EN BANC

G.R. No. 132527. July 29, 2005.

COCONUT OIL REFINERS ASSOCIATION, INC. represented by its President, JESUS L. ARRANZA, PHILIPPINE ASSOCIATION OF MEAT PROCESSORS, INC. (PAMPI),represented by its Secretary, ROMEO G. HIDALGO, FEDERATION OF FREE FARMERS (FFF),represented by its President, JEREMIAS U. MONTEMAYOR, and BUKLURAN NG MANGGAGAWANG PILIPINO (BMP),represented by its Chairperson, FELIMON C. LAGMAN, petitioners,vs.HON. RUBEN TORRES, in his capacity as Executive Secretary; BASES CONVERSION AND DEVELOPMENT AUTHORITY, CLARK DEVELOPMENT CORPORATION, SUBIC BAY METROPOLITAN AUTHORITY, 88 MART DUTY FREE, FREEPORT TRADERS, PX CLUB, AMERICAN HARDWARE, ROYAL DUTY FREE SHOPS, INC.,DFS SPORTS, ASIA PACIFIC, MCI DUTY FREE; DISTRIBUTOR CORP. (formerly MCI RESOURCES, CORP.),PARK & SHOP, DUTY FREE. COMMODITIES, L. FURNISHING, SHAMBURGH, SUBIC DFS, ARGAN TRADING CORP.,ASIPINE CORP.,BEST BUY, INC.,PX CLUB, CLARK TRADING, DEMAGUS TRADING CORP.,D.F.S. SPORTS UNLIMITED, INC.,DUTY FREE FIRST SUPERSTORE, INC.,FREEPORT, JC MALL DUTY FREE INC. (formerly 88 Mart Clark Duty Free Corp.),LILLY HILL CORP.,MARSHALL, PUREGOLD DUTY FREE, INC.,ROYAL DFS and ZAXXON PHILIPPINES, INC., respondents.

Sanidad Abaya Cortez Te Viterio Enriquez & Tan Law Firm for petitioners.

Arlyn D. Pangan for respondent SBFZ.

Government Corporate Counsel for BCDA and CDC.

Puno & Puno Law Office for Royal Duty Free Shops, Inc.

SYLLABUS

1. POLITICAL LAW; CONSTITUTIONAL LAW; STATUTES; MAY BE DECLARED UNCONSTITUTIONAL FOR CLEAR AND PALPABLE VIOLATION OF THE

2. ID.; ID.; ID.; REPUBLIC ACT NO. 7227 (

3. TAXATION; TAX EXEMPTIONS; TAX AND DUTY-FREE INCENTIVES BEING IN THE NATURE OF TAX EXEMPTIONS, THE BASIS THEREOF MUST BE CATEGORICALLY EXPRESSED FROM THE LANGUAGE OF THE STATUTE; CASE AT BAR. In the present case, while Section 12 of

4. POLITICAL LAW; CONSTITUTIONAL LAW; STATUTES;

5. ID.;ID.;BILL OF RIGHTS; EQUAL PROTECTION OF LAWS; NOT VIOLATED BY A LEGISLATION BASED ON A REASONABLE CLASSIFICATION; CLASSIFICATION, WHEN VALID. It is an established principle of constitutional law that the guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable classification. Classification, to be valid, must (1) rest on substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class.

6. ID.; ID.; STATUTES;

D E C I S I O N

AZCUNA, J p:

This is a Petition for Prohibition and Injunction seeking to enjoin and prohibit the Executive Branch, through the public respondents Ruben Torres in his capacity as Executive Secretary, the Bases Conversion and Development Authority (BCDA),the Clark Development Corporation (CDC) and the Subic Bay Metropolitan Authority (SBMA),from allowing, and the private respondents from continuing with, the operation of tax and duty-free shops located at the Subic Special Economic Zone (SSEZ) and the Clark Special Economic Zone (CSEZ),and to declare the following issuances as unconstitutional, illegal, and void:

1. Section 5 of dated April 3, 1993, regarding the CSEZ.

2.

3. Section 4 of BCDA Board Resolution No. 93-05-034, dated May 18, 1993, pertaining to the CSEZ.

Petitioners contend that the aforecited issuances are unconstitutional and void as they constitute executive lawmaking, and that they are contrary to and in violation of theSection 19, Article XII (prohibition of unfair competition and combinations in restraint of trade),and Section 12, Article XII (preferential use of Filipino labor, domestic materials and locally produced goods).

The facts are as follows:

On March 13, 1992,

SECTION 12. Subic Special Economic Zone.

xxx xxx xxx

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.

xxx xxx xxx

SECTION 15. Clark and Other Special Economic Zones. Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, located within the territorial jurisdiction of Angeles City, Municipalities of Mabalacat and Porac, Province of Pampanga and the Municipality of Capas, Province of Tarlac, in accordance with the policies as herein provided insofar as applicable to the Clark military reservations. CEIHcT

The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with such powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66 as amended.

The policies to govern and regulate the Clark Special Economic Zone shall be determined upon consultation with the inhabitants of the local government units directly affected which shall be conducted within six (6) months upon approval of this

Similarly, subject to the concurrence by resolution of the local government units directly affected, the President shall create other Special Economic Zones, in the base areas of Wallace Air Station in San Fernando, La Union (excluding areas designated for communications, advance warning and radar requirements of the Philippine Air Force to be determined by the Conversion Authority) and Camp

Upon recommendation of the Conversion Authority, the President is likewise authorized to create Special Economic Zones covering the Municipalities of Morong, Hermosa, Dinalupihan, Castillejos and San Marcelino.

On April 3, 1993, President Fidel V. Ramos issued

SECTION 5. Investments Climate in the CSEZ. Pursuant to Section 5(m) and Section 15 of

Among others, the CSEZ shall have all the applicable incentives in the Subic Special Economic and Free Port Zone under

The CSEZ Main Zone covering the Clark Air Base proper shall have all the aforecited investment incentives, while the CSEZ Sub-Zone covering the rest of the CSEZ shall have limited incentives. The full incentives in the Clark SEZ Main Zone and the limited incentives in the Clark SEZ Sub-Zone shall be determined by the BCDA.

Pursuant to the directive under

Section 4.SPECIFIC INCENTIVES IN THE CSEZ MAIN ZONE. The CSEZ-registered enterprises/businesses shall be entitled to all the incentives available under

I. As in Subic Economic and Free Port Zone:

A. ustoms:

xxx xxx xxx

4. Tax and duty-free purchase and consumption of goods/articles (duty free shopping) within the CSEZ Main Zone.

5. For individuals, duty-free consumer goods may be brought out of the CSEZ Main Zone into the Philippine Customs territory but not to exceed US$200.00 per month per CDC-registered person, similar to the limits imposed in the Subic SEZ. This privilege shall be enjoyed only once a month. Any excess shall be levied taxes and duties by the Bureau of Customs.

On June 10, 1993, the President issued Executive Order No. 97, "Clarifying the Tax and Duty Free Incentive Within the Subic Special Economic Zone Pursuant to

SECTION 1. On Import Taxes and Duties Tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought in by business enterprises into the SSEZ. Except for these items, importations of other goods into the SSEZ, whether by business enterprises or resident individuals, are subject to taxes and duties under relevant Philippine laws. TSEcAD

The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the Philippine territory shall be subject to duties and taxes under relevant Philippine laws.

Nine days after, on June 19, 1993,

SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone:

1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.

1.2. Residents of the SSEFPZ living outside the Secured Area can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, these residents can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$100 per month per person. Only residents age 15 and over are entitled to this privilege.

1.3. Filipinos not residing within the SSEFPZ can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, they can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this privilege. CcAHEI

Petitioners assail the $100 monthly and $200 yearly tax-free shopping privileges granted by the aforecited provisions respectively to SSEZ residents living outside the Secured Area of the SSEZ and to Filipinos aged 15 and over residing outside the SSEZ.

On February 23, 1998, petitioners thus filed the instant petition, seeking the declaration of nullity of the assailed issuances on the following grounds:

I.

II.

III.

IV.

THE CONTINUED IMPLEMENTATION OF THE CHALLENGED ISSUANCES IF NOT RESTRAINED WILL CONTINUE TO CAUSE PETITIONERS TO SUFFER GRAVE AND IRREPARABLE INJURY.

In their Comments, respondents point out procedural issues, alleging lack of petitioners' legal standing, the unreasonable delay in the filing of the petition, laches, and the propriety of the remedy of prohibition. cCTAIE

Anent the claim on lack of legal standing, respondents argue that petitioners, being mere suppliers of the local retailers operating outside the special economic zones, do not stand to suffer direct injury in the enforcement of the issuances being assailed herein. Assuming this is true, this Court has nevertheless held that in cases of paramount importance where serious constitutional questions are involved, the standing requirements may be relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review.

In the same vein, with respect to the other alleged procedural flaws, even assuming the existence of such defects, this Court, in the exercise of its discretion, brushes aside these technicalities and takes cognizance of the petition considering the importance to the public of the present case and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the

Now, on the constitutional arguments raised:

As this Court enters upon the task of passing on the validity of an This presumption is rooted in the doctrine of separation of powers which enjoins upon the three coordinate departments of the Government a becoming courtesy for each other's acts. Hence, to doubt is to sustain. The theory is that before the This Court, however, may declare a law, or portions thereof, unconstitutional where a petitioner has shown a clear and unequivocal breach of the In other words, before a statute or a portion thereof may be declared unconstitutional, it must be shown that the statute or issuance violates the

The Issue on Executive Legislation

Petitioners claim that the assailed issuances (

(1) [

(2) It provides that any exportation or removal of goods from the territory of the Subic Special Economic Zone to other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.

Anent the first alleged limitation, petitioners contend that the wording of

A careful reading of Section 12 ofSection 12 of the cited law is partly reproduced, as follows:

SECTION 12.Subic Special Economic Zone.

xxx xxx xxx

The abovementioned zone shall be subject to the following policies:

xxx xxx xxx

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importation of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines

While it is true that Section 12 (b) of

In the present case, there appears to be no logic in following the narrow interpretation petitioners urge. To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the "free flow of goods or capital within, into, and out of the zones" is insured.

The phrase "tax and duty-free importations of raw materials, capital and equipment" was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of

Furthermore, said legal maxim should be applied only as a means of discovering legislative intent which is not otherwise manifest, and should not be permitted to defeat the plainly indicated purpose of the Legislature.

The records of the Senate containing the discussion of the concept of "special economic zone" in Section 12 (a) ofwhich satisfy the needs of the zone and are consumed there are not subject to duties and taxes in accordance with Philippine laws, thus:

Senator Guingona....The concept of Special Economic Zone is one that really includes the concept of a free port, but it is broader. While a free port is necessarily included in the Special Economic Zone, the reverse is not true that a free port would include a special economic zone. CADSHI

Special Economic Zone, Mr. President, would include not only the incoming and outgoing of vessels, duty-free and tax-free, but it would involve also tourism, servicing, financing and all the appurtenances of an investment center. So, that is the concept, Mr. President. It is broader. It includes the free port concept and would cater to the greater needs of Olongapo City, Subic Bay and the surrounding municipalities.

Senator Enrile.May I know then if a factory located within the jurisdiction of Morong, Bataan that was originally a part of the Subic Naval reservation, be entitled to a free port treatment or just a special economic zone treatment?

Senator Guingona.As far as the goods required for manufacture is concerned, Mr. President, it would have privileges of duty-free and tax-free. But in addition, the Special Economic Zone could embrace the needs of tourism, could embrace the needs of servicing, could embrace the needs of financing and other investment aspects.

Senator Enrile.When a hotel is constructed, Mr. President, in this geographical unit which we call a special economic zone, will the goods entering to be consumed by the customers or guests of the hotel be subject to duties? ECaITc

Senator Guingona.That is the concept that we are crafting, Mr. President.

Senator Enrile.No. I am asking whether those goods will be duty-free, because it is constructed within a free port.

Senator Guingona.For as long as it services the needs of the Special Economic Zone, yes.

Senator Enrile.For as long as the goods remain within the zone, whether we call it an economic zone or a free port, for as long as we say in this law that all goods entering this particular territory will be duty-free and tax-free, for as long as they remain there, consumed there or reexported or destroyed in that place, then they are not subject to the duties and taxes in accordance with the laws of the Philippines?

Senator Guingona.Yes.

Petitioners rely on Committee Report No. 1206 submitted by the Ad Hoc Oversight Committee on Bases Conversion on June 26, 1995. Petitioners put emphasis on the report's finding that the setting up of duty-free stores never figured in the minds of the authors of AECacS

The Court is not persuaded. Indeed, it is well-established that opinions expressed in the debates and proceedings of the Legislature, steps taken in the enactment of a law, or the history of the passage of the law through the Legislature, may be resorted to as aids in the interpretation of a statute with a doubtful meaning. Petitioners' posture, however, overlooks the fact that the 1995 Committee Report they are referring to came into being well after the enactment of

Section 12 of

SEC. 12.Subic Special Economic Zone ...

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of thecommercial,financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments.

The aforecited policy was mentioned as a basis for the issuance of

WHEREAS,

WHEREAS, a special tax and duty-free privilege within a Secured Area in the SSEFPZ subject, to existing laws has been determined necessary to attract local and foreign visitors to the zone.

ATDHSC

The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 ofthe Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments." (Emphasis supplied.)

However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of ,allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of.Said Section clearly provides that "exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines."

On the other hand, insofar as the CSEZ is concerned, the case for an invalid exercise of executive legislation is tenable.

In , this Court resolved an issue, very much like the one herein, concerning the legality of the tax exemption benefits given to the John Hay Economic Zone under

In that case, among the arguments raised was that the granting of tax exemptions to

This Court sustained the argument and ruled that the incentives under

More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislature, unless limited by a provision of a state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the

The challenged grant of tax exemption would circumvent the STaIHc

Contrary to public respondents' suggestions, the claimed statutory exemption of the John, Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken. Tax exemption cannot be implied as it must be categorically and unmistakably expressed.

If it were the intent of the legislature to grant to

In the present case, while Section 12 of

Petitioners also contend that the questioned issuances constitute executive legislation for allowing the removal of consumer goods and items from one zone without payment of corresponding duties and taxes in violation or

On September 26, 1997,

SECTION 3. Special Shopping Privileges Granted During the Year-round Centennial Anniversary Celebration in 1998. Upon effectivity of this Order and up to the Centennial Year 1998, in addition to the permanent residents, locators and employees of the fenced-in areas of the until 31 December 1998.Domestic tourists visiting Subic and Clark shall be allowed a shopping privilege of US$25 for consumable goods which shall be consumed only in the fenced-in area during their visit therein.

SECTION 4. Grant of Duty Free Shopping Privileges Limited Only To Individuals Allowed by Law. Starting 1 January 1999, only the following persons shall continue to be eligible to shop in duty free shops/outlets with their corresponding purchase limits:

a. Tourists and Filipinos traveling to or returning from foreign destinations under

b. Overseas Filipino Workers (OFWs) and Balikbayans defined under

c. Residents, eighteen (18) years old and above, of the fenced-in areas of the freeports under as long as these are for consumption within these freeports.

The term "Residents" mentioned in item c above shall refer to individuals who, by virtue of domicile or employment, reside on permanent basis within the freeport area. The term excludes (1) non-residents who have entered into short- or long-term property lease inside the freeport, (2) outsiders engaged in doing business within the freeport, and (3) members of private clubs (e.g.,yacht and golf clubs) based or located within the freeport. In this regard, duty free privileges granted to any of the above individuals (e.g.,unlimited shopping privilege, tax-free importation of cars, etc.) are hereby revoked.

A perusal of the above provisions indicates that effective January 1, 1999, the grant of duty-free shopping privileges to domestic tourists and to residents living adjacent to SSEZ and the CSEZ had been revoked. Residents of the fenced-in area of the free port are still allowed unlimited purchase of consumer goods, "as long as these are for consumption within these freeports." Hence, the only individuals allowed by law to shop in the duty-free outlets and remove consumer goods out of the free ports tax-free are tourists and Filipinos traveling to or returning from foreign destinations, and Overseas Filipino Workers and Balikbayans as defined under

Subsequently, on October 20, 2000,

It bears noting at this point that the shopping privileges currently being enjoyed by Overseas Filipino Workers, Balikbayans, and tourists traveling to and from foreign destinations, draw authority not from the issuances being assailed herein, but from and

From the foregoing, it appears that petitioners' objection to the allowance of tax-free removal of goods from the special economic zones as previously authorized by the questioned issuances has become moot and academic.

In any event,

Thus, the removal of goods from the SSEZ to other parts of the Philippine territory without payment of said customs duties and taxes is not authorized by the paragraphs 1.2 and 1.3, Section 1 of

1.2. Residents of the SSEFPZ living outside the Secured Area can enter and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, these residents can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US $100 per month per person.Only residents age 15 and over are entitled to this privilege.

1.3 Filipinos not residing within the SSEFPZ can enter the Secured Area and consume any quantity of consumption items in hotels and restaurants within the Secured Area. However, they can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US $200 per year per person.Only Filipinos age 15 and over are entitled to this privilege.

A similar provision found in paragraph 5, Section 4(A) of BCDA Board Resolution No. 93-05-034 is also null and void. Said Resolution applied the incentives given to the SSEZ under

Having concluded earlier that the CSEZ is excluded from the tax and duty-free incentives provided under SATDEI

Equal Protection of the Laws

Petitioners argue that the assailed issuance (Section 1, Article III of the

Petitioners' contention cannot be sustained. It is an established principle of constitutional law that the guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable classification. Classification, to be valid, must (1) rest on substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class.

Applying the foregoing test to the present case, this Court finds no violation of the right to equal protection of the laws. First,contrary to petitioners' claim, substantial distinctions lie between the establishments inside and outside the zone, justifying the difference in their treatment. In , the constitutionality of

Upholding the constitutionality of

Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called "secured area" and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even more important, at this time the business activities outside the "secured area" are not likely to have any impact in achieving the purpose of the law, which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and incentives accorded in

It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As long as there are actual and material differences between territories, there is no violation of the constitutional clause. And of course, anyone, including the petitioners, possessing the requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free port zone.

The Court in found real and substantial distinctions between residents within the secured area and those living within the economic zone but outside the fenced-off area. Similarly, real and substantial differences exist between the establishments herein involved. A significant distinction between the two groups is that enterprises outside the zones maintain their businesses within Philippine customs territory, while private respondents and the other duly-registered zone enterprises operate within the so-called "separate customs territory." To grant the same tax incentives given to enterprises within the zones to businesses operating outside the zones, as petitioners insist, would clearly defeat the statute's intent to carve a territory out of the military reservations in Subic Bay where free flow of goods and capital is maintained.

The classification is germane to the purpose of, the real concern of

The classification, moreover, is not limited to the existing conditions when the law was promulgated, but to future conditions as well, inasmuch as the law envisioned the former military reservation to ultimately develop into a self-sustaining investment center.

And, lastly, the classification applies equally to all retailers found within the "secured area." As ruled in ,the individuals and businesses within the "secured area," being in like circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. They are all similarly treated, both in privileges granted and in obligations required.

With all the four requisites for a reasonable classification present, there is no ground to invalidate

Prohibition against Unfair Competition
and Practices in Restraint of Trade

Petitioners next argue that the grant of special tax exemptions and privileges gave the private respondents undue advantage over local enterprises which do not operate inside the SSEZ, thereby creating unfair competition in violation of the constitutional prohibition against unfair competition and practices in restraint of trade.

The argument is without merit. Just how the assailed issuance is violative of the prohibition against unfair competition and practices in restraint of trade is not clearly explained in the petition.

Suffice it to say that Congress had justifiable reasons in granting incentives to the private respondents, in accordance with

Preferential Use of Filipino Labor, Domestic Materials
and Locally Produced Goods

Lastly, petitioners claim that the questioned issuance (

Again, the argument lacks merit. This Court notes that petitioners failed to substantiate their sweeping conclusion that the issuance has violated the State policy of giving preference to Filipino goods and labor. The mere fact that said issuance authorizes the importation and trade of foreign goods does not suffice to declare it unconstitutional on this ground.

Petitioners cite which, however, does not apply. That case dealt with the policy enunciated under the second paragraph of Section 10, Article XII of the applicable to the grant of rights, privileges, and concessions "covering the national economy and patrimony," which is different from the policy invoked in this petition, specifically that of giving preference to Filipino materials and labor found under Section 12 of the same Article of the

In , this Court elaborated on the meaning of Section 12, Article XII of the

While theunfair.

This Court notes that the Executive Department, with its subsequent issuance of Executive Order Nos. 444 and 303, has provided certain measures to prevent unfair competition. In particular, Executive Order Nos. 444 and 303 have restricted the special shopping privileges to certain individuals. and imposed sanctions to curb abuses of duty-free privileges. With these measures, this Court finds no reason to strike down

WHEREFORE, the petition is PARTLY GRANTED. Section 5 of

No costs.

SO ORDERED.

Davide, Jr.,C.J.,Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Carpio Morales, Callejo, Sr.,Tinga, Chico-Nazario and Garcia, JJ., concur.

Carpio, J., took no part. EO No. 97A was referred to me when I was Chief President Legal Adviser.

Corona, J.,is on official leave.

Footnotes

1.

2. BCDA Board Resolution No. 93-05-034 is entitled, "Prescribing the Investment Climate in the Clark Special Economic Zone for Implementation by the Clark Development Corporation."

3.

4. Underscoring supplied.

5. Rollo,pp. 13, 15, 17, and 18.

6. ,G.R. No. 138570, October 10, 2000, 342 SCRA 449, citing ,G.R. No. 113375, May 5, 1994, 232 SCRA 110.

7. ,G.R. Nos. 100318, 100417, and 100420, July 30, 1991, 199 SCRA 750.

8. ,G.R. No. 91649, May 14, 1991, 197 SCRA 52.

9. ,G.R. Nos. 146319 and 146342, October 26, 2001, 368 SCRA 453.

10. ,G.R. No. 78742, July 14, 1989, 175 SCRA 343.

11. ,supra,note 9.

12. ,G.R. No. 83341, January 30, 1990, 181 SCRA 648.

13. Underscoring supplied.

14. ,G.R. No. 109404, January 22, 1996, 252 SCRA 106.

15. ,No. 32441, March 29, 1930, 54 Phil. 726.

16. ,G.R. No. 96859, October 15, 1991, 202 SCRA 779; ,G.R. Nos. 48468-69, November 22, 1989, 179 SCRA 542.

17. Emphasis supplied.

18. ,G.R. No. 28508-9, July 7, 1989, 175 SCRA 149.

19. Emphasis supplied.

20. G.R. No. 119775, October 24, 2003, 414 SCRA 356.

21. Section 28(4), Article VI of the

22. Supra,note 20, at 377.

23. Underscoring supplied.

24.

25.

"SEC. 1. The Ministry of Tourism, through the Philippine Tourism Authority (PTA) is hereby authorized to establish a duty and tax free merchandising system in the Philippines to augment the service facilities for tourists and to generate foreign exchange and revenue for the government. Under this system, the Philippine Tourism Authority shall have the exclusive authority to operate stores and shops that would sell, among others, tax and duty free merchandise, goods and articles, in international airports and sea ports throughout the country in accordance with the rules and regulations issued by the Ministry of Tourism."

26. Italics supplied.

27. ,G.R. No. 45987, May 5, 1939, 68 Phil. 12.

28. ,G.R. No. 127410, January 20, 1999, 301 SCRA 278.

29. Ibid.

30. Id.at 291.

31.

32. Sec. 10, Art. XII, provides that:

xxx xxx xxx

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. ...

33.

34. Id.at 58-59.

35.

36.

37.