Implementing Rules and Regulations of Republic Act No. 7652, otherwise known as the “Investors’ Lease Act”

Whereas, on May 31, 1993, the Congress of the Philippines enacted the “Investor’s Lease Act” which was subsequently signed into law by the President of the Philippines;

Whereas, under SEC, 5/(2) in relation with SEC, 7(3) of said Act, the Department of Trade and Industry (DTI) has the mandate to approve the area covered by lease agreement entered into under the provisions of the “Investor’s Lease Act”

Whereas, under SEC. 6 of the same Act, the Secretary of Trade and Industry, subject to conditions stated therein, is empowered to terminate any lease entered into under the provisions thereof;

Whereas, for the DTI, and other agencies concerned to properly implement said Act, there is a need to promulgate the rules and regulations to clarify the intent and provisions thereof.

Whereas, Republic Act No.7227, otherwise known as the Bases Conversion and Development Act., of 1992, empowers the Bases Conversion and Development Authority (BASECON) to own, hold and/or administer specified military reservations. Further, the Subic Bay Metropolitan Authority (SBMA) and the Clark Development Corporation (CDC) as the operating and implementing arms of the BASECON, are mandated to exercise said powers over the lands within the Subic Special economic Zone.

Now, therefore, for and in consideration of the foregoing premises, the following implementing rules and regulations are hereby promulgated to implement the intent and provisions of Republic Act No.7652, otherwise known as the “Investors’ Lease Act”.

RULE 1

Definition of Terms

Section 1. For purposes of Republic Act No.7652 and these rules and regulations.

(a) “Act” shall mean Republic Act No. 7652 also known as “Investors’ Lease Act”.

(b) “Foreign Investor ” shall mean an individual or juridical entity not falling within the meaning of “Philippine national” as the term is defined therein.

(c) “Philippine national” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organised under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to a vote is owned and held by the citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippines national and at least sixty percent (60%) of the fund will accrue to

the benefit of Philippine nationals; provided, that where a corporation and its non-Filipino stock holders owns stock in a Securities and Exchange Commission (SEC) registered enterprise at least sixty percent (60%) of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that a corporation be considered a Philippine national.

(d) “Private Lands” shall refer to those lands which have been segregated from the general mass of public domain, and distributed by any form of gratuitous or honorous grant by the State, such as but not limited to, a deed of sale, adjustment title; i.e., special grant or possessory information title converted into a record of ownership . The definition herein shall include patrimonial properties of the state owned, held, controlled, supervised or managed by government-owned or controlled corporations such as but not limited to the Export Processing Zone Authority, the PHIVIDEC Industrial Authority, the Bases Conversion arms, such as Clark Development Corporation (CDC) and the Subic Bay Metropolitan Authority (SBMA).

(e) “Industrial Estates” shall mean large and suitable tracks of land which will be developed primarily for use of a community of industries and provided with roads, water supply facilities, electrical facilities, communication facilities, sewage and drainage systems, and other infrastructures. The term Industrial Estates shall include within its meaning: science and technology parks described as knowledge based centers; set-up in proximity to scientific or industrial communities such as university, campuses, research institutes, export processing zones or industrial estate areas providing means of technology transfer from research laboratories to industry. The term likewise includes within its purview lands under the control, supervision, and management of EPZA, PHIVIDEC, and BASECON and its implementing arms, such as CDC and SBMA intended for that purpose.

(f) “Priority Productive Endeavors” shall refer to the preferred areas of activity listed in the Investments Priorities Plan (IPP) prepared by the Board of Investments in accordance with the provisions of Executive Order No. 226 otherwise known as the Omnibus Investment Code of 1987 as amended. Further, the term shall likewise include endeavors certified by the BASECON/SBMA/CDC/,EPZA or PHIVIDEC as preferred areas of activity.

(g) “Approved Investment” shall mean investment by a foreign investor approved by government as evidenced by any of the following:

1. Certificate of Registration in case of a BOI registered enterprise or Certificate of EPZA or PHIVIDEC registration of BASECON/CDC/SBMA registration or permit to operate.

2. Bureau of Trade Regulation and Consumer Protection (BTRCP) Certificate of Registration for Sole Proprietorship of SEC Certificate of Registration in case of investments not registrable with the BOI but registrable under the Foreign Investment Act of 1991.

3. Any other similar document purporting to show approval of any business undertaking in the Philippines.

RULE II

Applicability

Section 1. Long-term lease of private lands by foreign investors shall be authorised only for purposes of and in connection with the establishment of industrial estates, factory , assembly or processing plant, agro-industrial enterprises, land development for tourism, industrial or commercial use and/or other similar priority productive endeavors.

Section 2. “Private agricultural lands devoted to agricultural activities, such as cultivation of soil, planting of crops, growing of fruits and/or plantations, covered by the provisions of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law, (CARL) shall not qualify for the long-term lease under this Act and these rules and regulations.

The provisions of the preceding paragraph not withstanding, private agricultural lands approved for conversion by DAR for non-agricultural purposes and areas classified as non-agricultural prior to June 15, 1988 per town plans approved by the HLURB and which will be devoted to the establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for industrial or commercial use, tourism and other similar priority productive endeavors shall qualify for long-term lease under this Act and these rules and regulations.

Section 3. Foreign investors with pre-existing lease agreements entered into prior to the effectivity of the Act and which lease agreements were entered into for anyone or a combination of the purposes stated in Section 1, Rule II hereof, may opt to be governed by this Act and theese rules and regulations, provided, however, that in no case shall the total lease period, including that of the pre-existing lease agreement, exceeded a total of 75 years.

Section 4. Long-term lease of private lands of tourism projects shall be limited to those involving investments of not less that 5 million dollars, seventy percent (70%) of which must be infused into said project within three years from the signing of the lease agreement.

RULE III

Area of Lease and Approval Thereof

Section 1. Any foreign investor investing in the Philippines shall be allowed to lease private lands which shall comprise such area as may reasonably required for the purpose of the investment, subject, however, to the Comprehensive Agrarian Reform Law and the Local Government Code. The area of the leased private land as approved by the DTI or the BASECOM/CDC/SBMA shall Be used solely for the purpose of the investment.

a. Application letter signed by the owner(s)/lessor(s) and the foreign investor(s)/lessee signifying their intention to enter into a long term lease agreement under the provisions of Republic Act No. 7652;