iii. Nationalized Activities and the Negative List

Nationalized Activities and the Foreign Investment Negative List

Under the Foreign Investments Act, as amended, the general rule is that there are no restrictions on the extent of foreign ownership in export enterprises, and non-Philippine nationals may own up to one hundred percent (100%) of equity in domestic market enterprises. However, foreign ownership in domestic market enterprises is restricted or barred in areas included in the Foreign Investment Negative List, or where foreign ownership is prohibited or limited by the Constitution and existing laws.

The Foreign Investment Negative List contains two component lists:

• List A: Enumerates the areas of investment and activities reserved to Philippine nationals by mandate of the Constitution and specific laws¹.
• List B: Contains activities and enterprises regulated pursuant to law, namely: (1) defense-related activities requiring prior clearance and authorization from the Department of National Defense, such as the manufacture, repair, storage, or distribution of firearms, ammunition, lethal weapons, military ordnance, explosives, pyrotechnics, and similar materials, unless the Secretary of National Defense specifically authorizes a non-Philippine national to undertake manufacturing or repair activity with a substantial export component; and (2) activities with implications on public health and morals, such as the manufacture and distribution of dangerous drugs, all forms of gambling, nightclubs, bars, beerhouses, dance halls, sauna and steambath houses, and massage clinics¹.

List B also reserves to Philippine nationals small and medium-sized domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000¹. Non-Philippine nationals may qualify for the lower minimum paid-in capital of US$100,000 if the enterprise involves advanced technology as determined by the Department of Science and Technology, is endorsed as a startup enabler or startup by the lead host agencies, or employs a majority of Filipino direct employees, with at least fifteen (15) Filipino employees. Amendments to List B may be made upon recommendation of the relevant department head indorsed by the NEDA or motu proprio by the NEDA, approved by the President, and promulgated by Presidential Proclamation; every negative list is prospective in operation and cannot prejudice existing foreign investments².