AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NUMBERED FOUR THOUSAND EIGHT HUNDRED SIXTY, AS AMENDED (RE-FOREIGN BORROWING ACT).

• Number: Presidential Decree No. 81
• Sections: 11

Preamble

WHEREAS, the Government is vigorously engaged in a

continuing program of reconstruction and development of infrastructure

facilities, food production, and industrialization; WHEREAS, for this purpose,

the Government has presented, and will continue to present before financial

institutions specific proposals for the funding of both public and private

sector projects;

WHEREAS, availment of financial assistance from these

institutions to be able to undertake these priority projects would require

responsible foreign borrowing legislation;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution as

Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to

Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated

September 22, 1972, as amended, in order to assure a sustained and accelerated

implementation of its development program do hereby order to amend further R.A.

4860, as amended, and to adopt this Decree as part of the law of the land.

Section 1

SECTION 1. Section one of Republic Act Numbered Four

Thousand Eight Hundred Sixty, as amended, is further amended to read as

follows:

"SEC. 1. The President of the Philippines is hereby

authorized, in behalf of the Republic of the Philippines, to contract such

loans, credits, including supplier's credit, deferred payment arrangements, or

indebtedness as may be necessary and upon such terms and conditions as may be

agreed upon, not inconsistent with this Act, with Governments of foreign

countries with whom the Philippines has diplomatic or trade relations or which

are members of the United Nations, their agencies, instrumentalities or

financial institutions or with reputable international organizations or

non-governmental national or international lending institutions or firms

extending supplier's credit deferred payment arrangements to enable the

Government of the Republic of the Philippines to:

"(A) Undertake, through any government office, agency or instrumentality, or

government-owned or controlled corporation, industrial, agricultural or other

economic and social development projects and feasibility studies, which are

authorized by law including but not limited to those enumerated in Annex ‘A’

including lists 1, 2, 3 and 4 hereof, which are made integral parts of the Act

and such projects which may from time to time be recommended by the National

Economic Development Authority and approved by the President of the Philippines:

Provided, That at least seventy-five per cent of the loans, credits or

indebtedness authorized to be obtained under this paragraph shall be spent for

projects which are income-generating. Such foreign loans, credits or

indebtedness shall be used to meet the

direct and indirect foreign exchange requirements and up to twenty per centum

of the peso costs to cover the costs of studies, technical surveys, equipment,

machineries, supplies, construction, installation and related technical

services: Provided, further, That whenever necessary, part of

the proceeds of such loans, credits or indebtedness shall be used for

environmental, health, and ecologic management and control;

"(B) Lend the proceeds of such loans, credits or indebtedness to

Government-owned or controlled corporations to finance development projects

which are authorized by the charters of such corporations or by law:

Provided, That the proceeds of said loans, credits or indebtedness

shall likewise be used to meet the direct and indirect foreign exchange

requirements and up to twenty per centum of the peso costs to cover the costs of

studies, technical surveys, equipment, machineries, supplies, construction,

installation and related technical services;

"(C) Lend the proceeds of such loans, credits or indebtedness to the

Development Bank of the Philippines which shall administer said proceeds in

accordance with the agreement with the foreign creditor for relending to

individuals, partnerships, cooperatives, associations or private corporations,

whose capital stock, if not fully subscribed, is open to subscription by the

general public to meet the direct and indirect foreign exchange requirements as

well as up to twenty per centum of the peso costs for such industrial,

agricultural and other economic development projects subject to the provisions

of the charter, rules and regulations of said bank and to the terms and

conditions agreed upon by the Government and the institution providing financing

for the projects: Provided, That the Development Bank of the

Philippines shall pay the Republic of the Philippines at least for the

principal, interests and other charges on such loans, credits or indebtedness

turned over to it: Provided, further, That of the total authorized

borrowing for relending to the private sector:

Sixty per centum shall be for industrial and public utility projects which

are approved by the Board of Investments or their corresponding Boards; and

Forty per centum must be allocated to agricultural projects which are

recommended by the Department of Agriculture and Natural Resources and approved

by the National Economic Development Authority and which satisfy any or all of

the following criteria:

(a) New and/or export-oriented

(b) Import-substitute-oriented

(c)

Necessary to increase agricultural production; or

(d) Necessary to improve

the quality and marketability of agricultural products.

"The proceeds of the loans, credits or indebtedness under this paragraph

shall not be re-loaned to any individual, partnership, cooperative, association

or private corporation, the account of which with the Development Bank of the

Philippines or with any government financial institution in arrears for three or

more installments for causes other than force majeure or those beyond its

control, nor shall paid proceeds or portions thereof be used for any purpose

other than that for which the loan, credit or indebtedness has been granted. The

failure of any debtor to meet three amortization payments of its loan when due,

for causes other than force majeure or those beyond its control, will render the

entire obligation or any balance thereof due and demandable, and the debtor

shall pay a special penalty of two per centum of the total amount due.

"The authority of the President of the Philippines, as hereby

provided in this Section shall include the power to issue, for the

purposes stated, bonds, debentures, securities or other evidences of

indebtedness for sale in the international marker the income from which shall be

fully tax-exempt in the Philippines."

Section 2

SEC. 2. Section two of the same Act is hereby further

amended to read as follows:

"SEC. 2. The total amount of loans, credits or indebtedness,

excluding interest and other normal banking charges which shall not be in excess

of those imposed or charged by the International Bank for Reconstruction and

Development, the Asian Development Bank or other reputable international

organization or non-governmental national or international-lending institution,

which the President is authorized to incur under Section one of this Act shall

not exceed one billion United States dollars or its equivalent in other foreign

currencies at the exchange rate prevailing at the time the loans, credits or

indebtedness are incurred at terms of payment of not less than 10 years except

those contracted in the interest of national security and rehabilitation

resulting from natural calamities: Provided, That the price, interest

rates and other charges on loans, credits or indebtedness from non-governmental

national or international lending institutions or firms extending supplier's

credits or deferred credit arrangements shall be determined by the rules and

regulations which may be promulgated by the Central Bank: Provided,

finally, That seventy-Five per centum of such total authorized amount of

one billion United States dollars or its equivalent in other currencies shall be

incurred for projects of the public sector contemplated under paragraphs 'A' and

'B' of Section one and twenty-five per centum thereof shall he utilized for

projects of the private sector contemplated under paragraph 'C of Section one,

and that no individual, partnership, cooperative, association or private

corporation shall be allowed to borrow more than fifteen per centum of the total

of such loans, credits, indebtedness authorized to be incurred for relending by

the Development Bank of the Philippines, except those who may, undertake

projects whose financial requirements are in excess of such limitation, in which

case the recommendation of National Economic Development Authority and the

approval by the President to exceed such limit is required.

"The Central Bank of the Philippines shall promulgate and enforce such

measures as shall be necessary to eventually reduce the external debt service

requirements to an annual level not exceeding twenty per centum of the average

of the foreign exchange receipts of the immediately preceding

year."

Section 3

SEC. 3. Section three of the same Act is hereby further

amended to read as follows:

"SEC. 3. The President of the Philippines, upon

recommendation of the Secretary of Finance, the Monetary Board of the Central

Bank of the Philippines and the National Economic Development Authority, is

further authorized, in behalf of the Republic of the Philippines, to guarantee

such loans, credits or indebtedness as may be necessary and upon such terms and

conditions, not inconsistent with this Act, as may be agreed upon with the

governments of foreign countries with whom the Philippines has diplomatic or

trade relations or which are members of the United Nations, their agencies,

instrumentalities or financial institutions or with reputable international

organizations or non-governmental national or international lending

institutions, loans, credits or indebtedness extended directly to, or bonds,

debentures, securities or other evidences of indebtedness for sale in

international markets issued by:

"(A) Corporations-owned or controlled by the Government of the Philippines:

Provided, That the proceeds of bonds, debentures, securities or other

evidences of indebtedness floated or issued, shall be used to undertake

industrial, agricultural, or other economic development projects which are

authorized by law or by their respective charters, including but not limited to

those enumerated in Annex 'A' or by their respective charters and such projects

which may from time to time be .recommended by the National Economic Development

Authority and approved by the President of the Philippines.

"(B) Government-owned or controlled financial institutions for relending to

individuals, partnerships, cooperatives, associations or private corporations,

whose capital stock, if not fully subscribed, is open to subscription by the

general public for projects authorized by the charters of such financial

institutions or by law. "Seventy-five per centum of the total amount authorized

to be guaranteed under this section shall be incurred for projects under

paragraph "B" hereof; and that of the total amount guaranteed no individual,

partnership, cooperative, association or private corporation except development

finance corporations using funds supplied by International Bank for

Reconstruction and Development, the Asian Development Bank and other similar

international financial institutions, shall be allowed to borrow more than

fifteen per centum of the total amount of loans, credits, or indebtedness

authorized to be guaranteed hereunder."

Section 4

SEC. 4. Section three-A of the same Act is hereby amended to

read as follows:

"SEC. 3-A. Only Filipino 'citizens, partnerships,

cooperatives, associations or private corporations organized under the laws of

the Philippines, at least seventy per centum of the outstanding and paid-up

capital of which is owned and held by citizens of the Philippines, such

proportion to be maintained until such time as the loan is fully paid and whose

capital structure is open to public participation are qualified to borrow from

Government financial institutions the proceeds of loans, credits or indebtedness

incurred under authority of this Act.

"Failure of the private borrower to maintain the capital ownership

requirement stipulated herein, throughout the period that any part of a loan

remains outstanding, shall render the entire loan immediately due and

demandable, together with all interests and penalties, plus an additional

special penalty of two per centum of the total amount due for every month or

fraction, thereof that the violation of the capital ownership requirement

continues to subsist."

Section 5

SEC. 5. Section four of the same Act is hereby repealed and

Section four-A shall be renumbered Section Four and further amended to read as

follows:

"SEC. 4. In the contracting of any loan, credit or

indebtedness under this Act, the President of the Philippines may, when

necessary, agree to waive or modify the application of any law granting

preferences or imposing restrictions on international competitive bidding,

including among others, Act Numbered Four Thousand Two Hundred Thirty-Nine,

Commonwealth Act Numbered One Hundred Thirty-Eight, the provisions of

Commonwealth Act Numbered Five Hundred Forty-One, insofar as such provisions do

not pertain to constructions primarily for national defense or security

purposes, Republic Act Numbered Five Thousand One Hundred Eighty-Three:

Provided, however, That as far as practicable, utilization of the

services of qualified domestic firms in the prosecution of projects financed

under this Act shall be encouraged: Provided, further, That in case

where international competitive bidding shall be conducted preference of at

least fifteen per centum shall be granted in favor of articles, materials, or

supplies of the growth, production or manufacture of the Philippines:

Provided, finally, That the method and procedure in the comparison of

bids shall be the subject of agreement between the Philippine Government and the

lending institution."

Section 6

SEC. 6. Section five of the same Act is hereby further

amended to read as follows:

"SEC. 5. It shall be the duty of the President, within

thirty days after the opening of

every regular session, to submit a separate

report to Congress on the amount of loans, credits and indebtedness contracted

and in the process of negotiation and of the bonds, debenture, securities, or

other evidences of indebtedness sold in international markets and proposed to be

sold, as well as the guarantees extended, their respective terms and conditions,

and the purposes and projects for which the loan credits, or indebtedness were

incurred and for which the bonds, debentures, securities or other evidences of

indebtedness were floated, and the guarantees extended."

Section 7

SEC. 7. Section six of the same Act is hereby further

amended to read as follows:

"SEC. 6. Any provision of law to the contrary

notwithstanding, and in order to enable the Republic of the Philippines to pay

the principal, interest, taxes and other normal banking charges on the loans,

credits or indebtedness, or on the bonds, debentures, securities or other

evidences of indebtedness sold in international markets incurred under the

authority of this Act, the proceeds of which are deemed appropriated for the

projects, all the revenue realized from the projects financed by such loans,

credits or indebtedness, or on the bonds, debentures, securities of other

evidences of indebtedness, shall be turned over in full, after deducting actual

and necessary expenses for the operation and maintenance of said projects, to

the National Treasury by the government office, agency or instrumentality, or

government-owned or controlled corporation concerned, which is hereby

appropriated for the purpose as and when they shall become due. In case the

revenue realized is insufficient to cover the principal, interest and other

charges, such portion of the budgetary savings as may be necessary to cover the

balance or deficiency shall be set aside exclusively for the purpose by the

government office, agency or instrumentality, or government-owned or controlled

corporation concerned: Provided, That, if there still remains a

deficiency, such amount necessary to cover the payment of the principal and

interest on such loans, credit or indebtedness as and when they shall become due

is hereby appropriated out of any funds in the National Treasury not otherwise

appropriated: Provided, further, That the Monetary Board shall make

provisions out of current foreign exchange receipts for the foreign exchange

requirements to service the external debt: And provided, finally, That

this requirement to turnover the net revenues shall not apply in relending

arrangements covered under Section 1 (B)and(C)."

Section 8

SEC. 8. Section 6-A of the same Act is hereby repealed.

Section 9

SEC. 9. Any provision of law, executive orders, rules and

regulations inconsistent with this Decree are hereby repealed or modified

accordingly.

Section 10

SEC. 10. This Decree shall take effect immediately.

Done in the City of Manila, this 14th day of December, in the year of Our

Lord, nineteen hundred and seventy-two.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Secretary Executive