Creation of Zamboanga City Special Economic Zone

Policy and purpose

The State promotes sound and balanced industrial, economic, and social development by encouraging private enterprises (Section 2).
The State establishes special economic zones in suitable and selected areas to create an environment conducive to business, attract local and foreign investors, generate employment, and encourage regional dispersal of industries (Section 2).

Creation and geographic coverage

A special economic zone is created in the City of Zamboanga, known as the Zamboanga City Special Economic Zone or ZAMBOECOZONE (Section 3).
The creation is subject to the concurrence of the city government of Zamboanga affected by the zone (Section 3).
The specific metes and bounds of the ZAMBOECOZONE are defined in a presidential proclamation to be issued for that purpose (Section 3).

Governing principles for zone operations

The ZAMBOECOZONE is 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 (Section 4).
The ZAMBOECOZONE must be provided with transportation, telecommunications, and other facilities to attract legitimate and productive foreign investments, generate linkage industries, and create employment opportunities for people of Zamboanga City and neighboring towns and cities (Section 4).
The ZAMBOECOZONE may establish mutually beneficial economic relations with other entities within the country, subject to administrative guidance of the Department of Foreign Affairs and/or the Department of Trade and Industry regarding foreign entities or enterprises (Section 4).
Foreign citizens and foreign companies owned by non-Filipinos in any proportion may set up enterprises in the ZAMBOECOZONE, either by themselves or in joint venture with Filipinos, in any sector of industry and in international trade and commerce within the ZAMBOECOZONE (Section 4).
The ZAMBOECOZONE is managed and operated as a separate customs territory to ensure and facilitate the free flow, entry, and movement of machinery and other goods (Section 4).
The ZAMBOECOZONE has authority to issue certificates of origin for products manufactured or processed in the ZAMBOECOZONE, consistent with prevailing rules of origin and regulations of national bodies overseeing all other ECOZONES (Section 4).
Business establishments in the ZAMBOECOZONE are entitled to fiscal incentives under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those under Book VI of Executive Order No. 226 (Omnibus Investment Code of 1987), and to incentives, benefits, or privileges enjoyed by Subic special economic zone businesses under Republic Act No. 7227 (Section 4).
No taxes, local or national, are imposed on business establishments operating in the ZAMBOECOZONE; instead, business establishments must remit to the national government two percent (2%) of gross income and to the City of Zamboanga three percent (3%) of gross income (Section 4).
The two percent (2%) remittance to the national government is in lieu of paying taxes (Section 4).
The three percent (3%) remittance to the city government is allocated as follows: two percent (2%) to the City of Zamboanga and one percent (1%) to the barangay special development fund created for development and improvement of barangays within the City of Zamboanga (Section 4).
Local government units embraced within the ZAMBOECOZONE retain and maintain basic autonomy and identity; Zamboanga City operates under Republic Act No. 7160 (Local Government Code of 1991) (Section 4).
A foreign investor who establishes a business enterprise in the ZAMBOECOZONE and maintains a capital investment of not less than US$150,000 must be granted permanent resident status within the ZAMBOECOZONE, together with the foreign investor’s spouse, dependents, and unmarried children below twenty-one (21) years of age (Section 4).
Such foreign investor and family granted permanent resident status 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 (Section 4).
The Zamboanga City Special Economic Zone Authority issues working visas renewable every two (2) years to foreign executives and foreign technicians with highly specialized skills which no Filipino possesses, certified by the Department of Labor and Employment (Section 4).
The authority must report the names of foreigners granted permanent resident status and working visas to the Bureau of Immigration and Deportation within thirty (30) days from the grant (Section 4).
Foreigners may acquire permanent resident status in the Philippines in accordance with applicable immigration, retirement, and other related laws, without prejudice to the permanent resident status granted under the ZAMBOECOZONE rules (Section 4).
Foreigners, partnerships, corporations, or other business associations not created and existing under Philippine laws may engage in retailing goods and merchandise within the ZAMBOECOZONE after securing a license from the Zamboanga City Special Economic Zone Authority (Section 4).
Only foreign nationals engaged in medium- and large-scale retail trade may be permitted to engage in retail business within the ZAMBOECOZONE.
The ZAMBOECOZONE Authority determines whether retail operations are medium- and large-scale (Section 4).
Existing banking laws and Bangko Sentral ng Pilipinas (BSP) rules and regulations apply to 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 BSP supervision (Section 4).

Zone authority: creation, organization, office

The Zamboanga City Special Economic Zone Authority (the ZAMBOECOZONE Authority) is created as a body corporate to manage and operate the ZAMBOECOZONE in accordance with the Act (Section 5).
Creation is subject to the concurrence of the local government units affected by the creation of the ZAMBOECOZONE (Section 5).
The authority must be organized within one hundred eighty (180) days after the Act’s effectivity (Section 5).
The authority maintains its principal office in the City of Zamboanga and may establish branches and agencies in the Philippines and abroad as necessary (Section 6).

Powers, governance, and internal officers

The authority operates, administers, and manages the ZAMBOECOZONE under the principles and provisions of the Act (Section 7).
The authority recommends to the President the issuance of a proclamation to fix and delimit the ZAMBOECOZONE site (Section 7).
The authority registers, regulates, and supervises enterprises in the ZAMBOECOZONE in an efficient and decentralized manner (Section 7).
The authority regulates and undertakes establishment, operation, and maintenance of utilities and services/infrastructure in the ZAMBOECOZONE—including heat, light and power, water supply, telecommunications, transport, toll roads and bridges, port services—while fixing just, reasonable, and competitive rates, fares, charges, and prices (Section 7).
The authority may construct, acquire, own, lease, operate, and maintain public utilities and infrastructure using schemes allowed in Republic Act No. 6957 (Build-Operate-Transfer), or through joint venture with the private sector, coordinating with appropriate national and local government authorities and complying with applicable laws (Section 7).
The authority may operate, directly or through a subsidiary, or license tourism related activities, including games, amusements, and recreational and sports (Section 7).
The authority may raise or borrow adequate and necessary funds from local or foreign sources for projects and programs, and issue bonds, promissory notes, and other forms of securities, secured through guarantee, pledge, mortgage, deed of trust, or assignment of all or part of its property or assets (Section 7).
The authority provides security for the ZAMBOECOZONE in coordination with national and local governments and may establish and maintain its own security force and firefighting capability or hire others (Section 7).
The authority protects, preserves, maintains, and develops virgin forests, beaches, coral, and coral reefs within the ZAMBOECOZONE (Section 7).
The authority may create and operate functional units or offices as it deems necessary (Section 7).
The authority may adopt a corporate seal; make contracts and leases; own or dispose of personal and real property; sue and be sued; and perform other functions and duties under the Act (Section 7).
The authority issues rules and regulations consistent with the Act to implement its purposes and policies (Section 7).

Non-profit character and tax treatment

The ZAMBOECOZONE Authority is non-profit and must devote returns from capital investments and excess revenues to development, improvement, and maintenance and other related expenditures for the authority, to pay indebtedness and obligations, and to advance effective implementation of the Act (Section 8).
The authority is exempt from payment of all taxes, duties, fees, imposts, charges, costs, and service fees in any court or administrative proceedings where it is a party (Section 8).
The President may lift the authority’s exemptions entirely or partially upon the recommendation of the Secretary of Finance, but not earlier than five (5) years from the Act’s effectivity, if the President finds the authority self-sustaining and financially capable to pay taxes, customs duties, fees, and other charges after providing for debt service and projected capital and operating expenditures (Section 8).

Board of directors composition and operation

The powers of the authority are vested in and exercised by a Board of Directors (Board) (Section 9).
The Board includes: a chairman who is also the authority administrator; a vice-chairman from the national agency tasked to coordinate and monitor special economic zones and the like; and six (6) members (Section 9).
The six (6) members are: the city’s congressional representative; the mayor of the City of Zamboanga; a representative of the city council; a representative from domestic investors; a representative from foreign investors; and a representative from the labor sector chosen from workers in the ZAMBOECOZONE (Section 9).
The city’s congressional representative, the mayor, and the city council representative serve as ex officio voting members of the Board (Section 9).
The chairman and Board members (except ex officio members) are appointed by the President of the Philippines for a term of six (6) years, subject to removal for cause, death, or voluntary resignation (Section 9).
A replacement due to death, resignation, or removal for cause serves only the unexpired portion of the term (Section 9).
No person may be appointed as a Board member by the President unless the person is a Filipino citizen, of good moral character, and of recognized competence in relevant fields such as business, banking, shipping, business or labor management, port operations, engineering, or law—except for business and investment sector representatives (Section 9).
Board members receive a reasonable per diem fixed by the President once every six (6) years per Board meeting, but total per diem per month cannot exceed the equivalent per diems for four (4) meetings.
Unless and until the President fixes higher per diems, per diem is not more than Ten thousand pesos (P10,000.00) for every Board meeting (Section 9).

Chairman-administrator duties and reporting

The chairman-administrator directs and manages the authority’s affairs in accordance with Board policies (Section 10).
The chairman-administrator establishes the authority’s internal organization under conditions prescribed by the Board (Section 10).
The chairman-administrator submits an annual budget and necessary supplemental budget to the Board for approval (Section 10).
The chairman-administrator submits an annual report to the Board within thirty (30) days after the close of each fiscal year, plus other reports required (Section 10).
The chairman-administrator performs other duties assigned by the Board (Section 10).

Industrial peace mechanism

Representatives from the Department of Labor and Employment (DOLE), the labor sector, cultural minorities, and business and industry sectors must 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 Act’s effectivity (Section 11).

Capital structure and government ownership

The authority has authorized capital stock of two billion (2,000,000,000) no par shares with a minimum issue value of Ten pesos (P10.00) each (Section 12).
The national government initially subscribes and fully pays three hundred million (300,000,000) shares (Section 12).
The initial subscription amount is included in the General Appropriations Act of the year following the Act’s enactment and thereafter (Section 12).
The Board may increase the issue value of shares representing the authority’s capital stock from time to time with the written concurrence of the Secretary of Finance (Section 12).
The Board may sell shares representing not more than forty percent (40%) of the authority’s capital stock to the general public with an annual dividend policy determined by the Board and the Secretary of Finance (Section 12).
The national government must always own at least sixty percent (60%) of the total issued and outstanding capital stock of the authority (Section 12).

Supervision, LGU relationship, and auditing

For policy direction and coordination, the authority is under the direct control and supervision of the Office of the President until the agency tasked with coordinating special economic zones is in place (Section 13).
In conflicts between the authority and the City of Zamboanga involving matters affecting the ZAMBOECOZONE, the authority’s decision prevails except for defense and security matters (Section 14).
The Commission on Audit appoints a full-time auditor for the authority and assigns personnel as needed to assist in performing duties; salaries and emoluments of assigned auditor and personnel follow pertinent laws, rules, and regulations (Section 15).

Separability, repeal, and effectivity

If any provision of the Act is held unconstitutional or invalid, the other provisions remain in full force and effect (Section 16).
Laws, executive orders, issuances, or parts inconsistent with the Act are repealed or amended accordingly (Section 17).
The Act takes effect upon publication in at least one (1) newspaper of general circulation (Section 18).