(NAR) VOL. 11 NOS.

1-4 / JANUARY – MARCH 2000

[ DENR ADMINISTRATIVE ORDER NO. 99-53, December

23, 1999 ]
REGULATIONS GOVERNING THE INTEGRATED FOREST
MANAGEMENT PROGRAM (IFMP)

Pursuant to PD 705 of 1975, as amended, EO 725 dated September 9, 1981, EO 278

dated July 25, 1987, EO 192 dated June 10, 1987 and EO 292 dated July 25, 1987 and
Sec. 2, Art. XII of the 1987 Constitution, the following regulations governing the
Integrated Forest Management Program (IFMP), are hereby promulgated.

CHAPTER I

TITLE, POLICIES, OBJECTIVES AND DEFINITION OF TERMS

Section 1. Title . — This Administrative Order shall be known as the "Regulation on the
Integrated Forest Management Program".

Sec. 2. Policies and Objectives . — These regulations are in pursuance of the policies of
the State which are:

(a) The protection and advancement of the right of people to a balanced and healthful
environment;

(b) The equitable distribution of opportunities, income and wealth, sustained increase in
the amount of goods and services produced by the nation for the benefit of the people,
and an expanding productivity from natural resources as keys to uplift the quality of life;
and

(c) The promotion of industrialization and creation of employment opportunities based on

sound resource development through industries that make full and efficient use of human
and natural resources.

The objectives of these regulations are:

(a) To attain a balanced, productive, and efficiently functioning forest ecosystem through
the sustainable management of forests and the rehabilitation of degraded forestlands;
(b) To ensure a continuous supply of wood and non-wood products for the country by
encouraging all sectors to engage in the development of industrial forest plantations; and

(c) To improve the economic well-being of upland people and communities dependent on
forest resources by ensuring equitable opportunities and access to forest resources.

Sec. 3. Definition of Terms . — The following terms are to be understood and

interpreted, as follows:

(a) Ancestral Domain — subject to property rights existing and/or vested upon effectivity
of the Indigenous Peoples Rights Act of 1997, refers to areas generally belonging to
indigenous cultural communities/indigenous peoples comprising lands, inland waters,
coastal areas, and natural resources therein, held under a claim of ownership, occupied or
possessed by them, by themselves or through their ancestors, communally or
individually, since time immemorial, continuously to the present except when interrupted
by war, force majeure, or displaced by force, deceit or stealth or as a consequence of
government projects or any other voluntary dealings between the government and private
individuals/corporations.

(b) Annual Allowable Harvest — refers to the amount or volume of materials, whether of
timber, non-timber or other forest products, authorized by the government to be harvested
within each year from the forests.

(c) Basal Area — the sum of the outside bark cross-sectional area at breast height or
above buttress, as the case may be, of all trees in a given forest area.

(d) Brushlands — refer to areas characterized by discontinuous cover of shrubby and

non-wood vegetation including grasses usually as a result of repeated clearing and
burning of the then forest cover.

(e) Buffer Strips — refer to areas with a specified width usually of natural vegetation
serving as protective borders of streams or bodies of water or as boundaries between
management units (blocks or compartments) of the forest plantations.

(f) CENRO — refers to Community Environment and Natural Resources Office.

(g) Commercial Species — refer to all tree species in the categories of Premium,
Common, Construction and Furniture and Light Hardwoods, and Softwoods.

(h) Comprehensive Development and Management Plan (CDMP) — a long-term plan

prepared and submitted by an IFMA holder to, and for the approval by, the DENR which,
among others, indicates the series of sequential or simultaneous undertakings and their
schedules, in developing and managing the IFMA area, including the harvesting and
utilization of the products thereof.

(i) Degraded Residual Natural Forest — refers to a severely disturbed natural forest of
whatever cause with a basal area of less than five (5) square meters per hectare of all
commercial tree species, with dbh/dab of less than 65 centimeters.

(j) DENR — refers to the Department of Environment and Natural Resources.

(k) Ecosystem or ecological system — refers to the community of living organisms and
the non-living environment dynamically and harmoniously functioning together in a
given area.

(l) Environmental Compliance Certificate (ECC) — refers to the document issued by the
Department certifying that a proposed project or undertaking in an environmentally
critical or non-critical area, as evaluated through the processes of an EIA or IEE, will not
bring about an unacceptable environmental impact and that the proponent has complied
with the requirements of the environmental impact statement (EIS) system.

(m) Environmental Impact Assessment (EIA) — refers to the process of predicting the
likely environmental consequences of implementing a project or undertaking and
designing the appropriate preventive, mitigating or enhancement measures.

(n) FMB — refers to the Forest Management Bureau

(o) Forest — refers to either natural vegetation or plantation of crops mainly of trees, or
both, occupying a definable, uninterrupted or contiguous area exceeding but not less than
one hectare with tree crown covering at least ten percent (10%) of the area, exclusive of
the associated seedlings, saplings, palms, bamboos and other undercover vegetation. A
natural forest is a stand dominated by trees whose structure, functions and dynamics have
been largely the result of natural succession process. A natural forest is classified as
either 1) primary or virgin forest which has not never been subjected to significant human
disturbance, or has not been significantly affected by the gathering of forest products
such that its natural structure, functions and dynamics have not undergone any major
ecological change; or 2) secondary or residual forest that may be classified into either
degraded or productive type.

(p) Forestlands — refer to lands of the public domain which have been classified as such
and all unclassified lands of public domain.

(q) IFMA Area — refers to a specified and delineated area of forestland subject of or
covered by an IFMA.
(r) Indigenous Cultural Communities (ICC)/Indigenous People (IP) — refer to a group of
people or homogenous societies identified by self-ascription and ascription by others,
who have continuously lived as an organized community on communally bounded and
defined territory, and who have, under claims of ownership since time immemorial,
occupied, possessed and utilized such territories, sharing common bonds of language,
customs, traditions and other distinctive cultural traits, or who have, through resistance to
political, social and cultural inroads of colonization, non-indigenous religions and
cultures, became historically differentiated from majority of the Filipinos. Indigenous
cultural community (ICC) is synonymous with indigenous people (IP).

(s) Industrial Forest Plantation (IFP) — refers to any tract of land planted mainly to
timber producing tree species, including rubber, and/or non-timber species such as rattan
and bamboo, primarily to supply the raw material requirements of forest-based industries,
among others.

(t) Initial Environment Examination (IEE) — refers to the document required of a

proponent describing the environmental impact of, and mitigation and enhancement
measures for, a project or undertaking located in an Environmentally Critical Area.

(u) Integrated Forest Management Agreement (IFMA) — a production-sharing contract

entered into by and between the DENR and a qualified applicant wherein the DENR
grants to the latter the exclusive right to develop, manage, protect and utilize a specified
area of forestland and forest resource therein for a period of 25 years and may be renewed
for another 25-year period, consistent with the principle of sustainable development and
in accordance with an approved CDMP, and under which both parties share in its
produce.

(v) LGU — refers to the local government unit, such as province, city, municipality and
barangay.

(w) Managed Forest — refers to a forest under a deliberate system of protection,

rehabilitation and development which may include utilization of resources, to ensure the
sustainable production of desired products and services, and the conservation of soil,
water, wildlife and other natural resources therein for the benefit of present and future
generations.

(x) National Integrated Protected Area Systems (NIPAS) — refer to the classification and
administration of all designated protected areas to maintain essential ecological processes
and life-support systems, to preserve genetic diversity, to ensure sustainable use of
resources found therein and to maintain their natural conditions to the greatest extent
possible.
(y) Open and Denuded Lands — refer to the lands that has been depleted of its natural
forest cover and is predominantly covered by grasses, herbs, or otherwise bare of any soil
cover.

(z) Operations Plan — In accordance with the approved CDMP, a one year written plan
detailing the activities in the natural productive residual forest, if any, or a five (5) year
written plan detailing the developmental activities in the open, denuded, brushed and
degraded residual natural forest.

(aa) PENRO — refers to Provincial Environment and Natural Resources Office.

(bb) Production Forest — refers to forestlands designated as such for the sustainable
production of timber and/or non-wood forest products.

(cc) Production Residual Natural Forest — refers to a natural forest with a basal area of
five (5) square meters per hectare or more and to be properly managed as a sustainable
and economic source of natural-grown timber.

(dd) Protection Forest — refers to forestlands not the subject of commercial or industrial
activities that include all areas under NIPAS and such other areas the Secretary may
designate.

(ee) RED — refers to Regional Executive Director.

(ff) RENRO — refers to the Regional Environment and Natural Resources Officer.

(gg) Rotation — refers to the number of years between the initial establishment of a
plantation and the time when it is considered ready for harvesting.

(hh) Secretary — refers to the Secretary of the Department of Environment and Natural
Resources.

(ii) Sustainable Development — means meeting the needs of the present generation
without compromising the ability of the future generation to meet their own needs.

(jj) Timber License Agreement (TLA) — refers to a privilege granted by the State to a
person to utilize forest resources within a forestland with the right of possession and
occupation thereof, to the exclusion of others, except the Government, but with the
corresponding obligation to develop, protect and rehabilitate the same in accordance with
the terms and conditions set forth in the said agreement.

CHAPTER II

IFMP AREAS
Sec. 4. Areas Available for IFMP. — Except areas enumerated in Sec. 5 herein, IFMAs
may cover all lands of the public domain under the jurisdiction of the DENR, such as:

(a) Open and denuded lands, brushlands, degraded residual natural forests;

(b) Areas covered by cancelled/expired Forest Land Grazing Agreement or pasture

permits or leases;

(c) Government reforestation projects or portions thereof found to be more suitable or can
be better developed as IFP in terms of public interest and benefits to surrounding
communities;

(d) Production residual natural forest that may be best included in any of the
aforementioned areas and be a part of the managed forest under the IFMA;

(e) Areas under cancelled and expired TLAs; provided, areas under existing TLAs may
be allowed for conversion to IFMA by the holder thereof pursuant to Sections 6, 9 and 12
herein.

Sec. 5. Areas Prohibited for IFMA . — In no case shall IFMAs be awarded in the
following:

(a) Areas or lands of the public domain established under the NIPAS within the
classification of national park as provided for in the Constitution and/or those
proclaimed, designated or set aside pursuant to a law, presidential decree, presidential
proclamation or executive order as well as those the Secretary shall propose for inclusion
in the initial component of the System except when such areas fall within the buffer zone;

(b) Areas or lands subject of Certificates of Ancestral Domain/Certificate of Land Claims

(CADC/CALC) or of any other tenurial instruments issued by the DENR under the
Integrated Social Forestry Program, Community Forest Program, and other people-
oriented forestry programs and other licenses, permits or lease unless with prior informed
consent of the holder.

(c) Those areas with pending applications CADC/CALC or those areas verified by the
DENR to be actually occupied by indigenous cultural communities under a claim of
immemorial possession unless after due notice and hearing in accordance with existing
rules and regulations same shall be denied or rejected.

Sec. 6 . Size of IFMA Area. — The minimum size of the area that may be covered by an
IFMA shall be five hundred (500) hectares and the maximum size may depend upon the
capability of the applicant to develop and manage into productive condition as well as the
requirements of his processing plant(s) existing or to be installed in the area/region;
provided, that it shall not exceed forty thousand (40,000) hectares, preferably but not
necessarily of one single block of an area; provided, however, that where a TLA is
converted into IFMA, the size of the IFMA area may extend up to the size of the TLA
area at the time of the conversion.

For purposes of effective management, economic scale or economies of scale, holders of

adjoining or economically-distanced small-sized IFMA areas may be allowed to integrate
into cooperative, a federation of cooperatives, or corporation the aggregate area of which
shall not exceed 40,000 hectares.

Sec. 7 . Evaluation, Delineation and Approval of Potential IFMA Areas. — The

DENR shall determine the land use and vegetative cover of the identified areas for forest
plantation development taking into consideration major watershed divide as boundaries,
if possible with the application of the latest forest resource and other baseline data as well
as modern methods such as aerial photography and remote sensing techniques.

7.1Areas so delineated shall be validated on the ground, particularly the extent of each of
the forest cover types, such as open/denuded lands, brushlands, residual natural forest and
with the assistance of the LGU, dependent communities shall be consulted about the
delineation of the area for IFMA purposes; and

7.2The delineated areas for IFMA purposes shall be prepared either through the
conventional and/or geographic information system (GIS) in scale 1:50 000 or an
appropriate scale indicating thereon the extent in hectares of each forest cover types and
such other relevant information. Same shall be duly indorsed by the LGU concerned
through Board/Council Resolution, and approved by the Regional Executive Director
concerned, the original copy of which, together with all pertinent documents shall be
forwarded to the FMB Director for safekeeping, updating and reference.

Sec. 8 . Registry of Available IFMA Areas. — The FMB, RED, PENRO, and CENRO
shall maintain a Registry containing the location, description and status of all delineated
IFMP areas and approved IFMAs which shall be made accessible to local communities,
LGUs and other stakeholders as a matter of their rights which shall not be impaired.

CHAPTER III

APPLICATION FOR AND APPROVAL OF THE IFMA

Sec. 9 . Qualifications of Applicants. — The applicants for IFMA shall be:

(a) A Filipino citizen of legal age; or,

(b) Partnership, cooperative or corporation whether public or private, duly registered
under Philippine laws.

However, in the case of application for conversion of TLA into IFMA, an automatic
conversion after proper evaluation shall be allowed, provided the TLA holder shall have
signified such intention prior to the expiry of the TLA, PROVIDED further, that the TLA
holder has showed satisfactory performance and have complied in the terms of condition
of the TLA and pertinent rules and regulations.

Sec. 10. Requirements for Application . — Applicants shall submit through the
CENRO concerned, the following documents, together with the duly accomplished
application form shown in Annex "A" and the sketch map of the area applied for:

10.1Certified copy of Certificate of Registration issued by the Securities and Exchange

Commission (SEC) and/or Cooperative Development Authority (CDA) or Articles of
Incorporation and By-Laws and list of the current officers and stockholders duly certified
by the Board Secretary;

10.2Audited financial statements for the last two (2) preceding years, if the applicant was
already in existence;

10.3Proof of financial and technical capability to undertake initial activities in forest

plantation establishment and development such as credit lines from financial institutions,
collaterable properties, or good past performance or track records in forest development
and management as TLA or IFMA Holder and other DENR tenurial instruments;

10.4Application fee in the amount of P0.50 per hectare or fraction thereof and survey fee
of P50.00/ha plus the actual transport cost of the survey team from the official station to
the site in consonance with the provisions of DAO 93-18 subject for adjustment upon
review by the DENR.

10.5Board resolution authorizing any of the officers to file the application in behalf of the
corporation, cooperative and/or partnership, duly certified by the Board Secretary.

Sec. 11. Procedures in Processing of Applications and Approval of IFMA . — The

following procedures shall be observed in the processing of IFMA applications:

11.1 At the CENRO — Except in the case of conversion of TLA into IFMA as provided
for in Section 9 herein, the CENRO concerned shall accept and process the IFMA
application on a first-come-first-served basis taking into consideration, the qualifications
of the applicant, the completeness of the documents submitted, and if the area applied for
is included in the approved IFMA site and still available for application per the Registry.
Thereafter, the area applied for shall be inspected on the ground based on the form as
shown in "Annex B", after which the CENRO shall within 10 working days after the
completion of the field inspection, prepare the IFMA in the form shown in Annex "C"
hereof. The CENRO shall then endorse the application documents to the PENRO with his
recommendation for approval; otherwise, same shall be returned by him to the applicant
concerned with his comments.

11.2 At the PENRO — Upon receipt of the application documents, the PENRO concerned
shall within five (5) working days from the receipt thereof evaluate/review the same. If
all are found in order, the PENRO shall endorse the application documents to the RED
concerned with his recommendations for approval; otherwise, same shall be returned with
his comments to the CENRO concerned for further action.

11.3 At the RENRO — The RED concerned shall evaluate/review within five (5) working
days from the receipt thereof the application documents. If all are found in order, the
RED shall forward the IFMA, together with all application documents and his
recommendation for approval to the Secretary; through the FMB Director; otherwise,
same shall be returned by the RED with his comments to the CENRO concerned through
the PENRO for further action.

11.4 At the FMB — Upon receipt of the IFMA together with all application documents,
the FMB Director shall evaluate and review within five (5) working days thereof. If all
are found in order, the Director shall recommend to the Secretary the approval of the
IFMA; otherwise, same shall be returned by the FMB Director with his comments to the
concerned RED, copy furnished the Secretary.

11.5 At the OSEC — The Secretary may approve or disapprove the IFMA after which the
notice of approval shall be sent to applicant, copy furnished the FMB, RENRO, PENRO,
CENRO and the LGUs concerned.

Sec. 12. Initial Environmental Examination (IEE) and Environmental Clearance

Certificate (ECC). — After an IFMA has been awarded, and in order to identify the
environmental impacts that have to be addressed in the development of the industrial
forest plantation, the holder thereof shall submit an Initial Environmental Examination
(IEE) in a checklist to be prepared therefor which shall at least include the following:

12.1 A brief description of the project and its process of operations;

12.2 Description of the environmental setting and receiving environment including the
primary and secondary impact areas;

12.3 Description of the environmental and socio-economic impacts of the project;

12.4 Matrix of the mitigation/enhancement measures;

12.5 Consultation and discussion with upland communities and indigenous peoples
within the IFMA area about the socio-economic, political and cultural impacts of the
project;

12.6 Documentation of the consultative process undertaken and agreements that shall be
followed;

12.7 Discussion on gender issues with significant impact on women, including their
roles/participation in project implementation; and

12.8 Accountability statements of the proponents and preparers.

Pursuant to the provision of DAO 96-37, the RED may either grant or deny the issuance
of the ECC or decide that an EIS be further required taking into account the social and
environmental cost implication relative to the judicious utilization, development and
conservation of the country's natural resources.

CHAPTER IV

TERMS AND CONDITIONS OF THE IFMA

Sec. 13. Duration of the IFMA. — An IFMA shall have a duration of twenty five (25)
years and may be renewed for another twenty five (25) years, provided, that all the
conditions of the IFMA, pertinent laws, rules and regulations have been complied by the
holder thereof.

Sec. 14. Responsibilities of the IFMA Holders. — All IFMAs shall include the
following conditions and/or responsibilities the holders thereof shall comply with:

14.1 Under the supervision of the DENR, reckoned from the date the IFMA was
awarded, conduct the delineation and marking on the ground of the perimeter boundaries
of the IFMA area based on the land classification standard and establish control points on
the ground following the Universal Transverse Mercator (UTM) including the conduct of
timber inventory at 5% intensity to determine the extent of the natural forest cover and
the forest plantation as TLA reforestation compliance therein, if applicable.

14.2 Submit within one (1) year from the date the IFMA was awarded, a Comprehensive
Development and Management Plan (CDMP) in the form shown in Annex "D" and an
Initial Environmental Examination (IEE) as basis for approval by the Secretary on the
former and the issuance by the RED of an Environmental Compliance Certificate (ECC)
on the latter;

14.3 Submit within one (1) year from the date of the award of the IFMA and every five
years thereafter to the FMB up-to-date aerial photos or landsat imageries including their
interpretation map covering the entire IFMA area in consonance with DAO No. 92-17;
provided, that this condition shall be waived if such airphotos and/or imageries were
procured by the DENR, or if the IFMA area has no natural forest, or if the area regardless
of vegetative cover is less than 5,000 hectares;

14.4 Implement the mitigation/enhancement measures stipulated in the IEE and comply
with the conditionalities of the ECC;

14.5 Plant principally timber-producing species compatible with the ecological and
biophysical characteristics of the area, but not excluding rubber, durian and/or non-timber
species like rattan and bamboo; provided, that a suitable area of at most ten percent
(10%) therein may be used for agricultural purposes; provided, further that these
endeavors are included and scheduled in the approved CDMP; provided, finally that the
total plantable area shall be planted based on the rotation period of the plantation species
but not exceeding 12 years;

14.6 If included in the CDMP, convert the degraded residual natural forest within the
IFMA area into a productive state by one or more of the following methods:

14.6.1 enrichment planting, timber stand improvement and assisted natural regeneration;

14.6.2 establishing plantations of rattan or other suitable non-timber species; and/or

14.6.3 clearing natural vegetation from degraded residual natural forest and establishing
industrial forest plantation (IFP); provided, that:

14.6.3.1 the timing, location, extent, methods of harvest, expected volume and value of
salvaged wood and the environmental impact of any clearing carried out for such
conversion shall be stated in the approved CDMP, OP, and IEE;

14.6.3.2 buffer strips of natural vegetation at least 50 meters in width, following to the
extent possible natural boundaries, between compartments which shall not exceed 100
hectares each, and at least 20 meters on both sides of major rivers or streams shall be
retained and shall be subject of enrichment planting or shall be used for rattan or bamboo
plantation;

14.6.3.3 all extraction of commercial timber carried out in connection with conversion of
degraded natural residual forest to IFP shall be indicated in the operations plan approved
by the RED and shall be subject to forest charges provided for in RA 7161; and

14.6.3.4 planting the entire area cleared shall be undertaken within six (6) months of
clearing.
14.7 Manage and protect production residual natural forest in accordance with laws and
regulations governing thereto and if authorized in the approved CDMP, harvest and
utilize naturally grown trees therein on a sustainable basis and in accordance with the
Operations Plans (OP) duly approved by the concerned RED, PROVIDED that should
there be old growth (virgin) and protection forest within the IFMA area, same shall be
protected and no cutting shall be allowed therein.

14.8 Reforest open/denuded lands found within areas classified as protection forestlands
and within twenty (20)-meter strips from both sides of river banks which shall be kept
permanently under forest cover;

14.9 Protect and conserve unique, rare and endangered flora and fauna found within the
IFMA area;

14.10 Not cut trees found in protection forestlands, in all areas with 50% and over in
slope and with elevation above 1000 meters above sea level, or within twenty (20) meters
strips from both sides of river/stream banks;

14.11 Construct permanent structures and roads within the IFMA Area only in
accordance with the approved CDMP and OP;

14.12 Employ as many experienced registered foresters as may be required in major

aspects of forest management, development, protection, etc. including the appointment of
one of them as Forest Operations Manager or in any top level management position;
otherwise, hire a DENR-accredited Forest Services Organization such as a forestry
consulting firm to undertake similar activities on a continuing basis; and

14.13 Submit to the DENR Annual Accomplishment Report in the form prescribed in
Annex "E" of this Order.

Sec. 15. Responsibilities of the DENR . — The DENR shall undertake and/or observe
the following conditions in respect of all IFMAs:

15.1 Make available upon request to the IFMA holder existing information on the status
of the land, resources thereon and dependent communities within or adjacent to the IFMA
areas;

15.2 Ensure that the activities indicated in the approved CDMP, mitigation/enhancement
measures stated in the IEE, conditionalities prescribed in the ECC, pertinent provisions
stipulated in this Order and other applicable laws, rules and regulations are complied with
by the IFMA holder;
15.3 Assist the IFMA holder and host communities in the development and
implementation of mutually beneficial agreements;

15.4 Not alter or modify the boundaries or legal status of any IFMA Area, once
established; provided, that amicable settlement shall be undertaken by the DENR in the
event of boundary conflict with adjacent IFMA area(s), or with licensed, leased and
vested rights areas as well as Ancestral Land/Domain areas; and

15.5 Promote and/or approve joint venture, financing and/or securitization schemes
recommended by the IFMA Holder designed to support the development of the IFMA
Area in an orderly and expeditious manner.

Sec. 16. Compensation . —

16.1 Compensation to the IFMA Holder. The IFMA Holder shall be entitled to receive
from the Government compensation for the fair market value of permanent improvements
introduced, including plantation forest crops remaining in his IFMA area under the
following circumstances:

16.1.1 expiration of the IFMA;

16.1.2 termination of the IFMA when public interest demands; or
16.1.3 reduction of the IFMA area for right-of-way or when the public interest demands.

16.2 If the Government retracts, for reasons other than cause, an IFMA holder's rights to
carry out harvests, in accordance with the approved CDMP, in residual natural forest or
in any portion thereof, the Government shall compensate the IFMA holder for cost
incurred in maintaining, improving and protecting said forest up to the time such rights
were retracted.

16.3 Appraisal for Improvements for Compensation. The fair market value of permanent
improvements shall be decided upon by a committee comprising of representatives of the
DENR, the IFMA holder and a qualified independent appraiser whose appointment shall
be mutually agreed upon by the DENR and the IFMA holder. The DENR and the IFMA
holder shall bear equally the cost of such appraisal.

Sec. 17. Warranties . —

17.1 Modifications. No IFMA shall be amended in any way except by written instrument
signed and agreed to by the duly authorized representatives of the DENR and the IFMA
Holder.

17.2 Notice of Breach. In the event of any default or breach of any of the provisions of an
IFMA by either party, the other party may, by notice to the party in default or breach,
specify such default or breach and require the same to be remedied within thirty (30) days
after service of the notice.

17.3 Arbitration. In the event of dispute between the DENR and an IFMA Holder that
cannot be settled by mutual accord, the dispute shall be referred to arbitration which shall
be held in accordance with the rules provided in RA No. 876 and the decision arising
from which shall be binding to both DENR and IFMA Holder.

Sec. 18. Transfers . — An IFMA Holder may transfer, exchange, sell or convey the
IFMA or any rights therein or any assets used in connection therewith, if authorized by
the Secretary, and if:

18.1 The IFMA has been in existence for at least three (3) years;

18.2 The IFMA Holder has been faithfully complying with the terms and conditions of
the IFMA, including implementation of the Comprehensive Development and
Management Plan;

18.3 The transferee is qualified to hold an IFMA;

18.4 There is no evidence that such transfer or conveyance is being made for purposes of
speculation;

18.5 The transferee shall assume all the obligations of the transferor specified in the
IFMA, CDMP, and ECC;

18.6 For IFMA Areas in which development is being financed by loan funds, the consent
of involved financing institutions has been obtained; and

18.7 Consultation has been held and agreement has been reached with all certified
Ancestral Domain or Ancestral Land Claimants; if applicable.

Sec. 19. Encumbrances . — An IFMA Holder shall not offer as security, mortgage or
otherwise encumber the IFMA or any rights therein or any assets used in connection
therewith, unless authorized by the Secretary.

CHAPTER V

INCENTIVES AND PROFIT SHARING

Sec. 20. Incentives . — The IFMA Holder shall be entitled to the following incentives:

20.1 Interplant secondary crops between trees within areas designated for IFP.
20.2 All planted trees and other crops established pursuant to an IFMA belong to the
IFMA Holder who shall have the right to harvest, sell and utilize such trees and crops in
whatever marketable form(s) and in whatever legal manner(s).

20.3 Allow without restriction the IFMA Holder to export logs, lumber and other forest
products derived from IFMA Area; provided, that logs harvested or obtained from
naturally growing trees (not planted) in the IFMA Area and the lumber manufactured
from such logs will not be exported.

20.4 All plantation products derived from an IFMA Area shall be exempted from forest
charges; provided, that logs derived from trees growing naturally (not planted) and/or
other forest products naturally growing trees (not planted also) in an IFMA Area as well
as logs from trees planted in compliance with TLA reforestation obligations of TLAs
shall be subject to forest charges stipulated in RA 7161.

20.5 Entitlement to all relevant incentives provided for under the Omnibus Investment
Code and to all applicable incentives enumerated under Section 36 of PD 705, as
amended.

20.6 Transfer developed plantations that are at least three (3) years old to a cooperative
upon fair compensation or payment thereof by the cooperative itself or through a
financing institution or to open up public investment in accordance with Section 15.5
herein.

20.7 Use stable plantation crops that are at least three (3) years old as collateral or
security for loans offered by government development banks, financial institutions, or
government-owned and controlled corporations.

20.8 An IFMA holder who has satisfactorily complied with the terms and conditions of
this IFMA based on performance evaluation by the DENR may be allowed either a) an
additional area to the existing IFMA Area, provided, that the resulting aggregate size of
the IFMA Area shall not exceed 40,000 hectares; or b) a new or another IFMA the
maximum area of which shall not exceed 40,000 hectares.

Sec. 21. Profit Sharing. — The sharing of the profit arising from an IFMA between the
holder thereof and the Government shall be negotiated between the said holder and the
DENR immediately following the approval of the CDMP and the grant of ECC, taking
into consideration, among others, the following cost factors:

21.1 Plantation establishment, protection, management, infrastructure and harvesting cost

as well as mitigating measures;
21.2 Fixed assets, equipment and machineries directly related to the plantation
development and harvest;

21.3 Kind and volume of products that shall be harvested and prevailing fair market
prices thereof;

21.4 Variation in rates of interest and foreign exchange of financial investment;

21.5 Expenses incurred in indirect activities such as community development, etc;

21.6 Forest charges and taxes paid; and

21.7 Reasonable margin for profit and risks.

The profit sharing agreed upon shall form part of the IFMA.

CHAPTER VI

MONITORING AND CONTROL

Sec. 22. Program Management . — The program shall be managed and implemented
through the various DENR Offices as follows:

22.1 FMB shall be the National Program Coordinating Office tasked to formulate
policies, rules and regulations pertinent to forest plantation development and
management, establish linkages with concerned agencies both government and non-
government to ensure the success of the program implementation, continuously monitor
and assist the Secretary in the supervision of the program, provide the Secretary and other
concerned authority with periodic reports on program accomplishments and other
relevant information and keep updated and orderly files of all issued IFMAs including
relevant documents of the program.

22.2 RENRO — The RED, assisted by the ARED concerned shall be responsible for the
efficient and effective implementation of the program in the region. The RENRO shall
keep copy of the records of all IFMAs within the jurisdiction of the region. The RED
shall submit to the Secretary thru the FMB periodic reports on the accomplishments,
issues and problems with recommendation regarding the implementation of the program.

22.3 PENRO AND CENRO — The PENRO and the CENRO shall be directly
responsible in the implementation of the program. The PENRO shall maintain a database
of all IFMAs in the province, while the CENRO shall likewise maintain information of
all IFMAs under its jurisdiction, including periodic monitoring and evaluation of IFMA
holder's accomplishments for submission to the DENR authority.
Sec. 23. Suspension of an IFMA . — In the event of any alleged violation committed by
the IFMA holder against any of the provisions of the IFMA, the RED concerned or the
Secretary himself shall initiate an investigation into the violation in accordance with the
warranties provided herein and, depending on the gravity of the violation, may either
issue a Notice of Breach or Notice of Suspension of Operations. The notice of suspension
shall indicate the actions/activities that shall be done by the IFMA holder in order to
facilitate the lifting of the suspension including the admonition that non-compliance
thereto shall result to the cancellation of the IFMA. If any development activity pursuant
to the IFMA is being financed by loan funds or if any improvement within the IFMA
Area is encumbered by a third party, the DENR shall notify the bank or the other party
involved about any of the preceding notices. The IFMA Holder shall within thirty (30)
days from receipt of any of such notices, file an answer, a motion for reconsideration, or
an appeal, as the case may be, with the Office of the Secretary.

Sec. 24. Grounds for Cancellation of IFMA . — The following violations shall be
sufficient grounds for cancellation of the IFMA:

24.1 If the IFMA was obtained through fraud, misrepresentation or omission of material
facts existing at the time of the filing of the application;

24.2 Failure of an IFMA Holder to settle any forestry account, such as forest charges,
when they become due and upon prior notice to the IFMA Holder.

24.3 Violation of any of the terms and conditions of, or failure to comply with, or
perform the obligations imposed in, the IFMA, and of other pertinent laws, or policies
affecting the exercise of the IFMA;

24.4 Failure to submit a CDMP and IEE within one (1) year from the date the IFMA is
entered into;

24.5 Failure to submit aerial photographs or satellite imageries for the IFMA Area, when
required and every five years thereafter;

24.6 Failure to carry out an inventory resource inventory for areas containing any natural
forest, in case such inventory has not been undertaken prior to the issuance of the IFMA;

24.7 Failure to implement, without due and reasonable cause explained in writing, the
approved CDMP, OP and/or the conditions of IEE and ECC;

24.8 Conducting any operations in violation of the approved CDMP or OP, or engaging
in activities outside the IFMA Area without the expressed consent or authority of the
Secretary;
24.9 Failure to protect the IFMA Area except as a result(s) of force majeure, where the
IFMA Holder has no control over; and

24.10 Abandonment of the IFMA Area as evidenced by absence of the IFMA Holder,
whether actual or constructive, for any given period of one (1) year.

Sec. 25. Finality and Execution of Orders of Cancellation . — Any decision by the
Secretary to cancel an IFMA shall become final and executory after thirty (30) days from
receipt thereof by the IFMA Holder, unless the latter, prior to the expiry of said thirty-day
period, files a motion for reconsideration or an appeal with the Office of the Secretary.

Sec. 26. Forfeiture of Rights to Compensation . — Upon cancellation of an IFMA for

any of the reasons specified herein, all permanent improvements introduced into the
IFMA Area, including forest plantations, shall become the property of the Government
without there being any obligation to compensate the IFMA Holder.

CHAPTER VII

MISCELLANEOUS PROVISIONS

Sec. 27. Previously Issued IFMAs. — The terms and conditions of any IFMA entered
into prior to this Order remain valid unless modifications are agreed to by the DENR and
the IFMA Holder in accordance with the provisions hereof, without prejudice to whatever
action that the office may take after a performance evaluation thereof has been
undertaken in the area.

Sec. 28. Repeating Clause. — This Order repeals DAO 91-42, DAO 93-60 and DAO
97-04 and Orders, Memoranda, Circulars, and other issuances which are inconsistent
herewith.

Sec. 29. Effectivity. — This Order shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation and upon
acknowledgment by the UP Law Center.

Adopted: 23 Dec. 1999

(SGD.) ANTONIO H. CERILLES

Secretary
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