MALACAANG Manila PRESIDENTIAL DECREE No. 894 February 26, 19 6 RE!

"IRING G#$ERNMENT #FFICES, AGENCIES, INSTR"MENTALITIES AND G#$ERNMENT #%NED #R C#NTR#LLED C#RP#RATI#NS, PERS#NS AND ENTITIES EN&#'ING TA( E(EMPTI#N, INCENTI$E #R S")SID' FR#M T*E G#$ERNMENT T# "TILI+E IN INTERNATI#NAL TRANSP#RTATI#N T*E SER$ICES #F T*E P*ILIPPINE FLAG AIR CARRIER AND S*IPPING LINES AND F#R #T*ER P"RP#SES WHEREAS, it is necessary for our national economic development that every effort is exerted by all to save and conserve our foreign exchange reserves; WHEREAS, payment of transportation fares to foreign airlines and shipping lines, even if made in hilippine !urrency, constitutes a heavy drain to our foreign exchange reserves in vie" of the fact that such foreign airlines and shipping lines remit abroad their receipts in excess of their local expenses; WHEREAS, the hilippine flag air carrier and shipping lines operating international transportation perform transportation services of vital importance to the foreign commerce and trade of the hilippines including its balance of payments, to the ostal Service, and to the national security and defense; WHEREAS, in most countries of the World, the policy and practice of granting preference to the national flag air carrier and shipping lines over foreign air carriers and shipping lines "ith respect to transportation of #overnment financed passengers and property has either been adopted and implemented or is in the process of being adopted and implemented; $%W, &HERE'%RE, (, 'ER)($A$) E* MAR!%S, resident of the hilippines, by virtue of the po"ers vested in me by the !onstitution, do hereby order and decree as follo"s+ Se,-.o/ 1. Whenever any branch, department, agency, instrumentality or office of the #overnment including local governments and corporations and institutions o"ned and controlled by the #overnment, shall procure, contract for, or other"ise obtain, directly or indirectly any transportation of persons or property by air or "ater bet"een the hilippines and a place outside thereof or bet"een t"o places both of "hich are outside the hilippines, the payment for "hich is made directly or indirectly from funds of the Republic of the hilippines, the appropriate agency or agencies and public officials concerned shall ta,e such steps as may be necessary to assure that such transportation is provided by the hilippine flag air carrier or shipping lines to the maximum extent service by such carrier and shipping lines is available* Se,-.o/ 2. Any person, partnership, association or corporation, contractor and subcontractor, granted and en-oying any tax exemption, subsidy or incentive from the #overnment, or "ith an outstanding loan from or "hose existing obligation is guaranteed by the #overnment or by any

#overnment o"ned or controlled corporation and financial institution, or a"arded any contract by the #overnment or any of its agencies and instrumentalities, re.uiring any transportation of persons and property by air or "ater bet"een the hilippines and a place outside thereof or bet"een t"o places both of "hich are outside the hilippines, the payment for "hich is made directly or indirectly from the funds of such person, partnership, association, corporation, contractor or subcontractor, shall cause such air or "ater transportation to be provided by the hilippine flag air carrier or shipping lines to the maximum extent service by such air carrier or shipping lines is available+ rovided, &hat any such person, partnership, association, corporation, contractor or subcontractor may procure the services of foreign air carriers or shipping lines to the extent that service by the hilippine flag air carrier or shipping lines is not available, only upon prior certification by the !ivil Aeronautics /oard or by the /oard of &ransportation, as the case may be* Se,-.o/ 0. &he Auditor #eneral shall disallo" any expenditure from appropriated funds of the #overnment for payment of passenger or cargo transportation on foreign flag air carriers and shipping lines in the absence of satisfactory proof of the clear necessity therefor* Se,-.o/ 4. Any violation of the provisions of Section 0 shall cause the "ithdra"al, revocation, cancellation, or acceleration of payment, as the case may be, of the tax exemption, subsidy, incentive, loan, guarantee and contract of such person, partnership, association or corporation* Se,-.o/ 1. All la"s, decrees, orders, rules and regulations or part thereof inconsistent "ith this )ecree are hereby repealed or modified accordingly* Se,-.o/ 6. &his )ecree shall ta,e effect immediately* )one in the !ity of Manila, this 01th day of 'ebruary, in the year of %ur 2ord, nineteen hundred and seventy3six*