Doing business in the Philippines: Foreign Investment Negative List
The Foreign Investment Negative List, or Negative List, is a list of economic sectors where foreign ownership and participation in the Philippines are regulated. It contains 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, on the other hand, 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 years.
The regular Negative List is updated and issued every two years and the current version being implemented is the 11th version, signed into law by President Rodrigo Duterte under Executive Order (EO) No. 65 in October 2018.
Updates on the 11th Version of the Negative List
The 11th version added sectors where up to 100% foreign participation will be allowed:
- Internet businesses (a new category previously included in the category of mass media, which remains completely restricted to foreign participation and ownership);
- Teaching at higher education levels (provided the subject being taught is not a professional subject or included in a government board or bar examination);
- Training centers engaged in short-term high-level skills development that do not form part of the formal education system;
- Insurance adjustment companies, lending companies, and investment houses; and
- Wellness centers.
It also increased participation of up to 40% on two sectors:
- Contracts for construction and repair of locally-funded public works (except those that are foreign-funded or assisted and required to undergo international competitive auction), which used to have 25% foreign equity cap; and
- Private radio communication networks (previously only up to 20% equity).
However, the new Negative List removed the following sectors from the list (where up to 40% foreign equity was previously allowed):
- Facility operator of an infrastructure or a development facility requiring a public utility franchise; and
- Adjustment companies.
The 11th Foreign Investment Negative List (under EO 65)
No Foreign Equity
- Mass media, except recording and internet business
- Practice of professions, including radiologic and x-ray technology, law, criminology, and marine deck officers and marine engine officers
- 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; and
- Foreigners may teach at higher education levels if subject being taught is not a professional subject (included in a government board or bar examination).
- Retail trade enterprises with paid-up capital of less than US$2.5 million
- 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
- Manufacture of firecrackers and other pyrotechnic devices
Up to 25% Foreign Equity
- Private recruitment, whether for local or overseas employment
- Contracts for the construction of defense-related structures
Up to 30% Foreign Equity
Up to 40% Foreign Equity
- Contracts for the construction and repair of locally-funded public works, except:
- Infrastructure/development projects covered in Republic Act (RA) No. 7718; and
- Projects which are foreign-funded or assisted and required to undergo international competitive bidding.
- Exploration, development, and utilization of natural resources
- Ownership of private lands
- 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
- 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 (BP) No. 232 (1982)
- 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 and Controlled Corporation (GOCC), company, agency or municipal corporation
- Operation of deep-sea commercial fishing vessels
- Ownership of condominium units
- Private radio communications network
Up to 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 therefor, instruments or implements used or intended to be used in the manufacture of firearms;
- 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;
- Perchlorates of ammonium, potassium, and sodium;
- Amorphous phosphorus;
- Hydrogen peroxide;
- Strontium nitrate powder;
- Toluene; and
- 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 (RA No. 7042 as amended by RA No. 8179).
- Manufacture, repair, storage, and/or distribution of products requiring Department of National Defense (DND) clearance:
- Guns and ammunition for warfare;
- Military ordinance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles);
- Gunnery, bombing, and fire control 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; and
- 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 (RA No. 7042 as amended by RA No. 8179).
- Manufacture and distribution of dangerous drugs (RA No. 7042 as amended by RA No. 8179)
- 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 Philippine Amusement and Gaming Corporation (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: Official Gazette of the Philippines
Updated: November 8, 2019