Law Summary
Structure and Amendment of the Negative List
- Composed of two lists: List A and List B.
- List A identifies areas with limits based on constitutional and specific laws.
- List B lists areas limited for reasons of security, defense, health, morals, and protection of small and medium enterprises.
- Amendments to List A can be made any time reflecting legal changes.
- Amendments to List B can only be made once every two years.
- Inconsistent orders or regulations are revoked or modified by this order.
Reserved Areas under List A (Foreign Ownership Limited by Constitution or Specific Laws)
No Foreign Equity Allowed:
- Mass media (except recording), per constitutional mandate.
- Practice of various professions such as engineering, medicine, accountancy, law, teaching, and more as listed.
- Retail trade enterprises with paid-up capital below US$2,500,000.
- Cooperatives, private security agencies, small-scale mining.
- Utilization of marine resources in Philippine waters.
- Ownership and management of cockpits.
- Manufacturing and distribution of nuclear, biological, chemical weapons.
- Manufacture of firecrackers and pyrotechnics.
Limited Foreign Equity Participation:
- 25% foreign equity in private recruitment and certain locally-funded public works construction contracts.
- 30% foreign equity in advertising.
- 40% foreign equity in exploration and development of natural resources; ownership of private lands; operation of public utilities; educational institutions; rice and corn trading; certain government supply contracts; BOT projects; deep sea fishing; adjustment companies; ownership of condominium units.
- 60% foreign equity in financing companies, investment houses, and retail trade enterprises with paid-up capital between US$2.5M and US$7.5M.
Foreign Ownership Limitations in List B (Security, Defense, Health, Morals, SME Protection)
- Up to 40% foreign equity allowed in:
- Manufacture/repair/storage/distribution of firearms and explosives, subject to Philippine National Police clearance.
- Manufacture/repair/storage/distribution of defense articles and equipment, subject to Department of National Defense clearance.
- Manufacture and distribution of dangerous drugs.
- Sauna, steam bathhouses, massage clinics, and similar businesses regulated for health and moral reasons.
- All forms of gambling including racetrack operations.
- Domestic market enterprises with paid-in equity less than US$200,000.
- Domestic market enterprises involving advanced technology or employing at least 50 direct employees with paid-in equity less than US$100,000.
Legal and Constitutional Bases
- Foreign ownership limitations grounded on:
- Articles and sections of the 1987 Philippine Constitution.
- Specific Republic Acts such as RA 7042, RA 8179, RA 8762, and others.
- Presidential decrees and memoranda.
- International treaties and conventions ratified by the Philippines.
Conditions and Exceptions
- Full foreign participation is allowed in natural resource projects via Financial or Technical Assistance Agreement with the President.
- Foreign ownership in financing companies and investment houses subject to reciprocity rights granted by foreign government.
- Retail trade enterprises with paid-up capital above US$7,500,000 or those specializing in high-end products have full foreign ownership permitted.
- Foreign investors in rice and corn production must divest 60% equity to Filipinos within 30 years from start of operations.
Effective Date and Repeal Clause
- The Fourth Regular Foreign Investment Negative List takes effect on October 24, 2000.
- All inconsistent orders, issuances, and rules are revoked or modified accordingly to ensure conformity with this order.