Law Summary
Conversion and Scope
- Bataan Economic Zone in Mariveles, Bataan, converted into Freeport Area of Bataan (FAB).
- FAB covers the entire Municipality of Mariveles.
Governing Principles
- FAB operates as a decentralized, self-reliant center including industrial, commercial, agro-industrial, tourist, banking, and investment activities.
- Infrastructure to attract investments and generate employment.
- Economic relations allowed with local and foreign entities.
- Foreign ownership and joint ventures permitted without restriction.
- FAB as a separate customs territory allowing free flow of goods and capital.
- Incentives include tax and duty-free importation of raw materials, capital, and equipment.
- Export of goods from FAB to the rest of the Philippines subject to customs duties and taxes.
- FAB’s area may be expanded/reduced through acquisition of land for development, right of way, and environmental protection.
- Mechanism to prevent environmental exploitation and improper land use.
- Goods manufactured in FAB can be sold domestically except those on PEZA's negative list.
- National Government is responsible for defense and security in coordination with FAB Authority and LGUs.
Fiscal Incentives
- Registered enterprises eligible for incentives under the Special Economic Zone Act and Omnibus Investment Code.
Taxation
- Business establishments exempt from local and national taxes.
- 5% final tax on gross income replacing all other taxes.
- Tax shares: 1% National Government, 1% Province of Bataan, 1% Municipality of Mariveles, 2% AFAB Authority.
Investor Incentives
- Foreign investors investing at least US$150,000 qualify for an investor’s visa.
- Visa entitles investor to reside in the Philippines while investment subsists.
- Conditions: age 18+, no conviction involving moral turpitude, no contagious disease, no mental disability.
- Visa expires upon withdrawal of investment.
Administration and Monitoring
- AFAB responsible for administering incentives and trade/customs policies.
- BOC manages customs area outside FAB gate.
- AFAB submits annual tax expenditure reports to DOF.
- DOF maintains database and reports incentive usage to the President.
Incentive Duration and Extension
- Availment period of incentives may be extended for operational force majeure.
- Incentives terminate after 20 years, with possible extension for indispensable industries.
AFAB Creation and Structure
- AFAB established as corporate body to manage and operate FAB.
- Principal office in Mariveles; liaison offices may be established.
Powers and Functions of AFAB
- Conduct contracts, own property, sue and be sued.
- Manage and develop FAB, coordinate with LGUs.
- Register and regulate enterprises.
- Authorize and regulate infrastructure and utilities; prioritize private investors.
- Fix rates and fees for services and utilities.
- Build-operate-transfer projects and joint ventures.
- Operate tourism and gaming activities, subject to PAGCOR.
- Raise or borrow funds; issue bonds and securities.
- Provide security, maintain environmental protection.
- Create functional units/offices.
- Issue certificates of origin and necessary rules/regulations.
Board of Directors
- Chairman (also AFAB Administrator), Vice Chairman, and members.
- Members from national government, province, municipality, domestic and foreign investors, and workers.
- Appointed by the President for six-year terms.
- Qualification: Filipino citizen, good moral character, relevant degree, and 10 years experience.
- Members receive per diem with a monthly maximum.
Chairman-Administrator Duties
- Manage AFAB affairs, establish organization.
- Submit budgets and annual reports.
- Propose policies and ensure industrial peace, environmental protection.
Organization and Personnel
- AFAB personnel subject to civil service laws.
- Appointments made with DTI approval.
- Prohibition on partisan political activities except voting.
- Removal only for cause.
Labor Center
- Establishment of a labor center for dispute settlement, contract interpretation, health, safety, and monitoring.
Banking Regulations
- BSP rules apply to banking and financial institutions in FAB.
Foreign Investment Remittances
- Registered enterprises may remit earnings in original currency at prevailing exchange rates, subject to law.
Applicability of Special Economic Zone Law
- Provisions of Sections 30-41 of RA 7916 apply to FAB.
Capitalization
- Authorized capital stock of Php2 billion, fully subscribed by the Republic of the Philippines.
- Includes lands, assets, and cash contributions.
Supervision
- AFAB under direct control and supervision of the Office of the President.
Regional Development Coordination
- FAB development integrated within national and regional planning.
Relationship with Local Governments
- Municipality of Mariveles operates under Local Government Code with exceptions.
- AFAB decisions prevail over LGUs and NG on FAB matters except defense and security.
Legal Counsel
- AFAB maintains internal legal counsel; may engage external counsel as needed.
Interpretation
- AFAB’s powers aim at decentralization and cooperative governance.
Audit
- Commission on Audit assigns auditors to AFAB.
Transitory Provisions
- Transfer of assets and personnel from BEZ to AFAB with protection of tenure and benefits.
- BEZ abolished upon AFAB organization.
Implementing Rules
- DTI, DOF, LGU, and DILG to formulate implementing regulations within 90 days after approval.
Separability Clause
- Invalid provisions do not affect the rest of the Act.
Repealing Clause
- Amendments to RA 5490, PD 66, and repeals of inconsistent laws and issuances.
Effectivity
- Act takes effect upon publication in a newspaper of general circulation.