On March 2, 2022, President Rodrigo Duterte signed Republic Act No. 11647 (Act 11647), which amends the Foreign Investment Act (FIA), also known as Republic Act No. 7042. The amendments aim to promote and attract foreign investments by allowing, for the first time, international investors to set up and fully own domestic enterprises (including micro and small enterprises) in the Philippines.
Further, another amendment includes the establishment of an Inter-Agency Investment Promotion Coordination Committee (IIPCC) tasked with integrating the promotion activities to encourage foreign investment.
What are the amendments to the Foreign Investment Act?
Foreign ownership of small and medium-sized enterprises
Under the FIA, micro, small, and medium-sized enterprises (MSME) with paid-in capital of less than US$200,000 are reserved for Philippine nationals. However, under the amendments, foreign nationals can own an MSME with a minimum paid-in capital of US$100,000 provided that the enterprises meet the following conditions:
- Utilize advanced technology (to be determined by the Department of Science and Technology);
- Are endorsed as startup enablers or as a startup in accordance with the Innovative Startup Act; or
- The company hires no less than 15 Filipino employees, a reduction from the previous requirement of 50.
The new Inter-Agency Investment Promotion Coordination Committee
Under the amended FIA, the government will create the Inter-Agency Investment Promotion Coordination Committee (IIPCC) which is a body that integrates all the promotion and facilitation efforts to encourage foreign investments. An inter-agency body will provide a uniform approach to foreign investment promotion, since various government agencies may have different strategies when it comes to foreign investment promotion and facilitation.
The President has the power to suspend, prohibit, or limit foreign investments
To safeguard national interests, the amened FIA gives the President of the Philippines power to order the IIPCC to review foreign investments that may threaten the safety, security, and well-being of Filipinos. Examples include foreign investments involving cyberinfrastructure, military-related industries, and pipeline transportation, among others.
Understudy or skills development program for foreign nationals
Foreign businesses employing foreign nationals and are enjoying fiscal incentives must devise an understudy or skills development program that benefits Filipino workers. This ensures that local workers receive the knowledge and skills from their foreign colleagues.
The program that companies develop will be monitored by the Department of Labor and Employment.
Why has the Philippines amended its Foreign Investment Act?
The Philippines has long struggled to lure foreign investments and a 2019 Organization for Economic Cooperation and Development index shows the country had Asia’s most restrictive foreign investment laws. The Philippines is also plagued with issues such as policy uncertainty, corruption, red tape, and poor infrastructure. Moreover, its economy is dominated by conglomerates (many family-owned) who have spanned their industries to include telecommunications, real estate, and retail, and the tough foreign investment rules have acted as a form of protectionism to protect these local brands.
Foreign businesses usually undertake a joint venture with a local partner or franchise chains to enter the Philippine market and have complained over the protection local rivals receive and their lack of management control.
However, the onset of the COVID-19 pandemic has forced the government to enact reforms to encourage foreign investments into the country. GDP decreased by 9.5 percent in 2020, making it the worse drop since 1947 and foreign direct investment (FDI) dropped 24.6 percent in 2020, to US$6.5 billion, down from US$8.7 billion — the third consecutive year of decline.
Lockdowns and other restrictions have shattered the economy and the long-run costs of COVID could reach US$810 billion, twice the 2020 GDP. During the periods of lockdown, the Philippines saw only 29 percent of businesses able to operate and from this 29 percent, 78 percent were operating at half capacity or less whilst only four percent of businesses were operating at full capacity.
In addition to amendments to the FIA, the government has also approved Senate Bill (SB) 2094, which amends the Public Service Act by enabling 100 percent foreign ownership of public services and has made amendments to the Retail Trade Liberation Act that reduces the minimum paid-up capital for foreign retail enterprises.
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FAQs
The amendments to Foreign Investment Act (FIA) eliminated restrictions of foreign ownership of export enterprises and opened up most areas except those subject to nationality requirements outlined in the Constitution and in the Philippines' Foreign Investment Negative List (FINL).
What is the foreign investment Act amendment in the Philippines? ›
11647 (Act 11647), which amended the Foreign Investment Act (FIA), also known as Republic Act No. 7042. The amendments aim to promote and attract foreign investments by allowing international investors to set up and fully own domestic enterprises (including micro and small enterprises) in the Philippines.
What are the foreign investment issues in the Philippines? ›
Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, a cumbersome bureaucracy, and corruption remain disincentives to investment. The Philippines' complex, slow, redundant, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes.
Is the Philippines a good country to invest in? ›
Is the Philippines a good country to invest in? The Philippines is considered one of the best countries to invest in. Foreign investors, businesses, and experts see great potential in the country since it has shown rapid economic growth in recent years.
Why do investors not invest in the Philippines? ›
Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, and corruption are major disincentives to investment. The Philippines' complex, slow, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes.
Can foreign investors own property in the Philippines? ›
Foreigners are prohibited from owning land in the Philippines, but can legally own a residence. The Philippine Condominium Act allows foreigners to own condo units, as long as 60% of the building is owned by Filipinos.
What is the new investment law in the Philippines? ›
First, the PSA Amendatory Law, which was signed into law on 02 March 2022, removes restrictions on foreign ownership in public services, such as telecommunications, transportation, and power generation. This means that foreign investors can now own 100% of businesses in these sectors, up from the previous limit of 40%.
What are the three 3 benefits of foreign investment in the Philippines? ›
The Philippines seeks foreign investment to generate employment, promote economic development, and contribute to sustained growth.
Who is the largest foreign investor in the Philippines? ›
Germany emerged as the leading foreign investor in the Philippines, with total investments amounting to approximately 394 billion Philippine pesos. The Netherlands came next with about 350 billion Philippine pesos in investments.
Can a foreigner own 100% of a business in the Philippines? ›
Foreign investments in the Philippines
Anyone, regardless of nationality, can invest in the Philippines with up to 100% equity. A business with 60% Filipino equity is considered a Philippine company, while one with more than 40% foreign equity is considered a foreign-owned domestic company.
Time Deposit: Safe and Steady
If you prioritize safety and liquidity, a time deposit is a viable option. It's a small investment in the Philippines offered by banks. When you deposit your money in a time deposit, you agree not to withdraw it for a fixed period, typically ranging from a few months to several years.
Is the Philippines a rich country in the world? ›
In 2024, the Philippine economy is estimated to be at ₱26.55 trillion ($471.5 billion), making it the world's 32nd largest by nominal GDP and 13th largest in Asia according to the International Monetary Fund. $471.516 billion (nominal; 2024 est.) $1.392 trillion (PPP; 2024 est.)
Is it safe to invest in the Philippines? ›
The Philippines remains committed to improving its overall investment climate and sustaining economic growth. While potential challenges from global economic headwinds would impact the economy, sovereign credit ratings remain at investment grade, supported by the country's sound macroeconomic fundamentals.
What are the risks of investing in the Philippines? ›
Business investment and establishment in the Philippines is hampered by a complex tax environment, widespread corruption and lengthy bureaucratic processes.
What is the Philippines foreign investment negative list? ›
Doing Business in the Philippines: Foreign Investment Negative List. The Foreign Investment Negative List, or Negative List, is a list of economic sectors where foreign ownership and participation in the Philippines are regulated. It contains two component lists: List A and List B.
Will you recommend the Philippines to foreign investors why? ›
The Philippines offers all the qualities any business is looking for. Its strategic location makes it a gateway to both the Asian and Western markets. Its government is supportive of foreign investment.
What is the foreign ownership limit in the Philippines? ›
Foreign investments in the Philippines
Anyone, regardless of nationality, can invest in the Philippines with up to 100% equity. A business with 60% Filipino equity is considered a Philippine company, while one with more than 40% foreign equity is considered a foreign-owned domestic company.
Does the Philippines have citizenship by investment? ›
To be eligible for Philippine naturalization, you must have resided in the country at least 10 years, not have been convicted of any crime during this period, own real estate worth not less than PHP5,000 or have a lucrative business, profession or lawful occupation, be able to speak Tagalog or English or Spanish and ...
What is 60 40 ownership rule in the Philippines? ›
The Foreign Investment Act (R.A. 7042, 1991, amended by R.A. 8179, 1996) states that at least 60% of the business should be owned by a Filipino citizen, while the rest can be owned by the foreign investor.
What is the current Philippine foreign policy? ›
The three pillars of foreign policy, namely, the preservation and enhancement of national security, the promotion and attainment of economic security, and the protection of the welfare and interests of Filipinos overseas overlap and cannot be considered apart from each other.
