Foreign Investment Negative List
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Doing business in the Philippines: Foreign Investment Negative List

Participation of foreign entities in economic and commercial activities in the Philippines is regulated under Republic Act No. 7042, as amended, otherwise known as the Foreign Investments Act of 1991 (FIA). The FIA requires the publication of the Foreign Investment Negative List (Negative List) – which outlines economic activities where foreign equity and participation are either prohibited or limited to a specific percentage.

The Negative List has two component lists: List A and List B. List A contains areas of investment where foreign ownership is limited by mandate of the Philippine Constitution or by specific laws. List B contains areas of investment where foreign ownership is limited for reasons of security, defense, risk to health and morals, and protection of local small-and-medium enterprises (SMEs). Except for activities where restrictions on foreign equity are imposed under the Philippine Constitution or statutes, the President of the Philippines may amend the Negative List and such amendments should not be made more than once every two (2) years.

The regular Negative List is updated and issued every two years and the current list being implemented is the tenth version signed into law by Former President Benigno S. Aquino III under Executive Order No. 184 in May 2015. The eleventh version has been drafted and submitted to the Office of the President last October 2017 and is pending for approval from President Rodrigo Duterte.

The 10th version retained the list of activities and sectors restricted to foreign equity and participation previously provided in the 9th regular Negative List and earlier versions. Under the impending 11th version, however, the Duterte administration is keen on reducing restrictions in almost every area of investment in the Philippines (except land ownership) to boost the entry of foreign direct investments into the country.

The 10th Regular Negative List (provided under EO No. 184)

LIST A

No Foreign Equity

  • Mass media except recording
  • Practice of Professions
    • Pharmacy
    • Radiologic and x-ray technology
    • Criminology
    • Forestry
    • Law
  • Retail trade enterprises with paid-up capital of less than US$ 2,500,00
  • Cooperatives
  • Private Security 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-personal 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 Twenty Percent (20%) Foreign Equity

  • Private radio communication network

Up to Twenty-Five Percent (25%) Foreign Equity

  • Private recruitment, whether for local or overseas employment
  • Contracts for the construction and repair of locally-funded public works, except:
    • Infrastructure/development projects covered in RA 7718; and
    • Projects which are foreign-funded or assisted and required to undergo international competitive bidding of contracts for construction of defense-related structure

Up to Thirty Percent (30%) Foreign Equity

  • Advertising

Up to Forty Percent (40%) Foreign Equity

  • Exploration, development, and utilization of natural resources
  • Ownership of Private Lands
  • Operation and management of public utilities
  • Educational institutions other than those established by religious groups and mission boards
  • 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 corporation, company, agency or municipal corporation
  • Facility operator of an infrastructure or a development facility requiring a public utility franchise
  • Operation of deep sea commercial fishing vessels
  • Adjustment companies
  • Ownership of condominium units

LIST B

Up to Forty Percent (40%) Foreign Equity

  • Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) 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
        • Amorphous phosphorus
        • Hydrogen peroxide
        • Strontium nitrate powder
        • Toluene
      • 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 foreign nationals; provided that a substantial percentage of output, as determined by the said agency, is exported and the extent of foreign equity ownership allowed shall be specified in the said authority/clearance.
  • Manufacture, repair, storage, and/or distribution of products requiring Department of National Defense (DND) clearance;
    • Guns and ammunition for warfare
    • Military ordnance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles)
    • Gunnery, bombing, and fire control systems and components
    • Guided missiles/missile systems and components
    • Tactical aircraft (fixed and rotary-winged), parts and components thereof
    • Space vehicles and component systems
    • Combat vessels (air, land, and naval) and auxiliaries
    • Weapons repair and maintenance equipment
    • Military communications equipment
    • Night vision equipment
    • Stimulated coherent radiation devices, components, and accessories
    • Armament training devices
    • 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 Defence to foreign nationals; provided that a substantial percentage of output, as determined by the said agency, is exported and the extent of foreign equity ownership allowed shall be specified in the said authority/clearance.
  • 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
  • All forms of gambling, except those covered by investment agreements with PAGCOR
  • Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000
  • 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$100,000

Source: Securities and Exchange Commission
Updated: March 20, 2018

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