President Rodrigo Duterte signed into law a measure that removes several restrictions on foreign investments, one of the economic measures he certified as urgent for Congress to pass in a bid to stimulate an economy recovering from the COVID-19 pandemic.
Malacañang, on Friday, March 4, released the signed Republic Act No. 11647, an “Act Promoting Foreign Investments” through amendments of the Foreign Investments Act of 1991.
The measure aims to make the Philippines a more attractive destination for foreign investments, after it has been deemed one of the most restrictive in Southeast Asia and the world. Lawmakers and the Duterte administration hope that by attracting more foreigners to put up businesses or invest in local businesses, more jobs would be generated for Filipinos and there would be a transfer of skills and technology in industries the Philippines is yet to advance in.
The new law has the following features:
It reduces the list of investment areas reserved for Filipinos to just 1) defense-related businesses like the manufacture, repair, storage, and distribution of firearms, ammunition, and lethal weapons, and 2) small and micro domestic market enterprises with paid-up equity capital of less than $200,000 (the old law had a broader restriction – enterprises with paid-up equity capital of less than the equivalent $500,000).
It allows foreigners 100% ownership of startups or startup enablers, enterprises involving advanced technology, enterprises where a majority of direct employees are Filipinos and there must be at least 15 such employees.
Creates the Inter-Agency Investment Promotion Coordination Committee led by the Department of Trade and Industry which will craft plans to promote the Philippines as a foreign investment destination, maintain an online database of foreign investments and local enterprises that can be partnered up, help local governments attract foreign investments, and address concerns of foreign investors.
Export enterprises involving foreign investors that fail to meet export ratio requirements will be ordered to reduce its domestic market sales to at most 40% of its total production, compared to at most 60% in the old law.
One other key economic measure requested by the Duterte administration from the legislative branch is the amendments to the Public Service Act, which would allow full foreign ownership of key industries like telecommunications and transportation.
This measure has already been ratified by both houses and is awaiting Duterte’s signature.