Constitutional and Legal Restrictions on Foreign Equity
- Constitution and relevant laws reserve certain investment areas exclusively or partially to Filipino nationals.
- Protection of national security, defense, health, morals, and local enterprises is emphasized.
Establishment of the Foreign Investment Negative List
- Executive Order No. 182 establishes the Foreign Investment Negative List as "Annex A".
- Contains specific investment areas where foreign equity is limited or prohibited.
Amendments and Validity Period
- Amendments to the Negative List can be made only once every two years.
- Ensures consistency and predictability in investment regulations.
Repeal and Effectivity
- All conflicting orders, rules, and regulations are revoked or modified accordingly.
- Executive Order takes effect following the transitory period on October 24, 1994.
List A: Areas with Foreign Ownership Limited by Constitution and Specific Laws
No Foreign Equity Allowed in: • Mass media • Licensed professions (engineering, medical, accountancy, architecture, law, etc.) • Retail trade, cooperatives, private security agencies, small-scale mining • Utilization of marine resources except deep-sea fishing • Rice and corn industry except as authorized by NFA
Foreign Equity up to 25% Allowed in: • Private recruitment agencies • Locally-funded public works contracts
Foreign Equity up to 30% Allowed in: • Advertising sector
Foreign Equity up to 40% Allowed in: • Exploration and development of natural resources • Ownership of private lands • Operation and management of public utilities • Educational institutions requiring DECS approval • Financing companies regulated by SEC • Various construction contracts including public utilities and defense-related projects
List B: Areas with Foreign Ownership Limited for Security, Health, Morals, and SME Protection
- Up to 40% foreign equity allowed in: • Manufacture, repair, storage, and distribution of firearms-related products (PNP clearance required) • Manufacture, repair, storage, and distribution of defense-related products and equipment (DND clearance required) • Manufacture and distribution of dangerous drugs • Sauna, steam bathhouses, massage clinics regulated for health and moral risks • Other gambling forms such as race track operations • Domestic enterprises below US$500,000 paid-in capital, unless involving advanced technology • Export enterprises using depleting natural resources with paid-in capital below US$500,000
List C: Areas Limited by Capacity of Existing Enterprises
- No investment areas listed as no petitions for inclusion were submitted.
Special Allowances
- Full foreign participation allowed via financial or technical assistance agreements approved by the President in natural resources exploration and utilization.
Key Legal References Cited
- Constitution Articles relevant: XVI Section 11; XIV Section 14; XII Sections 2, 7, 11; XIV Section 4.
- Republic Acts: No. 1180, 6938, 5487, 7076, 3018, 5980, 4566, 6957, 5183, 7042.
- Presidential Decrees: PD 194, PD 1594.
- Implementing guidelines under RA 7042 governing amendments and enforcement.