Question & AnswerQ&A (Republic Act No. 7042)
The title is the 'Foreign Investments Act of 1991'.
The policy is to attract, promote, and welcome productive foreign investments that contribute to national industrialization and socioeconomic development, within constitutional and legal limits.
A Philippine National means a citizen of the Philippines or a domestic partnership or association wholly owned by Filipinos, or a corporation with at least 60% capital owned and voting rights held by Filipinos, including certain trustees of funds for Filipino beneficiaries.
It includes soliciting orders, service contracts, opening offices, appointing representatives or distributors domiciled in the Philippines, participating in management or control of Philippine businesses, and other acts implying continuity of commercial dealings, but excludes mere investment as a shareholder or appointing a representative transacting business on its own account.
As a general rule, there are no ownership restrictions for export enterprises (up to 100% foreign ownership). For domestic market enterprises, foreigners can own up to 100% equity except in areas listed in the Foreign Investments Negative List.
It is a list of economic activities where foreign ownership is limited to a maximum of 40% equity. It has three components: List A (reserved by constitution/laws), List B (regulated activities), and List C (activities adequately served by existing enterprises).
Non-Philippine nationals investing or doing business in Philippine enterprises must register with SEC or BTRCP, unless otherwise disqualified or restricted by law or the Foreign Investment Negative List.
Violators may be fined up to P100,000; juridical entities can be fined up to 0.5% of paid-in capital but not exceeding P5,000,000; responsible officials may be fined up to P200,000; and may forfeit all benefits granted under the Act.
No, banking and other financial institutions are governed separately by the General Banking Act and supervised by the Central Bank.
For 36 months after the implementing rules, a Transitory Foreign Investment Negative List applies, containing Lists A, B, and C with specific industries and investment areas where foreign ownership limits or restrictions apply temporarily before the regular negative list replaces it.
Yes, a domestic market enterprise can become an export enterprise if, over a three-year period, it consistently exports at least 60% of its output each year.
Strategic industries are those crucial to accelerated industrialization, requiring massive investments and advanced technology, with strong industry linkages and foreign exchange benefits. The NEDA Board formulates and publishes the list within 18 months after the Act's effectivity.
They are encouraged to increase Filipino participation through partnerships, election of Filipinos to boards, transfer of technology, creating employment, and enhancing Filipino workers' skills.
The National Economic and Development Authority (NEDA) recommends them, and the President promulgates them by proclamation. Amendments to Lists B and C can be made not more often than once every two years after the first regular list.