Legal Framework for Philippine Economic Zones

The government recognizes the vital role of the private sector.
Private enterprise is encouraged with incentives for investments.
Preference is given to Filipino labor, domestic materials, and locally produced goods to enhance competitiveness.
Promotion of balanced industrial, economic, and social development to create jobs, especially in rural areas.
Improvement of income levels and living standards through establishment of Special Economic Zones (SEZs).
Attraction of legitimate and productive foreign investments.

Establish legal framework to integrate, coordinate, plan and monitor SEZs and similar zones.
Develop selected areas as agro-industrial, industrial, commercial, tourism, banking, investment, and financial centers.
Promote local and foreign investments generating employment and industrial linkages.
Stimulate repatriation of Filipino capital through incentives.
Foster cooperation with industrialized countries by encouraging technology-intensive industries.
Grant SEZ areas a separate customs territory status respecting sovereignty and territorial integrity.

Special Economic Zones (SEZ/ECOZONES): Selected areas developed or suitable for agro-industrial, industrial, tourist, commercial, banking, investment, and financial centers, potentially encompassing industrial estates, export processing zones, free trade zones, and tourist centers.
Industrial Estate (IE): Subdivided land with unified management and infrastructure, possibly including standard factory buildings and community facilities.
Export Processing Zone (EPZ): Specialized industrial estate outside customs territory focused on export production with duty-free imports.
Free Trade Zone: Policed area near ports where imported goods may be handled without import duties unless moved to non-free-trade areas; offers preferential tax treatment and lenient immigration laws.

Initial ECOZONES identified across various provinces and cities, including Bataan, Batangas, Misamis Oriental, Davao, Cebu, Leyte, Zambales, Palawan, Negros, and others.
Development schemes include private initiative, local government with national assistance, or national government initiative.
Boundaries defined by Presidential proclamation upon PEZA recommendation and coordination with local councils and land use committees.

Must be a regional growth center per national plans.
Availability of infrastructure like roads, ports, power, water.
Adequate land for industrial/commercial use and worker housing.
Sufficient skilled and trainable labor force.
Holds significant economic advantage and profitability.
Must be strategically located with controllable smuggling risks.
Exceptions exist for locally or privately initiated zones meeting lesser criteria but must reach substantial development within five years.

ECOZONES aimed to be decentralized, self-reliant industrial and commercial hubs requiring minimal government intervention.
Facilitated mutual economic relations within the country and internationally under relevant government agency coordination.
Operated as separate customs territories with PEZA authority to issue certificates of origin.

Defense and security are national government responsibilities in coordination with PEZA.
National military forces shall not interfere with internal ECOZONE affairs and costs are covered by the national government.
PEZA may organize internal security and fire-fighting forces.

Investors with at least $150,000 investment plus spouses and dependents under 21 granted permanent resident status in ECOZONE without special immigration authorization.
PEZA issues renewable working visas to highly technical foreign executives based on labor certification.

Corporate entity under Department of Trade and Industry headed by a Director General.
Board includes government department representatives and labor and business sectors.
Functions include policy formulation, regulation, utility establishment, budget approval, rulemaking, and annual reporting.
Director General oversees daily operations, property safeguarding, revenues, personnel, policy recommendations.
ECOZONE administered by executive committee with advisory body including local government and investor representatives.

PEZA officials barred from holding other jobs, practicing professions, or engaging in business with PEZA or government during tenure.
Full disclosure of financial and business interests required upon assuming office.

Business establishments in ECOZONE entitled to incentives from existing laws including Export Processing Zone Authority provisions and Omnibus Investment Code.
Exempt from all local and national taxes except a 5% gross income remittance shared among government levels and development funds.
National income taxes still apply to persons and service establishments.
Domestic sale of ECOZONE products allowed, except for industries on PEZA’s negative list.

PEZA tasked with resource surveys, strategy formulation, and infrastructure construction.
Foreign investors may lease land/buildings up to 50 years renewable 25 years.
Agricultural land conversion permitted under existing agrarian laws.
Private shipping allowed under PEZA regulations with access to ports ensured.
Environmental protection coordinated by PEZA and appropriate agencies.
Procedures for business termination set by PEZA ensuring debt clearance and funds transfer.

Mandatory registration of business enterprises with PEZA to avail incentives.
One-stop shops to facilitate business registration involving all relevant government representatives.

Labor relations governed by Philippine Labor Code ensuring standards equal or better than law.
Tripartite industrial peace body formed to maintain harmony.
Master Employment Contract prescribed.
Foreign nationals employed limited to 5% without special authorization.
Programs to support migrant workers coordinated between PEZA and Department of Labor.
Additional tax deductions for labor training expenses.

Development plans coordinated with regional development councils.
Local government units maintain autonomy under Local Government Code except for provisions overridden by this Act.
Privately-owned estates retain autonomy but monitored for incentives implementation.
Transfer of government industrial estate resources to PEZA with personnel adjustments and separation benefits.

Initial funding from transferred EPZA funds; further funding from rents, fees, bonds, and investor payments.
Disbursements adhere strictly to approved budgets.

National laws prevail unless specific ECOZONE powers granted.
Act excludes zones under Republic Act 7227 which have separate governance.
Benefits from RA 7227 applicable to ECOZONES but without free port status.
Severability clause ensures other provisions remain if parts are invalidated.
Act promotes decentralization and efficient coordination among government and local entities.

Inter-agency committee to formulate implementing rules within 90 days of approval.
Previous Export Processing Zone rules remain until new rules take effect.
Act took effect upon approval on February 24, 1995.