Any foreign investor planning to enter the Philippines should get familiar with the Philippines’ Negative Investment List. This document tells you if your business area is open to foreign investors.
Find out if your business is allowed to operate in the Philippines.
The Philippines is a country with over 7,000 islands and some 150 languages spoken. This large market makes things slightly tricky for foreign investors or businesses planning to start their business there.
Although the Philippines ranked 95th out of 190 economies in the World Bank’s ease of doing business index 2020, it has significantly improved from 2018 when it was previously ranked 124th. This huge jump has encouraged foreign investors and entrepreneurs to set their eyes on this archipelagic market.
As such, any foreign investor planning to enter the Philippines in 2021 should get familiar with the Philippines’ 11th Foreign Investment Negative List. This document tells you if your business area is open to foreign investors.
But let us first answer a common question frequently asked: Can foreigners invest in the Philippines?
The answer is yes! It just depends on the extent to which business field.
Quick Navigation
- What is the Philippines Negative Investment List?
- What fields are open for full foreign ownership?
- What fields are open for partial foreign ownership?
- What fields are closed off to foreign ownership?
- What fields are restricted for security reasons?
- Are there any other restricted fields?
- How should I start?
What is the Philippines Foreign Investment Negative List?
The Philippines Foreign Investment Negative List is an Executive Order that regulates where foreign entities are not allowed to invest. This regulation tells you the business fields that are fully and partially open to foreign investment in the Philippines.
In the past, mass media was not allowed to be 100 percent owned by foreigners, but only Filipinos. Thereafter, the Philippines Foreign Investment Act of 1991 and the following 10th Negative Investment List also restricted foreign equity in mass media, except recording.
President Rodrigo Duterte signed the 11th Negative Investment List – the most recent version – in October 2018. This version of the Negative List updates the previous one signed by then-president Benigno Aquino III in 2015 The new 11th Negative Investment List is also broken down into 2 Lists - List A and List B. The following are what each list consists of and includes:
- List A includes areas of investment and extent of foreign ownership, where limitations are by the mandate of the Philippine Constitution or law
- List B includes areas of investment and extent of foreign ownership, where limitations are for reasons such as national security and defense, the risk to health and morals, and protection of local Small and Medium Enterprises (SMEs). The official document is available on the Official Gazette of the Republic of the Philippines.
What fields are open for full, 100% foreign ownership?
The 11th Philippines Negative Investment List allows full foreign participation in five business areas that were previously either restricted or not explicitly discussed.
Most of these – such as internet businesses, teaching, and training centers – are exceptions to other categories where the Negative List doesn’t allow foreign ownership. The Philippines government made these exceptions to welcome foreign investment in these areas, as long as they’re not directly related to professions or formal education.
You can find the breakdown below.
Up to 100% foreign ownership
In one of our webinars launched last year, our COO Viktor Kyosev discussed with Rocky Chan and RJ Ledesma from EnterPH how foreign businesses have adapted their market entry strategies since the beginning of COVID-19 and debated possible scenarios for the near future.
In his opening presentation on the Philippines, Rocky Chan cleared a huge misconception that foreigners can only own 40 percent of their business in the Philippines. However, most of the time, any foreigner can own 100 percent of their business.
Read more about Doing Business in the Philippines: Attractiveness & Opportunities Post COVID-19
What fields are open for partial foreign ownership?
The Philippines Negative Investment List also allows partial foreign participation in many other business fields. In other words, foreign investors are allowed to be minority owners in these business fields, with a variety of ownership caps.
You can find the breakdown below.
Up to 40% foreign ownership
There are a few major changes in this section compared to the 10th Negative Investment List from 2015.
For example, foreigners can now own up to 40 percent of contracts for the construction and repair of locally-funded public works, subject to regulations. Previously, foreigners could only have up to 25 percent equity in these contracts.
Foreigners can also now own up to 40 percent of private radio communications networks, compared to only up to 20 percent in the 2015 Negative List.
Up to 30% foreign ownership
Up to 25% foreign ownership
What fields are closed off to foreign ownership?
The 11th Philippines Negative Investment List also provides a list of business fields where foreign entities can’t invest at all.
Most of these are still the same as the 10th Negative List from 2015. However, the Philippines government included new exceptions to make these business areas more flexible to foreign investment.
You can find the breakdown below.
What fields are restricted for security reasons?
In addition to the lists above, the Negative Investment List also limits other business areas based on reasons of security or defense. This is also known as List B.
Besides having restrictions for foreigners, investing in these fields also need approval from the Philippines National Police (PNP) or Department of Defense (DND).
You can find the breakdown below.
Requires Philippines National Police (PNP) approval
Requires Department of Defense (DND) approval
Are there any other restricted fields?
The Philippines also restricts some other business fields based on risk to health and morals or protection of small and medium enterprises (SMEs).
You can find the breakdown below.
Summary
In short, investors need to pay attention to the Philippines’ 11th Foreign Investment Negative List, List A and List B, when planning to invest or start a business in the Philippines.
The Negative Investment List allows investors to understand which businesses are fully open and can be 100 percent owned by foreigners and which are completely closed off.
If you are still unsure, we recommend reaching out to us here and we will be happy to connect you with our service providers on the ground to answer any questions you may have.
How should I start
Negative Investment Lists are challenging to navigate. It is quite difficult for governments to prepare specific categories, as a result, businesses struggle to navigate the gray areas.
If you have not been through this experience before, we would advise you to connect with experienced consultants on the ground who can help figure out the most suitable options for your company.
Greenhouse empowers you to book business incorporation services and connect with market entry consultants in the Philippines.
We’ll connect you with experienced consultants on the ground who can help answer your questions about doing business in the Philippines.