Foreign ownership limitations updated in the 12th Regular Foreign Investment Negative List
The government issues Executive Order (EO) 175 S. 2022, containing the updated foreign ownership limitation rules explaining which key investment areas and activities are available to foreign investors.
By Atty. Joanne Ranada, Principal, Corporate Services
Malacañang Palace has finally issued the 12th Regular Foreign Investment Negative List (“Negative List”) on June 27, 2022. The Negative List was initially created as a result of Republic Act (RA) 7042, otherwise known as “Foreign Investments Act of 1991”, which was amended on March 2, 2022, under Republic Act 11647.
The Negative List was updated to accurately reflect the changes brought about by the amendment, which revision focuses on reducing the restrictions regarding foreign influence on significant investment areas and activities.
The new Negative List also reflects the updates to the Retail Trade Liberalization Act (“Retail Trade Law”) that was amended on December 10, 2021 under Republic Act No. 11595. The highlight of the amendment was allowing foreign participation in retail trade enterprises as long as the paid-up capital is more than PHP 25,000,000.00. Previously, the paid-up capital required was USD 2,500,000.00, which is approximately PhP 146,000,000.00 in today’s exchange rate.
No longer included is the manufacturing and distribution of products that require clearance from the Department of Defense. Under the previous Negative List, guns, ammunition for warfare, guided missiles, tactical aircraft, space vehicles and military communication equipment were limited to 40% foreign equity.
Private recruitment firms can also now have up to 25% foreign equity whether such is for local or overseas employment.
Under List A, foreign equity restrictions relative to the operation of public utilities reflected the changes brought about by Republic Act 11659 or the amended Public Service Act. Under this amendment, distribution and transmission of electricity, petroleum and petroleum products pipeline transmission systems, water pipeline transmission systems, wastewater and sewerage pipeline systems, seaports and public utility vehicles are now considered public utilities and thus subject to the 40% foreign equity limitations under the Philippine Constitution. Telecommunications or other corporations engaged in activities that were previously considered as such have been excluded.
The foregoing changes, which were highlighted in key sectors, now allow for bigger opportunities for foreign investors to enter the Philippine capital market.
