1 month ago
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THE Senate approved on third and final reading a bill establishing a Special Defense Economic Zone (SpeDEZ) inside the government arsenal defense industrial estate in Camp Gen. Antonio Luna in Limay, Bataan.
The senators on Monday passed Senate Bill (SB) 2900 to encourage foreign investors to help further develop the Philippines' arsenal.
"The production of defense materials carries significant security and safety hazards, and the defense manufacturers cannot be treated just like any other economic zone locator," said Sen. Migz Zubiri, sponsor of the measure.
The government intends to set up a 370-hectare defense economic zone in Limay, Bataan to give locators a place to go.
"They have to be in relative isolation, far from putting the public in harm and must be located in a secure location with due consideration for national security," he said.
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The bill, once passed into law, will pave the way for the creation of the Special Defense Economic Zone Authority (SpeDEZA).
"With the Special Defense Economic Zone, we look forward to foreign direct investors planting their feet in Limay," Zubiri said in his sponsorship speech.
"We can also look forward to technological, skills-building, and research and development exchanges between them and our government arsenal, as well as infrastructural development that will benefit not just the economic zone but the entire municipality as well," he said.
Zubiri said the SpeDEZA is a vital complementary bill to the recently passed Self-Reliant Defense Posture Act (SRDPA).
"When the president signed the SRDP Act into law in October [2024], I celebrated it as a step towards positioning the Philippines as a key player in the global defense market, with a robust homegrown defense industry that produces top-tier defense material, primarily for the use of our own troops, but for export in the global market as well," Zubiri said.
"But with the SRDP's signing also came a big question: Where will defense investors go? Which of our economic zones would be best suited to welcome the defense manufacturers looking to set up shop here?" he asked.
Under the bill, locators in the SpeDEZ would be entitled to value added tax (VAT) exemption in importation, as well as VAT zero-rating on local purchases.
They would also enjoy an income tax holiday, with their fiscal incentives terminating after 20 years.
In return, they will be required to pay a five percent final tax on their gross income earned, which shall then be distributed in the following manner: one percent to the Armed Forces pension fund; one percent to the province of Bataan; one percent to the host city or municipality; and two percent to the SpeDEZA.
The SpeDEZ would also have a Special Labor Center, comprising of labor office, an industrial health and safety office, an inspection and investigative disputes office, and an enforcement office.
The center should oversee labor issues and disputes, and to monitor workplace hygiene and safety standards which is crucial, given the high-risk nature of the defense industry.
