FOREIGN INVESTMENT NEGATIVE LIST - ABO LAW FIRM

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FOREIGN INVESTMENT NEGATIVE LIST

FOREIGN INVESTMENT NEGATIVE LIST

On 29 October 2018 President Rodrigo Duterte issued the 11th Foreign Investment Negative List. The said Foreign Investment Negative List took effect on 16 November 2018. As with the previous List, the current one outlines, clarifies the scope and limitations of foreign ownership in businesses in specific industries.

The intent of the 11th Foreign Investment Negative List is to ease restrictions on foreign participation in certain investment areas or activities. This can be seen in the easing of restrictions of foreign ownership in many sectors or industries, which now can be owned 100 percent by foreigners or foreign corporations.

  1. Internet Business
  2. Teaching at higher education levels provided the subject being taught is not a professional subject
  3. Training centers that are engaged in short-term high level skills development that do not form part of the formal educations system
  4. Adjustment companies, lending companies, financing companies, and investment houses
  5. Wellness centers

WHAT IS THE FOREIGN NEGATIVE LIST

As stated earlier, the Foreign Investment Negative List is a list which outline the scope and limitations of foreign ownership in businesses is specific industries. The list is divided into LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE OF THE CONSTITUTION AND SPECIFIC LAWS and LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE, RISK TO HEALTH, AND MORALS AND PROTECTION OF SMALL AND MEDIUM SCALE ENTERPRISES.

THE 11th FOREIGN INVESTMENT NEGATIVE LIST

LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE OF THE
CONSTITUTION AND SPECIFIC LAWS

NO FOREIGN EQUITY

  1. Mass media, except recording andinternet business
  2. Practice of professions, including radiologic and x-ray technology, law, criminology, and marine deck officers and marine engine officers.
    1. subject to the Annex on Professions indicating professions where foreigners are allowed to practice in the Philippines subject to reciprocity and where corporate practice is allowed
    2. foreigners may teach at higher education levels if subject being taught is not a professional subject (included in a government board or bar examination)4.
  3. Retail trade enterprises with paid-up capital of less than US$2.5 million
  4. Cooperatives
  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 utilization 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
  11. Manufacture of firecrackers and other pyrotechnic devices

UP TO TWENTY-FIVE PERCENT (25%) FOREIGN EQUITY

12. Private recruitment, whether for local or overseas employment

13. Contracts for the construction of defense-related structures

UP TO THIRTY PERCENT (30%) FOREIGN EQUITY\ UP TO 30% FOREIGN EQUITY

14. Advertising

UP TO 40% FOREIGN EQUITY

15. Subject to applicable regulatory frameworks, contracts for the construction and repair of locally-funded public works except:

A. Infrastructure/development projects covered in Republic Act No. 7718

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

16. Exploration, development and utilization of natural resources

17. Ownership of private lands

18. Operation of public utilities,except power generation and the supply of electricity to the contestable market and similar businesses or services not covered by the definition of public utilities

19. 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 as defined in Section 20 of Batas Pambansa No. 232 (1982)

20. 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

21. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation

22. Operation of deep sea commercial fishing vessels

23. Ownership of condominium units

24. Private radio communications network

LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE, RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL AND MEDIUM SCALE ENTERPRISES

UP TO FORTY PERCENT (40 %) FOREIGN EQUITY

  1. Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) clearance:
    1. Firearms (handguns to shotguns), parts of firearms and ammunition therefor, instruments or implements used or intended to be used in the manufacture of firearms;
    2. Gunpowder;
    3. Dynamite;
    4. Blasting supplies;
    5. Ingredients used in making explosives:
      1. Chlorates of potassium and sodium;
      2. Nitrates of ammonium, potassium, sodium barium, copper (11), lead (11), calcium and cuprite;
      3. Nitric acid;
      4. Nitrocellulose;
      5. Perchlorates of ammonium, potassium and sodium;
      6. Dinitrocellulose;
      7. Glycerol;
      8. Amorphous phosphorus;
      9. Hydrogen peroxide;
      10. Strontium nitrate powder;
      11. Toluene; and
      12. Telescopic sights, sniper scope and other similar devices.

However, the manufacture or repair of these items may be authorized by the Chief of the PNP to non-Philippine nationals; Provided that a substantial percentage of output, as determined by the said agency, is exported. Provided further that the extent of foreign equity ownership allowed shall be specified in the said authority/clearance.

  1. Manufacture, repair, storage and/or distribution of products requiring Department of National Defense (DND) clearance:
    1. Guns and ammunition for warfare;
    2. Military ordnance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles);
    3. Gunnery, bombing and fire control systems and components;
    4. Guided missiles/missile systems and components;
    5. Tactical aircraft (fixed and rotary-winged), parts and components thereof;
    6. Space vehicles and component systems;
    7. Combat vessels (air, land and naval) and auxiliaries;
    8. Weapons repair and maintenance equipment;
    9. Military communications equipment;
    10. Night vision equipment;
    11. Stimulated coherent radiation devices, components and accessories;
    12. Armament training devices; and
    13. Others as may be determined by the Secretary of the DND.

However, the manufacture or repair of these items may be authorized by the Secretary of National Defense to non-Philippine nationals; Provided that a substantial percentage of output, as determined by the said agency, is exported. Provided further that the extent of foreign equity ownership allowed shall be specified in the said authority/clearance

  1. Manufacture and distribution of dangerous drugs
  2. 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
  3. All forms of gambling except those covered by investment agreements with PAGCOR
  4. Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000
  5. Domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-in equity capital of less than the equivalent of US$100,00

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