Shepherding TEZ applications

October 18, 2011 at 12:08

This is a re-posted opinion piece.

TWO years ago Congress enacted Republic Act (RA) 9593, otherwise known as the Tourism Act of 2009. This law, among other things, reorganized the then-Philippine Tourism Authority (PTA) as the Tourism Infrastructure and Economic Zone Authority (Tieza) and authorized the Tieza to grant certain incentives to operators of so-called tourism enterprise zones (TEZs) and registered tourism enterprises (RTEs) within TEZs.

RA 9593 also mandated the Tieza to designate, regulate and supervise these TEZs (subject to minimum requirements to be subsequently promulgated by the Tieza) as well as to register, monitor and regulate RTEs.

Some quarters eagerly awaited the issuance of the Tieza minimum requirements for the designation of TEZs, and not only to benefit from fiscal and non-fiscal incentives. Tellingly, under RA 9593, lands identified as part of a TEZ shall qualify for exemption under the Urban Development and Housing Act and the Comprehensive Agrarian Reform Law, subject to rules made by the Tieza, the Housing and Urban Development Coordinating Council (HUDCC) and the Department of Agrarian Reform (DAR).

On July 14 the Tieza finally published its guidelines for the designation and supervision of TEZs and the administration of incentives under RA 9593. It turned out that the Tieza Board adopted the guidelines early this year, or on January 14. Consistent with RA 9593, the guidelines require TEZ proponents to submit, among other things, a development plan, a resolution of the concerned local government unit approving the development plan, and environmental compliance certificate (ECC). If the application for TEZ designation is found viable, the Tieza Board shall approve the same, subject to other conditions it may reasonably impose. The guidelines state that the decision of the Tieza Board in designating a particular area as a TEZ is final and nonappealable

Some observations about these guidelines are worth pointing out.

First, to discourage the proliferation of TEZs in a manner that diminishes their strategic economic and developmental value to the national economy, the guidelines identified six criteria that any geographic area has to possess in order to be designated a TEZ. RA 9593 already prescribes such criteria of five characteristics or features required of the geographic area, but we note the guidelines establish an additional benchmark—that the area must be situated where controls can be easily established to curtail illegal activities—to that already contained in the law. Moreover, while RA 9593 specified that the area should be “sufficient in size, such that it may be further utilized for bringing in any new investments in tourism establishments and services,” the guidelines additionally required that the area must be at least five hectares, provided that, in extremely meritorious cases, an area less than five hectares may be developed as a TEZ if the Tieza Board deems it sufficient for the purposes, requirements and nature of the tourism project to be undertaken therein.

Second, in order that an applicant may be entitled to fiscal and nonfiscal incentives under RA 9593, the guidelines generally provide that the minimum amount of investment required shall not be less than $5 million, exclusive of land acquisition costs. However, in extremely meritorious cases, the incentives may still be bestowed even if the investment is less than $5 million if it is invested for a cultural heritage tourism zone or an ecotourism zone, subject to the determination by the Tieza Board that the amount invested is sufficient for the purposes, requirements and nature of the tourism project to be undertaken. In this connection, the guidelines identified five classifications of TEZs: cultural heritage, health and wellness, ecotourism, general leisure, and mixed use. Thus, it appears that proponents of TEZs for health and wellness or general leisure tourism whose investment commitment falls short of $5 million will not be able to avail themselves of any incentive under RA 9593, even if a lower amount is actually sufficient for the purposes, requirements and nature of the project to be undertaken.

Third, the guidelines require that the development of the whole TEZ to be completed within a maximum period of five years, unless a different period is required and duly approved by the Tieza Board. Likewise, unless otherwise
provided by the Tieza Board, the phasing development of the area may be allowed in the following manner: Phase 1 (30 percent of the area), Phase 2 (30 percent), Phase 3 (20 percent), Phase 4 (10 percent) and Phase 5 (10 percent). At the end of each phase, though, the TEZ operator must already be able to provide the basic infrastructure facilities and utilities ready for immediate use and occupancy by prospective RTEs. Failure to develop and/or complete within the approved period, unless extended by the Tieza Board for good cause, shall leave the TEZ operator liable for penalties. Further, areas not developed and completed within the approved period shall be restored to their original land use at the expense of the TEZ operator, unless the Tieza Board provides otherwise.

Thus, a proponent may well be advised against making commitments in its TEZ application that it knows will not materialize.


This article has been prepared for informational purposes only and should not be treated as legal advice.

Pancho G. Umali is a partner at Villaraza Cruz Marcelo & Angangco ( He heads CVCLAW’s Tourism and Leisure Practice Group, and is a member of the Firm’s Corporate and Special Projects Department and Mining & Natural Resources Department. He may be reached at [email protected].
By: Pancho G. Umali – On Firm Ground
Source: Business Mirror, Aug. 31, 2011
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