Foreign investment negative list updated, reflects shipping, air transport ownership liberalization

• Executive Order 175 replaces the 11th regular foreign investment negative list that President Rodrigo Duterte approved in 2018

• 11 areas on the list, led by mass media and practice of professions, remain off limits to foreign equity

• The National Economic and Development Authority welcomed the amendments that, it says, reflects full foreign ownership liberalization for telecommunications, domestic shipping, railways and subways, and air transport

President Rodrigo Duterte has issued an executive order updating the regular foreign investment negative list that enumerates the areas or activities open to foreign investors and those exclusively reserved for Filipino nationals.

Duterte promulgated the 12^th regular foreign investment negative list by issuing Executive Order No. 175 on June 27. EO 175 replaced the 11th regular foreign investment negative list he approved in 2018. The new EO and the amended list were uploaded onto the Official Gazette on June 28.

The 12^th regular foreign investment negative list reflects the full foreign ownership liberalization for telecommunications, domestic shipping, railways and subways, and air transport as provided under the amendments to the Public Service Act, said the National Economic and Development Authority, which welcomed the amendments.

READ: Duterte signs amended Public Service Act

The President said there is a need to formulate the 12^th regular foreign investment negative list to reflect changes pursuant to existing laws, “consistent with the policy to ease restrictions on foreign participation in certain investment areas or activities.”

The updating of the regular foreign investment negative list is one of the last official acts of Duterte, whose six-year term as President ends at the stroke of midnight on June 30. He will give way to President-elect Ferdinand Marcos Jr., who will be sworn into office on July 1.

The Foreign Investments Act of 1991 calls for the crafting of the list, which is divided into Lists A and B. List A may be amended anytime to reflect changes made in specific laws. List B shall not be amended more often than once every two years.

List A specifies areas where foreign ownership is not allowed:

1. Mass media, except recording and internet business
2. Practice of professions, except in cases specifically allowed by law
3. Retail trade enterprises with paid-up capital of less than P25 million
4. Cooperatives, except investments of former natural born citizens of the Philippines
5. Organization and operation of private detective, watchmen or security guards agencies
6. Small-scale mining
7. Utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zone, as well as small-scale use of natural resources in rivers, lakes, bays and lagoons
8. Ownership, operation and management of cockpits
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines, and
11. Manufacture of firecrackers and other pyrotechnic devices

Professions where foreigners are not allowed to practice in the Philippines, except if subject to reciprocity, as provided in pertinent laws, and corporate practice of professions with foreign equity restrictions under pertinent laws, are the following:

• Accountancy
• Aeronautical engineering
• Agricultural and biosystems engineering
• Agriculture
• Architecture
• Chemical engineering
• Chemistry
• Civil engineering
• Criminology
• Customs brokers
• Dentistry
• Electrical engineering
• Electronics technician
• Environmental planning
• Fisheries
• Food technology
• Forestry
• Geodetic engineering
• Geology
• Guidance and counselling
• Interior design
• Landscape architecture
• Librarianship
• Marine deck and engineering
• Master plumbing
• Mechanical engineering
• Medical technology
• Medicine
• Metallurgical engineering
• Midwifery
• Naval architecture
• Nursing
• Nutrition and dietetics
• Optometry
• Pharmacy
• Physical and occupational therapy
• Professional teaching
• Psychology
• Radiologic and x-ray technology
• Real estate service
• Respiratory therapy
• Sanitary engineering
• Social work
• Speech language pathology
• Veterinary medicine, and
• Other professions as may be provided by law or treaty where the Philippines is a party.

Areas where the allowed foreign equity is only up to 25%:

1. Private recruitment, whether local or overseas employment; and
2. Contracts for the construction of defense-related structures.

Area where up to 30% foreign equity is allowed:

1. Advertising

Areas where up to 40% foreign equity is allowed:

1. Procurement of infrastructure
2. Exploration, development and utilization of natural resources
3. 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
4. Operation of public utilities
5. 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
6. 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
7. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporations, company, agency or municipal corporation
8. Operation of deep-sea commercial fishing vessels
9. Ownership of condominium units and private radio telecommunication network.

List B contains several areas where foreign ownership is limited for reasons related to security, defense, health and morals, and for the protection of small and medium-scale enterprises.

Areas where up to 40% foreign equity is allowed:

1. Manufacture, repair, storage or distribution of products or ingredients requiring police clearance, namely, firearms, gunpowder, dynamite, blasting supplies, ingredients used in making explosives and telescopic sights, sniper scope and other similar devices;
2. Manufacture and distribution of dangerous drugs;
3. Sauna and steam bathhouses, massage clinics and other similar activities, except wellness centers;
4. All forms of gambling except those covered by investment agreements with the state-run Philippine Amusement and Gaming Corp.
5. Micro and small domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000
6. Micro and small domestic market enterprises that involve advance technology or are endorsed as start-up or start-up enablers by state agencies
7. Those whose majority of direct employees are Filipinos, provided that their Filipino employees should not be fewer than 15, and with a paid-in equity capital of less than the equivalent of US$100,000.

NEDA welcomed the President’s updating of the regular foreign investment negative list as being in line with recent amendments to the Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act.

“We welcome the issuance of the 12th regular foreign investment negative list. The revised list is aligned with the recently passed amendments to the PSA, RTLA, and FIA. It is also consistent with the policy to ease restrictions on foreign participation,” Socioeconomic Planning Secretary Karl Kendrick Chua said in a statement on June 28.

The revised list incorporates the amendments to the RTLA that provides for a uniform minimum paid-up capital of US$500,000 (P25 million) from as much as US$2.5 million to US$7.5 million for non-luxury foreign retailers.

It also takes into account the amendments to the FIA that allows for a lower minimum paid-up capital of US$100,000 for non-Philippine nationals if the enterprise involves advanced technology as determined by the Department of Science and Technology, endorsed as a start-up by the lead host agencies pursuant to the Innovative Startup Act, or employs no fewer than 15 Filipino employees.

“In the future, we also intend to liberalize more sectors like renewable and inexhaustible energy sources such as wind, tidal, solar to help address the looming power crisis and climate change concerns,” Chua added.