Bases Conversion and Development Act Summary

Authority creation, term, and dissolution

Section 3 creates the Bases Conversion and Development Authority (the Conversion Authority) as a body corporate with perpetual succession and corporate powers.
Section 3 requires the Conversion Authority to be organized within thirty (30) days after approval of Republic Act No. 7227.
Section 3 sets the Conversion Authority’s term at fifty (50) years from its organization.
Section 3 authorizes Congress, through a joint resolution, to dissolve the Conversion Authority whenever Congress judges the primary purpose has been accomplished.
Section 3 provides that the Conversion Authority shall establish its principal office in Metropolitan Manila unless otherwise provided by the Conversion Authority and may establish necessary branches.

Core purposes and strategic functions

Section 4 empowers the Conversion Authority 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
- portions of Metro Manila military camps transferred to it by the President.
Section 4 requires adoption and implementation of a comprehensive and detailed development plan with a list of projects, consistent with ecological and environmental standards, for the conversion of Clark and Subic reservations and extensions.
Section 4 requires the Conversion Authority to encourage active participation of the private sector in conversion.
Section 4 makes the Conversion Authority a holding company for subsidiary companies under Section 16 and to invest in Special Economic Zones under Sections 12 and 15.
Section 4 authorizes the Conversion Authority to manage and operate, through private sector companies, developmental projects outside subsidiary companies and Special Economic Zones.
Section 4 establishes a consultation mechanism with appropriate local government units for plans, programs, and projects, including impacts on surrounding communities.
Section 4 authorizes planning and undertaking the readjustment, relocation, or resettlement of population within the Clark and Subic reservations and extensions in coordination with government agencies and local government units.

Powers, property transfers, and capitalization

Section 5 vests the Conversion Authority with corporate powers including the authority to sue and be sued, adopt and use a corporate seal judicially noticed, and adopt and amend its bylaws.
Section 5 authorizes the Conversion Authority to enter into contracts and to contract loans, indebtedness, credit, and issue commercial papers and bonds in local or convertible foreign currency, from international financial institutions, foreign government entities, and local or foreign private commercial banks, under lawful terms.
Section 5 authorizes execution of deeds and guarantees (such as guarantee, mortgage, pledge, trust, or assignment) for financing vital programs and projects, subject to constitutional constraints referenced in Section 5.
Section 5 authorizes constructing, owning, leasing, operating, and maintaining public utilities and infrastructure facilities.
Section 5 authorizes reclamation projects in areas adjacent/contiguous to the Conversion Authority’s lands under Section 7, either alone or with the Public Estates Authority (PEA) established under Presidential Decree No. 1084, as amended.
Section 5 authorizes acquisition, ownership, administration, leasing, encumbrance, sale, alienation, and other disposition of real and personal properties at fair market value.
Section 5 grants authority to receive donations, grants, and assistance and to invest funds and assets outside Special Economic Zones (under Sections 12 and 15).
Section 5 authorizes the Conversion Authority to exercise the right of eminent domain.
Section 5 authorizes oversight functions over Special Economic Zones declared under the Act and later presidential proclamations.
Section 6 sets the Conversion Authority’s authorized capital at PHP 100,000,000,000, fully subscribed by the Republic of the Philippines.
Section 6 provides that capital may be paid up from proceeds of land sales under Section 8 or by transferring properties valued at that amount.
Section 6 authorizes initial operating capital of PHP 70,000,000, appropriated from National Treasury funds not otherwise appropriated, and states it shall be covered by preferred shares retireable within two (2) years.
Section 7 requires the President to transfer forthwith to the Conversion Authority specified stations, namely:
- 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)
Section 7 also requires transfer of other properties including portions of Metro Manila military camps under Section 8.
Section 7 provides that areas remaining as military reservations must be delineated and proclaimed as such by the President.

Funding scheme and sales limitations

Section 8 provides that Conversion Authority capital comes from sales proceeds and/or transfers of certain Metro Manila military camps, including lands covered by Proclamation No. 423, series of 1957 (Fort Bonifacio and Villamor (Nichols) Air Base).
Section 8 divides the authorized areas for immediate disposal into Phase 1 with a total of 640.60 and lists Phase II entries with a total of 271.20.
Section 8 provides that specified areas are exempt from sale, including:
- Approx. 148.80 hectares in Fort Bonifacio for NCR Security Brigade, AFP officers’ housing, and PNP jails/support services (presently Camp Bagong Diwa),
- Approx. 99.91 hectares in Villamor Air Base for the Presidential Airlift Wing, helicopter squadron for the NCR and security units,
- areas segregated by Proclamation Nos. 461 (1965), 462 (1965), 192 (1967), 208 (1967), 469 (1969), 653 (1970), 684 (1970), 1041 (1972), 1160 (1973), 1217 (1973), 682 (1970), 1048 (1975), 1453 (1975), 1633 (1977), 2219 (1982), 172 (1987), 389 (1989), 518 (1990), 467 (1968), 347 (1968), 376 (1968), (Grand Manila terminal/market entries as listed), 1048 (1975), 1453 (1975), 2219 (1982), 172 (1987), 389 (1989), 518 (1990) and other enumerated exempt areas,
- a proposed 30.15 hectares relocation site for families affected by circumferential road 5 and radial road 4, subject to boundaries determined by actual ground survey.
Section 8 authorizes the President to sell the covered lands in whole or in part, declaring them alienable and disposable under existing laws governing government property sales.
Section 8 requires that no sale or disposition be undertaken until a development plan containing projects for conversion is approved by the President under paragraph (b), Section 4 of the Act.
Section 8 authorizes, six (6) months after approval of the Act, the President to authorize the Conversion Authority to dispose of certain areas in Fort Bonifacio and Villamor as it determines.
Section 8 requires the Conversion Authority to provide the President a report on any disposition or proposed disposition plan within one (1) month from disposition or preparation of the plan.
Section 8 requires distribution of sale proceeds after deducting all sale expenses:
- 32.5%: transfer of AFP military camps; construction of new camps; AFP self-reliance and modernization; concessional and long-term housing loan assistance and livelihood assistance to AFP officers and enlisted men and their families; rehabilitation and expansion of AFP medical facilities,
- 50%: conversion and commercial uses of the Clark and Subic reservations and extensions,
- 5%: 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,
- the remainder (“balance”) accrues and is remitted to the National Treasury to be appropriated by Congress for the sole purpose of financing programs and projects vital for the economic upliftment of the Filipino people.
Section 8 provides a special rule for Fort Bonifacio: 2.5% of its proceeds goes in equal shares each to Municipalities of Makati, Taguig and Pateros.
Section 8 mandates that farmers affected shall not be denied due compensation.
Section 8 authorizes, for military reservations and extensions, the President (upon recommendation of the Conversion Authority, or the Subic Authority when it concerns the Subic Special Economic Zone) to sell or dispose portions essential for development of projects.
Section 8 states the President may authorize sales only as provided in Section 8 and subject to the development plan approval requirement.

Governance: Board, President, interim leadership, compensation

Section 9 provides that the Conversion Authority’s powers and functions are exercised by a Board of Directors composed of nine (9) members.
Section 9 requires a full-time chairman who is also the president of the Conversion Authority plus eight (8) other members from the private sector, including two (2) from the labor sector.
Section 9 requires appointment by the President with the consent of the Commission on Appointments.
Section 9 provides initial board term staggerings for initial members:
- three (3) (including chairman; one private sector representative; one labor sector representative) for six (6) years,
- three (3) for four (4) years,
- three (3) for two (2) years.
Section 9 provides that vacancies are filled for the unexpired term of the predecessor.
Section 9 requires that appointees be natural-born Filipino citizens, of good moral character, unquestionable integrity, and recognized competence in relevant fields, including economics, management, international relations, law, or engineering (preferably naval or aeronautical).
Section 9 sets fixed terms for the chairman and president of the Conversion Authority at six (6) years.
Section 9 provides per diem rules:
- up to PHP 5,000 per board meeting,
- no more than the equivalent of four (4) meetings per month,
- the President may increase per diem but not within two (2) years from its last increase.
Section 10 makes the Board the policy-making body and requires it to:
- determine organization structure and define duties/responsibilities and adopt a compensation and benefit scheme at least equivalent to the Central Bank of the Philippines,
- appoint all officials down to the third level and authorize the Conversion Authority president to appoint others (with merit and fitness and in pursuance of Civil Service Laws, except coterminous employees of Board members),
- prepare annual and supplemental budgets,
- submit an annual report to the President, President of the Senate, and Speaker of the House of Representatives,
- ensure major conversion projects use a turnkey or build-operate-transfer (BOT) scheme under Republic Act No. 6957,
- begin, starting the fourth year of full operation, a privatization or divestment program under general guidelines prescribed by the President.
Section 11 assigns the Conversion Authority president to serve as Chief Executive Officer, execute Board-approved policies, direct and supervise operations, represent the Authority in government and private dealings, prepare Board meeting agendas and submit policies for Board consideration, and exercise additional powers under bylaws and vested by the Board.
Section 20 provides interim service rules: except for the chairman of the Subic Authority, and except for the Conversion Authority chairman and Board and Subic Authority members, the board leadership serves until the 31st of July 1992 or until successors are duly appointed.

Subic Special Economic Zone and governance

Section 12 creates the Subic Special Economic Zone subject to concurrence by resolution of the sangguniang panlungsod of the City of Olongapo and the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa.
Section 12 defines the Subic Special Economic Zone as the City of Olongapo and Municipality of Subic in Zambales, including lands occupied by the Subic Naval Base and contiguous extensions embraced by the 1947 Military Bases Agreement, as amended, within Morong and Hermosa territorial jurisdiction in Bataan.
Section 12 requires each local government unit to submit its concurrence resolution to the Office of the President within thirty (30) days after approval of the Act.
Section 12 requires the President to issue a proclamation defining metes and bounds within the manner provided by the Act.
Section 12 mandates zone policies, including development as a self-sustaining industrial, commercial, financial and investment center; operation/management as a separate customs territory ensuring free flow of goods and capital; incentives including tax and duty-free importations of raw materials, capital and equipment (with export/removal to other Philippine territory subject to customs duties and taxes).
Section 12 imposes a tax regime inside the Subic Special Economic Zone: no taxes, local and national, shall be imposed; instead, businesses remit 3% of gross income to the National Government and 1% each to local government units in proportion to population area and other factors, plus a 1% development fund of gross income for development of municipalities outside Olongapo/Subic and other contiguous municipalities.
Section 12 directs that in conflict between national and local laws on tax exemption privileges, the rule favors the latter.
Section 12 prohibits application of any exchange control policy and allows/maintains free markets for foreign exchange, gold, securities and futures.
Section 12 requires the Central Bank, through the Monetary Board, to supervise and regulate banking and other financial institutions in the Zone.
Section 12 requires banking and finance liberalization, including establishment of foreign currency depository units and offshore banking units with minimum Central Bank regulation.
Section 12 grants permanent resident status within the Zone to any investor (and spouse and dependent children under twenty-one (21) years of age) whose continuing investment is not less than US$250,000, with freedom of ingress/egress without special authorization from the Bureau of Immigration and Deportation.
Section 12 authorizes the Subic Bay Metropolitan Authority to issue working visas renewable every two (2) years to foreign executives and other aliens with highly-technical skills certified by the Department of Labor and Employment, subject to the conditions stated, and requires reporting of names to the Bureau of Immigration and Deportation within thirty (30) days after issuance.
Section 12 assigns defense and perimeter security to the National Government in coordination with the Subic Bay Metropolitan Authority; requires the Subic Bay Metropolitan Authority to establish its own internal security and fire-fighting forces.
Section 12 provides local autonomy: local government units comprising the Zone retain basic autonomy and identity, with cities governed by their charters and municipalities under Republic Act No. 7160.
Section 13 creates the Subic Bay Metropolitan Authority (the Subic Authority) as an operating and implementing arm of the Conversion Authority.
Section 13 authorizes the Subic Authority to operate and develop key facilities in the Subic Special Economic and Free-port Zone (ship repair and ship building facilities, container port, oil storage and refueling facility, and Cubi Air Base) consistent with Section 12 policies.
Section 13 authorizes the Subic Authority to accept local and foreign investments subject only to its regulations conforming to Conversion Authority policies and without prejudice to constitutional nationalization requirements.
Section 13 authorizes regulation of utilities and infrastructure (including shipping-related business, stevedoring, port terminal concessions, and airport operations in coordination with the Civil Aeronautics Board) and authority to fix just and reasonable rates, fares, charges, and other prices.
Section 13 authorizes constructing and operating required utilities and infrastructure, directly or through contracts, franchises, licenses, bulk purchase from private sector, BOT scheme, or joint venture in coordination with local government units and appropriate agencies and in conformity with applicable laws.
Section 13 authorizes incorporation governance measures (corporate seal), contracting, leasing, selling, disposing, acquiring and owning properties, suing and being sued, and exercising eminent domain for public use and public purpose.
Section 13 authorizes raising/borrowing funds from local and international financial institutions, issuing bonds, promissory notes, and securities, and securing them with guarantees, pledge, mortgage, deed of trust, or assignment of Subic Authority properties held by the Subic Authority.
Section 13 authorizes operation or licensing of tourism-related activities with priorities and standards set by the Subic Authority, including games and amusements; it exempts horse racing, dog racing, and casino gambling, which continue to be licensed by PAGCOR upon recommendation of the Conversion Authority.
Section 13 mandates preservation of forested areas as a national park and requires permanent total log ban.
Section 13 authorizes the Subic Authority to enforce environmental pollution control measures in its territory and requires the creation of an Ecology Center.
Section 13 provides for governance through a Board of Directors of fifteen (15) members:
- local government unit representatives that concur,
- two (2) national government representatives,
- five (5) private sector representatives from specified existing naval stations/facilities,
- remaining members from business and investment sectors.
Section 13 requires presidential appointment of board members for six (6) years, with local government unit representatives serving three (3) years; removal for cause is allowed, with replacements serving unexpired terms.
Section 13 requires Filipino citizenship, good moral character, and recognized competence for board appointment, and gives preference to residents within the Subic Special Economic Zone.
Section 13 imposes per diem limits of up to PHP 5,000 per meeting and maximum equivalent of four (4) meetings per month; it permits presidential increase but not within two (2) years from last increase.
Section 13 requires the President to appoint a professional manager as administrator of the Subic Authority, with compensation determined by the Board subject to approval of the Secretary of Budget.
Section 13 designates the Secretary of Budget as ex officio chairman of the Board and chief executive officer of the Subic Authority.
Section 13 provides that for the first year of operations from effectivity of the Act, the mayor of the City of Olongapo serves as chairman and chief executive officer.
Section 13 sets Subic Authority capitalization at authorized capital stock of PHP 20,000,000,000 divided into 20,000 no-par shares fully subscribed and paid up by the Republic of the Philippines through:
- lands and permanent improvements/fixtures embraced and defined in Section 12 not otherwise alienated/conveyed/transferred to another government agency,
- other assets transferred by the President as Government equity contribution,
- Government cash contribution of PHP 300,000,000 a year for the next three (3) years appropriated from National Treasury funds not otherwise appropriated.
Section 14 governs relationship with local government units: the Subic Authority exercises administrative powers, rule-making, and disbursement in conformity with Conversion Authority oversight.
Section 14 provides that in conflicts between Subic Authority and concerned local government units on matters other than defense and security, Subic Authority decisions prevail.

Clark and other Special Economic Zones

Section 15 authorizes the President to create by executive proclamation a Clark Special Economic Zone covering lands of Clark military reservations and contiguous extensions within the territories of Angeles City, Mabalacat and Porac (Pampanga), and Capas (Tarlac), subject to concurrence by resolution of directly affected local government units.
Section 15 provides that the governing body of the Clark Special Economic Zone is established by executive proclamation with powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66, as amended.
Section 15 requires consultation with inhabitants of directly affected local government units to determine policies governing the Clark Zone, conducted within six (6) months from approval of the Act.
Section 15 authorizes other Special Economic Zones with concurrence by directly affected local government units, including:
- areas in 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,
- Camp John Hay in the City of Baguio.
Section 15 further authorizes, upon recommendation of the Conversion Authority, Special Economic Zones covering municipalities of Morong, Hermosa, Dinalupihan, Castillejos, and San Marcelino.

Subsidiaries, supervision, legal counsel, audits, injunctions

Section 16 authorizes the Conversion Authority to form and maintain subsidiary corporations in accordance with Philippine Corporation Law and SEC rules, unless otherwise provided in the Act.
Section 16 requires the Conversion Authority to own initially at least 51% of each subsidiary’s capital stock and to have majority of each subsidiary’s Board, with at least one director as chairman of the Conversion Authority and a second director as the Conversion Authority president or designated representative.
Section 16 provides that subsidiaries are exempt from Civil Service Laws and related rules and regulations.
Section 17 places the Conversion Authority under the direct control and supervision of the Office of the President for policy direction and coordination.
Section 18 establishes that the Government Corporate Counsel is ex officio legal counsel of the Conversion Authority, the governing boards of Special Economic Zones, and subsidiaries where the Conversion Authority owns a majority of shares.
Section 18 allows the Government Corporate Counsel to designate a full-time representative whose compensation must be approved by the Board.
Section 19 mandates the Commission on Audit to appoint a representative who becomes the full-time auditor of the Conversion Authority, its subsidiaries, and the Special Economic Zones, with personnel to assist the auditor.
Section 19 requires pre-audit within thirty (30) days after submission of all proposed substantial sales, transfers, and alienations of property.
Section 19 requires the auditor to render a full report to Congress every sixty (60) days.
Section 19 requires the Board to approve the auditor and staff salaries.
Section 21 provides that implementation of conversion projects is urgent and necessary and shall not be restrained or enjoined except by an order issued by the Supreme Court of the Philippines.

Effectivity, separability, and repeals

Section 22 provides a separability rule: unconstitutional or invalid provisions do not affect other provisions remaining in full force and effect.
Section 23 repeals or amends all laws, executive issuances, or parts inconsistent with the Act.
Section 24 provides that Republic Act No. 7227 takes effect upon its publication in at least one (1) newspaper of general circulation.
Approval date is March 13, 1992.