Cottage Industries Development Decree Of 1981

Case Overview and Summary

Summary of the Cottage Industries Development Decree of 1981

Declaration of Policy (Section 2)
- The State mandates the National Cottage Industries Development Authority (NACIDA) to develop and promote cottage industries to its full potential, aiming for high employment levels, growth and diversification of exports, and countryside development.

Creation and Powers of NACIDA (Sections 3-4)
- NACIDA is created as a body corporate under the Ministry of Industry.
- NACIDA has corporate powers, including the ability to:
  - Make contracts, own property, sue and be sued
  - Accept donations and development aids
  - Establish subsidiary corporations and other institutional mechanisms
  - Make expenditures and prescribe rules and regulations
  - Invest in financial undertakings for the benefit of cottage industries

Functions of NACIDA (Section 5)
- Organize, strengthen, encourage, and promote cottage industries (Section 5a)
- Develop financial assistance programs and funding mechanisms (Section 5b)
- Undertake a nationwide program for cottage industry development and expansion, particularly in less developed areas (Section 5c)
- Plan, design, and formulate viable, resource-based, low-budget, income-generating, and market-oriented "training-production" livelihood projects (Section 5d)
- Evolve and validate viable special projects that are employment-generating and income-producing, to be collectively managed and operated by trainee-graduates (Section 5e)
- Undertake industrial surveys of different craft skills needed by industry (Section 5f)
- Conduct field surveys of indigenous raw materials and equipment (Section 5g)
- Initiate and procure certified raw materials needed for production by cottage industries (Section 5h)
- Help producers attain competitive footing in the market (Section 5i)
- Rationalize different aspects of cottage industry operations (Section 5j)
- Establish and develop Cottage Industries Training Centers and undertake research and development (Section 5k)
- Promote the quality assurance of cottage industries products (Section 5l)
- Extend assistance to cottage industries producers in financing, production, and marketing (Section 5m)
- Work in close coordination with the private sector (Section 5n)

Board of Directors (Section 6)
- The NACIDA Board of Directors is the governing body that defines and promulgates policies affecting NACIDA and cottage industries.
- The Board consists of 11 members, including representatives from various government agencies and 3 representatives from the private sector appointed by the President/Prime Minister for a 4-year term.
- The Board has powers and duties, including:
  - Enunciate policies, determine objectives, establish priorities, allocate resources, and provide overall direction and supervision (Section 6b1)
  - Establish regional and sub-regional offices (Section 6b2)
  - Approve annual and supplemental budgets (Section 6b3)
  - Determine and grant merit increases, hazard pay, bonuses, allowances, and compensation levels for NACIDA officers and employees (Section 6b4)
  - Ban the export of local raw materials needed by cottage industries when supply is insufficient (Section 6b5)
  - Issue summons, subpoenas, and subpoena duces tecum for investigations and fact-finding (Section 6b6)
  - Adopt an accreditation scheme to upgrade and protect the industry (Section 6b7)
  - Review and approve externally funded programs and projects (Section 6b8)
  - Determine the use and expenditure of earnings from NACIDA investments (Section 6b9)

Administration (Sections 7-8)
- The Minister of Industry, as Chairman of the NACIDA Board, is the Chief Executive Officer with full powers to restructure, reorganize, and manage NACIDA (Section 7).
- The Administrator is the Chief Operating Officer, responsible for administering NACIDA affairs under the Chairman's supervision (Section 8a).
- The Administrator has powers and duties, including:
  - Appointing subordinate officials and employees (Section 8b)
  - Submitting an annual budget 60 days before the fiscal year (Section 8c)
  - Submitting an annual report 60 days before the fiscal year's end (Section 8d)
  - Performing acts necessary for NACIDA's objectives and duties (Section 8e)
  - Performing other duties assigned by the Board (Section 8f)

Regional Offices (Section 9)
- NACIDA shall establish regional offices in accordance with the Integrated Reorganization Plan, each headed by a Regional Manager and Assistant Regional Manager.

Definition of Cottage Industry (Section 10)
- A "Cottage Industry" is a modest economic activity for profit using primarily indigenous raw materials in the production of various articles involving craftsmanship, artistic skills, and tradition of the country.
- Cottage industries must be owned and operated by Filipino citizens or corporations/partnerships/cooperatives with at least 75% Filipino capital investment.
- Total assets of a cottage industry must not exceed ₱100,000 at the time of NACIDA registration, but this limit can be modified by the Board with Presidential approval.
- Cottage industries are classified into:
  - Handicraft Industry (Section 10a)
  - Metalcraft Industry (Section 10b)
  - Furniture Industry (Section 10c)
  - Garment Industry (Section 10d)
  - Ceramics Industry (Section 10e)
  - Food Processing Industry (Section 10f)
  - Complementation Industry (Section 10g)

Registration, Revalidation, and Accreditation (Sections 11-13)
- Persons, corporations, partnerships, cooperatives, and associations engaging in cottage product production may register with NACIDA to avail of benefits (Section 11).
- Registered NACIDA producers prior to this Decree must revalidate their registration within 1 year to continue receiving benefits (Section 12).
- The Board may adopt an accreditation system to ensure compliance with standards and requirements set by the government in consultation with industry sectors (Section 13).

Incentives and Benefits (Sections 14-16)
- The government may provide incentives and benefits to NACIDA-registered cottage industries, including:
  - Tax privileges (Section 14)
  - Promotion/marketing assistance (Section 14)
  - Production assistance (Section 14)
  - Skills development and technology assistance (Section 14)
  - Credit and loans assistance (Section 14)
  - Equipment assistance (Section 14)
  - Raw material assistance (Section 14)
  - Other incentives or benefits provided by subsequent laws (Section 14)
- Tax exemptions include exemption from all taxes except specific and income taxes for 5 years from NACIDA registration, with no exemption from percentage taxes for sales exceeding ₱400,000 per year (Section 15).
- NACIDA can approve tax-free importation of tools, machinery, or equipment not available locally and used exclusively for production by registered entities (Section 16).

Withdrawal of Registration and Accreditation (Section 17)
- The Board can withdraw registration and accreditation of a NACIDA producer after due notice, upon violation of this Decree, failure to maintain product quality or comply with terms and conditions, or failure to submit reports.

Penal Provisions (Section 18)
- Any person, firm, or corporation violating Section 16 (tax-free importation) shall be punished by imprisonment not exceeding 5 years and/or a fine not exceeding ₱5,000, and aliens shall be subject to deportation.

Incentive Pay (Section 19)
- NACIDA officers and personnel are entitled to an incentive pay equivalent to 1 month's salary for every year of meritorious service, or a proportional fraction for less than 1 year.

Membership in Industry Associations (Section 20)
- NACIDA shall encourage the formation of cottage industry associations along sectoral lines.
- The Board may require membership in such associations as a condition for registration or accreditation.

Repealing Clause (Section 21)
- All laws, decrees, orders, and acts inconsistent with this Decree are repealed or modified accordingly.

Effectivity (Section 22)
- This Decree shall take effect upon approval.