New Developments Brought About by the 11th Foreign Investment Negative List

On 29 October 2018, President Rodrigo R. Duterte signed Executive Order No. 65 which provided the Eleventh Foreign Investment Negative List (“11th FINL”), effectively amending the previous 10th FINL issued by the Aquino Administration in 2015. The 11th FINL made several amendments to List A and List B of the 10th FINL as stated below:

  1. Internet Business not considered as Mass Media

    Previously under the 10th FINL, mass media are still reserved exclusively to Filipinos, except recording. The 11th FINL introduced Internet business as an additional exception thereto, the investment of which is now open to foreign nationals. The term “mass media” refers to any medium of communication, a newspaper, radio, motion pictures, television, designed to reach the masses and that tends to set the standards, ideals and aims of the masses.Under DOJ Opinion No. 40 (s.1998), “Internet Business” is not considered as “mass media”, since the internet access provided merely serves as a carrier of transmitting messages. It does not create the messages/information, nor transmit the messages/information to the general public, as mass media do. It is also the sender who decides the publication of messages/information carried by the Internet to be transmitted to the computer owner, and the Internet access provider becomes a mere conduit.

  2. Expanded List of Professions that can be Practiced by Foreign Nationals, subject to the rules on reciprocity

    Under List A No. 2 of the 11th FINL, pharmacy and forestry have been removed from the practice of professions reserved exclusively for citizens of the Philippines. Marine deck officers and marine engine officers have been added to the list, pursuant to Republic Act 10635. An Annex of Professions has been attached to the 11th FINL, enumerating professions which can be practiced by foreigners in the Philippines, and where corporate practice of said professions are allowed. Under the Annex, foreign individuals are now allowed to practice in the Philippines the professions mentioned therein, provided that their home country entitles Filipinos to practice the same professions. Forestry and pharmacy can now be seen in the enumeration therein. Ergotherapy, speech therapy, homeopathy and acupuncture are not considered as part of the “medical profession” for purposes of the 11th FINL, and may therefore be practiced by foreigners without conditions on reciprocity.Foreigners are now likewise allowed to teach subjects at higher education levels, provided that they are not subjects included in a government board or bar examination.
  3. Private radio communications network foreign equity now at forty percent (40%)

    Foreign equity in private radio communications network has now been increased to up to forty percent (40%) under the 11th FINL. The previous twenty (20%) cap on foreign equity under the 10th FINL was imposed by Republic Act No. 3846, which was promulgated in 1931. Following the effectivity of the 1987 Philippine Constitution, and the issuance of NTC Memorandum Circular No. 10-8-91 in 1991 which provided a forty percent (40%) cap on foreign shareholders for private radio communications network applications, the forty percent (40%) increase in the 11th FINL is now a mere reflection of the pertinent statutory amendments.

  4. Contracts for construction and repair of locally-funded works increased to forty percent (40%)

    Under List A No. 15 of the 11th FINL, contracts for the construction and repair of locally-funded works can now have to up to forty percent (40%) foreign equity, except:

    1. Infrastructure/development projects under RA 7718; and,
    2. Projects which are foreign funded and assisted and required to undergo international competitive bidding (RA 7718).

Under the 10th FINL, they are only limited to up to twenty-five percent (25%) foreign equity.

  1. Lending companies have been removed from the 11th FINL

    Previously, under the 10th FINL, lending companies regulated by the SEC are allowed to have up to forty-nine percent (49%) foreign equity participation pursuant to Republic Act 9474. Under the 11th FINL, however, this limitation has been removed and is not indicated elsewhere in the current List. This is pursuant to the proclamations made by Republic Act No. 10881, which repealed Republic Act 9474 with respect to lending companies, Presidential Decree No. 612 with respect to adjustment companies, Presidential Decree No. 129 with respect to investment houses, and Republic Act No. 8556 with respect to financing companies. As a consequence thereof, the aforementioned institutions can now be one hundred percent (100%) foreign-owned.

  2. Express exclusion of power generation and the supply of electricity from public utility

    Under List A No. 18 of the 11th FINL, power generation and the supply of electricity to the contestable market have been expressly excluded from the forty percent (40%) foreign equity limitation for the operation of public utilities, since they are not considered as public utility operation. Previously under the 10th FINL, their exclusion was indicated as footnote only.
  3. Expansion of foreign participation in educational institutions
    Under List A No. 19 of the 11th FINL, educational institutions for foreign diplomatic personnel and their dependents, and other temporary residents, or for short-term high-level skills development that do not form part of the formal education system (e.g., training centers), can now be operated by entities with up to forty percent (40%) foreign equity, unlike in the 10th FINL.
  4. Facility operator of infrastructure or development facilities and adjustment companies removal from 11th FINL
    Like in the case of a lending company, a facility operator of an infrastructure or a development facility requiring a public utility franchise has been removed from the 11th FINL requiring up to forty-percent (40%) foreign equity. Adjustment companies have likewise been removed in the 11th FINL under the forty percent (40%) foreign equity cap.
  5. Wellness centers can now have one hundred percent (100%) foreign equity

    Under the previous 10th FINL, wellness centers were imposed a forty percent (40%) limitation on foreign equity due to the risks posed to public health and morals. Wellness centers are now befittingly removed from the list pursuant to Republic Act No. 8179, which does not include such institution in the enumeration of activities which have implications on public health and morals.