Economic and Social Development: Mindanao Final Agreement

III. The New Regional Autonomous Government D. The Economic and Financial System, Mines and Minerals

Article 126:

The Regional Autonomous Government in the area of autonomy shall establish its own Regional Economic and Development Planning Board chaired by the Head of Government in the area of autonomy. The Board shall prepare the economic development plans and programs of the Autonomous Government.

Article 127:

The pivotal role of banks and other financial institutions for development in the area of autonomy is recognized.

Article 128:

The Regional Autonomous Government in the area of autonomy has the power to promote tourism as a positive instrument for development provided that the diverse cultural heritage, moral and spiritual values of the people in the area of autonomy shall be strengthened and respected.

Article 129:

The Regional Autonomous Government in the area of autonomy shall have the power to grant incentives including tax holidays within the power and resources in the area of autonomy.

Article 130:

The Regional Autonomous Government in the area of autonomy advocates equal opportunities for all the inhabitants of the area of autonomy regardless of ethnic origin, culture, sex, creed and religion.

Article 131:

In enacting tax measures, the Regional Legislative Assembly shall observe the principle of uniformity and equity in taxation and shall not impose confiscatory taxes or fees of any kind.

Article 132:

The Regional Autonomous Government in the area of autonomy shall have the power to enact a Regional Tax Code and a regional Local Tax Code applicable to all local government units within the area of autonomy.

Article 133:

All corporations, partnerships or business entities directly engaged in business in the area of autonomy shall pay their corresponding taxes, fees, and charges in the province, city or municipality in the area of autonomy where the establishment is doing business.

Article 134:

All corporations, partnerships or business entities whose head offices are located outside the area of autonomy, but doing business within its territorial jurisdiction, either by using, exploiting, and utilizing the land, aquatic and all natural resources therein, shall pay their income taxes corresponding to their income realized from their business operation in the area of autonomy through the province. city or municipality where their branch offices are located. In case the business establishment has no branch in the area of autonomy, such business establishment shall pay through the city or municipality where its operation is located.

Article 135:

The Regional Autonomous Government in the area of autonomy as a corporate body, may contract domestic loans.

Article 136:

The Regional Autonomous Government recognizes the pivotal role played by banks and other financial institutions in the economic development of the area of autonomy. Toward this end, the Autonomous Government shall:
1. Encourage the establishment of banks and bank branches in the area of autonomy;
2. Encourage the entry and establishment of off-shore banking units of foreign banks in the area of autonomy.

Article 137:

The Regional Autonomous Government may accept foreign financial and economic grant for the development and welfare of the people in the region.

Article 138:

The Regional Autonomous Government may issue its own treasury bills, bonds, promissory notes, and other debt papers in consultation and coordination with the Bangko Sentral ng Pilipinas.

Article 139:

The Regional Autonomous Government may contract foreign loans within the purview of national laws and pertinent monetary and fiscal policies.

Article 140:

In the pursuit of the region’s economic growth, development and welfare, the autonomous government shall have the right to formulate economic and financial policies and implement economic and financial programs, taking into account national laws and policies.

Article 141:

The Regional Autonomous Government in the area of autonomy shall encourage, promote and support the establishment of economic zones, industrial centers, and ports in strategic area and growth centers to attract local and foreign investments and business enterprise.

Article 142:

The Regional Autonomous Government in the area of autonomy shall undertake encourage, promote and support the establishment of economic zones and industrial centers. And, in order to attract local and foreign investments within the area of the zone and outside but within the area of autonomy, the government in the area of autonomy may grant incentives to investors as may be defined in an Autonomous Investment Act to be formulated by the Regional Legislative Assembly within one year from its organization.

Article 143:

The residents in the area of the autonomy shall have preferential rights over the exploration, development and utilization of natural resources in the area of autonomy respecting existing rights on the exploitation, exploration, development and utilization of natural resources.

Article 144:

The Regional Autonomous Government in the area of autonomy shall enjoy fiscal autonomy in budgeting its own revenue resources and block subsidies granted to it by the National Government and foreign donors. Budgeting includes planning, programming and disbursing of funds.

Article 145:

The National Government shall appropriate for the area of autonomy a sufficient amount and for a period (both to be determined later) for infrastructure projects which shall be based on a development plan duly approved by the Regional Autonomous Government taking into account national policies.

Article 147:

In the regulation of the exploration, utilization, development, protection of the natural resources inclusive of mines and minerals, except strategic minerals which will be defined later, the government in the area of autonomy shall enact rules and regulations and shall impose regulatory fees, taking into account national policies.

Article 148:

An Islamic Banking Unit shall be established in the Bangko Sentral ng Pilipinas which shall be staffed by qualified Islamic banking experts nominated by the Governor of the Regional Autonomous Government. The Governor of the Regional Autonomous Government shall nominate at least three (3) qualified persons from the area of autonomy, from which nomination the appointing authority shall appoint the Head of the Unit. The same procedure shall be observed as regards the rest of the positions in the Unit.

Article 149:

The Bangko Sentral ng Pilipinas shall have a Regional Office with full banking service in the capital of the government of the Autonomous Region to respond to the growing needs of the banking community in the area of autonomy which shall be established within one (1) year from the establishment of the Autonomous Government. The Governor of the Autonomous Government shall submit a list of qualified recommendees to the appointing authority from which the staff of the regional office may be chosen; provided that those staff who are now occupying and already appointed to positions in the regional office are considered as recommended by the Governor of the Regional Autonomous Government.

Article 150:

The Regional Autonomous Government shall establish a body in the area of autonomy with the same powers as the Philippine Economic Zone Authority (PEZA) consistent with the Special Economic Zone Act of 1995.

Article 151:

All current year collections of internal revenue taxes within the area of autonomy shall, for a period of five (5) years, be allotted for the Regional Autonomous Government (RAG) in the Annual General Appropriations Act; provided that:

1. The Bureau of Internal Revenue (BIR) shall continue to collect such taxes and the BIR Collection Districts/Offices concerned shall retain such collections and remit the same to the RAG through an approved depository bank within thirty (30) days from the end of each quarter of the current year;

2. Out of said internal revenue tax collections, fifty percent (50%) of the tax collected under Section 100 (Value-added tax on sale of goods), 102 (Value added tax on sale of services), 112 (Tax on persons exempt from value-added tax), 113 (Hotel, motels and others), and 114 (Caterers) of the National Internal Revenue Code (NIRC), as amended, in excess of the increase in collections for the immediately preceding year shall be shared by the RAG and the local government units (LGUs) within the area of autonomy as follows: (1) Twenty percent (20%) shall accrue to the city or municipality where such taxes are collected; and (2) Eighty percent (80%) shall accrue to the RAG. In all cases, the RAG shall remit to the LGUs their respective shares within sixty (60) days from the end of each quarter of the current year. Provided, however, that the provinces, cities, municipalities and barangays within the area of autonomy shall continue to receive their respective shares in the Internal Revenue Allotment (IRA), as provided for in Section 284 of the Local Government Code of 1991. Provided, finally, that the five-year (5) periods herein above mentioned may be extended upon mutual agreement of the National and Regional Autonomous Governments.

Implementation History

1996

Minimum Implementation

The 1996 peace agreement calls for various provisions such as the ARMM establishing its own Regional Economic and Development Planning Board, tourism promotion, authority to the ARMM to give incentives including tax holidays within its power and resources in the area of autonomy, enact a regional tax code and regional local tax code, encourage the establishment of banks and bank branches along with establishing an Islamic Banking Unit in the ARMM. The ARMM was allowed to accept foreign financial and economic grants, issue its own bonds, treasury bills and debt papers in coordination with the central bank. The peace accord calls for the fiscal autonomy of the ARMM, gives preferential rights over the exploration, development and utilization of natural resources in the autonomy area respecting existing rights on the exploration, exploitation and utilization of the natural resources. The internal revenue tax collected from the ARMM region was to be allocated for the Regional Autonomous Government, for a period of five year, in the Annual General Appropriation Act, which could be extended upon the mutual agreement between the national and regional autonomous government.

Executive Order no. 371 created the Southern Philippines Council for Peace and Development (SPCPD) as a transitional body to be dissolved after the plebiscite scheduled for 1999. The SPCPD however did not lead to the establishment of the institutional frameworks called for in the accord for socio-economic development.1

The Regional Economic and Development Planning Board was not established. Concerning Islamic banks, there was only one Islamic Bank, Al-Amanah, in the region. The Growth with Equity in Mindanao project sought to get other overseas Islamic Banks to set up branches in the ARMM region.2 As provided in the accord, the ARMM was allowed to keep 80 percent of tax revenue for five years, but the amount was miniscule.3 There were no records found of the ARMM issuing treasury bills or debt papers.

  • 1. John D. Harber, "Conflict and Compromise in the Southern Philippines: The Case of Moro Identity," (M.A. Thesis, Naval Postgraduate School, Monterey, California, 2008).
  • 2. "Philippines lures foreign Islamic banks," Agence France Presse, October 25, 1996.
  • 3. "Philippines dangles more autonomy to Moslem rebels," Agence France Presse, February 2, 1999.
1997

Minimum Implementation

Socioeconomic reform in Mindanao was supposed to be addressed in an institutional fashion after establishing the Regional Economic and Development Planning Board. This did not happen in 1997. In terms of foreign support for socio-economic development, in December 1997, $500 million was pledged in a meeting attended by representatives from the Consultative Group for the Philippines for the development of Mindanao which included programs related to livelihood and eco-tourism among other developmental projects.4 In respect with establishing the Islamic bank branches, the central bank was in a process to amend the country’s banking regulation to attract foreign Islamic banks.5

  • 4. "Philippines Gets Us$500 m for Mindanao Development," AAP Newsfeed, December 23, 1997.
  • 5. "Philippines preparing rules to attract Islamic banks," Associated Press, January 29, 1997.
1998

Minimum Implementation

The Regional Economic and Development Planning Board was not created in 1998. There were no reports of newly established Islamic banks in the region. However, as provided in the accord, however, the ARMM was allowed to keep 80 percent of tax revenue for five years.6 The ARMM received foreign support and grants for various socio-economic development related projects.

  • 6. "Philippines dangles more autonomy to Moslem rebels," Agence France Presse, February 2, 1999.
1999

Minimum Implementation

The Regional Economic and Development Planning Board was not created in 1999. There were no reports of newly established Islamic banks in the region. However, as provided in the accord, however, the ARMM was allowed to keep 80 percent of tax revenue for five years.7 The ARMM received foreign support and grants for various socio-economic development related projects.

2000

Minimum Implementation

The Regional Economic and Development Planning Board was not created in 2000. There were no reports of newly established Islamic banks in the region. As called for in the accord, the ARMM was allowed to keep 80 percent of tax revenue for five years.8 The ARMM received foreign support and grants for various socio-economic development related projects.

2001

Minimum Implementation

The Regional Economic and Development Planning Board was not created in 2001. The ARMM was allowed to keep 80 percent of tax revenue for five years.9 

2002

Minimum Implementation

The Regional Economic and Development Planning Board was not created in 2002. There were no reports of newly established Islamic banks in the region. The ARMM did receive foreign support and grants for various socio-economic development related projects.

2003

Intermediate Implementation

In 2003 the ARMM Department of Trade and Industry called for the regional legislature to expedite the passage of the Regional Economic Zone Authority (REZA) bill in order to boost local and foreign investment through tax incentives and revenue holidays.10 On 15 August 2003, the regional assembly passed the RIZA law in accordance with the 1996 accord. The RIZA law provides the legal mechanism for the creation, operation, administration, and coordination of the special economic zones within the region.11 This also paved the way for the formulation of policies for various socio-economic development programs including the local tax code, and preferential rights over the exploration, development and utilization of natural resources in the autonomy area. 

  • 10. "Mindanao Region Calls for Rapid Passage of Bill to Boost Investment in Philippines," World Markets Analysis, January 10, 2003.
  • 11. "ARMM ecozone authority gets P13M," Alternate Forum for Research in Mindanao, accessed August 31, 2012, http://www.afrim.org.ph
2004

Intermediate Implementation

Following the establishment of the Regional Economic Zone Authority (REZA) in the ARMM region, there were no clear indications or reports that the organization carried out the specific reforms called for in the accord.

2005

Intermediate Implementation

In 2005, the Al-Amanah Islamic Bank was the only bank in the ARMM.12 The Regional Economic Zone Authority (REZA) was established, and the ARMM received large amounts of foreign support and grants for various socio-economic development related projects. Most of the broad reforms called for in the 1996 accord did not materialize.

  • 12. "Islamic Banking in East Asia-Growing but not without Challenges," Moody’s Global Banking 2008.