Foreign Investments Act Amendments

Policy, purpose, and principles

The State recognizes that increased capital and technology benefits the Philippines and that global and regional economies affect the Philippine economy.
The State policy is to attract, promote, and welcome productive investments from foreign individuals, partnerships, corporations, and governments (including their political subdivisions) in activities that significantly contribute to sustainable, inclusive, resilient, and innovative economic growth, productivity, global competitiveness, employment creation, technological advancement, and countrywide development, to the extent foreign investment is allowed by the Constitution and relevant laws, and consistent with the protection of national security.
Foreign investments are encouraged in enterprises that: significantly expand livelihood and employment opportunities for Filipinos; enhance economic value of agricultural products; promote the welfare of Filipino consumers; expand the scope, quality and volume of exports and their access to foreign markets; and/or transfer relevant technologies in agriculture, industry and support services.
Foreign investments are welcome as a supplement to Filipino capital and technology in enterprises serving mainly the domestic market.
The State promotes accountability and integrity in public office and promotes and administers efficient public service to entice foreign investments.
Foreign investments must be conducted based on the principles of transparency, reciprocity, equity, and economic cooperation.

Core definitions added and amended

“Investment” means equity participation in an enterprise organized or existing under Philippine laws and duly recorded in the enterprise’s stock and transfer book or equivalent registry of ownership.
“Foreign investment” means an equity investment made by a non-Philippine national in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Bangko Sentral ng Pilipinas.
“Practice of profession” means an activity or undertaking rendered and performed by a registered and duly licensed professional or holder of a special temporary permit as defined in the scope of practice of a professional regulatory law.
“Pipeline transaction” means the sector that includes transport of goods or materials through a pipeline such as crude, refined petroleum, natural gas, biofuels, and other chemically stable substances.

Investment promotion coordination committee

Republic Act No. 7042 creates the Inter-Agency Investment Promotion Coordination Committee (IIPCC) to integrate promotion and facilitation efforts to encourage foreign investments.
The Department of Trade and Industry (DTI) acts as the lead agency for the IIPCC.
The IIPCC is composed of:
- (a) the Secretary of the DTI (presiding Chairperson);
- (b) the Secretary/Undersecretary of the Department of Finance (DOF) (Vice-Chairperson);
- (c) one representative from DTI–Board of Investments (BOI);
- (d) one representative from DTI–Philippine Economic Zone Authority (PEZA);
- (e) one representative from the Department of Foreign Affairs (DFA), Office of the Undersecretary for Multilateral Affairs and International Economic Relations (OUMAIER);
- (f) one representative from the National Economic and Development Authority (NEDA);
- (g) one representative from the Department of Information and Communications Technology (DICT);
- (h) one representative from the Commission on Higher Education (CHED);
- (i) one representative from the Technical Education and Skills Development Authority (TESDA); and
- (j) four (4) representatives: one each from the National Capital Region, Luzon, Visayas, and Mindanao, chosen from a list submitted by nationally recognized leading industry or business chambers, who must be of known competence, probity, integrity, and expertise in investment-related fields (including advertising, banking, finance management, and law) with at least ten (10) years of outstanding management or leadership experience.
The Chairperson may request participation of other government departments and agencies or instrumentalities, LGUs, NGOs, and local business chambers and enterprises as a particular foreign investment may require.
The IIPCC coordinates with and, when necessary, partners with specified economic zone and development authorities, including BCDA, AFAB, CDC, SBMA, CEZA, JHMC, PPMC, ZCSEZA, PHIVIDEC Industrial Authority (PIA), APECO, TIEZA, and all similar authorities created by law, in promoting foreign investments—but this coordination does not include administration, design, and grant of fiscal incentives.
The BOI serves as the secretariat of the IIPCC and implements its policies and resolutions.

IIPCC powers and FIPMP development

The IIPCC must establish both a medium-and-long-term Foreign Investment Promotion and Marketing Plan (FIPMP) integrating all existing investment development plans and programs under BOI, PEZA, and various investment promotion agencies (IPAs), LGUs, and other agencies delineated in Section 4-B.
The IIPCC must design a comprehensive marketing strategy and campaign promoting the country as a desirable investment area.
The IIPCC must support inbound and outbound foreign direct and trade missions to explore the country for business locations.
The IIPCC must encourage and support research and development in priority areas indicated by the FIPMP.
The IIPCC must monitor actual performance against measurable and timebound targets in the FIPMP, including job generation.
The IIPCC must submit annual evaluation and reports to the President and Congress regarding IIPCC activities.
The IIPCC must establish and regularly update an online database that includes a directory of ready local partners from priority sectors under the FIPMP for investment promotion and business matching in local supply chains.
The IIPCC must support local government efforts to promote foreign direct investments, expedite compliance with national requirements, and address investors in their respective localities.

Medium-term and long-term FIPMP rules

The IIPCC must develop the FIPMP for a medium five-year and long-term ten-year plan.
The FIPMP must be based on competitive advantages, natural resources, skill and educational development, traditional linkages, and international market potential.
The FIPMP must be fully consistent with the strategic investment priorities plan under Title XIII of the National Internal Revenue Code, as amended.
An online portal containing the FIPMP must be uploaded and must contain further details including the IIPCC’s procedure and contacts and schedules, among others.
The database must include a directory of local enterprises capable and willing to partner with potential foreign investors.
When foreign applicants seek partners, subcontractors, suppliers, and other local counterparts, the IIPCC must consult local chambers of commerce, sectoral business groups, and other individual partners.
Education and skills development agencies (including DepEd, CHED, TESDA, DOLE, PRC, and other training agencies) must direct curriculum and training efforts toward manpower requirements of the FIPMP.
The IIPCC must coordinate with concerned government agencies to ensure alignment with the FIPMP.
The DTI must promulgate rules and regulations necessary to implement this FIPMP development provision.

Foreign ownership and registration rules

A non-Philippine national may, without need of prior approval, register with the Securities and Exchange Commission (SEC) or with the DTI in the case of single proprietorships, to do business or invest in a domestic enterprise up to one hundred percent (100%) of its capital.
The non-Philippine national must not be otherwise disqualified by law, and the right to full ownership is subject to any prohibition or limitation on non-Philippine participation by existing law or under the Act.
The SEC or DTI must not impose limitations on foreign ownership beyond those provided in the Act.
Any enterprise seeking to avail of incentives under the Omnibus Investment Code of 1987 must apply for registration with the BOI, and the BOI must process the application under the evaluation criteria prescribed in the Omnibus Investment Code of 1987.
A non-Philippine national intending to engage in the same line of business as an existing joint venture where the applicant or its majority shareholder is a substantial partner must disclose in its SEC registration application the fact of the related joint venture and the names and addresses of the partners in the existing joint venture.
During the transitory period provided in Section 15 of Republic Act No. 7042 (as amended and renumbered accordingly), the SEC must disallow registration of the applying non-Philippine national if the existing joint venture enterprise—particularly the Filipino partners—can reasonably prove the domestic market activities to be undertaken by the SEC.
The SEC must effect registration of any enterprise applying under the Act within fifteen (15) days upon submission of completed requirements.

Export enterprise ownership and compliance

Foreign investment in an export enterprise whose products and services do not fall within Lists A and B of the Foreign Investment Negative List is allowed up to one hundred percent (100%) ownership.
Non-Philippine nationals operating export enterprises must register with the BOI and submit reports required to ensure continuing compliance with export requirements.
The BOI must advise the SEC or DTI when an export enterprise fails to meet its export ratio requirement.
Upon advice, the SEC or DTI must order the non-complying export enterprise to reduce sales to the domestic market to not more than forty percent (40%) of its total production.
Failure to comply with the SEC or DTI order without justifiable reason subjects the enterprise to cancellation of SEC or DTI registration and/or the penalties provided in Section 14 of Republic Act No. 7042.
Export enterprises must register and comply with export requirements under Title XIII of the National Internal Revenue Code, as amended, for purposes of availing tax incentives or benefits.

Foreign Investment Negative List updates

The Foreign Investment Negative List includes defense-related activities requiring prior clearance and authorization from the Department of National Defense (DND) to engage in such activity, including manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons, military ordinance, explosives, pyrotechnics and similar materials—unless manufacturing or repair is specifically authorized by the Secretary of National Defense.
The Negative List reserves certain retail and small domestic market enterprises to Philippine nationals, including micro and small domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollar (US$200,000.00), and incorporates related carve-outs and qualifications.
Non-Philippine nationals may be allowed participation if the micro and small enterprise: involves advanced technology as determined by the Department of Science and Technology; or is endorsed as a startup or startup enabler by the lead host agencies under Republic Act No. 11337 (Innovative Startup Act); or has a workforce where a majority of direct employees are Filipinos but the number of Filipino employees is not less than fifteen (15), and the minimum paid-in capital is One hundred thousand US dollars (US$100,000.00).
Registered foreign enterprises employing foreign nationals and enjoying fiscal incentives must implement an understudy or skills development program to ensure transfer of technology or skills to Filipinos.
Compliance with the understudy or skills development program is regularly monitored by DOLE.
Nothing in the Act terminates employees hired prior to the effectivity of the Act; the Labor Code of the Philippines and other applicable laws, rules and regulations issued by DOLE prevail.
Amendments to List B (and relevant portions of the Negative List) are made upon recommendation of the Secretary of National Defense, or the Secretary of Health endorsed by NEDA, or upon NEDA recommendation motu proprio, approved by the President and promulgated through the issuance of the Foreign Investment Negative List by Executive Order.
Amendments to the Foreign Investment Negative List must not be made more often than once every two (2) years.
Every two (2) years, NEDA in consultation and cooperation with the BOI, DTI, SEC, DICT, IPAs, and other pertinent agencies must (i) review the Foreign Investment Negative List and (ii) submit to Congress an analysis of foreign investment performance economic activities of industries covered by the Negative List and the reasons for recommended amendments, if any.
NEDA must recommend to Congress investment-related matters requiring necessary legislation.

Strategic industries review and limits

Upon the order of the President, the IIPCC, in coordination with the National Security Council (NSC) and NEDA, must review foreign investments involving military-related industries, cyber infrastructure, pipeline transportation, or other activities that may threaten territorial integrity and the safety, security, and well-being of Filipino citizens when:
- (a) the investment is made by a foreign government-controlled entity or state-owned enterprises (except independent pension funds, sovereign wealth funds, and multi-national banks); or
- (b) the investment is located in geographical areas critical to national security.
Any recommendation to suspend, prohibit, or otherwise limit a reviewed foreign investment must be transmitted to the Office of the President for appropriate action.

Anti-graft penalties in promotion

Public officials and employees involved in foreign investment promotions must uphold the highest standards of public service, accountability, and integrity.
Any public official or employee involved in foreign investment promotions who commits any act under Section 3 of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) must be punished, in addition to the penalties under Section 9(a) of Republic Act No. 3019, by a fine of not less than PHP 2,000,000.00 but not more than PHP 5,000,000.00.

Non-applicability and professions covered

The Act does not apply to banking and other financial institutions governed and regulated by Republic Act No. 8791 (General Banking Law of 2000) and other laws under the supervision of the Bangko Sentral ng Pilipinas.
The Act does not apply to the practice of professions covered by specific laws under the jurisdiction of various Professional Regulatory Boards (PRBs) or other equivalent regulating body, or those subject to reciprocity agreements with other countries.
For occupations, employment, or practice of profession not covered by any special law or reciprocity agreement, the Act applies to the extent applicable, provided that the necessary licenses, work permits, and visas are properly secured from the relevant government agencies.

Appropriations, rules, repeals, separability

Fifty million pesos (P50,000,000.00) from the Contingent Fund of the General Appropriations Act for the current fiscal year is appropriated and released to the IIPCC.
Amounts necessary to carry out the Act thereafter must be included in the General Appropriations Act (GAA).
The Department of Trade and Industry (DTI) must promulgate rules and regulations necessary to implement the FIPMP provisions.
The NEA, in consultation with the DTI and the DOF, is directed to amend the existing rules and regulations necessary for the efficient implementation of the Act.
All laws, decrees, orders, rules and regulations, or other issuances, or parts thereof, inconsistent with Republic Act No. 11647 are repealed or modified accordingly.
If any portion or provision of the Act is declared unconstitutional, the remainder of the Act or provisions not affected remains in force and effect.

Implementation structure via amendments

Republic Act No. 11647 amends Republic Act No. 7042 by: amending Section 2 (Declaration of Policy), amending Section 3 (Definitions), amending Section 4 (IIPCC creation and composition), inserting Sections 4-A and 4-B, amending Section 5 (Registration of Investments of Non-Philippine Nationals), amending Section 6 (Foreign Investment in Export Enterprises), further amending Section 8 (Foreign Investment Negative List), inserting Sections 16 and 17, inserting Section 18 (Non-Applicability), and revising the remaining sections through renumbering.
Republic Act No. 11647 provides that the existing rules and regulations must be amended for efficient implementation by NEA in consultation with DTI and DOF.