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

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 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:

1. Sixty per centum shall be for industrial and public utility projects which
   are approved by the Board of Investments or their corresponding Boards; and
2. 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.”

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.”

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.”

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.”

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.”

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.”

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).”

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 Section 6-A of the same Act is hereby repealed.

SEC. 9. Any provision of law, executive orders, rules and
regulations inconsistent with this Decree are hereby repealed or modified
accordingly.

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