Business Transaction and Management

Foreign Investment Negative List


Starting a business can be very difficult, especially for a foreigner. Unlike Filipino citizens, foreigners are almost always subject to ownership limitations and equity restrictions. However, with the recent amendment to the Foreign Investment Negative List, things might be looking up for potential foreign investors

Understanding the reason for the regulation

In the first place, why is there a need to regulate foreign direct investments? The primary reason for this is to maintain control. By placing restrictions on foreign ownership and equity in certain industries, foreign investors are prevented from dominating and exploiting the market. Like all things, management of Foreign Direct Investment calls for balance, depending on the status of the economy.

What’s changed in the latest Foreign Investment Negative list?

One of the more significant changes in the latest foreign investment list is the lowered paid-up capital required for foreign investors who wish to engage in retail trade enterprises in the country. In the 2018 Eleventh Regular Foreign Investment Negative List, a retail trade enterprise must have no foreign equity if their paid-up capital is less than $2,500,000 or around P125,000,000. In the Twelfth Regular Foreign Invest Negative List, this amount has been lowered to only P25,000,000.

This means that foreign-owned partnerships, associations, and corporations are allowed to engage in retail trade provided that:

A. The foreign retailer shall have a minimum paid-up capital of P25,000,000
B. The foreign retailer’s country of origin does not prohibit entry of Filipino retailers, and
C. A foreign retailer with more than one physical store must have a minimum of P10,000,000 investment per store.

This development eases the barriers of entry for foreign investors and makes it attractive for foreign investors to invest in the country.

Aside from this, another development is the removal of the 40% restriction on foreign equity for manufacture repair, storage, and/or distribution of products requiring Department of National Defense clearance. In the latest Foreign Investment Negative List, full participation of foreign investors is now allowed for these kinds of activities and enterprises.

How FBRT can help you

At FBRT, we aim to ensure that any client, whether Filipino or Foreign, who engages in trade in the Philippines, does so in compliance with prevailing rules and regulation. Our lawyers are equipped with the knowledge and expertise in the field of corporate practice from compliance with the Securities and Regulations Code and the Securities and Exchange Commission requirements, to the filing and maintenance of business trademarks with the Intellectual Property Office. Together, let’s make our way towards making your business more successful. Contact our lawyers today to take that first step in growing your business.