There are numerous business opportunities for those who want to invest in the Philippines. Attracting foreign investment has been a government policy since the 1980s, and the Philippine Congress has passed several laws to attract foreign capital. RA 7042, otherwise known as the Foreign Investments Act of 1991 (FIA), as amended by RA 8179, is the law that governs foreign investments in the Philippines, except in banking and other financial institutions which are governed and regulated by the BSP. The FIA declares that it is the policy of the State to attract, promote and welcome productive investments from foreign individuals, partnerships, corporations and governments in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed by the Constitution and the relevant laws.
All investors and enterprises are entitled to the basic
rights and guarantees provided in the Philippine
Constitution. In addition, Philippine laws provide certain
rights for foreign investors, including the following:
The FIA liberalized the entry of foreign investments
into the country. In general, foreigners can invest up to
100% equity in corporations, partnerships and other
entities in the Philippines, except in areas included in
the Foreign Investments Negative List (FINL). The FINL
lists investment areas and activities reserved to Filipino
nationals where foreign investments are prohibited or
limited to a certain percentage.
The FINL is composed of two lists, as follows:
A Philippine national is defined as a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock outstanding is wholly owned by Filipinos; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of Philippine nationals. Where a corporation and its non-Filipino stockholders own shares of stock in an enterprise registered with the Securities and Exchange Commission (SEC), at least 60% of the capital stock outstanding must be owned and held by citizens of the Philippines and at least 60% of the members of the Board of Directors must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. For purposes of determining compliance, the required percentage of Filipino ownership shall be applied to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.
Under the FIA, non-Philippine nationals may own up to 100% of a domestic market enterprise or an export enterprise unless foreign ownership is prohibited or limited by the Constitution and existing laws or the FINL. A domestic market enterprise is defined as an enterprise which produces goods for sale or renders services to the domestic market entirely or, if exporting a portion of its output, fails to consistently export at least 60% of such output. On the other hand, an export enterprise is a manufacturer, processor, or service (including tourism) enterprise that exports 60% or more of its output, or a trader that purchases products domestically and exports 60% or more of such purchases.
If a non-Philippine national invests in a domestic market enterprise, the paid-in capital must not be less than the peso equivalent of USD200,000. This requirement is reduced to the peso equivalent of USD100,000 if the investment will involve advanced technology as determined by the Department of Science and Technology, or will employ at least 50 direct employees.
Talamban Road, Cebu City 6000 Philippines