AMENDING REPUBLIC ACT NUMBERED FOUR THOUSAND EIGHT HUNDRED SIXTY, AS AMENDED (RE FOREIGN BORROWING ACT)

WHEREAS, there are indications from international financial
organizations about future changes in their lending policies aimed at
increasing the financing of local costs of certain projects; and

WHEREAS, experience has shown the need for flexibility in
tapping foreign sources of funding;

NOW, THEREFORE, I, FERDINAND E. MARCOS, Commander-in-Chief
of all the Armed Forces of the Philippines, pursuant to Proclamation No.
1104, dated January 17, 1973, and General Order No. 1, as amended,
dated September 22, 1972, and in order to assure a sustained and
accelerated implementation of our development program, do hereby order
to amend further certain sections of Republic Act Number Four Thousand
Eight Hundred Sixty, as amended, and to adopt this Decree as part of the
law of the land.

SECTION 1. Section 1, of Republic Act Numbered Four
Thousand Eight Hundred Sixty, as amended, is further amended to read as
follows:

“SECTION 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, and to enter into and conclude bilateral agreements
involving other forms of official assistance such as grants and
commodity credit 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 or 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 and Development Authority and approved by the President of the
Philippines: Provided, That at least seventy-five percent 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 peso costs of the project
including 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 ecological 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 peso costs of the project including
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 including 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 the total authorized borrowing for relending to the
private sector shall be allocated by the National Economic and
Development Authority such that a proper balance of allocation is
attained among the industrial, public utility, and agricultural
projects: Provided, finally, That industrial and public utility
projects shall respectively, be approved by the Board of Investments
and the pertinent specialized regulatory boards and that agricultural
projects shall be recommended by the Department of Agriculture and
Natural Resources and shall be duly approved by the National Economic
and Development Authority.

“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 institutions, is 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 on 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 market the income from which
shall be fully tax exempt in the Philippines.

SEC. 2. A new section to be known as Section 4-A is hereby
inserted into the same Act to read as follows:

“SEC. 4-A. Upon the recommendation of the Secretary of
Finance, in consultation with the National Economic and Development
Authority and approval of the President of the Philippines, loan
agreements, as well as contracts involving the availment of or
utilization of the proceeds of loans, credits or indebtedness obtained
under the provisions of this Act, may provide for the exemption from
taxes, charges, or other levies.”

SEC. 3. Any provision of Republic Act Numbered Four Thousand
Eight Hundred Sixty, as amended, and other pertinent laws which are
inconsistent with this Decree are hereby modified or repealed
accordingly.

SEC. 4. This Decree shall take effect immediately.

Done in the City of Manila, this 13th day of March, in the
year of Our Lord, nineteen hundred and seventy-three.