Provincial Ordinance 011-2010, an Ordinance Amending Ordinance No. 005-1999, Known as the La Union Investment and Incentive Code of 1999

March 25, 2010 Journal of the 138th Regular Session of the 18th Sangguniang Panlalawigan of La Union held at the City of San Fernando, Province of La Union on March 25, 2010 EXPLANATORY NOTE As declared under Provincial Ordinance No. 005-99 otherwise known as the La Union Investment and Incentive Code of 1999, it is the policy of the Provincial Government to encourage investments in La Union in order to provide employment opportunities, generate additional revenue for the province which will be used for the delivery of basic services, and ultimately improve the quality of life of the people in the province. However, Provincial Ordinance No. 005-99, decade-old as it is, does not reflect present realities and transformations in the technological and economic milieus which are brought about by the changing times. The emergence of Information Communication Technology and Business Process Outsourcing are only some of the industrial innovations that have not been taken into account in the said ordinance. Hence, amendments to the existing Code are considered necessary. This is to align the contents of the ordinance to the preferred areas of the nation's Investment Priority Plan and to contemporary events and development and make it attuned to present-day scenarios and realities. The amendment to the existing La Union Investment Incentive Code is then very appropriate and relevant in so far as responsiveness to investor needs and investment promotions are concerned. In view of the foregoing, the approval of the proposed Amended Ordinance is hereby earnestly requested. HENRY B. BALBIN Chairperson LA UNION PROVINCIAL ORDINANCE NO. 011-10 PROVINCIAL ORDINANCE 011-2010, AN ORDINANCE AMENDING ORDINANCE NO. 005-1999, KNOWN AS THE LA UNION INVESTMENT AND INCENTIVE CODE OF 1999 Authored by: Hon. Henry B. Balbin, Hon. Jose Ma. "Pepe" C. Ortega, Hon. Francisco "Kit" C. Ortega, Jr. Co-authored by: Hon. Jonathan Justo A. Orros, Hon. Hermenegildo A. Gualberto, Hon. Joaquin C. Ostrea, Jr., Hon. Victoria L. Aragon, Hon. Henry A. Bacurnay, Jr., Hon. Rolando V. Rivera, Hon. Robert B. Madarang, Jr., Hon. Pablo M. Olarte, Hon. Manuel "Mannix" R. Ortega, Jr., Hon. Chester C. Bambico CHAPTER I Title and Declaration of Policy SECTION 1. Title. This ordinance shall be known and cited as the PROVINCIAL ORDINANCE 011-2010, AMENDING THE LA UNION INVESTMENT AND INCENTIVE CODE OF 1999. SECTION 2. Declaration of Policy. It is the policy of the Provincial Government to attract investors, both local and foreign, to invest in La Union by providing incentives in order to increase the profitability of their projects and the competitiveness with other localities which are critical to the realization of an image as a haven for productive investments and business that would spur sustainable industrialization, expand livelihood opportunities and enhance the socio-economic life of every citizen. SECTION 3. Objectives . Following are the objectives of this Code: A. To transform La Union into a highly developed local economy anchored on the development of tourism, agriculture and fishery, infrastructure, and Business Process Outsourcing/Information Communication Technology; B. To promote the flow of investors, both foreign and local, in La Union which would generate employment opportunities and provide backward and forward linkages among small, medium, and large businesses or industries in the province; C. To promote sustainable development of undeveloped and underdeveloped areas of the province without jeopardizing the environment and welfare of the next generation; D. To lay down the legal framework and mechanism of integrating the Investment/Incentives Laws of the national government to the local development initiative; E. To increase to profitability of putting up business in La Union; and F. To make La Union a very competitive area for investment development in terms of adequate human resources, accessible basic services for employees and employer needs, and extensive government support especially in maintaining a strike-free environment. SECTION 4. Definition of Terms. The following terms shall be construed to mean only as defined by this Code as follows: A. "BOARD" shall mean the La Union Investment and Incentive Board created under this Code; B. "BONAFIDE RESIDENT" is a person who is a registered voter of La Union and has established minimum residence of one (1) year in the province; C. "CAPITALIZATION" shall mean the total project cost which includes land, building, machineries, equipment and working capital; D. "CENTER" shall mean the La Union Investment and Incentive Promotions Center, which will serve as Secretariat to the Board; E. "CODE" shall mean the PROVINCIAL ORDINANCE 001-2010 AMENDING THE INVESTMENT CODE OF 1999; F. "EXISTING ENTERPRISE" shall mean an existing business entity in La Union duly registered under existing Philippine laws [ i.e. , Securities and Exchange Commission (SEC), Cooperative Development Authority (CDA), Department of Trade & Industry (DTI)]; G. "EXPANDING ENTERPRISE" shall mean an existing enterprise that shall undertake the acquisition of new equipment, rehabilitation, upgrading and increase of existing volume of production; H. "INCENTIVES" shall mean the benefits derived by the registered enterprise, which shall be in the form of exemptions, deductions or reductions from payments of taxes and other fees and charges as well as assistance as indicated herein and other benefits defined in the Code, as provided under Chapters VI and VII; I. "LOCAL GOVERNMENT UNIT" shall mean the municipalities and the city within the Province of La Union; J. "NEW ENTERPRISE" shall mean prospective firms that are interested to engage in preferred economic activities within the Province; K. "PIONEER ENTERPRISE/S" shall mean: a. An enterprise that is engaged in the manufacture, processing or production of goods, products, commodities or raw materials that have not been/not being produced in La Union on a commercial scale; or b. An enterprise that uses a design, formula, scheme, method, process or system of production or transformation of any element, substance or raw materials into another raw material or finished goods which is new and untried in La Union; or c. An enterprise that is engaged in the pursuit of agricultural and forestry activities and/or services including the industrial aspects of food processing whenever appropriate, pre-determined by the Board, in consultation with the appropriate Department, to be feasible and highly essential to the attainment of the goal of the province in relation to a declared specific provincial food and agricultural program for self-sufficiency and other social benefits of the project; or d. An enterprise which produces non-conventional fuels or manufactures equipment which utilize non-conventional sources of energy or uses or converts to coal or other non-conventional fuels or sources of energy in its production, manufacturing or processing operations: Provided, that the final product in any of the foregoing instances, involves or will involve substantial use and processing of domestic raw materials, whenever available. L. "PROVINCE" shall mean the Provincial Government of La Union; M. "REGISTERED ENTERPRISE" shall mean any single proprietorship, partnership, corporation and other entity incorporated and/or organized and existing under Philippine Laws and registered with the Board in accordance with the provisions of this Code. CHAPTER II The La Union Investment and Incentive Board La Union Investment and Incentive Promotions Center SECTION 5. The La Union Investment and Incentive Board (LUIID) . There is hereby created a La Union Investment Board which shall be the policy governing and approving body that will implement the provisions of this Code. SECTION 6. Composition of the Board. The Board shall be composed of 7 regular members composed of the following: Chairperson : Provincial Governor Vice-Chairperson : President, Chamber of Commerce and Industry of La Union Members : Chairperson, Committee on Trade, Commerce and Industry, Sangguniang Panlalawigan : Chairperson, Committee on Agriculture and Aquatic Resources, Sangguniang Panlalawigan : President, Filipino-Chinese Chamber of Commerce and Industry of La Union : President, La Union Hotel, Resort and Restaurant Association (LUHRRA) : President, Poro Point Management Corporation (PPMC) SECTION 7. Meetings and Quorum of the Board . The Board shall hold a monthly regular meeting and, as often as may be necessary, hold special meetings, on such a day and time as it may fix. The presence of at least a majority of its members shall constitute a quorum for the Board to exercise its powers and functions. SECTION 8. Powers, Duties and Functions of the Board . The La Union Investment and Incentive Board shall have the following powers, duties and functions: A. Formulate policies to implement the intent and provisions of this Code, and promulgate the Implementing Rules and Regulations (IRR); B. Act on applications for registration with the Board within a period of twenty (20) days and issue certificate of registration under the seal of the Province of La Union stating the incentives and privileges granted under the provisions of this Ordinance, or notice of disapproval thereof, as the case may be; C. Act on the Investment Priority Plan to be prepared by the La Union Investment and Incentive Promotions Center; D. After due notice and hearing, cancel the registration or suspend the enjoyment of incentives or benefits of any registered enterprise for: 1) failure to maintain the qualifications required by this Code within one year from the date of registration; and 2) violation of relevant provisions of this Code and its IRR and the terms and conditions of registration; E. Review the Code and recommend to the Sangguniang Panlalawigan its revisions as it deems necessary to make it more responsive to the needs of investors and become competitive with other local investment codes; F. Supervise the operation of the Center; and G. Generally, exercise all other functions and powers necessary or incidental to the attainment of the objectives of this Code. SECTION 9. Functions and Duties of the Chairperson . The Chairperson shall have the following functions and duties: 1. Preside over the regular and special meetings of the Board; and 2. Generally, exercise such other powers and perform such other duties as may be authorized by the Board, from time to time. SECTION 10. Functions and Duties of the Vice-Chairperson . The Vice-Chairperson shall have the following functions and duties: 1. Preside over the meetings of the Board in the absence of the Chairperson; and 2. Perform the other duties of the Chairperson in the absence of the latter, and such other duties as may be assigned to him by the Board. SECTION 11 . The La Union Investment and Incentive Promotions Center (LUIIPC) . There is hereby created a La Union Investment and Incentive Promotions Center under the Office of the Governor. The LUIIPC shall have the following functions: 1. Prepare and recommend Investment Priorities Plan for the consideration of the Board, which shall contain a listing of specific activities that can qualify for incentives under this Code; 2. Assist the Board in the promotional aspect of this Code such as establishing business linkages and networking, conducting and coordinating investment missions, preparing trade and investment promotions materials, and undertaking investment or economic briefings; 3. Provide counseling to the public on business and investments; 4. Evaluate applications for registration on the basis of documents submitted. The Office shall forward complete applications of prospective investors to the Board, and inform applicants immediately of the approval or disapproval, as the case may be, of their applications and, in the case of disapproval, the reasons thereof; 5. Periodically check and verify, either by inspection of the books or by requiring regular reports, to ascertain compliance by registered enterprises with the provisions of this Code, with the rules and regulations promulgated under this Code and with the terms and conditions of registration; 6. Assist the Board in the preparation of the industry and sectoral development programs and gathering and compiling statistical, technical, marketing, financial and other data required for the effective implementation of this Code; 7. Submit quarterly reports to the Board and within three (3) months after the closing of the fiscal year, submit an annual report to the Board on its activities including recommendation on investment policies; and 8. Generally, exercise all the powers and perform the functions as may be validly delegated to it by the Board. CHAPTER III Rights and Obligations of the Provincial Government, Investors and Registered Enterprises SECTION 12. Rights and Obligations of the Provincial Government (Through the Board) . To enhance investor's confidence in the investment and incentive program, the Province shall: A. Clearly publicize to prospective investors the economic priorities of the Province including target investment areas and the general conditions applicable to incoming direct private investment; B. Clearly communicate investment evaluation criteria and procedures to enhance transparency in the incentive granting process; C. In the formulation of qualifications, policies and ordinances that effect investments, take the fullest possible account of the need of the investors in terms of stability and security for their unhampered operations; D. Ensure consistency of policy implementation and refrain from unnecessary modification of agreements, after details of the implementation of the investment project has been accepted and the ownership and management structure of the enterprise has been established; E. Determine and promulgate areas of investment of high priority where total foreign ownership may be allowed subject to the provisions of existing laws; F. Ensure a stable and reasonable tax system on gross sales/receipts and real property including permits and licenses to encourage private investments; G. Resolve all doubts concerning the benefits and incentives granted under this Code; and H. Help promotes industrial peace through the establishment of mechanisms to assure harmonious relationship between labor and management. SECTION 13. Rights and Obligations of Investors and Registered Enterprises. Investors and registered enterprises shall have the following rights and obligations: A. Fully make known its expectations concerning the expansion of the enterprise, employment and marketing prospects and financing of its operations; B. Provide relevant information about the operation of the enterprise; C. Whenever feasible, offer part of the equity to local investors who are bonafide residents of La Union; D. Comply with the law and regulations in relation to the submission of the necessary financial Information in connection with assessment and collection of taxes; E. Abide by the undertakings given by the Province in connection with investment; F. Encourage local participation in the management of the enterprise and give employment preference to qualified and bonafide residents, including indigenous peoples and those differently-abled within their field of expertise, especially to positions with responsibility and provide the necessary training for such positions; G. To give preferences to suppliers, contractors and other services provided by local establishments subject to the requirements, standards and specification of the enterprise; H. Comply with all labor-related laws (Labor Code of the Philippines/Civil Code and other existing laws) in accordance with the Philippine Government's policies; I. Support the investment with appropriate services and suitable technology transfer to ensure the full contribution of investment to the community; J. Ensure a system in examining the impact of its operations on the environment and take steps to minimize damage in so far as it is economically and technically practical in the local situation; and K. Respect and abide by all national and provincial laws and policies as well as the economic, cultural and social objectives of the national and local government, including local ordinances. CHAPTER IV General Eligibility Criteria SECTION 14. Criteria for All Enterprises . Existing, expanding and new enterprises/investors who intend to avail of the incentives provided in this Code must meet the following criteria: A. The prospective investor's production facility, service or business must be located within the territorial jurisdiction of the Province of La Union; B. Eligible existing enterprises are those whose principal production facility, service or business is already located within the territorial jurisdiction of the Province of La Union and whose proposed expansion or diversification should principally be within the territorial jurisdiction of the province; C. Eligible new enterprises are those which are registered with the SEC/DTI/CDA after effectivity of this Code and whose proposed relocation should principally be within the territorial jurisdiction of the province; and D. The business enterprise has complied with all the requirements mandated under existing local or national laws and the Constitution. SECTION 15. Additional Qualifications for New Enterprises. In addition to the criteria set in Section 13 hereof, new investors must have the following qualifications and requirements: A. An initial investment of not less than Five Million Pesos (PhP5,000,000.000); B. Submission of a Letter of Intent to engage in a preferred project listed under the Investment Priority Areas of the Province in accordance with the current Investment Priorities Plan of the Philippines; C. Capacity to operate on a sound and efficient basis and to contribute to the local development of the preferred investment areas; D. Adherence to the provisions set forth in this Code at all times; E. An environment management plan; F. The new enterprise will employ only qualified bonafide residents of the province for its labor/manpower requirement unless the work assignment requires highly technical and specialized skills which cannot be undertaken by the labor force of the province; and G. Foreign companies intending to apply for registration must comply with the Foreign Investment Act of 1991. SECTION 16. Qualifications for Existing Enterprises. All eligible existing enterprises are entitled to apply for the benefits set forth under this Code as follows: A. Undertake expansion of existing production, service or business capacity or construction of new factories, agri-productions or new building or other civil works for the installation of new machinery and equipment or improvement thereof which shall result in an increase in production or service capacity, provided that the expansion shall have a minimum project cost of Sixty Million Pesos (Php60,000,000.00), exclusive of operational expenses and such expansion as stated in the investor's project study has been submitted to and approved by the Board; B. The expansion will include an environment management plan; and C. The expansion project will provide employment only to bonafide residents of the province unless the work assignment requires highly technical and specialized skills and supervisory position which cannot be undertaken by the local labor force of the province. SECTION 17. Application Requirements . Application for registration may be filed with the LUIIPC after payment of a non-refundable filing fee of Five Thousand Pesos (PhP5,000.00) together with the following documents: A. Four (4) copies of the project study/business plan showing that the project covered by the application is economically, technically and financially viable; B. Four (4) copies of registration papers with SEC/DTI/CDA, whichever is applicable. C. Resolution of the applicant's Board of Directors authorizing the filing of application or Letter of Intent by owner for single proprietorship; and D. List of directors and other principal officers in their respective nationalities and current addresses certified by the corporate secretary or list of officers for single proprietorship as certified by the owner-applicant. CHAPTER V Preferred Areas of Investments SECTION 18. Investment Priority Areas of the Province . The following are the preferred areas of investments of the Province of La Union: A. Tourism 1. Concert Centers and Amusement Parks 2. Development of Tourism Spots in La Union each as Surfing in San Juan, Tapuakan Falls in Pugo, etc. 3. Retirement Village with Complete Wellness Center 4. Establishment of All-Weather Track Oval with Physical Fitness Center 5. One-Stop Medical Tourism Center (coordination between hotels and hospitals) 6. Training Centers of "Hilot" or Masseurs with World-Class Skills 7. Leisure Flying (Skydiving) 8. Tourist Shuttle Bus Transport 9. Establishment of Eco-Tourism Facilities 10. Water Transport (La Union to Lingayen Hundred Islands) 11. Convention Center La Union 12. Travel and Tours (complete package services) 13. Religious Tourism (Pilgrim Mountain Resort, Retreat Houses) 14. Five-Star Hotels 15. Cable Car Transport for Inland Towns B. Agriculture and Fishery 1. Exotic Fruits Production and Processing 2. Organic Fertilizer Production and Organic Crops 3. High Value Commercial Crops Production and Processing 4. Forestry 5. Livestock and Poultry Production, Processing and Packaging 6. Expansion of Mariculture Projects C. Infrastructure and Services 1. Water Sources Development 2. Construction or Pipe-laying of Water Transmission and Distribution Pipelines 3. Septage Treatment Facility 4. Water Distribution Upgrade or Expansion 5. Light Sea Craft or Vessel-Manufacturing Facility 6. Solar Power Facility for Isolated Areas 7. Smart Security System to Protect Provincial Boundaries 8. Steel Plant for Manufacturing Steel Rods or Bars 9. Expansion of the Post-Harvest Facilities like Solar Dryer or Warehouse 10. Low-Cost Housing Projects 11. Conversion of Diesel Plant to Liquefied Natural Gas 12. Sewerage System and Water Treatment Facility 13. Mini-Hydroelectric Power Plant 14. Construction of Commercial and Administrative Buildings 15. Logistics/Warehouses 16. Unique Upgrading of Existing Facilities 17. Sky Train 18. Development of the Existing Ports (Airport and Seaport) 19. Parking Facilities 20. Development of Road Network Creating Alternate Routes Connecting Rural and Urban and Inter-Municipality 21. Janitorial, Security and Manpower Services for Job Operation 22. Upgrading of Drainage Facilities (drainage canals and road-widening) 23. Mall Operators D. Business Process Outsourcing (BPO)/Information Communication Technology (ICT) 1. Establishment of Tax Audit/Consultancy Firms 2. Creative Industries (Film and TV Productions, Theater Arts Production, etc.) 3. Language Training Centers 4. BPO (Voice/Non-voice) 5. Creation of Information Technology (IT) Park and ICT Building 6. Putting up of Facilities for Call Centers 7. Upgrading of Facilities for Centers of Excellence and Training in Research and Development 8. Expansions on Infrastructure CHAPTER VI Fiscal Incentives SECTION 19. Tax Incentives to be Granted to Qualified Registered Enterprises . The following are the fiscal incentives granted under this Code: A. Exemption from the Basic Real Property Tax equivalent to 35% of the province share shall be granted for a period of three (3) years at the time of registration; Additionally, registered enterprises that invested more than Sixty Million Pesos (PhP60,000,000.00) for expansion project shall receive 10% discount on the 35% provincial share from Real Property Taxes corresponding to actual cost of expansion project for the period of five (5) years from the period of full exemption. B. Exemption from Transfer Tax for a period of two (2) years, from the date of registration of the enterprise under this Code; C. Exemption from Franchise Tax for Two (2) years; D. Exemption from Amusement Tax for Three (3) years; E. Exemption from Land Tax for fifteen (15) years for Commercial Tree Plantation; and F. Exemption from Land Tax for ten (10) years for Fruit-Bearing Tree Plantation. CHAPTER VII Non-Fiscal Incentives SECTION 20. Non-Fiscal Incentives to be Granted to Qualified Registered Enterprises. Upon the issuance of the Certificate of Registration, qualified registered enterprises and investors shall be granted the following non-fiscal incentives: A. Provision of a One-Stop Documentation Center for simplified documentation procedures; B. Assistance in securing local permits and licenses; C. Consistent support for industrial peace; D. Assistance in labor recruitment and arbitration; E. Assistance in securing direct source of electric power, water supply, connection and other public utilities; F. Facilitating service communications with local utilities; G. Assistance in identifying suitable business locations or factory; H. Assistance in the negotiation of special rates for industries with a minimum load of at least 1000 kilowatts; I. Assistance in selection and negotiation of right of way; J. Facilitating access to financial and technical assistance programs of the government; and K. Joint venture market-matching. CHAPTER VII Final Provisions SECTION 21. Funding. The Provincial Government shall initially appropriate the sum of TWO MILLION PESOS (PhP2,000,000.00) from its 2010 Budget and to provide an annual subsidy of not less than One Million Pesos (Php1,000,000.00) thereafter as support fund to defray the expenses of the LUIIB and the LUIIPC subject to the usual accounting and auditing rules and regulations. The Board may undertake fund generation activities provided it is in accordance with existing laws. SECTION 22. Separability Clause. The provisions of this Code are hereby declared to be separable and in the event that one or more of the other provisions are held invalid or unconstitutional, the validity of the other provisions shall not be affected. SECTION 23. Repealing Clause. All provincial ordinances, executive orders and rules and regulations inconsistent or in conflict with the provisions of this Code are hereby repealed or modified accordingly. SECTION 24. Amendments or Revisions . Any amendment to or revision of this Code shall be introduced by the Board. The proposed amendment or revision shall be submitted by the Board to the Sangguniang Panlalawigan for approval. SECTION 25. Prospective Application. This Ordinance shall have prospective application. SECTION 26. Effectivity . This ordinance shall take effect 15 days after its publication in any local newspaper in the province. APPROVED. (SGD.) EULOGIO CLARENCE MARTIN P. DE GUZMAN III Presiding Officer Vice-Governor (SGD.) JONATHAN JUSTO A. ORROS Sangguniang Panlalawigan Member (SGD.) HENRY B. BALBIN Sangguniang Panlalawigan Member (SGD.) HERMENEGILDO A. GUALBERTO Sangguniang Panlalawigan Member (SGD.) HENRY A. BACURNAY, JR. Sangguniang Panlalawigan Member (SGD.) JOAQUIN C. OSTREA, JR. Sangguniang Panlalawigan Member (SGD.) ROLANDO V. RIVERA Sangguniang Panlalawigan Member (SGD.) JOSE MA. "PEPE" C. ORTEGA Sangguniang Panlalawigan Member (SGD.) ROBERT B. MADARANG, JR. Sangguniang Panlalawigan Member (SGD.) VICTORIA L. ARAGON Sangguniang Panlalawigan Member (SGD.) PABLO M. OLARTE Sangguniang Panlalawigan Member (SGD.) FRANCISCO "KIT" C. ORTEGA, JR. Sangguniang Panlalawigan Member (SGD.) CHESTER C. BAMBICO Sangguniang Panlalawigan Member ATTESTED: (SGD.) CARIDAD J. VILUAN Secretary to the Sanggunian APPROVED: (SGD.) MANUEL C. ORTEGA Governor