Republic of the Philippines


G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

Abraham C. La Vina for petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell Petroleum Corporation.


This is a petition to annul and set aside the decision of the Board of Investments (BOI)/Department of Trade and Industry (DTI) approving the transfer of the site of the proposed petrochemical plant from Bataan to Batangas and the shift of feedstock for that plant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman Enrique T. Garcia v. the Board of Investments", September 7, 1989, where this Court issued a decision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board of Investments is ordered: (1) to publish the amended application for registration of the Bataan Petrochemical Corporation, (2) to allow the petitioner to have access to its records on the original and amended applications for registration, as a petrochemical manufacturer, of the respondent Bataan Petrochemical Corporation, excluding, however, privileged papers containing its trade secrets and other business and financial information, and (3) to set for hearing the petitioner's opposition to the amended application in order that he may present at such hearing all the evidence in his possession in support of his opposition to the transfer of the site of the BPC petrochemical plant to Batangas province. The hearing shall not exceed a period of ten (10) days from the date fixed by the BOI, notice of which should be served by personal service to the petitioner through counsel, at least three (3) days in advance. The hearings may be held from day to day for a period of ten (10) days without postponements. The petition for a writ of prohibition or preliminary injunction is denied. No costs. (Rollo, pages 450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule on the import of P.D. Nos. 949 and 1803 and on the foreign investor's claim of right of final choice of plant site, in the light of the provisions of the Constitution and the Omnibus Investments Code of 1987, this Court on October 24, 1989, made the observation that P.D. Nos. 949 and 1803 "do not provide that the Limay site should be the only petrochemical zone in the country, nor prohibit the establishment of a petrochemical plant elsewhere in the country, that the establishment of a petrochemical plant in Batangas does not violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements and other circumstances surrounding its first choice of plant site may change it simply because it has the final choice on the matter. The Court merely ruled that the petitioner appears to have lost interest in the case by his failure to appear at the hearing that was set by the BOI after receipt of the decision, so he may be deemed to have waived the fruit of the judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we resolve the basic issue of whether or not the foreign investor has the right of final choice of plant site; that the non-attendance of the petitioner at the hearing was because the decision was not yet final and executory; and that the petitioner had not therefor waived the right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of final choice" of plant site? Neither under the 1987 Constitution nor in the Omnibus Investments Code is there such a 'right of final choice.' In the first place, the investor's choice is subject to processing and approval or disapproval by the BOI (Art. 7, Chapter II, Omnibus Investments Code). By submitting its application and amended application to the BOI for approval, the investor recognizes the sovereign prerogative of our Government, through the BOI, to approve or disapprove the same after determining whether its proposed project will be feasible, desirable and beneficial to our country. By asking that his opposition to the LPC's amended application be heard by the BOI, the petitioner likewise acknowledges that the BOI, not the investor, has the last word or the "final choice" on the matter.

Secondly, as this case has shown, even a choice that had been approved by the BOI may not be 'final', for supervening circumstances and changes in the conditions of a place may dictate a corresponding change in the choice of plant site in order that the project will not fail. After all, our country will benefit only when a project succeeds, not when it fails. (Rollo, pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and this ponente voted to grant the motion for reconsideration stating that the hearing set by the BOI was premature as the decision of the Court was not yet final and executory; that as contended by the petitioner the Court must first rule on whether or not the investor has the right of final choice of plant site for if the ruling is in the affirmative, the hearing would be a useless exercise; that in the October 19, 1989 resolution, the Court while upholding validity of the transfer of the plant site did not rule on the issue of who has the final choice; that they agree with the observation of the majority that "the investor has no final choice either under the 1987 Constitution or in the Omnibus Investments Code and that it is the BOI who decides for the government" and that the plea of the petitioner should be granted to give him the chance to show the justness of his claim and to enable the BOI to give a second hard look at the matter.

Thus, the herein petition which relies on the ruling of the Court in the resolution of January 17, 1990 in G.R. No. 88637 that the investor has no right of final choice under the 1987 Constitution and the Omnibus Investments Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located in Lamao, Limay, Bataan were reserved for the Petrochemical Industrial Zone under the administration, management, and ownership of the Philippine National Oil Company (PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation, located at Bataan. It produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical Corporation (BPC) and applied with BOI for registration as a new domestic producer of petrochemicals. Its application specified Bataan as the plant site. One of the terms and conditions for registration of the project was the use of "naphtha cracker" and "naphtha" as feedstock or fuel for its petrochemical plant. The petrochemical plant was to be a joint venture with PNOC. BPC was issued a certificate of registration on February 24, 1988 by BOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1) exemption from taxes on raw materials, (2) repatriation of the entire proceeds of liquidation investments in currency originally made and at the exchange rate obtaining at the time of repatriation; and (3) remittance of earnings on investments. As additional incentive, the House of Representatives approved a bill introduced by the petitioner eliminating the 48% ad valorem tax on naphtha if and when it is used as raw materials in the petrochemical plant. (G.R. No. 88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the major investor in BPC, personally delivered to Trade Secretary Jose Concepcion a letter dated January 25, 1989 advising him of BPC's desire to amend the original registration certification of its project by changing the job site from Limay, Bataan, to Batangas. The reason adduced for the transfer was the insurgency and unstable labor situation, and the presence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by the Philippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquino expressed her preference that the plant be established in Bataan in a conference with the Taiwanese investors, the Secretary of National Defense and The Chief of Staff of the Armed Forces.

Despite speeches in the Senate and House opposing the Transfer of the project to Batangas, BPC filed on April 11, 1989 its request for approval of the amendments. Its application is as follows: "(l) increasing the investment amount from US $220 million to US $320 million; (2) increasing the production capacity of its naphtha cracker, polythylene plant and polypropylene plant; (3) changing the feedstock from naphtha only to "naphtha and/or liquefied petroleum gas;" and (4) transferring the job site from Limay, Bataan, to Batangas. (Annex B to Petition; Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner addressed to Secretary Concepcion to be furnished a copy of the proposed amendment with its attachments which was denied by the BOI on May 25, 1989, BOI approved the revision of the registration of BPC's petrochemical project. (Petition, Annex F; Rollo, p. 32; See pp. 4 to 6, Decision in G.R. No. 88637; supra.)

BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways and Means of the Senate asserted that:

The BOI has taken a public position preferring Bataan over Batangas as the site of the petrochemical complex, as this would provide a better distribution of industries around the Metro Manila area. ... In advocating the choice of Bataan as the project site for the petrochemical complex, the BOI, however, made it clear, and I would like to repeat this that the BOI made it clear in its view that the BOI or the government for that matter could only recomend as to where the project should be located. The BOI recognizes and respect the principle that the final chouce is still with the proponent who would in the final analysis provide the funding or risk capital for the project. (Petition, P. 13; Annex D to the petition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in the present petition.

Section 1, Article VIII of the 1987 Constitution provides:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

There is before us an actual controversy whether the petrochemical plant should remain in Bataan or should be transferred to Batangas, and whether its feedstock originally of naphtha only should be changed to naphtha and/or liquefied petroleum gas as the approved amended application of the BPC, now Luzon Petrochemical Corporation (LPC), shows. And in the light of the categorical admission of the BOI that it is the investor who has the final choice of the site and the decision on the feedstock, whether or not it constitutes a grave abuse of discretion for the BOI to yield to the wishes of the investor, national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and determine the paramount issue. We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC agreed. That is why it organized itself into a corporation bearing the name Bataan. There is available 576 hectares of public land precisely reserved as the petrochemical zone in Limay, Bataan under P.D. No. 1803. There is no need to buy expensive real estate for the site unlike in the proposed transfer to Batangas. The site is the result of careful study long before any covetous interests intruded into the choice. The site is ideal. It is not unduly constricted and allows for expansion. The respondents have not shown nor reiterated that the alleged peace and order situation in Bataan or unstable labor situation warrant a transfer of the plant site to Batangas. Certainly, these were taken into account when the firm named itself Bataan Petrochemical Corporation. Moreover, the evidence proves the contrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces 60% of the national output of naphtha which can be used as feedstock for the plant in Bataan. It can provide the feedstock requirement of the plant. On the other hand, the country is short of LPG and there is need to import the same for use of the plant in Batangas. The local production thereof by Shell can hardly supply the needs of the consumers for cooking purposes. Scarce dollars will be diverted, unnecessarily, from vitally essential projects in order to feed the furnaces of the transferred petrochemical plant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the approval of Republic Act No. 6767 by President Aquino but excluding LPG from exemption from ad valorem tax. The law was enacted specifically for the petrochemical industry. The policy determination by both Congress and the President is clear. Neither BOI nor a foreign investor should disregard or contravene expressed policy by shifting the feedstock from naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State to "regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities." The development of a self-reliant and independent national economy effectively controlled by Filipinos is mandated in Section 19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the national economy in consonance with the principles and objectives of economic nationalism" is the set goal of government.

Fifth, with the admitted fact that the investor is raising the greater portion of the capital for the project from local sources by way of loan which led to the so-called "petroscam scandal", the capital requirements would be greatly minimized if LPC does not have to buy the land for the project and its feedstock shall be limited to naphtha which is certainly more economical, more readily available than LPG, and does not have to be imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the venture to the great benefit and advantage of the government which shall have a participation in the management of the project instead of a firm which is a huge multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan, practically nothing is shown to justify the transfer to Batangas except a near-absolute discretion given by BOI to investors not only to freely choose the site but to transfer it from their own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

x x x           x x x          x x x

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

xxx xxx xxx

Every provision of the Constitution on the national economy and patrimony is infused with the spirit of national interest. The non-alienation of natural resources, the State's full control over the development and utilization of our scarce resources, agreements with foreigners being based on real contributions to the economic growth and general welfare of the country and the regulation of foreign investments in accordance with national goals and priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be treated like a garment or embroidery firm, a shoe-making venture, or even an assembler of cars or manufacturer of computer chips, where the BOI reasoning may be accorded fuller faith and credit. The petrochemical industry is essential to the national interest. In other ASEAN countries like Indonesia and Malaysia, the government superintends the industry by controlling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors, among them:

(1) For an initial authorized capital of only P20 million, the Central Bank gave an eligible relending credit or relending facility worth US $50 million and a debt to swap arrangement for US $30 million or a total accommodation of US $80 million which at current exchange rates is around P2080 million.

(2) A major part of the company's capitalization shall not come from foreign sources but from loans, initially a Pl Billion syndicated loan, to be given by both government banks and a consortium of Philippine private banks or in common parlance, a case of 'guiniguisa sa sariling manteca.'

(3) Tax exemptions and privileges were given as part of its 'preferred pioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of the Asian Development Bank portfolio because of the petrochemical firm's massive loan request. (Taken from the proceedings before the Senate Blue Ribbon Committee).

but through its regulatory agency, the BOI, it surrenders even the power to make a company abide by its initial choice, a choice free from any suspicion of unscrupulous machinations and a choice which is undoubtedly in the best interests of the Filipino people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion in approving the transfer of the petrochemical plant from Bataan to Batangas and authorizing the change of feedstock from naphtha only to naphtha and/or LPG for the main reason that the final say is in the investor all other circumstances to the contrary notwithstanding. No cogent advantage to the government has been shown by this transfer. This is a repudiation of the independent policy of the government expressed in numerous laws and the Constitution to run its own affairs the way it deems best for the national interest.

One can but remember the words of a great Filipino leader who in part said he would not mind having a government run like hell by Filipinos than one subservient to foreign dictation. In this case, it is not even a foreign government but an ordinary investor whom the BOI allows to dictate what we shall do with our heritage.

WHEREFORE, the petition is hereby granted. The decision of the respondent Board of Investments approving the amendment of the certificate of registration of the Luzon Petrochemical Corporation on May 23, 1989 under its Resolution No. 193, Series of 1989, (Annex F to the Petition) is SET ASIDE as NULL and VOID. The original certificate of registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site and naphtha as the feedstock is, therefore, ordered maintained.


Cruz, Gancayco, Padilla, Bidin, Sarmiento and Medialdea, JJ., concur.

Fernan, C.J., Paras, JJ., took no part.

Feliciano, J., is on leave.


Separate Opinions


GRIÑO-AQUINO, J., dissenting Opinion:

This is the petitioner's second petition for certiorari and prohibition with application for a temporary restraining order or preliminary injunction against the respondents Board of Investments (BOI), Department of Trade and Industry (DTI), the Luzon Petrochemical Corporation (LPC), formerly Bataan Petrochemical Corporation, and Pilipinas Shell Corporation (SHELL) on the transfer of the LPC petrochemical plant site from Bataan to Batangas. The first case was docketed in this Court as G.R. No. 88637 and was decided on September 7, 1989. Consistent with my opinion in the first case, I vote once more to deny the petition.

The petitioner filed this second petition supposedly "upon the authority and strength" of this Court's statement in its Resolution of January 9, 1990 in G.R. No. 88637 that the foreign investor (LPC) does not have a right of final choice of plant site because its choice is subject to approval or disapproval by the BOI (p. 3, Rollo). Ergo, the BOI has the "final choice."

Petitioner contends that since the BOI had earlier approved Bataan as the plant site of the LPG petrochemical complex, and of "naphtha only" as the feedstock, that approval was "final" and may not be changed. Hence, the BOI allegedly abused its discretion: (1) in approving the transfer of the LPC's plant site from Bataan to Batangas (in spite of the BOI's initial preference for Bataan) "upon the false and unlawful thesis that the foreign investor has the right of final choice by plant site" (p. 13, Rollo), and (2) in allowing the LPC to shift feedstock from naphtha only, to naphtha and/or LPG, despite the disadvantages of using LPG. Petitioner prays the Court to annul the BOI's action and prohibit LPC from transferring its plant site to Batangas and shifting feedstock to naphtha and/ or LPG (p. 22, Rollo).

The petition is not well-taken. There is no provision in the 1987 Investments Code prohibiting the amendment of the investor's application for registration of its project, such as, in this case, its plant site, the feedstock to be used, and the capitalization of the project.

Neither does the law prohibit the BOI from approving the amended application.

Since the investor may amend its application and the BOI may approve or disapprove the amendments, when may the BOI be deemed to have made a "final choice" regarding those aspects of the project which have been changed?

Only the BOI or the Chief Executive is competent to answer that question, for the matter of choosing an appropriate site for the investor's project is a political and economic decision which, under our system of separation of powers, only the executive branch, as implementor of policy formulated by the legislature (in this case, the policy of encouraging and inviting foreign investments into our country), is empowered to make. It is not for this Court to determine what is, or should be, the BOI's "final choice" of plant site and feedstock, for, as we said in our decision in G.R. No. 88637:

This Court ... does not possess the necessary technology and scientific expertise to detail e whether the transfer of the proposed BPC (now LPC) petrochemical complex from Bataan to Batangas and the change of fuel from 'naphtha only to naphtha and/or LPG' will be best for the project and for our country. This Court is not about to delve into the economics and politics of this case. It is concerned simply with the alleged violation of due process and the alleged extra limitation of power and discretion on the part of the public respondents in approving the transfer of the project to Batangas without giving due notice and an opportunity to be heard to the vocal opponents of that move." (pp. 445-446, Rollo of G.R. No. 88637.)

Although we did say in our decision in G.R. No. 88637 that the BOI, not the foreign investor, has the right of "final choice" of plant site for the LPC project, the Court would be overstepping the bounds of its jurisdiction were it to usurp the prerogative of the BOI to make that choice or change it.

The petitioner's contention that the BOI abused its discretion in approving the transfer of the LPC plant site to Batangas because the BOI, in effect, yielded to the investor's choice, is not well taken. The record shows that the BOI approved the transfer because "the BOI recognizes the justification given by the proponent of the project (p. 30, Rollo). The fact that the petitioner disagrees with the BOI's decision does not make it wrong. The petitioner's recourse against the BOI's action is by an appeal to the President (Sec. 36, 1987 Investments Code), not to this Court.

This Court, in the exercise of its judicial power, may review and annul executive as well as legislative actions when they clash with the Constitution or with existing laws, or when any branch or instrumentality of the Government has acted with grave abuse of discretion amounting to lack or excess of jurisdiction (Sec. 1, Art. VIII, 1987 Constitution) but the Court may not do more than that. It may not make the decisions that the executive should have made nor pass the laws that the legislature should have passed. Not even the much publicized "petroscam" involving the financial arrangements (not the issue in this case) for the LPC project would justify the intervention of this court in a matter that pertains to the exclusive domain of the executive department. The court does not have a panacea for all the ills that afflict our country nor a solution for every problem that besets it.

Did the BOI gravely abuse its discretion in approving the LPC's amended application for registration of its petrochemical project to warrant the intervention of this Court? Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Abad Santos vs. Prov. of Tarlac, 67 Phil. 480; Alafriz vs. Nable, 70 Phil. 278).

In light of the LPC's justifications for the transfer of its project site and the shift from one kind of feedstock to two, we are not prepared to hold that the BOI's decision to approve the changes was the product of a capricious and arbitrary exercise of judgment on its part, despite the seemingly impressive arguments of the petitioner showing the advantages of establishing the petrochemical plant in Bataan and of using naphtha only as feedstock. We are not prepared to substitute the judgment of the BOI on this matter with one crafted by this Court.

With regard to the scandalously liberal financial accommodations that local banks have allegedly agreed to grant to the LPC (the so-called "petroscam") to enable it to raise a major part of its capital requirements from local sources (hence, a betrayal of the people's expectation that foreign investors will bring in foreign exchange to finance their projects in this country) it is significant that the petitioner has not led an outcry for the disapproval and cancellation of the project on this score. Apparently, the petitioner is not seriously disturbed by the moral implications of the "scam" provided the petrochemical plant is set up in Bataan.

The decision of the BOI to allow the transfer of the LPC petrochemical project to Batangas and shift feedstock from naphtha only to naphtha and/or LPG, may appear to the petitioner to be extremely unwise and inadvisable, but the Court may not, for that reason annul the BOI's action or prohibit it from acting on a matter that lies within its particular sphere of competence, for the Court is not a judge of the wisdom and soundness of the actions of the two other co-equal branches of the Government, but only of their legality and constitutionality.

WHEREFORE, I vote to deny the petition for certiorari and prohibition for lack of merit.

Melencio-Herrera, Narvasa and Regalado, JJ., concur.

MELENCIO-HERRERA, J., dissenting:

Consistent with my dissent in G.R. No. 88637, the first petition, I concur in the dissent herein of Mme. Justice Aquino and merely wish to add that in its Decision, the majority has actually imposed its own views on matters falling within the competence of a policy-making body of the Government. It decided upon the wisdom of the transfer of the site of the proposed project (pp. 8-9); the reasonableness of the feedstock to be used (pp. 8-9); the undesirability of the capitalization aspect of the project (p. 10), and injected its own concept of the national interest as regards the establishment of a basic industry of strategic importance to the country (p. 13).

It is true that the judicial power embodied in Article VIII of the 1987 Constitution speaks of the duty of Courts of justice to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. By no means, however, does it vest in the Courts the power to enter the realm of policy considerations under the guise of the commission of grave abuse of discretion.

But this is exactly what the majority Decision has resulted in. It has made a sweeping policy determination and has unwittingly transformed itself into what might be termed a "government by the Judiciary," something never intended by the framers of the Constitution when they provided for separation of powers among the three co-equal branches of government and excluded the Judiciary from policy-making.

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