Requesting Entity: Department of Trade and Industry

Issues Concern: Request for Exemption of the PCs for Public Schools Project – Phase 2 from the Filipino Ownership/Equity Requirement Provided under Executive Order No. 40, Series of 2001 (E.O. 40) and its Implementing Rules and Regulations (IRR)


Please be informed that Republic Act No. 5183 (“R.A. 5183”) provides for an exemption from the 60/40 Filipino ownership/equity requirement under Section 1 thereof.

We also wish to inform you that Section 23.11.1 of the draft Implementing Rules and Regulations (“IRR”) of Republic Act No. 9184 (“R.A. 9184”), otherwise known as the “Government Procurement Reform Act,” also provides for an exemption, in particular:

However, when the goods sought to be procured are not available from local sources, as provided in this Section, at the prescribed minimum specifications of the appropriate Government authority and/or ABC of the procuring entity, as certified by the head of the procuring entity, or when there is a need to prevent situations that defeat competition or restrain trade, the said procuring entity may invite foreign suppliers, manufacturers and/or distributors to participate in the procurement of the said goods. The GPPB shall promulgate the necessary guidelines for this provision.

Based on the above provisions, considering that the IRR of R.A. 9184 has not yet been officially issued by the President, and considering further that the bidding for PCPS2 was conducted during the effectivity of E.O. 40, we believe that the exemption provided in the IRR of R.A. 9184 may not be availed of by your agency. Moreover, considering that R.A. 5183 only provides for an exemption under the principle of reciprocity, we believe that it is not applicable as well to the bidding under consideration.

We note, however, that an earlier letter was issued by your agency to our office pertaining to the same subject matter. We refer to the letter from the office of Assistant Secretary Armin B. Raquel-Santos of the Department of Trade and Industry, dated July 16, 2003. In the said letter, an assertion was made that the PCPS2 is a foreign funded project.

In view of the foregoing, based upon the above representation that PCPS2 is a foreign funded project, and upon the assumption that the funding for the said project is contained in an agreement that provides for its own procurement procedures, it could be argued that the provisions of E.O. 40 and its IRR may not be applicable, applying Section 1.2 thereof, which provides as follows:

1.2. For procurement financed wholly or partly from Official Development Assistance (ODA) funds from International Funding Institutions (IFIs), as well as from bilateral and other sources, the corresponding loan/grant agreement governing said funds as negotiated and agreed upon by and between the Government and the concerned IFI shall be observed.

In this regard, if Section 1.2 of the IRR of E.O. 40 were to be adopted, the 60/40 nationality requirement for public biddings embodied therein would then not be applicable.