President Rodrigo Duterte has signed an executive order (EO) updating a list of industries restricted from foreign investment and reserved for Filipinos.
EO No. 175, signed on Monday, was issued as part of the requirements under Republic Act No. 7042 or the Foreign Investments Act of 1991, which mandates the formulation of a Regular Foreign Investment Negative List.
“There is a need to formulate the Twelfth Regular Foreign Investment Negative List, replacing the Eleventh Regular Foreign Investment Negative List, to reflect changes to List A and List B, pursuant to existing laws, consistent with the policy to ease restrictions on foreign participation in certain investment areas or activities,” the EO read.
List A may be amended at any time to reflect changes instituted in specific laws while List B will only be made at least once every two years.
List A enumerates areas where foreign ownership is limited by mandate of the Constitution and specific laws, while List B enumerates areas where foreign ownership is limited for reasons of security, defense, risk to health and morals. and protection of small and medium-scale enterprises.
Areas and activities where no foreign equity is allowed under List A are mass media except recording and internet business; practice of professions except in cases specifically allowed by the law; retail trade enterprises with paid-up capital of less than P25 million; Cooperatives except investments of former natural-born citizens of the Philippines; organization and operation of private detective, watchmen or security guards agencies; small-scale mining; Utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zone, as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons; ownership, operation, and management of cockpits;
Manufacture, repair, stockpiling and/or distribution of nuclear weapons; manufacture, repair, stockpiling, and/or distribution of biological, chemical, and radiological weapons, and anti-personnel mines; and manufacture or firecrackers and other pyrotechnic devices.
Up to 25 percent foreign equity will be allowed in private recruitment, whether local or overseas employment, and contracts for the construction of defense-related structures.
Advertising is one area where the allowed foreign equity is only up to 30 percent; while areas where the allowed foreign equity is only up to 40 percent procurement of infrastructure are in exploration, development and utilization of natural resources; Ownership of private lands, except a natural-born citizen who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine laws; Operation of public utilities; educational institutions other than those established by religious groups and mission boards, for foreign diplomatic personnel and their dependents and other foreign temporary residents, or for short-term high-level skills development that do not form part of the formal education system; Culture, production, milling, processing, trading except retailing of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof; Contracts for the supply of materials, goods and commodities to government-owned or controlled corporations, company, agency or municipal corporation; Operation of deep-sea commercial fishing vessels; ownership of condominium units and private radio telecommunication network.
Under List B, up to 40 percent foreign equity will be allowed in areas and activities involved in the manufacture, repair, storage or distribution of products or ingredients requiring police clearance – firearms, gunpowder, dynamite, blasting supplies, ingredients used in making explosives, and telescopic sights, sniper scope and other similar devices; Manufacture and distribution of dangerous drugs; sauna and steam bathhouses, massage clinics, and other similar activities, except wellness centers; all forms of gambling except those covered by investment agreements with the state-run Philippine Amusement and Gaming Corporation; Micro and small domestic market enterprises with paid equity capital of less than the equivalent of USD200,000; and Micro and small domestic market enterprises that involve advance technology or are endorsed as startup or startup enablers by state agencies or those whose majority of direct employees are Filipinos, provided that their Filipino employees should not be less than 15, and with a paid equity capital of less than the equivalent of USD100,000.