Regulations Update: Freeport Area of Bataan Act of 2009

The Rules and Regulations Implementing the Provisions of Republic Act No. 9728, Otherwise Known as “The Freeport Area of Bataan Act of 2009” was among the implementing rules and regulations published in June 2010 to implement the various laws passed by the Fourteenth Congress. Republic Act No. 9728 was passed by both houses of Congress in September 2009 and lapsed into law on October 23, 2010 without the signature of the President.

Republic Act No. 9728 converted the existing Bataan Economic Zone located in Mariveles, Bataan into a special economic zone to be known as the Freeport Area of Bataan (FAB). Under the Implementing Rules, the FAB is a separate customs territory consisting of the Bataan Economic Zone and the entire Municipality of Mariveles. As such, all articles may be imported by FAB enterprises into the FAB free of customs and import duties and national internal revenue taxes.

FAB enterprises enjoy the incentives under the Special Economic Zone Act of 1995 or the Omnibus Investments Code of 1987. Registration as FAB enterprise is open to nationals and business enterprises of any country in any area of economic activity, except those where the Constitution limits the ownership to Filipinos or Philippine nationals. FAB enterprises, however, must not source more than 30% of its income from the Customs Territory (or the area of the Philippines outside the FAB); otherwise, all of its income shall be subject to the tax laws of the Customs Territory and customs duties and taxes must be paid for sale of articles to the Customs Territory.

It is interesting that the Board of Directors of the Authority of the Freeport Area of Bataan (AFAB) shall be composed of nine members, with two representatives from the National Government, one representative from the Province of Bataan, to be nominated by the Provincial Board, one representative from the Congressional District to be nominated by the Congressman, one representative from the Municipality of Mariveles, to be nominated by the Municipal Council, and one representative each from the domestic investors, the foreign investors and the workers working within the FAB.

It also interesting to note that the AFAB has the power to operate on its own, or to license, tourism-related enterprises, including games, gambling casinos, horse-racing, dog-racing, and other recreational and sports facilities, subject to the approval and supervision of PAGCOR.

The AFAB will have an authorized capital of P2 billion, to be subscribed by the National Government and paid with the lands covered by the FAB and improvements thereon and cash contribution of P500 million a year for the next five years. (It would seem that Congress did not realize that they appropriated more than the P2 billion capital provided in the law.)

With all these powers vested in the Board and with P2 billion at its disposal, it is no wonder that, according to a former member of the House of Representatives, there were more than a hundred similar bills pending in the Fourteenth Congress all seeking to make the respective districts of the congressmen freeport zones. Let’s hope that the current administration will closely scrutinize these bills.