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Investment Barriers Rise Around The Philippines

2 Nov 2012

Latest presidential decree severely restricts foreigners from investments in Philippines 

New law likely to send potential foreign investors to more friendly countries 


Or to put it another way, the Philippine government is placing more restrictions on foreigners owning and/or operating businesses in the Philippines. This also lessens opportunities for non-Filipinos to make direct investments buying or starting up businesses, turning back the commercial clock.President Benigno S. Aquino III has signed Executive Order No. 98 to expand the investment areas and economic activities reserved to Philippine nationals under the 9th Regular Foreign Investment Negative list, Executive Secretary Paquito N. Ochoa Jr. announced on Friday.

This could possibly be a knee-jerk reaction to reports that the BSP (Philippine central bank) and government want to slow down investment inflows (see Reuters report below). If so, it could backfire, sending potential investors to more welcoming South East Asian countries. 

Ochoa said EO No. 98, signed by the President on October 29, 2012, replaces EO No. 858, which has been in effect since February 2010. 

The only law restricting foreign ownership that makes any sense is that to do with "... public health and morals..." presumably which includes the sex industry in Angeles City, Subic and parts of Manila.

The only investment restriction in tody's order that makes any sense is that to do with the sex industry (above), all the rest will deter inward investments                                                                      

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The law, accountancy, architecture and the real estate business are all barred to foreigners practising in PHL.

Recruitment, media and advertising are also included. 

The 9th Regular Foreign Investment Negative List enumerates the industries and business activities that are open to Filipino businessmen, and defines the extent of participation of foreign investors in areas allowed by specific laws and the Constitution.

“There are investments areas or activities which foreign ownership limitations imposed by law were not included in EO 858. Those changes are now reflected in the ‘List A’ of the new presidential directive,” Ochoa explained in a statement.

Among the amendments, Ochoa said, are the foreign ownership and foreign practice limitations imposed under:

  • The Real Estate Service Act of the Philippines (RA 9646), 
  • The Philippine Respiratory Act (RA 10024), 
  • The Philippine Psychology Act (RA 10029) – all enacted in 2009 – and  
  • The Lending Company Regulation Act of 2007 (RA 9474). 

 


Except for RA 9474, which allows foreign ownership of up to 49 percent in lending companies, the three others limit the practice of non-Filipinos in the areas of real estate and health care such as respiratory therapy and psychology, unless there is a reciprocity arrangement prescribed by a law. 

List A of EO No. 98 specifies the areas of economic activity where foreign ownership is prohibited or limited by the Constitution or laws, among them

 

  • The mass media, 
  • Practice of all professions, 
  • Cooperatives, 
  • Private security agencies, 
  • Small-scale mining, 
  • Private radio communications network, 
  • Private recruitment for local or overseas employment, 
  • Advertising, 
  • Ownership of private lands, 
  • Lending companies, 
  • Financing companies and investment houses regulated by the Securities and Exchange Commission (SEC). 

 


List B contains economic activities regulated by law such as

  • Small- and medium-scale domestic enterprises, 
  • Defense-related industry (i.e., manufacture of firearms, etc.), and 
  • Businesses that have implications on public health and morals (i.e., gambling, sauna, massage clinics, etc.). 


“List A may be amended any time to reflect changes brought about by new laws. List B may be amended not more than once every two years upon the recommendation of the departments concerned and endorsed by the National Economic and Development Authority, or upon NEDA’s own initiative and recommendation, approved by the President and promulgated by a presidential proclamation,” Ochoa said.

“For now, List B stays while the changes to the negative list covers only List A,” he added.

Under the Foreign Investments Act of 1991 (RA 7042), foreign investors are allowed to own 100-percent equity in businesses excluded from the negative list.

EO No. 98 takes effect 15 days after its publication in a newspaper of general circulation.(OES) 

Reuters yesterday published a feature that seemed to suggest the PHL government and central bank are getting concerned about the inflows of investment money, and that the "Sick Man of Asia" is not looking sick any more.

Credit ratings agencies are slowly pushing up the grades, up towards the hallowed "Investment Rating".

Interest rates are coming down as the BSP try to halt the ris of the peso against other currencies. 

To read the full Reuters article, click the link below:

REUTERS STORY: Philippines grapples with cost of economic success 

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Investment Barriers Rise Around The Philippines by Balita Pinoy is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

 

 

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