Structure and Amendments of the Negative List
- The Negative List consists of List A and List B.
- List A covers sectors where foreign ownership is limited by the Constitution and specific laws.
- List B restricts foreign ownership due to security, defense, health, moral concerns, or to protect small and medium enterprises.
- Amendments to List A can be made anytime to comply with new laws.
- Amendments to List B are limited to once every two years, pursuant to RA No. 7042 and its Revised Implementing Rules.
Legal Effect and Validity
- All previous orders, rules, and issuances inconsistent with this Order are repealed or modified.
- Provisions found unconstitutional or invalid do not affect the validity of remaining provisions.
- The Order takes effect 15 days after publication in a newspaper of general circulation.
List A: Absolute and Partial Restrictions on Foreign Ownership
Sectors where no foreign equity is allowed include:
- Mass media (except recording and internet business).
- Practice of certain professions unless reciprocity applies.
- Retail trade enterprises with paid-up capital below PHP 25 million.
- Cooperatives, except for investments by former natural-born citizens.
- Private detective and security agencies.
- Small-scale mining, utilization of certain marine resources, cockpits, manufacture of weapons and firecrackers.
Restrictions allowing limited foreign ownership in certain sectors:
- Up to 25% foreign equity in private recruitment and construction of defense-related structures.
- Up to 30% foreign equity in advertising.
- Up to 40% foreign equity in public utilities, exploration and utilization of natural resources, ownership of private land under specified conditions, educational institutions, culture and trading of rice and corn (subject to divestment), supply contracts to GOCCs, deep sea commercial fishing vessels, condominium units, and private radio communications networks.
List B: Foreign Investment Restrictions for Reasons of Security, Health, Morals, and SME Protection
- Limits foreign ownership up to 40% in:
- Manufacture, repair, or distribution of firearms, explosives, and related materials requiring police clearance.
- Manufacture and distribution of dangerous drugs.
- Sauna, steam bathhouses, massage clinics, and similar activities regulated for public health and morals.
- All forms of gambling, except those under PAGCOR agreements.
- Micro and small domestic market enterprises with specific capital thresholds and technology or startup endorsements.
Definitions and Conditions Pertaining to Practice of Professions
- Foreigners are generally prohibited from practicing certain professions except under reciprocity agreements.
- Some professions forbid foreign practitioners unless law or treaties allow otherwise.
- Specific professions include accountancy, engineering fields, agriculture, medicine, nursing, teaching, and many others enumerated.
- Corporate practice of professions is subject to restrictions: corporations must be registered, have licensed professionals as directors and stockholders, and foreign equity is limited as per relevant laws.
- Foreign architects, for example, cannot own equity in Philippine architectural firms.
Constitutional and Legal References
- The Law references specific constitutional provisions regarding foreign ownership limits (e.g., Articles XII and XVI).
- Applicable Republic Acts, Presidential Decrees, and other regulations provide the legal basis for ownership restrictions.
- Specific international treaties and conventions prohibit foreign participation in manufacture or distribution of nuclear and biological weapons.
Procedures for Amendment and Enforcement
- Amendments follow legislative and regulatory prescriptions.
- Compliance with regulatory clearances (e.g., from Philippine National Police for certain industries) is mandatory.
- Investment agreements with government entities and regulatory bodies provide exceptions where applicable.
Penalties and Compliance
- Foreign investments violating the List may be subject to legal sanctions.
- Investments must adhere to prescribed ownership percentages and divestment deadlines.
- Agencies involved include the Securities and Exchange Commission, Professional Regulatory Commission, Department of Justice, and other relevant government bodies.
Effect of the Executive Order
- This Executive Order governs foreign investment participation in the Philippines.
- Ensures protection of national interests while allowing foreign investments in compliant sectors.
- Reflects the government's policy to ease restrictions in some areas while maintaining essential safeguards.