

of an application, the SEC or BTRCP shall act on the same.
Otherwise, the application shall be considered as automatically
approved if it is not acted upon within said period for a cause not
attributable to the applicant.
SECTION 3. REGISTRATION WITH THE SEC
a. Existing Requirements. As required by existing laws and

regulations, an application form together with the following
documents shall be submitted to the SEC:
(1) In the case of a new domestic corporation or a partnership:
(i) Articles of Incorporation/Partnership
(ii) Name Verification Slip
(iii) Bank Certificate of Deposit
(iv) ACR/ICR, SIRV (Special Investors Resident Visa), Visa

#13 of the alien subscribers
(v) Proof of Inward Remittance (for non-resident aliens)
(2) In the case of a foreign corporation:
(i) Name verification slip
(ii) Certified Copy of the board Resolution authorizing the

establishment of an office in the Philippines; designating
the resident agent to whom summons and other legal
processes may be served in behalf of the foreign
corporation; and stipulating that in the absence of such
agent or upon cessation of its business in the Philippines,
the SEC shall receive any summons or legal processes
as if the same is made upon the corporation at its home
office.
177
(iii) Financial statements for the immediately preceding

year at the time of filing of the application, certified by
an independent Certified Public Accountant of the home
country,
(iv) Certified copies of the Articles of Incorporation/

Partnership with an English translation thereof if in
foreign language.
(v) Proof of inward remittance such as a bank certificate of

inward remittance or credit advices.
For representative office, the amount remitted initially should be

at least US$30,000.
If the paid-in equity/capital is in kind, additional requirements

shall be submitted to the SEC pursuant to its existing rules and
regulations.
All documents executed abroad should be authenticated by the

Philippine Embassy or Consular Office.
(3) In the case of an existing corporation intending to increase

foreign equity participation, all documents required of the
proposed transaction under applicable laws, rules and
regulations shall be submitted.
b. Additional Requirements. As required by the Act, the following

shall also be submitted to SEC.
(1) For enterprises wishing to engage in defense-related

activities, clearance from the National Defense or Philippine
National Police.
(2) For small and medium sized domestic market enterprises with
paid-in equity capital less than the equivalent of US$200,000
but not less than the equivalent of US$100,000, a certificate
from the Department of Science and Technology (DOST) that
the investment involves advanced technology, or a certificate
from the appropriate Department of Labor and Employment
(DOLE) Regional Office that the enterprise has issued an
178
undertaking to employ at least 50 direct employees shall be

submitted.
The DOLE through its Regional Offices, shall validate and

monitor compliance by the investor to the undertaking that
it will hire at least 50 direct employees within six (6) months
from the start of commercial operations. Non-satisfaction
of the undertaking shall be reported by the DOLE Regional
Office to the SEC, which shall cause the investor to satisfy
the appropriate higher investment requirement, with penalty
for failure to satisfy the undertaking.
(3) For former natural born Filipinos wishing to engage in

investment areas allowed to them under this Act, the following
documents are required:
(i) Copy of birth certificate
(i.1) Certified by the local civil registrar or the National

Statistics Office (NSO); or
(i.2) For those born abroad, certificate of birth from the

appropriate government agency of the country
where the birth is recorded showing the father or
mother to be a Filipino at the time of birth or if the
citizenship of the parents is to indicated, additional
proof that the parent/s is a Filipino citizen or has
not lost his/her Filipino citizenship at the time of the
applicant investor’s birth.
(ii) Those born before 17 January 1973 of Filipino mothers

must additionally submit all of the following: certified true
copies of his/her sworn statement of election of Filipino
citizenship, oath of allegiance from the civil registrar
where the documents were filed and/or forwarded,
and identification certified issued by the Bureau of
Immigration;
(iii) In case of loss and/or destruction of the record of birth or

non-registration of birth
179
(iii.1) Certificate of non-availability of birth certificate on

account of loss and/or destruction of birth record
from the local civil registrar and/or appropriate
government agency if birth was registered
abroad;
(iii.2) Copy of birth certificate of mother or father certified

by the local civil registrar or the NSO; and
(iii.3) Affidavit of two (2) disinterested persons attesting

to their personal knowledge that at the time of the
applicant’s birth, the child was born of a Filipino
mother or Father.
Any document executed or issued abroad must be authenticated

by the Philippine embassy or consulate having jurisdiction over
the place of execution or issuance of the document.
c. Application Fee. A reasonable application fee to be determined

by the SEC shall be collected from each applicant.
d. SEC Action. Upon fulfillment of all SEC requirements and

favorable evaluation by the SEC, the Certificate of Registration
under the Act for domestic corporations and partnerships, or
license to do business in the case of foreign corporation, shall be
issued by the SEC. In case of disapproval, the SEC shall also
inform the applicant in writing of the reasons for the disapproval
of the registration.
SECTION 4. REGISTRATION WITH THE BTRCP-DEPARTMENT OF

TRADE AND INDUSTRY.
a. Existing Requirements. As required by existing laws and

regulations, BTRCP Form No. 17 and accompanying documents
shall be submitted to BTRCP.
All documents executed abroad should be authenticated by the

Philippine Embassy or Consular Office.
180
b. Additional Requirements. The additional requirements for

corporations and partnerships provided under Sec. 3(b) hereof
shall be complied with.
c. Application Fee. A reasonable application fee to be determined

by BRCP shall be collected from each applicant.
d. BTRCP-DTI Action. Upon fulfillment of all BTRCP-DTI

requirements and favorable evaluation by DTI, the Certificate of
Registration for Sole Proprietorship shall be issued by DTI. In
case of disapproval, DTI shall also inform the applicant in writing
of the reasons for the disapproval of the registration.
SECTION 5. REGISTRATION OF NON-PHILIPPINE NATIONALS

INTENDING TO ENGAGE IN THE SAME LINE OF BUSINESS AS THEIR
EXISTING JOINT VENTURE
a. During the transitory period, any applicant who has an investment

in an existing joint venture, in which he or his majority shareholder
in the existing joint venture is a substantial partner, shall be
registered with the SEC or BTRCP in the same line of business
if the Filipino partners representing the majority of the Filipino
equity in the existing joint venture certify under oath that they
are not capable and willing to make the investment needed for
the domestic market activities, which is being proposed to be
undertaken by the applicant.
b. If the Filipino partners are willing and able to make the needed
investment, the SEC shall not register the applicant, in which
case, both joint venture partners may agree to undertake the
expansion. Both partners are then required to place the balance
of their agreed upon investment shares within six (6) months
from the date of agreement. The Filipino partner (s) shall not
be compelled to make additional investment for the proposed
expansion of domestic market activities, if such will result in a
higher Filipino equity share. If the Filipinos partner (s) fails to
infuse said capital within said period, per the report of the non-
Philippine national applicant to the SEC, the SEC or BTRCP
shall then allow the registration of said non-Philippine national
applicant as a separate enterprise under the Act.
181
RULE V. REGISTRATION WITH THE CENTRAL BANK
SECTION 1. CB REQUIREMENTS. Enterprises seeking to remit foreign

exchange abroad for purposes of remittance of profits and dividends
and capital repatriation in connection with the foreign investment made
pursuant to the Act shall be deemed registered with the CB after SEC or
BTRCP registration. For this purpose, CB rules and regulations covering
procedures for registration of foreign investments shall be observed.
RULE VI. FOREIGN INVESTMENTS IN EXPORT ENTERPRISES
SECTION 1. ALLOWABLE FOREIGN EQUITY PARTICIPATION. Foreign

equity participation in export enterprises shall be allowed up to one hundred
percent (100%) provided that the products and services of such enterprises
do not fall within Lists A and B of the FINL.
SECTION 2. REGISTRATION OF EXPORT ENTERPRISES. Export

enterprises shall be deemed registered with the BOI pursuant to Section 6
of the Act upon registration with the SEC or BTRCP.
Enterprises registered under the Act seeking to avail of incentives under

EO 226 must apply for registration with the BOI. Rules and regulations on
EO 226 shall be observed for this purpose.
Within ten (10) working days from the issuance of the certificate of
registration, the SEC or BTRCP shall transmit to BOI copies of the Certificate
of Registration together with the application form duly accomplished by the
export enterprises.
SECTION 3. SUBMISSION OF REPORTS. All duly registered export

enterprises under this Rule shall submit to the Board of Investments a
duly accomplished form within six (6) months after the end of each taxable
year.
Failure of export enterprises to submit the required reports within the

prescribed period of time of the submission of fraudulent reports shall be a
ground for the SEC or BTRCP to impose appropriate sanctions as provided
for under Rule XVII, Section 1, of these Rules and Regulations.
SECTION 4. MONITORING OF COMPLIANCE WITH THE EXPORT

REQUIREMENT. Upon receipt of the reports submitted by the export
182
enterprise, the BOI shall determine compliance of the enterprise with

the export requirement. If the enterprise fails to comply with the export
requirement, the BOI shall advise the SEC or BTRCP of said failure. The
SEC or BTRCP shall require the firm to immediately increase its export to
at least sixty percent (60%) of total sales. If the firm fails to comply with
the order of the SEC or BTRCP without any justifiable reason, it shall be
penalized in accordance with the provisions of Rule XVIII, Section 1, of
these Implementing Rules and Regulations. The BOI, in consultation with
the SEC and BTRCP shall issue guidelines for this purpose.
RULES VII. FOREIGN INVESTMENTS IN

DOMESTIC MARKET ENTERPRISES
SECTION 1. ALLOWABLE FOREIGN EQUITY PARTICIPATION. Foreign

equity participation in domestic market enterprises shall be allowed up
to one hundred percent (100%) unless such participation is prohibited or
limited by existing laws or the FINL.
SECTION 2. CHANGE OF STATUS FROM DOMESTIC MARKET

ENTERPRISE TO EXPORT ENTERPRISE. A domestic market enterprise
may change its status to an export enterprise any time by notifying the
SEC or BTRCP.
Section 2 of Rule VI shall apply for any change of status from domestic to
export enterprise. Such application shall be supported by relevant reports
as evidence that the applicant enterprise has exported sixty percent (60%)
or more of its output.
The new export enterprise shall be subject to the reportorial requirements

and shall be monitored for its compliance with the export requirements
under Sections 3 and 4, respectively, of Rule VI of these Rules and
Regulations.
RULE VIII. THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1. DESCRIPTION. The Regular FINL shall have two component

lists: A and B, ;which shall contain areas of economic activities reserved to
Philippine nationals. The description and guidelines governing Lists A and
B are provided for in Rules IX, X and XI hereof, respectively.
183
SECTION 2. FORMULATION. The NEDA shall be responsible for the

formulation of the Regular FINL, following the process and criteria provided
in Section 8 of the Act and in Rules IX and X hereof.
SECTION 3. APPROVAL. The NEDA shall submit the proposed Regular

FINL to the President for approval and promulgation. The NEDA shall submit
the first Regular FINL and subsequent proposed RFINLs to the President
at least forty five (45) days before the scheduled date of publication.
SECTION 4. PUBLICATION. The NEDA shall publish the first Regular

Negative List not later than sixty (60) days before the end of the transitory
period. Subsequent Negative Lists shall be published not later than fifteen
(15) days before the end of the effectivity of the current Negative List.
SECTION 5. EFFECTIVITY. The first Regular Negative shall become

immediately effective at the end of the transitory period. Subsequent
Regular FINLs shall become effective fifteen (15) days after publication
in a newspaper of general circulation in the Philippines. Except for List A,
each Regular FINL shall remain in force for two (2) years from the date of
its effectivity.
SECTION 6. COVERAGE OF OPERATION. Each Regular FINL shall

apply only to new foreign investments and shall not affect existing foreign
investments at the same time of its publication.
RULE IX. GUIDELINES FOR LIST OF

THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1. COVERAGE. List A of the FINL shall consist of the areas of

activities reserved to Philippine nationals where foreign equity participation
in any domestic or export enterprise engaged in any activity listed therein
shall be limited to a maximum of forty percent (40%) as prescribed by the
Constitution and other specific laws.
The NEDA shall make an enumeration of said activities reserved to

Philippine nationals by the Constitution and other specific laws.
SECTION 2. AMENDMENTS. Amendments to List A may be made by

the NEDA anytime to reflect changes made by law regarding the extent of
foreign equity participation in any specific area of economic activity.
184
RULE X. GUIDELINES FOR LIST B OF

THE REGULAR FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1. COVERAGE. List B shall consist of the following:
a. Activities where foreign ownership is limited pursuant to law such

as defense or law enforcement-related, requiring prior clearance
and authorization from the DND or PNP, to engage in such activity
as the manufacture, repair, storage and/or distribution of firearms,
ammunition, armored vests and other bullet proof attires, lethal
weapons, military ordnance, explosives, pyrotechnics and similar
materials.
However, the manufacture and repair of said items may be

specifically authorized by the Secretary of National Defense
or Chief of the PNP, to non-Philippine nationals, provided a
substantial percentage of output as determined by said agencies
is exported.
Compliance with the export requirement shall be monitored by

the DND or PNP, as the case may be.
b. Activities which have negative implications on public health and

morals, such as the manufacture and distribution of dangerous
drugs, all forms of gambling, sauna and steam bathhouses and
massage clinics.
b. Small and medium-sized domestic market enterprises with

paid-in equity capital of less than US$200,000 or its equivalent:
However, small and medium sized domestic market enterprises
which involve advanced technology or which issue an undertaking
to employ at least fifty (50) direct employees are allowed a
minimum paid in capital of US$100,000 or its equivalent.
SECTION 2. PROCESS FOR DETERMINATION OF LIST B.
a. Activities (a) and (b) above shall be determined upon

recommendation of the Secretary of National Defense, Chief of
the PNP, Secretaries of Health or Education, Culture and Sports
and endorsed by the NEDA or upon recommendation motu
185
propio of NEDA, approved and promulgated by the President.

List B shall be submitted for Presidential action together with List
A. The NEDA shall inform said agencies of the deadline for the
submission of their recommendations.
b. Enterprises which are covered by Section 1 (c) above are

automatically reserved to Philippine nationals.
SECTION 3. AMENDMENTS. Amendments to List B shall be made only

after two years, upon the recommendation of the Secretary of National
Defense, Chief of the PNP, Secretaries of Health and Education, Culture
and Sports, endorsed by the NEDA, or upon recommendation motu propio
of NEDA, approved and promulgated by the President. List B shall be
submitted for Presidential action together with List A.
RULE XI. INVESTMENT RIGHTS OF

FORMER NATURAL BORN FILIPINOS
SECTION 1. Former natural born citizens of the Philippines shall have

the same investment rights of a Philippine citizen I cooperatives under RA
6938, rural banks under RA 7353, thrift banks and private development
banks under RA 7906, financing companies under RA 5980, and activities
listed under B including defense-related activities, if specifically authorized
by the Secretary of National Defense.
RULE XII. RIGHTS OF FORMER

NATURAL BORN FILIPINOS TO OWN PRIVATE LAND
SECTION 1. Any natural born citizen who has lost his Philippine citizenship
and who has the legal capacity to enter into a contract under Philippine
laws may be a transferee of a private land up to a maximum area of 5,000
square meters in the case of urban land or three (3) hectares in the case of
rural land to be used by him for business or other purposes.
SECTION 2. In case where both spouses are qualified under the law, one
of them may avail of the said privilege. However, if both shall avail of the
privilege, the total area acquired shall not exceed the maximum allowed.
SECTION 3. In case the transferee already owns urban or rural land for
business or other purposes, he shall still be entitled to be a transferee of
186
additional urban or rural land for business or other purposes, which when
added to those already owned by him shall not exceed the maximum areas
allowed.
SECTION 4. A transferee acquire not more than two (2) lots which should
be situated in different municipalities or cities anywhere in the Philippines.
The total land area acquired shall not exceed 5,000 square meters in the
case of urban land or three (3) hectares in the case of rural land for use by
him for business or other purposes. A transferee who has already acquired
urban land shall be disqualified from acquiring rural land and vice versa.
However, if the transferee has disposed of his urban land, he may still
acquire rural land and vice versa, provided that the same shall be used for
business or other purposes.
SECTION 5. Land acquired under this Act shall be primarily, directly

and actually used by the transferee in the performance or conduct of his
business or commercial activities in the broad areas of agriculture, industry
and services, including the lease of land, but excluding the buying and
selling thereof. A transferee shall use his land to engage in activities that
are not included in the Negative List or in those areas wherein investment
rights have been granted to him under this Act.
SECTION 6. REGISTRATION OF LAND. The Register of Deeds in the

province or city where the land is located shall register the land in the name
of the transferee that it will be used for any of the purposes mentioned in
Section 5 above, i.e., certification of business registration issued by the
BTRCP/Department of Trade and Industry and affidavit that the land shall
be used for business purposes.
The provision of BP 185 (An Act to Implement Section 15 of Article XIV of

the Constitution and for Other Purposes Pertaining to the Ownership of
Private Lands for Residential Purposes by Former Natural Born Filipinos)
and its implementing Rules and Regulations shall be adopted, where
applicable, in the implementation of this Act through a Circular to be issued
by the Land Registration Authority.
The Register of Deeds shall also ensure that the limits prescribed by law
are observed.
187
RULE XIII. TRANSITORY PROVISIONS
SECTION 1. Prior to effectivity of these Implementing Rules and

Regulations, the provision of Book II of EO 226 and its implementing rules
and regulations shall govern the registration of foreign investments without
incentives.
SECTION 2. There shall be a transitory period of thirty-six (36) months

after issuance of these Implementing Rules and Regulations to implement
the Act.
SECTION 3. During the transitory period, the Transitory FINL described in

Rule XIV, Section 1 hereof shall take effect.
RULE XIV. TRANSITORY FOREIGN INVESTMENT NEGATIVE LIST
SECTION 1. DESCRIPTION. The Transitory FINL shall consist of the

following:
a. List A
All investment areas in which foreign ownership is limited by
mandate of the Constitution and specific laws.
b. List B
(1) Manufacture, repair, storage and/or distribution of firearms,
ammunition, armored vests and other bullet proof attires,
lethal weapons, military ordnance, explosives, pyrotechnics
and similar materials required by law to be licensed by and
under the continuing regulation of the DND or of the PNP, as
the case may be.
However, the manufacture or repair of these items may be

specifically authorized by the Secretary of National Defense,
or the Chief of the PNP to non-Philippine nationals, provided
a substantial percentage of output, as determined by the
said agencies, is exported.
The extent of foreign equity ownership allowed shall be

specified in the said authority/clearance.
188
Compliance with the export requirement shall be monitored

by the DND or PNP, as the case may be;
(2) Manufacture and distribution of dangerous drugs; all forms

of gambling, sauna and steam bath houses, massage clinics
and other like activities regulated by law because of risks
they may pose to public health and morals;
(3) “Small and medium-sized domestic market enterprises

with paid-in equity capital less than the equivalent of Two
hundred thousand US dollars (US$200,000.00), are reserved
to Philippine nationals: Provided, That if: (1) they involve
advanced technology as determined by the Department of
Science and Technology or (2) they employ at least fifty (50)
direct employees, then a minimum paid-in capital of One
hundred thousand US dollars (US$100,000.00) shall be
allowed to non-Philippine nationals.
SECTION 2. FORMULATION OF THE TRANSITORY FOREIGN

INVESTMENT NEGATIVE LIST.
a. NEDA, in consultation with relevant agencies, shall enumerate,

as appropriate, the areas of investment covered in this Transitory
FINL.
b. The Transitory FINL shall be published in full at the same time

as, or prior to, the publication of these Implementing Rules and
Regulations to implement the Act.
RULE XV. OPTIONS FOR EXISTING

BOI-REGISERED ENTERPRISES
SECTION 1. Existing enterprises which have been issued Certificates

of Authority to do Business or to Accept Permissible Investments under
Book II of EO 226, Book II of PD 1789 and RA 5455, whose activities
are included in the Transitory FINL or in Subsequent Negative List, are
allowed to continue to undertake the same activities which they have been
authorized to do subject to the same terms and conditions stipulated in
their certificates of registration.
189
Those whose activities have been previously authorized under Book II

of EO 226, Book II of PD 1789, and RA 5455, and whose activities are
not in the Transitory FINL or in subsequent Negative Lists may opt to be
governed by the provisions of the Act. Said enterprises shall be considered
automatically registered with the SEC upon surrender of their certificates
of authority to the BOI. The SEC shall issue a new certificate of authority
upon advise of the BOI.
SECTION 2. Existing enterprise with more than forty percent (40%)

foreign equity which have availed of incentives under any of the investment
incentives laws implemented by the BOI may opt to be governed by the
Act. In such cases, said enterprises shall be required to surrender their
certificates of registration, which shall be deemed as an express waiver
of their privilege to apply for and avail of incentives under the incentives
law under which they were previously registered. Subject to BOI rules
and regulations, said enterprises may be required to refund all capital
equipment incentives availed of.
RULE XVI. CONSISTENT GOVERNMENT ACTION
SECTION 1. No agency, instrumentality or political subdivision of the

Government shall take any action in conflict with or which will nullify the
provisions of the Act, of any certificate or authority granted hereunder.
RULE XVII. COMPLIANCE WITH ENVIRONMENTAL STANDARDS
SECTION 1. All industrial enterprises, regardless of nationality or

ownership, shall comply with existing rules and regulations, and applicable
environmental standards set by the Department of Environment and
Natural Resources (DENR) to protect and conserve the environment.
The DENR shall provide the SEC with a list of environmentally critical
activities/ projects and area. Necessary clearances may be secured after
registration with the SEC.
RULE XVIII. ADMINISTRATIVE SANCTIONS
SECTION 1. FOREIGN INVESTMENTS IN EXPORT ENTERPRISES.

Non-compliance by any duly-registered export enterprise with Rule VI,
Section 3 and 4 above shall be subject to the following sanctions:
190
a. For late submission of the required annual report –
1st violation – written warning
2nd violation – basic fine of P1,000.00 and a daily fine of P50.00
3rd violation – basic fine of P2,000.00 and a daily fine of

P100.00
Subsequent violation – basic fine of P5,000.00
b. For the submission of fraudulent reports –
FINE Partnership / Corporation Sole Proprietorship

1st violation ------ P100,000.00 P50,000.00
2nd violation ------ P150,000.00 P70,000.00
3rd violation ------ Fine in an amount not P100,000.00
exceeding ½ of 1% of total
paid-in capital but not more
than Five Million Pesos
Subsequent ------- Cancellation of registration
granted under the Act
The President and/or official/personnel of the partnership/

corporation responsible for the submission of fraudulent reports
shall be subject to the following sanction:
1st violation - a fine of P50,000.00
2nd violation - a fine of P100,000.00
3rd violation - a fine of P200,000.00
c. For non-submission of the required reports within twelve (12)

months after the taxable year, cancellation of the certificate of
registration granted under the Act.
191
d. For failure of any duly-registered export enterprise to comply

without justifiable reason, with the SEC, BTRCP order to increase
its export to at least sixty percent (60%) of total sales.
Partnership / Corporation Sole Proprietorship

st
1 violation ------ P100,000.00 P50,000.00
nd
2 violation ------ P150,000.00 P70,000.00
rd
3 violation ------ Fine in an amount not P100,000.00
exceeding ½ of 1% of total
paid-in capital but not more
than Five Million Pesos
4th violation ------ Cancellation of registration
granted under the Act
The President and/or official/personnel of the partnership/

corporation responsible for the failure to comply with the said
SEC or BTRCP order shall be subject to the following sanction:
1st violation - a fine of P50,000.00
2nd violation - a fine of P100,000.00
3rd violation - a fine of P200,000.00
SECTION 2. COMPLIANCE WITH ENVIRONMENTAL STANDARDS.

Any industrial enterprise, regardless of nationality of ownership which fails
to comply with existing rules and regulations to protect and conserve the
environment and meet applicable environment standards shall be subject
to the sanctions as may be provided for in the rules and regulations of the
DENR.
SECTION 3. HEARING OF VIOLATIONS OF THE ACT. The SEC or

BTRCP shall adopt their respective rules and regulations for the purpose of
conducting hearings and investigations involving violations of the provision
of the Act and these Implementing Rules and Regulations.
SECTION 4. OTHER GROUNDS FOR CANCELLATION. The following

are other grounds for the cancellation of the certificate of registration
granted under the act.
192
a. Failure of a non-Philippine national intending to engage in the

same line of business as an existing joint venture, in which he or
his majority shareholder is a substantial partner, to disclose such
fact and the names and addresses of the partners in the existing
joint venture in his application for registration with the SEC; or
b. Commission of any other fraudulent act.
SECTION 5. OTHER VIOLATIONS. Any other violation of the Act and these
Implementing Rules and Regulations shall be penalized in accordance with
Section 14 of the Act.
RULE XIX. EFFECTIVTY
SECTION 1. These amended Implementing Rules and Regulations shall

take effect fifteen (15) days after publication in a newspaper of general
Approved by the NEDA Board on 9 July 1996
Cielito F. Habito
Secretary of Socio-Economic
Planning & NEDA Director General
DTI-BOI Publication
Reprinted with revisions October 1996
193
AN ACT ACCELERATING THE CONVERSION OF MILITARY

RESERVATIONS INTO OTHER PRODUCTIVE USES,
CREATING THE BASES CONVERSION AND DEVELOPMENT
AUTHORITY FOR THE PURPOSE, PROVIDING FUNDS
THEREFORE AND FOR OTHER PURPOSES

SECTION 1. Short Title. – This Act shall be known as the

“Bases Conversion and Development Act of 1992.”
SEC. 2. Declaration of Policies. – It is hereby declared the

policy of the Government to accelerate the sound and balanced
conversion into alternative productive uses of the Clark and Subic
military reservations and their extensions (John Hay Station,
Wallace Air Station, O’Donnell Transmitter Station, San Miguel
Naval Communications Station and Capas Relay Station), to raise
funds by the sale of portions of Metro Manila military camps, and
to apply said funds as provided herein for the development and
conversion to productive civilian use of the lands covered under the
1947 Military Bases Agreement between the Philippines and the
United States of America, as amended.
It is likewise the declared policy of the Government to enhance

the benefits to be derived from said properties in order to promote
the economic and social development of Central Luzon in particular
and the country in general.
SEC. 3. Creation of the Bases Conversion and Development

Authority. – There is hereby created a body corporate to be known
as the Bases Conversion and Development Authority, hereinafter
referred to as the Conversion Authority, which shall have the
attribute of perpetual succession and shall be vested with the powers
of a corporation.
194
It shall be organized within thirty (30) days after approval of

this Act. It shall have a term of fifty (50) years from its organization:
Provided, that Congress, by a joint resolution, may dissolve the
Conversion Authority whenever in its judgment the primary
purpose for its creation has been accomplished. It shall establish its
principal office in Metropolitan Manila unless otherwise provided
by the Conversion Authority and may put up such branches as may
be necessary.
SEC. 4. Purposes of the Conversion Authority. – The

Conversion Authority shall have the following purposes:
(a) To own, hold and/or administer the military reservations

of John Hay Air Station, Wallace Air Station, O’Donnell Transmitter
Station, San Miguel Naval Communications Station, Mt. Sta. Rita
Station (Hermosa, Bataan) and those portions of Metro Manila
military camps which may be transferred to it by the President;
(b) To adopt, prepare and implement a comprehensive and

detailed development plan embodying a list of projects including
but not limited to those provided in the Legislative-Executive
Bases Council (LEBC) framework plan for the sound and balanced
conversion of the Clark and Subic military reservations and their
extensions consistent with ecological and environmental standards,
into other productive uses to promote the economic and social
development of Central Luzon in particular and the country in
general;
(c) To encourage the active participation of the private

sector in transforming the Clark and Subic military reservations
and their extensions into other productive uses;
(d) To serve as the holding company of subsidiary companies

created pursuant to Section 16 of this Act and to invest in Special
Economic Zones declared under Sections 12 and 15 of this Act;
(e) To manage and operate through private sector companies

developmental projects outside the jurisdiction of subsidiary
195
companies and Special Economic Zones declared by presidential

proclamations and established under this Act;
(f) To establish a mechanism in coordination with the

appropriate local government units to effect meaningful consultation
regarding the plans, programs and projects within the regions where
such plans, programs and/or project development are part of the
conversion of the Clark and Subic military reservations and their
extensions and the surrounding communities as envisioned in this
Act; and
(g) To plan, program and undertake the readjustment,

relocation, or resettlement of population within the Clark and
Subic military reservations and their extensions as may be
deemed necessary and beneficial by the Conversion Authority, in
coordination with the appropriate government agencies and local
government units.
SEC. 5. Powers of the Conversion Authority. – To carry out

its objectives under this Act, the Conversion Authority is hereby
vested with the following powers:
(a) To succeed in its corporate name, to sue and be sued in

such corporate name and to adopt, alter and use a corporate seal
which shall be judicially noticed;
(b) To adopt, amend and repeal its bylaws;
(c) To enter into, make, perform and carry out contracts of

every class, kind and description which are necessary or incidental to
the realization of its purposes with any person, firm or corporation,
private or public, and with foreign government entities;
(d) To contract loans, indebtedness, credit and issue

commercial papers and bonds, in any local or convertible foreign
currency from any international financial institutions, foreign
government entities, and local or foreign private commercial banks
or similar institutions under terms and conditions prescribed by
law, rules and regulations;
196
(e) To execute any deed of guarantee, mortgage, pledge,

trust or assignment of any property for the purpose of financing
the programs and projects deemed vital for the early attainment
of its goals and objectives, subject to the provisions of Article VII,
Section 20, and Article XII, Section 2, paragraphs (4) and (5) of the
Constitution;
(f) To construct, own, lease, operate and maintain public

utilities as well as infrastructure facilities;
(g) To reclaim or undertake reclamation projects as it may

deem necessary in areas adjacent or contiguous to the Conversion
Authority’s lands described in Section 7 of this Act either by itself or
in collaboration with the Public Estates Authority (PEA) established
under Presidential Decree No. 1084 as amended;
(h) To acquire, own, hold, administer, and lease real and

personal properties, including agricultural lands, property rights
and interests and encumber, lease, mortgage, sell, alienate or
otherwise dispose of the same at fair market value it may deem
appropriate;
(i) To receive donations, grants, bequests and assistance of

all kinds from local and foreign governments and private sectors
and utilize the same;
(j) To invest its funds and other assets other than those of
the Special Economic Zones under Section 12 and 15 of this Act in
such areas it may deem wise;
(k) To exercise the right of eminent domain;
(l) To exercise oversight functions over the Special Economic

Zones declared under this Act and by subsequent presidential
proclamations within the framework of the declared policies of this
Act;
(m) To promulgate all necessary rules and regulations; and
197
(n) To perform such other powers as may be necessary and

proper to carry out the purposes of this Act.
SEC. 6. Capitalization. – The Conversion Authority

shall have an authorized capital of One hundred billion pesos
(P100,000,000,000) which may be fully subscribed by the Republic
of the Philippines and shall either be paid up from the proceeds of
the sales of its land assets as provided for in Section 8 of this Act
or by transferring to the Conversion Authority properties valued in
such amount.
An initial operating capital in the amount of Seventy million

pesos (P70,000,000) is hereby authorized to be appropriated out
of any funds in the National Treasury not otherwise appropriated
which shall be covered by preferred shares of the Conversion
Authority retireable within two (2) years.
SEC. 7. Transfer of Properties. – Pursuant to paragraph

(a), Section 4 hereof, the President shall transfer forthwith to the
Conversion Authority:
(a) Station
Area in has. (more or less)
John Hay Air Station 570
Wallace Air Station 167
O’Donnell Transmitter Station 1,755
San Miguel Naval Communications Station 1,100
Mt. Sta. Rita Station (Hermosa, Bataan)
(b) Such other properties including, but not limited to,

portions of Metro Manila military camps, pursuant to Section 8 of
this Act: provided, however, that the areas which shall remain as
198
military reservations shall be delineated and proclaimed as such by

the President.
SEC. 8. Funding Scheme. – The capital of the Conversion

Authority shall come from the sales proceeds and/or transfers of
certain Metro Manila military camps, including all lands covered
by Proclamation No. 423, series of 1957, commonly known as Fort
Bonifacio and Villamor (Nicholas) Air Base, namely:
Camp Area in has. (more or less)
Phase I (for immediate disposal)
1. Camp Claudio 2.0
2. Camp Bago Bantay 5.0
3. Part of Villamor Air Base 135.10
4. Part of Fort Bonifacio 498.40

----------
Total 640.50
=======
Phase II
1. Camp Ver 1.9

2. Camp Melchor 1.0
3. Camp Atienza 4.9
4. Part of Villamor Air Base 37.9
5. Part of Fort Bonifacio 224.90
6. Fort Abad 60
––––
Total 271.20
=======
Provided, that the following areas shall be exempt from sale:
(a) Approximately 148.80 hectares in Fort Bonifacio for the

National Capital Region (NCR) Security Brigade, Philippine Army
199
(PA) officers’ housing area, and Philippine National Police (PNP)

jails and support services (Presently Camp Bagong Diwa);
(b) Approximately 99.91 hectares in Villamor Air Base for

the Presidential Airlift Wing, one squadron of helicopters for the
NCR and respective security units;
(c) The following areas segregated by Proclamation Nos.:
(1) 461, series of 1965; (AFP Officers Village)
(2) 462, series of 1965; (AFP Enlisted Men’s Village)
(3) 192, series of 1967; (Veterans Center)
(4) 208, series of 1967; (National Shrines)
(5) 469, series of 1969; (Philippine College of

Commerce)
(6) 653, series of 1970; (National Manpower and Youth

Council)
(7) 684, series of 1970; (University Center)
(8) 1041, series of 1972; (Open Lease Concession)
(9) 1160, series of 1973; (Manila Technical Institute)
(10) 1217, series of 1973; (Maharlika Village)
(11) 682, series of 1970; (Civil Aviation Purposes)
(12) 1048, series of 1975; (Civil Aviation Purposes)
(13) 1453, series of 1975; (National Police Commission)
(14) 1633, series of 1977; (Housing and Urban

Development)
200
(15) 2219, series of 1982; (Ministry of Human Settlements,

BLISS)
(16) 172, series of 1987; (Upper, Lower and Western

Bicutan and Signal Housing)
(17) 389, series of 1989; (National Mapping and Resource

Information Authority)
(18) 518, series of 1990; (CEMBO, SO CEMBO, W REMBO,

E REMBO, COMEMBO, PEMBO, PITOGO)
(19) 467, series of 1968; (Greater Manila Terminal Food

Market Site)
(20) 347, series of 1968; (Greater Manila Food Market

Site)
(21) 376, series of 1968; (National Development Board

and Science Community)
(d) A proposed 30.15 hectares as relocation site for families to

be affected by circumferential road 5 and radial road 4 construction:
provided, further, that the boundaries and technical description
of these exempt areas shall be determined by an actual ground
survey.
The President is hereby authorized to sell the above lands, in

whole or in part, which are hereby declared alienable and disposable
pursuant to the provisions of existing laws and regulations
governing sales of government properties: provided, that no sale or
disposition of such lands will be undertaken until a development
plan embodying projects for conversion shall be approved by the
President in accordance with paragraph (b), Section 4, of this Act.
However, six (6) months after approval of this Act, the President
shall authorize the Conversion Authority to dispose of certain areas
in Fort Bonifacio and Villamor as the latter so determines. The
Conversion Authority shall provide the President a report on any
such disposition or plan for disposition within one (1) month from
201
such disposition or preparation of such plan. The proceeds from any

sale, after deducting all expenses related to the sale, of portions of
Metro Manila military camps as authorized under this Act, shall be
used for the following purposes with their corresponding percent
shares of proceeds:
(1) Thirty-two and five-tenths percent (35.5%) – To finance

the transfer of the AFP military camps and the construction of new
camps, the self-reliance and modernization program of the AFP, the
concessional and long-term housing loan assistance and livelihood
assistance to AFP officers and enlisted men and their families, and
the rehabilitation and expansion of the AFP’s medical facilities;
(2) Fifty percent (50%) – To finance the conversion and the

commercial uses of the Clark and Subic military reservations and
their extentions;
(3) Five Percent (5%) – To finance the concessional and long-

term housing loan assistance for the homeless of Metro Manila,
Olongapo City, Angeles City and other affected municipalities
contiguous to the base areas as mandated herein; and
(4) The balance shall accrue and be remitted to the National

Treasury to be appropriated thereafter by Congress for the sole
purpose of financing programs and projects vital for the economic
upliftment of the Filipino people.
Provided, that, in the case of Fort Bonifacio, two and five

tenths percent (2.5%) of the proceeds thereof in equal shares
shall each go to the Municipalities of Makati, Taguig and Pateros:
provided, further, that in no case shall farmers affected be denied
due compensation.
With respect to the military reservations and their extensions,

the President upon recommendation of the Conversion Authority or
the Subic Authority when it concerns the Subic Special Economic
Zone shall likewise be authorized to sell or dispose those portions of
lands which the Conversion Authority or the Subic Authority may
find essential for the development of their projects.
202
SEC. 9. Board of Directors: Composition. – The powers

and functions of the Conversion Authority shall be exercised by a
Board of Directors to be composed of nine (9) members, as follows:
(a) A full-time chairman who shall also be the president of

the Conversion Authority; and
(b) Eight (8) other members from the private sector, two (2)
of whom coming from the labor sector.
The chairman and members shall be appointed by the

President with the consent of the Commission on Appointments. Of
the initial members of the Board, three (3) including the chairman,
a representative from the private sector and a representative from
the labor sector shall be appointed for a term of six (6) years, three
(3) for a term of four (4) years and the other three (3) for a term of
two (2) years. In case of vacancy in the Board, the appointee shall
serve the unexpired term of the predecessor.
No person shall be appointed or designated unless he

is a natural-born Filipino citizen, of good moral character, of
unquestionable integrity, and of recognized competence in relevant
fields including, but not limited to, economics, management,
international relations, law or engineering, preferably naval or
aeronautical.
The chairman and president of the Conversion Authority shall

have a fixed term of six (6) years.
All procedural matters in the conduct of board meetings shall

be prescribed in its internal rules.
Members of the Board shall receive a per diem of not more than
Five thousand pesos (P5,000) for every board meeting: provided,
however, that the per diem collected per month does not exceed the
equivalent of four (4) meetings: provided further, that the amount of
per diem for every board meeting may be increased by the President
but such amount shall not be increased within two (2) years after
its last increase.
203
SEC. 10. Functions of the Board. – The Board of Directors

shall be the policy-making body of the Conversion Authority and
shall perform the following functions:
(a) Determine the organizational structure of the Conversion

Authority, define the duties and responsibilities of all officials and
employees and adopt a compensation and benefit scheme at least
equivalent to that of the Central Bank of the Philippines;
(b) Appoint all officials down to the third level and authorize
the president of the Conversion Authority to appoint all others:
provided, that all appointments shall be on the basis of merit and
fitness and all personnel action shall be in pursuance of Civil Service
Laws, rules and regulations, except those coterminous employees of
the members of the Board;
(c) Prepare the annual and supplemental budgets of the

Conversion Authority;
(d) Submit an annual report of the operation of the

Conversion Authority to the President of the Philippines, President
of the Senate and Speaker of the House of Representatives;
(e) Carry out the purposes of the Conversion Authority with

the following terms and references:
(1) As much as possible, major conversion projects shall be

undertaken under the complete project turnkey or build-operate-
transfer (BOT) scheme, as provided under Republic Act Numbered
Sixty-nine hundred and fifty-seven (RA 6957); and
(2) Starting the fourth year of the Conversion Authority’s

full operation, a privatization or divestment program of its projects
and subsidiaries shall begin under general guidelines prescribed by
the President of the Philippines.
SEC. 11. Duties and Responsibilities of the President of the

Conversion Authority. – The president of the Conversion Authority
shall have the following duties and responsibilities:
204
(a) To act as Chief Executive Officer of the Conversion

Authority;
(b) To execute, administer and implement the policies and

measures approved by the Board;
(c) To direct and supervise the operations and administration

of the Conversion Authority;
(d) To represent the Conversion Authority in all dealings

with offices, agencies and instrumentalities of the Government and
with all persons and entities, public or private, domestic or foreign;
(e) To direct and supervise the preparation of the agenda for

the meeting of the Board, and to submit for the consideration of the
Board such policies and measures as he believes necessary to carry
out the purposes and objectives of this Act; and
(f) To exercise such other powers and functions provided in

the bylaws and as may be vested in him by the Board.
SEC. 12. Subic Special Economic Zone. – Subject to the

concurrence by resolution of the sangguniang panlungsod of the
City of Olongapo and the sangguniang bayan of the Municipalities
of Subic, Morong and Hermosa, there is hereby created a Special
Economic and Free-port Zone consisting of the City of Olongapo and
the Municipality of Subic, Province of Zambales, the lands occupied
by the Subic Naval Base and its contiguous extensions as embraced,
covered, and defined by the 1947 Military Bases Agreement between
the Philippines and the United States of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong
and Hermosa, Province of Bataan, hereinafter referred to as the
Subic Special Economic Zone whose metes and bounds shall be
delineated in a proclamation to be issued by the President of the
Philippines. Within thirty (30) days after the approval of this
Act, each local government unit shall submit its resolution of
concurrence to join the Subic Special Economic Zone to the office
of the President. Thereafter, the President of the Philippines shall
205
issue a proclamation defining the metes and bounds of the Zone as

provided herein.
The abovementioned zone shall be subject to the following

policies:
(a) Within the framework and subject to the mandate and

limitations of the Constitution and the pertinent provisions of the
Local Government Code, the Subic Special Economic Zone shall be
developed into a self-sustaining, industrial, commercial, financial
and investment center to generate employment opportunities in
and around the zone and to attract and promote productive foreign
investments;
(b) The Subic Special Economic Zone shall be operated

and managed as a separate customs territory ensuring free flow
or movement of goods and capital within, into and exported out
of the Subic Special Economic Zone, as well as provide incentives
such as tax and duty-free importations of raw materials, capital
and equipment. However, exportation or removal of goods from the
territory of the Subic Special Economic Zone to the other parts of
the Philippine territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax laws of
the Philippines;
(c) The provisions of existing laws, rules and regulations to

the contrary notwithstanding, no taxes, local and national, shall be
imposed within the Subic Special Economic Zone. In lieu of paying
taxes, three percent (3%) of the gross income earned by all businesses
and enterprises within the Subic Special Economic Zone shall be
remitted to the National Government, one percent (1%) each to the
local government units affected by the declaration of the zone in
proportion to their population area, and other factors. In addition,
there is hereby established a development fund of one percent (1%)
of the gross income earned by all businesses and enterprises within
the Subic Special Economic Zone to be utilized for the development
of municipalities outside the City of Olongapo and the Municipality
of Subic, and other municipalities contiguous to be base areas.
206
In case of conflict between national and local laws with respect

to tax exemption privileges in the Subic Special Economic Zone, the
same shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied and free

markets for foreign exchange, gold, securities and future shall be
allowed and maintained in the Subic Special Economic Zone;
(e) The Central Bank, through the Monetary Board, shall

supervise and regulate the operations of banks and other financial
institutions within the Subic Special Economic Zone;
(f) Banking and finance shall be liberalized with the

establishment of foreign currency depository units of local commercial
banks and offshore banking units of foreign banks with minimum
Central Bank regulation;
(g) Any investor within the Subic Special Economic Zone

whose continuing investment shall not be less than Two hundred
fifty thousand dollars ($250,000), his/her spouse and dependent
children under twenty-one (21) years of age, shall be granted
permanent resident status within the Subic Special Economic Zone.
They shall have freedom of ingress and egress to and from the Subic
Special Economic Zone without any need of special authorization
from the Bureau of Immigration and Deportation. The Subic Bay
Metropolitan Authority referred to in Section 13 of this Act may
also issue working visas renewal every two (2) years to foreign
executives and other aliens possessing highly-technical skills which
no Filipino within the Subic Special Economic Zone possesses, as
certified by the Department of Labor and Employment. The names
of aliens granted permanent residence status and working visas
by the Subic Bay Metropolitan Authority shall be reported to the
Bureau of Immigration and Deportation within thirty (30) days
after issuance thereof;
(h) The defense of the zone and the security of its

perimeters shall be the responsibility of the National Government
in coordination with the Subic Bay Metropolitan Authority. The
207
Subic Bay Metropolitan Authority shall provide and establish its

own internal security and firefighting forces; and
(i) Except as herein provided, the local government units

comprising the Subic Special Economic Zone 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. 13. The Subic Bay Metropolitan Authority. –
(a) Creation of the Subic Bay Metropolitan Authority.

– A body corporate to be known as the Subic Bay Metropolitan
Authority, is hereby created as an operating and implementing arm
of the Conversion Authority.
(b) Powers and Functions of the Subic Bay Metropolitan

Authority. – The Subic Bay Metropolitan Authority, otherwise
known as the Subic Authority, shall have the following powers and
functions:
(1) To operate, administer, manage and develop the ship

repair and ship building facility, container port, oil storage and
refueling facility and Subic Air Base within the Subic Special
Economic and Free-Port Zone as a free market in accordance with
the policies set forth in Section 12 of this Act;
(2) To accept any local or foreign investment, business

or enterprise, subject only to such rules and regulations to be
promulgated by the Subic Authority in conformity with the policies
of the Conversion Authority without prejudice to the nationalization
requirements provided for in the Constitution;
(3) To undertake and regulate the establishment, operation

and maintenance of utilities, other services and infrastructure in
the Subic Special Economic Zone including shipping and related
business, stevedoring and port terminal services or concessions,
incidental thereto and airport operations in coordination with the
208
Civil Aeronautics Board, and to fix just and reasonable rates, fares,
charges and other prices therefore;
(4) To construct, acquire, own, lease, operate and maintain

on its own or through contract, franchise, license permits bulk
purchase from the private sector and build-operate-transfer
scheme or joint-venture the required utilities and infrastructure
in coordination with local government units and appropriate
government agencies concerned and in conformity with existing
applicable laws therefore;
(5) To adopt, alter and use a corporate seal, to contract,

lease, sell, dispose, acquire and own properties; to sue and be sued
in order to carry out its duties and functions as provided for in this
Act and to exercise the power of eminent domain for public use and
public purpose;
(6) Within the limitation provided by law, to raise and/or

borrow the necessary funds from local and international financial
institutions and to issue bonds, promissory notes and other
securities for that purpose and to secure the same by guarantee,
pledge, mortgage, deed of trust, or assignment of its properties held
by the Subic Authority for the purpose of financing its projects and
programs within the framework and limitations of this Act;
(7) To operate directly or indirectly or license tourism-

related activities subject to priorities and standards set by the Subic
Authority including games and amusements, except horse racing,
dog racing and casino gambling which shall continue to be licensed
by the Philippine Amusement and Gaming Corporation (PAGCOR)
upon recommendation of the Conversion Authority; to maintain and
preserve the forested areas as a national park;
(8) To authorize the establishment of appropriate educational

and medical institutions;
(9) To protect, maintain and develop the virgin forests within

the baselands which will be proclaimed as a national park and
subject to a permanent total log ban, and for this purpose, the rules
209
and regulations of the Department of Environment and Natural

Resources and other government agencies directly involved in the
above functions shall be implemented by the Subic Authority;
(10) To adopt and implement measures and standards for

environmental pollution control of all areas within its territory,
including, but not limited to all bodies of water and to enforce the
same. For which purpose the Subic Authority shall create an Ecology
Center; and
(c) Board of Directors. – The powers of the Subic Authority

shall be vested in and exercised by a Board of Directors, hereinafter
referred to as the Board, which shall be composed of fifteen (15)
members, to wit:
(1) Representatives of the local government units that

concur to join the Subic Special Economic Zone;
(2) Two (2) representatives from the National Government;
(3) Five (5) representatives from the private sector coming

from the present naval stations, public works center, ship repair
facility, naval supply depot and naval air station; and
(4) The remaining balance to complete the Board shall be

composed of representatives from the business and investment
sectors.
The chairman and the members of the Board shall be

appointed by the President to serve for a term of six (6) years, unless
sooner removed for cause except for the representatives of the local
government units who shall serve for a term of three (3) years. In
case of removal for cause, the replacement shall serve only the
unexpired portion of the term.
No person shall be appointed as a member of the Board unless

he is a Filipino citizen, of good moral character, and of recognized
competence in relevant fields including, but not limited to economics,
management, international relations, law or engineering. Preference
210
in the appointment of the members of the Board shall be given to

residents within the Subic Special Economic Zone.
Members of the Board shall receive a per diem of not more

than Five thousand pesos (P5,000.00) for every board meeting:
provided, however, that the per diem collected per month does not
exceed the equivalent of four (4) meetings: provided, further, that
the amount of per diem for every board meeting may be increased
by the President: provided finally, that the amount of per diem shall
not be increased within two (2) years after its last increase.
(d) Chairman/Administrator. – The President shall appoint

a professional manager as administrator of the Subic Authority
with a compensation to be determined by the Board subject to the
approval of the Secretary of Budget, who shall be the ex officio
chairman of the Board and who shall serve as the chief executive
officer of the Subic Authority: provided, however, that for the first
year of its operations from the effectivity of this Act, the mayor of
the City of Olongapo shall be appointed as the chairman and chief
executive officer of the Subic Authority.
(e) Capitalization. – The Subic Authority shall have an

authorized capital stock of Twenty billion pesos (P20,000,000,000)
divided into twenty thousand (P20,000) no-par shares fully
subscribed and paid up by the Republic of the Philippines with:
(1) All lands embraced, covered and defined in Section

12 hereof, as well as permanent improvements and fixtures upon
proper inventory not otherwise alienated, conveyed, or transferred
to another government agency;
(2) All other assets which the President may transfer to the
Subic Authority as part of the equity contribution of the Government;
and
(3) Cash contribution by the Government in the amount

of Three hundred million pesos (P300,000,000) a year for the next
three (3) years, which is hereby appropriated out of any fund in the
National Treasury not otherwise appropriated.
211
SEC. 14. Relationship with the Conversion Authority and

the Local Government Units. –
(a) The provisions of existing laws, rules and regulations

to the contrary notwithstanding, the Subic Authority shall exercise
administrative powers, rule-making and disbursement of funds over
the Subic Special Economic Zone in conformity with the oversight
function of the Conversion Authority.
(b) In case of conflict between the Subic Authority and the

local government units concerned on matters affecting the Subic
Special Economic Zone other than defense and security, the decision
of the Subic Authority shall prevail.
SEC. 15. Clark and Other Special Economic Zones. – Subject

to the concurrence by resolution of the local government units
directly affected, the President is hereby authorized to create by
executive proclamation a Special Economic Zone covering the lands
occupied by the Clark military reservations and its contiguous
extensions as embraced, covered and defined by the 1947 Military
Bases Agreement between the Philippines and the United States of
America, as amended, located within the territorial jurisdiction of
Angeles City, Municipalities of Mabalacat and Porac, Province of
Pampanga, and the Municipality of Capas, Province of Tarlac, in
accordance with the policies as herein provided insofar as applicable
to the Clark military reservations.
The governing body of the Clark Special Economic Zone shall

likewise be established by executive proclamation with such powers
and functions exercised by the Export Processing Zone Authority
pursuant to Presidential Decree No. 66 as amended.
The policies to govern and regulate the Clark Special Economic

Zone shall be determined upon consultation with the inhabitants of
the local government units directly affected which shall be conducted
within six (6) months upon approval of this Act.
Similarly, subject to the concurrence by resolution of the

local government units directly affected, the President shall create
212
other Special Economic Zones, in the base areas of Wallace Air

Station in San Fernando, La Union (excluding areas designated for
communications, advance warning and radar requirements of the
Philippine Air Force to be determined by the Conversion Authority)
and Camp John Hay in the City of Baguio.
Upon recommendation of the Conversion Authority, the

President is likewise authorized to create Special Economic Zones
covering the Municipalities of Morong, Hermosa, Dinalupihan,
Castillejos, and San Marcelino.
SEC. 16. Subsidiaries. – The Conversion Authority shall have

the power to form, establish, organize and maintain a subsidiary
corporation or corporations. Such subsidiary or subsidiaries shall
be formed in accordance with the Philippine Corporation Law and
existing rules and regulations promulgated by the Securities and
Exchange Commission, unless otherwise provided in this Act. In all
cases, the Conversion Authority shall own initially at least fifty-one
per centum (51%) of the capital stock of a subsidiary. The Conversion
Authority shall also initially have the majority of the Board of
Directors of the subsidiaries, of which at least one (1) director shall
be the chairman of the Conversion Authority and a second director
shall be the president of the Conversion Authority or his designated
representative.
Such subsidiaries shall be exempt from the coverage of the

Civil Service Laws, rules and regulations.
SEC. 17. Supervision. – The Conversion Authority shall be

under the direct control and supervision of the Office of the President
for purposes of policy direction and coordination.
SEC. 18. Legal Counsel. – Without prejudice to the hiring of

an outside counsel, the Government Corporate Counsel shall be the
ex officio legal counsel of the Conversion Authority, the governing
boards of the Special Economic Zones and the subsidiaries wherein
the Conversion Authority owns the majority of the shares of stocks,
and for this purpose he may designate a full time representative
whose compensation shall be approved by the Board.
213
SEC. 19. Auditor. – The Commission on Audit shall appoint

a representative who shall be the full time auditor of the Conversion
Authority, its subsidiaries and the Special Economic Zones and
such personnel as may be necessary to assist said representative in
the performance of his duties. He is mandated to impose pre-audit
within thirty (30) days after submission of all proposed substantial
sales, transfers, and alienations of property. He shall likewise render
a full report thereof to Congress every sixty (60) days. The salaries
of the auditor and his staff shall be approved by the Board.
SEC. 20. Interim Capacity. – Except for the chairman of the

Subic Authority, the chairman and other members of the Board of
the Conversion Authority and the Subic Authority shall act in an
interim capacity and shall serve until the 31st of July 1992 or until
such time that their successors shall have been duly appointed.
SEC. 21. Injunction and Restraining Order. – The

implementation of the projects for the conversion into alternative
productive uses of the military reservations are urgent and necessary
and shall not be restrained or enjoined except by an order issued by
the Supreme Court of the Philippines.
SEC. 22. Separability Clause. – If any provision of this Act

shall be held unconstitutional or invalid, the other provisions not
otherwise affected shall remain in full force and effect.
SEC. 23. Repealing Clause. – All laws, executive issuances

or parts thereof which are inconsistent herewith are hereby repealed
or amended accordingly.
SEC. 24. Effectivity Clause. – This Act shall take effect upon
its publication in at least one (1) newspaper of general circulation.
APPROVED, March 13, 1992.
214
RULES AND REGULATIONS IMPLEMENTING THE

PROVISIONS RELATIVE TO THE SUBIC SPECIAL
ECONOMIC AND FREEPORT ZONE AND THE SUBIC BAY
METROPOLITAN AUTHORITY UNDER REPUBLIC ACT
NO. 7227, OTHERWISE KNOWN AS THE “BASES
CONVERSION AND DEVELOPMENT ACT OF 1992”
CHAPTER I. PRELIMINARY PROVISIONS
Section 1. Scope – These Rules and Regulations are hereby

promulgated to implement the provisions governing the Subic Special
Economic and Freeport Zone, and the Subic Bay Metropolitan Authority,
under Republic Act No. 7227, otherwise known as the Bases Conversion
and Development Act of 1992, and other related laws.
Sec. 2. Declaration of Policy – Within the framework and subject to

the mandate of the Constitution and the pertinent provisions of the Local
Government Code, it is hereby declared the policy of the SBMA to develop
the Subic Special Economic and Freeport Zone into a self-sustaining,
industrial, commercial, financial and investment center to generate
employment opportunities in and around the Zone, to attract and promote
productive foreign investments, to accelerate the sound and balanced
conversion into alternative productive uses of the former Subic Naval Base
and its contiguous extensions, and to enhance the benefits to be derived
from the Zone in order to promote the economic and social development of
Central Luzon in particular and the country in general.
It is also declared the policy of the SBMA to operate and manage the
SBF as a separated customs territory ensuring the free flow or movement
of gods and capital within, into and exported out of the SBF, as well as
provide incentives such as tax and duty free importations of raw materials
capital and equipment.
Sec. 3. Definitions – For purposes of these Rules, these terms shall

be understood to have the following meanings:
a. Act – refers to Republic Act No. 7227, otherwise known as the

Bases Conversion and Development act of 1992.
b. Rules – refers to these Implementing Rules and Regulations.

215
c. SBF – is the Subic Bay Freeport referred as the Special Economic

and Freeport Zone in Section 12 of this Act, a separate customs
territory consisting of the City of Olongapo and the municipality
of Subic, Province of Zambales, the lands occupied by the Subic
Naval Base and its contiguous extensions as embraced, covered
and defined by the 1947 Philippine- U.S. Military Base Agreement
as amended and within the territorial jurisdiction of Morong and
Hermosa, Province of Bataan, the metes and bounds which shall
be delineated in a proclamation to be issued by the President of
the Philippines; provided, pending the establishment of secure
perimeters around the entire SBF, the SBF shall refer to the area
demarcated by the SBMA pursuant to section 13 hereof.
d. SBMA – refers to the Subic Bay Metropolitan Authority created

under Section 13 of this Act.
e. Conversion Authority – refers to the Bases Conversion

Development Authority created under Section 13 of this Act.
f. Point of Entry – refers to any place designated by the SBMA

where articles may be lawfully introduced into or removed from
the SBF or any part therein designated by the SBMA.
g. SBF enterprise – refers to any business entity or concern within

the SBF duly registered with and/or licensed by the SBMA to
operate any lawful economic activity within the SBF.
h. Certificate of Registration – refers to the certificate issued by the

SBMA representing the registration of the business entity as an
SBF Enterprise.
i. Certificate of Residency – refers to the certificate issued by the

SBMA representing the registration of an individual as an SBF
Resident.
j. SBF Facilities Operator – refers to an SBF Enterprise which

operates facilities or services within the SBF, including the
subleasing of land or other property to other SBF Enterprises.
k. Board – refers to the Board of Directors of the SBMA.
216
l. Domestic Articles – refers to articles which are the growth, product

or manufacture of the Philippines and upon which all national
internal revenue taxes have been paid, if subject thereto, and
upon which no drawback or bounty has been allowed; and the
articles of foreign origin on which all duties and taxes have been
paid and upon which no drawback or bounty has been allowed,
of which have previously been entered into customs territory free
of duties and taxes.
m. Foreign Articles – refers to articles of foreign origin on which

duties and taxes have not been paid, or upon which drawback
or bounty has been allowed, or which have not been previously
entered into customs territory, or articles which are the growth,
product or manufacture of the Philippines on which not all national
internal revenue taxes have been paid, if subject thereto, or upon
which drawback or bounty has been allowed.
n. Customs Territory – refers to the portion of the Philippines outside

the SF where the Tariff and Customs Code of the Philippines and
other national tariff and customs laws are in force and effect.
o. Articles – for purposes of these Rules, and when used with

reference to importations and exportations, the term includes raw
materials, supplies, equipment, machinery, packaging materials,
goods, wares, merchandise and in general anything that may,
under the Rules of the SBMA, be made the subject of importation
into or exportation from the Zone.
p. Transshipment – refers to transshipment of articles, discharge at

ports or airports of entry located in Customs Territory destined for
delivery to the SBF and articles coming from the SBF intended
for export through a Philippine Customs port/airport of entry
which may be transported under bond, upon examination and
consigned to the Collector at the port of destination/export who
will allow the consignor or consignee, as the case may be, to
make entry for exportation.
q. Foreign Exchange – refers to any currency other than he

Philippine peso acceptable for payment by the Central Bank of
the Philippines.
217
r. National Government – refers to the Government of the

Philippines.
s.Foreign National – refers to a natural person who is not a citizen

of the Philippines.
t. Offshore Banking Unit (OBU) – refers to an offshore bank licensed

and registered under the laws of the Philippines.
SEC. 4. Rules of Interpretation. – Pursuant to the declared policies

of the State on the SBF, the following rules of interpretation shall be
observed in the implementation of Sections 12, 13 and 14, and other
related provisions of the Act, as well as the provisions of these Rules:
a. All trade and business, immigration, corporation, banking and

quarantine laws shall be subordinated and/or liberally construed
in favor of the SBF to enhance and promote the policies of
the special economic Freeport system within the boundaries
established by law and these Rules.
b. In case of conflict between national and local laws and tax

exemption privileges in the SBF, the same shall be resolved in
favor of the latter.
c. In case of conflict between the SBMA and the local government

units concerned on matters affecting the SBF other than the
defense security of the said local government units, the decision
of the SBMA shall prevail.
d. The provisions of existing laws, rules and regulations to the

contrary notwithstanding, the SBMA shall exercise administrative
powers, rule-making and disbursements of funds over the SBF.
Sec. 5. Boundaries of the Subic Bay Freeport – The boundaries

of the SBF shall comprise the area described in Section 12 of this Act, the
metes and bounds of which will be further delineated through Presidential
Proclamation. Pending the establishment of secure perimeters around
the SBF, the SBMA shall adopt and implement the gradual and phased
operationalization of areas within the SBF to ensure strict compliance with
the Act, these Rules and other Philippine laws.
218
CHAPTER II. THE SUBIC BAY METROPOLITAN AUTHORITY (SBMA)
A. Composition and Operation of the Board of Directors
Sec. 6. Board of directors – The powers of the SBMA shall be vested

in and exercised by a Board of Directors.
Sec. 7. Composition – The Board shall be composed of fifteen (15)

members to be appointed by the President, as follows:
a. Representatives of all local government units that concur to be

part of the SBF;
b. Two (2) representatives from the national Government;
c. Five (5) representatives from the private sector coming from the
present naval air station, public works center, ship repair facility,
naval supply depot, and naval station;
d. The remaining balance to complete the Board membership

shall be composed of representatives from the business and
investment sectors.
Sec. 8. Chairman/Administrator – The President shall appoint a

professional manager as administrator of the SBMA with a compensation
to be determined by the Board subject to the approval of the Secretary of
Budget, who shall be the ex officio chairman of the Board and who shall
serve as the chief executive officer of the SBMA; Provided, however, that
for the first year of its operations from the effectivity of this Act, the Mayor
of the City of Olongapo shall be appointed as the chairman and executive
officer of the SBMA.
Sec. 9. By-Laws – The Board of Directors shall adopt a set of by-

laws that shall govern the SMBA’s internal business and operations.
B. Powers and Functions of the SBMA
Sec. 10. Powers and Functions – The SBMA shall have the following
powers and functions:
219
a. To operate, administer, manage and develop the ship repair and

ship building facility, container port, oil storage and refueling
facility and Cubi Air Base within the SBF as a free market in
accordance with the policies set forth in Section 12 of the Act;
b. To accept any local or foreign investment, business or enterprise,

subject only to these Rules and in conformity with the policies of
the act, the SBMA and the Conversion Authority;
c. To undertake and regulate the establishment, operation and

maintenance of utilities, other services and infrastructure in the
SBF including shipping and related business, stevedoring and
port terminal services or concessions incidental thereto and
airport operations in coordination with the Civil Aeronautics
Board, and to fix just and reasonable rates, fares, charges and
other prices thereof;
d. To construct, acquire, own, lease, operate, and maintain on

its own or through contract, franchise, license, permits, bulk
purchase from the private sector and build-operate-transfer
scheme or joint venture, the required utilities and infrastructure in
coordination with local government units conformity with existing
applicable laws therefor;
e. To adopt, alter and use a corporate seal; to contract, lease, sell,

dispose, acquire and own properties; to sue and be sued in order
to carry out its duties and functions as provided for in the Act; and
to exercise the power of eminent domain for public purpose;
f. Within the limitations provided by law, to raise and/or borrow the

necessary funds from local and international financial institutions
and to issue bonds, promissory notes and other securities for
that purpose and to secure the same by guarantee, pledge,
mortgage, deed of trust, or assignment of its properties held by
the SBMA for the purpose of financing its projects and programs
within the framework and limitations of the Act;
g. To operate directly or indirectly or license tourism-related activities

subject to priorities and standards set by the SBMA including
games and amusements, except horse racing, dog racing and
casino gambling which shall continue to be licensed by the
220
Philippine Amusement and Gaming Corporation (PAGCOR)

upon recommendation of the Conversion Authority; to maintain
and preserve the forested areas as a national park;
h. To authorize the establishment of appropriated educational and

medical institutions;
i. To protect, maintain and develop the virgin forests within the

baselands which will be proclaimed as a national park and subject
to a permanent total log ban, and for this purpose, the rules
Resources and other government agencies directly involved in
the above functions shall be implemented by the SMBA;
j. To accept and implement measures and standards for environment

pollution control of all areas within its territory, including, but not
limited to all bodies of water and to enforce the same. For the
purpose, the SBMA shall create an Ecology Centre; and
k. To raise revenues from among, but not limited to, the following:
(1) Periodic license fees and/or application, filing and registration

and administrative/regulatory fees from SBF Enterprises;
l. To lease out land, facilities and other properties in the SBF, by

negotiated contract or otherwise, giving due consideration to the
declared policies of the Act: and
m. To exercise such powers as may be essential, necessary or

incidental to the powers granted to it hereunder as well as to
carry out the policies and objectives of the Act.
Sec. 11. Responsibilities of the SBMA – Other than the powers and
functions prescribed in Section 10 of these Rules, the SBMA shall have the
following responsibilities:
a. The SBMA shall exercise authority and jurisdiction over all

economic activity within the SBF;
b. The SBMA shall provide and establish its own internal security
and fire fighting forces. However, the defense of the SBF and
221
the security of its perimeters shall be the responsibility of the

National Government in coordination with the SBMA;
c. The SBMA will coordinate the provisions of security, police, and

municipal services within the overall area of the SBF with the
existing local government units;
d. The SBMA shall have the authority to exclude from the SBF any
articles substance, merchandise, operation, activity or process it
considers to be inconsistent with the policies and purposes of the
Act and these Rues, or detrimental to the public interest, and to
establish procedures for such exclusion;
e. The SBMA may require SBF Enterprises or Residents to secure

the necessary permits for any article, substance, merchandise,
transaction, activity, or operation in the SBF, specify conditions
under which such permit will be issued, and establish procedures
for issuing and revoking such permits; and
f. Consistent with the Constitution, the SBMA shall have the

following powers to enforce the law and these Rules in the SBF;
(1) to audit and inspect the records of any SBF Enterprise;
(2) to inspect and search the premises of any SBF Enterprise

or Resident, or any vehicle, aircraft, vessel, or person in the
SBF to detect any violation of the law or these Rules;
(3) to conduct investigations of any suspected violation of the

law or these Rules, provided that the investigation of any
violation of the criminal laws of the Philippines occurring in
the SBF shall not be conducted by the SBMA, but rather by
the police or National Government agency having jurisdiction
in the area where the violation occurred;
(4) to seize articles, substances, merchandise and records

considered to be in violation of the law and these Rules, and
to provide for their return to the enterprise or person from
whom they were seized, or their forfeiture to the SBMA;
(5) to issue subpoena duces tecum and ad testificandum in the
222
course of its investigations;
(6) to arrest person in the SBF for any violation of the laws of the
Philippines;
(7) to assess and collect administrative fees or impose
administrative fines or other monetary penalties for violation
of these Rules;
(8) to issue, alter, modify, suspend or revoke for cause, any

permit, certificate, license, visa or privilege allowed under
the Act or these Rules;
(9) to regulate ingress to and egress from the SBF;
(10)to regulate traffic within the SBF and to impose administrative

fines and penalties for traffic violations, including charges for
towing and impounding; and
(11) to promulgate such other rules, regulations and circulars

as may be necessary, proper or incidental to carry out the
policies and objectives of the Act, these Rules, as well as the
powers and duties of the SBMA thereunder.
Sec. 12. Best Use of SBMA Properties – The SBMA shall take all
measures necessary to secure the best of its properties within the SBF.
The SBMA may lease the aforesaid properties to private facilities operators
who may thereafter, under conditions approved by the SBMA, sub-lease
the facilities or otherwise provide services based thereon to other SBF
Enterprises.
Sec. 13. Establishment of Secure Perimeters, Points of Entry and

duty and Tax Free Areas of the SBF – Pending the establishment of secure
perimeters around the entire SBF, the SBMA shall have the authority to
establish and demarcate areas of the SBF with secure perimeters within
which articles and merchandise free of duties and internal revenue taxes
may be limited, without prejudice to the availment of other benefits conferred
by the Act and these Rules in the SBF outside such areas. The SBMA shall
furthermore have the authority to establish, regulate and maintain points of
entry to the SBF or to any limited duty and tax-free of the SBF.
223
Sec. 14. General Land Use Plan – The SBMA shall draw up and
publish a general land use plan specifying he general uses and economic
activities to promote different areas of the SBF and shall enforce said plan
subject to such revisions as the SBMA may deem necessary or appropriate
to accomplish the policies and objectives of the Act.
Sec. 15. Annual Reports – The SBMA shall render and publish
annual reports on the economic activities undertaken in the SBF.
CHAPTER III. PROCEDURES FOR REGISTRATION OF

SUBIC BAY FREEPORT ENTERPRISES & RESIDENTS
A. General Provisions
Sec. 16. Registration Office – The SBMA shall establish an

office to register all business enterprises or concerns applying to be SBF
Enterprises, as well as natural persons applying to be SBF Residents.
This office shall consist of two (2) departments, to wit: The SBF Enterprise
Department and the SBF Residents Department, which shall in turn consist
of two (2) divisions each, to wit: the Evaluation Division and the follow-up
Division.
The above department shall issue standard application forms and

require submission of pertinent documents to the proper department which
shall act thereon in the most expeditious manner possible. If warranted,
the Registration Office shall approve the application and register qualified
enterprises and residents, after which it shall issue certificates attesting
to their registration and residency, respectively. After issuance of the
certificates, the Registration Office shall periodically monitor the status of
all SBF Enterprises and Residents.
Sec. 17. Who are Eligible – Application for SBF registration shall
be open to national and business enterprises of any country in any area of
economic activity, except only as is specifically limited by the Constitution
of the Philippines.
Sec. 18. Conditions for Registration – An SBF Enterprise shall be

a constituted business enterprise organized or domiciled in the Philippines
or any foreign country. The enterprise must name a representative or agent
who is a legal resident of the SBF. If affiliated with an existing enterprise
in the Philippines outside of the SBF, the SBF Enterprise must establish a
224
separate business organization to conduct business exclusively within the

SBF which shall be a separate taxable entity.
Sec. 19. Criteria for Issuance of Certificate – The SBMA shall

issue the Certificate of Registration or Residency to an SBF Enterprise
or Resident, respectively, if qualified and if in the SBMA’s discretion such
issuance will promote the polices set forth in the Act and these Rules.
Sec. 20. Period of Issuance of Certificates – Should the

application(s) merit approval, the SBMA shall issue the certificates
applied for no later than thirty (30) days following receipt of the completed
application and all required supporting documents.
Sec. 21. Effect of Issuance of Certificates – Issuance of the

Certificate of Registration or Residency to an SBF Enterprise or Resident,
respectively, shall entitle and subject the business enterprise or resident
to all the benefits and obligations under the Act and these Rules, and
other regulations that may be promulgated by the SBMA, subject to the
provisions of Section 5 and 13 hereof.
In general, any business or enterprise registered as an SBF

Enterprise shall be automatically excluded from benefiting from any other
preferential regime such as that provided for in Republic Act 7042, otherwise
known as the Foreign Investments Act of 1991 and Executive Order No.
226, otherwise known as the Omnibus Investments Code of 1987, or other
special laws of the Philippines. If the enterprise already enjoys benefits
under these regimes, these benefits shall be withdrawn in the same
manner as they were granted, before it can enjoy any benefits under these
Rules or the Act. Exceptions to the foregoing may be separately made
and issued by the SBMA in consultation with the Board of Investments, the
Department of Finance and other concerned government agencies under
circumstances to be determined by the SBMA.
B. Registration of Existing Enterprises and Residents
C. Registration of New Industrial, Commercial and Service Enterprises
D. Registration of Banks and Affiliates
E. Registration of New Subic Bay Freeport Residents
225
AN ACT GRANTING TAX AND DUTY EXEMPTION AND TAX

CREDIT ON CAPITAL EQUIPMENT

SECTION 1. Paragraph (c), Article 39, Title III of the Omnibus

Investments Code of 1987 is hereby amended to read as follows:
“(c) Tax and Duty Exemption on Imported Capital Equipment.

– Until December 31, 1994, importations of machinery and
equipment and accompanying spare parts of new and expanding
registered enterprise shall be exempt to the extent of One hundred
percent (100%) of the customs duties and national internal revenue
tax payable thereon: Provided, That the importation of machinery
and equipment and accompanying spare parts shall comply with
the following conditions:
“(1) They are not manufactured domestically in sufficient

quantity, of comparable quality and at reasonable prices;
“(2) They are reasonably needed and will be used exclusively

by the registered enterprise in the manufacture of its products,
unless prior approval of the Board is secured for the part-time
utilization of said equipment in a non-registered activity to maximize
usage thereof or the proportionate taxes and duties are paid on the
specific equipment and machinery being permanently used for non-
registered activities;
“(3) The approval of the Board was obtained by the registered

enterprise for the importation of such machinery, equipment and
spare parts.” In granting the approval of the importations under
this paragraph, the Board may require international canvassing but
if the total cost of the capital equipment or industrial plant exceeds
US$5,000,000.00, the Board shall apply or adopt the provisions of
226
Presidential Decree Numbered 1764 on International Competitive

Bidding.
“If the registered enterprise sells, transfers or disposes these

machinery, equipment and spare parts without prior approval of
the Board within five (5) years from the date of acquisition, the
registered enterprise and the vendee, transferee, or assignee shall
be solidarily liable to pay twice the amount of the tax exemption
given it.
“The Board shall allow and approve the sale, transfer,

disposition of the said items within the said period of five (5) years
if made:
“(aa) to another registered enterprise or registered domestic

producer enjoying similar incentives;
“(bb) for reason of proven technical obsolescence; or
“(cc) for purposes of replacement to improve and/or expand

the operations of the registered enterprises.”
SEC. 2. Paragraph (d), Article 39, Title III of the same Code,
is likewise amended to read as follows:
“(d) Tax credit on Domestic Capital Equipment. – A tax

credit equivalent to One hundred percent (100%) of the value of the
national internal revenue taxes and customs duties that would have
been waived on the machinery, equipment and spare parts, had
these items been imported shall be given to the new and expanding
registered enterprise which purchases machinery, equipment and
spare parts from a domestic manufacturer: Provided, That (1) that
the said equipment, machinery and spare parts are reasonably
needed and will be used exclusively by the registered enterprise
in the manufacture of its products, unless prior approval of the
Board is secured for the part-time utilization of said equipment
in a nonregistered activity to maximize usage thereof; (2) that the
equipment would have qualified for tax and duty-free importation
under paragraph (c) hereof; (3) that the approval of the Board was
227
obtained by the registered enterprise; and (4) that the purchase is

made on or before December 31, 1994. If the registered enterprise
sells, transfers, or disposes of these machinery, equipment and spare
parts, the provision in the preceding paragraph for such disposition
shall apply.”
SEC. 3. For a period of three (3) years starting January 1,

1995, the following imported articles shall be exempt from duties
imposed under Section 104 of the Tariff and Customs Code of 1978,
as amended, and all kinds of levies provided by law or presidential
decree:
Provided, however, That the National Economic and

Development Authority may, upon due notice and public hearing,
and in consultation with concerned government agencies, exclude
any item from the foregoing list, subject to the condition that the
machinery or equipment is being manufactured domestically
in sufficient quantity, of comparable quality and at a reasonable
price.
SEC. 4. Pursuant to the preceding Section, a domestic

manufacturer of any of the articles enumerated therein shall be
entitled to a tax credit equivalent to one hundred percent (100%)
of the national internal revenue taxes, customs duties and levies
actually paid on the raw materials used in the manufacture of the
article. The purchaser of such article shall likewise be entitled to a
tax credit of one hundred percent (100%) of the value of the National
Internal Revenue taxes, customs duties imposed thereon under
Section 104 of the Tariff and Customs Code of 1978, as amended,
and levies provided by law or presidential decree had such article
been imported.
SEC. 5. As used in this Act, the term domestic manufacturer

shall mean a citizen of the Philippines, a partnership or any other
association organized under Philippine laws, with at least sixty
percent (60%) of its capital owned and controlled by citizens of the
Philippines; a corporation or cooperative organized under Philippine
laws with at least sixty percent (60%) of its capital stock outstanding
and entitled to vote owned and held by citizens of the Philippines,
228
and with at least sixty percent (60%) of the members of its Board of
Directors being citizens of the Philippines.
SEC. 6. The Board of Investments (BOI) shall issue certificates

for the tax credit mentioned in Section 4 hereof after evaluation as
to whether the manufactured article falls under Section 3 of this
Act; Provided, however, That the domestic manufacturer has not
availed of tax credits thereon under any other investment incentive
law, order, rule or regulation: Provided, further, That availment of
the tax credit provided for under this Act shall bar the availment of
tax credits under such other laws, orders, rules or regulations.
SEC. 7. The BOI shall formulate and publish guidelines for

the implementation of this Act in the Official Gazette and in any
newspaper of general circulation within ninety (90) days after its
approval.
SEC. 8. All laws, decrees, orders, issuances and rules and

regulations or parts thereof inconsistent with this Act are hereby
repealed or modified accordingly.
SEC. 9. This Act shall take effect fifteen (15) days after the
implementing rules have been published and shall be in effect for
five (5) years from the date of its approval.
APPROVED, April 10, 1992.
229
AN ACT INCREASING THE PENALTIES FOR TAX EVASION,

AMENDING FOR THIS PURPOSE THE PERTINENT
SECTIONS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED

SECTION 1. A new paragraph (e) is hereby added to Section

252 of the National Internal Revenue Code, as amended, to read as
follows:
“(e) The fines to be imposed for any violation of the provisions

of this Code shall not be lower than the fines imposed herein
or twice the amount of taxes, interests, and surcharges due
from the taxpayer, whichever is higher.”
SEC. 2. Section 253 of the National Internal Revenue Code, as

amended, is hereby further amended to read as follows:
“Sec. 253. Attempt to evade or defeat tax. – Any person who

willfully attempts in any manner to evade or defeat any tax
imposed under this Code or the payment thereof shall, in
addition to other penalties provided by law, upon conviction
thereof, be fined not less than Thirty thousand pesos but
not more than One hundred thousand pesos and suffer
imprisonment of not less than two years but not more than
four years.”
SEC. 3. The second paragraph of Section 254 of the National

Internal Revenue Code, as amended, is hereby further amended to
read as follows:
“Any person who attempts to make it appear for any reason that
he or another has in fact filed a return or statement, or actually
files a return or statement and subsequently withdraws the
230
same return or statement after securing the official receiving

seal or stamp of receipt of an internal revenue office wherein
the same was actually filed shall, upon conviction therefor,
be fined not less than Ten thousand pesos but not more than
Twenty thousand pesos and suffer imprisonment of not less
than one year but not more than three years.”

“Sec. 255. Penal liability of corporations. – Any corporation,

association, or general co-partnership liable for any of the
acts or omissions penalized under this Code, in addition to
the penalties imposed herein upon the responsible corporate
officers, partners, or employees, shall, upon conviction for
each act or omission, be fined not less than Fifty thousand
pesos but not more than One hundred thousand pesos.”

“Sec. 256. Penal liability for making false entries, records, or

reports. – (a) Any independent certified public accountant
engaged to examine and audit books of accounts of taxpayers
under subparagraph (a) of Section 232 and any person under
his direction who:
“(1) Willfully falsifies any report or statement bearing

on any examination or audit, or renders a report,
including exhibits, statements, schedules, or other forms
of accountancy work which has not been verified by him
personally or under his supervision or by a member of
his firm or by a member of his staff in accordance with
sound auditing practices; or
“(2) Certifies financial statements of a business

enterprise containing an essential misstatement of
facts or omission in respect of the transactions, taxable
income, deduction, and exemption of his client; or
231
“(b) Any person who:
“(1) Not being an independent certified public accountant

according to subparagraph (B) of Section 232, examines
and audits books of accounts of taxpayers; or
“(2) Offers to sign and certify financial statements

without audit; or
“(3) Offers any taxpayer the use of accounting

bookkeeping records for internal revenue purposes not
in conformity with the requirements prescribed in this
Code or regulations promulgated thereunder; or
“(4) Knowingly makes any false entry or enters any false

or fictitious name in the books of accounts or records
mentioned in the preceding paragraphs; or
“(5) Keeps two or more sets of such records or books of

accounts; or
“(6) In any way commits an act or omission, in violation

of the provisions of this section; or
“(7) Fails to keep the books of accounts or records

mentioned in Section 232 in a native language, English,
or Spanish, or to make a true and complete translation
as required in Section 234 of this Code, or whose books of
accounts or records kept in a native language, English, or
Spanish, and found to be at material variance with books
or records kept by him in another language, shall, upon
conviction for each act or omission, be punished by a fine
of not less than Thirty thousand pesos but not more than
Fifty thousand pesos and suffer imprisonment of not less
than two years but not more than six years.”

232
“Sec. 257. Unlawful pursuit of business. – Any person who

carries on any business for which a privilege tax is imposed
without paying the tax as required by law shall, upon
conviction for each act or omission, be fined not less than Five
thousand pesos but not more than Twenty thousand pesos
and suffer imprisonment of not less than six months but not
more than two years: Provided, That, in the case of a person
engaged in the business of distilling, rectifying, repacking,
compounding, or manufacturing any article subject to excise
tax, he shall, upon conviction for each act or omission, be fined
not less than Thirty thousand pesos but not more than Fifty
thousand pesos and suffer imprisonment of not less than two
years but not more than four years.”

“Sec. 258. Illegal collection of foreign payments. – Any person

who knowingly undertakes the collection of foreign payments
as provided under Section 60 of this Code without having
obtained a license therefor, or without complying with its
implementing regulations, shall, upon conviction for each act
or omission, be fined not less than Twenty thousand pesos but
not more than Fifty thousand pesos and suffer imprisonment
of not less than one year but not more than two years.”
Section 8. Section 262 of the National Internal Revenue Code,

as amended, is hereby further amended to read as follows:
“Sec. 262. Unlawful possession or removal of articles subject to

excise tax without payment of the tax. – Any person who owns
and/or is found in possession of imported articles subject to
excise tax, the tax on which has not been paid in accordance
with law, or any person who owns and/or is found in possession
of imported tax-exempt articles other than those to whom they
are legally issued shall be punished by:
“(1) A fine of not less than One thousand pesos but not
more than Two thousand pesos and suffer imprisonment
233
of not less than sixty days but not more than one
hundred days if the appraised value, to be determined in
the manner prescribed in the Tariff and Customs Code,
including duties and taxes, of the articles does not exceed
One thousand pesos;
“(2) A fine of not less than Ten thousand pesos but

not more than Twenty thousand pesos and suffer
imprisonment of not less than two years but not more
than four years in the appraised value, to be determined
in the manner prescribed in the Tariff and Customs
Code, including duties and taxes, of the articles exceed
One thousand pesos but does not exceed Fifty thousand
pesos;
“(3) A fine of not less than Thirty thousand pesos but not
more than Sixty thousand pesos and suffer imprisonment
of not less than four years but not more than six years
if the appraised value, to be determined in the manner
prescribed in the Tariff and Customs Code, including
the duties and taxes, of the articles is more than Fifty
thousand pesos but does not exceed One hundred fifty
thousand pesos; or
“(4) A fine of not less than Fifty thousand pesos but

not more than One hundred thousand pesos and suffer
imprisonment of not less than ten years but not more than
twelve years if the appraised value, to be determined in
the manner prescribed in the Tariff and Customs Code,
including duties and taxes, of the articles exceed One
hundred fifty thousand pesos.
“Any person who is found in possession of locally

manufactured article subject to excise tax, the tax on which
has not been paid in accordance with law, or any person who
is found in possession of such articles which are exempt from
excise tax other than those to whom the same is lawfully
issued shall be punished with a fine of not less than ten times
the amount of excise tax due on the articles found but less
234
than Five hundred pesos and suffer imprisonment of not less

than two years but not more than four years.
“Any manufacturer, owner, or person in charge of any

article subject to excise tax who removes or allows or causes
the unlawful removal of any such articles from the place of
production or bonded warehouse, upon which the articles
subject to excise tax has not been paid at the time in manner
required, and any person who knowingly aids or abets in the
removal of such articles as aforesaid, or conceals the same
after illegal removal shall, for the first offense, be punished
with a fine of not less than ten times the amount of excise tax
due on the articles but not less than one thousand pesos and
suffer imprisonment of not less than one year but not more
than two years.
“The mere unexplained possession of articles subject to

excise tax, the tax on which has not been paid in accordance
with law, shall be punished under this section.”
SEC. 9. Paragraph (a) Section 263 of the National Internal

Revenue Code, as amended, is hereby further amended to read as
follows:
“(a) Any person who, being required under Section 238 to

issue receipts or sales or commercial invoices, fails or refuses
to issue such receipts or invoices, issues receipts or invoices
that do not truly reflect and/or contain all the information
required to be shown therein or uses multiple or double receipts
or invoices shall, upon conviction for each act or omission, be
fined not less than One thousand pesos, but not more than
Fifty thousand pesos and suffer imprisonment of not less than
two years but not more than four years.”
SEC. 10. Section 264 of the National Internal Revenue Code,

“Sec. 264. Offenses relating to stamps. – Any person who

commits any of the acts enumerated hereunder shall, upon
235
conviction thereof, be fined not less than Twenty thousand

pesos but not more than Fifty thousand pesos and suffer
imprisonment of not less than four years but not more than
eight years:
“(1) Makes, imports, sells, or uses, or possesses without

express authority from the Commissioner any die for
printing or making stamps, labels, tags, or playing
cards;
“(2) Erases the cancellation marks of any stamp

previously used or alters the written figures or letters or
cancellation marks on internal revenue stamps;
“(3) Possesses false, counterfeit, restored, or altered

stamps, labels, or tags or causes the commission of any
such offense by another;
“(4) Sells or offers for sale any box or package containing

articles subject to excise tax with false, spurious, or
counterfeit stamps or labels or sells from any such
fraudulent box, package, or container as aforesaid; or
“(5) Gives away or accepts from another or sells, buys, or

uses containers on which the stamps are not completely
destroyed.”

“Sec. 265. Failure to obey summons. – Any person who, being

duly summoned to appear to testify, or to appear and produce books
of accounts, records, memoranda, or other papers, or to furnish
information as required under the pertinent provisions of this Code,
neglects to appear or to produce such books of accounts, records,
memoranda, or other papers, or to furnish such information, shall,
upon conviction, be fined not less than Five thousand pesos but not
more than Ten thousand pesos and suffer imprisonment of not less
than one year but not more than two years.”
236

“Sec. 268. Violations committed by government enforcement

officers. – Every official, agent, or employee of the Bureau
of Internal Revenue or any other agency of the Government
charged with the enforcement of the provisions of this Code
who is guilty of any of the offenses hereinbelow specified shall,
upon conviction for each act or omission, be fined not less than
Fifty thousand pesos but not more than One hundred thousand
pesos and suffer imprisonment of not less than ten years
but not more than fifteen years and shall likewise suffer an
additional penalty of perpetual disqualification to hold public
office, to vote, and to participate in any public election:
“(1) Those guilty of extortion or willful oppression

through the use of his office;
“(2) Those who knowingly demand other or greater

sums than are authorized by law or receive any fees,
compensation, or reward, except as prescribed by law,
for the performance of any duty;
“(3) Those who willfully neglect to give receipts, as

by law required by law, for any sums collected in the
performance of duty or who willfully neglect to perform
any other duties enjoined by law;
“(4) Those who conspire or collude with another or

others to defraud the revenues or otherwise violate the
provisions of this Code;
“(5) Those who by neglect or design permit the violation

of the law by any other person;
“(6) Those who make or sign any false entry or entries

in any books, or make or sign any false certificate or
return;
237
“(7) Those who allow or conspire or collude with another

to allow the unauthorized retrieval, withdrawal, or recall
of any return, statement, or declaration after the same
has been officially received by the Bureau of Internal
Revenue;
“(8) Those who, having knowledge or information of a

violation of this Code or of any fraud committed on the
revenues collectible by the Bureau of Internal Revenue,
fail to report such knowledge or information to their
superior officer or to report as otherwise required by law;
and
“(9) Those who, without the authority of law, demand

or accept or attempt to collect, directly or indirectly, as
payment or otherwise any sum of money or other thing
of value for the compromise, adjustment, or settlement
of any charge or complaint for any violation or alleged
violation of this Code.”
SEC. 13. There is hereby created the Congressional Oversight

Committee composed of the Chairmen of the Committees on Ways
and Means of both Houses of Congress as Co-Chairman and three
other members each from said committees. The Oversight Committee
shall convene within two years after the approval of this Act to
review its implementation and recommend amendments thereto.
SEC. 14. The Secretary of Finance shall, upon the

recommendation of the Commissioner of Internal Revenue,
promulgate the necessary rules and regulations for the effective
implementation of this Act.
SEC. 15. All laws, decrees, orders, rules and regulations, and
other issuances inconsistent with the provisions of this Act are
hereby repealed or amended accordingly.
238
AN ACT ALLOWING THE LONG-TERM LEASE OF PRIVATE

LANDS BY FOREIGN INVESTORS

SECTION 1. Title. – This Act shall be known as the “Investors’

Lease Act.”
SEC. 2. Declaration of Policy. – It is hereby declared the policy

of the State to encourage foreign investments consistent with the
constitutional mandate to conserve and develop our own patrimony.
Towards this end, the State hereby adopts a flexible and dynamic
policy of the granting of long-term lease on private lands to foreign
investors for the establishment of industrial estates, factories,
assembly or processing plants, agro-industrial enterprises, land
development for industrial, or commercial use, tourism, and other
similar priority productive endeavors.
SEC. 3. Definitions. – For purposes of this Act, unless the

context indicates otherwise, the term:
(1) “Investing in the Philippines” shall mean making an

equity investment in the Philippines through actual remittance of
foreign exchange or transfer of assets, whether in the form of capital
goods, patents, formulas, or other technological rights or processes,
upon registration with the Securities and Exchange Commission;
and
(2) “Withdrawal of approved investment” shall mean either:

(a) the failure to operate the investment project for any three (3)
consecutive years; or (b) outright abandonment of the investment
project at any time during the approved lease period: Provided, That
failure to pay lease rental for three (3) consecutive months coupled
with the failure to operate the investment project for the same
period shall be deemed as outright abandonment of the project.
239
SEC. 4. Coverage. – Any foreign investor investing in the

Philippines shall be allowed to lease private lands in accordance
with the laws of the Republic of the Philippines subject to the
following conditions:
(1) No lease contract shall be for a period exceeding fifty (50)

years, renewable once for a period of not more than twenty- five (25)
years;
(2) The leased area shall be used solely for the purpose of the
investment upon the mutual agreement of the parties;
(3) The leased premises shall comprise such area as may

reasonably be required for the purpose of the investment subject
however to the Comprehensive Agrarian Reform Law and the Local
Government Code.
The leasehold right acquired under long-term lease contracts

entered into pursuant to this Act may be sold, transferred, or
assigned: Provided, That when the buyer, transferee, or assignee
is a foreigner or a foreign-owned enterprise, the conditions and
limitations in respect to the use of the leased property as provided
for under this Act shall continue to apply.
SEC. 5. Limitations. – (1) Foreign individuals, corporations,

associations, or partnerships not otherwise investing in the
Philippines as defined herein shall continue to be covered by
Presidential Decree No. 471 and other existing laws in lease of
lands to foreigners.
(2) Withdrawal of the approved investment in the Philippines

within the period of the lease agreement entered into under this Act,
or use of the leased area for the purpose other than that authorized,
shall warrant the ipso facto termination of the lease agreement
without prejudice to the right of the lessor to be compensated for
the damages he may have suffered thereby.
(3) Any lease agreement under this Act which is renewable

at the option of the lessee subject to the same terms and conditions
240
of the original contract shall be interpreted to mean as renewable

upon the mutual agreement of the parties.
(4) In addition to the conditions for the renewal of a lease

agreement after the period of fifty (50) years as provided herein,
the foreign lease shall show that it has made social and economic
contributions to the country.
(5) In the case of tourism projects, lease of private lands by

foreign investors qualified herein shall be limited to projects with
an investment of not less than five million (5M) US dollars, seventy
percent (70%) of which shall be infused in said project within three
years from the signing of the lease contract.
SEC. 6. Termination of Lease Contract. – The Secretary of

Trade and Industry shall terminate any lease contract entered
into under the provisions of this Act, if the investment project is
not initiated within three (3) years from the signing of the lease
contract.
SEC. 7. Penal Provision. – Any contract or agreement made or

executed in violation of any of the following prohibited acts shall be
null and void ab initio and both contracting parties shall be punished
by a fine of not less than One Hundred thousand pesos (P100,000)
nor more than One million pesos (P1,000,000), or imprisonment of
six (6) months to (6) years, or both, at the discretion of the court:
(1) Any provision in the lease agreement stipulating a lease

period in excess of that provided in paragraph (1) Section 4;
(2) Use of the leased premises for the purpose contrary to

existing laws of the land, public order, public policy, morals, or good
customs;
(3) Any agreement or agreements resulting is the lease of

land in excess of the area approved by the DTI: Provided, That,
where the excess of the totality of the area leased is due to the
acts of the lessee, the lessee shall be held solely liable therefor:
Provided, further, That, in the case of corporations, associations, or
241
partnerships, the president, manager, director, trustee, or officers

responsible for the violation hereof shall bear the criminal liability.
SEC. 8. Separability Clause. – In case any provision of this Act

or the application of such provision is deemed unconstitutional, the
remaining provisions of this Act or the application of such provisions
shall not be affected thereby.
SEC. 9. Repealing Clause. – All acts, rules and regulations

contrary to or inconsistent with this Act are hereby repealed or
modified accordingly.
SEC. 10. Effectivity Clause. – this Act shall take effect

immediately upon its approval.
242
IMPLEMENTING RULES AND REGULATIONS OF

REPUBLIC ACT NO. 7652, OTHERWISE KNOWN AS THE
“INVESTORS’ LEASE ACT”
WHEREAS, on May 31, 1993, the Congress of the Philippines

enacted the “Investors’ Lease Act” which was subsequently signed
into law by the President of the Philippines;
WHEREAS, under SEC. 5/(2) in relation with SEC. 7(3)

of said Act, the Department of Trade and Industry (DTI) has the
mandate to approve the area covered by lease agreement entered
into under the provisions of the “Investors’ Lease Act”;
WHEREAS, Under SEC. 6 of the same Act, the Secretary

of Trade and Industry, subject to conditions stated therein, is
empowered to terminate any lease contract entered into under the
provisions thereof;
WHEREAS, for the DTI, and other agencies concerned to

properly implement said Act there is a need to promulgate rules
and regulations to clarify the intent and provisions thereof;
WHEREAS, Republic Act No. 7227, otherwise known as the

Bases Conversion and Development Act of 1992, empowers the
Bases Conversion and Development Authority (BASECON) to own,
hold and/or administer specified military reservations. Further,
the Subic Bay Metropolitan Authority (SBMA) and the Clark
Development Corporation (CDC) as the operating and implementing
arms of the BASECOM, are mandated to exercise said powers over
the lands within the Subic Special Economic Zone and the Clark
Special Economic Zone.
NOW, THEREFORE, for and in consideration of the foregoing

premises, the following implementing rules and regulations are
hereby promulgated to implement the intent and provisions of
Republic Act No. 7652, otherwise known as the “Investors’ Lease
Act”.
243
RULE I
DEFINITION OF TERMS
SECTION 1. For purposes of Republic Act No. 7652 and these

rules and regulations –
(a) “Act” shall mean Republic Act No. 7652 also known as
the “Investors’ Lease Act”,
(b) “Foreign Investor” shall mean an individual or judicial

entity not falling within the meaning of “Philippine national” as the
term is defined herein.
(c) “Philippine national” shall mean a citizen of the

Philippines or a domestic partnership or association wholly-owned
laws of the Philippines of which at least sixty percent (60%) of the
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is
a Philippine national and at least sixty per cent (60% of the fund
will accrue to the benefit of Philippine nationals: Provided, That
where a corporation and its non-Filipino stockholders own stock in a
Securities and Exchange Commission (SEC) registered enterprise,
at least sixty per cent (60%) of the capital stock outstanding and
entitled to vote of both corporations must be owned and held by
the citizens of the Philippines and at least sixty per cent (60%) of
the members of the Board of Directors of both corporations must
be citizens of the Philippines in order that the corporation shall be
considered a Philippine national.
(d) “Private Lands” shall refer to those lands which have

been segregated from the general mass of the public domain and
distributed by any form of gratuitous or onerous grant by the
State, such as but not limited to, a deed of sale, adjustment title,
special grant or possessory information title converted into a record
of ownership. The definition herein shall include patrimonial
properties of the state owned, held, controlled, supervised or
244
managed by the government-owned or controlled corporations

such as but not limited to the Export Processing Zone Authority,
the Phividec Industrial Authority, the Bases Conversion arms,
such as Clark Development Corporation (CDC) and the Subic Bay
Metropolitan Authority (SBMA).
(e)“Industrial Estates” shall mean large suitable tracts of

land which will be developed primarily for the use of a community
of industries and provided with roads, water supply facilities,
electrical facilities, communication facilities, sewage and drainage
systems, and other infrastructures. The term “industrial estates”
shall include within its meaning “science and technology parks”,
described as knowledge-based centers, set-up in proximity to
scientific, or industrial communities such as university campuses,
research institutes, export processing zones or industrial estate
areas providing means of technology transfer from research
laboratories to industry. The term likewise includes within its
purview lands under the control, supervision and management of
EPZA, PHIVIDEC, and BASECON and its implementing arms,
such as the CDC and SBMA, intended for that purpose.
(f) “Priority Productive Endeavors” shall refer to the

preferred areas of activity listed in the Investment Priorities Plan
(IPP) prepared by the Board of Investments in accordance with
the provisions of Executive Order No. 226 otherwise known as the
Omnibus Investment Code of 1987 as amended. Further, the term
shall likewise include endeavors certified by the BASECON/SBMA/
CDC, EPZA or PHIVIDEC as preferred areas of activity.
(g) “Approved Investment” shall mean investment by

foreign investors approved by government as evidenced by any of
the following:
1. Certificate of Registration in case of BOI registered

enterprise or Certificate of EPZA or PHIVIDEC
registration or BASECON/CDC/SBMA registration or
permit to operate.
245
2. Bureau of Trade Regulation and Consumer Protection

(BTRCP) Certificate of Registration for Sole Proprietorship
of SEC Certificate of Registration in case of investments
not registrable with the BOI but registrable under the
Foreign Investments Act of 1991;
3. Any other similar document purporting to show

government approval of any business undertaking in the
Philippines.
RULE II
APPLICABILITY
SECTION 1. Long-term lease of private lands by foreign

investors shall be authorized only for purposes of and in connection
with the establishment of industrial estate, factories, assembly or
processing plants, agro-industrial enterprises, land development for
tourism, industrial or commercial use and/or other similar priority
productive endeavors.
SEC. 2. “Private agricultural lands devoted to agricultural

activities, such as cultivation of soil, planting of crops, growing of
fruits and/or plantations, covered by the provisions of Republic Act
No. 6657, otherwise known as the Comprehensive Agrarian Reform
Law (CARL), shall not qualify for the long term lease under this Act
and these rules and regulations.
The provisions of the preceding paragraph notwithstanding,

private agricultural lands approved for conversion by DAR for non-
agricultural purposes and areas classified as non-agricultural prior
to June 15, 1988 per town plans approved by the HLURB and which
will be devoted to the establishment of industrial estates, factories,
assembly or processing plants, agro-industrial enterprises, land
development for industrial, or commercial use, tourism and other
similar priority productive endeavors shall qualify for long term
lease under this act and these rules and regulations.
246
SEC. 3. Foreign investors with pre-existing lease agreements

entered into prior to the effectivity of the Act and which lease
agreements were entered into for any one or a combination of the
purposes states in Section 1, Rule II hereof, may opt to be governed
by this Act and these rules and regulations, provided, however, that
in no case shall the total lease period, including that of the pre-
existing lease agreement, exceed a total of 75 years.
SEC. 4. Long-term lease of private lands for tourism projects

shall be limited to those involving investments of not less than Five
Million US Dollars (US$5,000,000.00), seventy percent (70%) of
which must be infused into said project within three (3) years from
the signing of the lease agreement.
RULE III
AREA OF LEASE AND APPROVAL THEREOF
SECTION 1. Any foreign investor investing in the Philippine

shall be allowed to lease private lands which shall comprise such area
as may reasonably be required for the purpose of the investment,
subject, however, to the Comprehensive Agrarian Reform Law and
the Local Government Code. The area of the leased/private land as
approved by the DTI or the BASECOM/CDC/ SBMA shall be used
solely for the purpose of the investment.
a. Application letter signed by the owner(s)/ lessor(s) and the

foreign investor/lease signifying their intention to enter
into a long-term lease agreement under the provisions of
Republic Act No. 7652;
b. A copy of the parties proposed long-term lease agreement

which, in addition to other terms and conditions, should
contain the following mandatory provisions:
1. A stipulation as to the term or period of the lease

which should not exceed that which is provided for
under Sec. 4(1) of the Act;
247
2. A stipulation as to the area of the premises to be

leased;
3. A stipulation as to the purpose of the investment for

which the long-term lease agreement is being entered
into;
4. A stipulation by the parties recognizing the unequivocal

authority of the Secretary of DTI or the Chairman of
BASECON/and or the Managing Heads of CDC/SBMA
whenever appropriate, to terminate or cancel the long-
term lease agreement if the investment project is not
initiated within three (3) years from the signing of the
lease agreement or in case of withdrawal of approved
investment or in case of use of the leased area for
purposes other than that authorized by the DTI or the
BASECON/CDC/SBMA or in case of violation by the
parties of any of the provisions of the Act and these
c. DAR approval of land use conversion of the leased area into

commercial and/or industrial use, whenever applicable.
d. Locational clearance from the City/Municipality or the

Housing and Land Use Regulatory Board pursuant to the
provisions of E.O. 72 dated March 25, 1993.
SECTION 3. The authority to evaluate, process, approve

or disapprove application for long term lease contracts over lands
located within the former US baselands or the special economic
zones, as provided for in R.A. 7227 and other pertinent presidential
issuances, is hereby delegated to BASECOM and its implementing
arms, such as the CDC and SBMA within their zonal jurisdiction.
For purposes of this provision any long term lease agreement entered
into by the BASECON/CDC/SBMA as lessor with an investor for
lease of lands within their zonal jurisdiction shall be construed as
approval of the long term lease agreement under the Act, rules and
regulations.
248
SECTION 4. The DTI-BOI or the BASECON/CDC/SBMA shall

render its decision within twenty (20) working days after official
acceptance of the application. Where an application for leasehold
rights is not acted upon by the DTI-BOI or the BASECON/CDC/
SBMA within the said period of time, the same shall be considered
automatically approved without prejudice to the imposition of usual
normal conditions, and limitations in respect to the use of the leased
property as provided for under Republic Act No. 7652.
RULE IV
SALE, TRANSFER OR ASSIGNMENT OF

LEASEHOLD RIGHTS
SECTION 1. The leasehold rights acquired under long-

term lease contracts entered into pursuant to this Act may be
sold, transferred, assigned, and/or sub-leased only with the prior
approval of the Secretary of DTI or the Chairman of BASECOM
and/or the Managing Heads of its implementing and limitations in
respect to the use of the lease property as provided for under the Act
shall continue to apply. Provided: that when the vendee, transferee,
assignee and or sub-lessee is a Philippine national, prior approval is
not required, but notice thereof shall be made to the DTI Secretary
or the Chairman of BASECOM and/or the Managing Heads of its
implementing arms (CDC/SBMA) whenever appropriate, within ten
(10) days from the date of sale, transfer, assignment and/or sub-
lease of the leasehold right.
RULE V
GROUNDS FOR TERMINATION OF LEASE AGREEMENTS
SECTION 1. The Secretary of DTI or the Chairman of

BASECON and/or the Managing Heads of its implementing arms,
whenever appropriate, may terminate or cancel any lease agreement
entered into under the provisions of the Act or these rules and
regulation assigned on any of the following grounds:
249
1. Failure by the lessors to initiate the investment project

within three (3) years from the signing of the lease
agreement; or
2. Withdrawal of approved investment;
3. Use of the leased premises other than that authorized by

the DTI or the BASECON/CDC/SBMA;
4. Violation by the parties of any provision of the Act or these

RULE VI
SCHEDULE OF FEES
SECTION 1. The following fees shall be collected by the DTI/

BOI: Provided, that the BASECON and its implementing arms such
as the CDC and the SBMA may impose their own schedule of fees on
long term lease agreements covering lands under their management
and control.
(a) Fees for the application of original long term

lease contract ------------------ 1/10 of 1% total capital,
but not lower than Five
Thousand Pesos (P5,000.00)
nor to exceed Fifteen
Thousand Pesos (P15,000.00)
For purposes of this sub-section, the term capital cost shall

mean capital in case of single proprietorship or partnership and
authorized capital in case of corporations and/or associations.
(b) Fees for renewal of the long term lease

contract….......................................................... P 5,000.00
(c) Fees for the application of transfers,

assignment, sub-lease and/or sale of
leasehold Rights acquired under this Act......... P 5,000.00
250
(d) Fees for the amendment/modification/

reformation of the original long term lease
contract….......................................................… P 5,000.00
RULE VII
SCHEDULE OF FINES
SECTION 1. Without prejudice to the provisions of Rule VIII

of this rules and regulations, the following schedule of fines shall be
imposed upon the lessee for the following violations.
a) For failure to secure prior DTI-BOI or

BASECON/CDC/SBMA approval for the
sale, transfer, assignment and/or sub-lease
of leasehold rights under this Act and
these rules………………………………….......... P10,000.00
b) For failure to initiate the investment

project within three (3) years from signing
of the lease agreement………......................... P100,000.00
c) For withdrawal of the approved investment

after the commencement of the project …..... P100,000.00
d) For use of leased premises other than that

authorized by DTI-BOI or BASECON/CDC/
SBMA…………………….........................…….. P100,000.00
RULE VIII
PENAL PROVISIONS
SECTION 1. Penal Provision. – Any contract or agreement

made or executed in violation or any of the following prohibited acts
shall be null and void ab initio and both contracting parties shall be
punished by a fine of not less than One Hundred Thousand Pesos
(P100,000.00) nor more than One Million Pesos (P1,000,000.00)
251
or imprisonment of six (6) months to six (6) years, or both, at the

discretion of the Court:
Any provision in the lease agreement stipulating a lease period

in excess of that provided in paragraph (1) Section 4 of Republic Act
No. 7652, otherwise known as the Investor’s Lease Act.
Use of the leased premises for the purpose contrary to

existing laws of the land, public order, public policy, morals, or good
customs;
Any agreement or agreements resulting in the lease of land

in excess of the area approved by the DTI or BASECON/CDC/
SBMA whenever appropriate: Provided, that, where the excess of
the totality of the area leased is due to the acts of the lessee, the
lessee shall be held solely liable therefor: Provided, Further That, in
the case of corporations, associations, or partnership, the President,
manager, director, trustee, or officers responsible for the violation
hereof shall bear the criminal liability.
RULE IX
EFFECTIVITY
SECTION 1. These rules and regulations shall take effect

after fifteen (15) days following publication thereof in a newspaper
of general circulation in the Philippines.
APPROVED: 29 November 1994.
Published: December 27, 1994 / Malaya, p. 11
252
AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC

ACT NO. 6957, ENTITLED “AN ACT AUTHORIZING
THE FINANCING, CONSTRUCTION, OPERATION AND
MAINTENANCE OF INFRASTRUCTURE PROJECTS BY
THE PRIVATE SECTOR, AND FOR OTHER PURPOSES”

SECTION 1.Section 1 of Republic Act No. 6957 is hereby

amended to read as follows: “SECTION 1. Declaration of Policy. –
It is the declared policy of the State to recognize the indispensable
role of the private sector as the main engine for national growth and
development and provide the most appropriate incentives to mobilize
private resources for the purpose of financing the construction,
operation and maintenance of infrastructure and development
projects normally financed and undertaken by the Government.
Such incentives, aside from financial incentives as provided by
law, shall include providing a climate of minimum government
regulations and procedures and specific government undertakings
in support of the private sector.”
SEC. 2. Section 2 of the same Act is hereby amended to read

as follows:
“SEC. 2. Definition of Terms. – The following terms used in

this Act shall have the meaning stated below: “[a] Private sector
infrastructure or development projects. – The general description
of infrastructure or development projects normally financed and
operated by the public sector but which will now be wholly or partly
implemented by the private sector, including but not limited to,
power plants, highways, ports, airports, canals, dams, hydropower
projects, water supply, irrigation, telecommunications, railroads
and railways, transport systems, land reclamation projects,
industrial estates or townships, housing, government buildings,
tourism projects, markets, slaughterhouses, warehouses, solid
253
waste management, information technology networks and database

infrastructure, education and health facilities, sewerage, drainage,
dredging, and other infrastructure and development projects as may
be authorized by the appropriate agency pursuant to this Act. Such
projects shall be undertaken through contractual arrangements as
defined hereunder and such other variations as may be approved by
the President of the Philippines.
“For the construction stage of these infrastructure projects,

the project proponent may obtain financing from foreign and/or
domestic sources and/or engage the services of a foreign and/or
Filipino contractor. Provided, That, in case an infrastructure or a
development facility’s operation requires a public utility franchise,
the facility operator must be Filipino or if a corporation, it must
be duly registered with the Securities and Exchange Commission
and owned up to at least sixty percent (60%) by Filipinos: Provided,
further, That in the case of foreign contractors, Filipino labor shall be
employed or hired in the different phases of the construction where
Filipino skills are available: Provided, finally, That projects which
would have difficulty in sourcing funds may be financed partly from
direct government appropriations and/or from Official Development
Assistance [ODA] of foreign governments or institutions not
exceeding fifty percent [50%] of the project cost, and the balance to
be provided by the project proponent.
“[b] Build-operate-and-transfer. – A contractual arrangement

whereby the project proponent undertakes the construction, including
financing, of a given infrastructure facility, and the operation and
maintenance thereof. The project proponent operates the facility
over a fixed term during which it is allowed to charge facility
users appropriate tolls, fees, rentals, and charges not exceeding
these proposed in its bid or as negotiated and incorporated in the
contract to enable the project proponent to recover its investment,
and operating and maintenance expenses in the project. The project
proponent transfers the facility to the government agency or local
government unit concerned at the end of the fixed term which shall
not exceed fifty [50] years: Provided, That in case of an infrastructure
or development facility whose operation requires a public utility
franchise, the proponent must be Filipino or, if a corporation, must
254
be duly registered with the Securities and Exchange Commission

and owned up to at least sixty percent [60%] by Filipinos.
“The build-operate-and-transfer shall include a supply-and-

operate situation which is a contractual arrangement whereby the
supplier of equipment and machinery for a given infrastructure
facility, if the interest of the Government so requires, operates the
facility providing in the process technology transfer and training to
Filipino nationals.
“[c] Build-and-transfer. – A contractual arrangement whereby

the project proponent undertakes the financing and construction of a
given infrastructure or development facility and after its completion
turns it over to the government agency or local government unit
concerned, which shall pay the proponent on an agreed schedule
its total investments expended on the project, plus a reasonable
rate of return thereon. This arrangement may be employed in the
construction of any infrastructure or development project, including
critical facilities which, for security or strategic reasons, must be
operated directly by the Government.
“[d] Build-own-and-operate. – A contractual arrangement

whereby a project proponent is authorized to finance, construct,
own, operate and maintain an infrastructure or development facility
from which the proponent is allowed to recover its total investment,
operating and maintenance costs plus a reasonable return thereon
by collecting tolls, fees, rentals or other charges from facility
users: Provided, That all such projects, upon recommendation
of the Investment Coordination Committee [ICC] of the National
Economic and Development Authority [NEDA], shall be approved by
the President of the Philippines. Under this project, the proponent
which owns the assets of the facility may assign its operation and
maintenance to a facility operator.
“[e] Build-lease-and-transfer. – A contractual arrangement

whereby a project proponent is authorized to finance and construct
an infrastructure or development facility and upon its completion
turns it over to the government agency or local government unit
concerned on a lease arrangement for a fixed period after which
255
ownership of the facility is automatically transferred to the

government agency or local government unit concerned.
“ [f] Build-transfer-and-operate. – A contractual arrange-

ment whereby the public sector contracts out the building of an
infrastructure facility to a private entity such that the contractor
builds the facility on a turn-key basis, assuming cost overrun, delay
and specified performance risks.
“Once the facility is commissioned satisfactorily, title is

transferred to the implementing agency. The private entity however,
operates the facility on behalf of the implementing agency under an
agreement.
“[g] Contract-add-and-operate. – A contractual arrangement

whereby the project proponent adds to an existing infrastructure
facility which it is renting from the government. It operates the
expanded project over an agreed franchise period. There may, or
may not be, a transfer arrangement in regard to the facility.
“[h] Develop-operate-and-transfer. – A contractual

arrangement whereby favorable conditions external to a new
infrastructure project which is to be built by a private project
proponent are integrated into the arrangement by giving that entity
the right to develop adjoining property, and thus, enjoy some of the
benefits the investment creates such as higher property or rent
values.
“[i] Rehabilitate-operate-and-transfer. – A contractual

arrangement whereby an existing facility is turned over to the private
sector to refurbish, operate and maintain for a franchise period, at
the expiry of which the legal title to the facility is turned over to the
government. The term is also used to describe the purchase of an
existing facility from abroad, importing, refurbishing, erecting and
consuming it within the host country.
“[j] Rehabilitate-own-and-operate. – A contractual arrange-

ment whereby an existing facility is turned over to the private
256
sector to refurbish and operate with no time limitation imposed on

ownership. As long as the operator is not in violation of its franchise,
it can continue to operate the facility in perpetuity.
“[k] Project proponent. – The private sector entity which shall

have contractual responsibility for the project and which shall have
an adequate financial base to implement said project consisting of
equity and firm commitments from reputable financial institutions
to provide, upon award, sufficient credit lines to cover the total
estimated cost of the project.
“[l] Contractor. – Any entity accredited under Philippine

laws which may or may not be the project proponent and which
shall undertake the actual construction and/or supply of equipment
for the project.
“[m] Facility operator. – A company registered with the

Securities and Exchange Commission, which may or may not be
the project proponent, and which is responsible for all aspects of
operation and maintenance of the infrastructure or development
facility, including but not limited to the collection of tolls, fees,
rentals or charges from facility users: Provided, That in case the
facility requires a public utility franchise, the facility operator shall
be Filipino or at least sixty per centum [60%] owned by Filipinos.
“[n] Direct government guarantee. – An agreement whereby

the government or any of its agencies or local government units
assume responsibility for the repayment of debt directly incurred
by the project proponent in implementing the project in case of a
loan default. “[o] Reasonable rate of return on investments and
operating and maintenance cost. – The rate of return that reflects
the prevailing cost of capital in the domestic and international
markets: Provided, That, in case of negotiated contracts, such rate
of return shall be determined by the ICC of the NEDA prior to the
negotiation and/or call for proposals: Provided, further, That for
negotiated contracts for public utility projects which are monopolies,
the rate of return on rate base shall be determined by existing laws,
which in no case shall exceed twelve per centum [12%].
257
“[p] Construction. – Refers to new construction, rehabilita-

tion, improvement, expansion, alteration and related works and
activities including the necessary supply of equipment, materials,
labor and services and related items.”
SEC. 3. Section 3 of the same Act is hereby amended to

read as follows: “SEC. 3. Private Initiative in Infrastructure. –
All government infrastructure agencies, including government-
owned and -controlled corporations and local government units are
hereby authorized to enter into contract with any duly prequalified
project proponent for the financing, construction, operation and
maintenance of any financially viable infrastructure or development
facility through any of the projects authorized in this Act. Said
agencies, when entering into such contracts, are enjoined to solicit
the expertise of individuals, groups, or corporations in the private
sector who have extensive experience in undertaking infrastructure
or development projects.”
SEC. 4. Section 4 of the same act is hereby amended to read

as follows: “SEC. 4. Priority projects. – All concerned government
agencies, including government-owned and -controlled corporations
and local government units, shall include in their development
programs those priority projects that may be financed, constructed,
operated and maintained by the private sector under the provisions
of this Act. It shall be the duty of all concerned government agencies
to give wide publicity to all projects eligible for financing under
this Act, including publication in national and, where applicable,
international newspapers of general circulation once every six (6)
months and official notification of project proponents registered
with them.
“The lists of all such national projects must be part of the

development programs of the agencies concerned. The list of projects
costing up to Three hundred million pesos [300,000,000] shall be
submitted to the ICC of the NEDA for its approval and to the NEDA
Board for projects costing more than Three hundred million pesos
[300,000,000]. The list of projects submitted to the ICC of the NEDA
Board shall be acted upon within thirty [30] working days.
258
“The list of local projects to be implemented by the local

government units concerned shall be submitted for confirmation to
the municipal development council for projects costing up to Twenty
million pesos; those costing above Twenty up to Fifty million pesos
to the provincial development council; those costing up to Fifty
million to the city development council; above Fifty million up to
Two hundred million pesos to the regional development councils; and
those above Two hundred million pesos to the ICC of the NEDA.”
SEC. 5. A new section is hereby added after Section 4 of the

same Act and numbered as Section 4-A, to read as follows: “SEC.
4-A. Unsolicited proposals. – Unsolicited proposals for projects may
be accepted by any government agency or local government unit on
a negotiated basis: Provided, That, all the following conditions are
met: [1] such projects involve a new concept or technology and/or
are not part of the list of priority projects, [2] no direct government
guarantee, subsidy or equity is required, and [3] the government
agency or local government unit has invited by publication, for
three [3] consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is
received for a period of sixty [60] working days: Provided, further,
That in the event another proponent submits a lower price proposal,
the original proponent shall have the right to match that price
within thirty [30] working days.”

as follows: “SEC. 5. Public Bidding of Projects. – Upon approval
of the projects mentioned in Section 4 of this Act, the head of
the infrastructure agency or local government unit concerned
shall forthwith cause to be published, once every week for three
[3] consecutive weeks, in at least two [2] newspapers of general
circulation and in at least one [1] local newspaper which is circulated
in the region, province, city or municipality in which the project is
to be constructed, a notice inviting all prospective infrastructure
or development project proponents to participate in a competitive
public bidding for the projects so approved.
“In the case of a build-operate-and-transfer arrangement, the

contract shall be awarded to the bidder who, having satisfied the
259
minimum financial, technical, organizational and legal standards

required by this Act, has submitted the lowest bid and most
favorable terms for the project, based on the present value of its
proposed tolls, fees, rentals and charges over a fixed term for the
facility to be constructed, rehabilitated, operated and maintained
according to the prescribed minimum design and performance
standards, plans and specifications. For this purpose, the winning
project proponent shall be automatically granted by the appropriate
agency the franchise to operate and maintain the facility, including
the collection of tolls, fees, rentals, and charges in accordance with
Section 5 hereof.
“In the case of a build-and-transfer or build-lease-and-transfer

arrangement, the contract shall be awarded to the lowest complying
bidder based on the present value of its proposed schedule of
amortization payments for the facility to be constructed according to
the prescribed minimum design and performance standards, plans
and specifications: Provided, however, That a Filipino contractor
who submits an equally advantageous bid with exactly the same
price and technical specifications as those of a foreign contractor
shall be given preference.
“In all cases, a consortium that participates in a bid must

present proof that the members of the consortium have bound
themselves jointly and severally to assume responsibility for any
project. The withdrawal of any member of the consortium prior to the
implementation of the project could be a ground for the cancellation
of the contract.
“The public bidding must be conducted under a two-envelope/

two-stage system: the first envelope to contain the technical proposal
and the second envelope to contain the financial proposal. The
procedures for this system shall be outlined in the implementing
rules and regulations of this Act.
“A copy of each contract involving a project entered into

under this Act shall forthwith be submitted to Congress for its
information.”
260
SEC. 7. A new section is hereby added after Section 5 of the

same Act and numbered as Section 5-A, to read as follows: “SEC.
5-A. Direct Negotiation of Contracts. – Direct negotiation shall be
resorted to when there in only one complying bidder left as defined
hereunder:
“[a] If, after advertisement, only one contractor applied for

prequalification and it meets the prequalification requirements, after
which it is required to submit a bid/proposal which is subsequently
found by the agency/local government unit [LGU] to be complying.
“[b] If, after advertisement, more than one contractor

applied for prequalification but only one meets the prequalification
requirements, after which it submits bid/proposal which is found by
the agency/LGU to be complying.
“[c] If, after prequalification of more than one contractor,

only one submits a bid which is found by the agency/LGU to be
complying.
“[d] If, after prequalification, more than one contractor

submit bids but only one is found by the agency/LGU to be complying:
Provided, That, any of the disqualified prospective bidder may appeal
the decision of the implementing agency/LGUs Prequalification
Bids and Awards Committee within fifteen [15] working days to the
head of the agency, in case of national projects or to the Department
of the Interior and Local Government, in case of local projects from
the date the disqualification was made known to the disqualified
bidder. Provided, furthermore, That the implementing agency/LGUs
concerned should act on the appeal within forty-five [45] working
days from receipt thereof.”

read as follows: “SEC. 6. Repayment Scheme. – For the financing,
construction, operation and maintenance of any infrastructure
project undertaken through the Build-Operate-and-Transfer
arrangement or any of its variations pursuant to the provisions of
this Act, the project proponent shall be repaid by authorizing it to
charge and collect reasonable tolls, fees, and rentals for the use of
261
the project facility not exceeding those incorporated in the contract

and, where applicable, the proponent may likewise be repaid in the
form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited, to the grant of a portion or
percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of land: Provided, That
for negotiated contracts, and for projects which have been granted
a natural monopoly or where the public has no access to alternative
facilities, the appropriate government regulatory bodies, shall
approve the tolls, fees, rentals, and charges based on a reasonable
rate of return: Provided, further, That the imposition and collection
of tolls, fees, rentals, and charges shall be for a fixed term as proposed
in the bid and incorporated in the contract but in no case shall this
term exceed fifty [50] years: Provided, furthermore, That the tolls,
fees, rentals, and charges may be subject to adjustment during the
life of the contract, based on a predetermined formula using official
price indices and included in the instructions to bidders and in the
contract: Provided, also, That all tolls, fees, rentals, and charges
and adjustments thereof shall take into account the reasonableness
of said rates to the end-users of private sector-built infrastructure:
Provided, finally, That during the lifetime of the franchise, the
project proponent shall undertake the necessary maintenance and
repair of the facility in accordance with standards prescribed in
the bidding documents and in the contract. In the case of a Build-
and-Transfer arrangement, the repayment scheme is to be effected
through amortization payments by the government agency or local
government unit concerned to the project proponent according to
the scheme proposed in the bid and incorporated in the contract.”

as follows: “SEC. 7. Contract Termination – In the event that a
project is revoked, cancelled or terminated by the Government
through no fault of the project proponent or by mutual agreement,
the Government shall compensate the said project proponent for
its actual expenses incurred in the project plus a reasonable rate
of return thereon not exceeding that stated in the contract as of
the date of such revocation, cancellation or termination: Provided,
That the interest of the Government in these instances shall be
duly insured with the Government Service Insurance System or any
262
other insurance entity duly accredited by the Office of the Insurance

Commissioner: Provided, finally, That the cost of the insurance
coverage shall be included in the terms and conditions of the bidding
referred to above.
“In the event that the government defaults on certain major

obligations in the contract and such failure is not remediable or if
remediable shall remain unremedied for an unreasonable length of
time, the project proponent/contractor may, by prior notice to the
concerned national government agency or local government unit
specifying the turn-over date, terminate the contract. The project
proponent/contractor shall be reasonably compensated by the
Government for equivalent or proportionate contract cost as defined
in the contract.”

read as follows: “SEC. 8. Regulatory Boards. – The Toll Regulatory
Board which was created by Presidential Decree No. 1112 is hereby
attached to the Department of Public Works and Highways with the
Secretary of Public Works and Highways as Chairman.”

as follows: “SEC. 9. Project Supervision. – Every infrastructure
project undertaken under the provisions of this Act shall be in
accordance with the plans, specifications, standards, and costs
approved by the concerned government agency and shall be under
the supervision of the said agency or local government unit in the
case of local projects.”
SEC. 12. A new section to be numbered as Section 10 is

hereby added to read as follows: “SEC. 10. Investment Incentives.
– Among other incentives, projects in excess of One billion pesos
[1,000,000,000] shall be entitled to incentives as provided by the
Omnibus Investments Code, upon registration with the Board of
Investments.”
SEC. 13. Section 10 of the same Act is hereby renumbered as

Section 11 to read as follows: “SEC. 11. Implementing Rules and
Regulations. – A committee composed of one (1) representative each
263
from the Department of Public Works and Highways, the Department

of Transportation and Communications, the Department of Energy,
the Department of Environment and Natural Resources, the
Department of Agriculture, the Department of Trade and Industry,
the Department of Finance, the Department of the Interior and Local
Government, the National Economic and Development Authority,
the Coordinating Council of the Philippine Assistance Program, and
other concerned government agencies shall within sixty [60] days
from the effectivity of this Act, formulate and prescribe, after public
hearing and publication as required by law, the implementing rules
and regulations including, among others, the criteria and guidelines
for evaluation of bid proposals, list of financial incentives and
arrangements that the Government may provide for the project, in
order to carry out the provisions of this Act in the most expeditious
manner.
“The Chairman of this committee shall be appointed by the

President of the Philippines from its members.
“From time to time the Committee may conduct, formulate

and prescribe after due public hearing and publication, amendments
to the implementing rules and regulations, consistent with the
provisions of this Act.”
SEC. 14. A new section to be numbered as Section 12 is hereby

added to read as follows: “SEC. 12. Coordination and Monitoring of
Projects. – The Coordinating Council of the Philippine Assistance
Program [CCPAP] shall be responsible for the coordination and
monitoring of projects implemented under this Act.
“Regional development councils and local government units

shall periodically submit to CCPAP, information on the status of
said projects.
“At the end of every calendar year, the CCPAP shall report
to the President and to Congress on the progress of all projects
implemented under this Act.”
264
SEC. 15. Section 11, 12 and 13 of the same Act are hereby
renumbered as Sections 13, 14, and 15, respectively.
SEC. 16. Repealing Clause. – All laws or parts of any law

inconsistent with the provisions of this Act are hereby repealed or
SEC. 17. Separability Clause. – If any provision of this Act is

held invalid, the other provisions not affected thereby shall continue
in operation.
SEC. 18. Effectivity Clause. – This Act shall take effect

fifteen [15] days after its publication in at least two (2) newspapers
of general circulation.
265
AN ACT LIBERALIZING THE ENTRY AND SCOPE OF

OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES

SECTION 1. Declaration of Policy. – The State shall develop a

self-reliant and independent national economy effectively controlled
by Filipinos and encourage, promote, and maintain a stable,
competitive, efficient, and dynamic banking and financial system
that will stimulate economic growth, attract foreign investments,
provide a wider variety of financial services to Philippine enterprises,
households and individuals, strengthen linkages with global financial
centers, enhance the country’s competitiveness in the international
market and serve as a channel for the flow of funds and investments
into the economy to promote industrialization.
Pursuant to this policy, the Philippine banking and financial

system is hereby liberalized to create a more competitive environment
and encourage greater foreign participation through increase in
ownership in domestic banks by foreign banks and the entry of new
foreign bank branches.
In allowing increased foreign participation in the financial

system, it shall be the policy of the State that the financial system
shall remain effectively controlled by Filipinos.
SEC. 2. Modes of Entry. – The Monetary Board may authorize

foreign banks to operate in the Philippine banking system through
any of the following modes of entry: (i) by acquiring, purchasing or
owning up to sixty percent (60%) of the voting stock of an existing
bank; (ii) by investing in up to sixty percent (60%) of the voting
stock of a new banking subsidiary incorporated under the laws of
the Philippines; or (iii) by establishing branches with full banking
authority: Provided, That a foreign bank may avail itself of only
266
one (1) mode of entry: Provided, further, That a foreign bank or

a Philippine corporation may own up to a sixty percent (60%) of
the voting stock of only one (1) domestic bank or new banking
subsidiary.
SEC. 3. Guidelines for Approval. – In approving entry

applications of foreign banks, the Monetary Board shall: (i) ensure
geographic representation and complementation; (ii) consider
strategic trade and investment relationships between the Philippines
and the country of incorporation of the foreign bank; (iii) study the
demonstrated capacity, global reputation for financial innovations
and stability in a competitive environment of the applicant; (iv) see
to it that reciprocity rights are enjoyed by Philippine banks in the
applicant’s country; and (v) consider willingness to fully share their
technology.
Only those among the top one hundred fifty (150) foreign
banks in the world or the top five (5) banks in their country of origin
as of the date of application shall be allowed entry in accordance
with Section 2 (ii) and (iii) hereof.
In the exercise of this authority, the Monetary Board shall

adopt such measures as may be necessary to: (i) ensure that at all
times the control of seventy percent (70%) of the resources or assets
of the entire banking system is held by domestic banks which are at
least majority-owned by Filipinos; (ii) prevent a dominant market
position by one bank or the concentration of economic power in one
or more financial institutions, or in corporations, participations,
partnerships, groups or individuals with related interests; and (iii)
secure the listing in the Philippine Stock Exchange of the shares
of stocks of banking corporations established under Section 2(i)
and (ii) of this Act: Provided, That said banking corporations shall
establish stock option plans for their officers and employees as
the resources or assets of these corporations may allow in the best
business judgment of their respective boards of directors, pursuant
to the Corporation Code of the Philippines.
To qualify to establish a branch or a subsidiary, the foreign

bank applicant must be widely-owned and publicly-listed in its
267
country of origin, unless the foreign bank applicant is owned by the

government of its country of origin.
SEC. 4. Capital Requirements. – (i) For Locally Incorporated

Subsidiaries. – The minimum capital required for locally incorporated
subsidiaries of foreign banks shall be equal to that prescribed by the
Monetary Board for domestic banks of the same category.
(ii) For Foreign Bank Branches. – Foreign banks seeking

entry pursuant to Section 2 (iii) of this Act shall permanently assign
capital of not less than the U.S. dollar equivalent of Two hundred
ten million pesos (P210,000,000.00) at the exchange rate on the date
of the effectivity of this Act, as ascertained by the Monetary Board.
The permanently assigned capital shall be inwardly remitted and
converted into Philippine currency. The foreign bank shall be
entitled to three (3) branches.
The foreign bank may open three (3) additional branches in

locations designated by the Monetary Board by inwardly remitting
and converting into Philippine currency as permanently assigned
capital, the U.S. dollar equivalent of Thirty-five million pesos
(P35,000,000.00) per additional branch at the exchange rate on the
date of the effectivity of this Act, as ascertained by the Monetary
Board. The total number of branches for each new foreign bank
entrant shall not exceed six (6).
For purposes of meeting the prescribed capital ratios, the

term “capital” shall include permanently assigned capital plus
“net due to head office, branches and subsidiaries and offices
outside the Philippines” in the ratio prescribed by law or as may
be prescribed by the Monetary Board: Provided, That in all cases,
the permanently assigned capital and fifteen percent (15%) of “net
due to” required to comply with prescribed capital ratios shall be
inwardly remitted and converted to Philippine currency: Provided,
further, That amounts invested in productive enterprises or utilized
by Philippine companies for export activities, shall not be subject
to conversion into Philippine currency: Provided, finally, That the
Monetary Board shall monitor the effective use of the “net due to”
funds. Whenever there results “net due from head office” outside
268
the Philippines, this shall be deducted from the capital accounts for
purposes of determining the required capital ratios.
SEC. 5. Head Office Guarantee. – The head office of foreign

bank branches shall guarantee prompt payment of all liabilities of
its Philippine branches.
SEC. 6. Entrants under Section 2 (iii). – Foreign banks shall

be allowed entry under Section 2 (iii) within five (5) years from the
effectivity of this Act. During this period, six (6) new foreign banks
shall be allowed entry under Section 2(iii) upon the approval of
the Monetary Board. An additional four (4) foreign banks may be
allowed entry on recommendation of the Monetary Board, subject to
compliance with Sections 2, 3, 4, and 5 of this Act, upon approval of
the President as the national interest may require.
SEC. 7. Board of Directors. – Non-Filipino citizens may

become members of the Board of Directors of a bank to the extent of
the foreign participation in the equity of said bank.
SEC. 8. Equal Treatment. – Foreign banks authorized to

operate under Section 2 of this Act, shall perform the same functions,
enjoy the same privileges, and be subject to the same limitations
imposed upon a Philippine bank of the same category. These limits
include, among others, the single borrower’s limit and capital to
risk asset ratio as well as the capitalization required for expanded
commercial banking activities under the General Banking Act and
other related laws of the Philippines.
The basis for computing the ratio shall be the capital of the
foreign bank branch in the Philippines.
The foreign banks shall guarantee the observance of the rights

of their employees under the Constitution.
Any right, privilege or incentive granted to foreign banks

or their subsidiaries or affiliates under this Act, shall be equally
enjoyed by and extended under the same conditions to Philippine
banks. Philippine corporations whose shares of stocks are listed in
269
the Philippine Stock Exchange or are of long standing for at least

ten (10) years shall have the right to acquire, purchase or own up to
sixty percent (60%) of the voting stock of a domestic bank.
SEC. 9. Development Loans Incentives. – Loans extended by

a foreign bank’s majority-owned subsidiary incorporated under the
laws of the Philippines and/or a Philippine bank sixty percent (60%)
of the voting stock of which is held by a foreign bank, to finance
educational institutions, cooperatives, hospitals and other medical
services, socialized or low-cost housing, and to local government
units without national government guarantee, shall be included
for purposes of determining compliance with the provisions of
Presidential Decree No. 717, as amended.
SEC. 10. Transitory Provisions. – Foreign banks operating

through branches in the Philippines upon the effectivity of this
Act, shall be eligible for the privilege of establishing up to six (6)
additional branches under the same terms and conditions required
by Section 4 (ii) hereof: Provided, That for any branch additional
to what is existing at the time of the effectivity of this Act, the
prescribed permanently assigned capital shall be complied with
immediately: Provided, further, That a foreign bank may open
three (3) branches in the location of its choice and the next three (3)
branches in locations designated by the Monetary Board to insure
balanced economic development in all the regions.
The existing Philippine branches of foreign banks shall be

given one-and-a-half (1 1/2) years from the effectivity of this Act
to comply with the minimum capital requirements as prescribed
under Section 4 (ii) of this Act.
SEC. 11. Separability Clause. – If any provision of this Act is

declared unconstitutional, the same shall not affect the validity of
the other provisions not affected thereby.
SEC. 12. Applicability of Other Banking Laws. – The

provisions of Republic Act No. 337, as amended, otherwise known
as the General Banking Act, insofar as they are applicable and
270
not in conflict with any provision of this Act, shall apply to banks
authorized pursuant to this Act.
SEC. 13.Delegation of Rule-Making Powers and Compliance

Reports. – The Monetary Board is hereby authorized to issue such
rules and regulations as may be needed to implement the provisions
of this Act after consultation with the chairpersons of the Banks
Committee of the House of Representatives and the Senate of the
Philippines. On or before May 30 of each year, the Monetary Board
shall file a written report to Congress and its respective Banks
Committees, on the developments in the implementation of this
Act.
SEC. 14. Amendment and Repeal of Inconsistent Laws. –

Sections 11, 12, 12-A, 12-B, 13, 14-A, 21-B, and 68 of Republic Act
No. 337, as amended, otherwise known as the General Banking Act:
Sections 4 and 5 of Republic Act No. 7353, otherwise known as the
Rural Banks Act; Sections 4 and 14 of Republic Act No. 3779, as
amended, otherwise known as the Savings and Loan Association
Act; and Section 4 of Republic Act No. 4093, as amended, otherwise
known as the Private Development Banks Act insofar as they
are inconsistent with this Act, are hereby repealed or modified
accordingly.
SEC. 15. Effectivity Clause. – This Act shall take effect fifteen
(15) days after its publication in the Official Gazette or in two (2)
national newspapers of general circulation.
271
AN ACT TO AMEND ARTICLE 7 (13) OF EXECUTIVE ORDER

NO. 226, OTHERWISE KNOWN AS THE OMNIBUS
INVESTMENTS CODE OF 1987

SECTION 1. Article 7 (13) of Executive Order No. 226,

otherwise known as the Omnibus Investments Code of 1987, is
hereby amended to read as follows:
“(13)To the extent that such activities are allowed by the

Constitution and relevant laws, to recommend to the President
of the Philippines, the suspension of the nationality requirement
provided in this Code in cases of ASEAN projects, or investments
by ASEAN nationals, regional ASEAN or multilateral financial
institutions including their subsidiaries in preferred projects and/
or projects allowed through either financial or technical assistance
agreements entered into by the President, and in the case of regional
complementation for the manufacture of a particular product which
seeks to take advantage of economies of scale. For the purpose of
this Act, a multilateral financial institution shall refer to a financial
agency or entity, and its affiliates which satisfy the following
qualifications:
“(1) The institution is either owned or controlled by member

countries but does not possess any national identity;
“(2) The institution sources its funds from capital stock

subscriptions and contributions by member countries; and
“(3) The primary responsibility of the institution is to provide

funds for developmental purposes and international economic
stability.”
SEC. 2. This Act shall take effect after fifteen (15) days
272
following its publication either in the Official Gazette or a newspaper

273
AN ACT CREATING A SPECIAL ECONOMIC ZONE AND FREE

PORT IN THE CITY OF ZAMBOANGA CREATING FOR
THIS PURPOSE THE ZAMBOANGA CITY SPECIAL
ECONOMIC ZONE AUTHORITY, APPROPRIATING FUNDS
THEREFORE, AND FOR OTHER PURPOSES


Zamboanga City Special Economic Zone Act of 1995.

of the State to encourage and promote the attainment of a sound and
balanced industrial, economic and social development in the country
through the promotion of private enterprises. Towards this end, the
State shall endeavor to establish special economic zones in suitable
and selected areas in the country where enterprises will be given
incentives to create an environment conducive to business. This
shall be the means to attract local and foreign investors, general
employment opportunities, and encourage the regional dispersal of
industries.
SEC. 3. Creation of the Zamboanga City Special Economic

Zone. – In accordance with the foregoing policy and subject to the
concurrence of the city government of Zamboanga affected by the
zone, there is hereby established a special economic zone in the
City of Zamboanga to be known as the Zamboanga City Special
Economic Zone, hereinafter referred to as the ZAMBOECOZONE.
The specific metes and bounds of the ZAMBOECOZONE shall be
more particularly defined in a presidential proclamation that shall
be issued for this purpose.
SEC. 4. Governing Principles. – The Zamboanga City Special

Economic Zone shall be managed and operated under the following
principles:
274
(a) Within the framework and limitations of the Constitution

and the applicable provisions of the Local Government Code, the
ZAMBOECOZONE shall be developed into a decentralized, self-
reliant and self-sustaining agro-industrial, commercial, financial,
investment and tourist center and free port with suitable retirement
and residential areas. The ZAMBOECOZONE shall be provided with
transportation, telecommunications, and other facilities needed to
attract legitimate and productive foreign investments, generate
linkage industries and employment opportunities for the people of
Zamboanga City and its neighboring towns and cities.
(b) The ZAMBOECOZONE may establish mutually

beneficial economic relations with other entities within the country,
subject to the administrative guidance of the Department of Foreign
Affairs and/or Department of Trade and Industry with foreign
entities or enterprises.
(c) Foreign citizens and companies owned by non-

Filipinos in whatever proportion may set up enterprises in the
ZAMBOECOZONE, either by themselves or in joint venture with
Filipinos in any sector of industry, international trade and commerce
within the ZAMBOECOZONE.
(d) The ZAMBOECOZONE shall be managed and operated

as a separate customs territory to ensure and facilitate the free
flow, entry and movement of machinery and other goods. It shall be
vested with the authority to issue certificates of origin for products
manufactured or processed in the ZAMBOECOZONE in accordance
with prevailing rules of origin, and the pertinent regulations of
the duly recognized national bodies tasked to oversee all other
ECOZONES in the country.
(e) Business establishments within the ZAMBOECOZONE

shall be entitled to the existing 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, and such incentives, benefits or privileges presently enjoyed
275
by business establishments operating within the Subic special

economic zone pursuant to Republic Act No. 7227.
(f) Any provisions of existing laws, rules or regulations

to the contrary notwithstanding, no taxes, local and national,
shall be imposed on business establishments operating within
the ZAMBOECOZONE. In lieu of paying taxes, said business
establishments shall pay and remit to the national government two
percent (2%) of their gross income. In addition, they shall remit to
the city government of Zamboanga three percent (3%) of their gross
income, to be allocated as follows:
(1) Two percent (2%) to the City of Zamboanga; and
(2) One percent (1%) to the barangay special development

fund, which is hereby created, for the development
and improvement of the barangays within the City of
Zamboanga.
(g) Except as otherwise provided herein, the local

government unit/s embraced within the ZAMBOECOZONE shall
retain and maintain their basic autonomy and identity. Zamboanga
City shall operate and function in accordance with Republic Act No.
7160, otherwise known as the Local Government Code of 1991.
(h) Any foreign investor who establishes a business

enterprise within the ZAMBOECOZONE and who maintains capital
investment of not less than One hundred fifty thousand United States
dollars (US$150,000) shall be granted, along with his or her spouse,
dependents, and unmarried children below twenty-one (21) years of
age, a permanent resident status within the ZAMBOECOZONE.
Such foreign investor and his or her spouse, dependents and

unmarried children below the age of twenty-one (21) years, shall have
freedom of ingress and egress to and from the ZAMBOECOZONE
without any need of any special authorization from the Bureau of
Immigration and Deportation.
276
Likewise, the Zamboanga City Special Economic Zone

Authority shall issue working visas renewable every two (2) years
to foreign executives and foreign technicians with highly specialized
skills which no Filipino possesses, as certified by the Department of
Labor and Employment.
The names of the foreigners granted permanent resident

status and working visas by the Zamboanga City Special Economic
Zone Authority shall be reported to the Bureau of Immigration and
Deportation within thirty (30) days from such grant.
The foregoing is without prejudice to a foreigner acquiring

permanent resident status in the Philippines in accordance with
applicable immigration, retirement, and other related laws.
(i) The provisions of any law to the contrary notwithstanding,

any foreigner, partnership, corporation, or any other business
association not created and existing under the laws of the Republic
of the Philippines, engaged in the business of retailing goods and
merchandise, shall be permitted to engage in the business in such
retail trade within the ZAMBOECOZONE after securing license
for that purpose from the Zamboanga City Special Economic
Zone Authority: provided, that only foreign nationals engaged in
medium- and large-scale retail trade may be permitted to engage in
such business within the ZAMBOECOZONE. The determination
of the medium- and large-scale retail trade operation shall be the
responsibility of the ZAMBOECOZONE Authority.
(j) Existing banking laws and Bangko Sentral ng Pilipinas

(BSP) rules and regulations shall apply on 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. 5. Creation of the Zamboanga City Special Economic Zone

Authority. – Subject to the concurrence of the local government units
that will be affected by the creation of the ZAMBOECOZONE, there
277
is hereby created a body corporate to be known as the Zamboanga

City Special Economic Zone Authority, hereinafter referred to as
the ZAMBOECOZONE Authority, which shall manage and operate
the ZAMBOECOZONE, in accordance with this Act. It shall be
organized within one hundred eighty (180) days after the effectivity
of this Act.
SEC. 6. Principal Office. – The ZAMBOECOZONE Authority

shall maintain its principal office in the City of Zamboanga, but it
may establish branches and agencies within the Philippines and
abroad as may be necessary for the proper conduct of its business.
SEC. 7. Powers and Functions of the ZAMBOECOZONE

Authority. – The ZAMBOECOZONE Authority shall have the
following functions:
(a) To operate, administer, and manage the

ZAMBOECOZONE according to the principles and provisions set
forth in this Act;
(b) To recommend to the President the issuance of a

proclamation to fix and delimit the site of the ZAMBOECOZONE;
(c) To register, regulate and supervise the enterprises in

the ZAMBOECOZONE in an efficient and decentralized manner;
(d) To regulate and undertake the establishment, operation

and maintenance of utilities, other services and infrastructure in
the ZAMBOECOZONE such as heat, light and power, water supply,
telecommunications, transport, toll roads and bridges, port services,
etc., and to fix reasonable and competitive rates, fares, charges and
prices therefore;
(e) To construct, acquire, own, lease, operate and maintain on

its own or through others by virtue of contracts, franchises, licenses,
or permits under any of the schemes allowed in Republic Act No.
6957 (the build-operate-transfer law), or in joint venture with the
private sector, any or all of the public utilities and infrastructure
required or needed in the ZAMBOECOZONE in coordination with
278
appropriate national and local government authorities and in

conformity with applicable laws thereon;
(f) To operate on its own, either directly or through a subsidy

entity, or license to other tourism related activities, including games,
amusements and recreational and sports facilities;
(g) Within the limitation provided by law, to raise or borrow

adequate and necessary funds from local or foreign sources to finance
its projects and programs under this Act, and for that purpose to
issue bonds, promissory notes, and other forms of securities, and to
secure the same by a guarantee, pledge, mortgage, deed of trust, or
an assignment of all part of its property or assets;
(h) To provide security for the ZAMBOECOZONE in

coordination with national and local governments. For this purpose,
the ZAMBOECOZONE Authority may establish and maintain
its own security force and firefighting capability or hire others to
provide the same;
(i) To protect, preserve, maintain and develop the virgin

forests, beaches, coral and functional units or offices within the
ZAMBOECOZONE.
(j) To create, operate and/or contract to operate such

agencies and functional units or offices of the ZAMBOECOZONE
Authority as it may deem necessary;
(k) To adopt, alter and use a corporate seal; make contracts,

leases, own or otherwise dispose of personal or real property; sue
and be sued; and otherwise carry out its functions and duties as
provided for in this Act; and
(l) To issue rules and regulations consistent with the

provisions of this Act as may be necessary to implement and
accomplish the purposes, objectives, and policies provided therein.
SEC. 8. Non-profit Character of the ZAMBOECOZONE

Authority. – The ZAMBOECOZONE Authority shall be non-profit
279
and shall devote the use of its returns from capital investments, as
well as excess revenues from its operations, for the development,
improvement, and maintenance and other related expenditures
of the ZAMBOECOZONE Authority to pay its indebtedness and
obligations and in furtherance and effective implementation
of the policy provided in this Act. In consonance with this, the
ZAMBOECOZONE Authority is hereby declared exempt from the
payment of all taxes, duties, fees, imposts, charges, costs and service
fees in any court or administrative proceedings in which it may be
a party.
The foregoing exemptions may however be entirely or partially

lifted by the President of the Philippines upon the recommendation
of the Secretary of Finance, not earlier than five (5) years from the
effectivity of this Act, if the President shall find the Authority to be
self-sustaining and financially capable by then to pay such taxes,
customs duties, fees and other charges after providing for debt
service requirements of the ZAMBOECOZONE Authority and of its
projected capital and operating expenditures.
SECTION 9. Board of Directors of the ZAMBOECOZONE

Authority. – The powers of the ZAMBOECOZONE Authority shall
be vested in and exercised by a Board of Directors, hereinafter
referred to as the Board, which shall be composed of the following:
(a) A chairman who shall, at the same time, be the

administrator of the ZAMBOECOZONE Authority;
(b) A vice-chairman who shall come from the national agency

tasked to coordinate and monitor special economic zones and the
like in the country;
(c) Six (6) members consisting of:
(1) The city’s congressional representative;
(2) The mayor of the City of Zamboanga;
(3) One (1) representative of the city council;
280
(4) One (1) representative from domestic investors in the

ZAMBOECOZONE;
(5) One (1) representative from foreign investors in the

ZAMBOECOZONE; and
(6) One (1) representative from the labor sector chosen from
the workers in the ZAMBOECOZONE.
The city’s congressional representative, the mayor of the City

of Zamboanga and the representative of the city council shall serve
as ex officio voting members of the Board.
The chairman and the members of the Board, except the

ex officio members, shall be appointed by the President of the
Philippines to serve for a term of six (6) years, unless sooner removed
for cause or dies or resigns voluntarily. In case of death, resignation
or removal for cause, the replacement shall serve only the unexpired
portion of the term.
Except for the representatives of the business and investment

sectors no person shall be appointed by the President of the
Philippines as member of the Board unless he is a Filipino citizen,
of good moral character and of recognized competence in some
relevant fields of business, banking, shipping, business or labor
management, port operations, engineering or law.
Members of the Board shall receive a reasonable per diem

which shall be fixed by the President of the Philippines once every
six (6) years for every Board meeting: provided, however, that the
total per diem collected each month shall not exceed the equivalent
per diems for four (4) meetings. Unless and until the President of
the Philippines has fixed a higher per diem for the members of the
Board, such per diem shall not be more than Ten thousand pesos
(P10,000.00) for every Board meeting.
SEC. 10. Powers and Duties of the Chairman-Administrator.

– The chairman-administrator shall have the following powers and
duties:
281
(a) To direct and manage the affairs of the Authority in

accordance with the policies of the Board;
(b) To establish the internal organization of the Authority

under such conditions that the Board may prescribe;
(c) To submit an annual budget and necessary supplemental

budget to the Board for its approval;
(d) To submit within thirty (30) days after the close of each
fiscal year an annual report to the Board and such other reports as
may be required; and
(e) To perform such other duties as may be assigned to him

by the Board.
SEC. 11. Promotion of Industrial Peace. – One representative

each from the Department of Labor and Employment (DOLE), labor
sector, cultural minorities, business and industry sectors shall
formulate a mechanism under a social pact for the enhancement and
preservation of industrial peace in the City of Zamboanga within
thirty (30) days after the effectivity of this Act.
SEC. 12. Capitalization. – The Zamboanga City Special

Economic Zone Authority shall have an authorized capital stock of
two billion (2,000,000,000) no par shares with a minimum issue value
of Ten pesos (P10.00) each. The national government shall initially
subscribe and fully pay three hundred million (300,000,000) shares
of such capital stock. The initial amount necessary to subscribe
and pay for the shares of stock shall be included in the General
Appropriations Act of the year following its enactment into law
and thereafter. The Board of Directors of the ZAMBOECOZONE
Authority may, from time to time and with the written concurrence
of the Secretary of Finance, increase the issue value of the shares
representing the capital stock of the ZAMBOECOZONE Authority.
The Board of Directors of the ZAMBOECOZONE Authority, with
the written concurrence of the Secretary of Finance, may sell shares
representing not more than forty per centum (40%) of the capital
stock of the ZAMBOECOZONE Authority to the general public
282
with such annual dividend policy as the Board and the Secretary
of Finance may determine. The national government shall in no
case own less than sixty per centum (60%) of the total issued and
outstanding capital stock of the ZAMBOECOZONE Authority.
SEC. 13. Supervision and Coordination of Development

Plans. – For purposes of policy direction and coordination, the
ZAMBOECOZONE Authority shall be under the direct control and
supervision of the Office of the President, in the meantime that the
agency tasked with the coordination of special economic zones is not
yet in place.
SEC. 14. Relationship with the Local Government Units. – In

case of any conflict between the ZAMBOECOZONE Authority and
the City of Zamboanga on matters affecting the ZAMBOECOZONE
other than defense and security matters, the decision of the
ZAMBOECOZONE Authority shall prevail.
SEC. 15. Auditing. – The Commission on Audit shall

appoint a representative who shall be a full time auditor of the
ZAMBOECOZONE Authority and assign such number of personnel
as may be necessary to assist said representative in the performance
of his/her duties. The salaries and emoluments of the assigned
auditor and personnel shall be in accordance with pertinent laws,

SEC. 17. Repealing Clause. – All laws, executive orders or

issuance, or any parts thereof which are inconsistent herewith, are
283
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

CHAPTER I
PURPOSES AND OBJECTIVES; ESTABLISHMENT AND

NATURE OF SPECIAL ECONOMIC ZONES; COORDINATION
WITH OTHER SIMILAR SCHEMES
SECTION 1. Title. – This Act shall be known and cited as

“The Special Economic Zone Act of 1995.”
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,
284
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;
(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.
285
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 (IEs), 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.
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
286
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
287
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;
288
(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 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 may be 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;
289
(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;
(ii) So much as may be necessary of that portion of the

Province of La Union;
(jj) 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;
(ll) 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 following

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/
290
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 Philippine 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.
291
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 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
292
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 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
293
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
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 PEZA
294
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 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 regulations 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
295
(g) Render annual reports to the President and the

Congress.
SEC. 13. General Powers and Functions of the Authority. –

The PEZA 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

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
296
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 PEZA 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;
(d) To give such information and recommend such measures

to the Board, as he shall deem advantageous to the ECOZONE;
297
(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

as may be prescribed by the Board, and to implement the policies,
298
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 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.
299
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 with, or in any franchise, or special privilege granted
by the PEZA 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.
300
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 the 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
301
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 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.
302
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
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
303
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-
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
requirements 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
304
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 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
305
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,
technical 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.
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
306
to the regional development council for inclusion in and as inputs to

the overall regional development plan.
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 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 personnel 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.
307
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 government.
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 PEZA 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-

generating instruments which the PEZA is authorized to impose
and collect under this Act;
(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 ECOZONE 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.
308
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, 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

are hereby declared separable, and in the event one or more of
such provisions or part thereof are declared unconstitutional, such
declaration of unconstitutionality shall not affect the validity of the
other provisions thereof.
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.
309
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 Zone
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, amended, and its implementing rules
and regulations shall remain in force.
SEC. 57. Effectivity. – This Act shall take effect upon its
approval.
310
AN ACT AMENDING ARTICLE 39, TITLE III OF EXECUTIVE

INVESTMENTS CODE OF 1987, AS AMENDED, AND FOR
OTHER PURPOSES

SECTION 1. Article 39, Title III of Executive Order No. 226,

otherwise known as the Omnibus Investments Code of 1987, as
“Art. 39. Incentives to Registered Enterprises. – All registered

enterprises shall be granted the following incentives to the extent
engaged in a preferred area of investment:
“(a) Income Tax Holiday. –
“(1) For six (6) years from commercial operation for pioneer
firms and four (4) years for non-pioneer firms, new registered firms
shall be fully exempt from income taxes levied by the national
government. Subject to such guidelines as may be prescribed by the
Board, the income tax exemption will be extended for another year
in each of the following cases:
“(i) The project meets the prescribed ratio of capital

equipment to number of workers set by the Board;
“(ii) Utilization of indigenous raw materials at rates set by

the Board;
“(iii) The net foreign exchange savings or earnings amount

to at least US$500,000 annually during the first three (3) years of
operation.
311
“The preceding paragraph notwithstanding, no registered

pioneer firm may avail of this incentive for a period exceeding eight
(8) years.
“(2) For a period of three (3) years from commercial operation,

registered expanding firms shall be entitled to an exemption from
income taxes levied by the national government proportionate to
their expansion under such terms and conditions as the Board may
determine: Provided, however, That during the period within which
this incentive is availed of by the expanding firm it shall not be
entitled to additional deduction for incremental labor expense.
“(3) The provision of Article 7(14) notwithstanding, registered

firms shall not be entitled to any extension of this incentive.
“(b) Additional Deduction for Labor Expense. – For the

first five (5) years from registration a registered enterprise shall
be allowed an additional deduction from the taxable income of
fifty percent (50%) of the wages corresponding to the increment in
the number of direct labor for skilled and unskilled workers if the
project meets the prescribed ratio of capital equipment to number of
workers set by the Board: Provided, That this additional deduction
shall be doubled if the activity is located in less developed areas as
defined in Article 40.
“(c) Tax and Duty Exemption on Imported Capital

Equipment and its Accompanying Spare Parts. – New, expanding/
modernizing enterprise which have been registered with the Board
of Investments on or before December 31, 1994 shall be exempt to the
extent of one hundred percent (100%) of national internal revenue
taxes and customs duties on importations of machinery, equipment
and accompanying spare parts within the prescribed period under
its law of registration or until December 31, 1997 whichever comes
first: Provided, however, That the enterprise which shall register
after December 31, 1994 shall be subject to the provisions of
Republic Act No. 7716, and three percent (3%) customs duties up
to December 31, 1997: Provided, finally, That the importation of
machinery, equipment and accompanying spare parts shall comply
with the following conditions:
312
“(1) They are not manufactured domestically in sufficient

quantity, or comparable quality, and at reasonable prices;
“(2) They are reasonably needed and will be used exclusively

by the registered enterprise in its registered activity, unless prior
approval of the Board is secured for the part-time utilization of said
equipment in a non-registered activity to maximize usage thereof or
the proportionate taxes and duties are paid on specific equipment
and machinery being permanently used for non-registered activities;
and
‘(3) The approval of the Board was obtained by the registered

enterprise for the importation of such machinery, equipment and
accompanying spare parts.
“In granting the approval of the importations under this

paragraph, the Board may require international canvassing but if
the total cost of the capital equipment or industrial plant exceeds
US$5,000,000, the Board shall apply or adopt the provisions of
Presidential Decree No. 1764 on international competitive bidding.
“If the registered enterprise sells, transfers or disposes of these

machinery, equipment and spare parts without prior approval of the
Board within five (5) years from date of acquisition, the registered
enterprise and the vendee, transferee, or assignee shall be solidarily
liable to pay twice the amount of the tax exemptions given it. The
Board shall allow and approve the sale, transfer or disposition of
the said items until December 31, 1997 or December 31, 1999 as the
case may be if made:
“(aa) To another registered enterprise or registered domestic

producer enjoying similar activities;
“(bb) For reasons of proven technical obsolescence; or
“(cc) For purpose of replacement to improve and/or expand

the operations of the registered enterprise.
313
“(d) Tax Credit on Domestic Capital Equipment. – A tax

credit equivalent to one hundred percent (100%) of the value of the
national internal revenue taxes and customs duties that would have
been waived on the machinery, equipment and spare parts, had
these items been imported shall be given to the new and expanding
enterprise registered with the Board of Investments as of December
31, 1994 which purchases machinery, equipment and spare
parts from a domestic manufacturer: Provided, (1) That the said
equipment, machinery and spare parts are reasonably needed and
will be used exclusively by the registered enterprise in its registered
activity, unless prior approval of the Board is secured for the part-
time utilization of said equipment in a non-registered activity to
maximize usage thereof; (2) That the equipment would have qualified
for tax and duty exemption under paragraph (c) hereof; (3) That the
approval of the Board was obtained by the registered enterprise;
and (4) That the purchase is made on or before December 31, 1997 or
December 31, 1999 as the case may be. If the registered enterprise
sells, transfers, or disposes of these machinery, equipment and spare
parts, the provision in the preceding paragraph for such disposition
shall apply.
“(e) Simplification of Customs Procedures. – Customs

procedures for the importation of equipment, spare parts, raw
materials and supplies, exports of processed products by registered
enterprises shall be simplified by the Bureau of Customs.
“(f) Unrestricted Use of Consigned Equipment. – Provisions

of existing laws notwithstanding, machinery, equipment and spare
parts consigned to any enterprise shall not be subject to restrictions
as to period of use of such machinery, equipment and spare parts:
Provided, That the appropriate re-export bond is posted unless
importation is otherwise covered under subsections (c) and (1) of
this Article: Provided, further, That such consigned equipment shall
be for the exclusive use of the registered enterprise.
“If such equipment is sold, transferred or otherwise, Article

39(c)(3) shall apply. Outward remittance of foreign exchange
covering the proceeds of such sale, transfer or disposition shall be
allowed only upon prior Bangko Sentral ng Pilipinas approval.
314
“(g) Employment of Foreign Nationals. – Subject to the

provisions of Section 29 of Commonwealth Act No. 613, as amended,
a registered enterprise may employ foreign nationals in supervisory,
technical or advisory positions for a period not exceeding five (5)
years from its registration, extendible for limited periods at the
discretion of the Board: Provided, however, That when the majority
of the capital stock of a registered enterprise is owned by foreign
investors, the positions of president, treasurer, and general manager
or their equivalents may be retained by foreign nationals beyond
the period set forth within.
“Foreign nationals under employment contract within the

purview of this incentive, their spouses and unmarried children
under twenty-one (21) years of age, who are not excluded by Section
29 of Commonwealth Act No. 613, as amended, shall be permitted to
enter and reside in the Philippines during the period of employment
of such foreign nationals.
“A registered enterprise shall train Filipinos as understudies

of foreign nationals in administrative, supervisory and technical
skills and shall submit annual reports on such training to the
Board.
“(h) Exemption on Breeding Stocks and Genetic Materials. –

The importation of breeding stocks and genetic materials within ten
(10) years from the date of registration of commercial operation of
the enterprise shall be exempt from all taxes and duties: Provided,
That such breeding stocks and genetic materials are: (1) not locally
available and/or obtainable locally in comparable quality and at
reasonable prices; (2) reasonably needed in the registered activity;
and (3) approved by the Board.
“(i) Tax Credit on Duty Portion of Domestic Breeding Stocks

and Genetic Materials. – A tax credit equivalent to one hundred
percent (100%) of the value of national internal revenue taxes and
customs duties that would have been waived on the breeding stocks
and genetic materials had these items been imported shall be given
to the registered enterprise which purchases breeding stocks and
genetic materials from a domestic producer: Provided, (1) That
315
said breeding stocks and genetic materials would have qualified

for tax and duty-free importation under the preceding paragraph;
(2) That the breeding stocks and genetic materials are reasonably
needed in the registered activity; (3) That approval of the Board
has been obtained by the registered enterprise; and (4) That the
purchase is made within ten (10) years from the date of registration
of commercial operation of the registered enterprise.
“(j) Tax Credit for Taxes and Duties on Raw Materials. –

Every registered enterprise shall enjoy a tax credit equivalent to
the national internal revenue taxes and customs duties paid on the
supplies, raw materials and semi-manufactured products used in
the manufacture, processing or production of its export products
and forming part thereof; Provided, however, That the taxes on
the supplies, raw materials and semi-manufactured products
domestically purchased are indicated as a separate item in the sales
invoice.
“Nothing herein shall be construed as to preclude the Board

from setting a fixed percentage of exports sales as the approximate
tax credit for taxes and duties of raw materials based on an average
or standard usage for such materials in the industry.
“(k) Access to Bonded Manufacturing/Trading System.

– Registered export-oriented enterprises shall have access to the
utilization of the bonded warehousing system in all areas required
by the project subject to such guidelines as may be issued by the
Board upon prior consultation with the Bureau of Customs.
“(l) Exemption from Taxes and Duties on Imported Spare

Parts. – Importation of required supplies and spare parts for
consigned equipment or those imported tax and duty-free by a
registered enterprise with a bonded manufacturing warehouse
shall be exempt from customs duties and national internal revenue
taxes payable thereon: Provided, however, That such spare
parts and supplies are not locally available at reasonable prices,
sufficient quantity and comparable quality: Provided, finally, That
all such spare parts and supplies shall be used only in the bonded
manufacturing warehouse of the registered enterprise under such
316
requirements as the Bureau of Customs may impose.
“(m) Exemption from Wharfage Dues and Export Tax,

Duty, Imposts and Fee. – The provision of law to the contrary
notwithstanding, exports by a registered enterprise of its non-
traditional export products shall be exempted from any wharfage
dues, and any export tax, duty impost and fee.”
SEC. 2. All other provisions of Executive Order No. 226

and Republic Act No. 7369, also known as “An Act Granting Tax
and Duty Exemption and Tax Credit on Capital Equipment,” not
otherwise affected by the provisions of this Act shall remain in full
force and effect.
SEC. 3. All other laws, decrees, orders, issuances and rules

and regulations or parts thereof inconsistent with this Act, are
hereby repealed or modified accordingly.
SEC. 4. Effectivity Clause. – This Act shall have retroactive

effect to May 5, 1994 fifteen (15) days following its publication in a
newspaper of general circulation.
317
AN ACT GRANTING LEGAL RESIDENCE STATUS TO CERTAIN

ALIENS THROUGH A SOCIAL INTEGRATION PROGRAM
IN THE PHILIPPINES UNDER CERTAIN CONDITIONS

SECTION 1. Title. – This Act shall be known as “The Alien

Social Integration Act of 1995.”
SEC. 2.Declaration of Policy. – The State shall control and

regulate the admission and integration of aliens into its territory
and body politic. Towards this end, aliens with unlawful residence
status shall be integrated into the mainstream of Philippine society
subject to national security and interest, and in deference to
internationally recognized human rights.
SEC. 3. Coverage. – Upon effectivity of this Act, all aliens

whose stay in the Philippines is otherwise illegal under existing
laws, and who have entered the country prior to June 30, 1992,
including those who availed in good faith of the benefits of Executive
Order No. 324 whose applications have been approved before
or after November 21, 1988, are hereby granted legal residence
status upon compliance with the provisions of this Act, and shall
not be prosecuted for crimes defined under Commonwealth Act.
No. 613, otherwise known as the Immigration Act of 1940, which
are inherent to illegal residence such as the absence of valid travel
documents or visa : Provided, That in no case shall alien refugees in
the Philippines be qualified to apply under this Act.
The bar to prosecution shall apply only to such crimes or

felonies committed due to acts necessary or essential to maintain
a false or fraudulent or illegal residence, such as falsification of
marriage, birth or baptismal certificates or travel certificates
documents, visas or alien of registration.
318
SEC. 4. Integration Requirements and Fees. – The social

integration of aliens established under Sec. 3 shall be effective and
its benefits enjoyed by illegal residents upon completion of all the
following acts:
4.1 Filing of registration forms with the following agencies:(1)

the civil register of his place of residence;(2) the Bureau of Internal
Revenue (BIR);(3) the Bureau of Immigration;(4) the National
Bureau of Investigation (NBI); and(5) the commercial or universal
bank to which the alien pays the integration fee as hereafter
provided
In lieu thereof, the filing of registration forms may be done

in five (5) sets with a commercial or universal bank certified by the
BIR as authorized collectors for income tax.
4.2. The registration forms shall contain the applicant’s full

name and one alias by which he may be known; proof of his identity,
good moral character and financial capacity through affidavits
from two (2) Filipino citizens of good reputation in his/her place of
residence; history of stay in the Philippines; residential address for
the immediate past five (5) years; four (4) passport size pictures
and a complete fingerprint card for each of the agencies mentioned
in 4.1, including his/her most recent dental records which shall be
submitted to the NBI.
4.3 Payment of the integration fees to any duly licensed

commercial or universal bank accredited by the BIR as authorized
to receive income tax payments in the following amount:
4.3.1 One hundred thousand pesos (P100,000) upon filing

of the registration forms with the bank plus Fifty thousand pesos
(P50,000) per year over a three-year period from the payment of the
first installment. The subsequent three (3) installment payments
should be paid within twelve (12)months from the date of the first
payment without any extensions: Provided, That the payments
made by those who availed of the benefits of Executive Order No.
324 whose applications were approved before or after November 20,
1988 shall be accredited to their favor.
319
In lieu of the above installment payments, the applicant may

immediately pay Two hundred thousand pesos(P200,000).
4.3.2. A single payment of Fifty thousand pesos (P50,000)

for the spouse and Twenty-five thousand pesos (P25,000) for each
legitimate child below eighteen (18) years of age.
4.3.3. Children born after June 30, 1992 of parents who

received the benefits of this Act shall, upon proper registration with
the Bureau of Immigration, become legal residents.
4.3.4. The integration fees paid by an alien shall be in lieu of

all immigration fees and fines said alien may have incurred during
his unlawful residence in the country.
4.4. Submission of a medical certificate stating that the

applicant is not a user of prohibited drugs or otherwise a drug
addict and that he is not afflicted with Acquired Immune Deficiency
Syndrome (AIDS).
SEC. 5. Official Receipt. – The commercial or universal

bank shall issue an official receipt acknowledging receipt of the
integration fee, upon payment by the applicant of a processing fee of
One thousand pesos (P1,000). In the event registration was effected
under paragraph 2 of subsection. Sec. 4.1, the bank shall furnish
copies of the registration documents to the following agencies:(1)
the civil register of the applicant’s place of residence;(2) the BIR;
and(3) the NBI. Thereafter, the bank shall issue a certification to
this effect in favor of the applicant.
SEC. 6. Duties of the Bureau of Immigration. – Upon

presentation by the applicant of the official receipt from the bank,
together with a certification from the bank or the agency concerned,
as the case may be that the civil registrar, BIR and NBI received
copies of the registration forms, and the submission to the Bureau
of Immigration of the registration forms defined in Section 4.2
hereof, the Bureau of Immigration shall immediately issue an alien
certificate of registration (ACR) to the applicant. The legal residence
320
granted under this Act shall commence from the date the Bureau of
Immigration issues the ACR.
The Bureau of Immigration shall publish, at the applicant’s

cost, the names, ages, addresses, and a photograph of each of the
applicants in a national newspaper of general circulation at the
end of each calendar month during the effectivity of the application
period, as hereinafter provided in Section 8. The banks authorized
under this Act to collect the fees herein required shall collect a
publication fee of Five thousand pesos (P5,000) from the applicant.
SEC. 7. Ministerial Duty of the Civil Regristrar, the BIR and

the NBI. – The civil registrar, the BIR and the NBI shall have the
ministerial duty to accept the registration forms required under Sec.
4. Each of these agencies may charge no more than One hundred
pesos (P100) for the filing of the registration forms. Upon payment
of the filing fee, the agency concerned shall issue a certification that
the alien has filed with said office by himself/herself or through the
bank, all the forms required under Section 4.
SEC. 8. Application Period. – The benefits extended by Section

3 can be availed of from June 1, 1995 to December 31, 1996.
SEC. 9. Administrative Confirmation. – The procedure

herein provided may be availed of by any alien who may want a
confirmation or affirmation of his stay in the Philippines.
SEC. 10. Eligibility for Citizenship. – Aliens granted legal

residence under this Act shall be eligible to apply for naturalization
after five (5) years from the approval of his/her application.
SEC. 11. Compliance Report and Oversight Functions. – The

Bureau of Immigration shall submit to the chair of the committees
on justice of each chamber of Congress copy furnished the Senate
President and the Speaker of the House of Representatives, a
written report on the developments in the implementation of this
Act on November 30, 1995, May 31, 1996, November 30, 1996, and
May 31, 1997 for purposes of oversight functions.
321
SEC. 12. Perjury. – The registration forms, together with

the proof required therein, shall be supported by affidavits of two
(2) Filipino citizens of good reputation in the applicant’s place of
residence.
All applications shall be under oath or affirmation, which oath

or affirmation shall be required for their registration. Applicants who
violate their oath or affirmation by knowingly making untruthful
statements on any material matter in their applications shall be
liable for perjury under the Revised Penal Code.
In addition to the penalty imposed on perjury, the subsequent

convictions of the applicant shall revoke the legal residence granted
him/her and shall subject the applicant to deportation proceedings.
SEC. 13. Appropriation. – There is hereby appropriated,

out of the payments received under Section 4 hereof, an amount of
Five million pesos (P5,000,000) to cover administrative and other
expenses to be incurred in the implementation of this Act.
SEC. 14. Privacy Clause. – Information submitted by an alien

applicant pursuant to this Act, shall be used only for the purpose of
determining the veracity of the factual statements by the applicant
or for enforcing the penalties prescribed by this Act.
SEC. 15. Rule-making Powers.- The provision of this Act are

self-executory and shall not be dependent on the issuance of any
rules or regulations. The Secretary of Justice is hereby authorized,
however, to promulgate only such rules and regulations as may be
needed to efficiently and administratively implement the provisions
of this Act.
SEC. 16. Separability Clause. – If any provisions of this Act

is declared invalid or unconstitutional, the provisions not affected
thereby shall continue to be in full force and effect.
SEC. 17. Repealing Clause. – All laws, decrees or rules

322
SEC. 18. Effectivity Clause. – This Act shall take effect fifteen
(15) days after the completion of its publication in at least two (2)
national newspapers of general circulation.
323
AN ACT ESTABLISHING A SPECIAL ECONOMIC ZONE AND

FREE PORT IN THE MUNICIPALITY OF SANTA ANA AND
THE NEIGHBORING ISLANDS IN THE MUNICIPALITY OF
APARRI, PROVINCE OF CAGAYAN, PROVIDING FUNDS
THEREFOR, AND FOR OTHER PURPOSES


“Cagayan Special Economic Zone Act of 1995.”
SEC. 2. Declaration of Policy. – It is hereby declared the

policy of the government to 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 condition through the establishment, among
others, of special economic zones and free ports in suitable and
strategic locations in the country and through measures that shall
effectively attract legitimate and productive foreign investments.
SEC. 3. The Cagayan Special Economic Zone and Free Port.

– In accordance with the foregoing declared policy, there is hereby
established a special economic zone and free port, to be known as
the Cagayan Special Economic Zone, hereinafter known as the Zone,
which shall cover the entire area embraced by the Municipality
of Santa Ana and the islands of Fuga, Barit, and Mabbag in the
Municipality of Aparri, Province of Cagayan.
SEC. 4. Governing Principles. – The Cagayan Special

Economic Zone shall be managed and operated under the following
principles:
324
(a) Under the framework and limitations of the Constitution

and the applicable and the provisions of the Local Government Code,
the Zone shall be developed into and operated as a self-sustaining,
commercial, financial, investment, and tourism/recreational center
and free port with suitable retirement/residential areas, in order to
create employment opportunities in and around the Zone, and to
effectively encourage and attract legitimate and productive foreign
investments therein;
(b) Business establishments operating within the Zone shall

be entitled to the existing fiscal incentives as provided for under
Presidential Decree No. 66, the law creating the Export Processing
Zone Authority (EPZA), or those provided under Book VI of Executive
Order No. 226, otherwise known as the Omnibus Investments Code
of 1987;
(c) Any provision of existing law, rules or regulations to

the contrary notwithstanding, no taxes, local and national, shall be
imposed on business establishments operating within the Zone. In
lieu of paying taxes, said business establishments shall pay and
remit to the national government five per centum (5%) of their gross
income, to be divided as follows:
(1) Two per centum (2%) shall accrue to the general fund of
the national government;
(2) One per centum (1%) to the Province of Cagayan;
(3) One-half per centum (1/2%) to be shared by the

municipalities affected by the declaration of the Zone in proportion
to their income from business activities within the Zone; and
(4) One and one-half per centum (1 1/2%) to the Cagayan

Economic Zone Authority which shall be created under this Act;
(d) Existing banking laws and Bangko Sentral ng Pilipinas

(BSP) rules and regulations shall apply on foreign exchange and
other current account transactions (trade and non-trade), local
and foreign borrowings, foreign investments, establishment and
325
operation of local and foreign banks, foreign currency deposit units,

offshore banking units and other financial institutions under the
supervision of the BSP;
(e) Any foreign investor who establishes a business

enterprise within the Zone and who maintains capital investment
of not less than One hundred fifty thousand United States dollars
(US$150,000) shall be granted, along with his or her spouse,
dependents, and unmarried children below twenty-one (21) years of
age, a permanent resident status within the Zone. The responsibility
and authority to grant such permanent resident status is hereby
delegated to the Cagayan Economic Zone Authority referred to in
Section 5 of this Act.
Such foreign investor and his or her spouse, dependents, and

unmarried children below the age of twenty-one (21) years, shall
have the freedom of ingress and egress to and from the Zone without
need of any special authorization from the Bureau of Immigration.
Likewise, the Cagayan Economic Zone Authority shall issue

working visas renewable every two (2) years to foreign executives
and foreign technicians with highly specialized skills which no
Filipino possesses, as certified by the Department of Labor and
Employees.
The names of foreigners granted permanent resident status

and working visas by the Cagayan Economic Zone Authority shall
be reported to the Bureau of Immigration within thirty (30) days
from such grant.
The foregoing is without prejudice to a foreigner acquiring

permanent resident status in the Philippines in accordance with
applicable immigration, retirement, and other related laws; and
(f) Except as otherwise provided herein, the local government

units totally or partially embraced within the Zone shall retain and
maintain their basic autonomy and identity. The Municipality of
Santa Ana and the Municipality of Aparri shall operate and function
in accordance with Republic Act No. 7160, otherwise known as the
326
Local Government Act of 1991, insofar as the areas within their

respective jurisdiction covered in this Act are concerned.
SEC. 5. Creation of the Cagayan Economic Zone Authority.

– A body corporate to be known as the Cagayan Economic Zone
Authority, hereinafter referred to as the CEZA, is hereby created to
manage and operate, in accordance with the provisions of this Act,
the Cagayan Special Economic Zone and Free Port. This corporate
franchise shall expire in fifty (50) years counted from the first day
of the fifth (5th) calendar year after the effectivity of this Act, unless
otherwise extended by Congress.
SEC. 6. Powers and Functions of the Cagayan Economic

Zone Authority. – The Cagayan Economic Zone Authority shall have
the following powers and functions.
(a) To adopt, alter, use a corporate seal; to contract, lease,

buy, sell, acquire, own and dispose, movable and immovable as well
as personal and real property of whatever nature (including but not
limited to shares of stock or participation in private corporations or
in limited partnerships, or in joint ventures with limited liability),
bonds, precious metals in bullions, ingots, and easily convertible
foreign exchange; to sue and be sued in order to carry out its duties,
responsibilities, privileges, powers and functions as granted and
provided for in this Act; and to exercise the power of eminent domain
for public use and public purpose;
b) Within the limitation provided by law, to raise or borrow

adequate and necessary funds from local or foreign sources to finance
its projects and programs under this Act, and for that purpose to
issue bonds, promissory notes, and other form of securities, and to
an assignment of all or part of its property or assets;
(c) To approve, accept, accredit and allow any local or foreign

business, enterprise or investment in the Zone subject only to such
rules and regulations as CEZA may promulgate from time to time
in conformity with the provisions of this Act and the limitations
provided in the Constitution;
327
(d) To authorize or undertake, on its own or through others,

and regulate the establishment, operation and maintenance of public
utilities, services, and infrastructure in the Zone such as shipping,
barging, stevedoring, cargo handling, hauling, warehousing, storage
of cargo, port services or concessions, piers, wharves, bulkheads,
bulk terminals, mooring areas, storage areas, roads, bridges,
terminals, conveyors, water supply and storage, sewerage, drainage,
airport operations in coordination with the Civil Aeronautics Board,
and such other services or concessions or infrastructure necessary
or incidental to the accomplishment of the objectives of this Act:
Provided, however, That the private investors in the Zone shall be
given priority in the awarding of contracts, franchises, licenses,
or permits for the establishment, operation and maintenance of
utilities, services and infrastructure in the Zone;
(e) To construct, acquire, own, lease, operate and maintain on

its own or through others by virtue of contracts, franchises, licenses,
or permits under the build-operate-transfer scheme or under a joint
venture with the private sector any or all of the public utilities
and infrastructure required or needed in the Zone, in coordination
with appropriate national and local government authorities and in
conformity with applicable laws thereon;
(f) To operate on its own, either directly or through a

subsidiary entity, or license to others, tourism-related activities,
including games, amusements, recreational and sports facilities
such as horse racing, dog racing, gambling casinos, golf courses, and
others, under priorities and standards set by the CEZA;
(g) To protect, preserve, maintain and develop the virgin

forests, beaches, coral and coral reefs within the Zone. The virgin
forest within the Zone will be proclaimed as a national park and will
be covered by a permanent total log ban. For this purpose, the rules
Resources and other government agencies involved in the above
functions shall be implemented by the CEZA;
(h) To adopt, implement and enforce reasonable measures

and standards to control pollution within the Zone;
328
(i) To provide security for the Zone in coordination with

the national and local governments. For this purpose, CEZA may
establish and maintain its own security force and firefighting
capability or hire others to provide the same;
(j) To form, establish, organize and maintain subsidiary

corporations, as its business and operations may require, whether
under the laws of the Philippines or not;
(k) To issue rules and regulations consistent with the

accomplish the purposes, objectives and policies herein provided;
and
(l) To exercise such powers as may be essential, necessary

or incidental to the powers granted to it hereunder as well as those
that shall enable it to carry out, implement, and accomplish the
purposes, objectives and policies of this Act.
SEC. 7. Board of Directors of CEZA. – The powers of the

Cagayan Economic Zone Authority shall be vested in and exercised
by a Board of Directors, hereinafter referred to as the Board, which
shall be composed of fifteen (15) members, to wit.
(a) The Secretary of Trade and Industry who shall serve as

an ex officio chairman of the Board of Directors and four (4) other
representatives of the national government;
(b) The mayors of the Municipality of Aparri and the

Municipality of Sta. Ana, Province of Cagayan, as ex officio voting
members;
(c) Two (2) representatives of labor from among the workers

in the Cagayan Special Economic Zone;
(d) Four (4) representatives from the business and

investment sectors in the Zone, two (2) of whom must come from the
investors in the Municipality of Sta. Ana and the other two (2) must
329
come from the investors in the islands of Fuga, Barit and Mabbag in
the Municipality of Aparri; and
(e) Two (2) representatives of the private sector coming from

the residents of the municipalities of Santa Ana and Aparri.
The chairman and the members of the Board, except the

ex officio members, shall be appointed by the President of the
Philippines to serve for a term of three (3) years, unless sooner
removed for cause or dies or resigns voluntarily. In case of death,
resignation or removal for cause, the replacement shall serve only
the unexpired portion of the term.
Except for the representatives of the business and investment

sectors, no person shall be appointed by the President of the
Philippines as a member of the Board unless he is a Filipino citizen,
of good moral character and of recognized competence in some
relevant fields in business, banking, shipping, business or labor
management, port operations, engineering, or law.
Members of the Board shall receive a reasonable per

diem which shall not be 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 total per diem
collected each month shall not exceed the equivalent per diem for
four (4) meetings. Unless and until the President of the Philippines
has fixed a higher per diem for the members of the Board, such per
diem shall not be more than Ten thousand pesos (P10,000.00) for
every Board meeting.
SEC. 8. Administrative and Chief Executive Officer. – The

President of the Philippines shall appoint a full-time professional and
competent administrator and chief executive officer for the Cagayan
Economic Zone Authority whose compensation shall be determined
by its Board of Directors and shall be in accordance with the revised
compensation and position classification system. The administrator
as chief executive officer of CEZA shall be responsible to the Board
330
and the President of the Philippines for the efficient management

and operation of the Cagayan Special Economic Zone.
SEC. 9. Capitalization. – The Cagayan Economic Zone

Authority shall have an authorized capital stock of two billion
(2,000,000,000) no par shares with a minimum issue value of
Ten pesos (P10.00) each. The national government shall initially
subscribe and fully pay three hundred million (300,000,000) shares
of such capital stock. The initial amount necessary to subscribe
and pay for the shares of stock shall be included in the General
Appropriations Act of the year following its enactment into law
and thereafter. The Board of Directors of CEZA may, from time to
time and with the written concurrence of the Secretary of Finance,
increase the issue value of the shares representing the capital stock
of the Cagayan Economic Zone Authority. The Board of Directors
of CEZA, with the written concurrence of the Secretary of Finance,
may sell shares representing not more than forty per centum (40%)
of the capital stock of the CEZA to the general public with such
annual dividend policy as the Board and the Secretary of Finance
may determine. The national government shall in no case own less
than sixty per centum (60%) of the total issued and outstanding
capital stock of the CEZA.
SEC. 10. Supervision. – The Cagayan Special Economic

Zone shall be under the direct control and supervision of the Office
of the President of the Philippines for purposes of policy direction
and coordination, in the meantime that the agency tasked with the
coordination of special economic zones is not yet in place.
SEC. 11. Relationship with the Municipalities of Santa Ana

and Aparri. – In case of any conflict between the Cagayan Economic
Zone Authority and the municipalities of Santa Ana and Aparri on
matters affecting the Cagayan Special Economic Zone other than in
defense and security matters, the decision of CEZA shall prevail.
SEC. 12. Legal Counsel. – The Cagayan Economic Zone

Authority and the corporations in which CEZA owns a majority of
the issued capital stock shall have its own internal legal counsel
under the supervision of the government corporate counsel. When
331
the exigencies of its businesses and operations demand it, the CEZA
may engage the services of an outside counsel either on a case to
case basis or on a fixed retainer.
SEC. 13. Auditor. – The Commission on Audit shall appoint

a representative who shall be a full-time auditor of the Cagayan
Economic Zone Authority and its subsidiaries, and assign such
number of personnel as may be necessary to assist said representative
in the performance of his or her duties. The salaries and emoluments
of the assigned auditor and personnel of the Commission on Audit
shall be in accordance with the revised compensation and position
classification system. The Commission on Audit shall render an
annual report to the President of the Philippines and to Congress on
the business activities, transactions and operations of the Cagayan
Economic Zone Authority.

SEC. 15. Repealing Clause. – All laws, executive orders or

issuances, or any parts thereof which are inconsistent herewith are
332
CUSTOMS ADMINISTRATIVE ORDER NO. 9-2003
RULES AND REGULATIONS GOVERNING CUSTOMS

OPERATIONS IN CAGAYAN SPECIAL ECONOMIC ZONE
AND FREEPORT
Pursuant to the Revised Administrative Code of 1987, in

relation to Republic Act 7922 and the Tariff and Customs Code
of the Philippines (TCCP), as amended, the following rules and
regulations are hereby promulgated.
1. DEFINITIONS
The following terms used in these Rules and Regulations

are hereby defined as follows:
1.1 ACT – refers to Republic Act No. 7922, otherwise

known as the Cagayan Economic Zone Authority Act
of 1995.
1.2 ARTICLES – any goods, wares, merchandise and,

in general, anything that may, under the Tariff and
Customs Code of the Philippines, as amended, be
made the subject of importation or exportation.
1.3 CAGAYAN ECONOMIC ZONE AUTHORITY (CEZA)

– is the Zone Authority authorized under Section 5 of
the Act to manage and operate the CSEZF.
1.4 CONTAINER – the outer container in which

merchandise is held for storage or transportation,
not an inter-modal container covered by the Customs
Convention on Containers done at Geneva on December
02, 1972, unless otherwise indicated.
1.5 CESZF – the Cagayan Special Economic Zone and

Freeport referred to under Section 3 of the Act.
333
1.6 CUSTOMS – means the Philippine Bureau of

Customs.
1.7 CUSTOMS CLEARANCE AREA – an area provided

and delineated, pursuant to Administrative Order
296, by the CEZA in consultation with Customs as the
clearing and processing center for articles entering
and existing the CSEZF; guarded and managed by
Customs.
1.8 CUSTOMS TERRITORY – the territory outside of

CSEZF.
1.9 DOMESTIC ARTICLES – articles which are grown,

produced or manufactured in the Philippines and
upon which all national internal revenue taxes have
been paid, if subject thereto, and upon which no
drawback or bounty has been allowed, and articles of
foreign origin on which all duties and taxes have been
paid and upon which no drawback or bounty has been
allowed, or which have previously been duly entered
into Customs Territory free of duties or taxes.
1.10 FOREIGN ARTICLES – articles of foreign origin on

which duties and taxes have not been paid, or if paid,
upon which drawback or a bounty has been allowed, or
which have not been entered into Customs Territory, or
articles which are grown, produced, or manufactured
in the Philippines on which not all national internal
revenue taxes have been paid, or upon which a
drawback or bounty has been allowed.
1.11 IMPORT PERMIT – the authority issued by the CEZA

to the locators/residents, allowing the importation of
specific foreign articles into the CSEZF.
1.12 LOCATOR/ENTERPRISE – any sole proprietorship,

partnership, corporation or entity duly registered with
the CEZA, unless otherwise indicated, to do business
334
in the secured area of CSEZF, whether or not for

profit.
1.13 REGULATED ARTICLES – articles the importation of

which requires authority of the concerned government
agency(ies).
1.14 PERSON – a natural person who brings merchandise

into, possesses merchandise in, or takes merchandise
from the CSEZF, whether or not a resident of the
CSEZF.
1.15 POINT OF ENTRY OR EXIT – refers to any place

designated by the Cagayan Export Zone Authority
(CEZA), the Department of Finance/Bureau of
Customs, where articles may be lawfully introduced
into or removed from the secured area of the CSEZF.
1.16 PROHIBITED ARTICLES – articles the importation

of which is prohibited by law.
1.17 RESIDENT – refers to those individuals and members

of their immediate family who; (a) are registered and
authorized by the CEZA to establish and maintain a
personal residence in the secured area of the CSEZF
and are actually residing on a permanent basis within
the secured area of the CSEZF by virtue of domicile or
employment; or (b) have qualified investments of at
least US$150,000 or its equivalent in the CSEZF and
have continuously stayed within the secured area of
the CSEZF for a period of at least one hundred eighty
(180) days.
1.18 RETAIL SALE – the sale of articles in the CSEZF in

small non-commercial quantities to a person for his
own personal use and account, not for resale.
335
1.19 RULES AND REGULATIONS – unless otherwise

specified, the regulations issued by CEZA to implement
the Act.
1.20 SELECTIVITY – an automated system for the risk

profiling/assessment of shipments discharged at the
CSEZF based on previously determined risk criteria.
The system automatically assigns the risk level of a
particular shipment b color, codes, as follows:
1.21 Green Lane – low risk where shipments can be

admitted without any kind of inspection.
1.22 Yellow Lane – medium risk where documentary

inspection is required prior to the admission of
shipments.
1.23 Red Lane – high-risk inspection of documents and

physical examination of goods are required.
1.24 SECURED AREA- the area in the CSEZF designated

by the CEZA, in consultation with the Department of
Finance/Bureau of Customs, within which there shall
be unimpeded, tax/duty-free flow of goods and articles;
may be expanded jointly by the CEZA, the Department
of Finance/Bureau of Customs and the Department
of Interior and Local Government from time to time,
with a resolution of concurrence of the affected local
government units, as the requirements of the business
in the CSEZF may demand or permit.
1.25 TCCP – the Tariff and Customs Code of the Philippines,

as amended.
1.26 WITHDRAWAL PERMIT – the authority signed/issued

by BoC/CEZA allowing the removal of specified foreign
articles from the CSEZF into Customs Territory.
336
2. SCOPE
This Order shall cover all foreign shipments/articles

entered into or removed from the secured area of the CSEZF.
3. AUTHORITIES AND RESPONSIBILITIES
3.1 CEZA
3.1.1 Operates/manages the CSEZF, pursuant to

Section 6 of the Act and its implementing rules
and regulations, as well as to the provisions of
this Order,
3.1.2 Implements its own procedures to ensure the free

flow and movement of articles into, within, and
out of the CSEZF secured area, provided that
the foreign articles shall be entered into/removed
from the CSEZF secured area in accordance with
this Order.
3.1.3 Issues Import Permits and Withdrawal Permits

as prescribed in this Order;
3.1.4 Maintains/keeps true and updated records of

articles entering into and leaving the CSEZF
secured area and of all Customs transactions
made with regard to the activities in the CSEZF,
for submission, periodically or as required, to the
Commissioner of Customs.
3.2 CUSTOMS
3.2.1 Supervises and administers Customs operations

involving the admission/removal of articles into/
from the CSEZF secured area.
3.2.2 Applies the Selectivity scheme in the processing of

foreign shipments/articles brought into the CSEZF
337
secured area and issues Alert/Hold Orders and/

or Warrant of Seizure and Detention (WSD) on
said shipments/articles, as may be warranted, in
accordance with existing rules and regulations.
3.2.3 In coordination with the CEZA, establishes and

maintains Customs offices, within the secured
area; and to efficiently conduct Customs operations
therein.
3.2.4 In coordination with the CEZA, sets up/operates

the Customs Clearance Area (CCA) and the
Customs checkpoint(s) at the point of entry/exit of
the CSEZF secured area.
4. SEARCH, SEIZURE AND ARRESTS
Customs, in coordination with the CEZA, shall enforce

all customs laws, rules and regulations within the CSEZF, as
follows:
4.1 Persons, baggage, vehicles and cargoes entering or

leaving the CSEZF secured area shall be subject to
search by Customs. For this purpose, the point(s) of
entry/exist at the CSEZF secured area shall be equipped
with adequate facilities to pull aside vehicles/passengers,
to hold/store seized or entering/leaving articles and/or to
assess and collect taxes and duties.
4.2 Upon specific authority of the Commissioner of Customs,

or the Collector of Customs who has jurisdiction over the
CSEZF, the designated customs officials, in the presence
and with the assistance of CEZA officials/representatives,
may at any time:
4.2.1 Pass through, search or enter any land or

enclosure, or warehouse, store or building, except
a dwelling house inside the CSEZF;
338
4.2.2 Go on board any vessel or aircraft within the

CSEZF; and to inspect, search and examine said
vessel/aircraft and any trunk, package, box or
envelope on board, and to search any person on
board the said vessel or aircraft if under way; to
use all necessary force to compel compliance; and
if it shall appear that any breach or violation of
the customs and tariff laws of the Philippines
has been committed, whereby or in consequence
of which such vessels or aircraft, or the article or
any part thereof on board of or imported by such
vessel/aircraft has become subject to forfeiture, to
make seizure of the same or any part thereof.
4.3 Prohibited articles and those not covered by Import

Permit during the search or any examination, audit
or check of articles by Customs may be seized by the
Customs for violation of the tariff/customs laws, rules
and regulations.
4.4 Where authorized under the law, Customs may arrest

persons entering/leaving the CSEZF secured area. Arrests
within the CSEZF shall be made with the assistance/in
the presence of CEZA officials/representatives.
5. INVENTORY, AUDIT AND RECORD-KEEPING
5.1 At the end of its business year, each locator/enterprise

shall conduct an annual physical inventory of all articles
in its premises and possession within the CSEZF, and
reconcile any discrepancies, if any. Such reconciliation
shall be made and reported to the CEZA on a CEZA-
prescribed form, copy furnished the Collector of Customs,
within ninety (90) days after the end of the business
year, along with any payment of duty/tax shortages or
for excess importations/deliveries.
5.2 Authorized officials of CEZA and Customs shall, at any

time during office hours, jointly check or conduct an
339
audit or inventory count of the accounts or records of

any locator/enterprise for purposes of verification and/or
reconciliation.
5.3 Locator/enterprises bringing articles into the CSEZF

secured area are responsible for keeping records of
the permits, receipts, sales transfers, deliveries, and
removals from CSEZF secured area of said articles, and
for maintaining on a current basis the accounts and
inventory records of the articles brought into the CSEZF
secured area in accordance with the generally-recognized
accounting principles and standards of the Republic of
the Philippines.
5.4 The records shall provide an audit trail of the articles

from the time of their receipt by the locator/enterprise
in CSEZF to the time the locator/enterprise is relieved
of responsibility over the articles pursuant to existing
5.5 Such records shall be kept for five (5) years. If the
record keeping system of a locator/enterprise has been
impaired to the point where no effective check, audit or
inventory can be made by the CEZA, Customs, Bureau of
Internal Revenue, or other authorized office, the CEZA
may order the suspension of that enterprise’s Certificate
of Registration. For its part, the locator/enterprise
shall provide authorized officials of the CEZA, Bureau
of Internal Revenue, or any other government agency
access to articles in the CSEZF that are in its premises
and possession, and to records pertaining thereto.
6. ADMINISTRATIVE PROVISIONS
6.1 Boarding Formalities. Regulations and procedures for

the arrival formalities and clearance of aircraft/vehicles
calling directly at the CSEZF shall be the same as those
observed in the Customs Territory.
340
6.2 Importable Articles. Any kind or class of articles,

except those prohibited under the Philippine laws, may
be admitted into the CSEZF in accordance with this
Order.
6.3 Prohibited Articles. Prohibited articles and those not

covered by an Import Permit, shall be proceeded against
pursuant to the pertinent TCCP provisions and this
Order.
6.4 Import Permit Required. Except as herein provided,

raw materials, capital goods, consumer items and other
foreign articles may be brought, free of tax and duty,
into the CSEZF by locator/enterprises/residents, either
by direct unloading at CSEZF from abroad or through a
Port Discharge/Unloading in Customs Territory, or from
a CBW, PEZA locator or other special economic zones;
provided that said articles are not prohibited and are
covered by the corresponding Import Permit duly issued
by the CEZA.
6.5 No Import Permit Required. No Import Permit shall

be required for the admission of foreign articles to the
CSEZF secured area for the following:
6.5.1 Any article of foreign origin valued at less than

Five US Dollars (US$5.00);
6.5.2 Any personal effect of residents or of CSEZF

locators valued at less than One Hundred Dollars
(US$100.00);
6.5.3 Articles for delivery to a vessel or aircraft for

loading and exportation to a foreign country;
6.5.4 Articles being returned to the CSEZF secured

area after their temporary transfer from said area
to the Customs Territory under the procedures
allowed herein;
341
6.5.5 Domestic articles, subject however to the

presentation to Customs the covering commercial
invoice or similar document describing the articles
in commercial items, along with a declaration that
the articles are domestic articles as per Customs
regulations in force in the Customs Territory.
7. APPLICATION FOR ADMISSION INTO CSEZF
7.1.1 Applicants. – The application for admission of foreign

articles to the CSEZF secured area shall be made
by or on behalf of the locator/enterprise or its duly
authorized representative.
7.1.2 Applicant Other Than Consignee. – If the applicant is

not the person/enterprise shown as the consignee in
the Import Permit or in the other shipping documents,
the admission application shall be accompanied by
evidence satisfactorily showing that the applicant
is filing the application on behalf of the consignee/
importer.
7.1.3 Customs Broker. – Customs brokers that are engaged

to represent a locator/enterprise/resident must be
duly licensed by the Collection District which has
jurisdiction over the CSEZF.
7.1.4 Application Form. – The admission application shall

be made on a CEZA-prescribed form that shall provide
the name of the registered owner, the shipment’s
source of goods/country of origin, its value and
description, which shall be accomplished according to
the convention provided under CMO 46-94.
8.0 PRESENTATION AND REVIEW OF ADMISSION

DOCUMENTS
8.1 Presentation to Customs. – The admission application

shall be presented at the customs office at the CSEZF
342
secured area along with the Import Permit duly issued

by CEZA, and the pertinent commercial/shipping
documents, such as, bill of lading/airway bill and packing
list.
8.2 Review of Admission. – Upon arrival of the foreign

articles at the CSEZF, the pertinent/required admission
documents shall be submitted to the Customs office
for verification as to the authenticity, accuracy and
completeness of the admission documents.
8.3 Stationing at CCA. – While Customs is in the said

verification process, the goods/articles being applied for
admission into the CSEZF secured area shall be brought
to the CCA.
9.0 EXAMINATION
9.1 When Subject to Examination. For purposes of admission

into the CSEZF and for other purposes provide elsewhere
in this order, all foreign articles including transshipments
and return shipments destined for the CSEZF shall not
be subject to examination except:
9.1.1 Under the automated Selectivity Scheme or, if not

yet in place, under a program of random check
which shall be established by Customs;
9.1.2 Under the Alert/Hold Order system issued in

accordance with existing rules and regulations;
9.1.3 When the Commissioner has reason to believe

that there has been a violation of this Order and
other customs laws and regulations.
9.2 In Customs Clearance Area. If an examination is required,

the same shall be conducted in the Customs Clearance
Area, unless the applicant requests the examination
343
to be conducted in its premises for justifiable reasons,

subject to the approval of the Collector of Customs.
9.3 If Not Subject to Examination. If the articles are not

subject to examination, or if no discrepancy/irregularity
that would warrant their detention is discovered during
the examination, Customs shall check the condition
of the vehicle delivering the articles to the applicant’s
premises and the seals affixed thereto. Irregularities,
if any, shall be noted on the admission documents and
the cargoes shall be proceeded against accordingly. If in
order, Customs shall allow the delivery of the cargoes to
the applicant’s premises inside the CSEZF.
10.0 REMOVAL OF ARTICLES FROM CSEZF
10.1 Various Types of Removal. Articles inside CSEZF

secured are may be removed therefrom for any of the
following purposes:
10.1.1 direct exportation abroad;
10.1.2 for exportation abroad through a port of loading/

exportation within Customs Territory;
10.1.3 for transfer to a CBW, PEZA locator or other

ecozones in Customs Territory;
10.1.4 for temporary transfer to Customs territory, in

which case the same shall be returned to the
CSEZF secured area as prescribed herein;
10.1.5 for consumption in Customs Territory.
10.2 Withdraw Permit Required. Except as specified herein,

articles, materials, capital goods, equipment and
consumer items shall not be removed from the CSEZF
secured area without the Withdrawal Permit issued
by the CEZA and approved by BoC. The Withdrawal
344
Permit shall be in the form prescribed by CEZA and

shall indicate the purpose of the removal as specified in
10.1.
10.3 No Withdrawal Permit Required. Domestic articles,

including those manufactured, blended or combined with
foreign articles outside CSEZF and thereafter admitted
into the CSEZF, may be removed from the CSEZF
without a Withdrawal Permit, provided the person or
enterprise presenting such articles for removal from
CSEZF surrenders to Customs the following:
10.3.1 a declaration that the articles are domestic

articles and thus exempted from the permit
requirements; and
10.2.2 a commercial invoice or similar document

describing the articles in commercial terms.
10.4 Cancellation of Withdrawal Permit. Articles for which a

Withdrawal Permit has been issued shall, within seven (7)
calendar days from said issuance, be physically removed
from the CSEZF, otherwise, said Withdrawal Permit
shall be deemed cancelled, in which case the locator/
enterprise concerned shall re-assume responsibility for
said articles.
11.0 EXPORTATION
11.1 Various Types of Exportations. Articles may be exported

from CSEZF in accordance with customs rules and
regulations and this Order, as follows:
11.1.1 Direct from CSEZF unto the carrying vessels/

aircraft at CSEZF;
11.1.2 From CSEZF through a Port of Loading in

Customs Territory;
345
11.1.3 From Customs Territory for loading onto vessels/

aircraft at CSEZF.
11.2 No Customs Examination. Except when subject of an

Alert/Hold Order, articles in the process of/destined for
exportation are not subject to Customs examination.
While inside the CSEZF or at the port of exportation in
Customs awaiting to be loaded on the exporting carrier,
the holding containers shall be kept unopened, evidenced
by the unbroken Customs and/or CSEZF shipper’s sea.
12.0 TRANSFER/TRANSSHIPMENT TO/FROM CSEZF
12.1 Various Types of Transshipment/Transfer. Movements

of shipments/articles to/from CSEZF from/to the Ports
of Discharge/Loading, CBWs, PEZA locators and other
ecozones and other areas in Customs Territory, including
temporary transfers as provided in this Order, shall be
undertaken in accordance with existing transshipment
procedures applicable in Customs Territory.
12.2 Customs Supervision and Control. Such transshipments

shall be under Customs supervision and control as
required by existing laws and regulations. For this
purpose, Customs shall establish controls, such as
escorts, gate passes, seals and/or other devices to ensure
that the articles are duly and properly removed from the
CSEZF and shall not be pilfered in transit or diverted
into the domestic market.
12.3 Examination of Transshipments. Articles under

transshipments shall, upon arrival at the CSEZF, be
subject to the examination provision in 9.1. In case a
transshipment to CSEZF from a Port of Discharge in
Customs Territory has been subjected to examination
pursuant to a Selectivity Scheme on Alert/Hold Order
system in the Port of Discharge, said transshipment
may no longer be subject to the examination provision in
9.1, unless there is a valid reason to the contrary.
346
12.4 Markings. Containers of articles subject of transfer/

transshipment shall be marked to show both the origin
and destination of the shipment, as follows.
12.4.1 TO CSEZF: “SHIP TO CSEZF, FROM (name of

PORT OF DISCHARGE/ CBW/ PEZA/ OTHER
ECOZONE LOCATOR/ OTHERS)”;
12.4.2 From CSEZF: “SHIPPED FROM CSEZF, TO

(name of PORT OFLOADING/ CBW/ PEZA/
OTHER ECOZONE LOCATORS/ OTHERS)”;
12.4.3 Temporary Transfers: “TEMPORARY RANSFER

FROM CSEZF TO (CBW/ PEZA/ OTHER
ECOZONE LOCATORS/OTHERS)” or “RETURN
TO CSEZF FROM (CBW/PEZA/OTHER
ECOZONE LOCATORS/ OTHERS)”, whichever
is appropriate and applicable.
12.5 Registered Carriers. Foreign articles inside the CSEZF

may be transferred to the Customs Territory using the
vehicle of the CSEZF Enterprise concerned or a carrier
duly licensed by the CEZA for carriage within the
CSEZF.
12.6 Bonded Carriers. Carriers who undertake to transship

foreign articles from/to CSEZF shall be bonded in an
amount to be determined by the CEZA which in no case
shall be less than Fifty Thousand Pesos (P50,000).
12.7 Proof of Exportation. The admission into the CSEZF of

articles transshipped from a CBW/PEZA/other ecozone/
area in Customs Territory in the admission documents
and the acceptance, receipt or acknowledgement
thereof by a locator/enterprise shall serve as proof of
exportation for purposes of determining/granting claims
on drawbacks/zero-rating, subject to compliance with
the applicable laws, rules and regulations.
347
13.0 TEMPORARY TRANSFER TO CUSTOMS TERRITORY
Articles in the CSEZF may be removed temporarily

from the CSEZF to Customs Territory for repair, restoration,
testing, production process and such other services not
available/accessible inside CSEZF and upon completion of
the purpose for the transfer, said articles shall be returned to
CSEZF, subject to the rules and regulations applicable in the
Customs Territory and as herein provided:
13.1 Withdrawal Permit for Temporary Transfer. A person

or enterprise with a Withdrawal Permit for Temporary
Transfer shall present to Customs, for review and
examination, the application for temporary transfer in
the form prescribed by the CEZA for the purpose.
13.2 Certificate of Identification. In approving the

temporary transfer, Customs shall issue a Certificate
of Identification (CI) describing the articles allowed for
temporary transfer and the place/facility in Customs
Territory where the good shall be brought temporarily.
13.3 Examination of Temporary Transfer. Articles under

Temporary Transfer shall be subject to the examination
provision in 9.1 just as when said articles are returned
to CSEZF.
13.4 Prescriptive Period. The articles shall be allowed to

remain outside the CSEZF for a period of not more than
four (4) months from the issuance of the Withdrawal
permit for Temporary Transfer, unless the period is
extended for another (4) months by the CEZA for valid
reason(s).
13.5 When Not Returned to CSEZF. If not returned within

the 4-month period, or within the period of extension,
or if transferred for other purposes, the articles shall
be considered to have been removed for consumption
without proper authority and, thus, shall be subject to
348
duties/taxes and such other liabilities prescribed under

TCCP and this Order.
13.6 Payment of Taxes/Duties. While in temporary transfer

status, the article may not be entered into Customs
Territory for consumption unless the proper Withdrawal
Permit for Consumption is first secured and the
applicable duties and taxes are paid in accordance with
existing laws, rules and regulations.
13.7 Cancellation of Withdrawal Permit for Temporary

Transfer. Upon the return of the articles to CSEZF,
the Withdrawal Permit for Temporary Transfer and
the subject articles shall be presented to Customs for
Examination and review. In the case of those that have not
violated the conditions/requirements of their temporary
transfer, the Withdrawal Permit for Temporary Transfer
shall then be cancelled and the locator/enterprise
concerned shall reassume responsibility of the articles
as foreign articles.
13.8 Markings. The containers of articles subject of temporary

transfers should be properly marked to show the origin
and destination of the articles as provided in 12.4.3.
14.0 REMOVAL/TRANSFER FOR CONSUMPTION
14.1 Subject to Taxes/Duties. Foreign articles or domestic

articles containing foreign components may be removed
from CSEZF and brought to Customs Territory for
consumption provided that they do not exceed the
threshold allowed/permitted under existing laws, rules
and regulations, and subject to payment of taxes/duties
in accordance with Customs laws and regulations and
wit this Order. Thus, said articles shall also be subject
to the examination provision in 9.1 hereof.
14.2 Tariff Classification. The classification of foreign articles,

whether or not they have been manufactured, blended
349
or otherwise combined with domestic articles, shall be

determined according to the nature, condition or make
up of such article at the time of the removal from the
CSEZF secured area into the Customs Territory; and the
corresponding tariff rate shall be applied accordingly.
14.3 Valuation The value of foreign articles, or foreign

article components, on which ad valorem duties and
taxes are assessed, shall be determined on the basis of
the transaction that brought such article from CSEZF to
the Customs Territory applying the existing valuation
system as per Sec. 201, TCCP, as amended by RA 9135
and implemented by CAO 5-2001 and CMO 37-2001 and
their amendments.
15.0 TREATMENT OF MOTOR VEHICLES/WATERCRAFT/

AIRCRAFT
15.1 For use by Locators/Residents. The registration/use

inside and outside CSEZF of motor vehicles, watercrafts
and aircraft brought, free of duties and taxes by
locators/residents into the CSEZF shall be subject to
separate rules and guidelines, and such other rules and
regulations as may hereafter be formulated by concerned
agencies, including the CEZA and Customs, The Bureau
of Internal Revenue (BIR) and the Land Transportation
Office (LTO) of the Department of Transportation and
Communication (DOTC) in case of vehicles, and the Civil
Aeronautics Board and/or the Air Transportation Office
in the case of aircraft.
15.2 Removal/Transfer into Customs Territory. Tax/Duty-

free motor vehicles, watercraft and aircraft brought into
Customs Territory shall be subject to tax/duty payments
when removed from CSEZF and shall be assessed on the
basis of the transaction in the CSEZF, which brought
the articles into the Customs Territory as prescribed
hereunder:
350
15.2.1 When sold inside CSEZF, on the basis of:
15.2.1.1 Winning auction price per unit, if sold

through public auction;
15.2.1.2 Selling price per unit, if sold through

private sale.
15.2.2 When issued Withdrawal Permit for Consumption,

prior to or when there is no auction/private sale,
on the basis of the following, applied in sequential
order:
15.2.2.1 Winning auction price/selling price per

unit of same, like or similar item sold/
bought in a public auction/private sale
conducted/held inside CSEZF not more
than three months ago;
15.2.2.2 In the absence of the above, the price at

which the same, like or similar item was
bought/sold in a public auction/private
sale conducted/held inside CSEZF not
more than six months ago.;
15.2.2.3 In the absence of the prices referred

to above, the market value of subject
motor vehicles as indicated in motor
vehicle reference books, such as the
Japanese and US Red Book, Karo and
World Car Book on automobile utility
vehicles and other motor vehicles; US
Red Book on motorcycles; US Truck Blue
Book and Japanese Truck Blue Book on
trucks and heavy equipment, subject
to depreciation following the strait-line
method of depreciation of 10% per year
but not more than nine years or 90%.
351
15.3 Database to Serve as VRIS
15.3.1 The Collector of Customs shall build a databank/

database on all auction/sales involving subject
motor vehicles under their respective jurisdiction
specifically the winning auction prices/sale prices
and the values accepted by BoC as basis for the
assessment of taxes/duties.
15.3.1 The auction/sale prices and accepted values stored

in the abovementioned database shall serve the
intents and purposes of the Value Reference
Information System (VRIS) and, thus, the values
declared on subject vehicles, which fall outside the
valuation range in the database shall be treated
in accordance with the applicable provisions in
CMO37-2001 providing for the “Revised Cargo
Clearance Procedure and its amendments.
15.4 Supporting Documents
The Customs entry filed on subject motor vehicle shall

be supported by the following documents:
15.4.1 Withdrawal Permit for Consumption issued by

CEZA allowing the removal/transfer of subject
vehicle from CSEZF to customs territory;
15.4.2 When applicable, Notice of Award or equivalent

document, in the case of public auction sale, or a
Deed of Sale, in the case of private sale, indicating
the auctioneer/seller and the winning bidder/
buyer, as the case may be, and the price the motor
vehicle was won or sold. Both Notice of Award
and Deed of Sale shall be duly subscribed and
sworn to.
352
15.5 Compliance with Other Customs Requirements
The processing and release of subject motor vehicles

shall comply with the requirements as provided by
CMO 15-2203 issued on 03 June 2003, providing, among
others, the issuance of “one unit one CP” guideline and
the transmittal of the CP to the Vehicle Importation
Compliance Monitoring Unit (VICMU), Office of the
Commissioner prior to submission to Land Transportation
Office (LTO), and such other processes.
16.0 TREATMENT OF CONSUMER ITEMS
16.1 Retail Sale of Consumer Items. The retail sale of tax/

duty-free consumer times by duly authorized retail
stores within the CSEZF to Overseas Filipino Workers,
Balikbayan and local and foreign tourists shall be
allowed in accordance with existing/applicable rules and
regulations. Locator/residents and non-residents may
be allowed to retail-purchase such items, provided these
are consumed within the CSEZF. For this purpose, all
packages shall be opened and duly marked at the point of
purchase. Stores shall be subject to the joint regulation
of Customs and CEZA to insure proper accounting of
imports and sales.
16.2 Exportation of Consumer Items. Consumer items

purchased by foreign tourist and CSEZF residents may be
exported provided these are brought along by them upon
their departure to a foreign country from a designated
port of exit, on board a vessel/aircraft in accordance with
the following guidelines:
16.2.1 The itemized listing provided by the retail seller

under the provision of this Administrative Order
shall contain the CEZA Withdrawal permit To
Export and the customs export documentation for
the articles.
353
16.2.2 Persons who board vessels/aircraft in the Customs

Territory shall present to Customs at the point of
exit.
l The articles to be exported from CSEZF;

l The itemized listing provided by seller; and
l A declaration of any foreign articles consumed
in the CSEZF.
16.2.3 The articles to be exported shall be placed in a

sealed container provided by the seller of the
articles.
16.2.4 The seller will be responsible for the delivery

of the merchandise, under the supervision of
the Customs, to the purchaser in the Customs
Territory up to the time of departure of the vessel/
aircraft; and for the payment of any duties, taxes
or penalties due or any merchandise that is not
properly delivered and exported.
17.0 SPECIAL PROVISIONS
17.1 Mail Matters. Articles arriving by mail or parcel at a

postal facility within the secured area of CSEZF shall
be released by Customs after completion of the required
admission procedure for delivery by postal officials to
the addressee.
17.2 Vessel Fuel, Equipment and Supplies. Foreign articles

or articles that are reasonably necessary for the use of
the vessels/aircraft calling at the CSEZF or otherwise
engage in foreign trade, may be delivered free of duties
and taxes to said aircraft/vessels for consumption on
board by the crew/passengers; or for use as fuel or as
equipment; or for repair; in the quantity/volume as may
be authorized under the laws and regulations currently
in effect in Customs Territory. The articles shall be
considered transferred/removed from the CSEZF upon
354
signature or receipt of the articles by an authorized

official of the aircraft/vessel intending to use them.
17.3 Domestic Articles Treated as Foreign Articles. Domestic

articles that have lost their identity as such in the CSEZF
shall be considered/treated as foreign articles if, at the
time of transfer to the Customs Territory, they cannot
be identified by Customs as domestic articles upon
examination or after consideration of proof presented
by the locator/enterprise, including accounting and
inventory records.
17.4 Re-imported Articles. Foreign articles previously

exported from the CSEZF to a foreign country and
subsequently re-imported through a port of discharge,
CBW, PEZA locator or another ecozone in Customs
Territory, may be admitted into the CSEZF as foreign
articles.
18.0 PENALTIES
Any person or enterprise found to have violated any

provision of the act of this Administrative Order shall be
subject to the pertinent penal provisions of the Tariff and
Customs Code of the Philippines, as amended.
19.0 REPEALING CLAUSE
All orders, memoranda, issuances not consistent herewith

are deemed repealed, modified or amended accordingly.
20.0 EFFECTIVITY
This Administrative Order shall take effect fifteen

(15) days after publication in the Official Gazette or in any
355
newspaper of general circulation. Certified copies of this

Customs Administrative Order shall be submitted to the UP
Law Center pursuant to Book VII, Chapter 11, Section 3 and
4 of the Revised Administrative Code of 1987.
(Sgd.) ANTONIO M. BERNARDO

Commissioner
APPROVED:
(Sgd.) JOSE ISIDRO N. CAMACHO

Secretary
Published: October 22, 2003 / The Manila Times, p. 5 – Section A
356
AN ACT TO FURTHER LIBERALIZE FOREIGN INVESTMENTS,

AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7042,

SECTION 1.Section 3, paragraph (a), of Republic Act No.

7042, otherwise known as the “Foreign Investments Act of 1991”, is
“SEC. 3. Definitions. – As used in this Act:
[a] the term “Philippine national” shall mean a citizen of

the Philippines, or a domestic partnership or association wholly
owned by citizens of the Philippines; or a corporation organized
under the laws of the Philippines of which at least sixty percent
[60%] of the capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines; or a corporation organized
abroad and registered as doing business in the Philippines under
the Corporation Code of which one hundred percent [100%] of the
capital stock outstanding and entitled to vote is wholly owned
by Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent [60%] of the fund will accrue to the
benefit of Philippine nationals: Provided, That where a corporation
and its non-Filipino stockholders own stocks in a Securities and
Exchange Commission [SEC] registered enterprise, at least sixty
percent [60%] of the capital stock outstanding and entitled to vote
of each of both corporations must be owned and held by citizens of
the Philippines, in order that the corporation shall be considered a
Philippine national.”
SEC. 2. Sec. 7 of Republic Act No. 7042 is hereby amended to

read as follows:
357
“SEC. 7. Foreign investments in domestic market enterprises. –

Non-Philippine nationals may own up to one hundred percent [100%]
of domestic market enterprises unless foreign ownership therein is
prohibited or limited by the Constitution and existing laws or the
Foreign Investment Negative List under Section 8 hereof.”
SEC. 3. Section 8 of the Foreign Investments Act of 1991 is

“SEC. 8. List of investment areas reserved to Philippine

nationals [Foreign Investment Negative List]. – The Foreign
Investment Negative List shall have two [2] component lists: A and
B:
[a] List A shall enumerate the areas of activities reserved

to Philippine nationals by mandate of the Constitution and specific
laws.
[b] List B shall contain the areas of activities and enterprises

regulated pursuant to law:
1. which are defense-related activities, requiring prior

clearance and authorization from the Department of National
Defense [DND] to engage in such activity, such as the manufacture,
repair, storage and/or distribution of firearms, ammunition,
lethal weapons, military ordnance, explosives, pyrotechnics and
similar materials; unless such manufacturing or repair activity is
specifically authorized, with a substantial export component, to a
non-Philippine national by the Secretary of National Defense; or
2. which have implications on public health and morals,

such as the manufacture and distribution of dangerous drugs; all
forms of gambling; nightclubs, bars, beer houses, dance halls, sauna
and steam bathhouses and massage clinics.
“Small and medium-sized domestic market enterprises with

paid-in equity capital less than the equivalent of Two hundred
thousand US dollars [US$200,000.00], are reserved to Philippine
nationals: Provided, That if [1] they involve advance technology as
358
determined by the Department of Science and Technology, or [2] they

employ at least fifty [50] direct employees, then a minimum paid-in
capital of One hundred thousand US dollars (US$100,000.00) shall
be allowed to non-Philippine nationals.
“Amendments to List B may be made upon recommendation

of the Secretary of National Defense, or the Secretary of Health, or
the Secretary of Education, Culture and Sports, endorsed by the
NEDA, or upon recommendation motu proprio, of NEDA, approved
by the President, and promulgated by a Presidential Proclamation.
“The transitory Foreign Investment Negative List established

in Section 15 hereof shall be replaced at the end of the transitory
period by the First Regular Negative Lists to be formulated and
recommended by NEDA following the process and criteria provided
in Sections 8 and 9 of this Act. The First Regular Negative List shall
be published not later than sixty [60] days before the end of the
transitory period. Subsequent Foreign Investment Negative List shall
become effective fifteen [15] days after publication in a newspaper of
general circulation in the Philippines: Provided, however, That each
Foreign Investment Negative List shall be prospective in operation
and shall in no way affect foreign investments existing on the date
of its publication.
“Amendments to List B after promulgation and publication

of the First Regular Foreign Investment Negative List at the end of
the transitory period shall not be made more often than once very
two [2] years.”
SEC. 4. Section 9 of the Foreign Investments Act of 1991 is

“SEC. 9. Investment rights of former natural-born Filipinos.

– For purposes of this Act, former natural-born citizens of the
Philippines shall have the same investment rights of Philippine
citizens in Cooperatives under Republic Act No. 6938, Rural Banks
under Republic Act No. 7353, Thrift Banks and Private Development
Banks under Republic Act No. 7906, and Financing Companies under
Republic Act No. 5980. These rights shall not extend to activities
359
reserved by the Constitution including [1] the exercise of profession;

[2] in defense-related activities under Section 8 (b) hereof, unless
specifically authorized by the Secretary of National Defense; and
[3] activities covered by Republic Act No. 1180 [Retail Trade Act],
Republic Act No. 5487 [Security Agency Act], Republic Act No. 7076
[Small Scale Mining Act], Republic Act No. 3018, as amended [Rice
and Corn Industry Act], and P.D. 449 [Cockpits Operation and
Management]”.
SEC. 5. The Foreign Investments Act is further amended by

inserting a new section designated as Section 10 to read as follows:
“SEC. 10. Other rights of natural-born citizen pursuant to

the provisions of Article XII, Section 8 of the Constitution. – Any
natural-born citizen who has lost his Philippine citizenship and
who has the legal capacity to enter into a contract under Philippine
Laws may be a transferee of a private land up to a maximum area
of five thousand [5,000] square meters in the case of urban land or
three [3] hectares in the case of rural land to be used by him for
business or other purposes. In the case of married couples, one of
them may avail of the privilege herein granted: Provided, That If
both shall avail of the same, the total area acquired shall not exceed
the maximum herein fixed.
“In case the transferee already owns urban or rural land for
business or other purposes, he shall be entitled to be a transferee of
additional urban or rural land for business or other purposes which
when added to those already owned by him shall not exceed the
maximum areas herein authorized.
“A transferee under this Act may acquire not more than two
[2] lots which should be situated in different municipalities or cities
anywhere in the Philippines: Provided, That the total land area
thereof shall not exceed five thousand [5,000] square meters in the
case of urban land or three [3] hectares in the case of rural land for
use by him for business or other purposes. A transferee who has
already acquired urban land shall be disqualified form acquiring
rural land and vice versa.”
360
SEC. 6. The National Economic and Development Authority,

in consultation with the Board of Investments, the Department of
Trade and Industry and Securities and Exchange Commission,
shall prepare and issue the necessary primer and other information
campaign materials regarding the Foreign Investments Act and
the amendments introduced thereto, with copies of said materials
furnished all the Philippine embassies, consulates and other
diplomatic offices abroad and disseminated to Filipino nationals,
former natural-born Filipino citizens, and foreign investors, within
sixty [60] days after the effectivity hereof.
SEC. 7. The NEDA is hereby directed to make the necessary

amendments to the implementing rules and regulations of Republic
Act No. 7042 in order to reflect the changes embodied in the Act.
SEC. 8. Sections 9 and 10 of Republic Act No. 7042 and

all references thereto in said law are hereby repealed or modified
accordingly. All other laws, rules and regulation and/or parts thereof
SEC. 9. If any part or section of this Act is declared

unconstitutional for any reason whatsoever, such declaration shall
not in any way affect the other parts or sections of this Act.
SEC. 10. This Act shall take effect fifteen [15] days after
publication in two [2] newspapers of general circulation in the
Philippines.
361
AN ACT LIBERALIZING THE PHILIPPINE INVESTMENT

HOUSE INDUSTRY, AMENDING CERTAIN SECTIONS
OF PRESIDENTIAL DECREE NO. 129, AS AMENDED,
OTHERWISE KNOWN AS THE INVESTMENT HOUSES
LAW

SECTION 1. Declaration of policy. – It is the policy of the State

to expand and strengthen the capital base of the economy in order
to ensure sustained economic growth and development. Toward this
end, the Philippine investment house industry is hereby liberalized,
increasing foreign equity participation and raising the minimum
capitalization of investment houses to enable them to meet the
present and future demands of the market.
SEC. 2. Sec. 5 of Presidential Decree No. 129, as amended,

otherwise known as the Investment Houses Law, is hereby further
amended, to read as follows:
“SEC. 5. Citizenship requirements. – At least forty percent

(40%) of the voting stock of any Investment House shall be owned
by citizens of the Philippines. In determining the percentage of
foreign-owned voting stocks in Investment Houses, the basis for
the computation shall be the citizenship of each stockholder, and,
if the stockholder is a corporation, the citizenship of the individual
stockholders holding voting shares in that corporation. In approving
foreign equity applications in Investment Houses, the Securities
and Exchange Commission shall approve such applications only if
the same or similar rights are enjoyed by Philippine nationals in the
applicant’s country.
“Foreign nationals may become members of the board of

directors to the extent of the foreign participation in the equity of
said enterprise.”
362
SEC. 3. Sec. 8 of the same Decree is hereby amended to read

as follows:
“SEC. 8. Capital requirements. – In the case of newly-

organized Investment Houses, the minimum paid-in capital shall
be Three hundred million pesos (P300,000,000). The minimum
paid-in capital of the existing Investment Houses shall be Three
hundred million pesos (P300,000,000) to be built up in two (2)
years after the effectivity of this Act in the following manner: Two
hundred million pesos (P200,000,000) after the effectivity of this
Act and an additional Fifty million pesos (P50,000,000) for every
year thereafter until the minimum capitalization is attained. The
Monetary Board may prescribe a higher minimum capitalization in
order to promote and ensure the stability of the Philippine capital
market and the competitiveness of the investment house industry
in line with the national economic goals. The Monetary Board shall,
within six (6) months, prescribe a risk assets to capital ratio and
other capital adequacy ratios in order to provide broader protection
to the investing public.”
SEC. 4. This Act shall take effect fifteen (15) days from its
publication in a newspaper of general circulation.
363
AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND

LICENSING REQUIREMENTS OF REGIONAL OR
AREA HEADQUARTERS, REGIONAL OPERATING
HEADQUARTERS, AND REGIONAL WAREHOUSES
OF MULTINATIONAL COMPANIES, AMENDING FOR
THE PURPOSE CERTAIN PROVISIONS OF EXECUTIVE
INVESTMENTS CODE OF 1987

SECTION 1. The title of Book III of Executive Order No. 226,

otherwise known as the Omnibus Investments Code of 1987, is
hereby amended as follows:
“BOOK III
“INCENTIVES TO MULTINATIONAL COMPANIES

ESTABLISHING REGIONAL OR AREA HEADQUARTERS
AND REGIONAL OPERATING HEADQUARTERS IN THE
PHILIPPINES”
SEC. 2. Definition of Terms. – For purposes of this Act, the

term:
(1) Multinational Company shall mean a foreign company

or a group of foreign companies with business establishments in two
or more countries;
(2) Regional or Area Headquarters (RHQ) shall mean

an office whose purpose is to act as an administrative branch of
a multinational company engaged in international trade which
principally serves as a supervision, communications and coordination
center for its subsidiaries, branches or affiliates in the Asia-Pacific
364
Region and other foreign markets and which does not earn or derive
income in the Philippines; and
(3) Regional Operating Headquarters (ROHQ) shall mean

a foreign business entity which is allowed to derive income in
the Philippines by performing qualifying services to its affiliates,
subsidiaries or branches in the Philippines, in the Asia-Pacific
Region and in other foreign markets.
SEC. 3. The Title and Article 58 of Chapter I of the same

Code are hereby amended as follows:
“CHAPTER I
LICENSING OF REGIONAL OR AREA HEADQUARTERS
Art. 58. Qualification of Regional or Area Headquarters. –

Any foreign business entity formed, organized and existing under
any laws other than those of the Philippines whose purpose, as
expressed in its organizational documents or by resolution of its
Board of Directors or its equivalent, is to supervise, superintend,
inspect or coordinate its own affiliates, subsidiaries or branches in
the Asia-Pacific Region and other foreign markets may establish
a regional or area headquarters in the Philippines, by securing a
license therefor from the Securities and Exchange Commission,
upon the favorable recommendation of the Board of Investments.
The Securities and Exchange Commission shall, within thirty

(30) days from the effectivity of this Code, issue the implementing
rules and regulations. The following minimum requirements shall,
however, be complied with by the said foreign entity:
(a) A certification from the Philippine Consulate/Embassy,

or a duly authenticated certification from the Department of Trade
and Industry or its equivalent in the foreign firm’s home country
that said foreign firm is an entity engaged in international trade
with affiliates, subsidiaries or branch offices in the Asia-Pacific
Region and other foreign markets.
365
(b) A duly authenticated certification from the principal

officer of the foreign entity to the effect that the said foreign entity
has been authorized by its Board of Directors or governing body
to establish its regional or area headquarters in the Philippines,
specifying that:
(1) The activities of the regional or area headquarters

shall be limited to acting as a supervisory, communications
and coordinating center for its subsidiaries, affiliates and
branches in the region;
(2) The regional or area headquarters will not derive

any income from sources within the Philippines and will
not participate in any manner in the management of any
subsidiary or branch office it might have in the Philippines nor
shall it solicit or market goods and services whether on behalf
of its mother company or its branches, affiliates, subsidiaries
or any other company; and
(3) The regional or area headquarters shall notify

the Board of Investments and the Securities and Exchange
Commission of any decision to close down or suspend
operations of its headquarters at least fifteen (15) days before
the same is effected.
(c) An undertaking that the multinational company will

remit into the country such amount as may be necessary to cover
its operations in the Philippines but which amount will not be
less than Fifty thousand United States dollars ($50,000) or its
equivalent in other foreign currencies annually. Within thirty (30)
days from receipt of certificate of registration from the Securities
and Exchange Commission, the multinational company will submit
to the Securities and Exchange Commission a certificate of inward
remittance from a local bank showing that it has remitted to the
Philippines the amount of at least Fifty thousand United States
dollars ($50,000) or its equivalent in other foreign currencies and
converted the same to Philippine currency. Annually, within thirty
(30) days from the anniversary date of the multinational company’s
registration as a regional or area headquarters with the Securities
366
and Exchange Commission, it will submit proof to the Securities and

Exchange Commission of inward remittance amounting to at least
Fifty thousand United States dollars ($50,000) or its equivalent in
other foreign currencies during the past year.
(d) Any violation by the regional or area headquarters of a

multinational company of any of the provisions of this Code, or its
implementing rules and regulations, or other terms and conditions
of its registration, or any provision of existing laws, shall constitute
a sufficient cause for the cancellation of its license or registration.
SEC. 4. Book III of the same Code is hereby further amended

by adding a new chapter designated as Chapter II to read as
follows:
“CHAPTER II
“LICENSING OF REGIONAL OPERATING

HEADQUARTERS
“Art. 59. Qualification of Regional Operating Headquarters

(ROHQs). – Any foreign business entity formed, organized and
existing under any laws other than those of the Philippines may
establish a regional operating headquarters in the Philippines to
service its own affiliates, subsidiaries or branches in the Philippines,
in the Asia-Pacific Region and other foreign markets. ROHQs will
be allowed to derive income by performing the qualifying services
enumerated under paragraph (b) 1 hereunder. ROHQs of non-
banking and non-financial institutions are required to secure a
license from the Securities and Exchange Commission, upon the
favorable recommendation of the Board of Investments. ROHQs of
banking and financial institutions, on the other hand, are required
to secure licenses from the Securities and Exchange Commission and
the Bangko Sentral ng Pilipinas, upon the favorable recommendation
of the Board of Investments.
“The Securities and Exchange Commission and the Bangko

Sentral ng Pilipinas shall, within thirty (30) days from the effectivity
of this Code, issue the implementing rules and regulations.
367
“The following minimum requirements shall be complied with

by the said foreign entity:
“(a) A certification from the Philippine Consulate/Embassy,

or a duly authenticated certification from the Department of Trade
and Industry or its equivalent in the foreign firm’s home country
that said foreign firm is an entity engaged in international trade
with affiliates, subsidiaries or branch offices in the Asia-Pacific
Region and other foreign markets.
“(b) A duly authenticated certification from the principal

has been authorized by its Board of Directors or governing body
to establish its regional operating headquarters in the Philippines,
specifying that:
“(1) The regional operating headquarters may engage in any

of the following qualifying services:
– General administration and planning;
– Business planning and coordination;
– Sourcing/procurement of raw materials and

components;
– Corporate finance advisory services;
– Marketing control and sales promotion;
– Training and personnel management;
– Logistics services;
– Research and development services, and product

development;
– Technical support and maintenance;
368
– Data processing and communication; and
– Business development.
“ROHQs are prohibited from offering qualifying services to

entities other than their affiliates, branches or subsidiaries, as
declared in their registration with the Securities and Exchange
Commission nor shall they be allowed to directly and indirectly
solicit or market goods and services whether on behalf of their
mother company, branches, affiliates, subsidiaries or any other
company.
“(2) The regional operating headquarters shall notify the

Board of Investments, the Securities and Exchange Commission
and the Bangko Sentral ng Pilipinas, as the case may be, of any
decision to close down or suspend operations of its headquarters at
least fifteen (15) days before the same is effected.
“(c) An undertaking that the multinational company will

initially remit into the country such amount as may be necessary to
cover its operations in the Philippines but which amount will not be
less than Two hundred thousand United States dollars ($200,000)
or its equivalent in other foreign currencies.
“Within thirty (30) days from receipt of certificate of

registration, the multinational company will submit to the Securities
and Exchange Commission a certificate of inward remittance from a
local bank showing that it has remitted to the Philippines the amount
of at least Two hundred thousand United States dollars ($200,000)
or its equivalent in other foreign currencies and converted the same
to Philippine currency.
“(d) Any violation by the regional operating headquarters

of a multinational company of the provisions of this Code, or its
implementing rules and regulations, or other terms and conditions
of its registration, or any provision of existing laws, shall constitute
a sufficient cause for the cancellation of its license or registration.”
369
SEC. 5. Chapter II of the same Code is hereby amended and

designated as Chapter III. Articles 59, 60, 61 and 62 under the same
Chapter are hereby amended as follows:
“CHAPTER III
“INCENTIVES TO EXPATRIATES
“Art. 60. Multiple Entry Visa. – Foreign personnel of regional

or area headquarters and regional operating headquarters of
multinational companies, their respective spouses and unmarried
children under twenty-one (21) years of age, if accompanying them
or if following to join them after their admission into the Philippines
as non-immigrant shall be issued a multiple entry special visa within
seventy-two hours upon submission of all required documents,
and which shall be valid for a period of three (3) years to enter the
Philippines: Provided, That a responsible officer of the applicant
company submits a duly authenticated certificate to the effect that
the person who seeks entry into the Philippines is an executive of
the applicant company and will work exclusively for applicant’s
regional or area headquarters or regional operating headquarters
which is duly licensed to operate in the Philippines, and that he
will receive a salary and will be paid by the headquarters in the
Philippines an amount equivalent to at least Twelve thousand
United States dollars ($12,000), or the equivalent in other foreign
currencies per annum.
“The admission and stay shall be coterminous with the validity

of the multiple entry special visa. The stay, however, is extendible
for three years upon submission to the Bureau of Immigration of a
sworn certification by a responsible officer of the regional or area
headquarters or regional operating headquarters: that its license to
operate remains valid and subsisting and that the regional or area
headquarters or regional operating headquarters has withheld tax
due on compensation and the same has been paid to the Bureau of
Internal Revenue.
“Non-immigrants who have been admitted under the

multiple entry special visa, as well as their respective spouses
370
and dependents, shall be exempt from: the payment of all fees due
under the immigration and alien registration laws; securing alien
certificates of registration; and obtaining emigration clearance
certificates, and all types of clearances required by any government
department or agency, except that upon final departure from the
Philippines the employer of the said non immigrants shall so advise
in writing the Bureau of Immigration at least five (5) working days
prior to the non-immigrant’s departure, and the finally departing
non-immigrant employee shall be required to submit to the said
office a tax clearance from the Bureau of Internal Revenue.
“Art. 61. Withholding Tax of 15% on Compensation Income. –

Aliens employed by the regional or area headquarters and regional
operating headquarters of multinational companies shall be subject
for each taxable year upon their gross income received as salaries,
wages, annuities, compensations, remuneration and emoluments to
a tax equal to fifteen per centum (15%) of such gross income. The same
tax treatment is applicable to Filipinos employed and occupying the
same positions as those aliens employed by multinational companies:
Provided, That said Filipinos shall have the option to be taxed at
either 15% of gross income or at the regular tax rate on their taxable
income in accordance with the National Internal Revenue Code, as
amended by Republic Act No. 8424.
“Art. 62. Tax and Duty Free Importation. – An alien executive

of the regional or area headquarters and regional operating
headquarters of a multinational company shall enjoy tax and duty
free importation of personal and household effects as provided for
under Section 105(h) of the Tariff and Customs Code, as amended,
and Section 109(I) of the National Internal Revenue Code, as
amended: Provided, That the personal and household effects shall
arrive in the Philippines within ninety (90) days before or after
conversion of the alien executive’s admission category to multiple
entry visa issued under this Act.
“Art. 63. Travel Tax Exemption. – Personnel of regional or area

headquarters and regional operating headquarters of multinational
companies and the dependents of such foreign personnel if joining
them during the period of their assignment in the Philippines,
371
as certified by the Board of Investments, shall be exempted from

the payment of travel tax imposed under Section 1 of Presidential
Decree No. 1183, as amended.”
SEC. 6. Chapter III of the same Code is hereby amended and

designated as Chapter IV. Articles 63, 64, 65, 66 and 67 are hereby
amended to read as follows:
“CHAPTER IV
“INCENTIVES TO REGIONAL OR AREA HEADQUARTERS

AND REGIONAL OPERATING HEADQUARTERS
“Art. 64. Corporate Income Tax Incentive to Regional or Area

Headquarters and Regional Operating Headquarters. – Regional or
area headquarters established in the Philippines by multinational
companies and which headquarters do not earn or derive income from
the Philippines and which act as supervisory, communications and
coordinating centers for their affiliates, subsidiaries, or branches in
the Asia-Pacific Region and other foreign markets shall not be subject
to income tax. Regional operating headquarters shall be subject to a
tax rate of ten percent (10%) of their taxable income as provided for
under the National Internal Revenue Code, as amended by Republic
Act No. 8424: Provided, That any income derived from Philippine
sources by the ROHQ when remitted to the parent company shall
be subject to the tax on branch profit remittances as provided for in
Section 28(a)(5) of the National Internal Revenue Code.
“Art. 65. Value-Added Tax. – The regional or area headquarters

established in the Philippines by multinational companies shall be
exempted from the value-added tax. In addition, the sale or lease
of goods and property and the rendition of services to regional or
area headquarters shall be subject to zero percent (0%) VAT rate as
provided for in the National Internal Revenue Code, as amended.
“Regional operating headquarters shall be subject to the ten

percent (10%) value-added tax as provided for under the National
Internal Revenue Code, as amended.
372
“Art. 66. Exemption From All Kinds of Local Taxes, Fees,

or Charges. – The regional or area headquarters and regional
operating headquarters of multinational companies shall be exempt
from all kinds of local taxes, fees, or charges imposed by a local
government unit except real property tax on land improvements
and equipment.
“Art. 67. Tax and Duty Free Importation of Training Materials

and Equipment; Importation of Motor Vehicles. – Regional or area
headquarters and regional operating headquarters shall enjoy tax
and duty free importation of equipment and materials for training
and conferences which are needed and used solely for their functions
as regional or area headquarters or regional operating headquarters
and which are not locally available subject to the prior approval of
the Board of Investments.
“The sale or disposition of equipment within two (2) years after

importation, entered tax and duty free, shall require prior approval
of the Board of Investments and prior payment of applicable taxes
and duties waived in favor of RHQ/ROHQ.
“Regional or area headquarters and regional operating

headquarters shall be entitled to the importation of new motor
vehicles subject to the payment of the corresponding taxes and
duties.
“BOOK IV
“INCENTIVES TO MULTINATIONAL COMPANIES

ESTABLISHING REGIONAL WAREHOUSES TO SUPPLY
SPARE PARTS, COMPONENTS, SEMI-FINISHED PRODUCTS
AND RAW MATERIALS TO THE ASIA-PACIFIC REGION AND
OTHER FOREIGN MARKETS”
SEC. 7. Articles 68, 69, 70, 71 and 72 of the same Code are
“Art. 68. Qualifications. – A multinational company organized

and existing under any laws other than those of the Philippines
373
which is engaged in international trade and supplies spare

parts, components, semi-finished products and raw materials
to its distributors or markets in the Asia-Pacific area and other
foreign areas and which has established or will simultaneously
establish a regional or area headquarters and/or regional operating
headquarters in the Philippines in accordance with the provisions
of Book III of this Code and the rules and regulations implementing
the same may also establish a regional warehouse or warehouses in
ecozones in the Philippines, after securing a license therefor from
the Philippine Economic Zone Authority (PEZA). With respect to
regional warehouses located or will locate in ecozones with special
charters, such license shall be secured from the concerned ecozone
authorities. For existing regional warehouses, said license shall be
secured from the Board of Investments unless they choose to relocate
inside ecozones: Provided, That:
“(1) The activities of the regional warehouse shall be limited to

serving as a supply depot for the storage, deposit, safekeeping of its
spare parts, components, semi-finished products and raw materials
including the packing, covering, putting up, marking, labelling
and cutting or altering to customer’s specification, mounting
and/or packaging into kits or marketable lots thereof, to fill up
transactions and sales made by its head offices or parent companies
and to serving as a storage or warehouse of goods purchased locally
by the home office of the multinational for export abroad. The
regional warehouse shall not directly engage in trade nor directly
solicit business, promote any sale, nor enter into any contract for
the sale or disposition of goods in the Philippines: Provided, That
a regional warehouse may be allowed to withdraw imported goods
from said warehouse/s for delivery to an authorized distributor in
the Philippines: Provided, however, That the corresponding taxes,
customs duties and charges under the Tariff and Customs Code have
been paid by the headquarters of the said multinational upon arrival
of such goods: Provided, further, That the delivery of said goods to
the aforesaid distributor in the Philippines shall be treated as a sale
made by the headquarters rather than that of its head office, and
shall be reflected in a separate book of accounts, any representation
as to who is the seller to the contrary notwithstanding: Provided,
374
furthermore, That the aforementioned sale shall be governed by

the provisions on value-added tax in accordance with the National
Internal Revenue Code, as amended by Republic Act No. 8424:
Provided, finally, That the income from the aforementioned sale
to said distributor shall be treated as income derived by the said
headquarters from sources within the Philippines and shall be
subject to the corporate income tax of a resident foreign corporation
under the National Internal Revenue Code, as amended, the
provision of any law to the contrary notwithstanding.
“(2) The personnel of a regional warehouse will not participate

in any manner in the management of any subsidiary, affiliate
or branch office it might have in the Philippines other than the
activities allowed under this Act.
“(3) The personnel of the regional or area headquarters

or regional operating headquarters shall be responsible for the
operation of the regional warehouse subject to the provisions of this
Code.
“(4) The multinational company shall pay the Board of

Investments, the PEZA or concerned ecozone authorities, as the
case may be, and the appropriate Collector of Customs concerned
the corresponding license fees and storage fees to be determined by
said offices.
“(5) An application for the establishment of a regional

warehouse located outside an ecozone shall be made in writing to
the Board of Investments, to the PEZA, or to concerned ecozone
authorities in the case of regional warehouses located in ecozones.
The application shall describe the premises, the location and
capacity of the regional warehouse and the purpose for which the
building is to be used.
“The jurisdiction and responsibility of supervising the regional

warehouses located outside ecozones shall be vested on the Bureau
of Customs, and the Board of Investments, or the PEZA or concerned
ecozone authorities for warehouses within ecozones.
375
“The Board of Investments, the PEZA or concerned ecozone

authorities, in consultation with the Regional Director of Customs
of the district where the warehouse will be situated shall cause an
examination of the premises to be made and if found satisfactory,
it may authorize its establishment without complying with the
requirements of any other government body, subject to the following
conditions:
“(1) That the articles to be stored in the warehouse

are spare parts, components, semi-finished products and
raw materials of the multinational company operator for
distribution and supply to its Asia-Pacific and other foreign
markets including packaging, coverings, brands, labels and
warehouse equipment as provided in Article 69(a) hereof;
“(2) That the entry or importation, storage or re-

export of the goods destined for or to be stored in the regional
warehouse will not involve any dollar outlay from Philippine
sources;
“(3) That they are of such character as to be readily

identifiable for re-export; and in case of local distribution they
shall be subject to Article 68(1), Article 69 paragraph (b) and
the guidelines implementing Book IV of this Code;
“(4) That it shall file an ordinary warehousing bond

in an amount equal to one hundred percent (100%) of the
ascertained customs duties on the articles imported without
prejudice to its filing a general warehousing bond in lieu of
the ordinary warehousing bond;
“(5) The percentage of annual allowable withdrawal

from warehouses located outside ecozones for domestic use
shall be subject to the approval of the Board of Investments, or
of the PEZA or concerned ecozone authorities with respect to
warehouses located within the ecozones of their jurisdiction:
Provided, however, That in the case of existing warehouses, in
no case shall their withdrawals exceed thirty percent (30%) of
the value of goods they have brought in for any given year and
376
the payment of the corresponding taxes and duties shall have

been made upon the arrival of such goods imported: Provided,
further, That the PEZA or concerned ecozone authorities
may allow withdrawal exceeding thirty percent (30%) of the
value of goods under such terms and conditions the PEZA or
concerned ecozone authorities may impose.
“Art. 69. Tax Treatment of Imported Articles in the

Regional Warehouse. -
“(a) Tax Incentives for Qualified Goods Destined for

Reexportation to the Asia-Pacific and Other Foreign Markets. –
Except as otherwise provided in this Code, imported spare parts,
components, semi-finished products, raw materials and other items
including any packages, coverings, brands and labels and warehouse
equipment as may be allowed by the Board of Investments, the
PEZA or concerned ecozone authorities, as the case may be, for
use exclusively on the goods stored, except those prohibited by law,
brought into the regional warehouse from abroad to be kept, stored
and/or deposited or used therein and re-exported directly therefrom
under the supervision of the Collector of Customs concerned
for distribution to its Asia-Pacific and other foreign markets in
accordance with the guidelines implementing Book IV of this Code
including to a bonded manufacturing warehouse in the Philippines
and eventually re-exported shall not be subject to customs duty,
internal revenue tax, export tax nor to local taxes, the provisions of
law to the contrary notwithstanding.
“(b) Payment of Applicable Duties and Taxes on Qualified

Goods Subject to Laws and Regulations Covering Imported
Merchandise if Destined for the Local Market. – Any spare parts,
components, semi-finished products, raw materials and other items
sent, delivered, released or taken from the regional warehouse to
the local market in accordance with the guidelines implementing
Book IV of this Code shall be subject to the payment of income taxes,
customs duties, taxes and other charges provided for under Section
68 hereof and for which purpose, the proper commercial invoice of the
head offices or parent companies shall be submitted to the Collector
of Customs concerned; and shall be subject to laws and regulations
377
governing imported merchandise: Provided, That in case any of

the foregoing items are sold, bartered, hired or used for purposes
other than they were intended for without prior compliance with
the guidelines implementing Book IV of this Code and without prior
payment of the duty, tax or other charges which would have been
due and payable at the time of entry if the articles had been entered
without the benefit of this Order, shall be subject to forfeiture
and the importation shall constitute a fraudulent practice against
customs revenue punishable under Section 3602, as amended, of
the Tariff and Customs Code of the Philippines: Provided, further,
That a sale pursuant to a judicial order shall not be subject to the
preceding proviso without prejudice to the payment of duties, taxes
and other charges.
“Art. 70. Exemption From the Maximum Storage Period Under

the Tariff and Customs Code; Period of Storage in the Regional
Warehouse. – The provision of the law in Section 1908 of the Tariff
and Customs Code of the Philippines, as amended, to the contrary
notwithstanding, articles duly entered for warehousing may remain
in the regional warehouses for a period of two (2) years from the
time of their transfer to the regional warehouse, which period may
be extended with the approval of the Board of Investments for an
additional period of one (1) year upon payment of the corresponding
storage fee on the unexported articles, as provided for under Article
68(4) for each extension until they are re-exported in accordance
with the guidelines implementing Book IV of this Code. Any articles
withdrawn, released or removed contrary to the provisions of said
guidelines shall be forfeited pursuant to the provisions of Article 69,
paragraph (b) hereof.
“Art. 71. Rules and Regulations on the Jurisdiction, Operation

and Control Over Qualified Goods in the Regional Warehouse. – The
Board of Investments, the PEZA, concerned ecozone authorities
and the Bureau of Customs shall jointly issue special rules and
regulations on the receiving, handling, custody, entry, examination,
classifications, delivery, storage, warehousing, manipulation and
packaging, release for reexportation or for importation and delivery
to a Philippine distributor and for the safekeeping, recording,
inventory and liquidation of said qualified goods, any existing law
378
notwithstanding. Such rules and regulations shall be formulated in

consultation with the applicants/operators of regional warehouses.
“Art. 72. Cancellation of License or Registration. – Any willful

violation by the regional or area headquarters or regional operating
headquarters of a multinational company which has established a
regional warehouse or warehouses contrary to or in violation of the
provisions of existing laws and the implementing guidelines of Book
IV of this Code shall constitute a sufficient cause for the cancellation
of its license or registration in addition to the penalties hereinabove
provided in Article 69, paragraph (b) hereof.
“The Board, the PEZA or concerned ecozone authorities, as

the case may be, shall have the authority to impose such fines in
amounts that are just and reasonable in cases of late submission or
non-compliance on the part of registered enterprises, with reporting
and other requirements under this Code and its implementing rules
and regulations.”
SEC. 8. Article 73 of the same Code is hereby repealed.
SEC. 9. A new article is hereby inserted to read as follows:
“Art. 73. Implementing Rules and Regulations. – To implement

the provisions of Books III and IV of this Code, the Department
of Trade and Industry, in coordination with the Department of
Foreign Affairs, the Board of Investments, the Philippine Economic
Zone Authority, the ecozone authorities with special charters,
the Securities and Exchange Commission, the Bureau of Internal
Revenue, the Bureau of Customs, Bangko Sentral ng Pilipinas,
Philippine Tourism Authority, and the Bureau of Immigration shall
jointly promulgate such rules and regulations which shall take effect
thirty (30) days after their publication in at least two (2) national
newspapers of general circulation in the Philippines.”
SEC. 10. Separability Clause. – If any part or section of this

Act is declared unconstitutional for any reason or whatsoever, such
parts not so declared shall remain in full force and effect.
379
SEC. 11. Repealing Clause. – All laws, decrees, orders, rules

and regulations or issuances or parts thereof inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.
SEC. 12. Effectivity Clause. – This Act shall take effect after
thirty (30) days following its full publication in at least two (2)
newspapers of general circulation in the Philippines.
380
RULES AND REGULATIONS IMPLEMENTING REPUBLIC

ACT NO. 8756 AMENDING BOOKS III & IV OF EXECUTIVE
INVESTMENTS CODE, AS AMENDED
Pursuant to Section 9 of R.A. 8756, the following rules and regulations

are hereby promulgated to implement the intent and provisions
of the said law.
PART IV – MULTINATIONAL COMPANIES ESTABLISHING

REGIONAL OR AREA HEADQUARTERS OR REGIONAL
OPERATING HEADQUARTERS IN THE PHILIPPINES
RULE XVII APPLICATION FOR REGISTRATION
A. REGIONAL OR AREA HEADQUARTERS (RHQ)
Section 1. Filling of Application. – Any multinational

company may file, upon payment of filing fee, an application with the
Securities and Exchange Commission (SEC) through the Registration
Division of the Board of Investments for the establishment of the
regional or area headquarters in the Philippines, in accordance with
the form prescribed for the purpose, accompanied by the following
documents:
(1) A certification from the Philippine Consulate/Embassy, or

the Philippine Commercial Office or from the equivalent
office of the Philippine Department of Trade and Industry
in the applicant’s home country that said foreign firm is
an entity engaged in international trade with affiliates,
subsidiaries or branch offices in the Asia-Pacific Region and
other foreign markets. In case the certification is issued
by the equivalent office of the Philippine Department of
Trade and Industry, the same shall be authenticated by
the Philippine Consulate/Embassy.
(2) A duly authenticated certification from the principal officer

of the foreign entity to the effect that the said foreign entity
381
has been authorized by its Board of Directors or governing

body to establish its regional or area headquarters in the
Philippines, specifying that:
a. The activities of the regional or area headquarters shall

be limited to acting as a supervisory, communications
and coordinating center for its subsidiaries, affiliates
and branches in the region;
b. The regional or area headquarters will not derive any

income from sources within the Philippines and will
not participate in any manner in the management of
any subsidiary or branch office it might have in the
Philippines nor shall it solicit or market goods and
services whether on behalf of its mother company or its
branches, affiliates, subsidiaries or any other company;
and
c. The regional or area headquarters shall notify the

Board of Investments and the Securities and Exchange
Commission of any decision to close down or suspend
operations of its headquarters at least fifteen (15) days
before the same is effected.
(3) An undertaking that the multinational company will

remit into the country such amount as may be necessary
to cover its operations in the Philippines but which
amount will not be less than fifty thousand United
States dollars (US$50,000.00) or its equivalent in other
foreign currencies annually. Within thirty (30) days from
receipt of Certificate of Registration from the Securities
and Exchange Commission, the multinational company
will submit to the Securities Exchange Commission a
certificate of inward remittance from a local bank showing
that it has remitted to the Philippines the amount of at
least fifty thousand United States dollars ($50,000.00) or
its equivalent in other foreign currencies and converted
the same to Philippine currency. Annually, within thirty
(30) days from the anniversary date of the multinational
382
company’s registration as a regional or area headquarters

with the Securities and Exchange Commission, it will
submit proof to the Securities and Exchange Commission
of inward remittance amounting to at least fifty thousand
United States dollars ($50,000.00) or its equivalent in
other foreign currencies during the past year.
Section 2. Issuance of Certificate of Registration and

License. – Upon submission of all the required documents and
the application having been favorably endorsed by the Board of
Investments, the Securities and Exchange Commission shall issue
to the applicant company a Certificate of Registration and License
authorizing it to establish a regional or area headquarters in the
Philippines.
Section 3. Reporting Requirements. – Every registered

regional or area headquarters of a multinational company shall
submit to the Board of Investments and the Securities and Exchange
Commission the following reports:
1. A general information sheet in the prescribed form

showing, among others, the names, positions, titles and
salaries of all the officers and personnel of the regional or
area headquarters in the Philippines, within thirty (30)
days after the issuance of the Certificate of Registration
and License.
2. An annual report showing its operation in the Philippines,

including proofs of inward remittance amounting to at
least fifty thousand United States dollars (US$50,000.00)
or its equivalent in other foreign currencies converted
into Philippine Pesos, and its expenditures in the
Philippines during the past year. All funds of the Regional
Headquarters shall be utilized for salaries and other
emoluments, including fringe benefits of personnel, rental
of offices, transportation expenses, communication fees
and similar costs for the maintenance of the regional or
area headquarters in the Philippines.
383
B. REGIONAL OPERATING HEADQUARTERS (ROHQ)
Section 4. Filling of Application. – Any multinational

company may file, upon payment of filing fee, an application with
the Securities and Exchange Commission through the Registration
Division of the Board of Investments for the establishment of the
regional operating headquarters in the Philippines, in accordance
with the form prescribed for the purpose, accompanied by the
following documents:
a) A certification from the Philippine Consulate/Embassy,

or the Philippine Commercial Office or from the equivalent
office of the Philippine Department of Trade and Industry in the
applicant’s home country that said foreign firm is an entity engaged
in international trade with affiliates, subsidiaries or branch offices
in the Asia-Pacific Region and other foreign markets. In case the
certification is issued by the equivalent office of the Philippine
Department of Trade and Industry, the same shall be authenticated
by the Philippine Consulate/Embassy.
b) A duly authenticated certification from the principal

has been authorized by its Board of Directors or governing body to
establish its regional operating headquarters in the Philippines:
1. Specifying any of the qualifying services it will render:
l general administration and planning;
l business planning and coordination;
l sourcing/procurement of raw materials and components;
l corporate finance advisory services;
l marketing control and sales promotion;
l training and personnel management;
l logistics services;
384
l research and development services, and product

development;
l technical support and maintenance;
l data processing and communication; and
l business development.
The ROHQ shall not offer qualifying services to entities

other than its affiliates, branches or subsidiaries, as declared in
its registration with the Securities and Exchange Commission nor
shall it directly and indirectly solicit or market goods and services
whether on behalf of their mother company, branches, affiliates,
subsidiaries or any other company.
ROHQ’s cannot directly or indirectly engage in the sale and

distribution of goods and services of its mother company, branches,
affiliates, subsidiaries or any other company.
2. The regional operating headquarters shall notify the Board

of Investments, the Securities and Exchange Commission
and the Bangko Sentral ng Pilipinas, as the case may be,
of any decision to close down or suspend operations of its
headquarters at least fifteen (15) days before the same is
effected.
c) An undertaking that the multinational company will

initially remit into the country within thirty (30) days from receipt
of the certificate of registration with the SEC through the BOI
such amount as may be necessary to cover its operations in the
Philippines but which amount will not be less than two hundred
thousand United States dollars ($200,000.00) or its equivalent in
other foreign currencies.

Investments, and the Bangko Sentral ng Pilipinas (BSP) in case
385
of ROHQ’s of banking or quasi-banking institutions, the SEC shall

issue to the applicant company a Certificate of Registration and
License authorizing it to establish a regional operating headquarters
in the Philippines.
After securing the SEC Certificate of Registration and License,

ROHQ’s of banking or quasi-0banking shall obtain a license from
the BSP in accordance with the prescribed form.
Within thirty (30) days from receipt of Certificate of

Registration, the multinational company will submit to the Securities
and Exchange Commission a certificate of inward remittance from
a local bank showing that it has remitted to the Philippines the
amount of at least two hundred thousand United States dollars
($200,000.00) or its equivalent in other foreign currency converted
the same to Philippine currency.
Section 6. Reporting Requirements. – Every registered

operating headquarters of a multinational company shall submit
to the Board of Investments and the Securities and Exchange
Commission the following reports:
1. A general information sheet in the prescribed form showing,

among others, the names, positions, titles and salaries of
all the officers and personnel of the regional operating
headquarters in the Philippines, within thirty (30) days
after the issuance of the Certificate of Registration and
License and annually thereafter.
2. An annual financial report together with an audited

financial statement and income tax return.
C. CONVERSION OF EXISTING REGIONAL OR AREA

HEADQUARTERS TO REGIONAL OPERATING
HEADQUARTERS
Section 7. Filing of Application for Conversion. – A

regional or area headquarters may file its application for conversion
into a regional operating headquarters with the Securities and
386
Exchange Commission through the Registration Division of the

Board of Investments, in accordance with the prescribed form,
accompanied by the following documents:
(a) A petition under oath to amend license signed by the

Resident Agent or duly authorized officer of the regional
or area headquarters requesting conversion into a regional
operating headquarters and indicating the qualifying
services to be rendered by the applicant.
(b) A duly authenticated certification from the principal

officer of the foreign entity to the effect that said foreign
entity has been authorized by its Board of Directors or
governing body to convert its regional headquarters to a
regional operating headquarters specifying the qualifying
services it will render as provided for under Section 4 of
the Rules.
(c) Proof by means of a bank certification that at the time of

conversion it has at least two hundred thousand United
States dollars ($200,000.00) or more.
The ROHQ shall not offer qualifying services to entities

other than its affiliates, branches or subsidiaries, as declared in
its registration with the Securities and Exchange Commission nor
shall it directly and indirectly solicit or market goods and services
whether on behalf of their mother company, branches, affiliates,
subsidiaries or any other company.
The ROHQ cannot directly and indirectly engage in the

sales and distribution of goods and services of its mother company,
branches, affiliates, subsidiaries or any other company.

Investments and the Bangko Sentral ng Pilipinas in case of ROHQ’s
of banking and quasi-banking institutions, the SEC shall issue to
the applicant company an amended Certificate of Registration and
387
License authorizing it to establish a regional operating headquarters

in the Philippines.
The Certificate of Registration and License for the

establishment and operation of the regional or area headquarters
of the multinational company shall be surrendered to the SEC for
cancellation.
ROHQ’s of banking and financial institutions, in addition to

the foregoing application, shall also obtain licenses from the Bangko
Sentral ng Pilipinas in accordance with its prescribed rules and
regulations.
D. INCENTIVES TO EXPATRIATES
Section 9. Multiple Entry Visa. – Upon submission of all

necessary documents, the Bureau of Immigration shall issue the
multiple entry special visa to foreign personnel of regional or area
companies, their respective spouses and unmarried children under
twenty-one (21) years of age, if accompanying them or if following
to join them after their admission into the Philippines as non-
immigrant within seventy-two (72) hours upon submission of all
required documents. This is without prejudice to the authority of
the Department of Foreign Affairs to issue visas.
The foregoing documents shall include a duly authenticated

certificate issued by a responsible officer of the applicant company
stating to the effect that the person who seeks entry into the
Philippines is an executive of the applicant company and will work
exclusively for applicant’s regional or area headquarters or regional
operating headquarters which is duly licensed to operate in the
Philippines, and that he will receive a salary and will be paid by
the headquarters in the Philippines an amount equivalent to at
least twelve thousand United States dollars ($12,000.00), or the
equivalent in other foreign currencies per annum.
The visa shall be valid for a period of three (3) years to enter
the Philippines.
388
The admission and stay shall be co-terminus with the validity

for three (3) years upon submission to the Bureau of Immigration of
a sworn certification by a responsible officer of the regional or area
headquarters or regional operating headquarters; that its license
to operate remains valid and subsisting and that the regional
headquarters: or regional operating headquarters has withheld tax
due on compensation and the same has been paid to the Bureau of
Internal Revenue.
Non-immigrants who have been admitted under the

multiple entry special visa, as well as their respective spouses and
dependents, shall be exempt from: the payment of all fees due under
immigration and alien registration laws; securing alien certificates
of registration; and obtaining emigration clearance certificates,
except reasonable administrative costs. They are also exempt from
all types of clearances required by any government department
or agency, except that upon final departure from the Philippines
the employer of the said non-immigrants shall so advise in writing
the Bureau of Immigration at least five (5) working days prior to
the non-immigrant’s departure and the finally departing non-
immigrant employee shall be required to submit to the said office a
tax clearance from the Bureau of Internal Revenue.
Section 10. Withholding Tax of 15% on Compensation

Income. – Alien executives occupying managerial and technical
positions employed by the regional or area headquarters and
regional operating headquarters of multinational companies shall
be subject for each taxable year upon their gross income received
as salaries, wages, annuities, compensations, remunerations and
emoluments to a final tax equal to fifteen percentum (15%) of such
gross income.
The same tax treatment is applicable to Filipinos employed

and occupying the same positions as those aliens employed by
multinational companies, regardless of whether or not there is an
alien executive occupying the same position.
Qualified Filipino employees shall have the option to be taxed

at either 15% of gross income or at the regular tax rate on their
389
taxable income in accordance with the National Internal Revenue

Code, as amended by RA 8424.
Section 11. Tax and Duty Free Importation of Personal

and Household effects. – This privilege may be enjoyed by an
alien executive of the regional or area headquarters and regional
operating headquarters of a multinational company provided that
the personal and household effects shall arrive in the Philippines
within ninety (90) days before or after conversion of the alien
executive’s admission category to multiple entry visa issued.
Section 12. Travel Tax Exemption. –Travel tax exemption

shall be granted by the Philippine Tourism Authority (PTA) upon
recommendation of the BOI, to personnel of regional or area
companies and the dependents of such foreign personnel if joining
them during the period of their assignment in the Philippines, as
certified by the Board of Investments.
For this purpose, the regional or area headquarters or

regional operating headquarters shall submit a certification as to
the purpose, duration and destination of travel.
E. INCENTIVES TO REGIONAL OR AREA HEADQUARTERS

AND REGIONAL OPERATING HEADQUARTERS
Section 13. Corporate Income Tax. – Regional or area

headquarters are exempt from payment of corporate income taxes.
However, they shall file an annual information return of a tax
exempt corporation in accordance with the provisions of National
Internal Revenue Code, as amended and its Implementing Rules
and Regulations.
Income derived by ROHQs from performing the qualifying

services shall be subject to the preferential rate of 10% on taxable
income in accordance with the provisions of the National Internal
Revenue Code, as amended. Moreover, any income derived from
Philippine sources by the ROHQ when remitted to the parent
company shall be subject to the tax on branch profit remittances as
390
provided for in Section 28(a) (5) of the National Internal Revenue

Code, as amended.
Section 14. Value-Added Tax. – Regional or area

headquarters shall be exempted from the value-added tax. The
sale or lease of goods and property and the rendition of services to
regional or area headquarters shall be subject to zero percent (0%)
VAT rate as provided for in the National Internal Revenue Code, as
amended.
The regional or area headquarters shall not be required to

obtain or secure a prior permit from the Bureau of Internal Revenue
for Zero-Rating of the supplier’s sale of goods and services to them.
In general, the regional operating headquarters shall be

subject to the ten percent (10%) value-added tax unless otherwise
provided under the National Internal Revenue Code, as amended or
other existing laws.
Section 15. Exemption from all Kinds of Local Taxes,

Fees, or Charges. – The regional or area headquarters and regional
operating headquarters of multinational companies shall be exempt
from all kinds of local taxes, fees, or charges imposed by a local
government unit except real property tax on land improvements
and equipment.
Section 16. Tax and Duty Free Importation of Training

Materials and Equipment. – Regional or area headquarters
and regional operating headquarters shall enjoy tax and duty free
importation of equipment and materials for training and conferences
which are needed and used solely for their functions as regional or
area headquarters or regional operating headquarters and which
are not locally available subject to the prior approval of the Board
of Investments.
Training materials shall refer to equipment and materials

exclusively appropriate and shall be used in holding seminars and
conferences, such as video equipment, slides, printed materials and
other visual aids.
391
The sale or disposition of equipment within two years after

importation, entered tax and duty free, shall require prior approval
of the Board of Investments and prior payment of applicable taxes
and duties waived in favor of RHQ/ROHQ.
Section 17. Importation of Motor Vehicles. – Regional

or area headquarters and regional operating headquarters shall
be entitled to the importation of new motor vehicles subject to the
payment of the corresponding taxes and duties.
Section 18. Suspension of Availment of Incentives. – No

availment of incentives by regional or area headquarters or regional
operating headquarters shall be allowed if found delinquent in
the compliance of any of the terms and conditions for registration
including such reports and statistical data which may be required
by the SEC or the BOI.
Section 19. Visitorial Powers. – In the public interest and/

or for the enforcement of any applicable law, rules and regulations,
the BOI, SEC or any government office having jurisdiction on the
matter may, through any of its duly authorized representatives,
conduct necessary examination of records and books of accounts
of the regional or area headquarters and regional operating
headquarters in the Philippines, make pertinent inquiries from its
officials and take such action as may be necessary for the proper
exercise of its authority.
Section 20. Withdrawal/Closure of Regional Head-

quarters and Regional Operating Headquarters. – Applications
for withdrawal or closure of regional or area headquarters and
regional operating headquarters shall be filed with the Securities
and Exchange Commission for appropriate consideration provided
that a favorable recommendation is obtained from the Board of
Investments.
Section 21. Penalties. – Any violation by the regional or area

headquarters or a regional operating headquarters in the Philippines
of any of the provisions of Book III of the Omnibus Investments
Code of 1987, as amended or these rules and regulations, or other
392
terms and conditions of its registration, or any provision of any

existing applicable laws shall constitute a sufficient cause for the
cancellation of its Certificate of Registration and License.
RULE XVIII. MULTINATIONAL COMPANIES

ESTABLISHING REGIONAL WAREHOUSES
Section 1. Application for the Establishment of a

Regional Warehouse. – Multinational Companies who have
established regional or area headquarters or regional operating
headquarters under Book III of the Omnibus Investments Code of
1987, as amended, shall file an application for the establishment
of regional warehouse(s) with Philippine Economic Zone Authority
or the concerned ecozone authority in a form prescribed for this
purpose, describing the premises, the location and capacity of the
regional warehouse and the purpose for which the building is to be
used, accompanied by the following documents:
(a) A certification from the Philippine Consulate/Embassy,

or the Philippine commercial office or from the equivalent
office of the Philippine Department of Trade and Industry
in the applicant’s home country that said foreign firm is
an entity engaged in international trade and supplies
spare parts, components, semi-finished products and raw
materials to its distributors or markets in the Asia-Pacific
Region and other foreign markets. In case the certification
is issued by the equivalent office of the Philippine
Department of Trade and Industry, the same shall be
authenticated by the Philippine Consulate/Embassy.
(b) A duly authenticated certification from the principal officer

of the foreign entity to the effect that the said foreign
entity has been authorized by its Board of Directors or
governing body to establish its regional warehouse in the
Philippines, specifying that:
(1) The activity of the regional warehouse shall be limited

to serving as a supply depot for the storage, deposit,
safekeeping of its spare parts, components, semi-
393
finished products and raw materials including the

packing, covering, putting up, marking, labelling
and cutting or altering to customer’s specification,
mounting and/or packaging into kits or marketable lots
thereof, to fill up transactions and sales made by its
head offices or parent companies and to serving as a
storage or warehouse of goods purchased locally by the
home office of the multinational for export abroad;
(2) The articles to be stored in the warehouse are spare

parts, components, semi-finished products and raw
materials of the multinational company operator for
distribution and supply to its Asia Pacific and other
foreign markets including packaging, coverings,
brands, labels and warehouse equipment as provided
in Article 69(a) of R.A. 8756;
(3) That the entry or importation, storage or re-export of

the goods destined for or to be stored in the regional
warehouse will not involve any dollar outlay from
Philippine sources;
(4) That they are of such character as to be readily

identifiable for re-export; and in case of local distribution
they shall be subject to Article 68 (1), Article 69
paragraph (b);
(5) That for Regional Warehouse operating outside the

ecozone, it shall file an ordinary warehousing bond in
an amount equal to one hundred per cent (100%) of the
ascertained customs duties on the articles imported
without prejudice to its filing a general warehousing
bond in lieu of the ordinary warehousing bond;
For a regional warehouse operating inside the

ecozone, it shall comply with all rules, regulations and
procedures of PEZA or the concerned ecozone authority,
and the Bureau of Customs in regard to the movement
394
of goods into and from the regional warehouse in the

ecozone.
(6) The regional warehouse shall not directly engage in

trade nor directly solicit business, promote any sale,
nor enter into any contract for the sale or disposition
of goods in the Philippines, Provided that a regional
warehouse may be allowed to withdraw imported goods
from said warehouse/s for delivery to an authorized
distributor in the Philippines: Provided, however, that
the corresponding taxes, customs duties and charges
under the Tariff and customs Code and value added tax
(VAT) have been paid by the headquarters of the said
multinational upon arrival of such goods.
(7) The regional warehouse shall maintain a separate

book of accounts of its delivery of said goods to the
aforesaid distributor in the Philippines which shall be
treated as a sale made by the headquarters rather than
that of its head office, any representation as to who is
the seller to the contrary notwithstanding, Provided,
that the aforementioned sale shall be governed by the
provisions of value added tax in accordance with the
National Internal Revenue Code as amended by R.A.
8424 Provide, furthermore, that the income from the
aforementioned sale to the said distributor shall be
treated as income derived by the said headquarters
from sources within the Philippines and shall be
subject to the corporate income tax of a resident foreign
corporation under the NIRC as amended, the provision
of any law to the contrary notwithstanding.
(8) The personnel of a regional warehouse will not

participate in any manner in the management of any
subsidiary, affiliate or branch office it might have in
the Philippines other than the activities allowed under
the law and shall be responsible for the operation of
the regional warehouse subject to the provisions of this
Code.
395
Section 2. Multinational companies without regional

headquarters or regional operating headquarters. –
Multinational companies who have not established regional or area
headquarters or regional operating headquarters in the Philippines
under Book III hereof shall be allowed to file simultaneously an
application to establish a regional warehouse(s) under Book IV of
the Code in a form prescribed for the purpose accompanied by the
documents mentioned in the preceding section and under Section 1,
Rules XVII of these Implementing Rules and Regulations.
The application for the establishment of the regional warehouse

by the applicant with the PEZA or concerned ecozone authority
shall be processed upon receipt thereof. Issuance of the license for
the regional warehouse shall, however, be held in abeyance until
the Certificate of Registration and License to establish regional
headquarters or regional operating headquarters under Book III of
the Code is issued by the Securities and Exchange Commission.
Section 3. Due Course Letters. – The PEZA or concerned

ecozone authority, upon submission by the applicant of all the
documents required in Section 1 hereof and said documents having
been found satisfactory shall issue in favor of the applicant a Due
Course Letter, specifying the terms and conditions for compliance.
Section 4. Certificate of Registration and License. –

Upon acceptance of the terms and conditions and compliance with
pre-registration requirements, the PEZA or concerned ecozone
authority shall issue in favor of the applicant company a Certificate
of Registration and License authorizing it to establish regional
warehouse(s). Payment of license fees and other fees/charges shall
be determined by PEZA or the concerned ecozone authority.
Section 5. List of Articles to be Imported. – Only

articles authorized by the concerned agency to be imported shall be
transferred and stored at the regional warehouse. For this purpose,
the concerned agency shall furnish the Collector of Customs a list of
importable articles as well as amendatory or supplemental lists.
396
Section 6. Period of Storage in the Regional Warehouse.

– The provision of the law in Section 1908 of the Tariff and Customs
Code of the Philippines, as amended, to the contrary notwithstanding,
articles duly entered for warehousing may remain in the regional
warehouses for a period of two (2) years from the time of transfer
to the regional warehouse, which period may be extended with the
approval of the PEZA or the concerned ecozone authority with respect
to regional warehouses in ecozones, or of the Board of Investments
with respect to existing regional warehouse outside ecozones for an
(68(4), for each extension until they are re-exported in accordance
with the guidelines implementing Book IV of this Code. Articles
not withdrawn within the reglementary period shall be examined,
assessed and the corresponding duties and taxes thereon collected,
Provided, articles withdrawn, released or removed contrary to the
provisions of existing laws shall be forfeited pursuant to Article
69(b) of R.A. 8756.
Section 7. Rules and Regulations on the Jurisdiction,

Operation and Control Over Qualified Goods in the Regional
Warehouse. – The Board of Investments, the PEZA, concerned
Ecozone authorities and the Bureau of Customs shall jointly issue
special rules and regulations on the receiving, handling, custody,
entry, examination, classifications, delivery, storage, warehousing,
manipulation and packaging, release for re-exportation or for
importation and delivery to a Philippine distributor and for the
safekeeping, recording, inventory and liquidation of said qualified
goods, any existing law notwithstanding. Such rules and regulations
shall be formulated in consultation with the applicants/operators of
regional warehouses, provided that pending the issuance thereof,
existing rules and regulations shall be observed.
Section 8. Manipulation of Articles in the Warehouse.

– All works on articles shall be done inside the warehouse. The
articles being prepared for re-export or for local consumption
may be repacked, packaged, covered, put up, marked, labeled, cut
otherwise altered but in no case shall processing be undertaken
unless authorized by the concerned Agency.
397
Section 9. Limitations on Withdrawals for Domestic

Use. – The percentage of annual allowable withdrawal for domestic
use from warehouses located outside ecozones shall be subject to the
approval of the Board of Investments, or of the PEZA or concerned
ecozone authorities with respect to warehouses located within the
ecozones: Provided, however, That in the case of existing warehouses,
in no case shall their withdrawals exceed thirty percent (30%) of
the value of goods they have brought in for any given year and the
payment of the corresponding taxes and duties shall have been made
upon the arrival of such goods imported: Provided, further, that
the PEZA or concerned ecozone authorities may allow withdrawal
exceeding thirty percent (30%) of the value of goods under such
terms and conditions the PEZA or concerned ecozone authorities
may impose, Provided, finally, that the sale of goods to the domestic
market beyond the allowed percentage described above shall be
subject to the taxes and duties imposed under existing laws.
Only goods for which taxes and duties have been paid thereon
upon arrival shall be allowed to be withdrawn for domestic sale.
Section 10. Tax Treatment of Income derived from

Sale to the Domestic Market. – The income derived from the
sale to the distributor shall be treated as income derived by the
said headquarters from sources within the Philippines and shall be
subject to the corporate income tax of a resident foreign corporation
under the National Internal Revenue Code, as amended, the
provision of any law to the contrary notwithstanding.
Section 11. Storage of Locally Purchased Goods for

Export. – The regional warehouse may also serve as a storage or
warehouse of goods purchased locally by the present company or
home office for export provided that such purchases shall be stored
separately from importations.
Section 12. Assignment of Customs Personnel to the

Regional Warehouses. – The Collector of Customs shall assign such
customs personnel as may be necessary to supervise the operations
of regional warehouses outside ecozones. The operator shall provide
398
customs personnel with suitable working space complete with the

supplies and equipment.
Section 13. Books and Records. – Books of account and

other records as may be prescribed by the PEZA or the concerned
ecozone authority with respect to regional warehouses in ecozones,
or by the Bureau of Customs with respect to regional warehouses
outside ecozones, shall be maintained by the operator and kept at
all times in their places of business and shall be made available,
as required, to duly authorized representatives of the concerned
agency.
Section 14. Visitorial Power. – In the public interest and/

or for the effective implementation of Book IV of this Code, the
Board of Investments, the PEZA or concerned ecozone authority
and the Bureau of Customs may, through any of its duly authorized
representatives, exercise the following functions:
a) Conduct such investigations as it deems necessary to

determine whether or not a multinational company which
has registered its regional warehouse in the Philippines
is complying with the provisions of Book IV of this Code
or of any applicable laws, rules and regulations, including
but not limited to:
Conducting necessary examination of the books and records

of accounts of the regional warehouse;
Determining all the facts and circumstances concerning the

matter to be investigated, including making inquiries from its
personnel; and
Taking such action as may be necessary for the proper exercise

of its authority.
Request such other reports, financial or otherwise, as may be

necessary in the public interest or for the proper compliance of this
Code: provided, that such requirement shall be applicable to all
those similarly situated;
399
Take such proper proceedings to recommend the revocation or

cancellation of the license or registration of the regional headquarters
or regional operating headquarters of the multinational company
which has established a regional warehouse in the Philippines in
case the same is found to have willfully violated any provisions of
this Code and these implementing rules and regulations.
Section 15. Cancellation of License or Registration.

– Any willful violation by the regional or area headquarters or
regional operating headquarters of a multinational company which
has established a regional warehouse or warehouses contrary to or
in violation of the provisions of existing laws and the implementing
guidelines of Book IV of this Code shall constitute a sufficient cause
for the cancellation of its license or registration in addition to the
penalties hereinabove provided in Article 69, paragraph (b) hereof.
The Board of Investments, the PEZA or concerned ecozone

authorities, as the case may be, shall have the authority to impose
such fines in amounts that are just and reasonable in cases of late
submission or non-compliance on the part of registered enterprises,
with reporting and other requirements under this Code and its
implementing rules and regulations.
RULE XIX – REPEALING AND EFFECTIVITY CLAUSES
Section 1. All other rules and regulations or parts thereof,

inconsistent with the foregoing rules and regulations are repealed,
amended or modified accordingly.
Section 2. These Rules shall take effect thirty (30) days

following its complete publication in two (2) newspapers of general
Published: April 7, 2000 / Malaya, p.6
400
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS,

REPEALING FOR THE PURPOSE REALING FOR THE
PURPOSE REPUBLIC ACT NO. 1180, AS AMENDED, AND
FOR OTHER PURPOSES

SECTION 1. Title – This Act shall be known as the “Retail

Trade Liberalization Act of 2000.”
SEC. 2. Declaration of Policy. – It is the policy of the State to

promote consumer welfare in attracting promoting and welcoming
productive investment that will bring down price for the Filipino
consumer, create more jobs, promote tourism, assist small
manufacturers, stimulate economic growth and enable Philippine
goods and services to become globally competitive through the
liberalization of the retail trade sector.
Pursuant to this policy, the Philippine retail industry is hereby

liberalized to encourage Filipino and competitive retail trade sector
in the interest of empower the Filipino consumer through lower
prices, higher quality goods, better services and wider choices.
SEC. 3. Definition. – As used in this Act.
(1) “Retail trade” shall mean any act, occupation or calling

of habitually selling direct to the general public merchandise,
commodities or good for consumption, but the restriction of this law
shall not apply to the following:
(a) Sales by manufacturer, processor, laborer, or worker,

to the general public the products manufactured, processed or
products by him if his capital dose not exceed One hundred
thousand pesos(100,000.00);
401
(b) Sales by a farmer or agriculturist selling the products

of his farm;
(c) Sales in restaurant operations by a hotel owner or

inn-keeper irrespective of the amount capital: provided, that
the restaurant is incidental to the hotel business; and
(d) Sales which are limited only to products

manufactured, processed or assembled by a manufactured,
processed or assembled by a manufacturer though a single
outlet, irrespective of capitalization.
(2) “High-end or luxury goods” shall refer to goods which are

not necessary for life maintenance and whose demand is generated in
large part by the higher income groups. Luxury goods shall include,
but are not limited to products such as; jewelry, branded or designer
clothing and footwear, wearing apparel, leisure and sporting goods,
electronics and other personal effects.
SEC. 4. Treatment of Natural Born Citizen Who Has Lost His

Philippine Citizenship. – A natural-born citizen of the Philippines
who resides in the Philippines shall be granted the same rights as
Filipino citizens for purposes of this Act.
SEC. 5. Foreign Equity Participation. – Foreign-owned

partnerships, associations and corporation formed and organized
under the laws of the Philippines may, upon registration with the
Securities and Exchange Commission (SEC) and the Department
of Trade and Industry (DTI), or in case of foreign owned single
proprietorships, with the DTI, Engage or invest in the retail trade
business, subject to the following categories.
Category A – Enterprises with paid-up capital of the equivalent

in Philippine Peso of the than Two million five hundred thousand US
dollars (US$2,500,000.00) shall be reserved exclusively for Filipino
citizens and corporations wholly owned by Filipino citizens.
Category B – Enterprises with a minimum paid-up capital

of the equivalent in Philippine Pesos of two million five hundred
402
thousand US dollar (US$2,500,000.00) but less than Seven million

five hundred thousand US dollars (US$7,500,000.00) may be wholly
owned by foreigners except for the first two (2) years after the
effectivity of this Act wherein foreign participation shall be limited
to not more than sixty percent (60%) of total equity.
Category C – Enterprises with a paid-up capital of the

equivalent in Philippine Pesos of Seven million five hundred
thousand US dollars (US$7,500,000.00), or more may be wholly
owned by foreigners: Provided, however, That in no case shall the
investments for establishing a store in vestments for establishing
a store in Categories B and C be less than the equivalent in
Philippine pesos of Eight hundred thirty thousand US dollars
(US$830,000.00).
Category D – Enterprises specializing in high-end or luxury

products with a paid-up capital of the equivalent in Philippine Pesos
of Two hundred fifty thousand US dollars (US$250,000.00) per store
may be wholly owned by foreigners.
The foreign investor shall be required to maintain in the

Philippines the full amount of the prescribed minimum capital
unless the foreign investor has notified the SEC and the DTI of
its intention to repatriate its capital and cease operations in the
Philippines. The actual use in Philippine operations of the inwardly
remitted minimum capital requirement shall be monitored by the
SEC.
Failure to maintain the full amount of the prescribed minimum

capital prior to notification of the SEC and the DTI, shall subject the
foreign investor to penalties or restrictions on any future trading
activities/business in the Philippines.
Foreign retail stores shall secure a certification from the

Bangko Sentral ng Pilipinas (BSP) and the DTI, which will verify
or confirm inward remittance of the minimum required capital
investments.
SEC. 6. Foreign Investors Acquiring Shares of Stock of Local

Retailers. – Foreign investors acquiring shares from existing retail
403
stores whether or not publicly listed whose net worth is in the

excess of the peso equivalent of Two million five hundred thousand
US dollars (US$2,500,000.00) may purchase only up to a maximum
of sixty percent (60%) of the equity thereof within the first two
(2) years from the effectivity of this Act and thereafter, they may
acquire the remaining percentage consistent with the allowable
foreign participation as herein provided.
SEC. 7. Public Offering of Shares of Stock. – All retail trade

enterprises under Categories B and C in which foreign ownership
exceeds eighty percent (80%) of equity shall offer a minimum of
thirty percent (30%) of their equity to the public through any stock
exchange in the Philippine within eight (8) years from their start of
operations.
SEC. 8. Qualification of Foreign Retailers. – No foreign retailer

shall be allowed to engage in retail trade in the Philippine unless all
the following qualifications are met:
(a) A minimum of Two hundred million US dollar

(US$200,000,000.00) net worth in its parent corporation for
Categories B and C, and Fifty million US dollar (US$50,000,000.00)
net worth in its parent corporation for category D;
(b) (5) retailing branches or franchises in operation

anywhere around the word unless such retailer has at least one (1)
store capitalized at a minimum of Twenty-five million US dollars
(US$25,000,000.00);
(c) Five (5)-year track record in retailing; and
(d) Only nationals from, or juridical entities formed or

incorporated in Countries which allow the entry of Filipino retailers
shall be allowed to engage in retail trade in the Philippines.
The DTI is hereby authorized to pre-qualify all foreign

retailers, subject to the provisions of this Act, before they are allowed
to conduct business in the Philippine.
404
The DTI shall keep a record of Qualified foreign retailers

who may, upon compliance with law, establish retail stores in the
Philippine. It shall ensure that parent retail trading company of the
foreign investor complies with the qualifications on capitalization
and track record prescribed in this section
The Inter- Agency Committee on Tariff and Related Matters

Authority (NEDA) Board shall formulate and regularly update a
list of foreign retailers of high-end or luxury goods and render an
annual report on the same to Congress.
SEC. 9. Promotion of Locally Manufactured Products. – For

ten (10) year after the effectivity of this Act, at least thirty percent
(30%) of the aggregate cost of the stock inventory of foreign retailers
falling under Categories B and C and ten percent (10%) for category
D shall be made in the Philippines.
SEC. 10. Prohibited Activities of Qualified Foreign Retailers. –

Qualified foreign retailers shall not be allowed to engage in certain
retailing activities outside their accredited stores through the use
of mobile or rolling stores or carts, the use of sales representatives,
door-to-door selling, restaurants and sari-sari stores and such
other similar retailing activities: Provided, That a detailed list of
prohibited activities shall hereafter be formulated by the DTI
SEC. 11. Implementing Agency: Rule and Regulations. –

The monitoring and regulation of foreign sole proprietorships,
partnerships, associations or corporations allowed to engage in
retail trade shall be the responsibility of the DTI. This shall include
resolution of conflicts.
The DTI, in coordination with the SEC, the NEDA and

the BSP, shall formulate and issue the implementing rules and
regulation necessary to implement this Act within ninety (90) days
after its approval.
SEC. 12. Penalty Clause. – Any person who shall be Found

guilty of Violation of any provision of this Act shall be punished
by imprisonment of not less that six (2) years and one (1) day
405
but not more than eight (8) years, and a fine of not less than One
million pesos (P1,000,000.00) but not more that Twenty million
pesos (P20,000,000.00) In the case of associations, partnerships
or corporations, the penalty shall be imposed upon its partners,
president, directors, manager and other officers responsible for the
violation. If the offender is not a citizen of the Philippines he shall
be deported immediately after service of sentence. If the Filipino
of fender is a public officer or employee, he shall, in addition to
the penalty prescribed herein, suffer dismissal and permanent
disqualification from public office
SEC. 13. Repealing Clause. – Republic Act No. 1180, as

amended, is hereby repealed. Republic Act No. 3018, as amended,
and all other laws, executive orders, rules and regulations or
parts thereof inconsistent with this Act are repealed or modified
accordingly.
SEC. 14. Separability Clause. – If any provisions of this Act

shall be held unconstitutional, the other provisions not otherwise
affected thereby shall remain in force and effect.
SEC. 15. Effectivity. – This act shall take effect fifteen (150
days after its approval and publication in at least two (2) newspapers
406
AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN

TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES,
FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS
THERETO, INCURRED BY CERTAIN BUSINESS
ENTERPRISES OPERATING WITHIN THE SPECIAL
ECONOMIC ZONES AND FREEPORTS CREATED UNDER
PROCLAMATION NO. 163, SERIES OF 1993; PROCLAMATION
NO. 216, SERIES OF 1993; PROCLAMATION NO. 420,
SERIES OF 1994; AND PROCLAMATION NO, 984, SERIES
OF 1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT
NO. 7227, AS AMENDED, AND FOR OTHER PURPOSES

SECTION 1. Grant of Tax Amnesty. – Registered business

enterprises operating prior to the effectivity of this Act within the
special economic zones and freeports created pursuant to Section
15 of Republic Act No. 7227, as amended, such as the Clark Special
Economic Zone created under Proclamation No. 163. series of 1993;
Poro Point Special Economic and Freeport Zone created under
Proclamation No. 216, series of 1993; John Hay Special Economic
Zone created under Proclamation No. 420, series of 1994; and Morong
Special Economic Zone created under Proclamation No. 984, series of
1997, may avail themselves of the benefits of remedial tax amnesty
herein granted on all applicable tax and duty liabilities, inclusive
of fines, penalties, interests and other additions thereto, incurred
by them or that might have accrued to them due to the rulings of
the Supreme Court in the cases of John Hay People’s Coalition v.
Lim, et al., G.R. No. 119775 dated 23 October 2003 and Coconut
Oil Refiners Association, Inc. v. Torres, et al, G.R. No. 132527 dated
29 July 2005, by filing a notice and return in such form as shall
be prescribed by the Commissioner of Internal Revenue and the
Commissioner of Customs and thereafter, by paying an amnesty
tax of Twenty-five thousand pesos (P25,000.00) within six months
407
from the effectivity of this Act: Provided, That the applicable tax
and duty liabilities to be covered by the tax amnesty shall refer only
to the difference between: (i) all national and local tax impositions
under relevant tax laws, rules and regulations; and (ii) the five
percent (5%) tax on gross income earned by said registered business
enterprises as determined under relevant revenue regulations of
the Bureau of Internal Revenue and memorandum circulars of the
Bureau of Customs during the period covered: Provided, however,
That the coverage of the tax amnesty herein granted shall not
include the applicable taxes and duties on articles, raw materials,
capital goods, equipment and consumer items removed from the
special economic zone and freeport and entered in the customs
territory of the Philippines for local or domestic sale, which shall
be subject to the usual taxes and duties prescribed in the National
Internal Revenue Code (NIRC) of 1997, as amended, and the Tariff
and Customs Code of the Philippines, as amended.
SEC. 2. Immunities and Privileges. – Those who have

availed themselves of the tax amnesty and have fully complied
with all its conditions shall be relieved of any civil, criminal and/or
administrative liabilities arising from or incident to the nonpayment
of taxes, duties and other charges covered by the tax amnesty
granted under Section 1 herein.
SEC. 3. Implementing Rules and Regulations. – The Department

of Finance, in coordination with the Bureau of Internal Revenue
and the Bureau of Customs, and in consultation with the Bases
Conversion and Development Authority, the Clark Development
Corporation, the John Hay Management Corporation, the Poro Point
Management Corporation, and the Bataan Technology Park, Inc.,
shall promulgate and publish the necessary rules and regulations
for the effective implementation of this Act within two months from
the date of effectivity of this Act.
SEC. 4. Separability Clause. – If any portion or provision of

this Act is declared unconstitutional, the remainder of this Act or
any provision not affected thereby shall remain in force and effect.
408
SEC. 5. Repealing Clause. – All laws, decrees, orders, rules and

regulations or other issuances or parts thereof inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.
SEC. 6. Effectivity. – This Act shall take effect fifteen (15) days
after its publication in the Official Gazette or in any two newspapers
of general circulation, whichever comes earlier.
409
AN ACT CONVERTING THE BATAAN ECONOMIC ZONE

LOCATED IN THE MUNICIPALITY OF MARIVELES
PROVINCE OF BATAAN, INTO THE FREEPORT AREA
OF BATAAN (FAB), CREATING FOR THIS PURPOSE THE
AUTHORITY OF THE FREEPORT AREA OF BATAAN
(AFAB), APPROPRIATING FUNDS THEREFOR AND FOR
OTHER PURPOSES


“Freeport Area of Bataan (FAB) Act of 2009”.

of the State to 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 productivity and individual and
family income, and thereby improve the level and quality of living
condition through the establishment, among others, of special
economic zones in suitable and strategic locations in the country
and through measures that will attract legitimate and productive
foreign investments.
SEC. 3. Conversion of the Bataan Economic Zone (BEZ) into

the Freeport Area of Bataan. – The existing Bataan Economic Zone
located in the Municipality of Mariveles, Province of Bataan is
hereby converted into a special economic zone and Freeport to be
known as the Freeport Area of Bataan (FAB). The FAB shall cover
the Municipality of Mariveles, Province of Bataan.
SEC. 4. Governing Principles. – The FAB shall be managed

and operated under the following principles:
(a) Within the framework and limitations of the Constitution

and applicable provisions of the Local Government Code, the FAB
410
shall be developed into and operated as a decentralized, self – reliant

and self-sustaining industrial, commercial-trading, agro-Industrial,
tourist, banking, financial and investment center with suitable
residential areas;
(b) The FAB shall continue to be provided with transportation,

telecommunications and other facilities needed to attract legitimate
and productive investments, generate linkage industries and
employment opportunities for the people of the Province of Bataan
and its neighboring towns and cities;
(c) The FAB may establish mutually beneficial economic

relations with other entities or enterprises within the country or
with foreign entities or enterprises;
(d) Foreign citizens and companies owned by non-Filipinos

in whatever proportion may set up enterprises in the FAB either
by themselves or in joint venture with Filipinos in any sector of
industry, international trade and commerce within the FAB;
(e) The FAB shall be managed and operated as a separate

customs territory ensuring free flow or movement of goods and
capital within, into and out of its territory;
(f) The FAB shall provide incentives such as tax and

duty-free importations of raw materials, capital and equipment
to registered enterprises located therein, However, exportation or
removal of goods from the territory of the FAB to the other parts
of the Philippine territory’ shall be subject to customs duties and
taxes under the Tariff and Customs Code of the Philippines, as
amended, and the National Internal Revenue Code (NIRC) of 1997,
as amended;
(g) The areas comprising the FAB may be expanded or

reduced when necessary, For this purpose, the FAB Authority
which will be created under this Act, with the concurrence of the
local government units (LGUs), in accordance with existing laws
and local ordinances shall have the power to acquire either by
purchase, negotiation or condemnation proceedings, any private
411
lands within or adjacent to the FAB for the following purposes: (1)
consolidation of lands for FAB development; (2) acquisition of right
of way to the FAB; and (3) the protection of watershed areas and
the maintenance and improvement of its water yield and natural
assets valuable to the prosperity of the FAB, the management of
solid and water waste and its impact to adjacent areas within the
local government concerned.
The LGU and the FAB shall provide for a mechanism to

address inappropriate exploitation of the natural environment and
disruptive land use within the jurisdiction of the FAB;
(h) Goods manufactured by the FAB enterprise shall be made

available for immediate retail sale in the domestic market, subject
to the payment of corresponding taxes on raw materials and other
regulations that may be formulated by the FAB Authority, together
with the Philippine Economic Zone Authority (PEZA), the Bangko
Sentral ng Pilipinas (BSP), the Department of Finance (DOF),
the Bureau of Customs (BOC) and the Department of Trade and
Industry (DTI) in accordance with the NIRC of 1997, as amended,
and the Tariff and Customs Code of the Philippines, as amended.
However, in order to protect the domestic industries, a negative list
of industries shall be drawn up and regularly updated by the PEZA.
Enterprises engaged in industries included in such negative list
shall not be allowed to sell their products locally; and
(i) The defense of the FAB and the security of its perimeter
fence shall be the responsibility of the National Government in
coordination with the FAB Authority and the LGUs.
SEC. 5. Fiscal Incentives. – The registered enterprises

operating within the FAB may be entitled to the existing pertinent
fiscal incentives as provided for under Republic Act No. 7916, as
amended by Republic Act No. 8748, also known as the Special
Economic Zone Act of 1995, or those provided under Executive Order
No. 226, as amended, otherwise known as the Omnibus Investment
Code of 1987.
412
SEC. 6. Imposition of a Tax Rate of Five Percent (5%) on Gross

Income Earned. – No taxes, local and national, shall be imposed on
business establishments operating within the FAB. In lieu thereof,
said business establishments shall pay a five percent (5%) final tax
on their gross income earned in the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer’s office of the

Municipality of Mariveles; and
(d) Two per centum (2%) to the Authority of the Freeport of

Area of Bataan.
SEC. 7. Incentive to Investors. – Any foreign national who

invests an amount of One hundred fifty thousand US dollars
(US$150,000.00), either in cash and/or equipment, in a registered
enterprise shall be entitled to an investor’s visa: Provided, That he
has the following qualifications:
(a) He is at least eighteen (18) years of age;
(b) He has not been convicted of a crime involving moral

turpitude;
(c) He is not afflicted with any loathsome, dangerous or

contagious disease; and
(d) He has not been institutionalized for any mental disorder

or disability.
As a holder of investor’s visa, an alien shall be entitled to reside

in the Philippines while his investment subsists. For this purpose,
he should submit an annual report, in the form duly prescribed for
the purpose, to prove that he has maintained his investment in
the country, should said alien withdraw his investments from the
413
Philippines, then the investor’s visa issued to him shall automatically

expire.
SEC. 8. Administration, Implementation and Monitoring of

Incentives. – For the proper administration, implementation and
monitoring of tax incentives provided under this law, the following
are herein mandated:
(a) The AFAB shall be responsible for the administration

and implementation of the incentives granted to its respective
registered enterprises. Among others, it shall adopt and implement
systems and procedures affecting trade and customs policies. The
BOC shall set up and establish a custom’s controlled area outside
the gate of the FAB to facilitate payment of taxes on goods entering
the Philippine customs territory; and
(b) The AFAB shall likewise submit to the DOF its annual
tax expenditures based on the tax incentives granted to its registered
enterprises. The DOF, for its part, shall create a single database of
all incentives provided by the governing authority. The DOF shall
monitor the incentives granted, and submit all annual report to the
President.
SEC. 9. Extension of Period of Availment. – The availment

period of the incentives provided herein may be extended by AFAB,
in the event that the registered enterprise has suffered operational
force majeure that has impaired its viability, equivalent thereto.
SEC. 10. Duration of Incentives. – Enterprises registered with

AFAB may enjoy the income tax holiday (ITH) or the net operating
loss carryover (NOLCO) granted by the authority prior to the
availment of the five percent (5%) gross income earned (GIE). Fiscal
incentives under this Act shall be terminated after a cumulative
period of twenty (20) years from date of registration or start of
commercial operation, whichever is applicable, except that it could
be extended with regard to industries deemed indispensable to
national development.
414
The industries exempted from this provision shall be

determined by the AFAB.
SEC. 11. Creation of the Authority of the Freeport Area of

Bataan (AFAB). – There is hereby created a body corporate to be
known as the Authority of the Freeport Area of Bataan (AFAB),
hereinafter referred to as the AFAB which shall manage and operate
the FAB, in accordance with the provisions of this Act.
SEC. 12. Principal Office of the AFAB. – The AFAB shall

maintain its principal office in the Municipality of Mariveles,
Province of Bataan, but it may establish liaison offices within
the Philippines as may be necessary for the proper conduct of its
business.
SEC. 13. Powers and Functions of the AFAB. – The AFAB

shall have the following functions:
(a) To adopt, alter, use a corporate seal, to contract, lease,

buy, sell, acquire, own and dispose properties of whatever nature;
(b) To sue and be sued in order to carry out its duties,

responsibilities, privileges, powers and functions as granted and
provided for in this Act and to exercise the power of eminent domain
for public use and public purpose;
(c) To operate, administer, manage, develop, in accordance

with Executive Order No. 525, as amended, the FAB according to
the principles and provisions set forth in this Act and to coordinate
with the LGUs for the development plans, activities and operation
of the FAB;
(d) To recommend to the President the issuance of a

proclamation to fix and delimit the site of the FAB;
(e) To register, regulate and supervise the enterprises in the

FAB in an efficient and decentralized manner, subject to existing
laws;
415
(f) To coordinate with the LGUs and exercise general

supervision over the development plans, activities and operations of
the FAB;
(g) To authorize or undertake, on its own or through others,

and to regulate the establishment, construction, operation and
maintenance of public utilities, services, and infrastructure in
the FAB such as shipping, barging, stevedoring, cargo, handling,
hauling, warehousing, storage of cargo, port services or concessions,
piers, wharves, bulkheads, bulk terminals, mooring areas, storage
areas, roads, bridges, reclamation projects, terminals, conveyors,
water supply and storage, sewerage, drainage, airport operations
in coordination with the Civil Aeronautics Board, and such other
services or concessions or infrastructure necessary or incidental to
the accomplishment of the objectives of this Act: Provided, however,
That the private investors in the FAB shall be given priority in
the awarding of contracts, franchises, licenses, or permits for the
establishment, operation and maintenance of utilities, services and
infrastructure in the FAB;
(h) To license, set fees, regulate and undertake the

establishment, operation and maintenance of utilities, other
services, educational and medical Institutions and infrastructure
in the F AB such as, but not limited to, heat, light and power,
water supply, telecommunications, mobile, internet and other data
facilities, transport, toll roads and bridges, port services, etc., and to
fix just, reasonable and competitive rates, fares, charges and prices
thereof;
(i) To construct, acquire, own, lease, operate and maintain

on its own or through contracts, franchises, licenses, bulk purchase
from the private sector and build-operate-transfer scheme, or under
a joint venture with the private sectors, any or all of the public
utilities and infrastructure required or needed for the operation and
development of the FAB, in coordination with appropriate national
and local government authorities and in conformity with applicable
laws thereon;
416
(j) To operate on its own, either directly or through a license

to other tourism -related activities, including games, amusements,
recreational and sports facilities, subject to the approval and
supervision of the Philippine Amusement and Gaming Corporation
(PAGCOR);
(k) To raise or borrow, within the limitation provided by law,

adequate and necessary funds from local or foreign sources, to finance
its projects and programs under this Act, and for that purpose, to
issue bonds, promissory notes, and other forms of securities, and to
an assignment of all or part of its property or assets;
(l) To provide security for the FAB in coordination with

the national and local governments. For this purpose, the AFAB
may establish and maintain its security forces and firefighting
capability or hire others to provide the same. In the event that an
assistance of the military force is necessary, it shall not interfere
in the internal affairs of the FAB except to provide the necessary
security and defense, and their expenses shall be borne by the
National Government;
(m) To protect, preserve, maintain and develop the virgin

forests, beaches, coral and coral reefs, and maintain ecological
balance within the FAB. For this purpose, the rules and regulations
of the Department of Environment and Natural Resources (DENR)
and other government agencies involved in the above functions shall
be implemented by the AFAB;
(n) To create, operate and/or contract to operate such

functional units or offices of the AFAB as it may deem necessary;
(o) To issue certificates of origin for products manufactured

or processed in the FAB;
(p) To Issue rules and regulations consistent with the

accomplish the purposes, objectives and policies provided herein;
417
(q) To exercise such powers as may be essential, necessary

or incidental to the powers granted to it hereunder as well as those
that shall enable it to carry out, implement and accomplish the
purposes, objectives and policies of this Act; and
(r) To be vested with other powers enjoyed or exercised by

other freeport zone authorities.
SEC. 14. Board of Directors of the FAB. – The powers of the

AFAB shall be vested in and exercised by a Board of Directors,
hereinafter referred to as the Board, which shall be composed of the
following:
(a) The chairman who shall, at the same time, be the

administrator of the AFAB;
(b) A vice chairman who shall come from among the members
of the Board;
(c) Members consisting of:
(1) Two (2) representatives from the National

Government;
(2) One (1) representative from the Province of Bataan;
(3) One (1) representative from the district covering the

site of the FAB;
(4) One (1) representative from the Municipality of

Mariveles, Province of Bataan;
(5) One (1) representative from the domestic investors;
(6) One (1) representative from the foreign investors;

and
(7) One (1) representative from the workers working in

the FAB.
418
The chairman and the members of the Board, shall be appointed

by the President of the Philippines to serve for a term of six (6)
years, unless sooner separated from service due to death, voluntary
resignation or removal for cause. In case of death, resignation or
removal for cause, the replacement shall serve only the unused
portion of the term.
Except for the representatives of the business and labor

sectors, no person shall be appointed by the President of the
Philippines as a member of the Board unless he is a Filipino citizen,
of good moral character, of proven probity and integrity, and a
degree holder in any of the following fields: economics, business,
public administration, law, management or their equivalent, and
with at least ten (10) years relevant working experience preferably
in the field of management or public administration.
The members of the Board shall each receive per diem at rates
to be determined by the Department of Budget and Management
(DBM) in accordance with existing rules and regulations: Provided,
however, That the total per diem collected each month shall not
exceed the equivalent per diem for four (4) meetings.
SEC. 15. Powers and Duties of the Chairman-Administrator.

– The chairman – administrator shall have the following powers
and duties:
(a) To direct and manage the affairs of the AFAB in

(b) To establish the internal organization of the AFAB under

such conditions that the Board may prescribe;
(c) To submit an annual budget and necessary supplemental

budget to the Board for Its approval;
may be required;
419
(e) To submit to the Board for its approval policies, systems,

procedures, rules and regulations that are essential to the operation
of the AFAB;
(f) To create a mechanism in coordination with relevant

agencies for the promotion of industrial peace, the protection of the
environment, and the advancement of the quality of life in the FAB;
and
(g) To perform such other duties as may be assigned to him

by the Board or which are necessary or incidental to his office.
SEC. 16. Organization and Personnel. – The AFAB Board of

Directors shall provide for an organizational structure and appoint
employees, subject to the civil service law. Upon the recommendation
of the chairman-administrator and with the approval of the Secretary
of the DTI, the Board shall appoint and fix the remuneration and
other emoluments of its officers and employees in accordance with
existing laws on compensation and position classification: Provided,
That the Board shall exercise administrative supervision on their
employees.
The officers and employees of the AFAB, including all members

of the Board, shall not engage directly or indirectly in partisan
activities nor take part in any election, except to vote.
No officer or employee of the AFAB, subject to civil service

laws and regulations, shall be removed or suspended except for
cause, as provided by law.
SEC. 17. Labor Center. – A labor center shall be established

within’ the FAB. This center shall be responsible for studying and
amicably settling professional and labor relations and disputes,
interpretation of employment contracts, and monitoring work,
hygiene and safety standards within the FAB. The labor center
shall comprise a labor office, an industrial health and safety office,
and an inspection and disputes office.
420
SEC. 18. Banking Rules and Regulations. – Existing banking

laws and rules/regulations of the BSP shall apply to banks and
financial institutions to be established in the FAB.
SEC. 19. Remittances. – In the case of foreign investments,

a registered enterprise in the Bataan Ecozone shall have the right
to remit earnings from the investment in the currency in which the
investment was originally made and at the exchange rate prevailing
at the time of remittance, subject to the provisions of Section 74 of
Republic Act No. 265, as amended.
SEC. 20. Applicability Clause. – The provisions of Sections

30-41 of Republic Act No. 7916, otherwise known as “The Special
Economic Zone Act of 1995”, as amended, shall likewise apply to
the FAB.
SEC. 21. Capitalization. – The AFAB shall have an authorized

capital stock of two billion pesos (Php2,000,000,000.00), with option
to increase capitalization upon the discretion of the AFAB, divided
into twenty thousand (20,000) no-par shares fully subscribed and
paid up by the Republic of the Philippines with:
(a) All lands embraced and covered by the F AB, as well as

permanent improvements and fixtures upon proper inventory not
otherwise alienated, conveyed, or transferred to another government
agency;
(b) All other assets which the President may transfer to the
AFAB as part of the equity contribution of the government; and
(c) Cash contribution by the government in the amount of

Five hundred million pesos (Php500,000,000.00) a year for the next
five (5) years, which is hereby appropriated out of any fund in the
National Treasury not otherwise appropriated.
SEC. 22. Supervision and Control. – For purposes of policy

direction and coordination, the AFAB shall be under the direct control
and supervision of the Office of the President of the Philippines.
421
SEC. 23. Regional Development Council. – The AFAB shall

determine the development goals for the FAB within the framework
of national development plans, policies and goals. The administrator
shall, upon approval by the Board, submit the FAB plans, programs
and projects to the Regional Development Council for inclusion and
inputs to the overall regional development plan.
SEC. 24. Relationship with Local Government Units. – Except

as herein provided, the Municipality of Mariveles in the Province
of Bataan shall operate and function in accordance with the Local
Government Code of 1991. In case of any conflict between the
AFAB and the local government units (LGUs) and the National
Government (NG) on matters affecting the FAB other than defense
and security matters, the decision of the AFAB shall prevail.
SEC. 25. Legal Counsel. – The AFAB shall have its own internal
legal counsel under the supervision of the Government Corporate
Counsel. When the exigencies of its businesses and operations
demand, the AFAB may engage the services of an outside counsel
either on a case-to-case or on a fixed retainer basis.
SEC. 26. Interpretation/Construction. – The powers,

authorities and functions that are vested m the AFAB are intended to
establish decentralization of governmental functions and authority
and promote an efficient and effective working relationship between
the AFAB, the National Government and the LGU.
SEC. 27. Audit. – The Commission on Audit shall appoint a full-

time auditor in the AFAB or may assign such number of personnel
as may be necessary in the performance of their functions.
SEC. 28. Transitory Provisions. – All properties, assets,

funds, rights, obligations, and liabilities are hereby transferred to
the AFAB except for the liabilities that are not properly accounted
for as per the reports coming from the Commission on Audit, which
shall be retained by the PEZA.
The AFAB shall be responsible for the operations,

administration, management and development of the FAB. The
422
AFAB shall effect the transfer herein provided in a manner that will
ensure the least disruption of ongoing programs of the BEZ. The
qualified and necessary personnel of the BEZ shall be transferred
to and absorbed by the AFAB: Provided, That the tenure, rank,
salaries and privileges of such personnel are not reduced or
adversely affected. The personnel whose services are not retained
by the AFAB shall be granted separation pay and retirement and
other benefits they are entitled to under existing laws but in no case
shall the separation pay be less than one (1) month for every year
of service.
In the period prior to the actual assumption of duties by the

AFAB, all officers and employees of the BEZ shall continue to exercise
their functions and discharge their duties and responsibilities.
The BEZ shall be deemed abolished upon the organization of the
AFAB.
SEC. 29. Implementing Rules and Regulations. – The DTI,

the DOF, the LGU and the Department of the Interior and Local
Government 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. 31. Repealing Clause. – Republic Act No. 5490 and

Presidential Decree No. 66 are hereby amended. All laws, executive
orders or issuances or any part thereof which are inconsistent
herewith are hereby repealed or amended accordingly.
SEC. 32. Effectivity Clause. – This Act shall take effect

upon its publication in at least one (1) newspaper of general
circulation.
423
Part II
Executive Issuances
426
EXECUTIVE ISSUANCES – PRESIDENTIAL DECREES
PRESIDENTIAL DECREES
427
428
PRESIDENTIAL DECREE NO. 66
CREATING THE EXPORT PROCESSING ZONE AUTHORITY AND

REVISING REPUBLIC ACT NO. 5490
WHEREAS, pending before Congress prior to the

promulgation of Proclamation No. 1081, dated September 21,
1972, was House No. 4317, entitled “An Act to Revise the Charter
of the Foreign Trade Zone Authority Created Under Republic Act
Numbered Five Thousand Four Hundred and Ninety and For Other
Purposes”, which I have certified as one of the urgent measures
necessitating immediate enactment;
WHEREAS, it is imperative that this measure be immediately

made part of the law of the land in order to assure the accelerated
development and efficient operations of the export processing zone
in Mariveles, Bataan, and such other zones as may be established in
the country, and thereby hastening the realization of the objectives
of the Government to create a new social and economic order for the
national benefit;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President

of the Philippines, by virtue of the powers vested in me by the
Constitution as Commander-in-Chief of all the Armed Forces of
the Philippines, and pursuant to Proclamation No. 1081, dated
September 21, 1972, and General Order No. 1, dated September
22, 1972, as amended, do hereby order and decree the following to
the Revised Charter of the Foreign Trade Zone Authority Created
Under Republic Act No. 5490 and as part of the law of the land:
SECTION 1. Declaration of Policy. – It is hereby declared

to be the policy of the Government to encourage and promote
foreign commerce as a means of making the Philippines a center of
international trade, of strengthening our export trade and foreign
exchange position, of hastening industrialization, of reducing
domestic unemployment, and of accelerating the development of
the country, by establishing export processing zones in strategic
locations in the Philippines.
429
SEC. 2. Creation of an Export Processing Zone Authority. – To

carry out the above policy, there is hereby created a body corporate
to be known as the Export Processing Zone Authority, hereinafter
referred to as Authority, which shall be under the direct supervision
of the Office of the President. The functions of the Authority are
hereby declared governmental.
SEC. 3. Principal Office. – The Authority shall maintain its

principal office in the Greater Manila area but it may establish
branches and agencies within the Philippines as may be necessary
for the proper conduct of its business.
SEC. 4. Purposes and Specific Powers. – The purposes and

specific powers of the Authority are as follows:
(a) To operate, administer and manage the export processing

zone established in the Port of Mariveles, Bataan, and such other
export processing zones as may be established under this Decree; to
construct, acquire, own, lease, operate and maintain infrastructure
facilities, factory building, warehouses, dams, reservoir, water
distribution, electric light and power system, telecommunications
and transportation, or such other facilities and services necessary
or useful in the conduct of commerce or in the attainment of the
purposes and objectives of this Decree;
(b) To take water from any public stream, river, creek,

lake, spring or waterfall in the Philippines as may be necessary for
the attainment of the purposes of this Decree; to alter, straighten,
obstruct or increase the flow of water in streams or in water channels
intersecting or connecting therewith or contiguous to its works or
any part thereof; and to undertake land reclamation;
(c) To acquire and hold agricultural lands in excess of

the areas permitted to private corporations or associations by the
Constitution;
(d) To determine and regulate the enterprises to be

established within an export processing zone in order not to
adversely affect the operations of existing domestic industries
430
outside said Zone; to operate such Zone as a public utility wherein

all the rates and charges for all services or privileges therein shall
be fair and reasonable as determined solely by the Authority, and
the Authority shall afford all who may apply for the use of the Zone
and its facilities and appurtenances uniform treatment under like
conditions subject to such treaties or commercial conventions as are
now enforced or may hereafter be made by the Philippines with any
foreign government from time to time;
(e) To grant the use or to rent, lease or let, for a consideration

and under such terms, arrangements and conditions it may
deem reasonable and proper, any and all port facilities, including
stevedoring and port terminal services, or any concession properly
incident thereto or in connection with the receipt, delivery, shipment
and transfer in transit, weighing, marking, tagging fumigating,
refrigerating, icing, storing, and handling of goods, wares and
merchandise: Provided, however, That where the port terminal
facilities are owned and operated by private persons, the fees and
charges to be levied shall not exceed that being collected by the
Government for similar services;
(f) Upon application, to grant such franchise to operate and

maintain exclusively within the Zone electric light, heat or power
system, transportation, communication, warehousing, iceplant
or cold storage; and, under uniform and reasonable rates and
regulations made thereunder, permit to persons, firms, corporations
or associations the use of the Zone and its facilities, or the privilege
to erect such buildings and other structures within the Zone as will
meet their particular requirements: Provided, That such franchise
or permission shall not constitute a vested right as against the
Government, nor interfere with or complicate the revocation of the
grant: Provided, further, That such franchise or permit shall not be
granted on terms that conflict with the public use of the Zone, as set
forth in this Decree;
(g) To fix, assess and collect storage charges and fees,

including rentals for the lease, use or occupancy of lands, buildings,
structure, warehouses, facilities and other properties owned and
administered by the Authority; and to fix and collect the fees and
431
charges for the issuance of permits, licenses and the rendering of

services not enumerated herein, the provisions of law to the contrary
notwithstanding;
(h) For the due and effective exercise of the powers

conferred by law and to the extend requisite therefor, to exercise
exclusive jurisdiction and sole police authority over all areas owned
or administered by the Authority. For this purpose, the Authority
shall have supervision and control over the bringing in or taking out
of the Zone, including the movement therein, of all cargoes, wares,
articles, machineries, equipment, supplies or merchandise of every
type and description;
(i) When essential to the proper administration of its

corporate affairs or when necessary for the proper transaction of its
business or for carrying out the purposes of this Decree, to contract
indebtedness and issue bonds, subject to the conditions set forth in
Section 19 hereof;
(j) To create and operate and/or contract to operate such

agencies, functional units, offices and departments of the Authority
as it may deem necessary or useful for the furtherance of any of the
purposes of this Decree;
(k) To adopt, alter and use a corporate seal which shall be

judicially noticed; make contracts, lease, own or otherwise dispose
of personal and real property; sue and be sued; and otherwise do
and perform any and all things that may be necessary or proper to
carry out the purposes of the Authority.
SEC. 5. Capitalization. – The capital of the Authority shall

consist of (1) its existing assets and such other properties as may
be contributed to the Authority by the Government to form part
of capital, (2) all capitalized surplus, and (3) cash contribution by
the Government in the amount of two hundred million pesos, which
is hereby appropriated out of any fund in the National Treasury
not otherwise appropriated, be they collection from any or all taxes
accruing to the general fund or proceeds from loans the issue of
bonds, treasury bills or notes, or derived from any other sources of
432
income, by or of the National Government, which amount shall be

programmed and released by the Budget Commission in accordance
with the schedule of development and expenditures to be prepared
and submitted by the Authority: Provided, however, That any
budgetary outlay allocated and released in favor of the Export
Processing Zone Authority and/or Foreign Trade Zone Authority
shall be correspondingly credited to the authorized capitalization
herein provided.
SEC. 6. Board of Commissioners. – The corporate powers

of the Authority shall be vested in and exercised by the Board of
Commissioners, hereinafter referred to as the Board, to be composed
of seven members to wit: the Deputy Governor of the Central Bank
of the Philippines, the vice-Chairman of the Board of Investments,
the Undersecretary of Finance and the Undersecretary of the
Department of Trade and Tourism, who shall be ex-officio members,
and the remaining members shall be appointed by the President
with the consent of the Commission on Appointments. The President
shall designate from among the members of the Board its Chairman,
who shall at the same time be the Administrator of the Authority.
SEC. 7. Qualifications and Disqualifications of Commissioners.

– No person shall be appointed as a member of the Board unless
he is a citizen of the Philippines, of good moral character and
unquestionable integrity and responsibility and of recognized
competence in any of the fields of finance, economics, law, taxation,
commerce, industry, engineering, management or the like.
No member of the Board shall directly or indirectly engage in

partisan political activities or practice any profession or business
dealing with or related to the exercise of the Authority’s functions
and powers; and be financially interested, directly or indirectly, in
any contract entered into by the Authority.
SEC. 8. Tenure of Office. – Except for the ex-officio members,

the tenure of office of the other members shall be six years; Provided,
That the term of office of the first appointees shall be fixed as follows:
the Chairman shall be for six years; one member shall be for four
years, and the last member shall be for two years: Provided, finally,
433
That no vacancy shall be filled except for the unexpired portion of

any term.
The Chairman and the members of the Board may be suspended

or removed for cause by the President of the Philippines.
SEC. 9. Meetings and Quorum. – The Board shall meet

regularly once a month and as often as the exigencies of the service
demand. The presence of at least four members shall constitute a
quorum, and the vote of four members shall be necessary for the
adoption of any rule, resolution or decision or any other act of the
Board.
SEC. 10. Compensation of Chairman and Members of the

Board. – The Chairman, who is also the Administrator of the
Authority, shall receive an annual salary of fifty thousand pesos
and a monthly commutable allowance of one thousand pesos. The
members of the Board shall receive a per diem of not to exceed two
hundred pesos for each board meeting actually attended by them:
Provided, That such per diems shall not exceed one thousand pesos
during any month for each member: Provided, further, That no
other allowances or any form of compensation shall be paid them,
except actual expenses in traveling to and from their residences to
attend board meetings.
SEC. 11. Powers and Duties of the Board. – The Board shall
have the following powers and duties:
(a) To promulgate policies and to prescribe such rules

and regulations as may be necessary to implement the intent
and provisions of this Decree, which rules and regulations shall
take effect thirty (30) days following their publication in two (2)
newspapers of general circulation in the Philippines;
(b) To recommend the establishment of other export

processing zones as it may deem advisable, and to recommend to the
President the issuance of a proclamation to fix and delimit the site
of the Zone or Zones, which shall at all times remain to be owned by
the Authority. The site of the Zone or Zones, as proclaimed by the
President, shall be surveyed by the Bureau of Lands and conveyed
434
thereafter in absolute ownership to the Authority by the President

of the Philippines for the nominal sum of one peso for each parcel of
land. Upon receipt of said deed of conveyance, the proper Register of
Deeds shall register the same and issue the corresponding original
certificate of title to the Authority;
(c) To approve the annual budget and such supplemental

budgets which may be submitted to it by the Chairman;
(d) Upon the recommendation of the Administrator, to

organize, reorganize and determine the Authority’s staffing pattern;
to fix their salaries and to define their powers and duties;
(e) Notwithstanding the provisions of law, rules and

regulations to the contrary, to enter by itself into any contract or
agreement as may be necessary for the proper, efficient and stable
administration of the Authority and for the attainment of the
purposes and objectives of this Decree;
(f) To recommend to the President the application of

compulsory arbitration in the settlement of any labor dispute
affecting any industry or business located inside the Zone. If in the
opinion of the President the labor dispute would seriously impair
Zone operation, he shall forthwith certify said labor dispute to the
National Labor Relation Commission or the Court of Industrial
Relations for immediate compulsory arbitration;
(g) To recommend to the Commissioner of Immigration that

entry into the Philippines of foreign nationals for employment as
authorized under Section 16 of this Decree;
(h) To render annual reports to the President and such

special reports as may be requested; and
(i) Generally, to exercise all the powers necessary or

incidental to attain the purposes of this Decree.
SEC. 12. Administrator and Deputy Administrators; Powers

and Duties. – The Chairman, who is also the Administrator of the
435
Authority, shall be assisted by two Deputy Administrators to be

chosen and may be removed by the Board upon recommendation of
the Chairman. The Administrator and the Deputy Administrators
shall be required to work full time in the Authority. Such deputies
shall perform the duties, functions and responsibilities as may be
assigned to them by the Administrator. The annual salary of each
deputy shall be thirty thousand pesos with a monthly commutable
allowance of five hundred pesos.
The Chairman-Administrator shall have the following powers

and duties:
(a) To direct and manage the affairs of the Authority in

(b) To assist registered Zone enterprises and prospective

investors to have their papers processed with dispatch by all
Government offices, agencies, instrumentalities and financial and
banking institutions;
(c) To prepare the agenda for the meeting of the Board and
submit for its consideration and approval the policies and measures
which he deems necessary and proper to carry out the provisions of
this Decree;
may be required;
(e) To submit an annual budget and necessary supplemental

budgets to the Board for its approval;
(f) To establish the internal organization of the Authority

under such conditions that the Board may prescribe: Provided, That
any major reorganization shall be subject to the approval of the
Board; and
(g) To perform such other duties as may be assigned to him

by the Board.
436
SEC. 13. Non-applicability of the Civil Service Law, and

the Regulation of the Wage and Position Classification Office. –
All officials and employees of the Authority shall be selected and
appointed on the basis of merit and fitness based on a comprehensive
and progressive merit system to be established by the Authority
immediately upon its organization and consistent with Civil Service
rules and regulations. The recruitment, transfer, promotion, and
dismissal of all personnel of the Authority, including temporary
workers, shall be governed by such merit system.
Likewise, all personnel of the Authority shall be exempt from

the regulations of the Wage and Position Classification Office.
SEC. 14. Appointment by Board. – Department heads

and similar rank shall be appointed by the Board, upon the
recommendation of the Administrator.
SEC. 15. Appointment by Administrator. – Employees and

officials below the rank of department heads shall be appointed to
positions in the approved budget by the Administrator upon written
recommendation of the department head concerned using as guide
the standards set forth in the Authority’s merit system: Provided,
That the Administrator shall submit a quarterly report to the Board
regarding personnel recruitment, placement and training.
SEC. 16. Foreign Enterprises. – The provisions of law to the

contrary notwithstanding, the Authority may authorize an alien or
an association, partnership, corporation or any other form of business
organization formed, organized, charactered or existing under any
law other than those of the Philippines, or which is not a Philippine
national, or the working capital of which is fully owned or controlled
by aliens to do business or engage in an industry inside the zone.
Subject to the provisions of Section twenty-nine of

Commonwealth Act Numbered Six hundred thirteen, as amended,
a zone enterprise whether domestic or foreign may within five years
from registration, employ foreign nationals in supervisory, technical
or advisory positions not in excess of five per centum of its total
personnel in each such category: Provided, That in no case shall each
437
employment exceed five years. The employment of foreign nationals

after five years from registration, or within such five years but in
excess of the proportion herein provided, shall be governed by Section
twenty of Commonwealth Act Numbered Six hundred thirteen, as
amended: Provided, furthermore, That when the majority of the
capital stock of the enterprise is owned by foreign investors, the
positions of president, treasurer and general manager, or their
equivalents, may be retained by foreign nationals. In exceptional
cases, the Board may allow employment of foreign national in other
positions that cannot be filled by Philippine nationals, but subject
to the limitations as herein provided.
Foreign national under employment contract within the

purview of this Decree, their spouses and unmarried children under
twenty-one years of age, who are not excluded by Section twenty-
nine of Commonwealth Act Numbered Six hundred thirteen,
shall be permitted to enter in the Philippines during the period of
employment of such foreign nationals.
SEC. 17. Tax Treatment of Merchandise in the Zone. – (1)

Except as otherwise provided in this Decree, foreign and domestic
merchandise, raw materials, supplies, articles, equipment,
machineries, spare parts and wares of every description, except
those prohibited by law, brought into the Zone to be sold, stored,
broken up, repacked, assembled, installed, sorted, cleaned, graded,
or otherwise processed, manipulated, manufactured, mixed with
foreign or domestic merchandise or used whether directly or
indirectly in such activity, shall not be subject to Customs and
internal revenue laws and regulations nor to local tax ordinances,
the provisions of law to the contrary notwithstanding.
(2) Merchandise purchased by a registered zone enterprise

from the customs territory, if paid for in the United States dollar or in
any convertible foreign currency and subsequently brought into the
zone, shall be considered as exported, and the exporter thereof shall
be entitled to the benefits allowed by law for such transaction.
(3) Domestic merchandise sent from the zone to the customs

territory shall, whether or not combined with or made part of
other articles likewise the growth, product or manufacture of the
438
Philippines while in the zone, be subject to internal revenue laws

of the Philippines as domestic goods sold, transferred or disposed of
for local consumption.
(4) Merchandise sent from the zone to the customs territory

shall, whether or not combined with or made part of other articles
while in the zone, be subject to laws and regulations governing
imported merchandise. The duties and taxes shall be assessed on
the value of imported materials (except when the final product is
exempt) and the internal revenue taxes on the value added.
(5) Domestic merchandise on which all internal revenue

taxes have been paid, if subject thereto, and foreign merchandise
previously imported on which duty or tax has been paid, or which
have been admitted free of duty and tax, may be taken into the zone
from the customs territory of the Philippines and be brought back
thereto free of quotas, duty or tax.
(6) Subject to such regulations respecting identity and the

safeguarding of the revenue as the Authority may deem necessary
when the identity of an article entered into the zone has been lost,
such article when removed from the zone and taken to the customs
territory shall be treated as foreign merchandise entering the
country for the first time, under the provisions of the Tariff and
Customs Code.
(7) Articles produced or manufactured in the zone and

exported therefrom shall, on subsequent importation into the
customs territory, be subject to the import laws applicable to like
articles manufactured in a foreign country.
(8) Unless the contrary is shown, merchandise taken out of

the zone shall be considered for tax purposes to have been sent to
customs territory.
SEC. 18. Additional Incentives. – A zone registered enterprise

shall also enjoy the following incentives benefits;
(a) Net-Operating Loss Carry Over. A net-operating loss

incurred in any of the first five years of operation inside the zone
439
may be carried over as a deduction from taxable income derived in

such zone during the five years immediately following the year of
such loss. The entire amount of the loss and any portion of such loss
which exceeds the taxable income of such first year shall be deducted
in like manner from the taxable income of the next remaining four
years. The net-operating loss shall be computed in accordance with
the provisions of the National Internal Revenue Code, any provision
of this Decree to the contrary notwithstanding, except that income
not taxable either in whole or in part under this Decree or other
laws shall be included in gross income.
(b) Accelerated Depreciation. Fixed assets may be (1)

depreciated to the extent of not more than twice the normal rate
of depreciation or depreciated at the normal rate of depreciation
if the expected life is ten years or less; or (2) depreciated over any
number of years between five years and expected life if the latter
is more than ten years; and the depreciation thereon allowed as a
deduction from taxable income: Provided, That the taxpayer notifies
the Bureau of Internal Revenue at the beginning of the depreciation
period which depreciation rate allowed by this subsection will be
used by it.
(c) Exemption from Export Tax. The provisions of law to the

contrary notwithstanding, foreign merchandise transhipped through
the zone or any article which has been processed, manufactured or
manipulated in said zone and exported therefrom, shall be exempt
from any export tax, imposts or fee, including the stabilization tax
imposed by Republic Act Numbered Sixty-one hundred twenty-
five.
(d) Foreign Exchange Assistance. The Central Bank of the

Philippines or any of its authorized agent banks shall extend to zone
registered enterprises, priority in the allocation of foreign exchange
and in the availment of the assistance and resources of the Central
Bank in a manner that would encourage and accelerate investment
in the zone.
(e) Financial Assistance. Notwithstanding any provisions

of law to the contrary, zone registered enterprises shall be entitled
440
to at least the same privileges accorded to enterprises approved

by and registered with the Board of Investments under Republic
Act Numbered Four thousand eight hundred sixty, as amended by
Republic Act Numbered Six thousand one hundred forty-two, or
under any existing law, executive order, rule or regulation or which
may hereafter be enacted or promulgated, insofar as obtaining
financial assistance by way of loans, credits, guarantees or other
forms of financial accommodations from government financial
institutions, whether directly or indirectly through the medium of
private banking or non-banking financial institutions: Provided,
That the proceeds derived from or through such financial assistance
shall be used in undertaking projects approved by the Authority:
Provided, further, That in order to facilitate the payment of the
foreign loans, credits and indebtedness contracted by zone registered
enterprises for such projects approved by the Authority, the Central
Bank shall, under such rules and regulations as it may promulgate
upon recommendation of the Authority, allow the deduction of
such portion of the foreign exchange earnings of said enterprises
sufficient to meet the foreign exchange requirements for servicing
foreign indebtedness incurred by them.
(f) Exemption from Local Taxes and Licenses.

Notwithstanding the provisions of law to the contrary, any business
enterprise engaged in the production, processing, packaging,
or manipulation of export products shall, to the extent of their
construction, operation or production inside the zone, be exempt from
the payment of any and all local government imposts, fees, licenses
or taxes, except real estate taxes imposed under Commonwealth Act
Numbered Four Hundred seventy and Republic Act Numbered Fifty-
four hundred forty-seven: Provided, That said business enterprise
shall pay in the municipality where the zone is located real estate
taxes on all its real properties located therein.
SEC. 19. Power to Issue Bonds or Incur Indebtedness. –

Whenever the Board may deem it advisable and necessary for the
Authority to contract loans, credits and other indebtedness, or to
issue bonds, notes debentures, securities and other instruments of
indebtedness for the development and/or operation of the Zone, it
shall by resolution so manifest and declare stating the purpose for
441
which the indebtedness is to be applied and citing the project study

devised for the purpose. In order for such resolution to be valid, it
shall be passed by the affirmative vote of at least four members of
such Board and approved by the President of the Philippines upon
the recommendation of the Secretary of Finance, after consultation
with the National Economic Development Authority and the
Monetary Board of the Central Bank.
The total principal domestic indebtedness of the Authority

payable in the Philippine currency shall not at any one time exceed
three hundred million pesos, while the total principal indebtedness
of the Authority payable in foreign currency shall not at any one time
exceed one hundred million United States dollars or the equivalent
thereof in other foreign currencies qualified to form part of the
international reserves of the Central Bank: Provided, That such
foreign indebtedness may be contracted from foreign governments or
any public or private international banking and financial institution
or fund sources. The bonds and other instruments of indebtedness
which the authority is authorized to issue under this section and
any income derived therefrom shall, except those contracted with
private international banking and financial institution, be exempt
from the payment of all taxes of whatever kind and nature including
withholding taxes imposed by the Republic of the Philippines, its
agencies, instrumentalities or political subdivisions, which fact may
be expressed on the face thereof, and shall be eligible as collateral
in any transaction with the national or any local government, its
agencies and instrumentalities, including government-owned or
controlled corporations and government banking and financial
institutions, in which collateral is required. Any or all loans or
instruments of indebtedness which the Authority is authorized
to contract or issue under this section shall be unconditionally
guaranteed both as to principal and interest by the Government
of the Republic of the Philippines whenever the President of the
Philippines, by himself or through his duly authorized representative,
may deem such guarantee by the Government of the Republic of
the Philippines to be advisable and necessary, in which case, the
President of the Philippines or his duly authorized representative
is hereby authorized to execute and deliver said guarantee of the
Government of the Republic of the Philippines.
442
The Central Bank of the Philippines or any of its authorized

agent banks shall extend to the Authority priority in the allocation
of foreign exchange and in the availment of the assistance and
resources of the Central Bank in a manner that shall facilitate the
contracting or issuance by the Authority of the loans or instruments
of indebtedness which the Authority is authorized to contract or
issue under this section or the repayment thereof. In any case,
where the Authority is required to surrender or sell to the Central
Bank foreign currencies qualified to form part of its international
reserves, the Authority is hereby given the right to repurchase any
or all of said foreign currencies as is necessary to meet all items
of debt service arising out of any and all loans and instruments of
indebtedness payable in foreign currency contracted or issued by
it pursuant to this section at the same rate or rates at which said
foreign currencies were respectively sold to the latter, subject to the
payment of foreign exchange premium or fees as the Central Bank
may deem reasonable.
In the negotiation, contracting and issuance of any loan, credit

and evidence of indebtedness under this section, the President of
the Philippines may, if deemed by him upon recommendation of the
Authority, to be necessary or justified and when made a condition
by the foreign creditor to the issuance of such loans, credits, or
instruments or indebtedness, agree to waive the application of any
law granting preference or imposing restrictions on international
competitive bidding, such as, but not limited to, Act Numbered
Forty-two hundred thirty-nine, Commonwealth Act Numbered One
hundred thirty-eight, Commonwealth Act Numbered Five hundred
forty-one, Republic Act Numbered Nine hundred twelve, Republic
Act Numbered Fifty-one hundred eighty-three: Provided, however,
That in every case where competitive bidding is agreed upon in the
purchase of machineries, equipment, materials and supplies financed
out of proceeds of such loans, credits and instruments of indebtedness,
preference may be granted in favor of such machineries, equipment,
materials and supplies produced, processed or manufactured in the
Philippines at such rate and in such manner as may be agreed upon
from time to time with the entity or institution providing financing
for the project.
443
SEC. 20. Sinking Fund. – The Authority is hereby authorized

to pay out of its appropriations, operating income, proceeds from
its borrowings or issuance of bonds and other instruments of
indebtedness, and from all other sources of funds, the amounts
necessary to meet its maturing obligations on the loans, credits
or indebtedness contracted by the Authority or on the bonds,
notes, or other instruments of indebtedness issued by it. For this
purpose, a sinking fund may be established out of said sources of
funds of the Authority in the Central Bank of the Philippines in
such manner that the total thereof at each due date of the bonds
and other instruments of indebtedness and the loans, credits or
indebtedness contracted by the Authority shall be equal to the
aggregate maturing obligations or amortization as of that date.
Said fund shall be under the custody of the Central Bank of the
Philippines under a special account, which shall invest the same
in such manner as the Monetary Board may approve, charging all
expenses of such investments to said sinking fund and crediting the
same with interest on investments and other income belonging to
it. A standing appropriation is hereby made out of any general fund
in the National Treasury not otherwise appropriated, of such sum
as may be necessary to meet all obligations of the Government of
the Republic of the Philippines under all guarantees which may be
executed by it pursuant to this Decree, in case such sinking fund
shall be insufficient to fully pay the indebtedness of the Authority
guaranteed by the Government of the Republic of the Philippines or
the Authority to fully pay the same by some other means.
SEC. 21. Non-profit Character of the Authority; Exemption

from Taxes. – The Authority shall be non-profit and shall devote
and use all its returns from its capital investment, as well as excess
revenues from its operations, for the development, improvement and
maintenance and other related expenditures of the Authority to pay
its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section 1 of this Decree.
In consonance therewith, the Authority is hereby declared exempt:
(a) From the payment of all taxes, duties, fees, imports,

charges, costs and service fees in any court or administrative
proceedings in which it may be a party, to the Republic of
444
the Philippines, its provinces, cities, municipalities and other

government agencies and instrumentalities;
(b) From all income taxes, franchise taxes, realty taxes

and all other kinds of taxes and licenses to be paid to the National
Government, its provinces, cities, municipalities and other
government agencies and instrumentalities; and
(c) From all tariff and customs duties, and advance sales
tax, on import of capital goods required for its operations.
The foregoing exemptions may however be entirely or partially

lifted by the President of the Philippines upon recommendation
of the Secretary of Finance, not earlier than five years from the
approval of this Decree, if the President shall find the Authority
to be self-sustaining and financially capable by then to pay such
taxes, customs duties, fees and other charges, after providing for
debt service requirements of the Authority and its projected capital
and operating expenditures.
SEC. 22. Road Networks in the Zone. – The road network

within the export processing zone are hereby declared to be national
roads and shall be eligible for allocation of monies coming from
the highway special fund to be used in the construction, repair or
maintenance of such roads therein, the provisions of law, executive
orders, rules and regulations to the contrary notwithstanding.
SEC. 23. Eminent Domain. – For the acquisition of rights of

way, or of any property for the establishment of export processing
zones, or of low-cost housing projects for the employees working
in such zones, or for the protection of watershed areas, or for the
construction of dams, reservoirs, wharves, piers, docks, quays,
warehouses and other terminal facilities, structures and approaches
thereto, the Authority shall have the right and power to acquire the
same by purchase, by negotiation, or by condemnation proceedings.
Should the authority elect to exercise the right of eminent domain,
condemnation proceedings shall be maintained by and in the name
of the Authority and if may proceed in the manner provided for by
law.
445
SEC. 24. Title to Real Property. – The public lands fixed and
delimited as the site of the foreign trade zone under Proclamation
No. 629, series of 1969, Proclamation Nos. 899 and 939, both series
of 1971, of the President of the Philippines shall be surveyed by the
Bureau of Lands and conveyed thereafter in absolute ownership to
the Authority by the President of the Philippines for the nominal
sum of one peso for each parcel of land being conveyed under this
section. Upon receipt of said deed of conveyance the proper Register
of Deeds shall register the same and issue the corresponding original
certificate of title to the Authority.
Likewise, the public land fixed and delimited as the site of a

low cost housing project for workers in the Zone under Proclamation
No. 740, series of 1970, as amended by Proclamation No. 900, series
of 1971, of the President of the Philippines, shall be surveyed by
the Bureau of Lands and conveyed in absolute ownership by the
President of the Philippines to the Authority, the Government
Service Insurance System and/or Social Security System and in the
manner hereinafter provided. Upon receipt of the deed of conveyance,
the proper Register of Deeds shall forthwith register the same and
issue the corresponding original certificate of title thereof.
The public land mentioned herein shall be disposed of as follows:

sixty hectares to the Authority upon payment to the Government the
nominal sum of one peso, and the balance to the Government Service
Insurance System and/or Social Security System, in consideration for
the development of a portion thereof by the GSIS and/or SSS as may
be necessary to accommodate the construction of standard housing
unit, and/or condominium houses, which the GSIS and/or SSS shall
sell and convey, together with the title or interest over the land as
it may appear upon conveyance thereof to the bona fide residents
of Barrio Nassco and Barrio Camaya, both in the Municipality of
Mariveles, Bataan, as certified by the Authority: Provided, That the
price at which said housing units may be sold to the aforementioned
bona fide residents of Barrio Nassco and Barrio Camaya shall not
include the site development cost thereof: Provided, further, That
the GSIS and/or SSS shall undertake the complete development of
the residual area, including the area alloted to the Authority, into
modern communities, always taking into account the policy of low-cost
446
housing as herein enunciated: Provided, furthermore, That the land

and/or housing units constructed therein shall be sold to the regular
workers in the Zone who shall have worked therein continuously
for a period of at least five years, as certified by the Authority:
Provided, moreover, That where there are no persons qualified to
own said land and/or housing units, the GSIS and/or SSS may hold
on the said properties for as long as they are not sold or disposed
of, notwithstanding the provisions of law to the contrary: Provided,
finally, That the Authority shall, in coordination with the GSIS and/
or SSS, administer, manage and operate the housing project, and
shall issue such rules and regulations as may be necessary for the
proper management and operation thereof, including the utilization
and disposition of the land and/or housing units.
SEC. 25. Relocation of Residents of Barrio Nassco in the

Municipality of Mariveles. – The residents of Barrio Nassco and
Barrio Camaya in the Municipality of Mariveles, which is within
the export processing zone, shall be relocated in the low-cost housing
area mentioned in Section twenty-four hereof: Provided, That only
those residential houses and buildings located within the Barrio
Nassco, which are constructed as of April 15, 1972, shall be entitled
to compensation based on their fair market value at such time, less
recoverable value, if any.
SEC. 26. Supplies and Services other than Personal. – All

purchases of supplies or contracts for services, except for personnel
services, entered into by the Authority, shall be done through
competitive public bidding: Provided, That bidding shall not be
required when (1) an emergency, as certified by the Chairman,
requires immediate delivery of the supplies or performance of the
services, and (2) the aggregate amount involved in any one purchase
of supplies or procurement of services does not exceed ten thousand
pesos, in which case, such purchase or procurement may be made in
the usual course of business: Provided, further, That the Authority’s
emergency purchase of supplies and services shall not exceed the
amount of fifty thousand pesos for any one month: Provided, finally,
That in comparing bids and in making awards, the Authority shall
consider such factors as the cost and relative quality and adaptability
of supplies or services: the bidder’s financial responsibility, skill,
447
experience, integrity, and ability to furnish repairs and maintenance

services; the time of delivery or performance offered; and the bidder’s
compliance with the specifications desired.
SEC. 27. Auditing. – The Auditor General shall be ex officio

in charge of the auditing office of the Authority. He shall appoint
a representative who shall be the auditor thereof. The Auditor
General shall, upon recommendation of the Authority, appoint or
remove personnel of said auditing office in accordance with law.
The operating expenses of this office and the salaries and travelling
expenses of the officials and employees thereof shall be fixed by the
Board and paid by the Authority. Such representative shall render
a semestral report on the financial condition and operations of the
Authority to the Auditor General and the Board. The Auditor General
shall submit to the President and the Congress an annual report
covering the financial condition and operations of the Authority.
These auditing report shall contain a statement of the

resources and liabilities including earnings and expenses, reserves
and profits, as well as losses, bad debts and such other facts which,
under the auditing rules and regulations, are considered necessary
to accurately describe the financial condition and operations of
the Authority: Provided, That before such reports are made, the
Authority shall be given reasonable opportunity to examine the
reports and make exceptions to any criticisms of the Auditor of the
Authority or the Auditor General as the case may be, to point out,
explain or answer any inaccuracies therein, if any, and to file a
statement which shall be appended by the Auditor of the Authority
and the Auditor General in their respective reports.
SEC. 28. Penalties. – Any person violating any provision

of this Decree or any of the rules and regulations promulgated
under Sections four and eleven hereof, shall suffer the penalty of
imprisonment of not less than five years nor more than ten years
and a fine of not less than five thousand pesos nor more than
ten thousand pesos and in addition, such violations shall ipso
facto constitute a valid ground for the revocation of all privileges,
permits and authorization granted to such person under this
Decree: Provided, however, That if the offender is a corporation,
448
firm, partnership or association, the penalty shall be imposed upon

the guilty officer or officers, as the case may be, of the corporation,
firm or association, and if such guilty officer or officers be an alien
or aliens, in addition to the penalties herein prescribed, he or they
shall be deported without further proceedings on the part of the
Deportation Board.
Any officer or employee of the Government who, by himself or

through his agent, acting under his discretion and authority, shall
connive, abet, or tolerate the violation of the provisions of this Decree
or any rules and regulations promulgated under Sections four and
eleven hereof or who fails to report within thirty days any violation
thereof to the Authority shall suffer the penalties prescribed in the
preceding paragraph including perpetual disqualification to hold
public office.
The foregoing penalties shall be without prejudice to the

assessment and collection of such taxes and duties as may be due on
the foreign-made articles or merchandise which have been landed in
the Zone and have not been reshipped to a foreign port at the time of
the revocation of the authority of the offender to operate within the
Zone. In the event such taxes and duties shall not, for any reason, be
paid upon demand by the collector of the district wherein the Zone
is located, the foreign-made articles or merchandise of the offender
remaining within such Zone at the time of revocation of its authority
to operate therein, including its physical plants, machinery and
equipment therein, shall, after due notice and hearing, be forfeited in
favor of the Government and may be disposed of by the Government
in the manner and for such purposes as it may so desire.
SEC. 29. Transitory Provisions. – The properties, monies,

assets, rights, chooses in action, obligations, liabilities, records and
contracts of the Foreign Trade Zone Authority under Republic Act
Numbered fifty-four hundred ninety shall continue to be vested
in and assumed by the Export Processing Zone Authority, as a
government corporation, pursuant to this Decree.
Likewise, all personnel of the Foreign Trade Zone Authority

who are occupying permanent positions shall be absorbed by Export
449
Processing Zone Authority and shall remain in their respective

positions without demotion in rank or reduction in salary: Provided,
That employee who shall be separated from the service shall be
given by the Authority at least one month gratuity for every year
of service but in no case more than twenty-four months salary, in
addition to all benefits to which they may be entitled under existing
laws and regulations.
SEC. 30. Repealing Clause. – The provisions of Republic Act

Numbered Fifty-four hundred ninety and all other acts, executive
orders, proclamations, administrative orders, rules and regulations
or parts thereof which are inconsistent with provisions of this Decree
are either repealed or modified accordingly.
SEC. 31. Separability Clause. – The provisions of this Decree

are hereby declared to be separable, and in the event any one or
more of such provisions are held unconstitutional, the validity of
other provisions shall not be affected.
SEC. 32. Effectivity. – This Decree shall take effect upon its
approval.
DONE in the City of Manila, this 20th day of November, in

the year of Our Lord, nineteen hundred and seventy-two.
(Sgd.) FERDINAND E. MARCOS

President of the Philippines
BY THE PRESIDENT:
(Sgd.) ALEJANDRO MELCHOR

Executive Secretary
450
GOVERNING THE ESTABLISHMENT, OPERATION AND

REGULATION OF INVESTMENT HOUSES
WHEREAS, there were pending before Congress, prior to

the promulgation of Proclamation No. 1081, dated September 21,
1972, urgent measures proposing the regulation of the so-called
investment banks;
WHEREAS, an extensive survey and study of the Philippine

financial system had been undertaken in order to determine its
adequacy in Philippine economic development, and an integrated
set of recommendations were submitted;
WHEREAS, the recommendations, as endorsed with

modifications by the monetary authorities and made the basis of
this Decree, advocated the enactment of the statutory framework
within which the underwriting of securities may be governed and,
to the extent that these entities perform quasi-banking functions, to
harmonize their operations with national monetary goals.

Constitution as Commander-in-Chief of all the Armed Forces of
the Philippines, and pursuant to Proclamation No. 1081, dated
September 21, 1972, and General Order No. 1, dated September
22, 1972, as amended, and in order to effect the desired changes
and reforms in the social, economic, and political structure of our
society, do hereby order and decree and make part of the law of the
land the following:
SECTION 1. Title. – This Decree shall be known as “The

Investment Houses Law”.
SEC. 2. Scope. – Any enterprise which engages in the

underwriting of securities of other corporations shall be considered
451
an “Investment House” and shall be subject to the provisions of this

Decree and of other pertinent laws.
Nothing in this Decree shall be understood to preclude other

enterprises from engaging in the mere buying and selling of short-
term securities of other persons or enterprises.
SEC. 3. Definitions. – For the purpose of this Decree, unless

the context otherwise indicates, the following definition of terms are
hereby adopted:
(a) “Underwriting” is the act or process of guaranteeing the

distribution and sale of securities of any kind issued by another
corporation.
(b) “Securities” are written evidences of ownership,

interest, or participation, in an enterprise, or written evidences of
indebtedness of a person or enterprise. It includes, but is not limited
to the instruments enumerated in Section 2 of the Securities Act
(Commonwealth Act No. 83, as amended).
SEC. 4. Organization and registration. – Investment Houses

shall be organized in the form of stock corporations.
The Securities and Exchange Commission shall not register

the articles of incorporation of any Investment House, or any
amendment thereto, unless it is satisfied from the evidence
submitted to it:
(a) That all the requirements of this Decree and of existing

laws or regulations to engage in the business have been complied
with;
(b) That the proposed enterprise will not be in conflict with

public interest and economic growth;
(c) That the amount of capital, the proposed organization,

direction and administration, as well as the integrity, experience
452
and expertise of the organizers and the proposed managerial staff,

provide reasonable assurance that the enterprise will be conducted
with financial prudence.
In determining compliance with the provisions of subsections

(b) and (c) above, the Securities and Exchange Commission shall
consult the Monetary Board of the Central Bank of the Philippines.
All applications for registration of the articles of incorporation

of Investment Houses shall be accompanied by:
1. At least three copies of the proposed articles of

incorporation;
2. A statement under oath of the educational background and

experience of the organizers, directors, and the proposed managerial
staff, as well as in information on any position concurrently held by
them in other financial or banking institutions, if any;
3. A projected statement of assets and liabilities of the

proposed Investment House;
4. A tentative program of operation for one year, including

its investment direction and volume; and
5. Such other information as the Securities and Exchange

Commission may require in support of the application and to enable
the Commission to determine the justifiability of establishing the
proposed enterprise.
Any enterprise already in operation and exercising the powers

of an Investment House prior to the effectivity of this Decree shall,
within six months therefrom, file an information sheet with the
Securities and Exchange Commission in such form and containing
such data as the Securities and Exchange Commission may, at
its discretion, require, to enable the Commission to determine,
in consultation with the Monetary Board, whether the enterprise
meets the requirements of this Decree.
453
SEC. 5. Citizenship requirements. – The majority of the voting

stock of any Investment House shall be owned by citizens of the
Philippines. In determining the percentage of foreign-owned voting
stocks in Investment Houses, the basis for the computation shall be
the citizenship of each stockholder, and, with respect to corporate
owners of voting stock, the citizenship of the individual owners of
voting stock in the corporation holding shares in that Investment
House.
The majority of the members of the Board shall be citizens of

the Philippines.
SEC. 6. Prohibitions. – Except as may be authorized by the

Monetary Board, no director or officer of an Investment House shall
concurrently be a director or officer of a bank, as defined in Section
2 of the Republic Act No. 337, as amended: Provided, however, That
in no event can a person be authorized to be concurrently an officer
of an Investment House and of a bank.
No Investment House shall engage in banking operations as

defined in Section 2 of Republic Act No. 337, as amended.
SEC. 7. Powers. – In addition to the powers granted to

corporations in general, an Investment House is authorized to do
the following:
1. Arrange to distribute on a guaranteed basis securities of

other corporations and of the Government or its instrumentalities;
2. Participate in a syndicate undertaking to purchase

and sell, distribute or arrange to distribute on a guaranteed basis
securities of other corporations and of the Government or its
instrumentalities;
3. Arrange to distribute or participate in a syndicate

undertaking to purchase and sell on a best-efforts basis securities of
other corporations and of the Government or its instrumentalities;
454
4. Participate as soliciting dealer or selling group member

in tender offers, block sales, or exchange offering or securities; deal
in options, rights or warrants relating to securities and such other
powers which a dealer may exercise under the Securities Act (Act
No. 83, as amended);
5. Promote, sponsor, or otherwise assist and implement

ventures, projects and programs that contribute to the economy’s
development;
6. Act as financial consultant, investment adviser, or

broker;
7. Act as porfolio manager, and/or financial agent, but not

as trustee of a trust fund or trust property as provided for in Chapter
VII of Republic Act No. 337, as amended;
8. Encourage companies to go public, and initiate and/or

promote, whenever warranted, the formation, merger, consolidation,
reorganization, or recapitalization of productive enterprises, by
providing assistance or participation in the form of debt or equity
financing or through the extension of financial or technical advice or
service;
9. Undertake or contract for researches, studies and surveys

on such matters as business and economic conditions of various
countries, the structure of financial markets, the institutional
arrangements for mobilizing investments;
10. Acquire, own, hold, lease or obtain an interest in real

and/or personal property as may be necessary or appropriate to
carry on its objectives and purposes;
11. Design pension, profit-sharing and other employee

benefits plans; and
12. Such other activities or business ventures as are directly

or indirectly related to the dealing in securities and other commercial
455
papers, unless otherwise governed or prohibited by special laws, in

which case the special law shall apply.
Nothing in this section shall preclude other enterprises not

covered by this Decree from engaging in the activities listed under
subsections (3) to (11) of this section, except as may otherwise be
governed by special laws.
SEC. 8. Capital. – The minimum initial paid-in-capital of any

Investment House shall be twenty million (P20,000,000) pesos.
SEC. 9. Credit policies. – Investment Houses shall coordinate

their credit policies with the general credit policies of the Monetary
Board of the Central Bank.
SEC. 10. Reports. – Investment Houses shall submit to the

Securities and Exchange Commission and to the Central Bank a
semi-annual report of operations and financial condition, signed
under oath by its chief accountant and verified by its president.
The Securities and Exchange Commission may, at its

discretion, require Investment Houses to include their underwriting
commitments as contingent accounts in their financial statements.
SEC. 11. Regulations. – Within six months after the approval

of this Decree, the Securities and Exchange Commission, in
coordination with the Central Bank, shall promulgate the necessary
rules and regulations implementing the provisions of this Decree.
SEC. 12. Central Bank regulatory powers. – Investment Houses

shall be subject to such regulations of the Central Bank or non-bank
financial intermediaries as may be promulgated pursuant to Section
2-B of Republic Act No. 337, as amended. The regulations which
may include, but need not be limited to (a) minimum size of fund
acceptance or receipt, (b) methods of marketing and distribution,
(c) terms of placement and maturities, and (d) uses of funds may be
modified by the Monetary Board insofar as they apply to Investment
Houses.
456
The Monetary Board may, at its discretion, determine whether

Investment Houses may be permitted to perform quasi- banking
functions as defined in Section 2-D, subsection (b) of Republic Act No.
337, as amended. The Monetary Board is hereby authorized, at its
discretion, to require any enterprise which is engaged or proposes to
engage in quasi-banking functions to incorporate as an Investment
House. If the Monetary Board decides to permit Investment Houses
to engage in quasi-banking functions, the Board may require as a
condition precedent the obtaining of a certificate of authority for the
purpose from the Monetary Board.
Whenever the Monetary Board authorizes an Investment

House to engage in quasi-banking functions, in accordance with
the provisions of this section, the Board may subject Investment
Houses to further regulations, pursuant to Republic Act 337, as
amended, which may include but need not necessarily be limited to
(a) liquidity reserve requirements; (b) capital-to-risk assets ratios;
(c) interest rate ceilings; and (d) such other constraints as the Board
may deem necessary.
In the exercise of its authority in this section, the Monetary

Board may, whenever, it determines that the circumstances so
warrant subject an Investment House to special examination.
Whenever on the basis of the reports submitted by, or upon

examination of the books and records of, an Investment House, the
Central Bank finds that the Investment House is not complying
with the provisions of this section, with the pertinent provisions
of this Decree, of other laws, or of orders, instructions, rules or
regulations issued by the Monetary Board pertaining non-bank
financial intermediaries and quasi-banking activities, said Board
shall forthwith issue a cease-and-desist order upon the Investment
House concerned. Failure on the part of an Investment House to
comply with the cease-and-desist order shall subject said Investment
House to a fine not exceeding two hundred (P200) pesos for every day
the order is violated, to be imposed by the Monetary Board, without
prejudice to the penalties provided in Section 16 of this Decree.
457
SEC. 13. Applicability of Securities Act. – An Investment

House may engage in the business of a dealer or a broker under the
Securities Act without obtaining a separate license for the purpose
as required in Section 14 of the Securities Act (C.A. No. 83, as
amended).
SEC. 14. Applicability of Corporation Law. – The provisions

of the Corporation Law (Act No. 1459, as amended) insofar as they
are not in conflict or inconsistent with the provisions of this Decree
shall apply to Investment Houses.
SEC. 15. Transitory provisions. – Existing enterprises which

are operating as Investment Houses shall, within one year following
the approval of this Decree, comply with the requirements hereof,
except with respect to the filing of an information sheet which
shall be complied with within six months as provided in the last
paragraph of Section 4 of this Decree.
SEC. 16. Penalties for violation. – Upon proof that an

Investment House is violating or not complying with the provisions
of this Decree, of other pertinent laws, of the terms or conditions of its
certificate of registration or charter, or of orders, decisions, rulings
or regulations issued by the Securities and Exchange Commission or
by the Central Bank of the Philippines, the Securities and Exchange
Commission shall impose upon the Investment House and collect
a fine not exceeding two hundred (P200) pesos per day for every
day during which such violation or non-compliance continues, and/
or suspend its certificate of registration. The officer or director of
the Investment House who ordered or authorized the violation or
non-compliance shall be solidarily liable. The fine so imposed shall
be paid to the Government of the Philippines through the Securities
and Exchange Commission.
Without prejudice to the provisions of the preceding paragraph

any person, or any director or officer of an Investment House who
violates or does not comply with the provisions of this Decree, of
other pertinent laws, of the terms or conditions of its certificate of
registration or charter, or of orders, decisions, rulings or regulations
issued by the Securities and Exchange Commission or by the Central
458
Bank of the Philippines, shall be punished by a fine of not more than

twenty thousand (P20,000) pesos, or an imprisonment of not more
than five years or both, at the discretion of the Court.
SEC. 17. Separability Clause. – The provisions of this Decree

are hereby declared separable, and if any clause, sentence, provision
or section hereof, or its application to any person or circumstance
should be declared invalid, such invalidity shall not affect the other
provisions of this Decree which can be given force and effect without
the provisions which have been declared invalid.
SEC. 18. Repeal. – All Acts and existing laws inconsistent

with this Decree are hereby repealed.
SEC. 19. Effectivity. – This Decree shall take effect

immediately.
DONE in the City of Manila, this 15th day of February, in the

year of Our Lord, nineteen hundred and seventy-three.

BY THE PRESIDENT:

Executive Secretary
459
FIXING A MAXIMUM PERIOD FOR THE DURATION OF LEASES

OR PRIVATE LANDS TO ALIENS
WHEREAS, the Constitution bans the acquisition by aliens

and alien-owned entities of public and private lands;
WHEREAS, leases of unreasonably long duration would

amount to a virtual transfer of ownership in violation of the intent
of the Constitutional prohibition;
WHEREAS, there is a compelling need to fix a reasonable

maximum period for the duration of leases of private lands to aliens
and to enforce compliance thereof by punishing violations;

Constitution, do hereby order and degree:
SECTION 1. The maximum period allowable for the duration

of leases of private lands to aliens or alien-owned corporations,
associations, or entities not qualified to acquire private lands in
the Philippines shall be twenty-five years, renewable for another
period of twenty-five years upon mutual agreement of both lessor
and lessee.
SEC. 2. Any contract or agreement made or executed in

violation of this degree shall be null and void ab initio, and both
parties to the agreement shall be punished by a fine of not less than
five hundred nor more than one thousand pesos, or by imprisonment
of from six months to one year, or both in the discretion of the court,
Provided, that the president or managers and directors or trustees
of corporations, associations or partnerships violating this decree
shall be criminally liable in lieu thereof.
SEC. 3. This decree shall take effect immediately.
460
DONE in the City of Manila, this 24th day of May, in the year
of Our Lord, nineteen hundred and seventy-four.

BY THE PRESIDENT:

Executive Secretary
461
AUTHORIZING THE ISSUANCE OF SPECIAL INVESTORS

RESIDENT VISAS TO ALIENS AND FOR OTHER
PURPOSES
WHEREAS, tourism and attraction of foreign investments

into the Philippines are two of the government’s prime target areas
in its move towards the improvement of the Philippine economy;
WHEREAS, there are still a number of economically

depressed areas in the country suitable for international tourism,
which have not been adequately exploited, developed and attended
to whether by the government or by the private sector;
WHEREAS, studies and researches conducted by

governmental agencies reveal that among the major obstacles
in the realization of optimum benefits from the governmental
programs of tourism and foreign investment attraction are the
stringent provisions of immigration laws, rules and procedure;
which serve as deterrent to alien investors wishing to make the
Philippines their second home;
WHEREAS, it is felt that selective relaxation of immigration

laws to accommodate alien investors who are willing to, and do in
fact, invest substantially in preferred depressed areas would go
along way towards infusing additional foreign exchange receipts
to the Philippines, encourage new constructions and real state
development, generate more employment and income opportunities
for the masses, in keeping with the escalating demands of our people
for the basic essentials that make for comfortable existence.

Constitution, do hereby order and decree:
462
SECTION 1. Under the conditions set forth in this Decree,

there may be issued Special Investors Resident visas to aliens who
are able to prove that they possess the following qualifications:
1. He had not been convicted of a crime involving moral

turpitude;
2. He is not afflicted with any loathsome, dangerous or

contagious disease;
3. He has not been institutionalized for any mental

disability;
4. He is willing and able to invest a substantial amount in an

economically depressed priority area, as the same may be
declared by the Office of the President of the Philippines;
provided, however, that for purposes of compliance with
this particular condition, the alien applicant should prove
that he has remitted in acceptable foreign currency, an
amount of not less than US$200,000 for the purpose of
direct investment into the economically depressed area
to which he is assigned.
SEC. 2. The same visa shall be issued to the spouse and

unmarried children of the applicant, if accompanying him or if
following to join him after his admission into the Philippines as
special investor resident;
SEC. 3. As holder of the Special Investors Resident Visa, an

alien shall be entitled to reside in the Philippines while investment
subsists. Should said alien, however, withdraw the said investment
from the Philippines, or transfer his investment to any other area
within the Philippines without prior approval from the Office of the
President, then the Special Investors Resident Visa issued to him
may be revoked by the Philippine Government;
463
SEC. 4. Any provision of existing general or special laws

inconsistent with the provisions of this Decree shall be considered
modified, amended, or repealed accordingly.
of Our Lord, nineteen hundred and seventy-nine.

BY THE PRESIDENT:
(Sgd.) JACOBO C. CLAVE

Presidential Executive Assistance
464

DATED NOVEMBER 20, 1972, CREATING THE EXPORT
PROCESSING ZONE AUTHORITY
WHEREAS, for the purpose of accelerating industrial

dispersal, employment generation and export promotion, LOI 1033
has mandated the development of twelve (12) more export processing
zones in strategic locations in the Philippines;
WHEREAS, in order to make export processing zones more

competitive and attractive to potential investors, and to increase the
capability and effectiveness of the Export Processing Zone Authority
(EPZA) in the attainment of its objectives, it has become necessary
to update and amend the incentive schemes for enterprises within
the zone;

Constitution, do hereby order and decree the further amendment of
Presidential Decree No. 66, dated November 20, 1972, as amended,
as follows:
SEC. 1. Gross receipts of registered zone enterprises shall be

exempt from the contractor’s tax under Section 205 of the Tax Code
of 1977, as amended.
SEC. 2. A net operating loss incurred in any of the first ten

years of operation as a registered zone enterprise may be carried over
as a deduction from taxable income for the six years immediately
following the year of such loss. The entire amount of the loss shall
be carried over to the first of six taxable years following the loss,
and any portion of such loss which exceeds the taxable income of
such first year shall be deducted in like manner from the taxable
income of the next remaining five years. The next operating loss
shall be computed in accordance with the provisions of the National
465
Internal Revenue Code, any provision of this Decree to the contrary

notwithstanding, except that income not taxable either in whole or
in part under this Decree or other laws shall be included in gross
income.
SEC. 3. The bond obligations of EPZA, whether principal

or interest, are hereby converted as capital contribution of the
National Government to EPZA. The capitalization of EPZA shall be
credited for the corresponding amount as each principal or interest
matures.
SEC. 4. Production equipment or machineries, not attached

to real estate, used directly or indirectly in production, assembly
or manufacture of the registered export products of registered zone
enterprises shall be exempt from real property tax.
SEC. 5. Utility companies, including the National Power

Corporation, Philippine Long Distance Telephone Company, water
supply and telex companies shall extend priority service to export
processing zones, and shall extend to EPZA the terms and the rates
prescribed for public utilities of the most preferred terms and rates
possible, whichever is lower. EPZA shall have the option within
any zone or area administered by it, to install, manage and operate
facilities, utilities and systems necessary for its operation.
SEC. 6. The administration and enforcement of the provisions

of Presidential Decree No. 1096, otherwise known as the National
Building Code of the Philippines in all zones and areas owned or
administered by the Authority shall be vested in the Administrator
or his duly authorized representative. He shall appoint such
EPZA qualified personnel as may be necessary to act as Building
Officials who shall be charged with the duty of issuing Building
Permits in the different zones. All fees and dues collected by the
Building Official under the National Building Code shall accrue to
the Authority.
SEC. 7. Foreign nationals employed under the provisions of

Presidential Decree No. 66, their respective spouses, and unmarried
466
children under twenty-one years of age shall be issued a multiple

entry visa, valid for a period of one year, to enter and leave the
Philippines without further documentary requirements other than
valid passports or other travel documents in the nature of passports.
The validity of the multiple entry special visa shall be extendible
yearly. Foreign Nationals who have been issued multiple entry
special visas under this provision, as well as their respective spouses
and dependents, shall be exempt from obtaining alien certificates of
registration and emigration clearances certificates and all types of
clearances required by any government department or agency. For
this purpose, the Commission on Immigration and Deportation and
the EPZA shall jointly issue the necessary implementing rules and
regulations.
SEC. 8. Any provision of law to the contrary notwithstanding,

the EPZA, in consultation with the Bureau of Customs, shall adopt
procedures which would facilitate the rapid movement of raw
materials, components, goods, commodities and finished products
to and from export processing zones, taking into account the need
to attain the objectives of customs and internal revenue regulations
and the need to facilitate export activities within the zone.
SEC. 9. The EPZA, in the exercise of its sole police authority

over export processing zones and areas owned or administered
by the Authority, shall have the power to receive and investigate
complaints relative to violations of penal laws committed inside the
zones and areas owned or administered by the Authority, and when
the evidence warrants, to file and be deputized herein to prosecute
the corresponding criminal cases before the appropriate court of
body.
SEC. 10. The Authority, through its Board of Commissioners

may segregate not more than twenty per cent (20%) of the land area
of each zone to be sold, leased or otherwise disposed or primarily for
housing and community purposes. The disposition and development
of the area segregated shall be subject to such terms and conditions
as may be prescribed by the Authority.
467
SEC. 11. With respect to, and for expeditious implementation

of EPZA infrastructure projects, the power to approve detailed
engineering documents, awards and contracts executed as a result
of competitive public biddings, negotiated contracts, assignment
of contracts, adjustment of contract prices and change orders,
extend work orders now vested in the Minister of Public Works,
Transportation and Communication, the Minister of Public
Highways or the Minister of Energy by Presidential Decree No.
1594 and its implementing rules and regulations, are hereby vested
in the Minister of Industry.
SEC. 12. The capital of the Authority shall consist of (1) its
existing assets and such other properties as may be contributed
to the Authority by the Government to form part of capital, (2) all
capitalized surplus, and (3) cash contribution by the Government in
the amount of two billion pesos, which is hereby appropriated out
of any fund in the National Treasury bills or notes, or derived from
any other sources of income, by or the National Government, which
amount shall be programmed and released by the Budget Commission
with approval of the President in accordance with the schedule of
development and expenditure to be prepared and submitted by the
Authority: Provided, however, That any budgetary outlay allocated
and released in favor of the Export Processing Zone Authority and/
or Foreign Trade Zone Authority shall be correspondingly credited
to the authorized capitalization herein provided.
SEC. 13. The positions of Administrator, Senior Deputy

Administrator, and Deputy Administrator are hereby declared
to be policy-determining and primarily confidential. The
Administrator shall be ex-officio Vice Chairman of the EPZA Board
of Commissioners.
SEC. 14. All laws, executive orders, rules and regulations or

part thereof inconsistent with this Decree are hereby repealed and/
or modified accordingly.
SEC. 15. This Decree shall take effect immediately.
468
DONE in the City of Manila, this 15th day of January, in the

year of Our Lord, nineteen hundred and eighty-one.
(Sgd.) FERDINAND E MARCOS

President Republic of the Philippines
BY THE PRESIDENT:
(Sgd.) JUAN C. TUVERA

Presidential Executive Assistant
469
A DECREE TO REVISE, AMEND AND CODIFY THE INVESTMENT,

AGRICULTURAL AND EXPORT INCENTIVES ACTS TO BE
KNOWN AS THE OMNIBUS INVESTMENTS CODE
WHEREAS, Republic Act Numbered 5186, as amended,

otherwise known as Investment Incentives Act, Republic Act
Numbered 6135, as amended, otherwise known as Export Incentives
Act, and Presidential Decree Numbered 1159, otherwise known as
Agricultural Investments Incentives Decree, grant substantially
the same incentives to investors and enterprises registered with the
Board of Investments;
WHEREAS, Republic Act Numbered 5455, otherwise

known as Foreign Business Regulation Act, regulates the entry of
foreign investments into the country and as such complements the
aforementioned investment incentives laws;
WHEREAS, there are in the aforementioned laws provisions

which require clarification, revision, or simplification as a result of
various presidential decrees, letters of instructions and executive
orders on the same subject;
WHEREAS, it is imperative to adopt a consolidated

investments code to integrate the said amendments and to clarify
and harmonize their provisions not only for the proper guidance of
domestic and foreign investors, but also for the efficient and effective
implementation of the said laws;

of the Republic of the Philippines, by virtue of the powers in me
vested by the Constitution, do hereby order and decree as follows:
SECTION 1. Codification of investment, agricultural and

export incentives laws. – All acts, presidential decrees, letters
of instructions and executive orders which govern investments
470
and the grant of incentives in connection therewith which are

administered by the Board of Investments and all laws regulating
the making of investments and the doing of business by foreigners
in the Philippines are hereby revised, consolidated and codified into
a single code to be known as the Omnibus Investments Code which
shall form an integral part of this Decree.
SEC. 2. Effectivity. – The provisions of the Omnibus

Investments Code shall take effect immediately.

year of Our Lord, nineteen hundred and eighty-one.

BY THE PRESIDENT:

Presidential Executive Assistance
471
AN ACT ALLOWING AN INCREASE IN FOREIGN EQUITY

PARTICIPATION IN PREFERRED AREAS OF INVESTMENT
WHEREAS, it is the policy of the State to encourage and

promote foreign investments in the various economic activities of
the country provided their participation is consistent with national
goals and policies;
WHEREAS, the accelerated entry of foreign investments at

this time of economic difficulty will contribute to the achievement
of economic goals;
WHEREAS, there is an increased interest on the part

of foreign investors to enter into joint ventures with Philippine
partners particularly in preferred areas of investments as defined
in the Omnibus Investments Code, as amended;
WHEREAS, it is in the best interest of the State to relax

the nationality requirements provided in the said Code for limited
period in order to facilitate the entry of foreign investments.

Constitution, do hereby order and decree:
SECTION 1. Notwithstanding the provisions of Article 34(1)

of Presidential Decree No. 1789, as amended, otherwise known as
the Omnibus Investments Code, the nationality requirement of
at least 60% Philippine nationals for non-pioneer industries to be
entitled to registration under Book One of the Omnibus Investments
Code shall be suspended for a period of one (1) year; Provided,
that foreign investors fulfil the other requirements provided in
the aforementioned article, particularly Article 34(1) (b), and such
other conditions provided in Book One of the Omnibus Investments
Code; and Provided, further, that foreign investors will not engage
472
in activities reserved by the Constitution and existing laws to

Philippine nationals and corporations and other juridical entities
owned and controlled by Philippine nationals.
SEC. 2. Existing non-pioneer enterprises registered under

Book One of the Omnibus Investments Code may increase their
foreign equity in accordance with and subject to the conditions of
the preceding Section.
SEC. 3. This Decree shall take effect immediately and shall

remain in force for a period of one (1) year from effectivity hereof,
provided that upon expiration of the one-year period, the suspended
provisions of the Omnibus Investments Code shall resume to
be in force and effect without in any way affecting the status of
investments approved during the suspension of the provision.
DONE in the City of Manila, this 4th day of December, in the

year of Our Lord, nineteen hundred and eighty-three.

BY THE PRESIDENT:
Sgd.) JUAN C. TUVERA

473

ENTITLED “AUTHORIZING THE ISSUANCE OF SPECIAL
INVESTORS RESIDENT VISAS TO ALIENS AND FOR
OTHER PURPOSES,” AS AMENDED
WHEREAS, there is a need to further liberalize the

investment requirements for aliens desiring to obtain special
Investors Resident Visas in the Philippines.

Constitution, do hereby order and decree the following:
SECTION 1. Section 1, Paragraph 4 of P.D. No. 1623, as

“4. He is willing and able to invest the amount of at least

US$75,000 in the Philippines; provided, however, that for purposes
of compliance with this particular condition, the alien-applicant
should prove that he has remitted such amount in acceptable foreign
currency to the Philippines.”
SEC. 2. This Decree shall take effect immediately.

year of Our Lord, nineteen hundred and eighty-three.

BY THE PRESIDENT:

474
EXECUTIVE ISSUANCES – EXECUTIVE ORDERS
EXECUTIVE ORDERS
475
476
EXECUTIVE ORDER NO. 11
APPROVING THE THIRD REGULAR FOREIGN INVESTMENTS

NEGATIVE LIST
WHEREAS, Republic Act 8179, which amends RA No.

7042 also known as the Foreign Investments Act of 1991, provides
the formulation of a Regular Foreign Investments Negative List
covering the investment areas/activities which may be opened to
foreign investors and/or reserved to Filipino nationals;
WHEREAS, the Regular Foreign Investment Negative

List, consisting of List A and B, has the effectivity of two years
pursuant to the Implementing Rules and Regulations of the Foreign
Investments Act of 1991;
WHEREAS, there is a need to formulate the third Foreign

Investment Negative List in view of the expiration of the effectivity
of the existing List on 23 October 1998, as well as to incorporate
thereto those provisions of existing laws on foreign investments;
NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA,

President of the Republic of the Philippines, by virtue of the powers
vested in me by law, do hereby order:
SECTION 1. Only the investment areas and/or activities

listed in Annex A herewith shall be reserved to Philippine nationals,
and hereafter shall be referred to as the Third Regular Foreign
Investments Negative List. The extent of foreign equity participation
in these areas shall be limited to the percentages indicated in the
List.
SEC. 2. Any amendment to List A may be made at any time

to reflect changes instituted in specific laws while amendments to
List B shall not be made more often than once every two years,
pursuant to Section 8 of the Foreign Investments Act of 1991, as
amended, and of its Implementing Rules and Regulations.
477
SEC. 3. All orders, issuances, regulations or parts thereof

which are inconsistent with this Order are hereby revoked or
SEC. 4. This Order shall take effect immediately on 24

October 1998.
DONE, in the City of Manila, this 11th day of August in the

Year of our Lord, Nineteen Hundred and Ninety Eight.
(Sgd.) JOSEPH E. ESTRADA

BY THE PRESIDENT:
(Sgd.) RONALDO B. ZAMORA

Executive Secretary
478
“ANNEX A”
THIRD REGULAR FOREIGN INVESTMENT NEGATIVE LIST
LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE

OF THE CONSTITUTION AND SPECIFIC LAWS
No Foreign Equity
1. Mass Media except recording (Article XVI, Section 11 of the

Constitution; Presidential Memorandum dated 04 May 1994)
2. Services involving the practice of licensed professions save in

cases prescribed by law
a. Engineering
i. Aeronautical Engineering
ii. Agricultural Engineering
iii. Chemical Engineering
iv. Civil Engineering
v. Electrical Engineering
vi. Electronics and Communication Engineering
vii. Geodetic Engineering
viii Mechanical Engineering
ix. Metallurgical Engineering
x. Mining Engineering
xi. Naval Architecture and Marine Engineering
479
xii. Sanitary Engineering
b. Medicine and Allied Professions
i. Medicine
ii. Medical Technology
iii. Dentistry
iv. Midwifery
v. Nursing
vi. Nutrition and Dietetics
vii. Optometry
viii. Pharmacy
ix. Physical and Occupational Therapy
x. Radiologic and X-ray Technology
xi. Veterinary Medicine
c. Accountancy
d. Architecture
e. Criminology
f. Chemistry
g. Customs Brokerage
h. Environmental Planning
480
i. Forestry
j. Geology
k. Interior Design
l. Landscape Architecture
m. Law
n. Librarianship
o. Marine Deck Officers
p. Marine Engine Officers
q. Master Plumbing
r. Sugar Technology
s. Social Work
t. Teaching
(Article XIV, Section 14 of the Constitution; Section 1 of RA No.

5181)
3. Retail Trade (Section of RA No. 1180)
4. Cooperatives (Chapter III, Article 26 of RA No. 6938)
5. Private Security Agencies (Section 4 of RA No. 5487)
6. Small-scale Mining (Section 3 of RA No. 7076)
7. Utilization of Marine Resources in archipelagic waters, territorial

sea, and exclusive economic zone (Article XII, Section 2 of the
481
Constitution)
8. Ownership, operation and management of cockpits (Section 5 of

Presidential Decree No. 449)
9. Manufacture, repair, stockpiling and/or distribution of nuclear

weapons (Article II, Section 8 of the Constitution)
10. Manufacture, repair, stockpiling and/or distribution of biological,

chemical and radiological weapons (Various treaties to which
the Philippines is a signatory and conventions supported by the
Philippines )
11. Manufacture of firecrackers and other pyrotechnic devices

(Section 5 of RA No. 7183).
Up to Twenty-Five Percent (25%) Foreign Equity
12. Private recruitment, whether for local or overseas employment

(Article 27 of Presidential Decree No. 442)
13. Contracts for the construction and repair of locally-funded public

works except:
a. infrastructure/development projects covered in RA No. 7718;

and
b. projects which are foreign-funded or assisted and required to

undergo international competitive bidding (Commonwealth
Act No 541; Presidential Decree No. 1594; Letter of
Instruction No. 630; Section 2a of RA No. 7718)
Up to Thirty Percent (30%) Foreign Equity
14. Advertising (Article XVI, Section 11 of the Constitution)
Up to Forty Percent (40%) Foreign Equity
482
15. Exploration, development and utilization of natural resources

(Article XII, Section 2 of the Constitution)
16. Ownership of private lands (Article XII, Section 7 of the

Constitution; Chapter 5, Section 22 of Commonwealth Act No.
141)
17. Operation and management of public utilities (Article XII,

Section 11 of the Constitution; Section 16 of Commonwealth Act
No. 146)
18. Ownership/establishment and administration of educational

institutions (Article XIV, Section 2 of the Constitution)
19. Engaging in the rice and corn industry (Presidential Decree No.
194)
20. Contracts for the supply of materials, goods and commodities to

government-owned or controlled corporation, company, agency
or municipal corporation (Section 1 of RA No. 5183)
21. Project proponent and facility operator of a BOT project

requiring a public utilities franchise (Article XII, Section 11 of
the Constitution; Section 2a of RA No. 7718)
22. Operation of deep-sea commercial fishing vessels (Section 27 of

RA No. 8550)
23. Adjustment Companies (Section 323 of Presidential Decree No.

612 as amended by Presidential Decree No. 1814)
24. Ownership of condominiums (Section 5 of RA No. 4726)
Up to Sixty Percent (60%) Foreign Equity
25. Financing companies regulated by the Securities and Exchange

Commission (SEC) (Section 6 of RA No. 5980 as amended by RA
No. 8556)
483
26. Investment houses regulated by the SEC (Presidential Decree

No. 129 as amended by RA No. 8366)
484
LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS

OF SECURITY, DEFENSE, RISK TO HEALTH AND MORALS
AND PROTECTION OF SMALL AND MEDIUM-SCALE
ENTERPRISES
1. Manufacture, repair, storage and/or distribution used in the

manufacture thereof requiring Philippine National Police (PNP)
clearance:
a. Firearms (handguns to shotguns), parts of firearms and

ammunition therefor, instruments or implements used or
intended to be used in the manufacture of firearms
b. Gunpowder
c. Dynamite
d. Blasting supplies
e. Ingredients used in making explosives:
i. Chlorates of potassium and sodium
ii. Nitrates of ammonium, potassium, sodium barrium,

Copper (11), lead (11), calcium and cuprite
iii. Nitric acid
iv. Nitrocellulose
v. Perchlorates of ammonium, potassium and sodium
vi. Dinitrocellulose
vii. Glycerol
485
viii. Amorphous phosphorus
ix. Hydrogen peroxide
x. Strontium nitrate powder
xi. Toluene
f. Telescopic sights, sniper scope and other similar devices
(RA No. 7042 as amended by RA No. 8179)
2. Manufacture, repair, storage and/or distribution of products

requiring Department of National Defense (DND) clearance:
a. Guns and ammunition for warfare
b. Military ordnance and parts thereof (e.g., torpedoes, mines,

depth charges, bombs, grenades, missiles)
c. Gunnery, bombing and fire control systems and

components
d. Guided missiles/missile systems and components
e. Tactical aircraft (fixed and rotary -winged), parts and

components thereof
f. Space vehicles and component systems
g. Combat vessels (air, land and naval) and auxiliaries
h. Weapons repair and maintenance equipment
i. Military communications equipment
j. Night vision equipment
486
k. Stimulated coherent radiation devices, components and

accessories
l. Armament training devices
m. Others as may be determined by the Secretary of the

Department of National Defense
(RA No. 7042 as Amended by RA No. 8179).
3. Manufacture and distribution of dangerous drugs (RA No. 7042

as amended by RA No. 8179)
4. Sauna and steam bathhouses, massage clinics and other like

activities regulated by law because of risks they imposed to
public health and morals (RA No. 7042 as amended by RA No.
8179)
5. Other forms of gambling, e.g. race track operation (RA No. 7042
6. Domestic market enterprises with paid-in equity capital of less

than the equivalent of US$200,000 (RA No. 7042 as amended by
RA No. 8179)
7. Domestic market enterprises which involve advanced technology

or employ at least fifty (50) direct employees with paid-in-equity
capital of less than the equivalent of US$100,000 (RA No 7042
487
ESTABLISHING AN INTERNATIONAL NETWORK OF HONORARY

INVESTMENT AND TRADE REPRESENTATIVES TO
ASSIST THE DEPARTMENT OF TRADE AND INDUSTRY
IN PROMOTING THE PHILIPPINES GLOBALLY
WHEREAS, due to the present Asian economic recession,

there is an urgent need to attract more foreign investments into the
Philippines as well as to expand the markets for Philippine products
and services abroad;
WHEREAS, available resources constrain the expansion of

the corps of Philippine trade attaches;
WHEREAS, there is very encouraging interest on the part

of many overseas Filipinos and other friends of the Philippines to
help the country weather the on-going Asian financial crisis;
WHEREAS, the Philippine government is desirous of

working with these distinguished personalities in the pursuit of
early economic recovery.

President of the Philippines, by virtue of the powers vested in me by
law, do hereby order:
SECTION 1. There is hereby established an international

network of Honorary Investment and Trade Representatives
whose members shall be screened, evaluated and appointed by the
Secretary of Trade and Industry in accordance with such criteria as
he may formulate.
SEC. 2. These Representatives shall not be limited to Filipino

citizens, the primary consideration being there sincere and personal
desire to assist in the economic development of the Philippines. They
are to be appointed annually for specific states, areas or territories,
488
and for terms not exceeding twelve (12) months at a time. Renewals
of such appointments shall always be based on:
a. Satisfactory performance in terms of actual investments

brought into the Philippines on their initiative, or expanding
the market for Philippine goods and services in their
respective states, areas or territories; and
b. non-involvement in questionable activities or practices that

will adversely affect the good name and honor of the country
or its officials.
SEC. 3. Being quasi-official extensions of the Department of

Trade and Industry, these Representatives shall be of impeccable
business, personal and professional reputation, with verifiable
track records of business and economic achievements. They shall
receive no salary, allowance, or remuneration from the Philippine
government except a token sum of One Peso (P1.00) per annum.
SEC. 4. There is also hereby created a Task Force on Honorary

Investment and Trade Representatives under the Secretary of
Trade and Industry which shall take full and exclusive charge of
organizing, monitoring, coordinating, managing and harnessing the
full potentials of the appointed honorary representatives. All reports
of the Representatives shall be sent directly to the Task Force but
copies thereof should be furnished the trade attache if there is one
in the state, area or territory concerned.
SEC. 5. The funding requirements of the Task Force shall be

sourced from the budget of the Department of Trade and Industry
or any of its agencies, or any other funds that may be authorized by
the President.
SEC. 6. The Secretary of Trade and Industry may tap the

assistance and services of any department, office or agency of the
government including but not limited to the Board of Investments,
the Bangko Sentral ng Pilipinas, the Bureau of Immigration and
Deportation, and specifically, the Philippine International Trading
489
Corporation (PITC), for the full and effective implementation of this

Executive Order. For this purpose, the Task Force shall maintain a
direct link and working coordination with the PITC as a corporate
arm of the Department of Trade and Industry to avail of the latter’s
international trading connections and resources.
SEC. 7. The Secretary of Trade and Industry may issue the

implementing rules and regulations of this Executive Order.
DONE in the City of Manila, Philippines, this 14 day of

September, in the year of Our Lord, Nineteen Hundred and Ninety-
Eight.
(Sgd.) JOSEPH E. ESTRADA

BY THE PRESIDENT:

Executive Secretary
490
OPENING THE SUB-PORT OF CLARK SPECIAL ECONOMIC

ZONE AS A PRINCIPAL PORT OF ENTRY TO BE KNOWN
AS THE PORT OF CLARK INTERNATIONAL AIRPORT,
PURSUANT TO SECTION 702 OF THE TARIFF AND
CUSTOMS CODE OF THE PHILIPPINES, AS AMENDED,
IN RELATION TO THE BASES CONVERSION AND
DEVELOPMENT ACT OF 1992
WHEREAS, Republic Act (RA) No. 7227, creating special

economic and free port zones provides that it is the declared policy
of the government to accelerate the sound and balanced conversion
into alternative productive uses of the former US military bases,
particularly Clark and Subic;
WHEREAS, the conversion of the Clark Special Economic

Zone into an airport-led metropolis (aerotropolis) to complement
the economic development of the Subic Freeport and enhance the
economic growth of Central Luzon and eventually make the entire
Philippines globally competitive is in furthermore of said policy;
WHEREAS, the expanding economic activity at the Sub-port

of Clark Special Economic Zone as evidenced by its present collection
levels, demands its upgrading or conversion into a Principal Port of
Entry;
WHEREAS, converting and opening the Sub-port of Clark

under the Port of Manila into a Principal Port of Entry will add
prestige to the Clark Special Economic Zone, particularly the Clark
International Airport, improve the administrative efficiency of the
Port in attending to the needs of importers/locators of the Clark
Special Economic Zone, incoming and outgoing passengers and the
general public using the Clark International Airport as their port
of entry;
WHEREAS, the Metro Clark Advisory Council has called for

the upgrading of the status of the Clark Special Economic Zone as a
491
sub-port of Manila into a Principal Port of Entry to be known as the

Principal Port of the Clark Special Economic Zone in view of the full
operation of the Clark International Airport;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO,

SECTION 1. Upgrading of the sub-port of Clark Special

Economic Zone and opening it as a Principal Port of Entry. – The sub-
port of Clark Special Economic Zone is hereby closed and abolished
and accordingly removed from the jurisdiction of Collection District
No. II-A (Port of Manila), and, in its stead, a new Principal Port of
Entry is hereby opened and created to be known as the Port of Clark
International Airport, which shall be located inside the secured
area consisting of the presently fenced-in Clark Special Economic
Zone whose meets and bounds are designated and defined under
Presidential Proclamation No. 163, s. of 1993.
SEC. 2. Authority of the Commissioner of Customs to define

the jurisdictional limits of the collection districts affected. — The
Commissioner of Customs, subject to the approval of the Secretary
of Finance pursuant to Section 701 of the Tariff and Customs
Code of the Philippines (TCCP), as amended, is hereby authorized
to redefine the jurisdictional boundaries of the Port of Manila
(Collection District II-A) and to delineate the jurisdictional limits
of the new Principal Port of Entry which shall become Customs
Collection District No. XIV and to be known as the Port of Clark
International Airport.
SEC. 3. Relationship between Clark Development Corporation

and the Bureau of Customs. – To ensure the smooth operation of the
Port of Clark International Airport, taking into consideration the
peculiar characteristics thereof, the Bureau of Customs and Clark
Development Corporation shall, within thirty (30) days from the
effectivity of this order, enter into a Memorandum of Agreement
defining their working relationships and the treatment of all cargoes
entering or leaving the fenced-in area including all incoming and
outgoing passengers thru the Port of Clark International Airport.
492
SEC. 4. Authority of the Commissioner to designate the officials

of the Port of Clark International Airport. – The new Collection
District No. XIV, also known as the Port of Clark International
Airport, shall be headed by a Collector of Customs VI, to be assisted
by such Deputy Collectors of Customs as may be determined and
designated by the Commissioner of Customs.
SEC. 5. Implementing Authority. – Subject to the approval of

the Secretary of Finance, the Commissioner of Customs is hereby
authorized to determine the personnel requirements of the Port of
Clark International Airport, taking into account the principles of
economy, efficiency, and effectiveness. For this purpose, he may,
subject to applicable Civil Service rules and regulations, issue
the needed orders to effect the transfer or movement of personnel
from any organizational unit of the Bureau to the Port of Clark
International Airport.
SEC. 6. Appropriations. – Funds for the initial operations of the

Port of Clark International Airport shall be drawn from the available
funds of the Bureau of Customs and subsequent appropriations
shall be incorporated into its budget proposals, subject to existing
budgeting, accounting and auditing laws and procedures.
SEC. 7. Effectivity. – This Executive Order shall take effect

fifteen (15) days following the completion of its publication in the
Official Gazette or a newspaper of general circulation.
DONE in the City of Manila, this 26th day of November, in

the year of Our Lord, Two Thousand and One.
(Sgd.) GLORIA MACAPAGAL-ARROYO

BY THE PRESIDENT:
(Sgd.) ALBERTO G. ROMULO

Executive Secretary
493
GRANTING INCENTIVES TO FOREIGN INVESTMENT

IN TOURIST-RELATED PROJECTS AND TOURIST
ESTABLISHMENTS AND FOR OTHER PURPOSES
WHEREAS, the development of international tourism could

significantly be enhanced through the acquisition or operation of
tourist establishments and tourist related projects in our country
and by the infusion of capital therein, by foreign investors;
WHEREAS, it is also the desire of government to dispose of

its tourist-related assets, the management of which by the private
sector will contribute to the national developmental efforts and to
the national economic recovery;
WHEREAS, it is thus necessary to grant benefits and

incentives to attract foreign investors to invest in tourist- related
projects and tourist establishments;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of

the Philippines, do hereby order:
SECTION 1. Foreign Investors. – Any alien who invests the

amount of at least US$50,000.00 in a tourist- related project or in
any tourist establishment as determined by the Committee created
herein shall be entitled to the benefits and incentives granted in
this Executive Order: Provided, That such investment be made in
accordance with the limitations set by the Constitution. For purposes
of compliance with this particular condition, the alien applicant
shall prove that he has remitted such amount in any acceptable
foreign currency to the Philippines.
In the determination of the areas of investments, the Committee

shall take into consideration the following criteria: the investment
shall promote the development of the tourism industry, shall provide
more opportunities for employment, and shall increase the country’s
national income. The Committee shall give priority to the disposal of
non-performing tourism-oriented assets of the government.
494
SEC. 2. Incentives to Investors. – The following benefits and

incentives shall be available to an investor under this Executive
Order:
(a) Special Investor Resident Visa. – The investor, his wife

and unmarried minor children shall be permitted to enter and
reside in the Philippines as special investor residents for as long
as the investment subsists: Provided, That (1) they have not been
convicted of a crime involving moral turpitude; (2) they are not
afflicted with any loathsome, dangerous or contagious disease; and
(3) they have not been institutionalized for any mental disorder or
disability; and Provided, further, That the said investor visits the
country at least twice a year and stays in the country at least seven
(7) days for each visit. The said investor, his wife and unmarried
minor children shall be issued a multiple entry special investor
resident visa to enter and leave the Philippines without further
documentary requirements other than valid passports or other
travel documents in the nature of passports. They shall be exempt
from payment of alien immigration and registration fees and from
securing alien certificates of registration.
Should the investor withdraw his investment from the

Philippines, or transfer his investment to any other area without the
prior approval of the Committee created herein, the special investor
resident visas issued to him, his wife and unmarried minor children
may be revoked by the Philippine Government. For this purpose,
he shall submit an annual report, in the form duly prescribed for
the purpose, to prove that he has maintained his investment in the
country.
(b) Remittance of Earnings. – The investor shall have the

right to remit earnings from the investment in the currency in
which the investment was originally made and at the exchange
rate prevailing at the time of remittance, subject to the provisions
of Section 74 of Republic Act No. 265, as amended: Provided, That
the investment is registered with the Central Bank, and reported to
and registered with the Board of Investments.
(c) Repatriation of Proceeds – The investor shall have the right

to repatriate the entire proceeds of the liquidation of the investments
495
in the currency in which the investment was originally made and at

the exchange rate prevailing at the time of repatriation, subject to the
provisions of Section 74 of Republic Act 265, as amended.
(d) Right of Succession – In case of death, the surviving

immediate family shall be entitled to the same privileges.
SEC. 3. Creation of Committee. – There is hereby created

a Committee composed of the representatives of the Ministry
of Tourism, Ministry of Foreign Affairs, Board of Investments,
Commission on Immigration and Deportation, National Economic
and Development Authority and Central Bank of the Philippines.
This representative of the Ministry of Tourism shall act as Chairman
of the Committee.
SEC. 4. Implementing Rules and Regulations – The Committee

shall implement the provisions of this Executive Order. For this
purpose, the Committee shall promulgate the rules and regulations
to implement this Executive Order.
SEC. 5. Repealing Clause.– All laws, orders, issuances, rules

and regulations or parts thereof inconsistent with this Executive
Order are hereby repealed or modified accordingly.

immediately.
DONE in the City of Manila, this 7th day of November, in the

year of Our Lord, nineteen hundred and eighty-six.
(Sgd.) CORAZON C. AQUINO

BY THE PRESIDENT:
(Sgd.) JOKER P. ARROYO

Executive Secretary
496
AMENDING EXECUTIVE ORDER NO. 286 (S. 2000) ENTITLED

“PROMULGATING THE FOURTH REGULAR FOREIGN
INVESTMENT NEGATIVE LIST”
WHEREAS, Executive Order (EO) No. 286, s. 2000,

promulgating the Fourth Regular Foreign Investment Negative
List, consisting of Lists A and B, was issued on 24 August 2000 and
is effective for two years from 24 October 2000;
WHEREAS, there is a need to amend the Fourth Regular

Foreign Investment Negative List to reflect changes to List B,
as recommended by the Secretary of the Department of National
Defense and indorsed by the National Economic and Development
Authority;
WHEREAS, any amendment of List B shall not be made

more often than once every two years, pursuant to Section 8 of RA
7042, as amended;
WHEREAS, no amendment has been made to List B of the

Fourth Regular Foreign Investment Negative List since its issuance
on 24 August 2000.

SECTION 1. Item 2, List B, Annex A of EO No. 286, s. 2000 is

“2. Manufacture, repair, storage and/or distribution of

products requiring Department of National Defense (DND)
clearance:
497
b. Military ordinance and parts thereof (e.g. torpedoes,

mines, Depth charges, bombs, grenades, missiles)

components
e. Tactical aircraft (fixed and rotary-winged), parts and

components thereof
k Stimulated coherent radiation devices, components

and accessories

Department of National Defense
However, the manufacture or repair of these items may be

authorized by the Secretary of National Defense to non-Philippine
nationals; Provided that a substantial percentage of output, as
determined by the said agency, is exported. Provided further that
the extent of foreign equity ownership allowed shall be specified in
the said authority/clearance.”
498
SEC. 2. This Executive Order shall take effect immediately.
Done in the City of Manila, this 15th day of April, in the year
of Our Lord, Two Thousand and Two.

BY THE PRESIDENT:

Executive Secretary
499
CLARIFYING THE TAX AND DUTY FREE INCENTIVE WITHIN

THE SUBIC SPECIAL ECONOMIC ZONE PURSUANT TO
REPUBLIC ACT NO. 7227 (1992)
WHEREAS, within the framework and subject to the

mandate and limitations of the Constitution and pertinent laws, the
Subic Special Economic Zone (SSEZ) shall be developed into a self-
sustaining, industrial, commercial, financial and investment center
to generate employment opportunities and to attract and promote
productive foreign investments.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the

Republic of the Philippines, by virtue of the powers vested in me by
SECTION 1. On Import Taxes and Duties. – Tax and duty-

free importations shall apply only to raw materials, capital goods
and equipment brought in by business enterprises into the SSEZ.
Except for these items, importations of other goods into the SSEZ,
whether by business or resident individuals, are subject to taxes
and duties under relevant Philippine laws.
The exportation or removal of tax and duty-free goods from

the territory of the SSEZ to other parts of the Philippine territory
shall be subject to duties and taxes under relevant Philippine laws.
SEC. 2. On All Other Taxes. – In lieu of all local and national

taxes (except import taxes and duties), all business enterprises in
the SSEZ shall be required to pay the tax specified in Section 12(c)
of R.A. No. 7227.
500

immediately.
DONE in the City of Manila, this 10th day of June in the year
of Our Lord, Nineteen Hundred and Ninety-Three.
(Sgd.) FIDEL V. RAMOS

BY THE PRESIDENT:
(Sgd.) ANTONIO T. CARPIO

Chief Presidential Legal Counsel
501
EXECUTIVE ORDER NO. 97-A
FURTHER CLARIFYING THE TAX AND DUTY-FREE PRIVILEGE

WITHIN THE SUBIC SPECIAL ECONOMIC AND FREE
PORT ZONE
WHEREAS, Republic Act 7227 (Bases Conversion and

Development Act of 1992) created a special economic and free port
zone with tax and other incentives as provided in said law;
WHEREAS, Republic Act No. 7227 provides that within

the framework and subject to the mandate and limitations of the
Constitution and the pertinent provisions of the Local Government
Code, the Subic Special Economic and Free Port Zone (SSEFPZ) shall
be developed into a self-sustaining industrial, commercial, financial
and investment center to generate employment opportunities in and
around the SSEFPZ and to attract and promote productive foreign
investments; and
WHEREAS, a special tax and duty-free privilege within

a Secured Area in the SSEFPZ subject, to existing laws has been
determined necessary to attract local and foreign visitors to the
zone.

SECTION 1. The following guidelines shall govern the tax

and duty-free privilege within the Secured Area of the Subic Special
Economic and Free Port Zone:
1.1. The Secured Area consisting of the presently fenced-

in former Subic Naval Base shall be the only completely tax and
duty-free area in the SSEFPZ. Business enterprises and individuals
(Filipinos and foreigners) residing within the Secured Area are free
to import raw materials, capital goods, equipment, and consumer
502
items tax and duty-free. Consumption items, however, must be

consumed within the Secured Area. Removal of raw materials,
capital goods, equipment and consumer items out of the Secured
Area for sale to non-SSEFPZ registered enterprises shall be subject
to the usual taxes and duties, except as may be provided herein.
1.2. Residents of the SSEFPZ living outside the Secured

Area can enter the Secured Area and consume any quantity of
consumption items in hotels and restaurants within the Secured
Area. However, these residents can purchase and bring out of the
Secured Area to other parts of the Philippine territory consumer
items worth not exceeding US $100 per month per person. Only
residents age 15 and over are entitled to this privilege.
1.3. Filipinos not residing within the SSEFPZ can enter the
Secured Area and consume any quantity of consumption items in
hotels and restaurants within the Secured Area. However, they
can purchase and bring out the Secured Area to other parts of the
Philippine territory consumer items worth not exceeding US $200
per year per person. Only Filipinos age 15 and over are entitled to
this privilege.
1.4. Foreign tourists, balikbayans and returning residents

(from abroad) passing through the Secured Area shall be entitled
to the same prevailing tax and duty-free privileges they presently
enjoy.
1.5. There shall be no pooling, tacking, or advance use of the

US $100 or US $200 entitlement which is a privilege similar to the
entitlement enjoyed by returning residents who shop at existing
government-owned tourist duty-free shops.
1.6. The sale of tax and duty-free consumer items in the

Secured Area shall only be allowed in duly authorized duty-free
shops. Duty-free shops shall be subject to the joint regulation of
the Bureau of Customs and the Subic Bay Metropolitan Authority
(SBMA) to insure proper accounting of imports and sales.
503
1.7. A control system shall be set up by duty-free shop

operators at their own expense. This system shall be approved by
the SBMA and Customs authorities before any duty-free outlet is
permitted to operate.
In the meantime that control measures have not been defined

and set in place, the SBMA is directed to order duty free shops
located in the SSEFPZ to desist from further selling duty and tax
free goods to persons other than tourists, balikbayans and returning
residents.
1.8. The SBMA shall install a computerized identification

system to insure compliance with the guidelines governing the
SSEFPZ, particularly the Secured Area.
Customs authorities together with SBMA personnel, shall

man the entry/exit gates of the Secured Area.
SEC. 2. The Bureau of Customs and the SBMA shall jointly

promulgate the rules and regulations to implement this Executive
Order.
DONE in the City of Manila, this 19th day of June in the year
of Our Lord, Nineteen Hundred and Ninety-Three.

BY THE PRESIDENT:

504
SIMPLIFYING THE PROCEDURES ON PHILIPPINE

GOVERNMENT APPROVAL OF PROJECTS/INVESTMENTS
IN THE PHILIPPINES FOR PURPOSES OF OVERSEAS
PRIVATE INVESTMENT CORPORATION (OPIC) POLITICAL
RISKS INSURANCE COVERAGE AND FOR OTHER
PURPOSES
WHEREAS, the Governments of the Republic of the

Philippines and the United States of America have entered into an
Investment Guarantee Agreement under the Exchange of Notes,
dated February 18 and 19, 1952, as amended on February 25, 1965
and August 15, 1966, concerning investment guarantee for projects/
investments made by United States nationals in the Philippines
against political risks;
WHEREAS, such political risk investment guarantees for

United States investments in the Philippines are being issued by the
Overseas Private Investment Corporation (OPIC), while Philippine
Government approval of projects/investments for purposes Overseas
Private Investment Corporation (OPIC) investment guarantees,
is presently granted by the National Economic and Development
Authority (NEDA);
WHEREAS, it is imperative that the existing procedures

which require approval of projects/investments for Overseas
Private Investment Corporation (OPIC) investment guarantees be
simplified and streamlined;
NOW, THEREFORE, I CORAZON C. AQUINO, President of

SECTION 1. Approval by Board of Investments (BOI), the

Technology Transfer Board (TTB), the Export Processing Zone
Authority (EPZA), or such other agencies as may be designated
from time to time by the President, and registration with the
Central Bank of direct investment of United States nationals
in the Philippines for purposes of Overseas Private Investment
505
Corporation (OPIC) investments guarantees shall constitute

Philippine Government approval of projects/investments pursuant
to the Investment Guarantee Agreement under the Exchange of
Notes dated February 18 and 19, 1952, as amended on February 25,
1965 and August 15, 1966, between the Governments of the Republic
of the Philippines and the United States of the America. Philippine
Government approval shall take effect on the date of registration of
the investment.
SEC. 2. Within sixty (60) days from the date of effectivity of

coverage of the investment by the Overseas Private Investment
Corporation (OPIC), the latter shall notify the Board of Investments
(BOI) of the amount of the insurance issued pursuant to the
guidelines to be promulgated by the Board of Investments. Failure
to submit such notice within the specified period shall automatically
cancel the Philippine Government approval.
SEC. 3. The National Economic and Development Authority

(NEDA) shall monitor all United States investments in the
Philippines with Overseas Private Investment Corporation (OPIC)
investment guarantees.
SEC. 4. The Board of Investments (BOI) shall promulgate

the rules and regulations to effectively carry out this Executive
Order which shall take effect after fifteen (15) days from date of the
promulgation.
DONE in the City of Manila, this 27th day of February in the

year of Our Lord, nineteen hundred and eighty-seven.

BY THE PRESIDENT:

Executive Secretary
506
PROMULGATING THE FIFTH REGULAR FOREIGN INVESTMENT

NEGATIVE LIST
WHEREAS, Republic Act (RA) No. 7042, also known as the

Foreign Investments Act of 1991, as amended by RA 8179, provides
for the formulation of a Regular Foreign Investment Negative List
covering investment areas/ activities which may be opened to foreign
investors and/or reserved to Filipino nationals;
WHEREAS, the Regular Foreign Investment Negative List

consisting of Lists A and B, is effective for two years pursuant to
Section B of RA 7042 as amended and its Implementing Rules and
Regulations;
WHEREAS, there is a need to formulate a Fifth Regular

Foreign Investment Negative List to reflect changes to List A and B
provided in new laws and recommended by concerned government
agencies;
NOW, THEREFORE, I, GLORIA MACAPAGAL ARROYO,


listed in Annex A hereof shall be reserved to Philippine nationals,
and hereafter shall be referred to as the Fifth Regular Foreign
Investment Negative List. The extent of foreign equity participation
List.
SEC. 2. Any amendment to List A may be made at any time to

reflect changes instituted in specific laws while amendments to List
B shall not be made more often than once every two years, pursuant
to Section 8 RA 7042 as amended, and its Implementing Rules and
Regulations.
507
SEC. 3. All orders, issuances, rules and regulations or parts

thereof, which are inconsistent with this Order are hereby revoked
SEC. 4. This order shall take effect fifteen (15) days after
publication.
DONE in the City of Manila, this 22nd day of October, in the

year of Our Lord, Two Thousand and Two.

President
BY THE PRESIDENT:

Executive Secretary
508
PROVIDING FOR THE ACTIVATION OF THE CENTRAL EAST

ASIA GROWTH CIRCLE PROGRAM AS AN ECONOMIC AND
DIPLOMATIC INITIATIVE AND FOR OTHER PURPOSES
WHEREAS, the Government recognizes the global trend

where different economies are liberalizing economic relations
in trade and investment and the resulting need for the country’s
products and services to be globally competitive;
WHEREAS, different economies have adopted the strategy

of forming regional economic cooperation blocs to strengthen their
respective economies, such as the Brunei Indonesia Malaysia
Philippines (Mindanao) – East Asia Growth Area (or BIMP-
EAGA);
WHEREAS, the countries across the South China Sea, to the

east and to the north of the Philippines, which are the Philippines
(North Luzon), China, Hongkong, Japan, South Korea and Taiwan,
comprise the economic heartland of Asia, where Japan, South
Korea, Hongkong and Taiwan are countries rich in capital and
advanced technology, where China is a huge market and where the
Philippines is rich in minerals, raw materials, natural and human
resources;
WHEREAS, these economic complementarities can be

harnessed through the formation or activation of a regional
economic cooperation bloc which will convert the region into an
economic powerhouse and provide significant economic benefits to
the member countries;
WHEREAS, the aim of this concept is to increase trade

and investments through an improved business climate, with the
ultimate target of creating new jobs and livelihood opportunities for
the ordinary Filipino in the region;
509
WHEREAS, the national government has taken the initial

steps in making the country, specifically the four (4) administrative
regions North of the National Capital Region, hereinafter referred
to as the North Luzon, namely: Regions 1, 2, 3, and the Cordillera
Administrative Region, ready to meet the challenges of a globally
competitive environment through economic integration.

SECTION 1. The Creation of the Central East Asia Growth

Circle Program. – There is hereby created under the Office of the
President, a program which is initially to be called the Central East
Asia Growth Circle and hereinafter called the CEA-GC, and which
shall promote and encourage the active and extensive economic
cooperation of the economies above-mentioned in the area of the
South China Sea.
SEC. 2. Implementation Strategy. – The CEA-GC program

shall be implemented by adopting a strategy of phased progression
in establishing economic cooperation with focus areas within the
Growth Circle resulting in a multilateral economic cooperation
agreement among the member countries.
SEC. 3. Presidential Action Officer for CEA-GC. – The

President shall appoint a Presidential Action Officer for the Central
East Asia Growth Circle Program (PAO-CEAGC) with the rank of
undersecretary, and with the following duties and functions:
a) Promote foreign investments, trade and tourism activities

in North Luzon which would enhance socio-economic
development in the area with focus on but not limited to
developing linkages with countries in the Central East
Asia Growth Circle;
b) Coordinate the related activities of concerned departments,

RDC’s and specialized government development agencies
510
in North Luzon, and ensure their active, but coordinated

participation in the program;
c) Mobilize private sector participation in all activities of

the program;
d) Cause the preparation of economic and feasibility studies,

and explore sources of financing of priority programs
and projects, whether governmental or private that will
support and encourage the active participation of the
North Luzon integrated economy in the program;
e) Advocate to the constituents of North Luzon, their

elected executives and representatives in Congress and
the National Government, national policies which will
foster the active participation of North Luzon, in such
policy areas as banking, investment and lending by
financial institutions, transport and telecommunication,
infrastructure, export of agricultural and other products,
tourism, environment, reforestation, education, science
and technology and human resource development;
f) Negotiate for sources of funds to include the Overseas

Development Assistance on a bilateral or multilateral
basis in accordance with existing rules and regulations;
g) Provide the machinery for extending the necessary

planning, management and technical assistance to
prospective and existing investors in North Luzon;
h) Receive and administer donations, contributions,

grants, requests or gifts in cash or in kind from foreign
governments, international agencies, private entities, and
contribute to the development of North Luzon, subject to
existing laws, rules and regulations and;
i) As the Presidential Action Officer for CEA-GC, he shall

exercise administrative and technical supervision over
the Program;
511
j) Appoint the officers and staff of the CEA-GC Program

Secretariat, and ensure that it performs its functions and
achieves the Program’s objectives;
k) The PAO-CEAGC shall submit to the President, quarterly

reports on its accomplishments and activities.
SEC. 4. The Advisory Council. – The PAO-CEAGC shall have

an Advisory Council, which shall have the following functions:
a) To advise the PAO-CEAGC on the different aspects of the

program;
b) To ensure that the goals and policies of the PAO-CEAGC

are consistent with overall national development goals
and policies;
c) To ensure that programs of PAO-CEAGC are consistent

with regional and local development plans and
programs.
SEC. 5. The Members of the Advisory Council. – The Advisory

Council shall be composed of the following:
a) The Executive Secretary as Chairman;
b) Secretary, Department of Trade and Industry as

Vice-Chairman;
c) Secretary, Socio-Economic Planning;
d) Secretary, Department of Tourism;
e) Secretary, Department of Foreign Affairs;
f) Secretary, Department of Transportation and

Communications;
512
g) Secretary, Department of Agriculture;
h) The Presidential Assistant for North Luzon;
i) The Presidential Adviser for Development

Administration;
j) The Chairman of the Regional Development Councils or

similar bodies of the aforementioned Regions and;
k) Two private sector representatives from each region of

North Luzon chosen by and from among the private sector
representatives of the concerned Regional Development
Councils;
l) One Congressional Representative from each region of

North Luzon who shall be chosen by and from among the
Congressional Representatives in the region.
m) One Governor from each region of North Luzon who

shall be chosen by and from among the Governors in the
region;
n) One City Mayor chosen by and from among the City

Mayors of North Luzon;
o) The Administrator or equivalent official of all government

corporations, commissions, development authorities and
like organizations based in the four regions such as, but
not limited to, the following:
North Luzon Growth Commission, Presidential Commission

for the Central Luzon Growth Corridor, Cagayan Special Economic
Zone Authority, Ifugao Terraces Commission, Lingayen Gulf
Commission, Vigan Heritage Commission, Clark Economic Zone
Authority, Agno River Basin Development Commission, Subic Bay
Metropolitan Authority, Clark Development Corporation, John Hay
Poro-Point Development Corporation.
513
The composition of the Advisory Council may be expanded

when necessary.
SEC. 6. Technical Support Staff of the PAO-CEAGC. – A

Program Office for CEAGC shall be constituted to assist the PAO-
CEAGC in implementing the program. It shall be headed by a Program
Director to be appointed by the President upon the recommendation
of the PAO-CEAGC. Additional technical and administrative staff
from the National Economic Development Authority, Department of
Trade and Industry, Department of Foreign Affairs, Department of
Tourism and other government agencies and institutions may also
be detailed or seconded to the Program Office as necessary.
SEC. 7. Role of National Line Agencies, Local Government

Units, GOCC’s, NGO’s. – Concerned national line agencies in the
regions, local government units, development authorities and special
project offices, government owned and controlled corporations, non-
government organizations/the private sector, shall, as appropriate,
serve as implementing entities of activities related to the CEAGC
program. These related activities are inclusive of, but not limited to
the organization of: trade/investment/tourism fairs and missions,
business conventions and forums, technical working group meetings,
senior officials’ meetings, etc.
SEC. 8. Funding. – The Department of Budget and Management

is hereby directed to release from the Presidential Contingent Fund,
an initial lump sum funding of P18,116,833.05 for the organization,
and the administrative and internal operational requirements of
the Presidential Action Office – CEAGC, for the period September
to December 1999. The additional budget for the year 2000 shall be
sourced from the Presidential Contingent Fund or any other fund
within the Office of the President. Thereafter, the appropriations
for the continued operations of the PAO-CEAGC shall be included
in the annual general appropriations bill submitted to congress.
SEC. 9. Implementing Authority. – The PAO-CEAGC is hereby

authorized to promulgate the necessary rules and regulations to
implement this Executive Order.
514
SEC. 10. Effectivity. – This Executive Order shall take

effect immediately. Provisions of existing executive orders, rules
and regulations inconsistent with this executive order are hereby
superseded by this issuance.
DONE in the City of Manila, this 28th day of September, in

the year of Our Lord, Nineteen Hundred and Ninety-Nine.
(Sgd.) JOSEPH EJERCITO ESTRADA

President
BY THE PRESIDENT:

Executive Secretary
515
ABOLISHING THE COUNCIL FOR INVESTMENTS IN TRADE,

INDUSTRY, TOURISM, AGRICULTURE, NATURAL
RESOURCES, TRANSPORTATION, COMMUNICATIONS
AND SERVICES AND REFOCUSING AND STRENGTHENING
THE INVESTMENT ONE-STOP ACTION CENTER
WHEREAS, investment generation is needed to sustain our

development efforts;
WHEREAS, there is need to enhance the coordination and

complementation efforts of government to promote investments and
provide assistance to current and potential investors;
WHEREAS, Executive Order No. 136, s. 1987, created a

Council for Investments in Trade, Industry, Tourism, Agriculture,
Natural Resources, Transportation, Communications and Services
to coordinate investment development efforts of the government and
promote the country as an attractive investment area in identified
sectors;
WHEREAS, EO 136 further created an Investment One-

Stop Action Center (OSAC) under the Board of Investments to
provide assistance to local and foreign investors by providing
information, advice, and guidance on pertinent laws and procedures
relative to doing business in the Philippines and to accept and act
on applications for investments;
WHEREAS, pursuant to the Cabinet agreement on 18

August 1992, investment promotion units were established in key
government offices to assist the OSAC in their respective areas;
WHEREAS, the President has continuing authority to

reorganize the administrative structure of the Office of the President
pursuant to Executive Order No. 292 (Administrative Code of
1987);
516
WHEREAS, under Section 77 of the General Provisions of

Republic Act No. 8745 or FY 1999 General Appropriations Act, the
President may direct changes in the organization and key positions
in any department, bureau or agency; and
WHEREAS, there is need to refocus and strengthen the

OSAC in order to be more responsive to the needs of investors in
view of the highly competitive global environment.

vested in me by law and the Constitution, do hereby order the
following:
SECTION 1. Abolishing the Council for Investments. – The

Natural Resources, Transportation, Communications and Services,
created pursuant to EO 136, s. 1987, is hereby abolished.
SEC. 2. Refocusing and Strengthening the OSAC. – The

Investment One-Stop Action Center of the Board of Investments,
created pursuant to EO 136, s, 1987, is hereby refocused to provide
facilitation and problem-solving services to investors. The OSAC is
also hereby strengthened through a more coordinated mechanism
to provide comprehensive service delivery to investors and a more
responsive organization to address investor concerns.
SEC. 3. Functions of the OSAC – The OSAC shall serve as

clearing house for potential investors and undertake due diligence
on the capabilities of potential investors. In this regard, the OSAC
shall undertake the following functions to assist investors with the
desired credentials:
a. Provide advise, guidance and information on various

laws, rules and regulations governing investments and conduct of
business in the Philippines, including incentives that can be availed
of;
517
b. Serve as the “ombudsman” of investors and act as a

complaints and action center regarding the government to address
the concerns of investors;
c. Assist in identifying investment opportunities;
d. Facilitate the processing of all investment-related

requirements by concerned agencies (e.g., licenses and permits,
importation, taxation, etc.) by ensuring that all frontline agencies
perform their tasks within prescribed standards and parameters;
e. Improve time and quality standards for processing of

investment-related papers in government agencies; and
f. Perform such other functions as may be directed by the

President and/or the Secretary of Trade and Industry.
SEC. 4. Organizational Set-Up. – The OSAC shall be under

the direct supervision of the Secretary of Trade and Industry. It
shall be headed by an Executive Director and assisted by a Deputy
Executive Director who shall be appointed by the President, upon
the recommendation of the Secretary of Trade and Industry. A
full-time staff complement shall also be appointed to ensure the
performance of its functions.
SEC. 5. Coordinating Mechanism and Establishment of

Investment Promotion Units. – The OSAC shall establish a
coordinating mechanism among concerned government agencies and
private sector organizations. The OSAC shall also coordinate closely
with other inter-agency bodies in addressing investor concerns.
For this purpose and to further enhance the services of the

OSAC, Investment Promotion Units (IPUs) shall be established in
concerned government agencies. The IPUs shall coordinate closely
with the OSAC and shall be part of a network providing current and
prospective investors with answers to technical and legal inquiries
and fast action on the approval of investment-related permits and
licenses.
518
SEC. 6. Funding. – The Secretary of Budget and Management

is hereby directed to allocate funds from the Organizational
Adjustment Fund or from any available fund under the annual
appropriations of the government to support the OSAC.
Funds for the operations of the OSAC shall be released

through the Department of Trade and Industry, subject to the
submission of the Staffing Pattern and Work and Financial Plan to
the Department of Budget and Management.
SEC. 7. Reporting System. – The OSAC, through the Secretary

of Trade and Industry, shall submit quarterly reports to the Office
of the President on steps taken to address investor concerns.
SEC. 8. Repealing Clause. – All issuances, orders, rules

and regulations or parts thereof which are inconsistent with the
provisions of this Executive Order are hereby repealed or modified
accordingly.
SEC. 9. Effectivity. – This Executive Order takes effect

immediately.
DONE, in the City of Manila, this 5th day of October, in the

Year of Our Lord, Nineteen Hundred and Ninety-Nine.

President
BY THE PRESIDENT:

Executive Secretary
519
AMENDING EXECUTIVE ORDER NO. 155 ABOLISHING THE

COUNCIL FOR INVESTMENTS IN TRADE, INDUSTRY,
TOURISM, AGRICULTURE, NATURAL RESOURCES,
TRANSPORTATION, COMMUNICATIONS AND SERVICES
AND REFOCUSING AND STRENGTHENING THE
INVESTMENT ONE-STOP ACTION CENTER AND CREATING
THE POSITION OF INVESTMENT OMBUDSMAN
WHEREAS, a more intensive generation of investments

from local and foreign investors is needed to sustain development
efforts;
WHEREAS, there is a need to entrench new policies with new

administrative procedures at the implementation level to provide
assistance to current and potential investors and to enhance the
coordination and complementation efforts of government to promote
investments;
WHEREAS, Executive Order No. 136, s. 1987, created a

Natural Resources, Transportation, Communications and Services
to coordinate investment development efforts of the government
and to promote the country as an attractive investment area in
identified sectors;
WHEREAS, EO 136 further created an Investment One-

Stop Action Center (OSAC) under the Board of Investments to
provide assistance to local and foreign investors by providing
information, advice, and guidance on pertinent laws and procedures
relative to doing business in the Philippines and to accept and act
on applications for investments;
WHEREAS, pursuant to the Cabinet agreement on 18

August 1992, investment promotion units were established in key
government offices to assist OSAC in their respective areas;
520

1987);
WHEREAS, under Section 77 of the General Provisions of

Republic Act No. 8745 or FY 1999 General Appropriations Act, the
in any department, bureau or agency; and
WHEREAS,, there is a need to refocus and strengthen the

OSAC in order to be more responsive to the needs of investors in
view of the highly competitive global environment.

following:
SECTION 1. ABOLISHING THE COUNCIL FOR

INVESTMENTS. The Council for Investments in Trade, Industry,
Tourism, Agriculture, Natural Resources, Transportation,
Communications and Services, created pursuant to EO 136 s. 1987,
is hereby abolished and its budget and plantilla of personnel is
hereby transferred to the Board of Investments..
SEC. 2. CREATING THE OFFICE OF THE INVESTMENT

OMBUDSMAN. There is hereby created an Office of the Investment
Ombudsman which shall be under the direct supervision of the
Chairman of the Board of Investments. It shall be headed by an
Investment Ombudsman who shall be appointed by the President
upon recommendation of the BOI Chairman.
The Investment Ombudsman shall be designated as a Special

Deputy of the Ombudsman.
The Investment Ombudsman shall be assisted by a Director

for the Complaints and Action Center for Investments and a Director
521
for the Quick Response One-Stop Action Center for Investments,

both of whom shall also be appointed by the President upon
recommendation of the BOI Chairman.
The Office of the Investment Ombudsman shall have a full-

time staff complement for the services directly supportive to the
performance of its functions.
SEC. 3. RENAMING AND REFOCUSING THE OSAC. The

Investment One-Stop Action Center of the Board of Investments,
created pursuant to EO 136, s. 1987 shall be transferred from the
Board of Investments and hereby re-named Quick Response One-
Stop Action Center for Investments (QROSACI) and shall be under
the Office of the Investment Ombudsman.
SEC. 4. FUNCTIONS OF THE QROSACI. The QROSACI

shall serve as clearing house for potential investors and undertake
due diligence on the capabilities of potential investors. In this
regard, the QROSACI shall undertake the following functions to
assist investors with the desired credentials:
a. Provide advise, guidance and information on various

laws, rules and regulations governing investments and the conduct
of business in the Philippines, including incentives that can be
availed of;
b. Facilitate the processing of all investment-related

requirements by concerned agencies including local government
units (e.g., licenses and permits, importation, taxation, etc., by
ensuring that all frontline agencies perform their tasks within
prescribed standards and parameters;
c. Coordinate closely with the Investment Facilitation

Specialists which shall be part of a network providing current and
prospective investors with answers to technical and legal inquiries
and fast action on the approval of investment-related permits and
licenses.
522
d. Improve time and quality standards for processing of

investment-related papers in government agencies; and
e. Coordinate with private sector organizations, the heads

of which may be invited to constitute an Advisory Council which
shall provide information, advice and feedback on the investment
development efforts of the government.
f. Promulgate rules of procedure for the effective exercise of

its powers, functions, and duties.
g. Perform such other functions as may be directed by the

President and/or the Secretary of Trade and Industry.
SEC. 5. COORDINATING MECHANISM AND DESIGNATION

OF INVESTMENT SPECIALISTS. The Investment Ombudsman
shall establish a coordinating mechanism for addressing investor
concerns with the following concerned government departments
and agencies: Department of Trade and Industry, Department of
Finance, Department of Environment and Natural Resources,
Department of Agriculture and Food, Department of Agrarian
Reform, Department of Tourism, Department of Interior and Local
Government, Department of Justice, Bureau of Immigration,
Bureau of Customs, Bureau of Internal Revenue, the Housing Land
Use Regulatory Board and the Philippine National Police, to further
enhance the services of the QROSACI. For this purpose, Investment
Facilitation Specialists shall be designated by the aforementioned
government departments and agencies, whose rank shall not be
less than third in rank therein. The designation of the Investment
Facilitation Specialists shall be confirmed by a memorandum of
agreement (MOA) between the Investment Ombudsman and the
head of the department or agency within thirty (30) days after the
Office of the Investment Ombudsman becomes operational.
The Investment Facilitation Specialist should have authority

to provide the QROSACI and investors with answers to technical
and legal inquiries as well as take fast action on the approval of
investment-related permits and licenses submitted by the QROSACI.
523
Whenever a more detailed evaluation of documents and papers

are necessary, the Investment Specialist shall be responsible for
monitoring the status of such documents and papers and ensuring
that they are returned to the QROSACI and the applicant in the
shortest possible time or within the prescribed time period.
SEC. 6. FUNCTIONS OF THE INVESTMENT OMBUDSMAN.

The Office of the Investment Ombudsman shall act as a Complaints
and Action Center for Investment and, as Special Deputy of the
Ombudsman, shall have the following powers and functions:
a. Conduct Inquiries: Inquire into acts or omissions of any

public official or employee of the Government, or of any office, agency
or instrumentality thereof concerned with the entry of local and
foreign investments, including local government units and officials,
which the Investment Ombudsman may consider to be:
* contrary to law or regulation;
* unreasonable, unfair, oppressive, irregular or

inconsistent with the general course of the operations
of a public officer, employee, office or agency;
* an error in the interpretation or application of law,

rules or regulations, or a gross or palpable error in the
appreciation of facts;
* based on improper motives or corrupt considerations;
* unclear or inadequately explained when reasons

should have been revealed;
* inefficiently performed or otherwise objectionable.
b. Direct Performance: Direct, upon complaint of any

investor, or at its own instance, any public official or employee or
any office, agency or instrumentality, including local government
units and officials, as well as any government-owned or controlled
524
corporation with original charter, to perform and expedite any act

or duty required by law to facilitate the entry of local and foreign
investment, or to stop, prevent and correct any abuse or impropriety
in the performance of duties.
c. Submission of Documents: Direct, in any appropriate

case, and subject to such limitations as may be provided by law, any
public official or employee, or any office, agency, or instrumentality,
including local government units and officials, as well as any
government-owned or controlled corporation with original charter,
to furnish copies of documents relating to contracts or transactions
entered into by such office involving the entry of local or foreign
investment or to examine, if necessary, pertinent records and
documents.
d. Request Assistance and Information: Request any

government agency or local government unit for assistance and
information necessary in the discharge of its responsibilities.
e. Publicity for Deterrence Purposes: With due prudence,

publicize matters covered by its inquiries or investigations when
circumstances so warrant.
f. Recommend Reforms: Determine the causes of

inefficiency; red tape, mis-management, fraud and corruption in the
offices concerned with the entry of local and foreign investment and
make recommendations for their elimination and the observance of
high standards of ethics and efficiency.
g. Promulgate Rules: Promulgate its rules of procedure and

exercise such other powers or perform such functions or duties as
may be provided by law.
SEC. 6. FUNDING. The Secretary of Budget and Management

is hereby directed to allocate funds from the Organizational
Adjustment Fund or from any available fund under the annual
appropriations of the government to support the Office of the
Investment Ombudsman.
525
Funds for the operations of the Office of the Investment

Ombudsman shall be released through the Secretary of Trade and
Industry, subject to the submission of the Staffing Pattern and Work
and Financial Plan to the Department of Budget and Management.
SEC. 7. REPORTING SYSTEM. The Investment Ombudsman,

through the Secretary of Trade and Industry, shall submit quarterly
reports to the Office of the President on steps taken to address
investors concerns.
SEC. 8. SEPARABILITY CLAUSE. In the event that the

provisions of this Executive Order are hereby declared to be
separable and in the event any provision or part thereof is declared
unconstitutional the other provisions or part thereof which are not
affected thereby shall remain in full force and effect.
SEC. 9. REPEALING CLAUSE. All issuances, orders, rules

provisions of this Executive Order are hereby repealed or modified
accordingly.
SEC. 9. EFFECTIVITY. This Executive Order takes effect

immediately.
DONE in the City of Manila, this 23rd day of November, in the

Year of Our Lord, Nineteen Hundred and Ninety-nine.

President
BY THE PRESIDENT:

Executive Secretary
526
FIRST REGULAR FOREIGN INVESTMENT NEGATIVE LIST
WHEREAS, there is a need to attract, promote and increase

productive investments in the country to ensure sustained economic
growth and realize its goal of becoming a newly industrializing
economy.
WHEREAS, the importance of foreign investments in

supplementing the financial and technological requirements of the
country is recognized.
WHEREAS, foreign equity participation of as much as one

hundred percent (100%) is allowed as a general rule except in areas
reserved to Philippine nationals as mandated in the Constitution
and other relevant laws of the country.
WHEREAS, the Government recognizes the rights of

Philippine nationals, and the need to protect certain areas as
provided for in the Constitution and other laws, and for reasons of
security, defense, risk to health and morals, and protection of local
small and medium-scale enterprises.
WHEREAS, no petitions for inclusion in List C were received

during the filing period set by the NEDA.

Republic of the Philippines, by virtue of the powers vested in me
by Sections 8 and 9 of Republic Act No. 7042, also known as the
Foreign Investments Act (FIA) of 1991 do hereby order:
SECTION 1. Only the investment areas listed in “Annex A”

hereof, also known as the Foreign Investment Negative List, shall
be reserved to Philippine Nationals. The extent of foreign equity
participation in these areas shall be limited to percentages indicated
in the List.
527
SEC. 2. Any amendment to the list shall only be made once

every two years, pursuant to Section 8 of the FIA and Rule XI of the
Implementing Rules and Regulations of the FIA.
SEC. 3. All orders, issuances, rules and regulations, or parts

thereof, which are inconsistent with this Executive order are hereby
revoked or modified accordingly.
SEC. 4. This Executive Order shall take effect immediately

following the end of the transitory period or on October 24, 1994.
DONE in the City of Manila, this 22nd day of June in the year
of our Lord, Nineteen Hundred and Ninety Four.

BY THE PRESIDENT:

528
CREATION OF A PHILIPPINE COORDINATING COMMITTEE TO

STUDY THE FEASIBILITY OF THE JAPAN-PHILIPPINES
ECONOMIC PARTNERSHIP AGREEMENT
WHEREAS, the Philippines is determined to improve the

state of its economy and eliminate poverty;
WHEREAS, trade expansion and market access are

necessary means to spur growth in the Philippines economy and
provide increased employment opportunities;
WHEREAS, the Philippines believes that it must deepen

regional economic integration to build the foundations for sustainable
growth;
WHEREAS, the Philippines and Japan share the vision of

an Asian economic integration and are committed to studying the
possibility of forging a bilateral economic partnership agreement;
WHEREAS, an economic partnership agreement could

promote stronger bilateral economic cooperation not only in trade
in goods but also in such fields as tourism, services, investments,
human resource development, science and technology, and other
areas of interest to both parties.

SECTION 1. A Philippine Coordinating Committee (PCC) to

study the feasibility of the Japan-Philippines Economic Partnership
Agreement (JPEPA) is hereby created.
The PCC shall be composed of representatives from the

following government agencies:
529
1) Department of Foreign Affairs (DFA);
2) Department of Trade and Industry (DTI);
3) Department of Agriculture (DA);
4) Department of Budget and Management (DBM);
5) Department of Education, Culture, and Sports (DECS);
6) Department of Energy (DOE);
7) Department of Environment and Natural Resources

(DENR);
8) Department of Finance (DOF);
9) Department of Health (DOH);
10) Department of Justice (DOJ);
11) Department of Labor and Employment (DOLE);
12) Department of Public Works and Highways (DPWH);
13) Department of Science and Technology (DOST);
14) Department of Tourism (DOT);
15) Department of Transportation and Communications

(DOTC);
16) National Economic and Development Authority (NEDA);
17) Bangko Sentral ng Pilipinas (BSP); and
18) Securities and Exchange Commission (SEC)
530
The agencies enumerated above shall have at least one (1)

permanent representative each with a rank not lower than Director.
Other concerned agencies may be invited to join the PCC as may be
necessary and appropriate.
The DFA Undersecretary for International Economic

Relations and the DTI Undersecretary for International Trade shall
act as co-chairs of the PCC. The DTI Undersecretary shall convene
and conduct the meetings of the PCC. In his/her absence, the DFA
Undersecretary may also convene and conduct the meetings of the
PCC.
The PCC shall be convened immediately after this Executive

Order takes effect.
SEC. 2. The functions of the PCC shall be as follows:
a. To participate in meetings, consultations, and/or

negotiations with the Japanese counterpart on the proposed
JPEPA;
b. To formulate recommended Philippine positions

for the meetings, consultations and/or negotiations with the
Japanese counterpart;
c To conduct consultations with concerned government

and private sector representatives, as necessary, regarding
the various issues and sectors covered in the JPEPA;
d. To draft a proposed framework for the JPEPA and

its Implementing Agreements (IAs); and
e. To perform other functions as may be necessary.
SEC. 3. The Bureau of International Trade Relations (BITR)

of the DTI shall act as the PCC Secretariat. The Secretariat shall be
tasked to manage and coordinate the work of the PCC. The DFA, on
531
the other hand, shall be responsible for coordinating with the PCC’s
Japanese counterpart.
SEC. 4. The DTI shall draft the final version of the proposed
framework for the JPEPA and its IAs, based on the work undertaken
by the PCC. It may also authorize the commissioning of consultancy
and related services as may be necessary and appropriate to fulfil
its functions, subject to existing rules and regulations.
SEC. 5. Budget. – All expenses incurred in connection with

the conduct of the individual agencies’ functions as a member of the
PCC, especially in participating in meetings, consultations, and/or
negotiations in Japan, shall be borne by the respective agencies.
The DTI shall submit to the Department of Budget and

Management (DBM) a work program and its corresponding budget
that shall defray the cost of activities to be implemented by the PCC
pursuant to this Executive Order.

immediately.
DONE, in the City of Manila, this 28th day of MAY in the year
of our Lord, Two Thousand and Three.

President
(Sgd.) EDUARDO R. ERMITA

Executive Secretary
532
AMENDING EXECUTIVE ORDER NO. 180 TO RENAME THE

QUICK RESPONSE ONE STOP ACTION CENTER FOR
INVESTMENTS (QROSACI) AND TO DELINEATE THE
OFFICE OF THE INVESTMENT OMBUDSMAN AS AN
OFFICE ATTACHED TO THE DEPARTMENT OF TRADE
AND INDUSTRY AND FOR OTHER PURPOSES
WHEREAS, intensive efforts are being undertaken to

promote the country as an attractive investment destination;
WHEREAS, as a parallel effort, it is vital to ensure that

focused attention be given to servicing the needs and addressing
the complaints of existing local and foreign investors against
departments, offices and agencies of the government which has
investment-related functions, including local government units;
WHEREAS, activities and experience of the Investment

Ombudsman since 01 December 1999 when Executive Order No.
180 creating the position of the Investment Ombudsman, was
implemented, show that the complaints of existing investors,
particularly the foreign investors who have large and significant
investments in the country, demand full-time attention, and that the
Investment Ombudsman is now perceived as a resource to ensure
that the operations of local and foreign investors, particularly,
exports, are not impeded.

following:
SECTION 1. Renaming the Quick Response One Stop Action

Center for Investments (QROSACI) into the One Stop Action Center
(OSAC) and reverting it to the Board of Investments (BOI) as an
office thereof. – To sustain the recognition and name recall it has
533
earned from the time it was originally constituted, the QROSACI

shall revert to its original name of One Stop Action Center (OSAC).
Further, in order to effectively focus the operations of the Center
to complement the investment promotion efforts of the BOI, the
Center shall be reverted back to its former status as an office under
the BOI.
SEC. 2. Delineating the Office of the Investment Ombudsman,

hereinafter referred to as OIO, as an Office attached to the Department
of Trade and Industry (DTI). – The OIO, which was created under
Executive Order No. 180 to perform the specific function of assisting
current and potential investors, shall be an office attached to the
DTI for administrative supervision and policy coordination.
SEC. 3. Repealing Clause. – All issuances, orders, rules

provisions of this Executive Order are hereby repealed and modified
accordingly.
SEC. 4. Effectivity. – This Executive Order takes effect

immediately.
DONE in the City of Manila, this 3rd day of April, in the year
of Our Lord, Two Thousand.

BY THE PRESIDENT:

Executive Secretary
534
THE OMNIBUS INVESTMENTS CODE OF 1987
WHEREAS, the Government is committed to encourage

investments in desirable areas of activities;
WHEREAS, to facilitate investment, there is a need to adopt

a cohesive and consolidated investments incentives law;
WHEREAS, it is imperative to integrate basic laws on

investment, to clarify and harmonize their provisions for the
guidance of domestic and foreign investors;

the Philippines, do hereby order and ordain the following:
PRELIMINARY TITLE
Chapter I. TITLE AND DECLARATION OF POLICY
Article 1. Short Title. – This Order shall be known as the

“Omnibus Investments Code” of 1987.
Article 2. Declaration of Investment Policies. – To accelerate

the sound development of the national economy in consonance
with the principles and objectives of economic nationalism and
in pursuance of a planned economically feasible and practical
dispersal of industries and the promotion of small and medium
scale industries, under conditions which will encourage competition
and discourage monopolies, the following are declared policies of the
State:
1. The State shall encourage private Filipino and foreign

investments in industry, agriculture, forestry, mining,
tourism and other sectors of the economy which shall:
provide significant employment opportunities relative
535
to the amount of the capital being invested; increase

productivity of the land, minerals, forestry, aquatic and
other resources of the country, and improve utilization
of the products thereof; improve technical skills of the
people employed in the enterprise; provide a foundation
for the future development of the economy; meet the tests
of international competitiveness; accelerate development
of less developed regions of the country; and result in
increased volume and value of exports for the economy.
2. The State shall ensure the holistic development by

safeguarding the well-being of the social, cultural and
ecological life of the people. For this purpose, consultation
with affected communities will be conducted whenever
necessary.
3. The State shall extend to projects which will significantly

contribute to the attainment of these objectives, fiscal
incentives without which said projects may not be
established in the locales, number and/or pace required
for optimum national economic development. Fiscal
incentive systems shall be devised to compensate for
market imperfections, to reward performance contributing
to economic development, be cost-efficient and be simple
to administer.
4. The Sate considers the private sector as the prime mover

for economic growth. In this regard, private initiative is
to be encouraged, with deregulation and self-regulation of
business activities to be generally adopted where dictated
by urgent social concerns.
5. The State shall principally play a supportive role, rather

than a competitive one, providing the framework, the
climate and the incentives within which business activity
is to take place.
536
6. The State recognizes that there are appropriate roles for

local and foreign capital to play in the development of
the Philippine economy and that it is the responsibility of
Government to define these roles and provide the climate
for their entry and growth.
7. The State recognizes that industrial peace is an essential

element of economic growth and that it is a principal
responsibility of the State to ensure that such a condition
prevails.
8. Fiscal incentives shall be extended to stimulate the

establishment and assist initial operations of the
enterprise, and shall terminate after a period of not more
than 10 years from registration or start-up of operation
unless a specific period is otherwise stated.
The foregoing declaration of investment policies shall apply to

all investment incentive schemes.
CHAPTER II
BOARD OF INVESTMENTS
Article 3. The Board of Investments. – The Board of Investments

shall implement the provisions of Books One to Five of this Code.
Article 4. Composition of the Board. – The Board of Investments

shall be composed of seven (7) governors: The Secretary of Trade
and Industry, three (3) Undersecretaries of Trade and Industry to
be chosen by the President, and three (3) representatives from other
government agencies and the private sector. The Secretary of Trade
and Industry shall be concurrently Chairman of the Board and
the Undersecretary of the Department of Trade and Industry for
Industry and Investments shall be concurrently the Vice-Chairman
of the Board and it’s Managing Head. The three (3) representatives
from the other government agencies and the private sector shall be
appointed by the President for a term of four (4) years: Provided,
That upon the expiration of his term, a governor shall serve as
537
such until his successor shall have been appointed and qualified:
Provided, further, That no vacancy shall be filled except for the
unexpired portion of any term, and that no one may be designated to
be governor of the Board in an acting capacity but all appointments
shall be ad interim or permanent.
Article 5. Qualifications of Governors of the Board. – The

governors of the Board shall be citizens of the Philippines, at least
thirty (30) years old, of good moral character and of recognized
competence in the fields of economics, finance, banking, commerce,
industry, agriculture, engineering, law, management or labor.
Article 6. Appointment of Board Personnel. – The Board

shall appoint its technical staff and other personnel subject to Civil
Service Law, rules and regulations.
Article 7. Powers and Duties of the Board. – The Board shall

be responsible for the regulation and promotion of investments
in the Philippines. It shall meet as often as may be necessary
generally once a week on such day as it may fix. Notice of regular
and special meetings shall be given all members of the Board. The
presence of four (4) governors shall constitute a quorum and the
affirmative vote of four (4) governors in a meeting validly held shall
be necessary to exercise its powers and perform its duties, which
shall be as follows:
(1) Prepare annually the Investment Priorities Plan as

defined in Article 26, which shall contain a listing of specific
activities that can qualify for incentives under Book I of
this Code, duly supported by the studies of existing and
prospective demands for such products and services in
the light of the level and structure of income, production,
trade, prices and relevant economic and technical factors
of the regions as well as existing facilities;
(2) Promulgate such rules and regulations as may be

necessary to implement the intent and provisions of this
Code relevant to the Board:
538
(3) Process and approve applications for registration with

the Board, imposing such terms and conditions as it
may deem necessary to promote the objectives of this
Code, including refund of incentives when appropriate,
restricting availment of certain incentives not needed by
the Project in the determination of the Board, requiring
performance bonds and other guarantees, and payment of
application, registration, publication and other necessary
fees and when warranted may limit the availment of the
tax holiday incentive to the extent that the investor’s
country law or treaties with the Philippines allows a
credit for taxes paid in the Philippines;
(4) After due hearing, decide controversies concerning the

implementation of the relevant books of this Code that
may arise between registered enterprises or investors
therein and government agencies, within thirty (30) days
after the controversy has been submitted for decision:
Provided, That the investor or the registered enterprise
may appeal the decision of the Board within thirty (30)
days from receipt thereof to the President;
(5) Recommend to the Commissioner of Immigration and

Deportation the entry into the Philippines for employment
of foreign nationals under this Code;
(6) Periodically check and verify, either by inspection of the

books or by requiring regular reports, the proportion of
the participation of Philippine nationals in a registered
enterprise to ascertain compliance with its qualification
to retain registration under this Code;
(7) Periodically check and verify the compliance by registered

enterprises with the relevant provisions of this Code,
with the rules and regulations promulgated under this
Code and with the terms and conditions of registration;
539
(8) After due notice, cancel the registration or suspend

the enjoyment of incentives benefits of any registered
enterprise and/or require refund of incentives enjoyed
by such enterprise including interests and monetary
penalties, for (a) failure to maintain the qualifications
required by this Code for registration with the Board of
(b) for violation of any provisions of this Code, of the rules
and regulations issued under this Code, of the terms and
conditions of registration, or of laws for the protection
of labor or of the consuming public: Provided, That the
registration of an enterprise whose project timetable, as
set by the Board is delayed by one year, shall be considered
automatically cancelled unless otherwise reinstated as a
registered enterprise by the Board;
(9) Determine the organizational structure taking into

account Article 6 of this Code; appoint, discipline and
remove its personnel consistent with the provisions of the
Civil Service Law and Rules;
(10) Prepare or contract for the preparation of feasibility and

other pre-investment studies for pioneer areas either
upon its own initiative; or upon the request of Philippine
nationals who commit themselves to invest therein and
show the capability of doing so; Provided, That if the
venture is implemented, then the amount advanced by
the Board shall be repaid within five (5) years from the
date the commercial operation of said enterprise starts;
(11) When feasible and considered desirable by the Board,

require registered enterprises to list their shares of
stock in any accredited stock exchange or directly offer
a portion of their capital stock to the public and/or their
employees;
(12) Formulate and implement rationalization programs

for certain industries whose operation may result in
dislocation, overcrowding or inefficient use of resources,
540
thus impeding economic growth. For this purpose, the Board

may formulate guidelines for progressive manufacturing
programs, local content programs, mandatory sourcing
requirements and dispersal of industries. In appropriate
cases and upon approval of the President, the Board may
restrict, either totally or partially, the importation of any
equipment or raw materials or finished products involved
in the rationalization program;
(13) In appropriate cases, and subject to the conditions which

the Board deems necessary, suspend the nationality
requirement provided for in this Code or any other
nationalization statute in cases of ASEAN projects or
investments by ASEAN nationals in preferred projects, and
with the approval of the President, extend said suspension
to other international complementation arrangements
for the manufacture of a particular product on a regional
basis to take advantage of economies of scale;
(14) Extend the period of availment of incentives by any

registered enterprise; Provided, That the total period of
availment shall not exceed ten (10) years, subject to any
of the following criteria:
(a) The registered enterprise has suffered operational

force majeure that has impaired its viability;
(b) The registered enterprise has not fully enjoyed

the incentives granted to it for reasons beyond its
control;
(c) The project of the registered enterprise has a gestation

period which goes beyond the period of availment of
needed incentives; and
(d) The operation of the registered enterprise has been

subjected to unforeseen changes in government
policies, particularly, protectionalism policies of
541
importing countries, and such other supervening

factors which would affect the competitiveness of the
registered firm;
(15) Regulate the making of investments and the doing of

business within the Philippines by foreigners or business
organizations owned in whole or in part by foreigners;
(16) Prepare or contract for the preparation of industry and

sectoral development programs and gather and compile
statistical, technical, marketing, financial and other data
required for the effective implementation of this Code;
(17) Within four (4) months after the close of the fiscal year,
submit annual reports to the President which shall cover
its activities in the administration of this Code, including
recommendations on investment policies;
(18) Provide, directly or through Philippine Diplomatic

Missions, such information as may be of interest to
prospective foreign investors;
(19) Collate, analyze and compile pertinent information

and studies concerning areas that have been or may be
declared preferred areas of investments; and
(20) Enter into agreements with other agencies of government

for the simplification and facilitation of systems and
procedures involved in the promotion of investments,
operation of registered enterprises and other activities
necessary for the effective implementation of this Code;
(21) Generally, exercise all the powers necessary or incidental

to attain the purposes of this Code and other laws vesting
additional functions on the Board.
Article 8. Powers and Duties of the Chairman. – The Chairman

shall have the following powers and duties:
542
(1) To preside over the meetings of the Board;
(2) To render annual reports to the President and such

special reports as may be requested;
(3) To act as liaison between investors seeking joint venture

arrangements in particular areas of investments;
(4) Recommend to the Board such policies and measures he

may deem necessary to carry out the objectives of this
Code; and
(5) Generally, to exercise such other powers and perform

such other duties as may be directed by the Board of
Governors from time to time.
Article 9. Powers and Duties of the Vice-Chairman. – The

Vice-Chairman shall have the following powers and duties:
(1) To act as Managing Head of the Board;
(2) To preside over the meetings of the Board in the absence

of the Chairman;
(3) Prepare the Agenda for the meetings of the Board and
submit for its consideration and approval the policies
and measures which the Chairman deems necessary and
proper to carry out the provisions of this Code;
(4) Assist registered enterprises and prospective investors

to have their papers processed with dispatch by all
government offices, agencies, instrumentalities and
financial institutions; and
(5) Perform the other duties of the Chairman in the absence

of the latter, and such other duties as may be assigned to
him by the Board of Governors.
543
BOOK I
INVESTMENT WITH INCENTIVES
TITLE I
PREFERRED AREAS OF INVESTMENTS
CHAPTER I
DEFINITION OF TERMS
Article 10. “Board” shall mean the Board of Investments

created under this Code.
Article 11. “Registered Enterprises” shall mean any individual,

partnership, cooperative, corporation or other entity incorporated
and/or organized and existing under Philippine laws; and registered
with the Board in accordance with this Book: Provided, however,
That the term “registered enterprise” shall not include commercial
banks, savings and mortgage banks, rural banks, savings and loan
associations, building and loan associations, developmental banks,
trust companies, investment banks, finance companies, brokers and
dealers in securities, consumers cooperatives and credit unions, and
other business organizations whose principal purpose or principal
source of income is to receive deposits, lend or borrow money, buy
and sell or otherwise deal, trade or invest in common or preferred
stocks, debentures, bonds or other marketable instruments generally
recognized as securities, or discharge other similar intermediary,
trust of fiduciary functions.
Article 12. “Technological assistance contracts” shall mean

contracts for: (1) the transfer, by license otherwise, of patents,
processes, formulas or other technological rights of foreign origin;
and/or (2) foreign assistance concerning technical and factory
management, design, planning, construction, operation and similar
matters.
Article 13. “Foreign loans” shall mean any credit facility or

financial assistance other than equity investment denominated and
payable in foreign currency or where the creditor has the option
544
to demand payment in foreign exchange and registered with the

Central Bank and the Board.
Article 14. “Foreign Investments” shall mean equity

investments owned by a non-Philippine national made in the form
of foreign exchange or other assets actually transferred to the
Philippines and registered with the Central Bank and the Board,
which shall assess and appraise the value of such assets other than
foreign exchange.
Article 15. “Philippine national” shall mean a citizen of the

Philippines or a domestic partnership or association wholly-owned
laws of the Philippines of which at least sixty per cent (60%) of the
citizens of the Philippines, or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is
a Philippine national and at least sixty per cent (60%) of the fund
will accrue to the benefit of Philippine nationals; Provided, That
where a corporation and its non-Filipino stockholders own stock in
a registered enterprise, at least sixty per cent (60%) of the capital
stock outstanding and entitled to vote of both corporations must be
owned and held by the citizens of the Philippines and at least sixty
per cent (60%) of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that the
corporation shall be considered a Philippine national.
Article 16. “Preferred areas of investments” shall mean the

economic activities that the Board shall have declared as such in
accordance with Article 28 which shall be either non-pioneer or
pioneer.
Article 17. “Pioneer enterprise” shall mean a registered

enterprise (1) engaged in the manufacture, processing or production,
and not merely in the assembly or packaging of goods, products,
commodities or raw materials that have not been or are not being
produced in the Philippines on a commercial scale or (2) which uses
a design, formula, scheme, method, process or system of production
545
or transformation of any element, substance or raw materials into

another raw material or finished goods which is new and untried in
the Philippines or (3) engaged in the pursuit of agricultural, forestry
and mining activities and/or services including the industrial
aspects of food processing whenever appropriate, pre-determined
by the Board, in consultation with the appropriate Department, to
be feasible and highly essential to the attainment of the national
goal, in relation to a declared specific national food and agricultural
program for self-sufficiency and other social benefits of the project
or (4) which produces non-conventional fuels or manufactures
equipment which utilize non-conventional sources of energy or uses
or converts to coal or other non-conventional fuels or sources of
energy in its production, manufacturing or processing operations.
Provided, That the final product in any of the foregoing instances,
involves or will involve substantial use and processing of domestic
raw materials, whenever available; taking into account the risks
and magnitude of investment: Provided, further, That the foregoing
definitions shall not in any way limit the rights and incentives
granted to less-developed-area enterprises provided under Title V,
Book I, hereof.
Article 18. “Non-pioneer enterprise” shall include all registered

producer enterprises other than pioneer enterprises.
Article 19. “Expansion” shall include modernization and

rehabilitation and shall mean increase of existing volume or value
of production or upgrading the quality of the registered product or
utilization of inefficient or idle equipment under such guidelines as
the Board may adopt.
Article 20. “Measured capacity” shall mean the estimated

additional volume of production or service which the Board
determines to be desirable in each preferred area of investment
in order to supply the needs of the economy at reasonable prices,
taking into account the export potential of the product, including
economies of scale which would render such product competitive
in the world market. Measured capacity shall not be less than the
amount by which the measurable domestic and country’s potential
546
export market demand exceeds the existing productive capacity in

said preferred areas. For export market industries, when warranted
the Board shall base measured capacity on the availability of
domestic raw materials after deducting the needs of the domestic
market therefor.
Article 21. “Tax credit” shall mean any of the credits against
taxes and/or duties equal to those actually paid or would have
been paid to evidence which tax credit certificate shall be issued
by the Secretary of Finance or his representative, or the Board, if
so delegated by the Secretary of Finance. The tax credit certificates
including those issued by the Board pursuant to laws repealed
by this Code but without in any way diminishing the scope of
negotiability under their laws of issue are transferable under such
conditions as may be determined by the Board after consultation
with the Department of Finance. The tax credit certificate shall
be used to pay taxes, duties, charges and fees due to the National
Government:Provided, That the tax credits issued under this Code
shall not form part of the gross income of the grantee/transferee
for income tax purposes under Section 29 of the National Internal
Revenue Code and are therefore not taxable: Provided,further, That
such tax credits shall be valid only for a period of ten (10) years from
date of issuance.
Article 22. “Export products” shall mean manufactured or

processed products the total F.O.B. Philippine port value of the
exports of which did not exceed five million dollars in the United
States Currency in the calendar year 1968 and which meet the local
content requirement, if any, set by the Board, and standards of
quality set by the Bureau of Product Standards, or, in default of such
standards, by the Board or by such public or private organization,
chamber, group or body as the Board may designate. The above
definition notwithstanding, the Investment Priorities Plan may
include other products for export subjects to such conditions and
limited incentives as may be determined by the Board.
Article 23. “Export sales” shall mean the Philippine port

F.O.B. value, determined from invoices, bills of lading, inward
547
letters of credit, landing certificates, and other commercial

documents, of export products exported directly by a registered
export producer or the net selling price of export product sold by
a registered export producer to another export producer, or to an
export trader that subsequently exports the same: Provided, That
sales of export products to another producer or to an export trader
shall only be deemed export sales when actually exported by the
latter, as evidenced by landing certificates or similar commercial
documents: Provided, further, That without actual exportation the
following shall be considered constructively exported for purposes
of this provision: (1) sales to bonded manufacturing warehouses of
export-oriented manufacturers; (2) sales to export processing zones;
(3) sales to registered export traders operating bonded trading
warehouses supplying raw materials used in the manufacture
of export products under guidelines to be set by the Board in
consultation with the Bureau of Internal Revenue and the Bureau of
Customs; (4) sales to foreign military bases, diplomatic missions and
other agencies and/or instrumentalities granted tax immunities, of
locally manufactured, assembled or repacked products whether paid
for in foreign currency or not: Provided, further, That export sales
of registered export trader may include commission income: and
Provided, finally, That exportation of goods on consignment shall
not be deemed export sales until the export products consigned are
in fact sold by the consignee.
Sales of locally manufactured or assembled goods for

household and personal use to Filipinos abroad and other non-
residents of the Philippines as well as returning Overseas Filipinos
under the Internal Export Program of the government and paid
for in convertible foreign currency inwardly remitted through the
Philippine banking systems shall also be considered export sales.
Article 24. “Production cost” shall mean the total of the

cost of direct labor, raw materials, and manufacturing overhead,
determined in accordance with generally accepted accounting
principles, which are incurred in manufacturing or processing the
products of a registered enterprise.
548
Article 25. “Processing” shall mean converting of raw materials

into marketable from through physical, mechanical, chemical,
electrical, biochemical, biological or other means or by a special
treatment or a series of actions, such as slaughtering, milling,
pasteurizing, drying or desiccating, quick freezing, that results in
a change in the nature or state of the products. Merely packing or
packaging shall not constitute processing.
Article 26. “Investment Priorities Plan” shall mean the over-

all plan prepared by the Board which includes and contains:
(a) The specific activities and generic categories of economic

activity wherein investments are to be encouraged and
the corresponding products and commodities to be grown,
processed or manufactured pursuant thereto for the
domestic or export market;
(b) Specific public utilities which can qualify for incentives

under this Code and which shall be supported by studies
of existing and prospective regional demands for the
services of such public utilities in the light of the level
and structure of income, production, trade, prices and
relevant economic and technical factors of the regions as
well as the existing facilities to produce such services;
(c) Specific activities where the potential for utilization

of indigenous non-petroleum based fuels or sources of
energy can be best promoted; and
(d) Such other information, analysis, data, guidelines or

criteria as the Board may deem appropriate.
The specific and generic activities to be included in the

Investment Priorities Plan with their status as pioneer or non-
pioneer shall be determined by the Board in accordance with the
criteria set forth in this Book.
549
CHAPTER II
INVESTMENT PRIORITIES PLAN
Article 27. Investment Priorities Plan. – Not later than

the end of March of every year, the Board of Investments, after
consultation with the appropriate government agencies and the
private sector, shall submit to the President an Investment Priorities
Plan: Provided, however, That the deadline for submission, may be
extended by the President.
Article 28. Criteria in Investment Priority Determination. – No

economic activity shall be included in the Investment Priority Plan
unless it is shown to be economically, technically and financially
sound after thorough investigation and analysis by the Board.
The determination of preferred areas of investment to be

listed in the Investment Priorities Plan shall be based on long-
run comparative advantage, taking into account the value of social
objectives and employing economic criteria along with market,
technical, and financial analyses.
The Board shall take into account the following:
(a) Primarily, the economic soundness of the specific activity

as shown by its economic internal rate of return;
(b) The extent of contribution of an activity to a specific

developmental goal;
(c) Other indicators or comparative advantage;
(d) Measured capacity as defined in Article 20; and
(e) The market and technical aspects and considerations of

the activity proposed to be included.
In any of the declared preferred areas of investment, the

Board may designate as pioneer areas the specific products and
550
commodities that meet the requirements of Article 17 of this Code

and review yearly whether such activity, as determined by the
Board, shall continue as pioneer, otherwise, it shall be considered
as non-pioneer and accordingly listed as such in the Investment
Priorities Plan or removed from the Investment Priorities Plan.
Article 29. Approval of the Investment Priorities Plan. – The

President shall proclaim the whole or part of such plan as in effect;
or alternatively, return the whole or part of the plan to the Board of
Investment for revision.
Upon the effectivity of the plan or portions thereof, the

President shall issue all necessary directives to all departments,
bureaus, agencies or instrumentalities of the government to
ensure the implementation of the plan by the agencies concerned
in a synchronized and integrated manner. No government body
shall adopt any policy or take any course of action contrary to or
inconsistent with the plan.
Article 30. Amendments. – Subject to publication requirements

and the criteria for investment priority determination, the Board of
Investments may, at any time, add additional areas in the plan,
alter any of the terms of the declaration of an investment area or
the designation of measured capacities, or terminate the status of
preference. In no case, however, shall any amendment of the plan
impair whatever rights may have already been legally vested in
qualified enterprises which shall continue to enjoy such rights to
the full extent allowed under this Code. The Board shall not accept
applications in an area of investment prior to the approval of the
same as a preferred area nor after approval of its deletion as a
preferred area of investment.
Article 31. Publication. – Upon approval of the plan, in whole

or in part, or upon approval of an amendment thereof, the plan
or the amendment, specifying and declaring the preferred areas
of investment and their corresponding measured capacity shall
be published in at least one (1) newspaper of general circulation
and all such areas shall be open for application until publication
551
of an amendment or deletion thereof, or until the Board approves

registration of enterprises which fill the measured capacity.
CHAPTER III
REGISTRATION OF ENTERPRISES
Article 32. Qualifications of a Registered Enterprises. – To

be entitled to registration under the Investment Priorities Plan, an
applicant must satisfy the Board that:
(1) He is a citizen of the Philippines, in case the applicant is

a natural person, or in case of a partnership or any other
association, it is organized under Philippine laws and
that at least sixty percent (60%) of its capital is owned
and controlled by citizens of the Philippines; or in case
of a corporation or a cooperative, it is organized under
Philippine laws and that at least sixty per cent (60%)
of the capital stock outstanding and entitled to vote is
owned and held by Philippine nationals as defined under
Article 15 of this Code, and at least sixty per cent (60%)
of the members of the Board of Directors are citizens of
the Philippines. If it does not possess the required degree
of ownership as mentioned above by Philippine nationals,
the following circumstances must be satisfactorily
established:
(a) That it proposes to engage in a pioneer projects as

defined in Article 17 of this Code, which, considering
the nature and extent of capital requirements,
processes, technical skills and relative business risks
involved, is in the opinion of the Board of such a
nature that the available measured capacity thereof
cannot be readily and adequately filled by Philippine
nationals; or, if the applicant is exporting at least
seventy per cent (70%) of is total production, the
export requirement herein provided may be reduced
in meritorious cases under such conditions and/or
limited incentives as the Board may determine;
552
(b) That it obligates itself to attain the status of a

Philippine national, as defined in Article 15, within
thirty (30) years from the date of registration or with
such longer period as the Board may require taking
into account the export potential of the project:
Provided, That a registered enterprise which exports
one hundred percent (100%) of its total production
need not comply with this requirement;
(c) That the pioneer are it will engage in is one that is not
within the activities reserved by the Constitution or
other laws of the Philippines to the Philippine citizens
or corporations owned and controlled by Philippine
citizens;
(2) The applicant is proposing to engage in a preferred

project listed or authorized in the current Investment
Priorities Plan within a reasonable time to be fixed
by the Board or, if not so listed, at least fifty percent
(50%) of its total production is for export or it is an
existing producer which will export part of production
under such conditions and/or limited incentives as
the Board may determine; or that the enterprise is
engaged or proposing to engage in the sale abroad of
export products bought by it from one or more export
producers; or the enterprise in engaged or proposing
to engage in rendering technical, professional or
other services or in exporting television and motion
pictures and musical recordings made or produced in
the Philippines, either directly or through a registered
trader.
(3) The applicant is capable of operating on a sound

and efficient basis of contributing to the national
development of the preferred area in particular and
of the national economy in general; and
553
(4) If the applicant is engaged or proposes to engage

in undertakings or activities other than preferred
projects, it has installed or undertakes to install
an accounting system adequate to identify the
investments, revenues, costs, and profits or losses of
each preferred project undertaken by the enterprise
separately from the aggregate investment, revenues,
costs and profits or losses of the whole enterprise or
to establish a separate corporation for each preferred
project if the Board should so require to facilitate
proper implementation of this Code.
Article 33. Application. – Applications shall be filed with

the Board, recorded in a registration book and the date appearing
therein and stamped on the application shall be considered the date
of official acceptance.
Whenever necessary, the Board, through the People’s Economic

Councils, shall consult the communities affected on the acceptability
of locating the registered enterprise within their community.
Article 34. Approval and Registration Procedures. – The Board

is authorized to adopt rules and regulations to facilitate action on
applications filed with it; prescribe criteria for the evaluation of
several applications filed in one preferred area; devise standard
forms for the use of applicants and delegate to the regional offices of
the Department of Trade and Industry the authority to receive and
process applications for enterprises to be located in their respective
regions.
Applications filed shall be considered automatically approved

if not acted upon by the Board within twenty (20) working days from
official acceptance thereof.
Article 35. Criteria for Evaluation of Applications. – The

following criteria will be considered in the evaluation of applications
for registration under a preferred area:
554
(a) The extent of ownership and control by Philippine citizens

of the enterprises;
(b) The economic rates of return;
(c) The measured capacity Provided, That estimates of

measured capacities shall be regularly reviewed and
updated to reflect changes in market supply and demand
conditions; Provided, Further, That measured capacity
shall not result in a monopoly in any preferred area of
investment which would unduly restrict trade and fair
competition nor shall it be used to deny the entry of any
enterprise in any field of endeavor or activity;
(d) The amount of foreign exchange earned, used or saved in

their operations;
(e) The extent to which labor, materials and other resources

obtained from indigenous sources are utilized;
(f) The extent to which technological advances are applied

and adopted to local condition;
(g) The amount of equity and degree to which the ownership

of such equity is spread out and diversified; and
(h) Such other criteria as the Board may determine.
Article 36. Appeal from Board’s Decision. – Any order or

decision of the Board shall be final and executory after thirty (30)
days from its promulgation. Within the said period of thirty (30)
days, said order or decision may be appealed to the Office of the
President. Where an appeal has been filed, said order or decision
shall be final and executory ninety (90) days after the perfection of
the appeal, unless reversed.
Article 37. Certificate of Registration. – A registered enterprise

under this Code shall be issued a certificate of registration under the
555
seal of the Board of Investments and the signature of its Chairman

and/or such other officer or employee of the Board as it may empower
and designate for the purpose. The certificate shall be in such form
and style as the Board may determine and shall state, among other
matters:
(a) The name of the registered enterprise;
(b) The preferred area of investment in which the registered

enterprise is proposing to engage;
(c) The nature of the activity it is undertaking or proposing

to undertake, whether pioneer or non-pioneer, and the
registered capacity of the enterprise; and
(d) The other terms and conditions to be observed by the

registered enterprise by virtue of the registration.
TITLE II
BASIC RIGHTS AND GUARANTEES
Article 38. Protection of Investments. – All investors and

registered enterprises are entitled to the basic rights and guarantees
provided in the Constitution. Among other rights recognized by the
Government of the Philippines are the following:
(a) Repatriation of Investments. In the case of foreign

investments, the right to repatriate the entire proceeds of
the liquidation of the investment in the currency in which
the investment was originally made and at the exchange
rate prevailing at the time of repatriation, subject to
the provisions of Section 74 of Republic Act No. 265 as
amended;
For investments made pursuant to Executive Order No.

32 and its implementing rules and regulations, remit
ability shall be as provided therein.
556
(b) Remittance of Earnings. In the case of foreign investments,

the right to remit earnings from the investment in the
currency in which the investment was originally made and
at the exchange rate prevailing at the time of remittance,
subject to the provisions of Section 74 of Republic Act No.
265 as amended;
(c) Foreign Loans and Contracts. The right to remit at the

exchange rate prevailing at the time of remittance such
sums as may be necessary to meet the payments of interest
and principal on foreign loans and foreign obligations
arising from technological assistance contracts, subject
to the provisions of Section 74 of Republic Act No. 265 as
amended;
(d) Freedom from Expropriation. There shall be no

expropriation by the government of the property
represented by investments or of the property of the
enterprise except for public use or in the interest of
national welfare or defense and upon payment of
just compensation. In such cases, foreign investors or
enterprises shall have the right to remit sums received
as compensation for the expropriated property in the
currency in which the investment was originally made
and at the exchange rate at the time of remittance, subject
to the provisions of Section 74 of Republic Act No. 265 as
amended;
(e) Requisition of Investment. There shall be no requisition

of the property represented by the investment or of the
property of enterprises, except in the event of war or
national emergency and only for the duration thereof.
Just compensation shall be determined and paid either
at the time of requisition or immediately after cessation
of the state of war or national emergency. Payments
received as compensation for the requisitioned property
may be remitted in the currency in which the investment
was originally made and at the exchange rate prevailing
557
at the time of remittance, subject to the provisions of

Section 74 of Republic Act No. 265 as amended.
TITLE III
INCENTIVES TO REGISTERED ENTERPRISES
Article 39. Incentives to Registered Enterprises. – All

registered enterprises shall be granted the following incentives to
the extent engaged in a preferred area of investment;
(a) Income Tax Holiday.
(1) For six (6) years from commercial operation for pioneer
firms and four (4) years for non-pioneer firms, new
registered firms shall be fully exempt from income
taxes levied by the National Government. Subject to
such guidelines as may be prescribed by the Board,
the income tax exemption will be extended for another
year in each of the following cases:
i. the project meets the prescribed ratio of capital

equipment to number of workers set by the
Board;
ii. utilization of indigenous raw materials at rates

set by the Board;
iii. the net foreign exchange savings or earnings

amount to at least US$500,000.00 annually
during the first three (3) years of operation.
The preceding paragraph notwithstanding, no

registered pioneer firm may avail of this incentive for
a period exceeding eight (8) years.
(2) For a period of three (3) years from commercial

operation, registered expanding firms shall be
entitled to an exemption from income taxes levied
558
by the National Government proportionate to their

expansion under such terms and conditions as the
Board may determine; Provided, however, That during
the period within which this incentive is availed
of by the expanding firm it shall not be entitled to
additional deduction for incremental labor expense.
(3) The provision of Article 7 (14) notwithstanding,

registered firms shall not be entitled to any extension
of this incentive.
(b) Additional Deduction for Labor Expense. For the first

five (5) years from registration a registered enterprise
shall be allowed an additional deduction from the taxable
income of fifty percent (50%) of the wages corresponding
to the increment in the number of direct labor for skilled
and unskilled workers if the project meets the prescribed
ratio of capital equipment to number of workers set by the
Board: Provided, That this additional deduction shall be
doubled if the activity is located in less developed areas
as defined in Art. 40.
(c) Tax and Duty Exemption on Imported Capital

Equipment. Within five (5) years from the effectivity of
this Code, importations of machinery and equipment
and accompanying spare parts of new and expanding
registered enterprise shall be exempt to the extent of
one hundred percent (100%) of the customs duties and
national internal revenue tax payable thereon: Provided,
That the importation of machinery and equipment and
accompanying spare parts shall comply with the following
conditions:
(1) They are not manufactured domestically in sufficient

quantity, of comparable quality and at reasonable
prices;
559
(2) They are reasonably needed and will be used exclusively

by the registered enterprise in the manufacture of its
products, unless prior approval of the Board is secured
for the part-time utilization of said equipment in a
non-registered activity to maximize usage thereof or
the proportionate taxes and duties are paid on the
specific equipment and machinery being permanently
used for non-registered activities; and
(3) The approval of the Board was obtained by the

registered enterprise for the importation of such
machinery, equipment and spare parts.
In granting the approval of the importations under

this paragraph, the Board may require international
canvassing but if the total cost of the capital equipment
or industrial plant exceeds US$5,000,000, the Board
shall apply or adopt the provisions of Presidential
Decree Numbered 1764 on International Competitive
Bidding.
If the registered enterprise sells, transfers or disposes

of these machinery, equipment and spare parts without
prior approval of the Board within five (5) years from
date of acquisition, the registered enterprise and the
vendee, transferee, or assignee shall be solidarily
liable to pay twice the amount of the tax exemption
given it.
The Board shall allow and approve the sale, transfer

or disposition of the said items within the said period
of five (5) years if made:
(aa) to another registered enterprise or registered

domestic producer enjoying similar incentives;
(bb) for reasons of proven technical obsolescence; or
560
(cc) for purposes of replacement to improve and/

or expand the operations of the registered
enterprise.
(d) Tax Credit on Domestic Capital Equipment. A tax credit

equivalent to one hundred percent (100%) of the value of
the national internal revenue taxes and customs duties
that would have been waived on the machinery, equipment
and spare parts, had these items been imported shall be
given to the new and expanding registered enterprise
which purchases machinery, equipment and spare parts
from a domestic manufacturer: Provided, That (1) That
the said equipment, machinery and spare parts are
reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products,
unless prior approval of the Board is secured for the part-
time utilization of said equipment in a non-registered
activity to maximize usage thereof; (2) that the equipment
would have qualified for tax and duty-free importation
under paragraph (c) hereof; (3) that the approval of the
Board was obtained by the registered enterprise; and (4)
that the purchase is made within five (5) years from the
date of effectivity of the Code. If the registered enterprise
sells, transfers or disposes of these machinery, equipment
and spare parts, the provisions in the preceding paragraph
for such disposition shall apply.
(e) Exemption from Contractor’s Tax. The registered

enterprise shall be exempt from the payment of
contractor’s tax, whether national or local.
(f) Simplification of Customs Procedure. Customs procedures

for the importation of equipment, spare parts, raw
materials and supplies, and exports of processed products
by registered enterprises shall be simplified by the Bureau
of Customs.
(g) Unrestricted Use of Consigned Equipment. Provisions
561
of existing laws notwithstanding, machinery, equipment

and spare part consigned to any registered enterprises
shall not be subject to restrictions as to period of use of
such machinery, equipment and spare parts Provided,
that the appropriate re-export bond is posted unless
the importation is otherwise covered under subsections
(c) and (m) of this Article. Provided, further, that such
consigned equipment shall be for the exclusive use of the
registered enterprise.
If such equipment is sold, transferred or otherwise

disposed of by the registered enterprise the related
provision of Article 39 (c) (3) shall apply. Outward
remittance of foreign exchange covering the proceeds of
such sale, transfer or disposition shall be allowed only
upon prior Central Bank approval.
(h) Employment of Foreign Nationals. Subject to the

provisions of Section 29 of Commonwealth Act Number
613, as amended, a registered enterprise may employ
foreign nationals in supervisory, technical or advisory
positions for a period not exceeding five (5) years from
its registration, extendible for limited periods at the
discretion of the Board: Provided, however, That when
the majority of the capital stock of a registered enterprise
is owned by foreign investors, the position of president,
treasurer and general manager or their equivalents may
be retained by foreign nationals beyond the period set
forth herein.
Foreign nationals under employment contract within the

purview of this incentive, their spouses and unmarried
children under twenty-one (21) years of age, who are not
excluded by Section 29 of Commonwealth Act Numbered
613, as amended, shall be permitted to enter and reside
in the Philippines during the period of employment of
such foreign nationals.
562
A registered enterprise shall train Filipinos as

understudies of foreign nationals in administrative,
supervisory and technical skills and shall submit annual
reports on such training to the Board.
(i) Exemption on Breeding Stocks and Genetic Materials.

The importation of breeding stocks and genetic materials
within ten (10) years from the date of registration or
commercial operation of the enterprise shall be exempt
from all taxes and duties: Provided, That such breeding
stocks and genetic materials are (1) not locally available
and/or obtainable locally in comparable quality and at
reasonable prices; (2) reasonably needed in the registered
activity; and (3) approved by the Board.
(j) Tax Credit on Domestic Breeding Stocks and Genetic

Materials. A tax credit equivalent to one hundred percent
(100%) of the value of national internal revenue taxes
and customs duties that would have been waived on the
breeding stocks and genetic materials had these items
been imported shall be given to the registered enterprise
which purchases breeding stocks and generic materials
from a domestic producer: Provided, 1) That said breeding
stocks and generic materials would have qualified for tax
and duty free importation under the preceding paragraph;
2) that the breeding stocks and genetic materials are
reasonably needed in the registered activity; 3) that the
approval of the board has been obtained by the registered
enterprise; and 4) that the purchase is made within
ten (10) years from date of registration or commercial
operation of the registered enterprise.
(k) Tax Credit for Taxes and Duties on Raw Materials.

Every registered enterprise shall enjoy a tax credit
equivalent to the National Internal Revenue taxes and
Customs duties paid on the supplies, raw materials and
semi-manufactured products used in the manufacture,
processing or production of its export products and
563
forming part thereof, exported directly or indirectly by the

registered enterprise: Provided, however, that the taxes
on the supplies, raw materials and semi- manufactured
products domestically purchased are indicated as a
separate item in the sales invoice.
Nothing herein shall be construed as to preclude the

Board from setting a fixed percentage of export sales as
the approximate tax credit for taxes and duties of raw
materials based on an average or standard usage for such
materials in the industry.
(l) Access to Bonded Manufacturing/Trading Warehouse

System. Registered export oriented enterprises shall
have access to the utilization of the bonded warehousing
system in all areas required by the project subject to such
guidelines as may be issued by the Board upon prior
consultation with the Bureau of Customs.
(m) Exemption from Taxes and Duties on Imported Spare

Parts. Importation of required supplies and spare
parts for consigned equipment or those imported tax
and duty free by a registered enterprise with a bonded
manufacturing warehouse shall be exempt from customs
duties and national internal revenue taxes payable
thereon, Provided, However, That at least seventy percent
(70%) of production is exported; Provided, further, that
such spare parts and supplies are not locally available
at reasonable prices, sufficient quantity and comparable
quality; Provided, finally, That all such spare parts and
supplies shall be used only in the bonded manufacturing
warehouse of the registered enterprise under such
requirements as the Bureau of Customs may impose.
(n) Exemption from Wharfage Dues and any Export Tax,

Duty, Impost and Fee. The provisions of law to the contrary
notwithstanding, exports by a registered enterprise of its
non- traditional export products shall be exempted of its
564
non-traditional export products shall be exempted from

any wharfage dues, and any export tax, duty, impost and
fee.
TITLE IV
INCENTIVES TO LESS-DEVELOPED-AREA REGISTERED
ENTERPRISE
Article 40. A registered enterprise regardless of nationality

located in a less-developed-area included in the list prepared by the
Board of Investments after consultation with the National Economic
& Development Authority and other appropriate government
agencies, taking into consideration the following criteria: low
per capita gross domestic product; low level of investments; high
rate of unemployment and/or underemployment; and low level of
infrastructure development including its accessibility to develop
urban centers, shall be entitled to the following incentives in
addition to those provided in the preceding article:
(a) Pioneer incentives. An enterprise in a less-developed-

area registered with the Board under Book I of this Code,
whether proposed, or an expansion of an existing venture,
shall be entitled to the incentives provided for a pioneer
registered enterprise under its law of registration.
(b) Incentives for necessary and Major Infrastructure and

Public Utilities. Registered enterprise establishing
their production, processing or manufacturing plants in
an area that the Board designates as necessary for the
proper dispersal of industry or in area which the Board
finds deficient in infrastructure, public utilities, and other
facilities, such as irrigation, drainage or other similar
waterworks infrastructure may deduct from taxable
income an amount equivalent to one hundred percent
(100%) of necessary and major infrastructure works it may
have undertaken with the prior approval of the Board in
consultation with other government agencies concerned;
Provided, That the title to all such infrastructure works
565
shall upon completion, be transferred to the Philippine

Government: Provided, further, That any amount not
deducted for a particular year may be carried over for
deduction for subsequent years not exceeding ten (10)
years from commercial operation.
TITLE V
GENERAL PROVISIONS
Article 41. Power of the President to Rationalize Incentives.

– The President may, upon recommendation of the Board and in the
interest of national development, rationalize the incentives scheme
herein provided; extend the period of availment of incentives or
increase rates of tax exemption of any project whose viability or
profitability require such modification.
Article 42. Refund and Penalties. – In case of cancellation

of the certificate granted under this Code, the Board may, in
appropriate cases, require the refund of incentives availed of and
impose corresponding fines and penalties.
Article 43. Benefits of Multiple Area Enterprises. – When a

registered enterprise engages in activities or endeavors that have
not been declared preferred areas of investments, the benefits and
incentives accruing under this Code to registered enterprises and
investors therein shall be limited to the portion of the activities of
such registered enterprise as is a preferred area of investment.
566
BOOK II
FOREIGN INVESTMENTS WITHOUT INCENTIVES
TITLE I
CHAPTER I
DEFINITIONS AND SCOPE OF THIS BOOK
Article 44. Definition of Terms. – As used in this Book, the

term “investment” shall mean equity participation in any enterprise
formed, organized or existing under the laws of the Philippines;
and the phrase “doing business” shall include soliciting orders,
purchases, service contracts, opening offices, whether called “liaison”
offices or branches; appointing representatives or distributors who
are domiciled in the Philippines or who in any calendar year stay in
the Philippines for a period or periods totalling one hundred eighty
(180) days or more; participating in the management, supervision
or control of any domestic business firm, entity or corporation in
the Philippines, and any other act or acts that imply a continuity
of commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution
of, commercial gain or of the purpose and object of the business
organization.
Article 45. Non-Applicability to Banking Institutions. – This

Book shall not apply to banking institutions which are governed
and regulated by the Central Banking Act and other laws which are
under the supervision of the Central Bank.
CHAPTER II
INVESTMENTS
Article 46. Permitted Investments.
(1) Without need of prior authority, anyone not a Philippine

national as that term is defined in Article 15 of this Code,
and not otherwise disqualified by law, may invest:
567
(a) In any enterprise registered under Book One hereof, to

the extent that the total investment of non-Philippine
nationals therein would not affect its status as a
registered enterprise under the law;
(b) In an enterprise not registered under Book One

hereof, to the extent that the total investment of
non-Philippine nationals herein shall not exceed
forty percent (40%) of the outstanding capital of
that enterprise, unless existing law forbids any non-
Philippine ownership in the enterprise or limits
ownership by non-Philippine national to a percentage
smaller than forty percent (40%).
(2) Within thirty (30) days after notice of the investment is

received by it, the enterprise in which any investment is
made by a non-Philippine national shall register the same
with the Board of Investments for purposes of record.
Investments made in the form of foreign exchange or
other assets actually transferred to the Philippines shall
also be registered with the Central Bank. The Board shall
assess and appraise the value of such assets other than
foreign exchange.
Article 47. Permissible Investments. – If an investment by a

non-Philippine national in an enterprise not registered under Book
One hereof is such that the total participation by non-Philippine
nationals in the outstanding capital thereof shall exceed forty
percent (40%), the enterprise must obtain prior authority from the
Board of Investments, which authority shall be granted unless the
proposed investment -
(a) Would conflict with existing constitutional provisions

and laws regulating the degree of required ownership by
Philippine nationals in the enterprise; or
(b) Would pose a clear and present danger of promoting

monopolies or combinations in restraint of trade; or
568
(c) Would be made in an enterprise engaged in an area

adequately being exploited by Philippine nationals; or
(d) Would conflict or be inconsistent with the Investment

Priorities Plan in force at the time the investment is
sought to be made; or
(e) Would not contribute to the sound and balanced

development of the national economy on a self-sustaining
basis.
Investments made in the form of foreign exchange or other

assets actually transferred to the Philippines shall also be registered
with the Central Bank. The Board shall assess and appraise the
value of such assets other than foreign exchange.
CHAPTER III
LICENSE TO DO BUSINESS
Article 48. Authority to Do Business.– No alien, and no firm

association, partnership, corporation or any other form of business
organization formed, organized, chartered or existing under any
laws other than those of the Philippines, or which is not a Philippine
national, or more than forty per cent (40%) of the outstanding capital
of which is owned or controlled by aliens shall do business or engage
in any economic activity in the Philippines or be registered, licensed,
or permitted by the Securities and Exchange Commission or by any
other bureau, office, agency, political subdivision or instrumentality
of the government, to do business, or engage in any economic activity
in the Philippines without first securing a written certificate from
the Board of Investments to the effect:
(1) That the operation or activity of such alien, firm,

association, partnership, corporation or other form
of business organization, is not inconsistent with the
Investment Priorities Plan;
569
(2) That such business or economic activity will contribute

to the sound and balanced development of the national
economy on a self-sustaining basis;
(3) That such business or economic activity by the applicant

would not conflict with the Constitution or laws of the
Philippines;
(4) That the field of business or economic activity is not one

that is being adequately exploited by Philippine nationals;
and
(5) That the entry of applicant therein will not pose a clear and
present danger of promoting monopolies or combinations
in restraint of trade.
Article 49. Requirements to be Imposed by the Board. – Upon

granting said certificate, the Board shall impose the following
requirements on the alien or the firm, association, partnership,
corporation or other form of business organization that is not
organized or existing under the laws of the Philippines
(1) To appoint a citizen of the Philippines, of legal age, good

moral character and reputation, and sound financing
standing, as resident agent, who shall be authorized to
accept summons and other legal process in behalf of the
applicant;
(2) To establish an office in the Philippines and to notify

the Securities and Exchange Commission in writing of
the applicant’s exact address and of every contemplated
transfer thereof or of the opening of new offices, at least
fifteen (15) days before the same are to be effected; and
once effected, not later than ten (10) days afterwards;
(3) To bring assets into the Philippines to constitute the

capital of the office or offices, of such kind and value as
the Board may deem necessary to protect those who may
570
deal with the applicant, and to maintain that capital

unimpaired during the period it does business in the
Philippines;
(4) To present prior proof that citizens of the Philippines and

corporations or other business organizations organized or
existing under the laws of the Philippines are allowed to
do business in the country or individual state within a
federal country of which applicant is a citizen or in which
it is domiciled: Provided, however, That if the state or
country of domicile of the applicant imposes on, or requires
of, Philippine nationals other conditions, requirements or
restrictions besides those set forth in this Code, the Board
of Investments shall impose the said other conditions,
requirements or restrictions on the applicant, if in its
judgment, the imposition thereof shall foster the sound
and balanced development of the national economy on a
self-sustaining basis;
(5) To submit to the Securities and Exchange Commission

certified copies of applicant’s charter and by-laws and all
amendments thereto, if any, with their translation into
an official language within twenty (20) days after their
adoption or after the grant of the prescribed certificate
by the Board of Investments and annually of applicant’s
financial statements showing all assets, liabilities and net
worth and results of operations, setting out separately
those pertaining to the branch office;
(6) To keep a complete set of accounting records with the

resident agent, which shall fully and faithfully reflect
all transactions within the Philippines, and to permit
inspections thereof by the Securities and Exchange
Commission, the Bureau of Internal Revenue and the
Board of Investments;
(7) To give priority to resident creditors as against non-

resident creditors and owners or stockholders in the
571
distribution of assets within the Philippines upon

insolvency, dissolution or revocation of the license;
(8) To give the Securities and Exchange Commission at least

six (6) months advance notice in writing of applicant’s
intention to stop doing business within the Philippines;
and to give such public notice thereof as the Securities and
Exchange Commission may require for the protection of
resident creditors and others dealing with the applicant;
and
(9) Not to terminate any franchise, licensing or other

agreement that applicant may have with a resident
of the Philippines authorizing the latter to assemble,
manufacture or sell within the Philippines the products of
the applicant, except for violation thereof or other just cause
and upon payment of compensation and reimbursement
of investment and other expenses incurred by the licensee
in developing a market for the said products: Provided,
however, That in case of disagreement, the amount of
compensation or reimbursement shall be determined
by the country where the licensee is domiciled or has its
principal office who shall require the applicant to file a
bond in such amount as, in its opinion, is sufficient for
this purpose.
The above requirements shall be in addition to those set forth

in the Corporation Code of the Philippines for authorizing foreign
corporations to transact business in the Philippines.
Article 50. Cause for Cancellation of Certificate of Authority

or Payment of Fine. – A violation of any of the requirements set forth
in Article 49 or of the terms and conditions which the Board may
impose shall be sufficient cause to cancel the certificate of authority
issued pursuant to this Book and/or subject firms to the payment
of fines in accordance with the rules and regulations issued by the
Board: Provided, however, That aliens or foreign firms, associations,
partnerships, corporations or other forms of business organization
572
not organized or existing under the laws of the Philippines which

may have been lawfully licensed to do business in the Philippines
prior to the effectivity of R.A. 5455, shall, with respect to the
activities for which they were licensed and actually engaged in
prior to the effectivity of said Act, not be subject to the provisions of
Article 48 and 49 but shall be subject to the reporting requirements
prescribed by the Board: Provided, further, That where the issuance
of said license has been irregular or contrary to law, any person
adversely affected thereby may file an action with the Regional Trial
Court where said alien or foreign business organization resides or
has its principal office to cancel the said license. In such cases, no
injunction shall issue without notice and hearing; and appeals and
other proceedings for review shall be filed directly with the Supreme
Court.
TITLE II
GENERAL PROVISIONS
Article 51. Mergers and Consolidations.– The provisions of

this Book Two shall apply to any merger, consolidation, syndicate
or any other combination of firms, associations, partnership or
other forms of business organization that will result in ownership
or control by persons or entities that are not Philippine nationals or
have foreign equity participation, of more than forty per cent (40%)
of the outstanding capital of whatever organizations results from
the merger, consolidation, syndicate or other combination.
Article 52. Local Government Action. – No agency,

instrumentality or political subdivision of the Government shall take
any action in conflict with or which will nullify the provisions of Book
Two of this Code, or any certificate of authority granted hereunder.
Article 53. Automatic Registration. – Application filed under

this Book shall be considered automatically approved if not acted
upon within ten (10) working days from official acceptance thereof.
Article 54. Publication and Posting of Notices. – Immediately

after the application has been given due course by the Board, the
573
Secretary of the Board or any official designated by the Board shall

require the applicant to publish the notice of the action of the Board
thereon at his expense once in a newspaper of general circulation
in the province or city where the applicant has its principal office,
and post copies of said notice in conspicuous places, in the office
of the Board or in the building where said office is located; setting
forth in such copies the name of the applicant, the business in which
it is engaged or proposes to engage or invest, and such other data
and information as may be required by the Board. No approval or
certificate shall be valid without the publication and posting of
notices as herein provided.
Article 55. Limited Authority to do Business.– When

appropriate, the Board may grant permissible investments or
authority to do business under Book Two of this Code for a limited
period where the need to prove economic viability of such activity
warrants the issuance of a temporary authorization.
Article 56. Periodic Reports. – The Board shall periodically

check and verify compliance with these provisions, either by
inspection of the books or by requiring regular reports from aliens
or foreign firms, domestic enterprises with foreign investments and
new entities licensed to do business under Article 48 of this Code.
A summary of said reports shall be periodically submitted by

the Board to the President. For this purpose, the Board may require
other government agencies licensing and/or regulating foreign
enterprises or domestic firms with foreign equity, to furnish the
Board with reports on such foreign investments.
Article 57. Penal Clause.
(1) Without prejudice to the provisions of Articles 42 and 50

hereof a violation of any provision of Books I and II of this
Code, or of the terms and conditions of registration, or of
the rules and regulations promulgated pursuant thereto,
or the act of abetting or aiding in any manner any such
violation, shall be punished by a fine not to exceed one
574
hundred thousand pesos (P100,000.00) or imprisonment

for not more than ten (10) years, at the discretion of the
Court.
(2) No official or employee of the government, its subdivisions

or instrumentalities shall appear as counsel for or act as
agent or representative of, or in any manner intervene or
intercede, directly or indirectly, in behalf of any party in
any transaction with the Board regarding any application
under Books I and II of this Code. The penalty for violation
of this prohibition is the same as that provided for in the
preceding paragraph. If the offender is an appointive
official or employee, the maximum of the penalty herein
prescribed shall be imposed, and the offender shall suffer
the additional penalty of perpetual disqualification from
public office, without prejudice to any administrative
action against him.
(3) If the offense is committed by a juridical entity, its

president and/or other officials responsible therefor shall
be subject to the penalty prescribed above. If the offender
or the president/official, in cases where the offense was
committed by a juridical entity, is an alien, he shall be
deported without further proceedings on the part of the
Deportation Board in addition to the penalty herein
prescribed and shall, if naturalized, be automatically
denaturalized from the date his sentence becomes final.
(4) Payment of the tax due after apprehension shall not

constitute a valid defense in any prosecution for violation
of any provision of this Code.
575
BOOK III
INCENTIVES TO MULTINATIONAL COMPANIES

ESTABLISHING REGIONAL OR AREA HEADQUARTERS IN
THE PHILIPPINES
CHAPTER I
LICENSING OF THE MULTINATIONAL COMPANY
Article 58. Qualifications of Multinational Company. – Any

foreign business entity formed, organized and existing under any
laws other than those of the Philippines whose purpose, as expressed
in its organizational documents or by resolution of its Board of
Directors or its equivalent, is to supervise, superintend, inspect or
coordinate, its own affiliates, subsidiaries, or branches in the Asia-
Pacific Region may establish a regional or area headquarters in the
Philippines, after securing a license therefor from the Securities
and Exchange Commission, upon the favorable recommendation of
the Board of Investments.
The Securities and Exchange Commission shall, within thirty

(30) days from the effectivity of this Code, issue the implementing
rules and regulations. The following minimum requirements shall,
however, be complied with by the said foreign entity.
(a) A certification from the Philippine Foreign Trade Senior

Officer or in the absence of such an official, a Philippine
Consul in the foreign firm’s home country that said
foreign firm is an entity engaged in international trade
with affiliates, subsidiaries or branch offices in the Asia-
Pacific Region.
(b) A certification from a principal officer of the foreign

entity to the effect that the said foreign entity has been
authorized by its Board of Directors or governing body
to establish its regional headquarters in the Philippines,
specifying that:
576
1. The activities of the regional headquarters shall be

limited to acting as a supervisory, communications
and coordinating center for its subsidiaries, affiliates
and branches in the region;
2. The headquarters will not derive any income from

sources within the Philippines and will not participate
in any manner in the management of any subsidiary
or branch office it might have in the Philippines;
3. The headquarters shall notify the Board of Investments

and the Securities and Exchange Commission of
any decision to close down or suspend operations
of its headquarters or terminate the services of any
expatriate at least fifteen (15) days before the same is
effected.
(c) Any undertaking that the multinational company will

remit into the country such amount as may be necessary to
cover its operations in the Philippines but which amount
will not be less than fifty thousand United States dollars
or its equivalent in other foreign currencies annually.
Within thirty (30) days from receipt of Certificate
of Registration from the Securities and Exchange
Commission, the multinational company will submit to
the Securities and Exchange Commission a Certificate
of inward remittance from a local bank showing that it
has remitted to the Philippines the amount of at least
thirty thousand United States dollars or its equivalent
in other foreign currencies and converted the same to
Philippine currency. Annually, within thirty (30) days
from the anniversary date of the multinational company’s
registration as a regional or area headquarters with the
Securities and Exchange Commission, it will submit proof
to the Securities and Exchange Commission of inward
remittance amounting to at least fifty thousand United
States dollars or its equivalent in other foreign currencies
during the past year.
577
(d) Any willful violation by the regional or area headquarters

of a multinational company of any of the provisions of this
Code, or its implementing rules and regulations, or other
terms and conditions of its registration, or any provision
of existing laws, shall constitute a sufficient cause for the
cancellation of its license or registration.
CHAPTER II
INCENTIVES TO EXPATRIATES
Article 59. Multiple entry visa. – Foreign personnel of

regional or area headquarters of multinational companies, their
respective spouses, and unmarried children under twenty-one years
of age, if accompanying them or if following to join them after their
admission into the Philippines as non- immigrant shall be issued a
multiple entry special visa, valid for a period of one year, to enter
the Philippines: Provided, That a responsible officer of the applicant
company submits a certificate to the effect that the person who
seeks entry into the Philippines is an executive of the applicant
company and will work exclusively for applicant’s regional or area
headquarters which is duly licensed to operate in the Philippines,
and that he will receive a salary and will be paid by the headquarters
in the Philippines an amount equivalent to at least twelve thousand
United States dollars, or the equivalent in other foreign currencies
per annum.
The admission and stay shall be co-terminus with the validity

yearly upon submission to the Commission on Immigration and
Deportation of a sworn certification by a responsible officer of the
regional or area headquarters; that its license to operate remains
valid and subsisting; that he has been paid in the Philippines
from the date of original admission, the equivalent of at least one
thousand United States dollars per month, or its equivalent in other
foreign currencies; and that the regional or area headquarters has
withheld the tax due on said compensation and the same has been
paid to the Bureau of Internal Revenue.
578
Non-immigrants who have been admitted under the

multiple entry special visa, as well as their respective spouses
and dependents, shall be exempt from: the payment of all fees due
under the immigration and alien registration laws; securing alien
certificates of registration; and obtaining immigration clearance
certificates, and all types of clearances required by any government
department or agency, except that upon final departure from the
Philippines the employer of the said non-immigrants shall so advise
in writing the Commission on Immigration and Deportation at least
five (5) working days prior to the non-immigrant’s departure, and
the finally departing non-immigrant employee shall be required to
submit to the said office a tax clearance from the Bureau of Internal
Revenue.
Article 60. Withholding Tax of 15 %. – Aliens employed by

regional or area headquarters of multinational corporations shall be
subject for each taxable year upon their gross income received from
the regional or area headquarters established in the Philippines
by multinational companies as salaries, wages, annuities,
compensations, remunerations, and emoluments to a tax equal to
fifteen percentum of such gross income.
Article 61. Tax and Duty Free Importation. – An alien

executive of the regional or area headquarters of a multinational
company shall enjoy tax and duty free importation of personal
and household effects as provided for under Section 105 (h) of the
Tariff and Customs Code, as amended, and Section 169 (b) (4) of the
Internal Revenue Code, as amended.
Article 62. Travel Tax Exemption. – Personnel of multinational

companies performing technical and supervisory functions with
regional headquarters at, but not engaged in business in the
Philippines and the dependents of such foreign personnel if joining
them during the period of their assignment in the Philippines, as
certified to by the Board of Investments, shall be exempted from
the payment of travel tax imposed under Section 1 of Presidential
Decree No. 1183, by securing a Travel Tax Certificate from the
Philippine Tourism Authority.
579
CHAPTER III
INCENTIVES TO THE REGIONAL HEADQUARTERS
Article 63. Exemption from Income Tax. – Regional or area

headquarters established in the Philippines by multinational
corporations and which headquarters do not earn or derive income
from the Philippines and which act as supervisory, communications
and coordinating center for their affiliates, subsidiaries, or branches
in the Asia-Pacific Regional shall not be subject to income tax.
Article 64. Exemption from Contractor’s Tax. – The regional or

area headquarters established in the Philippines by multinational
corporations, including their alien executives, are exempted from
the contractor’s tax.
Article 65. Exemption from all Kinds of Local Licenses

Fees, Dues. – The regional or area headquarters of multinational
companies shall be exempt from all kinds of local licenses, fees,
dues, imposts or any other local taxes or burdens.
Article 66. Tax and Duty Free Importation of Training

Materials; Importation of Motor Vehicles. – Regional or area
headquarters shall also enjoy tax and duty free importation of
equipment and materials for training, conferences which are needed
for the functions of the regional or area headquarters and which are
not locally available subject to the prior approval of the Board of
Investments.
Regional or area headquarters shall be entitled to the

importation of motor vehicles subject to the prior approval of the
Board and the payment of the corresponding taxes and duties:
Provided, That such motor vehicles shall be for the exclusive use of its
expatriate executives and that the number thereof shall not exceed
the number of its expatriate executives and that such motor vehicles
may be replaced every three (3) years from their importation.
Article 67. Exemption from Registration Requirements. – The

regional or area headquarters of multinational companies shall be
exempt from the provisions of Book II of this Code.
580
BOOK IV
INCENTIVES TO MULTINATIONAL COMPANIES
ESTABLISHING REGIONAL WAREHOUSES TO SUPPLY
SPARE PARTS OR MANUFACTURED COMPONENTS AND
RAW MATERIALS TO THE ASIA-PACIFIC REGION AND
OTHER FOREIGN MARKETS
Article 68. Qualifications. – A multinational company

organized and existing under any laws other than those of the
Philippines which is engaged in international trade and supplies
spare parts or manufactured components and raw materials to its
distributors or markets in the Asia-Pacific Area and other foreign
areas and which has established or will simultaneously establish a
regional or area headquarters in the Philippines in accordance with
the provisions of Book III of this Code and the rules and regulations
implementing the same may also establish regional warehouse or
warehouses in the Philippines, after securing a license therefor
from the Board of Investments.
The following minimum requirements shall be submitted

or complied with by the said foreign entity in accordance with the
rules and regulations to be issued by the Board of Investments as
provided for in Article 7 (2) of this Code.
(a) A certification from the Foreign Trade Officer or in

the absence of such an official, a Philippine Consul in
the foreign firm’s home country that said foreign firm
is engaged in international trade and supplies or will
supply spare parts or manufactured components and raw
materials to its distributors or markets in the Asia-Pacific
Region.
(b) A certification from a principal officer of the foreign entity

to the effect that said foreign entity has been authorized
by its Board of Directors or governing body to establish its
regional warehouse in the Philippines, specifying that:
581
1 The activities of the regional warehouse shall be

limited to serving as a supply depot for the storage,
deposit, safekeeping of its spare parts or manufactured
components and raw materials including the packing,
covering, putting up, marking, labelling and cutting
or altering to customer’s specification, mounting and/
or packaging into kits or marketable lots thereof, to
fill up transactions and sales made by its head offices
or parent companies and to serving as a storage or
warehouse of goods purchased locally by the home
office of the multinational for export abroad; Provided,
That said locally purchased goods for export may be
stored in the regional warehouse only after they have
been cleared for export in accordance with the laws
and regulations, including those of the Central Bank
and simplified procedures governing exports. The
regional warehouse shall not directly engage in trade
nor directly solicit business, promote any sale, nor
enter into any contract for the sale or disposition of
goods in the Philippines.
2. The regional warehouse will not derive any income

from the sources within the Philippines and its
personnel will not participate in any manner in the
management of any subsidiary, affiliate or branch
office it might have in the Philippines.
3. The personnel of the regional headquarters shall be

responsible for the operation of the regional warehouse
subject to the provisions of this Code.
(c) The multinational company shall pay the Board of

Investments and the appropriate Regional Collector of
Customs the corresponding license fees and storage fees
to be determined by said offices.
(d) An application for the establishment of a regional

warehouse shall be made in writing to the Board of
582
Investments upon recommendation of the Bureau of

Customs. The application shall describe the premises,
the location and capacity of the regional warehouse and
the purpose for which the building is to be used.
The jurisdiction and responsibility of supervising the

regional warehouses shall be vested on the Bureau of
Customs.
The Board of Investments, in consultation with the

Regional Director of Customs of the district where the
warehouse will be situated shall cause an examination
of the premises to be made with reference particularly
to the location, construction and means provided for the
safekeeping of its articles and if found satisfactory, it may
authorize its establishment without complying with the
requirements of any other government body and aimed at
providing speedy procedure for its establishment, subject
to the following conditions:
1) That the articles to be stored in the warehouse are

spare parts or manufactured components and/or raw
materials of the multinational company operator for
distribution and supply to its Asia-Pacific markets
including packaging, coverings, brands, labels and
warehouse equipment as provided in Art. 69 (a)
hereof;
2) That the entry or importation, storage or re-export of

the goods destined for or to be stored in the regional
warehouse will not involve any dollar outlay from
Philippine sources;
3) That they are of such character as to be readily

identifiable for re-export; and in case of local
distribution they shall be subject to Article 69
paragraph (b) and the guidelines implementing Book
IV of this Code;
583
4) That they shall be allowed provisional entry

expeditiously by means of a pro forma invoice of
the parent company, identified, examined and
appraised by the Regional Collector of Customs and
they shall be directly delivered to and kept in the
regional warehouses and released therefrom only in
accordance with Article 69 paragraphs (a) and (b) and
the guidelines implementing Book IV of this Code;
In the absence of a Regional Collector of Customs

where the volume of the establishment of regional
warehouses does not yet warrant the creation of said
offices, the duties of the Regional Collector of Customs
shall be performed by the Collector of Customs of
the district where the regional warehouse will be
located.
5) Each shipment of goods which will be stored in the

regional warehouse shall be covered by an affidavit
of the multinational company operator setting forth
that said articles shall be exclusively used as supply
for its Asia-Pacific markets and stating the C & F
price thereof;
6) That it shall file an ordinary warehousing bond in an

amount equal to ONE HUNDRED PER CENT (100%)
of the ascertained customs duties on the articles
imported without prejudice to its filing a general
warehousing bond in lieu of the ordinary warehousing
bond.
7) The percentage of annual allowable withdrawal for

domestic use shall be subject to the approval of the
Board of Investments; Provided, however, That in no
case shall such withdrawals exceed thirty per cent
(30%) of the value of goods it has brought in for any
given year and the payment of the corresponding
taxes and duties.
584
Article 69. Tax Treatment of Imported Articles in the Regional

Warehouse.
(a) Tax Incentives for Qualified Goods Destined for Re-

exportation to the Asia-Pacific and other Foreign
Markets. Except as otherwise provided in this Code,
imported spare parts or manufactured components,
raw materials and other items including any packages,
coverings, brands and labels and warehouse equipment
as may be allowed by the Board of Investments for the use
exclusively on the goods stored, except those prohibited
by law, brought into the regional warehouse from abroad
to be kept, stored and/or deposited or used therein and re-
exported directly therefrom under the supervision of the
Regional Collector of Customs for distribution to its Asia-
Pacific and other foreign markets in accordance with the
guidelines implementing Book IV of this Code including
to a bonded manufacturing warehouse in the Philippines
and eventually re-exported shall not be subject to customs
duty, internal revenue tax, export tax nor to local taxes,
the provisions of law to the contrary notwithstanding.
(b) Payment of Applicable Duties and Taxes on Qualified

Goods subject to Laws and Regulations Covering Imported
Merchandise if destined for the Local Market. Any spare
parts, manufactured components, raw materials and
other items sent, delivered, released or taken from the
regional warehouse to the local market in accordance
with the guidelines implementing Book IV of this Code
shall be subject to the payment of customs duties, taxes
and other charges and for which purpose, the proper
commercial invoice of the head offices or parent companies
shall be submitted to the Regional Collector of Customs;
and shall be subject to laws and regulations governing
imported merchandise, Provided, that in case any of
the foregoing items are sold, bartered, hired or used for
purposes other than they were intended for without prior
compliance with the guidelines implementing Book IV of
585
this Code and without prior payment of the duty, tax or

other charge which would have been due and payable at
the time of entry if the articles had been entered without
the benefit of this decree, shall be subject to forfeiture
and the importation shall constitute a fraudulent practice
against customs revenue punishable under Section 3602,
as amended, of the Tariff and Customs Code of the
Philippines; Provided, further, that a sale pursuant to a
judicial order shall not be subject to the preceding proviso
without prejudice to the payment of duties, taxes and
other charges.
Article 70. Exemption from the Maximum Storage Period

under the Tariff and Customs Code; Period of Storage in the Regional
Warehouse. – The provision of the law in Section 1908 of the Tariff
and Customs Code of the Philippines, as amended, to the contrary
notwithstanding, articles duly entered for warehousing may remain
in the regional warehouses for a period of two (2) years from the
time of their transfer to the regional warehouse, which period may
be extended with the approval of the Board of Investments for an
68 paragraph (c) for each extension until they are re-exported in
accordance with the guideline implementing Book IV of this Code.
Any article, withdrawn, release or removed contrary to the provisions
of said guidelines shall be forfeited pursuant to the provisions of
Article 69, paragraph (b) hereof.
Article 71. Rules and Regulations on the Jurisdiction, Operation

and Control over Qualified Goods Stored in the Regional Warehouse.
– The Board of Investments and the Bureau of Customs shall jointly
issue special rules and regulations on the receiving, handling, custody,
entry, examinations, classifications, delivery, storage, warehousing,
manipulation and packaging, release for re-exportation and for the
safekeeping, recording, inventory and liquidation of said qualified
goods, any existing law notwithstanding. Such rules and regulations
shall be formulated in consultation with the applicants/operators
of regional warehouses in order to be responsive to the objective
586
of providing a procedure for the speedy inflow and outflow of the

qualified goods which are destined for the Asia-Pacific and other
foreign markets and keeping a proper balance between promoting the
Philippines as a center for multinational regional warehouses and
safeguarding the revenue laws of the country.
The Commissioner of customs is directed is directed to expedite

the immediate re-exportation or transhipment of the foregoing
goods destined for regional warehousing to their Asia-Pacific and
other foreign markets, including the emergency withdrawal for
re-exportation by air and ship and the partial liquidation of bonds
adopting simplified export procedures therefor.
Article 72. Penalties. – Any willful violation by the regional

or area headquarters of a multinational company which has
established regional warehouse or warehouses of the provisions of
existing laws and the implementing guidelines of Book IV of this
Code shall constitute a sufficient cause for the cancellation of its
license or registration in addition to the penalties hereinabove
provided in Article 69, paragraph (b) hereof.
Article 73. The regional or area headquarters of multinational

companies establishing regional warehouses shall be exempt from
the provisions of Book II of this Code.
587
BOOK V
SPECIAL INVESTORS RESIDENT VISA
Article 74. Qualifications. – Any alien who possesses the

following qualifications may be issued a Special Investors Resident
Visa.
1. He had not been convicted of a crime involving moral

turpitude;
2. He is not afflicted with any loathsome, dangerous or

contagious disease;
3. He has not been institutionalized for any mental disorder

or disability;
4. He is willing and able to invest the amount of at least

US$75,000.00 in the Philippines; Provided, That the
foregoing invested amount shall be lowered to US$50,000
for aliens availing of Executive Order No. 63 and Executive
Order No. 1037 subject to the conditions imposed by
said legislations: Provided, further, That for purposes
of compliance with this particular condition, the alien-
applicant should prove that he has remitted such amount
in acceptable foreign currency to the Philippines.
Article 75. Reportorial Requirements. – As a holder of the

Special Investors Resident Visa, an alien shall be entitled to reside
in the Philippines while his investment subsists. For this purpose,
he should submit an annual report, in the form fully prescribed for
the purpose, to prove that he has maintained his investment in the
country. Should said alien withdraw his said investment from the
Philippines, then the Special Investors Resident Visa issued to him
will automatically expire.
588
BOOK VI
INCENTIVES OF EXPORT PROCESSING ZONE ENTERPRISES
Article 76. Employment of Foreign Nationals. – The provisions

of law to the contrary notwithstanding, Export Processing Zone
Authority, hereinafter referred to as the “Authority” may authorize
an alien or an association, partnership, corporation or any other form
of business organization formed, organized, chartered or existing
under any law other than those of the Philippines, or which is not a
Philippine national, or the working capital of which id fully owned
or controlled by aliens to do business or engage in an industry inside
the export processing zone.
Subject to the provisions of Section 29 of Commonwealth Act

No. 613, as amended, an enterprise, a zone registered enterprise
may employ foreign nationals in supervisory, technical or
advisory positions for a period not exceeding five (5) years from its
registration, extendible for limited periods at the discretion of the
Authority: Provided, however, That when the majority of the capital
stock of a zone registered enterprise is owned by foreign national,
the positions of president, treasurer, and general manager or their
equivalents may be retained by foreign nationals beyond the period
set forth herein.
Foreign nationals employed within the purview of this Book,

their spouses, and unmarried children under twenty-one years of
age who are not excluded by Sec. 29 of C.A. No. 613, as amended,
shall be permitted to enter and reside in the Philippines during the
period of employment of such foreign nationals. They shall be issued
a multiple entry visa, valid for a period of three years, to enter and
leave the Philippines without further documentary requirements
other than valid passports or other travel documents in the nature
of passports. The validity of the multiple entry special visa shall be
extendible yearly. Foreign Nationals who have been issued multiple
entry special visas under this provision, as well as their respective
spouses and dependents, shall be exempt from obtaining alien
589
certificates and all types of clearances required by any government

department or agency. For this purpose, the Commission on
Immigration and Deportation and the authority shall jointly issue
the necessary implementing rules and regulations.
A registered enterprise shall train Filipinos as understudies of

foreign nationals in administrative, supervisory and technical skills
and shall submit annual reports of such training to the Board.
Article 77. Tax Treatment of Merchandise in the Zone.
(1) Except as otherwise provided in this Code, foreign and

domestic merchandise, raw materials, supplies, articles,
equipment, machineries, spare parts and wares of every
description, except those prohibited by law, brought
into the zone to be sold, stored, broken up, repacked,
assembled, installed, sorted, cleaned, graded, or
otherwise processed, manipulated, manufactured, mixed
with foreign or domestic merchandise whether directly or
indirectly related in such activity, shall not be subject to
customs and internal revenue laws and regulations nor to
local tax ordinances, the provisions of law to the contrary
notwithstanding.
(2) Merchandise purchased by a registered zone enterprise

from the customs territory and subsequently brought
into the zone, shall be considered as export sales and the
exported thereof shall be entitled to the benefits allowed
by law for such transaction.
(3) Domestic merchandise sent from the zone to the customs

territory shall, whether or not combined with or made part
of other articles likewise of local origin or manufactured
in the Philippines while in the export processing zone,
be subject to internal revenue laws of the Philippines as
domestic goods sold, transferred or disposed of for local
consumption.
590
(4) Merchandise sent from the export processing zone to the

customs territory shall, whether or not combined with or
made part of other articles while in the zone, be subject to
rules and regulations governing imported merchandise.
The duties and taxes shall be assessed on the value of
imported materials (except when the final product is
exempt) and the internal revenue taxes on the values
added.
(5) Domestic merchandise on which all internal revenue

taxes have been paid, if subject thereto, and foreign
merchandise previously imported on which duty or tax
has been paid, or which have been admitted free of duty
and tax, may be taken into the zone from the customs
territory of the Philippines and be brought back thereto
free of quotas, duty or tax.
(6) Subject to such regulations respecting identity and

safeguarding of the revenue as the Authority may deem
necessary when the identity of an article entered into the
export processing zone under the immediately preceding
paragraph has been lost, such article when removed
from the zone and taken to the customs territory shall
be treated as foreign merchandise entering the country
for the first time, under the provisions of the Tariff and
Customs Code.
(7) Articles produced or manufactured in the zone and

exported therefrom shall, on subsequent importation
into the customs territory, be subject to the import laws
applicable to like articles manufactured in a foreign
country;
(8) Unless the contrary is shown, merchandise taken out of

the zone shall be considered for tax purposes to have been
sent to customs territory.
591
Article 78. Additional Incentives. – A zone registered

enterprise shall also enjoy all the incentive benefits provided
in Article 39 hereof under the same terms and conditions stated
therein. In addition zone registered enterprises shall also be entitled
to the following:
(a) Exemption from Local Taxes and Licenses.

Notwithstanding the provisions of law to the contrary,
zone registered enterprise shall, to the extent of their
construction, operation or production inside the zone be
exempt from the payment of any and all local government
imposts, fees, licenses or taxes except real estate taxes
which shall be collected by the Province/City/Municipality
responsible for the collection thereof under the provisions
of the Real Property Tax Code: Provided, That machineries
owned by zone registered enterprises which are actually
installed and operated in the Zone for manufacturing,
processing or for industrial purposes shall not be subject
to the payment of real estate taxes for the first three (3)
years of operation of such machineries: Provided, further,
That fifty percent (50%) of the proceeds of the real estate
taxes collected from all real properties located in the
Zone and such other areas owned or administered by
the Authority shall be remitted to the Authority by the
province/city/municipality responsible for the collection
of such taxes under the provisions of the Real Property
Tax Code. All real estate taxes accruing to the Authority
as herein provided shall be expanded for such community
facilities, utilities and/or services as the Authority may
determine.
(b) Production equipment or machineries, not attached to

real estate, used directly or indirectly, in the production,
assembly or manufacture of the registered product of
the zone registered enterprise shall be exempt from real
property taxes.
592
FINAL PROVISIONS
Article 79. Interpretation. – All doubts concerning the benefits

and incentives granted enterprises and investors by this Code shall
be resolved in favor of investors and registered enterprises.
Article 80. Vested Rights. – Existing registered enterprises

which are enjoying the incentives under the laws repealed by Books
One and Six of this Code shall continue to enjoy such incentives for
the period therein stated: Provided, however, That firms which made
investments in new or expansion projects approved or registered by
the Board of the Authority on or after December 1, 1986 but before
the effectivity of this Code may opt to be governed by the provisions
of this Code.
Article 81. Confidentiality of Applications. – All applications

and their supporting documents filed under this Code shall be
confidential and shall not be disclosed to any person, except with
the consent of the applicant or on orders of a court of competent
jurisdiction.
Article 82. Judicial Relief. – All orders or decisions of the Board

in cases involving the provisions of this Code shall immediately be
executory. No appeal from the order or decision of the Board by the
party adversely affected shall stay such order or decision: Provided,
That all appeals shall be filed directly with the Supreme Court
within thirty (30) days from receipt of the order or decision.
Article 83. Effectivity of Implementing Rules and Regulations.

– The Board shall promulgate rules and regulations to implement
the intent and provisions of this Code and shall have the authority
to impose such fines in amounts that are just and reasonable in
cases of late submission or non-compliance on the part of registered
enterprises, with reporting and other requirements under this
Code and its implementing rules and regulations. Such rules and
regulations shall take effect fifteen (15) days following its publication
in newspaper of general circulation in the Philippines.
593
Article 84. Separability Clause. – The provisions of this Code

are hereby declared to be separable and, in the event any such
provisions is declared unconstitutional, the other provisions which
are not affected thereby shall remain in force and effect.
Article 85. Repealing Clause. – The following provisions or

laws are hereby repealed:
1) Batas Pambansa 44
2) Batas Pambansa 391 (1983)
3) Presidential Decree 218
5) Presidential Decree 1623, as amended
6) Presidential Decree No. 1789 (1981)
8 Executive Order 815
9) Executive Order 1945 (1985)
All other laws, decrees, executive orders, administrative

orders, rules and regulations or parts thereof which are inconsistent
with the provisions of this Code are hereby repealed, amended or
Article 86. Effectivity. – This Code shall take effect

immediately upon approval.
594
DONE in the City of Manila, this 16th day of July, in the year
of Our Lord, nineteen hundred and eighty-seven.

President
BY THE PRESIDENT:

Executive Secretary
595
AMENDING EXECUTIVE ORDER NO. 182 WHICH PROMULGATES

THE FIRST REGULAR FOREIGN INVESTMENT NEGATIVE
LIST SPECIFICALLY “LIST A” OF ANNEX A
WHEREAS, List A of the First Regular Foreign Investment

Negative List enumerates investment activities/areas where foreign
equity participation is limited as prescribed in the Constitution and
other specific laws;
WHEREAS, Section 2, Rule IX of the Implementing Rules

and Regulations of Republic Act No. 7042, also known as the Foreign
Investment Act of 1991, allows amendments to List A to be made
by NEDA at any time to reflect changes made by laws regarding
foreign equity participation in any investment activity/area;
WHEREAS, there is a need to amend the first Regular

Foreign Investment Negative List (RFINL) to reflect the provisions
under Republic Act No. 7718 or “An Act Amending Certain Sections
of Republic Act No. 6957, Entitled An Act Authorizing The Financing,
Construction, Operation and Maintenance of Infrastructure Projects
By the Private Sector, And For Other Purposes” on the allowed
foreign equity in build-operate-transfer projects.
NOW, THEREFORE I, FIDEL V. RAMOS, President of the

Republic of the Philippines by virtue of the powers vested in me by
the Foreign Investments Act of 1991 do hereby order:
SECTION 1. List A of “Annex A” of Executive Order No.182 is

hereby amended as follows:
(a) Item No. 10 is amended to read as follows:
“10. Contracts for the construction and repair of locally-

funded works except (i) infrastructure/development
projects covered in Republic Act No. 7718, also known
596
as the Expanded BOT Law; and (ii) projects which are

foreign funded or assisted and required to undergo
international competitive bidding (Commonwealth Act
541 as amended by Presidential Decree 1594; Letter of
Instruction No. 630; Republic Act 7718)”
b) Item No. 17 (d) is deleted from the list.
(c) A new item 18 is added to read as follows:
“18. Project proponent and facility operator of a BOT

project requiring a public utility franchise (Article XII,
Section 11 of the Constitution; Republic Act No. 7718)”
SEC. 2. All orders, issuances, rules and regulation, or parts

thereof, which are inconsistent with this Executive Order are hereby

upon publication in two (2) newspapers of general circulation in the
Philippines.
DONE in the City of Manila, this 8th day of August, in the year
of Our Lord, nineteen hundred and ninety-five.

BY THE PRESIDENT:
(Sgd.) RUBEN D. TORRES

Executive Secretary
597

NATIONALS IN THE SUBIC BAY FREEPORT ZONE AS
TEMPORARY VISITORS
WHEREAS, it is a declared national policy to attract and

promote foreign trade, investment and tourism in the country,
especially in special economic zones such as the Subic Special
Economic and Freeport Zone (“Zone”) to promote economic growth
and national development;
WHEREAS, it is expected that visits to the Zone by

foreign nationals for business and tourism purposes will increase
significantly due mainly to the development and the growing
attraction of the Zone as an investment and tourism destination;
WHEREAS, the Subic Bay International Airport has likewise

attracted interest from international airlines as a destination point
for chartered and commercial flights which will no doubt contribute
immensely to the development of the Zone, the Central Luzon
Region, and ultimately, the entire Philippines;
WHEREAS, it is crucial to allow uncomplicated access to the

Secured Area of the Zone as defined in relevant issuances for foreign
nationals in order to realize the above-declared national policy.

Philippines, by virtue of the powers vested in me by law do hereby
order:
SECTION 1. Foreign nationals, not categorized as “restricted”

as determined by the DFA, visiting the Zone for business and/
or tourism purposes may be allowed to enter all ports of entry of
the Zone and stay therein without visa for a maximum period of
fourteen (14) days; provided that upon arrival, they present their
passports, Certificates of Identity or travel documents valid for
598
at least six (6) months beyond the intended stay in the Zone and
confirmed onward flight tickets. The determination of the identity
and admissibility of the foreign national seeking to enter the Zone
under this Executive Order shall be the primary responsibility of
the Bureau of Immigration (BI).
SEC. 2. Foreign nationals who enter the Zone under this

Executive Order shall be subject to the following restrictions:
a. they shall leave or depart from the Philippines only

through the Subic Bay International Airport, except as
hereinafter provided;
b. they shall not be allowed outside the Secured Area of the

Zone, except to visit areas outside the Secured Area but
within the Zone, provided, that they are escorted by BI
officers and/or Subic Bay Metropolitan Authority (SBMA)
officers duly deputized by the BI;
c. those who intend to visit areas outside the Zone and/

or extend their stay in the Zone for any reason beyond
the 14th day period must secure a visa waiver from the
Department of Foreign Affairs (DFA), provided, that upon
securing such visa waiver, the restrictions as provided
herein shall no longer be applicable.
SEC. 3. The Administrator of the SBMA may, in case of

extreme emergencies or under exceptional circumstances, allow
foreign nationals who enter the Zone under this Executive Order to
visit areas outside the Zone under special permit or escort, subject
to confirmation of visa waiver by the DFA.
SEC. 4. The DFA, BI and SBMA shall jointly implement this

Executive Order, and issue guidelines and circulars implementing
the same. They are hereby authorized to collect reasonable fees for
processing of no visa entry and applications for visa waivers.
599
SEC. 5. The foreign national who violates the provisions of

this Executive Order or its implementing guidelines and circulars
shall be subject to deportation under existing Philippine immigration
laws.
SEC. 6. The privileges accorded hereunder shall not in

any way impair other more favorable no-visa privileges accorded
to foreign nationals under any existing executive order, letter of
instruction, administrative order of issuance.
SEC. 7. All previous executive orders, letters of instruction,

administrative orders and/or similar issuances inconsistent with
this Executive Order are hereby repealed, amended or modified
accordingly.
SEC. 8. Special Subic Investors/Working Visas issued by the

SBMA in coordination with the BI shall be deemed regular visas
valid for entry and exit in the Philippine ports of entry.

after publication in a newspaper of general circulation.
DONE in the City of Manila, this 14th day of August, in the

year of Our Lord, nineteen hundred and ninety-five.

BY THE PRESIDENT:

Executive Secretary
600
PROMULGATING THE FOURTH REGULAR FOREIGN

WHEREAS, Republic Act (RA) No. 7042 also known as the

covering investment areas/activities which may be opened to foreign
WHEREAS, the Regular Foreign Investment Negative List,

consisting of Lists A and B, is effective for two years pursuant to
Section 8 of RA 7042 as amended and its Implementing Rules and
Regulations;
WHEREAS, there is a need to formulate a Fourth Regular

Foreign Investment Negative List in view of the expiration of the
existing list on 23 October 2000 and to reflect changes to List A and
B provided in new laws and recommended by concerned government
agencies;


listed in Annex A herewith shall be reserved to Philippine nationals,
and hereafter shall be referred to as the Fourth Regular Foreign
List.

601
to Section 8 of RA 7042 as amended, and of its Implementing Rules

and Regulations.

SEC. 4. This Order shall take effect on 24 October 2000.
DONE in the City of Manila, this 24th day of August, in the

year of our Lord, two thousand.

BY THE PRESIDENT:

Executive Secretary
602
“ANNEX A”
FOURTH REGULAR FOREIGN INVESTMENT NEGATIVE LIST

No Foreign Equity
1. Mass media except recording (Art. XVI, Sec. 11 of the

2. Practice of all professions 1
a Engineering
i. Aeronautical engineering
ii. Agricultural engineering
iii. Chemical engineering
iv. Civil engineering
v. Electrical engineering
vi. Electronics and communication engineering
vii. Geodetic engineering
viii. Mechanical engineering
ix. Metallurgical engineering
x. Mining engineering
xi. Naval architecture and marine engineering
xii. Sanitary engineering
603
b. Medicine and allied professions
i. Medicine
ii. Medical technology
iii. Dentistry
iv. Midwifery
v. Nursing
vi. Nutrition and dietetics
vii. Optometry
viii.Pharmacy
ix. Physical and occupational therapy
x. Radiologic and x-ray technology
xi. Veterinary medicine
c. Accountancy
d. Architecture
e. Criminology
f. Chemistry
g. Customs brokerage
h. Environmental planning
i. Forestry
j. Geology
604
k. Interior design
l. Landscape architecture
m. Law
n. Librarianship
o. Marine deck officers
p. Marine engine officers
q. Master plumbing
r. Sugar technology
s. Social work
t. Teaching
(Art. XII, Sec. 14 of the Constitution; Sec. 1 of Republic Act No.

5181)
3. Retail trade enterprises with paid-up capital of less than

US$2,500,000 (Sec. 5 of RA 8762)
4. Cooperatives (Ch. III, Art. 26 of RA 6938)
5. Private security agencies (Sec. 4 of RA 5487)
6. Small-scale mining (Sec. 3 of RA 7076)
7. Utilization of marine resources in archipelagic waters,

territorial sea, and exclusive economic zone (Art. XII, Sec. 2 of
the Constitution)
8. Ownership, operation and management of cockpits (Sec. 5 of

605

weapons (Art. II, Sec. 8 of the Constitution) 2

Philippines) 2
11. Manufacture of firecrackers and other pyrotechnic devices (Sec.

5 of RA 7183)

(Art. 27 of PD 442)
13. Contracts for the construction and repair of locally-funded

public works (Sec. 1 of Commonwealth Act No. 541, Letter of
Instruction No. 630) except:
a. Infrastructure/development projects covered in RA 7718;

and
b. Projects which are foreign funded or assisted and required

to undergo international competitive bidding (Sec. 2(a) of
RA 7718)
14. Advertising (Art. XVI, Sec. 11 of the Constitution)

(Art. XII, Sec. 2 of the Constitution) 3
16. Ownership of private lands (Art. XII, Sec. 7 of the Constitution;

Ch. 5, Sec. 22 of CA 141)
606
17. Operation and management of public utilities (Art. XII, Sec. 11

of the Constitution; Sec. 16 of CA 146)

institutions (Art. XIV, Sec. 4 of the Constitution)
19. Culture, production, milling, processing, trading excepting

retailing, of rice and corn and acquiring, by barter, purchase or
otherwise, rice and corn and the by-products thereof 4 (Sec. 5 of
PD 194; Sec. 15 of RA 8762)

or municipal corporation (Sec. 1 of RA 5183)
21. Contracts for the construction of defense-related structures (Sec.

1 of CA 541)
22. Project Proponent and Facility Operator of a BOT Project

requiring a public utilities franchise (Art. XII, Sec. 11 of the
Constitution; Sec. 2(a) of RA 7718)
23. Operation of deep sea commercial fishing vessels (Sec. 27 of RA

8550)
24. Adjustment companies (Sec. 323 of PD 612 as amended by PD

1814)
25. Ownership of condominiums units where the common areas

in the condominium project are co-owned by the owners of the
separate units or owned by a corporation (Sec. 5 of RA 4726)
Up to Sixty Percent (60%) Foreign Equity

Commission (SEC) (Sec. 6 of RA 5980 as amended by RA 8556) 5
27. Investment houses regulated by the SEC (Sec. 5 of PD 129 as

amended by RA 8366) 5
607
28. Retail trade enterprises with a minimum paid-up capital of

US$2,500,000 but less than US$7,500,000 (Sec. 5 of RA 8762) 6

AND PROTECTION OF SMALL- AND MEDIUM-SCALE
ENTERPRISES
1. Manufacture, repair, storage, and/or distribution of products

and/or ingredients requiring Philippine National Police (PNP)
clearance:

b. Gunpowder
c. Dynamite
ii. Nitrates of ammonium, potassium, sodium barium,

copper (11), lead (11), calcium and cuprite
iii. Nitric acid
iv. Nitrocellulose
608
vii. Glycerol
xi. Toluene
f. Telescopic sights, sniper scope and other similar devices
(RA 7042 as amended by RA 8179)

b. Military ordinance and parts thereof (e.g., torpedoes, mines,


components
e. Tactical aircraft (fixed and rotary-winged), parts and

components thereof
609

accessories
l Armament training devices

Department of National Defense (RA 7042 as amended by
RA 8179)
3. Manufacture and distribution of dangerous drugs (RA 7042 as

amended by RA 8179)

activities regulated by law because of risks they impose to public
health and morals (RA 7042 as amended by RA 8179)
5. All forms of gambling, e.g. race track operation (RA 7042 as

amended by RA 8179)

than the equivalent of US$200,000 (RA 7042 as amended by RA
8179)

capital of less than the equivalent of US$100,000 (RA 7042 as
amended by RA 8179)
Footnotes
1. This is limited to Filipino citizens save in cases prescribed by law
2. Domestic investments are also prohibited (Art. II, Sec. 8 of the

Constitution; Conventions/Treaties to which the Philippines is
a signatory)
3. Full foreign participation is allowed through financial or

technical assistance agreement with the President (Art. XII,
Sec. 2 of the Constitution)
610
4. Full foreign participation is allowed provided that within the

30-year period from start of operation, the foreign investor
shall divest a minimum of 60 percent of their equity to Filipino
citizens (Sec. 5 of PD 194; NFA Council Resolution No. 193 s.
1998)
5. No foreign national may be allowed to own stock in financing

companies or investment houses unless the country of which he
is a national accords the same reciprocal rights to Filipinos (Sec.
6 of RA 5980 as amended by RA 8556; PD 129 as amended by RA
8366)
6. Full foreign participation shall be allowed after 25 March 2002

but in no case shall investments for establishing a store be
less than US$830,000. Full foreign participation is currently
allowed in the following categories: C) Enterprises with a paid-
up capital of US$7,500,000 or more, provided that investments
for establishing a store should not be less than US$830,000;
and D) Enterprises specializing in high-end or luxury products,
provided that the paid-up capital per store is not less than
US$250,000 (Sec. 5 of RA 8762)

AND PROTECTION OF SMALL AND MEDIUM-SCALE
ENTERPRISES

and/or ingredients requiring Philippine National Police (PNP)
clearance:

611
b. Gunpowder
c. Dynamite
ii. Nitrates of ammonium, potassium, sodium barium,

iii. Nitric acid
iv. Nitrocellulose
vii. Glycerol
xi. Toluene
f. Telescopic sight, sniper scope and other similar devices
(R.A. 7042 as amended by R.A. 8179)

requiring Department of National Defense (DND) clearance;
612
b. Military ordnance and parts thereof (e.g., torpedoes, depth

charges, bombs, grenades, missiles)

components
e. Tactical aircraft (fixed and rotary -winged), parts and

components thereof
g. Combat vessels (air. land and naval) and auxiliaries

accessories
m. Others as may be determined by the Secretary of the DND
(R.A. 7042 as Amended by R.A. 8179).
3. Manufacture and distribution of dangerous drugs (R.A. 7042 as

amended by R.A. 8179)

activities regulated by law because of risks posed to public
health and morals (R.A. 7042 as amended by R.A. 8179)
613
5. All forms of gambling, e.g. race track operation (R.A. 7042 as


than the equivalent of US$200,000 (R.A. 7042 as amended by
R.A. 8179)

capital of less than the equivalent of US$100,000 (R.A. 7042 as
614
AUTHORIZING THE PAYMENT OF REASONABLE INCENTIVE

FEES TO FOREIGN BANKS, INVESTMENT BANKS AND
OTHER FINANCIAL INSTITUTIONS PARTICIPATING IN
THE DEBT-TO-EQUITY CONVERSION PROGRAM AND/
OR THE PRIVATIZATION SCHEME OF THE PHILIPPINE
GOVERNMENT AND PROVIDING FUNDS THEREFOR
WHEREAS, it is the objective of the Government to bring

about economic recovery as early as possible to achieve growth and
stability throughout the country;
WHEREAS, to gain this objective, the Government realizes

the immediate need to promote and foster renewed foreign
investment and for this purpose has encouraged proposals from
international investment counselors;
WHEREAS, in response to the foregoing, certain foreign

banks, investment banks and other financial institutions have
initiated moves and in fact have adopted, certain concrete measures
to encourage investments via the debt-to-equity conversion program
and/or the privatization scheme of the Philippine Government;
WHEREAS, in consideration of the services to be rendered

by the said foreign banks, investment banks, and other financial
institutions, the Government may agree to provide reasonable
incentive fees under certain terms and conditions as may be set
forth.

SEC. 1. The Department of Finance, in coordination with

the Central Bank of the Philippines is hereby authorized to pay
reasonable incentive fees to foreign banks, investment banks and
other financial institutions in the manner as may be agreed upon, for
615
services that may be rendered in support to programs that will help

achieve the objectives of encouraging foreign investments through
the debt-to-equity conversion program and/or the privatization
scheme of the Philippine Government.
SEC. 2. Such sums of money or so much thereof as may

be necessary to pay the reasonable incentive fees provided for in
Section 1 hereof shall be taken out of the proceeds to be realized
under Schedules 4 and 5 of Central Bank Circular No. 1111, dated
August 4, 1986.
DONE in the City of Manila, this 25th day of July, in the year
of Our Lord, nineteen hundred and eighty-seven.

BY THE PRESIDENT:

Executive Secretary
616
CREATING THE INVESTMENT EXPRESS LANE OFFICE

UNDER THE OFFICE OF THE PRESIDENT AND
TRANSFERRING THE ADMINISTRATIVE SUPERVISION
OF THE INVESTMENT OMBUDSMAN TO THE ECONOMIC
COORDINATING COUNCIL
WHEREAS, there is an urgent need to attract, generate

and sustain a high level of investments in agriculture, industry,
services, construction, transport, road networks, irrigation, major
infrastructure activities, telecommunications and other sectors from
local and foreign investors;
WHEREAS, there is a further need to fast-track and facilitate

pump-priming projects, whether through Official Development
Assistance (“ODA“), Build-Operate-Transfer (“BOT“) schemes, or
private investments, which would sustain development and growth
efforts of government;
WHEREAS, in order to attract pump-priming activities,

government should take a more proactive stance to provide assistance
to current and potential investors, expedite the screening and
approval process for ODA and BOT projects, and facilitate and
coordinate the processing of all documents, clearances, permits and
other requirements for the whole duration of these projects and
investments;
WHEREAS, there are already numerous government

agencies handling and facilitating investments and funding
for pump-priming projects, including the NEDA-Investment
Coordinating Council (“NEDA-ICC“), Investment One-Stop Action
Center (“OSAC“) and the Investment Promotion Units (“IPUs“)
under the Board of Investments, and the Office of the Investment
Ombudsman (“OIO”);
WHEREAS, despite the work undertaken by these agencies,

there remains an urgent need to refocus, consolidate and strengthen
617
existing government offices and agencies currently processing and

facilitating these investments in order to make government more
responsive to the needs of investors in view of the highly competitive
global environment;
WHEREAS, in order to place the highest priority on

facilitating pump-priming projects, an Investment Express Lane
Office (“IELO“) should be created under the Office of the President
which will fast-track and facilitate the flow of investments into the
country;
WHEREAS, there is a need to transfer the Office of the

Investment Ombudsman, which is under the administrative
supervision of the Department of Trade and Industry, back to the
Office of the President under the direct supervision of the ECC;

1987);
WHEREAS, under the General Appropriations Act, the

in any department, bureau or agency;

following:
SECTION 1. Creation of Investment Express Lanes Office –

There is hereby created an Investment Express Lane Office (“IELO“)
under the Office of the President, to be supervised by the Economic
Coordinating Council (“ECC“).
SEC. 2. Composition of the IELO – The IELO shall be headed

by the Vice-Chairman of the ECC. A secretariat is hereby established
618
to assist the Vice-Chairman of the ECC in the performance of his

functions.
SEC 3. Functions of the IELO – The IELO shall cause the

facilitation, expeditious processing, approval and release of all
government permits, licenses and requirements of investment-
entities, ODA and BOT projects with a total investment of at least
Fifty Million Pesos (P50,000,000.00) in the case of agricultural and
agri-based projects and One Hundred Million Pesos (P100,000,000.00)
in all other projects (“Qualified Investors“). In addition, it shall have
the following functions:
(a) Serve as the link between the Office of the President

and all government agencies and local government units in the
processing and approval of registration and licensing requirements
and start-up of operations;
(b) Facilitate the expeditious issuance and approval of

registration and licensing requirements and other national and
local governmental requirements in the start-up and in the ongoing
operations of Qualified Investors through the establishment of
Investment Express Lanes;
(c) Set time-bound processing of documents and standards

necessary for the start-up and operations of Qualified Investors
which will shorten existing periods for processing of documents
and streamline and improve existing standards affecting Qualified
Investors;
(d) Identify bottlenecks often encountered by Qualified

Investors and recommend and formulate remedial measures to
remove the same;
(e) Assist government departments, agencies, bureaus and

corporations and local government units in complying with this
Order;
619
(f) Ensure the consistency and complementation of all

issuances, pronouncements, plans, programs and projects, and
proposed legislation affecting Qualified Investors; and
(g) Exercise such other powers and perform such other

duties as may be required.
SEC. 4. Qualified Investors – The Vice-Chairman of the ECC,

in consultation with the ECC, may determine an investor to be a
Qualified Investor within the meaning of this Order even though
the requirements laid down in Section 3 not met; Provided, that
the IELO shall set the criteria for such Qualified Investors in the
Implementing Rules and Regulations.
SEC. 5. Location of IELs – IELs shall be established in

strategic locations as may be determined by the ECC. In addition,
an internet website shall be established to facilitate processing,
registration and follow-up queries from Qualified Investors.
SEC. 6. Transfer of the Administrative Supervision Over the

Office of the Investment Ombudsman to the Office of the President
– The administrative supervision of the Office of the Investment
Ombudsman created under Executive Order No. 180, as amended
by Executive Order No. 224, is hereby transferred to the ECC.
The Investment Ombudsman shall monitor and ensure that the
objectives of this Order are carried out fully and effectively.
SEC. 7. Support and Coordination – In fulfilling the objectives

of this Executive Order, all government departments, bureaus,
agencies and corporations and local government units are hereby
required to extend full support to and coordination with the IELO.
SEC. 8. Funding – To carry-out the provisions of this Order,

the amount of Ten Million Pesos (P10,000,000.00) shall be allotted
as initial funding, which shall come from the budget of the Office of
the President.
620
SEC. 9. Repealing Clause – All executive issuances or portions

thereof inconsistent with this Order, are hereby repealed or modified
accordingly.
SEC. 10. Effectivity – This Executive Order shall take effect

immediately.
DONE, in the City of Manila, this 26th day of December, in the

year of Our Lord, two thousand.

President
BY THE PRESIDENT:

Executive Secretary
621
PROMULGATING THESE GUIDELINES TO GOVERN THE

REVIEW BY GOVERNMENT AGENCIES CONCERNED OF
SERVICE AGREEMENTS BETWEEN LOCAL PETROLEUM
CONCESSIONAIRES AND FOREIGN OIL EXPLORATION
COMPANIES
WHEREAS, in recent years, the number of service

agreements between local petroleum concessionaires and foreign
oil exploration companies submitted for approval to the respective
government agencies concerned has greatly increased;
WHEREAS, there is now a pressing need to define the

guidelines for the review of these agreements, of such great
importance to the discovery and development of a strategic natural
resources;

of the Philippines, by virtue of the powers vested in me by law, do
hereby promulgate these guidelines, in the manner hereinafter
specified.
Guidelines
The following shall govern the review of service agreements

between local petroleum concessionaires and foreign oil exploration
companies. They are promulgated with a view to attracting
significant amounts of risks capital into petroleum exploration
venture in the Philippines, consistent with Constitutional and legal
requirements on the exploration, exploitation and disposition of
petroleum resources.
Compliance with Qualification and Application Procedures
1. In cases where applications for concessions are presented

contemporaneously with service agreements, proof of qualification
622
of both the concessionaire and the foreign entity under Republic Act
No. 387 (the Petroleum Act) and pertinent rules and regulations,
and of compliance with the application procedures established by
the Bureau of Mine for concessions, shall be required before any
service agreement is reviewed. More specifically, applicants for
concessions shall fulfill the qualifications under Article 31 of the
Petroleum Act, briefly as follows:
1.1. For an individual: Filipino citizenship, legal age, capacity

to contract;
1.2. For a corporation or partnership: at least 60%

ownership;
1.3. Proof of sufficient financial, organizational and technical

resources to undertake the operations contemplated.
2. The foreign entity must be registered with the Board

of Investments, and registered with, or licensed by, the Securities
and Exchange Commission. It must be, qualified, financially and
technically, to undertake and complete the agreed-upon program of
work, which shall include, but not be limited to, the completion of
predrilling exploration work within two years for either onshore or
offshore areas from the time of the approval of the service agreement
by the Secretary of Agriculture and Natural Resources.
3. All applications for concessions shall be submitted to

the Bureau of Mines and shall comply with the requirements of
applicable laws and regulations.
4. In accordance with Article 24 of the Petroleum Act, an

efficient and economic program of work shall be submitted for prior
approval to the Secretary of Agriculture and Natural Resources.
Service Agreements
1. Service agreements may be entered into between local

petroleum concessionaires and foreign oil exploration companies
623
with the prior approval of the Secretary of Agriculture and Natural

Resources, under the following guidelines:
1.1. In addition to the services to be rendered, the foreign

entity may elect to bear part of the costs incurred in exploration of
petroleum deposits. This should not give the foreign entity equity
participation; however, the foreign entity may, in addition, become
an equity participant in the Philippine entity holding the concession,
to the extent of the 40% participation allowed by the Constitution,
in the absence of other considerations which would defeat the intent
of the Constitution and pertinent laws.
1.2. The effective management of the activities authorized

the concessionaire under the terms of the concession cannot be
transferred or assigned to the foreign entity under the service
agreement.
1.3. The provisions of Section 13 of the Corporation Law

shall be observed in the review of agreements entered into between
a foreign entity and more than one Filipino entity.
Repayment of Service Contractor
1. The service agreement must incorporate a repayment

scheme for all advances in services and financing supplied by the
foreign entity, which shall include the following terms:
1.1. Approval of foreign exchange payments by the Central

Bank;
1.2. A fixed period of repayment less than the life of the

concession;
1.3. Except for repayment of pre-production expenses

which shall adhere as closely as possible to international practice,
a provision that the interest charged on the fair value of services
rendered actual funds advanced by the foreign entity shall not be
624
more than the prevailing international interest rates charged for

similar types of transaction.
2. Repayment to the foreign entity may be in cash or in

allotments of production, the latter subject to the condition that
domestic requirements of petroleum and its products are first
satisfied.
Work Obligations
1. As earlier indicated, the service agreement must show

that predrilling exploration work will be completed within two years
from the approval of such contract by the Secretary of Agriculture
and Natural Resources.
Furthermore, if predrilling exploration work warrants drilling,

the foreign entity shall drill at least one exploratory test well within
one year from the completion of the predrilling exploration work.
2. The service agreement must provide that the Government

may revoke the approval of the service agreement upon failure of
the foreign entity to fulfill the agreed-upon program of work. The
agreement shall thereafter be null and void.
Labor
1. The provisions of the service agreement must indicate

that Filipinos are to be given preference in employment in all phases
of operations for which they are qualified.
2. Alien employees shall be limited to technicians and

executives requiring highly specialized training or long experience,
whose duties shall be clearly specified, and whose employment shall
be subject to the required approvals under existing laws.
3. In every case where foreign technicians and executives

are employed, an effective program of understudies is to be
instituted, which shall be the responsibility of the concessionaire to
625
implement. The concessionaire shall submit to the Bureau of Mines

and to the Department of Labor semestral reports on the progress
of the training programs for Filipino understudies.
General Guidelines for Interpretation
In the review of service agreements between local

concessionaires and foreign entities, the agreements are to be
interpreted so as to ensure not only the continued inviolability of
the Constitution and the laws, but also the attraction of significant
amount of risk capital, both foreign and domestic, into oil exploration
and development ventures in the Philippines.
DONE in the City of Manila, this 22nd day of November, in

the year of Our Lord, nineteen hundred and seventy-one.

BY THE PRESIDENT:

Executive Secretary
626
WHEREAS, Republic Act (RA) 8179, which amends RA 7042

also known as the Foreign Investments Act (FIA) of 1991, provides
that the Regular Foreign Investment Negative List (RFINL) shall
consist only of Lists A and B;
WHEREAS, Section 5, Rule VIII of the amended

Implementing Rules and Regulations (IRR) of the FIA as amended,
provides that each RFINL shall remain in force only for two years;
WHEREAS, the first RFINL which took effect on 24 October

1994 shall expire on 23 October 1996;
WHEREAS, there is a need to formulate a second RFINL to

reflect amendments made by RA 8179 and changes to Lists A and B
as recommended by concerned government agencies;

the FIA of 1991 as amended, do hereby order:
SECTION 1. Only investment areas/activities listed in “Annex

A” hereof, also known as the second Regular Foreign Investment
Negative List, shall be reserved to Philippine Nationals. The extent
of foreign equity participation in these areas shall be limited to the
percentages indicated in the List.
SECTION 2. Any amendment to List A may be made at any

time to reflect changes instituted in specific laws while amendments
to List B shall not be made more often than once every two years,
pursuant to Section 8 of the FIA as amended and Rule VIII of its
amended IRR.
627
SECTION 3. All orders, issuances, rules and regulations or

parts thereof, which are inconsistent with this Executive Order are
hereby revoked or modified accordingly. lawphi1.net
SECTION 4. This Executive Order shall take effect

immediately after the end of the effectivity of the first RFINL on 24
October 1996.
DONE in the City of Manila, this 20th day of August in the

year of Our Lord Nineteen Hundred and Ninety Six.

BY THE PRESIDENT:

Executive Secretary
628
“ANNEX A”

No Foreign Equity
1. Mass Media except recording (Article XVI, Section 11 of the

2. Services involving the practice of licensed professions save in

cases prescribed by law
a) Engineering
i. Aeronautical Engineering
ii. Agricultural Engineering
iii. Chemical Engineering
iv. Civil Engineering
v. Electrical Engineering
vi. Electronics and Communication Engineering
vii. Geodetic Engineering
viii. Mechanical Engineering
ix. Metallurgical Engineering
x. Mining Engineering
629
xi. Naval Architecture and Marine Engineering
xii. Sanitary Engineering
b) Medicine and Allied Professions
i. Dentistry
ii. Medical Technology
iii. Midwifery
iv. Nursing
v. Nutrition and Dietetics
vi. Optometry
vii. Pharmacy
viii. Physical and Occupational Therapy
ix. Radiologic and X-ray Technology
x. Veterinary Medicine
c) Accountancy
d) Architecture
e) Criminology
f) Chemistry
g) Custom Brokerage
h) Environmental Planning
630
i) Forestry
j) Geology
k) Interior Design
l) Landscape Architecture
m) Law
n) Librarianship
o) Marine Deck Officers
p) Marine Engine Officers
q) Master Plumbing
r) Sugar Technology
s) Social Work
t) Teaching
(Article XIV, Section 14 of the Constitution; Section 1 of RA No.

5181)
3. Retail Trade (Section 1 of RA No. 1180)
4. Cooperatives (Chapter III, Article 26 of RA No. 6938)
5. Private Security Agencies (Section 4 of RA No. 5487)
6. Small-scale Mining (Section 3 of RA No. 7076)
7. Utilization of Marine Resources in archipelagic waters, territorial

sea, and exclusive economic zone (Article XII, Section 2 of the
Constitution)
631
8. Ownership, operation and management of cockpits (Section 5 of


weapons (Article II, Section 8 of the Constitution)1

Philippines)1

(Article 27 of Presidential Decree No. 442)
12. Contracts for the construction and repair of locally-funded public

works except:
a) infrastructure/development projects covered in RA No. 7718;

and
b) projects which are foreign funded or assisted and required to

undergo international competitive bidding (Commonwealth
Act No. 541; Presidential Decree 1594; Letter of Instruction
630; Section 2a of RA No. 7718)
13. Advertising (Article XVI, Section 11 of the Constitution)

(Article XII, Section 2 of the Constitution)2
1 Domestic investments are also prohibited (Article II, Section 8 of the Constitution;
Conventions/Treaties to which the Philippines is a signatory)
2 Full foreign participation is allowed through financial or technical assistance
agreement with the President (Article XII, Section 11 of the Constitution)
632
15. Ownership of private lands (Article XII, Section 7 of the

Constitution; Chapter 5, Section 22 of Commonwealth Act No.
141)
16. Operation and management of public utilities (Article XII,

Section 11 of the Constitution; Section 16 of Commonwealth Act
No. 146)

institutions (Article XIV, Section 2 of the Constitution)
18. Engaging in the rice and corn industry (Presidential Decree No.
194)

Commission (SEC) (Section 6 of RA No. 5980)

or municipal corporation (Section 1 of RA No. 5183)
21. Contracts for the construction of defense-related structures (e.g.,

land, air, sea and coastal defenses, arsenals, barracks, depots,
hangars, landing fields, quarters and hospitals) (Commonwealth
Act No. 541)
22. Project proponent and facility operator of a BOT project

requiring a public utilities franchise (Article XII, Section 11 of
the Constitution; Section 2a of RA No. 7718)
23. Private domestic construction contracts (Republic Act 4566;

Article XIV, Section 14 of the Constitution)
633

AND PROTECTION OF SMALL-AND MEDIUM-SCALE
ENTERPRISES
Up to Forty Percent (40 %) Foreign Equity
1. Manufacture, repair, storage, and/or distribution used in the

manufacture thereof requiring Philippine National Police (PNP)
clearance:
a) Firearms (handguns to shotguns), parts of firearms and

b) Gunpowder
c) Dynamite
d) Blasting supplies
e) Ingredients used in making explosives:
i. Cholorates of potassium and sodium
ii. Nitrates of ammonium, potassium, sodium barrium,

iii. Nitric Acid
iv. Nitrocellulose
vii. Glycerol
634
xi. Toluene
f) Telescopic sights, sniperscope and other similar devices (RA

No. 7042 as amended by RA No. 8179)

a) Guns and ammunition for warfare
b) Military ordnance and parts thereof (e.g., torpedoes, mines,

c) Gunnery, bombing and firecontrol systems and components
d) Guided missiles/missile systems and components
e) Tactical aircraft (fixed and rotary-winged), parts and

components thereof
f) Space vehicles and component systems
g) Combat vessels (air, land and naval) and auxiliaries
h) Weapons repair and maintenance equipment
i) Military communications equipment
j) Night vision equipment
k) Stimulated coherent radiation devices, components and

accessories
635
l) Armament training devices
(RA No. 7042 as amended by RA No. 8179)
3. Manufacture and distribution of dangerous drugs (RA No. 7042

636
PROMULGATING THE SIXTH REGULAR FOREIGN INVESTMENT

NEGATIVE LIST
WHEREAS, Republic Act (RA) No. 7042 also known as the

Foreign Investment Act of 1991, as amended by RA 8179, provides
WHEREAS, the Regular Foreign Investment Negative list,

consisting of Lists A and B, is effective for two years and has expired
on 8 November 2004, pursuant to Section 8 of RA 7042, as amended,
and its revised Implementing Rules and Regulations;
WHEREAS, there is a need to formulate a Sixth Regular

existing list to reflect the changes to Lists A and B provided in
specific laws;
NOW, THEREFORE, I GLORIA MACAPAGAL-ARROYO,

law, do hereby order.
SECTION 1. Only the investment areas or activities listed

in Annex A hereof shall be reserved to Philippine nationals,
and hereafter shall be referred to as the Sixth Regular Foreign
List.
SECTION 2. Any amendment to List A may be made at any

time to reflect changes instituted in specific laws while amendments
to List B shall not be made more often than once every two years,
pursuant to Section 8 of RA 7042 as amended, and its revised
Implementing Rules and Regulations.
637
SECTION 3. All orders, issuances, rules and regulations or

parts thereof, which are inconsistent with this Order are hereby
SECTION 4. This Executive Order shall take effect 15 days

DONE in the City of Manila this 30th day of November, in the

year of Our Lord, Two Thousand and Four.

BY THE PRESIDENT:

Executive Secretary
638
DIRECTING DEPARTMENT, BUREAUS, OFFICES AND

OTHER AGENCIES IN THE EXECUTIVE BRANCH,
INCLUDING GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS TO SIMPLIFY RULES AND REGULATIONS
AND REDUCE REPORTORIAL REQUIREMENTS TO
FACILITATE DOING BUSINESS AND ENCOURAGE MORE
INVESTMENTS IN THE COUNTRY
WHEREAS, the elimination of poverty is the overriding goal

of the administration, with the private sector serving as the leading
engine of development and progress;
WHEREAS, a vigorous and progressive business sector is

essential in the attainment of national socio-economic objectives;
WHEREAS, existing government rules, regulations and

procedures including reportorial requirements, cause undue
difficulty to private businesses and individual citizens alike, thus
discouraging investment and business expansion, and hampering
the attainment of a vibrant and progressive economy that demands
simpler and reduced rules and regulations for business and industry
in order to be more competitive with other countries;

1. Departments, bureaus, agencies and offices in the Executive

Branch of Government, including Government-Owned and
Controlled Corporations (GOCCs) are hereby directed to simplify
rules, regulations, procedures and reduce reportorial requirements
imposed for business and industry, with the aim of eliminating
duplication and unnecessary requirements, thereby attracting
and encouraging more investments and allowing business and
industry to devote maximum effort and time to their operation and
639
expansion rather than to compliance with excessive bureaucratic

requirements. Local Government Units are encouraged to adopt
similar measures.
2. The Executive Secretary shall see to it that this Order is

effectively carried out.
3. This Executive Order shall take effect immediately.
of Our Lord, Two Thousand and Five.

BY THE PRESIDENT:

Executive Secretary
640
CREATING A PERMANENT PHILIPPINE COMMITTEE FOR THE

JOINT PHILIPPINE-ROMANIAN ECONOMIC AND TRADE
COMMISSION
WHEREAS, the opening of diplomatic and trade relations

with the Socialist Republic of Romania can contribute towards
the Philippine Government’s objective of export and market
diversification as well as of tapping alternative sources of imports;
WHEREAS, being able to share in the demand generated

by the Romanian economy’s dynamic growth which is the highest
among all Socialist countries of Eastern Europe, will benefit the
Philippines by way of increased trade;
WHEREAS, the Republic of the Philippines and the

Socialist Republic of Romania, desiring to strengthen direct trade
and economic relations between them in accordance with their
development and trade needs and objectives and on the basis of
equality and mutual benefit have entered into a Trade Agreement
on April 10, 1975;
WHEREAS, Article IV of the Basic Agreement on Economic

and Technical Cooperation states that “The Contracting Parties
agree to establish a Joint Commission which will meet at the
request of either Contracting Party for the purpose of discussing any
matter pertaining to the implementation of the present agreement
and considering other ways and means of promoting economic and
technical cooperation between their countries;
WHEREAS, Article XII of the trade Agreement states

that “for the purpose of ensuring the expeditious and continuous
implementation of the Agreement, the Contracting Parties agree
to set-up a Governmental Joint Commission. Each government
shall nominate officials to that Commission as it deems fit and may
641
include representatives of commercial companies, state corporations

or economic organizations”;

Constitution, do hereby create a PERMANENT PHILIPPINE
COMMITTEE FOR THE JOINT PHILIPPINE-ROMANIAN
ECONOMIC AND TRADE COMMISSION with the following
composition:
1. Secretary Troadio T. Quiazon, Jr. Chairman

Department of Trade
2. Ambassador Leticia R. Shahani Co-Chairman

Philippine Embassy in Romania
3. Mr. Ramon B. Cardenas Vice-Chairman

Assistant Executive Secretary
Office of the President
4. Ambassador Sergio A. Barrera Vice-Chairman

Assistant Secretary for Economic Affairs
Department of Foreign Affairs
5. Mr. Filologo Pante, Jr. Member

Assistant Director-General
National Economic and Development Authority
6. Mr. Gabriel Y. Itchon Member

Assistant Secretary
Department of Industry
7. Mr. Antonio Aguenza Member

Assistant Secretary
Department of Natural Resources
8. Mr. Jose P. Leviste, Jr. Member

Assistant Secretary
Department of Agriculture
642
9. Mr. Roberto Y. Garcia Member

Assistant to the Governor
Central Bank of the Philippines
The Committee may in the performance of its functions,

call upon the assistance of any government agency, corporation or
instrumentality as well as any private entity on an ad hoc basis.
Secretarial and technical assistance will be extended by the

Bureau of Foreign Trade, subject prospectively to the creation of a
Permanent Secretariat as the need arises. Other technical advisers
may be nominated as the Committee deems fit.
DONE in the City of Manila, this 21st day of August, in the

year of Our Lord, nineteen hundred and seventy-five.

President
BY THE PRESIDENT:

Executive Secretary
643

NATIONALS IN THE CLARK SPECIAL ECONOMIC ZONE
AS TEMPORARY VISITORS
WHEREAS, it is declared national policy to attract and

promote foreign trade, investment and tourism in the country
especially in the special economic zones such as Clark Special
Economic Zone (“EcoZone”) to promote economic growth and national
development.
WHEREAS, it is expected that visits to the Clark EcoZone

by foreign nationals for business, tourism and recreation purposes
will increase significantly due to the development, and the growing
attraction of the Clark EcoZone as an investment, tourism,
recreational and industrial destination;
WHEREAS, the Clark International Airport has likewise

attracted interest from international airlines as a destination
point for chartered and commercial flights which will contribute
immensely to the development of the Clark EcoZone, the Central
Luzon Region, the entire Philippines and ultimately the entire
Asian Region;
WHEREAS, it is crucial to allow uncomplicated access to the

Secured Area of the Clark EcoZone as defined in relevant issuances
for foreign nationals in order to realize the above-declared national
policy.

Philippines, by virtue of the powers vested in me by law, do hereby
order:
SECTION 1. Foreign nationals, not categorized as “restricted”

as determined by the DFA, visiting the Clark EcoZone for business
and/or tourism purposes may be allowed to enter all ports of entry of
644
the Clark ECOZONE and stay at herein without visa for a maximum
period of fourteen (14) days; provided that upon arrival, they present
their passports, Certificates of Identity or travel documents valid
for at least six (6) months beyond the intended stay in the Clark
EcoZone and confirmed onward flight tickets. The determination
of the identity and admissibility of the foreign national seeking to
enter the Clark EcoZone under this Executive Order shall be the
primary responsibility of the Bureau of Immigration (BI).
SEC. 2. Foreign nationals who enter the Clark EcoZone under

this Executive Order shall be subject to the following restrictions:
a. they shall leave or depart from the Philippines only through

the Clark International Airport except as hereinafter provided;
b. they shall not be allowed outside the Secured Area of the

Clark EcoZone, except to visit areas outside the Secured Area but
within the Clark EcoZone, provided, that they are escorted by BI
officers and/or Clark Development Corporation (CDC) officers duly
deputized by the BI;
c. those who intend to visit areas outside the Clark EcoZone

at any given time and/or extend their stay in the Clark EcoZone
for any reason beyond the 14 day period must secure a visa waiver
from the Department of Foreign Affairs (DFA); provided, that upon
securing such visa waiver, the restrictions as provided herein shall
no longer be applicable.
SEC. 3. The head of the CDC may, in case of extreme

emergencies or under exceptional circumstances, allow foreign
nationals who enter the Clark EcoZone under this Executive Order
to visit areas outside the Clark EcoZone under special permit or
escort, subject to confirmation of visa waiver by the DFA.
SEC. 4. The DFA, BI and CDC shall jointly implement this

Executive Order by issuing appropriate guidelines and circulars.
They are hereby authorized to collect reasonable fees for processing
of non-visa entry and application for visa waivers.
645
SEC. 5. Any foreign national who violates the provisions of

this Executive Order or its implementing guidelines and circulars
shall be subject to appropriate sanctions under existing Philippine
immigration laws.
SEC. 6. The privilege accorded hereunder shall not in any

way impair more favorable no-visa privileges accorded to foreign
nationals under any existing executive order, letter of instruction,
administrative order or issuance.
SEC. 7. All previous executive orders, letters of instruction,

administrative orders and/or similar issuances inconsistent with
this Executive Order are hereby repealed, amended or modified
accordingly.
SEC. 8. Special Clark Investors/Working Visas issued by the

CDC in coordination with the BI shall be deemed regular visas for
entry and exit in the Philippine ports of entry.


year of Our Lord, Nineteen Hundred and Ninety-Eight.

BY THE PRESIDENT:
(Sgd.) ALEXANDER P. AGUIRRE

Acting Executive Secretary
646
PROMULGATING THE SEVENTH REGULAR FOREIGN

WHEREAS, Republic Act No. 7042, otherwise known as the

WHEREAS, the Regular Foreign Investment Negative List,

consisting of Lists A and B, is effective for two (2) years pursuant
to Section 8 of RA 7042 (as amended) and its revised Implementing
Rules and Regulations;
WHEREAS, there is a need to formulate a Seventh Regular

existing list on January 6, 2007;

SECTION 1. Only the investment areas or activities listed

in Annex A hereof shall be reserved to Philippine nationals, and
hereafter shall be referred to as the Seventh Regular Foreign
Investment Negative List. The extent of foreign equity in these
areas shall be limited to the percentages indicated in the List.

to Section 8 of RA 7042 (as amended) and its revised Implementing
Rules and Regulations.
647

SEC. 4. This Executive Order shall take effect upon the

expiration of the Sixth Regular Foreign Investment Negative List
on January 6, 2007 following its publication in a national newspaper
of general circulation.

year of Our Lord, Two Thousand and Six.


Executive Secretary
648
RATIONALIZING THE TAX PRIVILEGE COVERING

IMPORTATIONS BY REGISTERED ENTERPRISES WITHIN
THE SUBIC SPECIAL ECONOMIC ZONE, AND FOR OTHER
PURPOSES
WHEREAS, under existing laws, registered businesses and

enterprises within the Subic Special Economic Zone are exempt
from national internal revenue taxes and customs duties on their
importations of raw materials, capital goods and equipment for
their business operations.
WHEREAS, there is a need to ensure that raw materials,

capital goods and equipment, which will be imported by registered
enterprises within the Subic Special Economic Zone, are only those
required for their business activities and operations;
WHEREAS, the Government needs additional revenue to

finance the country’s economic and development programs and
projects.

law, do hereby order and direct as follows:
SECTION 1. Importations of registered businesses and

enterprises or locators within the Subic Special Economic Zone in
excess of the requirements of their registered business or authorized
business activity consisting of raw materials, capital goods and
equipment shall be deemed brought into or sold within the customs
territory and, therefore, subject to the payment of taxes and customs
duties in accordance with existing customs and tax laws.
SEC. 2. The Bureau of Customs and the Bureau of Internal

Revenue, in coordination with the Subic Bay Metropolitan
649
Authority, shall issue appropriate issuances or circulars to clarify

and/or simplify the documentation, procedures, tax treatment and
payment of taxes and duties of the excess importations with the end
view of effectively implementing this Order.
SEC. 3. All executive issuances, rules and regulations or

parts thereof, which are inconsistent with this Executive Order, are
hereby repealed or modified accordingly.
DONE in the City of Manila, this 13th day of September in

the year of Our Lord, two thousand and seven.

BY THE PRESIDENT:

Executive Secretary
650
DIRECTING ALL HEADS OF DEPARTMENTS, BUREAUS,

OFFICES, AGENCIES, AND THE INSTRUMENTALITIES
OF THE GOVERNMENT TO SUPPORT THE POWER
INFRASTRUCTURE REQUIREMENTS AND THE
INVESTMENT OF HANJIN HEAVY INDUSTRIES AND
CONSTRUCTION-PHILIPPINES, INC. IN SUBIC AND IN
MINDANAO
WHEREAS, it is a declared national policy to attract foreign

investment trade in the country to promote economic growth,
generate employment, upgrade technology and accelerate national
development;
WHEREAS, the ten-point agenda of the present

administration includes the development of Subic as the best
international service and logistic center in the region;
WHEREAS, Hanjin Heavy Industries and Construction-

Philippines, Inc. (Hanjin) will invest about US$1.6 Billion for a
shipyard project in the Subic Bay Freeport Zone that will generate
about 20,000 employment thereat;
WHEREAS, Hanjin will likewise invest about US$2 Billion

for another shipyard project in Mindanao that will generate about
30,000 employment thereat;
WHEREAS, there is a need for the concerned government

entities to support the investment of Hanjin, particularly its power
requirements, in order for the country to become a landmark in the
shipping Industry in the Southeast Asian Region.

651
SECTION 1. Connection Assets in Subic. – The National

Transmission Corporation (TRANSCO) shall acquire and take
possession of the Connection Assets (15 km. 230 kV Transmission
Line and 230kV/22.9kV Substation) constructed by Hanjin in
Subic.
SEC. 2. Funding and Repayment Scheme. – TRANSCO shall

advance the necessary funds to immediately acquire and take
possession of the Connection Assets.
The specific responsibilities of government agencies involved

in the acquisition of the Connection Assets (such as, but not limited
to TRANSCO, DBM and DOF), including the details of implementing
a repayment scheme, shall be embodied in a Memorandum of
Agreement for the purpose.
SEC. 3. TRANSCO Connection Charges. – Where applicable,

TRANSCO may collect Connection Charges as approved by the
Energy Regulation Commission (ERC) from users of the Connection
Assts.
SEC. 4. Generation, Transmission and Distribution Rates to

Hanjin. – The National Power Corporation (NPC) and TRANSCO
shall provide discounted generation and transmission rates of
US$0.0491 for year 0 to year 6 and US$0.0600 for year 7 to year
10 in its shipyard locations in the Subic Bay Freeport Zone and in
Mindanao in accordance with the policies, rules and regulations of
these government corporations. Should the prevailing Industrial
retail rates decrease to level lower than the discounted rates
agreed and granted by the NPC and TRANSCO, the rates shall
be correspondingly decreased to match the prevailing rates. Said
discounted rates shall be reported to the ERC. Distribution rates
collected by any government entities (i.e., Philippine Economic
Zone Authority), if any, shall be waived for the period covered by
the grant of discounted generation and transmission rates by NPC
and TRANSCO.
652
SEC. 5. Role of Departments, Bureaus, Offices, Agencies,

Instrumentalities of the Government. – All heads of departments,
bureaus, offices, agencies and instrumentalities of the government
are hereby directed to give full support to the power infrastructure
requirements and investment of Hanjin in the Subic Bay Freeport
Zone and in Mindanao.
SEC. 6. Repealing Clause. – All executive orders, rules

and regulations and other issuances or parts thereof, which are
inconsistent with this Executive Order, are hereby revoked,
amended, or modified accordingly.
SEC. 7. Separability Clause. – Any portion or provision of

this Executive Order that maybe declared unconstitutional shall
not have the effect of nullifying its other portions or provisions, as
long as such remaining portions can still be given effect. SEC. 8.
Effectivity. – This Executive Order shall take effect fifteen (15) days
after its publication in a national newspaper of general circulation.
DONE in the City of Manila, this 22nd day of January in the

year of Our Lord, Two Thousand and Eight.

President

Executive Secretary
653
APPENDIX
APPENDIX
655
656
APPENDIX
APPENDIX: Amendments on Foreign Investments
LAW AMENDS AMENDED BY REPEALS REPEALED BY

ACT 2719 ACT 1128
ACT 3518 ACT 1459
ACT 3590 ACT 3513
CA 613 RA 503
RA 5171
EO 95 s. 2002 EO 286 s. 2000
EO 97 s. 1993 RA 7227
EO 155 s. 1999 EO 180 s. 1999 EO 136 s. 1987
EO 180 s. 1999 EO 155 s. 1999 EO 224 s. 2000
EO 182 s. 1994 RA 7042
EO 188 s. 1999 EO 155 s. 1999 EO 136 s. 1987
EO 224 s. 2000 EO 180 s. 1999
EO 226 s. 1987 RA 7888
RA 7918
EO 286 s. 2000 EO 95 s. 2002
EO 584 s. 2006 RA 7042
RA 8179
PD 66 RA 5490 PD 1786
RA 9728
PD 129 RA 8366
PD 1623 PD 1893
PD 1786 PD 66
PD 1789 PD 1159
RA 5186
RA 6135
PD 1893 PD 1623
RA 503 CA 613
RA 767 RA 1861
RA 808 RA 5002
657
LAW AMENDS AMENDED BY REPEALS REPEALED BY

RA 1393 RA 5171
RA 1861 RA 767
RA 5002 RA 808
RA 5171 CA 613 RA 1393
RA 5490 PD 66 RA 9728
RA 1937
RA 7042 RA 8179
RA 7227 EO 97 s. 1993
RA 7642 PD 1178
RA 7718 RA 6957
RA 7721 RA 337
RA 3779
RA 4093
RA 7353
RA 7888 EO 226 s. 1987
RA 7918 EO 226 s. 1987
RA 8179 RA 7042
RA 7042 (IRR)
RA 8366 PD 129
RA 8756 EO 226 s. 1987
RA 8756 (IRR) EO 226 s. 1987
RA 8762 RA 3018 RA 1180
RA 9728 RA 9728
RA 5490
658
INDEX
INDEX
659
660
INDEX
INDEX
A Development loans incentives

RA 7721
A. J. Wills Bases Conversion and Development
Licenses RA 767 ; RA 1861 ; Act of 1992 RA 7227
RA 2987 Bases Conversion and Development
AFAB SEE Authority of the Authority
Freeport Area of Bataan Creation RA 7227
Agricultural Investments Incentives Powers and duties RA 7227
Decree Bataan Economic Zone (BEZ)
Amendments PD 1789 Conversion RA 9728
AIRCON Inc. Blue Network Incorporated
Licenses RA 1841 Licenses RA 2987
Alien Social Integration Act of 1995 Build-and-transfer RA 7718
RA 7919 Build-lease-and-transfer RA 7718
Aliens RA 7919 Build-operate-and-transfer (BOT)
Clark Special Economic Zone RA 7718
EO 464 s. 1998 Build-Operate-and-Transfer Law
Registration of Investments Laws and regulations RA
RA 7042 ; IRR of RA 7042 7718
Special Investors Resident Build-own-and-operate RA 7718
visas PD 1623 Build-transfer-and-operate RA 7718
Subic Bay Freeport Zone EO
271 s. 1995 C
Authority of the Freeport Area of
Bataan (AFAB) CEZA SEE Cagayan Economic
Creation RA 9728 Zone Authority
Functions RA 9728 CSEZF SEE Cagayan Special
Economic Zone and Freeport
B Cables, Submarine
Eastern Extension Australasia
BEZ SEE Bataan Economic Zone and China Telegraph
BOT SEE Build-operate-and- Company Limited
transfer Amendments RA 5002
Banco Español Filipino Licenses RA 808
Licenses ACT 1790 Cagayan Economic Zone Authority
Banks and banking (CEZA)
“National” (name) ACT Creation RA 7922
3546 Implementing rules and
Banks and banking, International regulations IRR of RA
RA 7721 7922
Banco Español Filipino Powers and duties RA 7922
Licenses ACT 1790
661
Cagayan Special Economic Zone Bases Conversion and

Creation RA 7922 Development Authority RA
Cagayan Special Economic Zone Act 7227
of 1995 RA 7922 Corporation Law Act
Cagayan Economic Zone Amendments ACT 3518
Authority Corporations, Foreign
Creation RA 7922 EO 362 s. 1996; ACT 2975
Cagayan Special Economic Zone and Organizations ACT 1459
Freeport (CSEZF) Council for Investments in
Cagayan Special Economic Trade, Industry, Tourism,
Zone Agriculture, Natural Resources,
Creation RA 7922 Transportation, Communications
Implementing rules and and Services
regulations IRR of RA Abolition EO 155 s. 1999 ;
7922 Abolition (Amendments) EO
Powers and duties IRR of 180 s. 1999
RA 7922
Capital Equipment SEE Industrial D
Equipment
Central East Asia Growth Circle Debt-to-equity Conversion Program
Program (CEA-GCI) EO 290 s. 1987
Creation EO 152 s. 1999 Develop-operate-and-transfer RA
Powers and duties EO 152 7718
s. 1999 Domestic capital equipment RA
Presidential Action Officer 7369, RA 7918
Advisory Council Drainage
Compositions George H. Fairchild
EO 152 s. 1999 Licenses ACT 2720
Powers and duties EO Duty-free importation
152 s. 1999 Subic Special Economic Zone
Citizenship EO 97 s. 1993 ; EO 97-A s.
Criminal provisions CA 108 1993
Government policy CA 108
Clark Special Economic Zone
E
Conversion EO 55 s. 2001
Laws and regulations EO
ECC SEE Economic Coordinating
464, s. 1998
Council
Coal lands ACT 2719
EPZ SEE Export Processing Zone
Coal leases ACT 2719
EPZA SEE Export Processing
Condominium
Zone Authority
Laws and regulations RA
Eastern Extension Australasia
4726
and China Telegraph Company
Condominium Act RA 4726
Limited
Contract-add-and-operate RA 7718
Amendments RA 5002
Conversion Authority
Licenses RA 808
662
INDEX
Economic Coordinating Council Foreign corporations SEE

Administrative Supervision of Corporations, Foreign
the Investment Ombudsman Foreign Equity Participation
EO 332 s. 2000 PD 1892
Economic Zones (Ecozones) Foreign Investment Negative List
Master Employment Contracts (FINL) RA 7042
RA 7916 Amendments RA 8179
Migrant workers RA 7916 Fifth Regular Foreign
Ecozones SEE Economic Zones Investment Negative
Edward J. Nell Company List EO 139 s. 2002
Licenses RA 1841 First Regular Foreign
Electric power systems ACT 1303 Investment Negative
Emigration and Immigration Law List EO 182 s. 1994 ;
CA 613 ; PD 1623 ; PD 1893 EO 269 s. 1995
Excise tax Second Regular Foreign
Laws and regulations RA Investment Negative
7642 List EO 362 s. 1996
Export Incentives Act Sixth Regular Foreign
Amendments PD 1789 Investment Negative
Export Incentives Act of 1970 List EO 389 s. 2004
Export processing zone (EPZ) RA Expiration EO
7916 584 s. 2006
Export Processing Zone Authority Seventh Regular
(EPZA) Foreign Investment
Amendments PD 1786 Negative List
Creation PD 66 Promulgation
Powers and duties PD 66 EO 584 s. 2006
Transferred to PEZA RA Foreign investments SEE
7916 Investments, Foreign
Foreign Investments Act of 1991
F RA 7042
Amendments EO 182 s. 1994
FAB SEE Freeport Area of Bataan ; EO 269 s. 1995 ; EO 362 s.
FIA SEE Foreign Investments Act 1996 ; EO 139 s. 2002 ; EO
FINL SEE Foreign Investment 389 s. 2004 ; EO 584 s. 2006
Negative List ; RA 8179
Fifth Regular Foreign Investment Foreign Investments in
Negative List EO 139 s. 2002 Domestic Market Enterprises
First Regular Foreign Investment RA 7042 ; IRR of RA 7042
Negative List EO 182 s. 1994 Amendments RA 8179
Amendments EO 269 s. 1 Foreign Investments in Export
995 Enterprises RA 7042 ; IRR
Foreign banks SEE Banks and of RA 7042
banking, International
Foreign Business Regulation Act
663
Foreign Investment Negative G

List
Amendments RA 8179 General Banking Act
Implementing rules and Amendments RA 7721
regulations IRR of RA George H. Fairchild
7042 Licenses ACT 2720
Rights of Former Natural-born
Filipinos to own private H
land IRR of RA 7042
Foreign investors SEE Hanjin Heavy Industries and
Investments, Foreign Construction-Philippines, Inc.
Foreign nationals SEE Aliens EO 701 s. 2008
Foreign oil exploration companies Honorary Investment and Trade
EO 353 s. 1971 Representatives
Foreign ownership SEE Creation EO 20 s. 1998
Corporations, Foreign Hydrofoil boats
Foreign retailers SEE Retail Trade Robert O. Phillips RA 4076
Foreign Trade Zone Licenses RA 4076
Mariveles Port RA 5490
Foreign Trade Zone Authority
Amendments PD 66
I
Creation RA 5490
IELO SEE Investment Express
Powers and duties RA 5490
Lane Office
Forest lands SEE Forests and
IPU SEE Investment Promotion
forestry
Units
Forest reserves ACT 2721
Imported Capital Equipment
Forests and forestry
RA 7369 ; RA 7918
Multiple use ACT 2721
Industrial equipment RA 7369
Former Natural Born Filipinos,
Infrastructure and development
Investment rights of IRR of RA
projects
7042
Amendments RA 7718
Former Natural Born Filipinos, to
Build-and-transfer RA 7718
own private land, Rights of IRR
Build-lease-and-transfer
of RA 7042
RA 7718
Fourth Regular Foreign Investment
Build-operate-and-transfer
Negative List (FINL) EO 286 s.
(BOT) RA 7718
2000
Build-operate-and-transfer
Amendments EO 95 s. 2002
(BOT) Law RA 7718
Franchises SEE Licenses
Build-own-and-operate RA
Freeport Area of Bataan (FAB)
7718
Creation RA 9728
Build-transfer-and-operate
Freeport Area of Bataan (FAB) Act of
RA 7718
2009 RA 9728
Contract-add-and-operate
RA 7718
664
INDEX
Develop-operate-and-transfer Investment Ombudsman, Office of

RA 7718 the
Direct government guarantee Creation EO 180 s. 1999
RA 7718 Functions EO 180 s. 1999
Private sector infrastructure or Quick Response One-
development projects RA Stop Action Center for
7718 Investments (QROSACI)
Private Initiative in Functions EO 180 s.
Infrastructure RA 7718 1999
Public Bidding of Projects Named EO 180 s.
RA 7718 1999
Rehabilitate-operate-and- Investment One-Stop Action Center
transfer RA 7718 (OSAC) EO 155 s. 1999
Rehabilitate-own-and-operate Investment Promotion Units
RA 7718 (IPUs)
International business enterprises Creation EO 155 s.
RA 8756 1999
Implementing rules and Renamed EO 180 s. 1999
regulations IRR of RA Investment Promotion Units (IPUs)
8756 Creation EO 155 s. 1999
Licensing of Regional or Area Investment Rights of Former
Headquarters (RHQs) Natural-born Filipinos IRR of
RA 8756 RA 7042
Licensing of Regional Investments
Operating Headquarters Rate of return RA 7718
(ROHQs) Laws and regulations EO
RA 8756 428 s. 2005
International traders and investors Investments, Board of
of foreign nationality RA 1393 ; Creation EO 226 s. 1987
RA 5171 Compositions EO 226 s.
Investment Express Lane Office 1987
(IELO) Investment Ombudsman,
Compositions EO 332 s. 2000 Office of the
Creation EO 332 s. 2000 Creation EO 180 s.
Functions EO 332 s. 2000 1999
Investment Facilitation Specialists Investment One-Stop Action
Powers and duties EO 180 Center (OSAC)
s. 1999 Functions EO 155 s.
Investment Houses 1999
Organizations PD 129 Organization EO 155
Registrations PD 129 s. 1999
Investment Houses Law PD 129 Renamed EO 180 s.
Amendments RA 8366 1999
Investment Incentive Act RA 5455 One Stop Action Center
Amendments PD 1789 Named EO 224 s.
2000
665
Powers and duties EO 226 Banco Español Filipino ACT

s. 1987 1790
Registration EO 226 s. 1987 Blue Network Incorporated
Investments, Foreign RA 5455 ; RA RA 2987
7042 ; RA 8762 Eastern Extension Australasia
Investors' Lease Act RA 7652 and China Telegraph
Implementing rules and Company Limited RA 808
regulations IRR of RA ; RA 5002
7652 Edward J. Nell Company RA
Investment Promotion Units (IPUs) 1841
Creation EO 155 s. 1999 George H. Fairchild ACT
Irrigation 2720
George H. Fairchild Mackay Radio and Telegraph
Licenses ACT 2720 Company of California
ACT 3513 ; ACT 3590
J Marconi Wireless Telegraph
Company of America ACT
JPEPA SEE Japan-Philippine 2384
Economic Partnership Agreement Martin M. Levering ACT
(JPEPA) 1303
Japan-Philippines Economic Robert Dollar Company ACT
Partnership Agreement (JPEPA) 3495
EO 213 s. 2003 Robert O. Phillips RA 4076
Washington Brodith RA
2984
L
Licensing of Regional Operating
Headquarters (ROHQs) RA 8756
Land lease—Policy SEE Land
Licensing of Regional or Area
tenure; Land use
Headquarters (RHQs) RA 8756
Land Lease Law PD 471
Local Petroleum Concessionaires
Land tenure PD 471 ; RA 7652 ;
EO 353 s. 1971
IRR of RA 7652
Long-term lease contracts SEE
Land use PD 471; RA 7652; IRR of
Leases
RA 7652
Leases PD 471
M
Corporations, Foreign ACT
2975
Mackay Radio and Telegraph
Forests and forestry ACT
Company of California
2721
Amendments ACT 3590
Laws and regulations RA
Licenses ACT 3513
7652
Marconi Wireless Telegraph
Licenses
Company of America
AIRCON Inc. RA 1841
Licenses ACT 2384
A. J. Wills RA 767 ; RA
Martin M. Levering
1861 ; RA 2987
Licenses ACT 1303
666
INDEX
Mining law ACT 2719 Export Processing Zone

Mining leases ACT 2719 Enterprises EO 226 s. 1987
Multinational Companies SEE Implementing rules and
International business enterprises regulations IRR of RA
8756
N International business
enterprises EO 226 s. 1987
“National” (name) ACT 3546 Regional or Area
National Internal Revenue Code Headquarters (RHQ)
Amendments RA 7692 RA 8756 ; IRR of RA
Nationalization CA 108 8756
National Transmission Corporation Regional Operating
(TRANSCO) Headquarters
Powers and duties EO 701 s. (ROHQ) RA 8756 ;
2008 IRR of RA 8756
Investment Priorities Plan
EO 226 s. 1987
O
Investments, Board of
Creation EO 226 s.
OPIC SEE Overseas Private
1987
Investment Corporation
Laws and regulations
OSAC SEE Investment One-Stop
EO 226 s. 1987
Action Center ; One Stop Action
Special Investors Resident
Center
Visas EO 226 s. 1987
Office of the President
One Stop Action Center (OSAC)
Cagayan Economic Zone
Named EO 224 s. 2000
Authority
Overseas Private Investment
Creation RA 7922
Corporation (OPIC) EO 138 s.
Central East Asia Growth
1987
Circle Program (CEA-GCI)
Creation EO 152 s.
1999 P
Investment Express Lane
Office PCC SEE Philippine Coordinating
Creation EO 332 s. Committee
2000 PEZA SEE Philippine Economic
Oil exploration SEE Petroleum-- Zone Authority
Prospecting Paper industry
Omnibus Investments Code Laws and regulations ACT
Amendments PD 1789 ; PD 2742
1892 Permanent Philippine Committee
Omnibus Investments Code of 1987 for the Joint Philippine-Romanian
EO 226 s. 1987 Economic and Trade Commission
Amendments RA 7369 ; Creation EO 453 s. 1975
RA7888 ; RA 7918 ; RA Composition EO 453 s. 1975
8756
667
Permissible investments SEE Private initiative infrastructure

Investments, Foreign--Laws and Amendments RA 7718
regulations Privatization Scheme of the
Permitted investments SEE Philippine Government EO 290
Investments, Foreign--Laws and s. 1987
regulations Public bidding SEE Public
Petroleum contracts
Prospecting EO 353 s. 1971 Public contracts RA 7718
Petroleum Act
Amendments EO 353 s. 1971 Q
Petroleum exploration SEE
Petroleum--Prospecting Quick Response One-Stop
Philippine Coordinating Committee Action Center for Investments
(PCC) (QROSACI)
Compositions EO 213 s. 2003 Named EO 180 s. 1999
Creation EO 213 s. 2003 Renamed EO 224 s. 2000
Function EO 213 s. 2003
Philippine Economic Zone Authority
R
(PEZA)
Creation RA 7916
Radio stations
A. J. Wills
Philippine Economic Zone Authority
Licenses RA 767 ; RA
(PEZA) Board
1861
Creation RA 7916
AIRCON Inc.
Licenses RA 1841
Philippine Immigration Act of 1940
Blue Network Incorporated
CA 613
Licenses RA 2987
Amendments RA 503 ;
Edward J. Nell Company
RA 1393 ; RA 5171
Licenses RA 1841
Philippine Investment House
Washington Brodith
Industry RA 8366
Licenses RA 2984
Port of Clark International Airport
Rehabilitate-operate-and-transfer
Creation EO 55 s. 2001
RA 7718
Port of Manila
Rehabilitate-own-and-operate
Sub-Port of Clark Special
RA 7718
Economic Zone
Retail business SEE Retail trade
Abolition EO 55 s.
Retail trade RA 1180
2001
Amendments RA 8762
Ports of Entry, Principal
Capital investments RA 8762
Mariveles Port RA 5490
Qualifications RA 8762
Port of Clark International
Repeals RA 8762
Airport
Retail Trade Liberalization Act of
Creation EO 55 s.
2000 RA 8762
2001
Return on investments SEE
Private Development Banks Act
Investments—Rate of return
Amendments RA 7721
668
INDEX
Revised Charter of the Foreign Trade ECOZONES RA 7916

Zone Authority Objectives RA 7916
Amendments PD 66 Philippine Economic Zone
Robert Dollar Company Authority (PEZA)
Licenses ACT 3495 Creation RA 7916
Robert O. Phillips Special Economic Zone and Free Port
Licenses RA 4076 Cagayan Special Economic
Rural Bank Act Zone
Amendments RA 7721 Creation RA 7922
Special Investors Resident Visas to
S Aliens PD 1623
Amendments PD 1893
SBMA SEE Subic Bay Sub-Port of Clark Special Economic
Metropolitan Authority Zones
SEZ SEE Special Economic Zones Abolition EO 55 s. 2001
SEZA SEE Special Economic Zones Subic Bay Freeport Zone EO 271
Savings and Loan Association Act s. 1995
Amendments RA 7721 Subic Bay Metropolitan Authority
Second Regular Foreign Investment (SBMA)
Negative List (RFINL) EO 362 Creation RA 7227
s. 1996 Powers and duties RA 7227
Sixth Regular Foreign Investment Subic Special Economic Zone
Negative List EO 389 s. 2004 Business Tax EO 97 s. 1993 ;
Expiration EO 584 s. 2006 EO 97-A s. 1993
Seventh Regular Foreign Investment Duty-free importation EO 97
Negative List s. 1993 ; EO 97-A s. 1993
Promulgation EO 584 s. Importations EO 660 s. 2007
2006 Special Economic and Free-
Social Integration Program RA port Zone
7919 Creation RA 7227
Special Economic and Free-port Zone Subic Special Economic and Freeport
Creation RA 7227 Zone
Special Economic Zone (SEZ) Business Tax EO 97 s. 1993
RA 7916 ; EO 97-A s. 1993
Cagayan Special Economic Duty-free importation EO 97
Zone and Free Port s 1993 ; EO 97-A s. 1993
Creation RA 7922 Submarine Telegraph Cable SEE
Clark Special Economic Zone Cables, Submarine
RA 7227
Zamboanga City Special T
Economic Zone
(ZAMBOECOZONE) TRANSCO SEE National
Creation RA 7903 Transmission Corporation
Special Economic Zone Act of 1995 Tariff and Customs Code of the
RA 7916 Philippines
Amendments RA 5490
669
Tax Amnesty Trade and Industry, Department of

Clark Special Economic Zone Honorary Investment and
RA 9399 Trade Representatives
John Hay Special Economic Creation EO 20 s.
Zone RA 9399 1998
Morong Special Economic Office of the Investment
Zone RA 9399 Ombudsman EO 224 s.
Poro Point Special Economic 2000
and Freeport Zone RA Philippine Economic Zone
9399 Authority (PEZA)
Special Economic Zones and Creation RA 7916
Freeports RA 9399 Philippine Economic Zone
Tax evasion RA 7642 Authority (PEZA) Board
Tax penalties RA 7642 Creation RA 7916
Telecommunication Powers and duties
Eastern Extension Australasia RA 7916
and China Telegraph
Company Limited W
Amendments RA 5002
Licenses RA 808 Washington Brodith
Telegraph, Wireless Licenses RA 2984
Mackay Radio and Telegraph Water transportation facilities
Company of California Robert O. Phillips
Amendments ACT Licenses RA 4076
3590 Wood-pulp industry
Licenses ACT 3513 Laws and regulations ACT
Marconi Wireless Telegraph 2742
Company of America
Licenses ACT 2384
Z
Robert Dollar Company
Licenses ACT 3495
ZAMBOECOZONE SEE
Television stations
Zamboanga City Special Economic
A. J. Wills
Zone
Licenses RA 1861
Third Regular Foreign Investments
Zone Act of 1995 RA 7903
Negative List EO 11 s. 1998
Tourist-Related Projects
Zone Authority
EO 63 s. 1986
Creation RA 7903
Trade agreement EO 453 s. 1975
670
INDEX
A Publication of the
Office of the Secretary General

and the
Legislative Information Resources Management Department
House of Representatives
Editorial Board
Atty. Marilyn B. Barua-Yap, DPA, Secretary General

Edgardo H. Pangilinan, Deputy Secretary General
Editorial Team
Editors: Henedina Mary Anne S. Polo,

Herminia B. Callejo, Dante Roberto P. Maling
Assistant Editor and Head Indexer: Ester S. Gapas
Research, Indexing and Proofreading Team:
Jose V. Enciso (Team Leader), Rosemarie D. Balidoy,
Denise Marie C. Betia, Kenny Rose D. Clasita,
Jertrude C. Dimaano, Eugene J.T. Espinoza,
Annaliza O. Quigao, Mary Geraldine S. Reyes,
Fairlyn H. Sarga, Israelex A. Veleña
Encoders: Katleen G. Borja, Jonathan Z. Rodriguez,
Enrico D. Seña, Liwayway C. Zuñiga
Administrative Support Team: Richard S. Balucan,
Robert S. Cariño, Edgar B. Mancio, Ramon B. Nungay
Cover Concept and Design: Israelex A. Veleña
Page Lay-out and Printing: Printing and Reproduction Service,
Administrative Department
Laws & Executive Issuances Series No. 6
671

Laws & Executive Issuances: Foreign Investment (1900-2014)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Laws & Executive Issuances: Foreign Investment (1900-2014)

Uploaded by

Copyright:

Available Formats

LAWS & EXECUTIVE ISSUANCES

foreign investments constute a

FELICIANO BELMONTE, JR.

we are grateful for the support of our Honorable Speaker

ATTY. MARILYN B. BARUA-YAP, DPA

PUBLIC LAWS PAGE

ACT NO. 1303 5

ACT NO. 1459 11

ACT NO. 1790 16

PUBLIC LAWS PAGE

ACT NO. 2384 21

ACT NO. 2719 25

ACT NO. 2720 32

ACT NO. 2721 36

ACT NO. 2742 37

PUBLIC LAWS PAGE

ACT NO. 2975 39

ACT NO. 3495 42

ACT NO. 3513 48

ACT NO. 3518 54

ACT NO. 3520 56

PUBLIC LAWS PAGE

ACT NO. 3546 59

ACT NO. 3590 60

COMMONWEALTH ACTS PAGE

COMMONWEALTH ACT NO. 108 63

COMMONWEALTH ACT NO. 613 65

REPUBLIC ACTS PAGE

REPUBLIC ACT NO. 503 71

REPUBLIC ACT NO. 767 73

REPUBLIC ACTS PAGE

REPUBLIC ACT NO. 808 78

REPUBLIC ACT NO. 1180 82

REPUBLIC ACT NO. 1355 85

REPUBLIC ACT NO. 1393 110

REPUBLIC ACT NO. 1841 111

REPUBLIC ACTS PAGE

REPUBLIC ACT NO. 1861 114

REPUBLIC ACT NO. 2984 115

REPUBLIC ACT NO. 2987 119

REPUBLIC ACT NO. 4076 120

REPUBLIC ACT NO. 4726 122

REPUBLIC ACT NO. 5002 136

REPUBLIC ACTS PAGE

ASSIGNS, A FRANCHISE TO LAND, CONSTRUCT, MAINTAIN,

REPUBLIC ACT NO. 5171 138

REPUBLIC ACT NO. 5455 139

REPUBLIC ACT NO. 5490 147

REPUBLIC ACT NO. 7042 155

REPUBLIC ACTS PAGE

° IMPLEMENTING RULES AND REGULATIONS OF RA 7042

REPUBLIC ACT NO. 7227 194

REPUBLIC ACT NO. 7369 226

REPUBLIC ACTS PAGE

REPUBLIC ACT NO. 7642 230

REPUBLIC ACT NO. 7652 239

IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC

REPUBLIC ACT NO. 7718 253

REPUBLIC ACT NO. 7721 266

REPUBLIC ACT NO. 7888 272

REPUBLIC ACT NO. 7903 274

REPUBLIC ACTS PAGE

REPUBLIC ACT NO. 7916 284

foreign investments constute a