Philippines Issues New Foreign Investment Negative List

11^th Foreign Investment Negative List

12^th Foreign Investment Negative List

１．Foreigners may teach at higher education levels (R.A. No. 8292 provided that the subject being taught is not a professional subject (i.e., included in a government board or bar examination.)

1.     Subject to reciprocity, professional teaching is allowed, including teaching at the primary and secondary levels (Annex No. 39). In addition, the exclusion for teaching professional courses has been removed, allowing foreigners to teach professional courses as long as they comply with current laws and regulations (including government commissions or judicial examinations).

２．No foreign equity in retail trade enterprise with paid-up capital of less than USD2,500,000 (R.A. No. 8762)

２．The required capitalization requirement for foreign investment in retail trade enterprises was decreased to a paid-up capital of at least PHP25,000,000 (Section 2, R.A. No. 11595, amending R.A. No. 8762)

3. No foreign equity in Cooperatives

3. Generally, no foreign equity is allowed in Cooperatives but investments of former natural born citizens of the Philippines are now allowed.

4. Up to 40% foreign equity was allowed in contracts for construction and repair of locally-funded public works, except:

a. Infrastructure/development projects covered in R.A. No. 7718; and

b. Projects which are foreign-funded or assisted and required to undergo international competitive bidding.

4. Replaced by a broader provision allowing up to 40% foreign equity in procurement of infrastructure projects under R.A. No. 9184

5. Operation of Public Utilities is subject to 40% limitation in foreign ownership equity.

5. Operation of Public Utilities is still subject to 40% limitation in foreign ownership equity, but the businesses considered as Pubic Utility has been redefined pursuant to the amendments to the Public Service Act, as follows:

– Distribution of electricity

– Transmission of Electricity

– Petroleum and Petroleum Products Pipeline Transmission Systems

– Water Pipeline Distribution systems and wastewater Pipeline systems, including sewerage pipeline systems

–        Seaports

–        Public Utility Vehicles

6. Only up to 40% foreign equity was allowed for the manufacture, repair, storage and/or distribution of products requiring Department of National Defense (DND) Clearance.

6. Deleted. Hence, manufacture, repair, storage and/or distribution of products requiring Department of National Defense (DND) Clearance may now be 100% owned by foreigners.

7. Domestic market enterprises which involve advanced technology or employ at least 50 direct employees with paid up capital of less than the equivalent of USD100,000 was subject to maximum of 40% foreign equity restriction.

7. The exception to the USD200,000 minimum capitalization requirement for Micro and small domestic market enterprises: those where 100% foreign ownership is allowed if their paid-in equity capital is at least equivalent of US$100,000 has been amended as follows:

(i) that involve advance technology as determined by the Department of Science and Technology (hereinafter referred to as, “DOST”); or

(ii) are endorsed as startup or startup enablers by the lead host agencies, namely the Department of Trade and Industry, Department of Information and Communications Technology or DOST, under the Innovative Startup Act; or

(iii) with a majority of their direct employees are Filipinos which in no case shall be less than fifteen (15).

8. The professions listed on the right were not included in the annex of professions subject to reciprocity.

8. The following are the added professions where foreigners may practice in the Philippines subject to reciprocity:

–        Criminology

–        Food technology

–        Marine deck engineering

–        Professional teaching

–        Radiologic and x-ray technology

–        Speech Language Pathology 

9. The list of corporate practice allowed in professions includes:

– Aeronautical engineering

– Agricultural biosystems engineering

– Architecture

– Chemistry

– Electronics engineering

– Environmental planning

– Forestry

– Guidance and counselling

– Interior design

– Landscape architecture

– Naval architecture

– Psychology

– Real estate service (real estate consultant, real estate appraiser, real estate assessor, real estate broker and real estate sales person

– Sanitary engineering

– Social work

9. Architecture is considered as corporate practice of professions with foreign equity restriction.

Limit on Foreign Equity

Industtry

No Foreign Equity Allowed / 0% Foreign Ownership

・   Mass media (Except recording and internet business)

・   Practice of professions; except in cases specifically allowed by law following the prescribed conditions stated therein; and the listed professions found in the Annex on Professions of the 12^th Foreign Investment Negative list, which indicates that:

Ø  Professions where foreigners are not allowed to practice in the Philippines, except if subject to reciprocity as provided in pertinent laws; and

Ø  Corporate practice of professions with foreign equity restrictions under pertinent laws.

・   Retail trade enterprises with paid-up capital of less than twenty-five million pesos (PHP25,000,000) (Please see https://oneasia.legal/8203)

・   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 zones, 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 (various treaties to which the Philippines is a signatory and conventions supported by the Philippines)

・   Manufacture of firecrackers and other pyrotechnic devices.

Up to 25%

・   Private recruitment, whether for local or overseas employment

・   Contracts for the construction of defense-related structures

Up to 30%

・   Advertising

Up to 40%

・   Procurement of infrastructure projects pursuant to the Government Procurement Reform Act.

・   Exploration, development and utilization of natural resources

・   Ownership of private lands (except 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

Public utilities have been clearly defined under the Public Service Act. For more information, you can check our previous newsletter in the following link  https://oneasia.legal/8416

・   Educational institutions (other than those established by religious groups and mission boards, for foreign diplomatic personnel and their dependents, and other foreign temporary residents, (Section 4, Article XIV of the Constitution), or for short-term high-level skills development that do not form part of the formal education system as defined un section 20 of Batas Pambansa No. 232

・   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, subject to period of divestment

・   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

・   Private radio communications network

Limit on Foreign Equity

Industry

Up to 40％

・     Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police clearance:

–               Firearms (handguns to shotguns), parts of firearms and ammunition therefore, instruments or implements used or intended to be used in the manufacture of firearms;

–               Gunpowder

–               Dynamite

–               Blasting supplies;

–               Ingredients used in making explosives:

–               Chlorates of potassium and sodium

–               Nitrates of ammonium, potassium, sodium barium, copper (11), lead (11), calcium and cuprite

–               Nitric acid

–               Nitrocellulose

–               Perchlorates of ammonium, potassium and sodium

–               Dinitrocellulose

–               Glycerol

–               Amorphousphosphorus

–               Hydrogen peroxide

–               Strontium and nitrate powder

–               Toluene

–               Telescopic sights, sniper scope and other similar devices.

The manufacture or repair of the above listed items may be authorized by the Chief of the Philippine National Police to non-Philippine nationals; provided that a substantial percentage of output as determined by it, is exported.

・     Manufacture and distribution of dangerous drugs

・     Sauna and steam bathhouses, massage clinics and other like activities regulated by law because of risks posed to public health and morals, except wellness centers

・     All forms of gambling (except those covered by investment agreements with PAGCOR)

・     Micro and small domestic market enterprises with paid in equity capital of less than the equivalent of US$200,000

・     Micro and small domestic market enterprises with paid-in equity capital of less than the equivalent of US$100,000: (see: https://oneasia.legal/8333) (i) that involve advance technology as determined by the Department of Science and Technology (hereinafter referred to as, “DOST”); or (ii) are endorsed as startup or startup enablers by the lead host agencies, namely the Department of Trade and Industry, Department of Information and Communications Technology or DOST, under the Innovative Startup Act; or (iii) with a majority of their direct employees be less than fifteen (15).