Strengthening Powers of Freeport Area of Bataan

Conversion of BEZ into Freeport Area

The existing Bataan Economic Zone (BEZ) located in the Municipality of Mariveles, Province of Bataan is converted into a special economic zone and freeport and, together with other territories in the Act, is known as the Freeport Area of Bataan (FAB) (Section 1 amending Section 3 of Republic Act No. 9728).
The FAB covers:
- (a) land territories in Mariveles formerly part of the BEZ comprising approximately 1,742.48 hectares (the “FAB main zone”); and
- (b) all other expansion areas within the Province of Bataan declared as part of the FAB in compliance with Section 4(g) (the “other FAB zones”), including all municipal waters within the FAB main zone and of the expansion areas located at the coastline of the Province of Bataan (Section 1).
The metes and bounds of the FAB main zone and other FAB zones shall be fenced and shall include the establishment of an administrative office for customs administration and border control; the metes and bounds are determined based on technical description and coordinates verified and approved by the Land Management Bureau, the National Mapping and Resource Information Authority, and other government agencies as may be provided by pertinent law (Section 1).
Prospective developers and locators may choose to register with AFAB, PEZA, or other investment promotion agencies, but:
- no registered enterprise may enjoy incentives from two (2) or more investment promotion agencies; and
- no AFAB-registered enterprise may be located within an ecozone administered or managed by another investment promotion agency (Section 1).

Governing principles for FAB management

The FAB shall be managed and operated as a decentralized self-reliant and self-sustaining industrial, commercial-trading, research and development, engineering, medical, education, information and communications technology, and other specified sectors, including emerging/future technologies such as artificial technology, blockchain, cloud computing, cybersecurity, distributed ledger technology, financial technology solutions, internet of things, and virtual reality, and related services including retirement and healthcare services, among others (Section 2 amending Section 4(a) of Republic Act No. 9728).
The National Government and/or local government shall continue to provide transportation, telecommunications, and other facilities needed to attract legitimate and productive investments and generate linkage and employment opportunities in Bataan and neighboring towns and cities; the FAB shall have priority and preferential access to such infrastructure, with access incorporated in planning, construction, and operation (Section 2 amending Section 4(b)).
Assistance and/or partnerships with other government units shall not waive the FAB’s autonomy (Section 2).
Foreign citizens and companies owned by non-Filipinos in any proportion may set up enterprises in the FAB in any sector within the FAB’s territorial jurisdiction, and the AFAB may require a minimum investment in freely convertible currencies from any enterprise seeking registration (Section 2 amending Section 4(d)).
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, while the Bureau of Customs (BOC) continues to exercise border protection and customs control authority over the customs territory adjacent to the FAB in accordance with Sections 301 and 817 of Republic Act No. 10863 (Section 2 amending Section 4(e)).
The AFAB shall allow patrol or other law enforcement arrangements by the BOC and other government agencies within the municipal waters covered by the other FAB zones, subject to coordination with the AFAB, to enhance protection and control and ensure compliance with customs, fisheries, and other laws and regulations (Section 2).
The AFAB’s areas comprising the FAB may be expanded or reduced when necessary; the AFAB, with concurrence of affected LGUs, agreement of appropriate national government agencies and government-owned and -controlled corporations and instrumentalities, and approval of the AFAB Board, may acquire/procure/expand private or alienable and disposable public lands and/or their water territories within Bataan for:
- (1) consolidation for FAB development and establishment of new industrial estates and economic zones;
- (2) acquisition of right-of-way to the FAB; and
- (3) protection/safeguard of watershed areas, maintenance/improvement of water yield and natural assets, effective management of solid and water waste, and impacts to adjacent areas within the concerned LGU (Section 2 amending Section 4(g)).
Any expansion must be aligned with the comprehensive land use plan of the affected LGUs (Section 2).
Expansion outside the Municipality of Mariveles may be revoked by the President of the Philippines (Section 2).
The AFAB and relevant LGUs and national government agencies must provide immediate and responsive mechanisms, best management practices, and suitable environmental protection programs for land and coastal management to address any abuse and/or exploitation of the natural environment within the FAB territorial jurisdiction (Section 2).
Goods manufactured by FAB enterprises must be available for immediate retail sale in the domestic market, subject to payment of corresponding taxes on raw materials and other regulations formulated by the AFAB together with PEZA, BSP, DOF, BOC, and DTI in accordance with the National Internal Revenue Code (NIRC) of 1997, as amended, and the Tariff and Customs Code of the Philippines, as amended (Section 2 amending Section 4(h)).
The value of the goods at the time of importation shall be the basis for determining the appropriate duties and taxes (Section 2).
The AFAB and cooperating agencies must provide and implement measures to support improvement of ease and cost of doing business within the FAB and enhancement of the AFAB’s investment promotion capacity; a negative list of industries must be drawn up and regularly updated by the AFAB, and enterprises engaged in industries included in the negative list shall not be allowed to sell products locally notwithstanding registration in the FAB (Section 2).
Defense of the FAB and security of its perimeter fence are the responsibility of the National Government in coordination with the AFAB and LGUs; the AFAB shall provide its own internal security and firefighting forces (Section 2 amending Section 4(i)).

Five percent final tax on gross income

No taxes, local and national, shall be imposed on registered business establishments operating within the FAB (Section 3 amending Section 6 of Republic Act No. 9728).
In lieu thereof, and subject to Section 10 of Republic Act No. 9728, registered business establishments shall pay a five percent (5%) final tax on their gross income earned (Section 3).
The 5% final tax on gross income is distributed as:
- 1% to the National Government;
- 1% to the Province of Bataan;
- 1% to the host city/municipality; and
- 2% to the Authority of the Freeport Area of Bataan (Section 3).

Investor visa for foreign investors

Any foreign national who invests US$75,000.00 in cash and/or equipment in a registered enterprise is entitled to an investor’s visa (Section 4 amending Section 7 of Republic Act No. 9728).
The foreign investor must qualify by meeting all listed requirements: at least 18 years of age; not convicted of a crime involving moral turpitude; not afflicted with any loathsome, dangerous or contagious disease; and not institutionalized for any mental disorder or disability (Section 4).
An investor visa holder may reside in the Philippines while the investment subsists and must submit an annual report in the form prescribed to prove the investment has been maintained; if the alien withdraws the investment, the investor’s visa automatically expires (Section 4).

AFAB powers, functions, and enforcement

The AFAB shall operate, administer, manage, and develop the FAB and coordinate with LGUs for development plans, activities, and operation of the FAB in accordance with Executive Order No. 525, as amended, and the FAB principles in the Act (Section 5 amending Section 13 of Republic Act No. 9728).
The AFAB shall register, regulate, and supervise enterprises in the FAB in an efficient and decentralized manner, subject to existing laws (Section 5).
The AFAB shall coordinate with LGUs and the Metro Bataan Development Authority (MBDA) and exercise general supervision over development plans, activities, and operations of the FAB; the AFAB may partner with the MBDA on development plans, enforcement of environmental laws, maintenance of road network and transport facilities, and other services enhancing FAB attractiveness, and may assist the MBDA by ensuring equipment/resources are provided (Section 5).
The AFAB may authorize or undertake and regulate establishment, construction, operation, and maintenance of public utilities, services, and infrastructure in the FAB, including shipping and port-related services and infrastructure; private investors in the FAB shall be given priority in awarding contracts, franchises, licenses, or permits for utilities, services, and infrastructure (Section 5).
The AFAB may license, set fees, regulate, and undertake establishment, operation, and maintenance of utilities and services and educational and medical institutions and infrastructure, and shall fix just, reasonable and competitive rates, fares, charges, and prices (Section 5).
The AFAB may construct, acquire, own, lease, operate, and maintain needed public utilities and infrastructure, including access and connection in coordination with appropriate authorities and conformity with applicable laws; for this purpose, the AFAB exercises the power of eminent domain over private lands granted in paragraph (b) of Section 13 insofar as reasonably necessary, subject to just compensation in accordance with Republic Act No. 10752 (Right-of-Way Act) and the prerequisites for taking possession and determination and payment of just compensation (Section 5).
The AFAB may operate tourism-related activities, including games, amusements, recreational and sports facilities, subject to PAGCOR approval and supervision (Section 5).
The AFAB may raise or borrow funds within the limitation provided by law and subject to approval or opinion of the Monetary Board of the BSP, and may issue bonds, promissory notes, and other securities secured by guarantee, pledge, mortgage, deed of trust, or assignment of property/assets (Section 5).
The AFAB shall exclusively enforce and administer the National Building Code of the Philippines and the Fire Code of the Philippines, as amended, within the FAB; the AFAB is fully responsible and accountable for enforcement and administration within the FAB (Section 5).
The AFAB administrator (or official designate) functions as AFAB building official and issues all building permits and other related permits, subject to collection by the AFAB of corresponding permit fees (Section 5).
Where owners fail to comply with AFAB notice regarding removal or demolition of structures constructed without required AFAB permits or structures condemned/abated under the Building Code or Civil Code, the AFAB may summarily cause removal or demolition at the expense of the owner and occupants if the owner does not remove or demolish within fifteen (15) days from receipt of notice (Section 5).
The AFAB may evict persons who refuse to vacate premises in accordance with Republic Act No. 7279 (Urban Development and Housing Act of 1992) and other existing laws, and must make a temporary or permanent relocation site available for qualified individuals or families (Section 5).
The AFAB provides security for the FAB in coordination with national and local governments and may establish and maintain its security and firefighting capability or hire others; if military force assistance becomes necessary, it shall not interfere in the internal affairs except to provide necessary security and defense, and expenses shall be borne by the National Government (Section 5).
To maintain law and order, including police investigations, arrests, and search and seizure for violations of penal laws inside the FAB, the Philippine National Police (PNP) shall establish a police substation if necessary under the supervision of the PNP Provincial Director, manned by sufficient personnel to effectively and efficiently pursue its mandate (Section 5).
The AFAB is authorized to install control gates at strategic points of national roads within the FAB through which access into and departure from the FAB is fully controlled by the AFAB (Section 5).
The AFAB shall protect, preserve, maintain, and develop forests, beaches, coral and coral reefs, and maintain ecological balance within the FAB; DENR and other agency rules shall be implemented by the AFAB, and the issuance, enforcement, and monitoring of ECCs, tree cutting permits, foreshore leases, and all other related permits and clearances issued by DENR and other agencies are under the AFAB’s exclusive control and jurisdiction (Section 5).
The AFAB shall recommend issuance of working visas renewable every three (3) years to foreign executives and foreign technicians with highly specialized skills no Filipino possesses, subject to the certification and alien employment permit by DOLE (Section 5).
The AFAB may act as an offshore financial center engaging in or allowing international financial and business services, including banking, offshore fund management, collective investment schemes, and cryptocurrency mining, subject to restrictions and consistency requirements involving Republic Act No. 7653 (New Central Bank Act), BSP issuances, Republic Act No. 8799 (Securities Regulations Code), existing laws, and other laws consistent with FAB objectives; banks and financial institutions engaged in quasi-banking functions established in the FAB shall be supervised by the BSP, while other financial institutions not engaged in quasi-banking functions, and those engaged in collective investment schemes and cryptocurrency mining within the FAB, shall be supervised by the Securities and Exchange Commission (Section 5).
The AFAB may issue special regulations for particular industries to improve ease of doing business, decrease cost of doing business, and lower bureaucratic burdens, provided the special regulations are not contrary to existing laws (Section 5).
The AFAB shall endorse Special Resident Retiree’s Visas (SRRVs) for retirees intending to reside in the FAB in collaboration with the Philippine Retirement Authority (PRA), and both PRA and AFAB must issue joint regulations on SRRV processing in accordance with existing laws (Section 5).
The AFAB may establish, operate, and maintain utilities, facilities, infrastructure, services, businesses, activities, and concessions in the FAB relating to shipping and maritime business and activities including stevedoring and port terminal services or concessions, while MARINA continues to regulate and supervise shipbuilding and ship repair of merchant marine vessels in domestic trade and domestic shipping industry within the FAB (Section 5).
The AFAB shall establish one-stop shops for issuance of all necessary permits, clearances, licenses, and similar certifications to conduct activities to improve ease of doing business within the FAB, in coordination with government agencies having jurisdiction over activities in the FAB not otherwise solely reserved to AFAB by the Act; all government agencies are directed to provide and extend utmost and full cooperation to the AFAB in establishing the one-stop shops (Section 5).
The AFAB may exercise powers essential, necessary, or incidental to its granted powers and to implement and accomplish Act objectives (Section 5).
The AFAB is vested with other powers enjoyed or exercised by other freeport zone authorities (Section 5).

AFAB Board composition and compensation

AFAB powers are vested in and exercised by a Board of Directors (Section 6 amending Section 14 of Republic Act No. 9728).
The Board consists of:
- a chairman and vice chairman elected from among Board members;
- the administrator (who shall not simultaneously be chairman or vice chairman);
- two (2) representatives from the National Government;
- one (1) representative from the Province of Bataan;
- one (1) representative from the district covering the site of the FAB;
- one (1) representative from the Municipality of Mariveles, Province of Bataan;
- one (1) representative from AFAB-registered domestic investors;
- one (1) representative from AFAB-registered foreign investors; and
- one (1) representative from the workers working in the FAB (Section 6).
All Board members must be Filipino citizens (Section 6).
Board members (including chairman and vice chairman elected from among members, and administrator) are appointed by the President of the Philippines to serve a six (6) year term, unless separated earlier due to death, voluntary resignation, or removal for cause; replacements serve only the unused portion of the term (Section 6).
No person may be appointed as Board member unless Filipino citizen, of good moral character, proven probity and integrity, and a degree holder in economics, business, public administration, law, management, or equivalent, with at least ten (10) years relevant working experience preferably in management or public administration (Section 6).
Each Board member receives per diem at rates determined by the Department of Budget and Management (DBM) under existing rules; total per diem collected each month shall not exceed the equivalent per diem for four (4) meetings (Section 6).

Powers and duties of the administrator

The administrator shall direct and manage AFAB affairs in accordance with the Board’s policies (Section 7 amending Section 15 of Republic Act No. 9728).
The administrator may establish AFAB internal organization under conditions the Board prescribes (Section 7).
The administrator shall submit an annual budget and necessary supplemental budgets to the Board for approval (Section 7).
The administrator shall 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 (Section 7).
The administrator shall submit to the Board for approval policies, systems, procedures, rules, and regulations essential to AFAB operations (Section 7).
The administrator shall create a mechanism in coordination with relevant agencies for promotion of industrial peace, protection of the environment, and advancement of quality of life in the FAB (Section 7).
The administrator shall perform other duties assigned by the Board or necessary/incidental to the office (Section 7).

Organization, personnel, and political neutrality

The AFAB Board shall provide an organizational structure and appoint employees subject to the Civil Service Law (Section 8 amending Section 16 of Republic Act No. 9728).
Upon the administrator’s recommendation, the Board shall appoint officers and employees and fix remuneration and emoluments in accordance with existing laws on compensation and position classification (Section 8).
The administrator’s salary and other compensation must be comparable with the president and chief executive officer of Clark Development Corporation (Section 8).
The Board shall exercise administrative supervision on its employees (Section 8).
AFAB officers and employees, including Board members, shall not engage directly or indirectly in partisan activities nor take part in any election except to vote (Section 8).
No AFAB officer or employee, subject to civil service laws and regulations, shall be removed or suspended except for cause as provided by law (Section 8).

Labor center, health, and housing facilities

A labor center shall be established within the FAB to study and amicably settle professional and labor relations and disputes, interpret employment contracts, and monitor work, hygiene and safety standards in the FAB (Section 9 amending Section 17(a)).
The labor center comprises a labor office, an industrial health and safety office, and an inspection and disputes office (Section 9).
Labor and management relations in the FAB are governed by applicable rules and regulations under the Labor Code of the Philippines, as amended, except as otherwise provided in the Act; employees in registered enterprises receive salaries and benefits and working conditions under the Labor Code and relevant laws and DOLE issuances (Section 9).
The AFAB must allow the visitorial power of the Secretary of DOLE or duly authorized representative, and/or may assign its personnel to join DOLE Regional Office III in labor inspection (Section 9).
The Department of Health shall establish, fund, operate, and maintain a tertiary hospital in the FAB (Section 9).
The National Housing Authority shall undertake vertical and horizontal housing development for marginalized informal settlers and low income earners within the FAB and shall source necessary funds through National Government subsidy (Section 9).

Remittance of earnings by foreign investors

A registered enterprise in the FAB has the right to remit earnings from foreign investments in favor of the investor and/or intended beneficiary, subject to Republic Act No. 7653 (New Central Bank Act), the manual of regulations on foreign exchange transactions, and other relevant rules and regulations (Section 10 amending Section 19 of Republic Act No. 9728).

Capitalization of AFAB

Government contributed capital stock shall be:
- (a) P2,500,000,000.00, with option to increase capitalization at AFAB discretion;
- (b) all lands embraced and covered by the FAB, including properties conveyed to GSIS and/or SSS under Proclamation No. 740, as amended by Proclamation No. 900, plus permanent improvements and fixtures upon proper inventory not otherwise alienated, conveyed, or transferred to another government agency; and
- (c) all other assets which the President may transfer to the AFAB as part of the government equity contribution (Section 11 amending Section 21).

Non-impairment of existing contracts and permits

All existing contracts, permits, and licenses duly granted by the AFAB before the effectivity date of this Act remain valid, unimpaired, and must be recognized by the government (Section 12, inserting Section 30).

Transitory, separability, and repealing rules

The incumbent chairman and administrator of the AFAB shall continue to serve as administrator for the remaining term of appointment without prejudice to reappointment to the same position at the discretion of the appointing authority (Section 13).
Any unconstitutional portion of the Act shall not nullify other provisions; the remaining provisions continue to subsist and be given effect (Section 14).
Proclamation No. 740, as amended by Proclamation No. 900, and Presidential Decree No. 545, insofar as these laws convey the balance of public land mentioned therein in favor of the GSIS and the SSS, and mandate those agencies to develop the land for housing units and/or condominium houses, are repealed (Section 15).
All other laws, decrees, executive orders, rules and regulations, or parts thereof inconsistent with Republic Act No. 11453 are repealed or modified accordingly (Section 15).