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Businesses Foreigners May Be Restricted to Invest In: the Foreign Investment Negative List

Philippine laws encourage and welcome foreign investment from individuals, partnerships, corporations, and governments that wish to do business in the country.Republic Act No. 7042, also known as the Foreign Investment Act of 1991, allows 100% foreign equity in a business, unless said company falls within the industries listed under the Foreign Investment Negative List (FINL).

 

The FINL is a list of industries wherein foreign equity is either prohibited or regulated. It also requires the investors to have a corporate presence in the Philippines.

 

The FINL is separated into two parts. List A includes industries that limit foreign equity in accordance with specific laws and the Constitution.List B contains enterprises whose activities are regulated by law, such as defense-related activities (ex. firearms, pyrotechnics, etc.) which require clearance from the Department of National Defense (DND).

 

Also under List B are businesses that affect public health and morals (ex. gambling, nightclubs, massage clinics) and small businesses with less than US$500,000 in capital unless they involve advanced technology as determined by the Department of Science and Technology (DOST).

 

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$ 2,500,000

  • 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, biological, chemical and radiological weapons, and anti-personal mines.

  • Manufacture of firecrackers and other pyrotechnic devices

Up to Twenty Percent (20%) Foreign Equity

  • Private radio communication networks

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 by R.A. 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, lead, 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 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 (ex., 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 Defense 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 direct employees with paid-in equity capital of less than the equivalent of US$100,000