Law Summary
Amendments and Validity
- Amendments to List A (Constitutionally or statutorily restricted sectors) may be made at any time in response to legal changes.
- Amendments to List B (areas limited for security, health, and SME protection) can only be made once every two years.
- Provisions declared invalid or unconstitutional do not affect the validity of the remainder of the order.
- The Order takes effect 15 days after publication in a general circulation newspaper.
Repealed Orders and Rules
- All previous orders or regulations inconsistent with this FINL are repealed, amended, or modified accordingly.
List A: Sectors with No Foreign Equity or Limited Foreign Ownership by Constitutional or Specific Law Mandate
- No foreign equity allowed in:
- Mass media except recording and internet business.
- Practice of professions listed in the Annex, subject to reciprocity and specific conditions.
- Retail trade businesses with paid-up capital below PHP 25 million.
- Cooperatives, except for investments by former natural-born Filipino citizens.
- Private detective and security agencies.
- Small-scale mining.
- Utilization of marine resources in territorial waters.
- Cockpit operations.
- Manufacture and handling of nuclear and biological weapons.
- Manufacture of firecrackers and pyrotechnics.
- Sectors with limited foreign equity (ranges from 25% to 40% depending on the activity):
- Private recruitment (up to 25% foreign equity).
- Construction of defense-related structures (up to 25%).
- Advertising (up to 30%).
- Infrastructure procurement as per government rules (up to 40%).
- Natural resource exploration and utilization (up to 40%).
- Ownership of private lands (up to 40%), except limited cases for natural-born Filipinos who lost Philippine citizenship.
- Public utilities (up to 40%).
- Educational institutions (up to 40%), except those operated by religious groups and foreign diplomatic personnel.
- Culture, milling and trading of rice and corn, with divestment requirements.
- Contracts for supply to government owned corporations.
- Operation of deep sea commercial fishing vessels.
- Ownership of condominium units.
- Private radio communications networks.
List B: Sectors with Restricted Foreign Ownership for Security, Health, Morals, and SME Protection
- Foreign equity limited to 40% in activities including:
- Manufacture, repair, storage, and distribution of sensitive products requiring police clearance (e.g., firearms, explosives).
- Manufacture and distribution of dangerous drugs.
- Sauna, steam bathhouses and massage clinics due to health and moral concerns.
- All forms of gambling except those under certain government investment agreements.
- Micro and small domestic market enterprises with paid-in equity capital below set USD thresholds, including exceptions for tech startups and enterprises with Filipino majority employment.
Annex on Professions: Foreign Practice Restrictions
- Foreign nationals generally prohibited from practicing specific professions unless reciprocity is granted.
- Professions include but not limited to: Accountancy, Engineering (various fields), Agriculture, Architecture, Medicine, Nursing, Pharmacy, Teaching, Psychology, Veterinary Medicine.
- Corporate practice of professions involving foreign equity is subject to restrictions, e.g., architecture firms can only be formed by Filipino architects.
Important Legal Concepts
- Reciprocity conditions allow foreign professionals to practice if their home countries grant similar rights to Filipino professionals.
- Certain sectors allow foreign participation via financial or technical assistance agreements approved by the President.
- Ownership limits in public utilities require that managing officers be Filipinos and foreign participation proportional to ownership share.
- Divestment schedules apply, such as in the rice and corn sector, requiring foreign investors to reduce their equity over time.
Procedural and Compliance Notes
- Foreign investors must secure necessary licenses, clearances or approvals, especially in restricted sectors like firearm manufacture or natural resource exploration.
- The FINL is enforced through regulatory agencies, with penalties and sanctions for non-compliance derived from existing laws governing investment and foreign participation.
This comprehensive framework promotes responsible foreign investment while protecting national sovereignty, security, public welfare, and Filipino enterprise development.