BY CAI ORDINARIO AND SAMUEL P. MEDENILLA
JUNE 28, 2022
The Philippines has removed the restrictions on foreign investments in weapons-making in the country, according to the 12th Foreign Investment Negative List (FINL).
Under the 12th FINL, the “manufacture, repair, storage and/or distribution of products requiring Department of National Defense [DND] clearance,” which used to have a 40-percent cap in the 11th FINL, has been removed.
Sources from the National Economic and Development Authority (Neda) said this takes into consideration the changes included in the Foreign Investment Act (FIA) where the DND “can recommend to liberalize investments in defense-related manufactures.”
“[It’s still] subject to review. May existing rules naman ang DND to process investment applications [These will still be subject to review. DND has existing rules to process investment applications],” the Neda source told the BusinessMirror.
Based on the 11th FINL, this included “guns and ammunition for warfare; military ordinance and parts thereof (torpedoes, depth charges, bombs, grenades, missiles); and gunnery, bombing and fire control systems and components; and missiles/missile systems and components; tactical aircraft (fixed and rotary-winged), parts and components thereof.
The list also includes guided space vehicles and component systems; combat vessels (air, land and naval) and auxiliaries; military communications equipment; military communications equipment; night vision equipment; stimulated coherent radiation devices, components and accessories; armament training devices; and others as may be determined by the Secretary of the DND.
President Duterte signed Executive Order (EO) No. 175 promulgating the updated RFINL containing the list of activities reserved for Filipinos subject to some exceptions and conditions.
He noted that EO 175 aims to make the RFINL consistent with existing laws and new policies “to ease restrictions on foreign participation in certain investment activities.”
Under the 12th FINL, only the manufacture, repair, storage, and/or distribution of products and/or ingredients require Philippine National Police (PNP) clearance that have a 40-percent foreign equity restriction.
In an official statement, Socioeconomic Planning Secretary Karl Kendrick T. Chua said the changes in the 12th FINL reflected not only the changes in the FIA but also “recently passed amendments to the Public Service Act [PSA] and Retail Trade Liberalization Act [RTLA].”
The Neda said the 12th FINL also reflects the full foreign ownership liberalization for telecommunications, domestic shipping, railways and subways, and air transport as provided under the amendments to the PSA.
The revised list incorporates as well the amendments to the RTLA that provides for a uniform minimum paid-up capital of $500,000 (P25 million) from as much as $2.5 to $7.5 million for non-luxury foreign retailers.
The 12th FINL also takes into account amendments to the FIA which allows for a lower minimum paid up capital of $100,000 for non-Philippine nationals if the enterprise i) involves advanced technology as determined by the Department of Science and Technology, ii) endorsed as a startup by the lead host agencies pursuant to the Innovative Startup Act, or iii) employs no less than 15 Filipino employees.
“In the future, we also intend to liberalize more sectors like renewable and inexhaustible energy sources such as wind, tidal, solar to help address the looming power crisis and climate change concerns,” Chua said.
Apart from this, natural-born Filipinos who are now citizens of other countries may now own land and invest in cooperatives under the 12th FINL.
Under the latest version, there are no more restrictions on the investments made by former natural-born citizens of the Philippines in cooperatives and more than 40-percent equity in owning private lands.
In terms of cooperatives, sources from the National Economic and Development Authority (Neda) said natural-born Filpinos are exempted under Republic Act 8179 on foreign investments passed in 1996.
In terms of land, sources told BusinessMirror that the limit for natural-born Filipinos now is 5,000 square meters of urban land and 3 hectares of rural lands.
Professions
Meanwhile, in terms of the practice of professions, the national government added six professions where foreigners are not allowed to practice under Philippine laws.
These professions are criminology; food technology; marine deck and engineering; professional teaching; radiologic and x-ray technology; and speech language pathology.
However, in terms of corporate practice of professions with foreign equity restrictions now only includes architecture. The restrictions on corporate practice of professions in the 11th FINL, except for architecture, no longer have any restrictions.
This includes aeronautical engineering; agriculture and biosystems engineering; chemistry; electronics engineering; environment planning; forestry; guidance and counseling; interior design; landscape architecture; naval architecture; psychology; real estate service; sanitary engineering; and social work.
The Neda is tasked to review and revise the country’s FINL. The FINL contains investment areas/activities where foreign equity participation is limited by mandate of the Constitution and specific laws.
It also consists of investment areas/activities where foreign equity participation is limited for reasons of defense, security, risk to public health and morals, and protection of small- and medium-sized domestic market enterprises.
The amendment of the list is led by the Neda Secretariat, as provided for under Section 8 of RA 7042, or the Foreign Investments Act of 1991, which states that amendments may be made upon the recommendation of the secretary of national defense or the secretary of health, or the secretary of education, endorsed by the Neda, approved by the President, and promulgated by a Presidential Proclamation.
Image credits: AP/Bullit Marquez
Source: https://businessmirror.com.ph/2022/06/28/phl-lifts-investment-curbs-on-defense-business/