Press Release
August 21, 2007


Sen. Loren Legarda yesterday filed a bill proposing the creation of a special economic zone and free port in Jolo, Sulu, to promote and hasten the industrial and economic development of the area.

In her explanatory note, Loren said the bill allows foreign individuals and organizations to invest in the zone. Investors shall be granted fiscal incentives and tax exemptions.

"The bill answers the need for development in the area through the creation of a special economic zone and free port," said Loren. It shall be managed and operated by the Sulu Special Economic Zone and Free Port Authority (SSEZA) headed by a board of directors.

The Secretary of the Department Trade and Industry, the Director General of the National Economic Development Authority or their respective representatives will serve as ex-officio members of the board. This measure allows foreign individuals and organizations to invest in the zone. Investors shall be granted incentives such as resident status and visa, fiscal incentives and tax exemptions. In her bill, Loren proposed that the state should pursue a policy to "actively encourage, promote and accelerate a sound and balanced industrial, economic and social development of the country in order to provide jobs to people, increase productivity and income, and improve the quality of living condition through the establishment of special economic zones and free ports in suitable and strategic locations in the country and through measures that shall effectively attract legitimate and productive foreign investments." She likewise asked the government "to enhance regional economic cooperation as a means of bolstering the country's own industrial development, and to establish facilities which such cooperation can materialize." Loren said the Sulu Economic Zone and Free Port shall be managed and operated by the Sulu Special Economic Zone and Free Port Authority, referred to as the SSEZA.

The Zone shall be operated as a decentralized, self-reliant and self-sustaining industrial, commercial, trading, agro-industrial, tourist, recreational, banking, financial and investment center with corresponding residential areas in order to create employment opportunities in and around and to effectively encourage and attract legitimate and productive foreign investment. Other salient provisions of Loren's bill are: The Zone shall be managed and operated as a separate customs territory outside the customs territory of the Philippines to ensure and facilitate the free flow or movement of machinery, goods, articles and capital within, into and exported out of the Zone.

However, exportation or removal of goods, articles and capital from the Zone to other parts of the Philippines territory shall be subject to customs duties and taxes under the Customs and Tariff code and other relevant tax laws of the Philippines.

The Zone shall be provided with transportation, telecommunication, and other facilities needed to attract legitimate and productive foreign investments, generate linkage with industries and create employment opportunities for the people of the province of Sulu.

The Zone may establish mutually beneficial economic relations with other entities or enterprises within the country or, subject to the administrative guidance of the Department of Foreign Affairs (DFA), the Philippines Economic Zone Authority (PEZA) and/ or the Department of trade and Industry (DTI), with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos may set up enterprises in the Zone either by themselves or in joint venture with Filipinos in whatever proportion in any sector of industry, international trade and commerce within the Zone.

Goods manufactured by a Zone enterprise shall be made available for immediate retail sale in the domestic market, subject to the payment of corresponding taxes on raw materials and other regulations that may be formulate by the SSEZA together with PEZA, the Bureau of Customs and the DTI.

However, in order to protect the domestic industry, there shall be a negative list of industries that will be drawn up and regularly updated by the PEZA. Enterprises engaged to industries included in such negative list shall not be allowed to sell their products locally.

The defense of the Zone and Security of its perimeter fence shall be the responsibility of the national government in coordination with the SSEZA and local government units.

Any foreign investor who establishes a business enterprise within the Zone and who maintains capital investment of not less than US$150,000.00 shall be granted, along with his or her spouse, dependents, and unmarried children below twenty-one (21) years of age, permanent resident status within the Zone and freedom of ingress and egress to and from the Zone without any need of any special authorization from the Bureau of Immigration. Working visas renewable every two (2) years shall be issued to foreign executives and foreign technicians with highly specialized skills which no Filipino possesses, as certified by the Department of Labor and Employment. This privilege is without prejudice to a foreigner acquiring permanent resident status in the Philippines in accordance with applicable immigration, retirement, and other related laws.

Business establishments within the Zone shall be entitled to the existing fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority (EPZA), or the "Omnibus Investments Code of 1987", and Republic act No. 7916, otherwise known as the "Special Economic Zone Act of 1995", as amended by R.A. 8748.

Except for real property taxes on land owned by the developers, no taxes, local and national including final withholding taxes on dividend to a business establishment's parent company and branch profits remittance to a business establishment's head office, shall be imposed on business establishments operating within the Zone. In lieu thereof, said business establishments shall pay to the national government a final tax of eight percent (8%) of the net taxable income as determined in accordance with the provisions of the National internal Revenue Code

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