Philippines Eases Barriers to Foreign Direct Investment

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The Philippines has recently enacted three (3) key legislative measures to woo foreign investors by easing the barriers to inbound foreign investments. These measures were enacted to push economic recovery by welcoming new capital, ideas, and technology that comes along with foreign investments.

The first to be amended was the restrictions on retail trade. Signed into law on 10 December 2021, Republic Act No. 11595 liberalized restrictions on foreign direct investments (FDI) by reducing capital requirements on retail enterprises with foreign entity, particularly the (i) minimum paid-up capital from USD 2.5 Million to only P25 Million (or about USD 500,000), and (ii) minimum investment per store from the previous USD 830,000 to P10 Million per store (or about USD 200,000).

Click here to read more on the Amendment on Retail Trade Liberalization Act of 2000.

Subsequently, on 02 March 2022, the Philippines enacted the amendment to the Foreign Investments Act that extended the lower minimum paid-up capital requirement of USD 100,000 (instead of the higher USD 200,000) to startup or startup enablers, and lowered the mandatory Filipino direct hires from fifty (50) to just a majority of the enterprise’s employees, provided that the number of Filipinos shall not be less than fifteen (15).

Click here to read more on the amendment of the Foreign Investments Act.

Finally, on 21 March 2022, the Philippines amended its Public Service Act by limiting the sectors considered as public utility to (i) distribution of electricity, (ii) transmission of electricity, (iii) petroleum and petroleum products pipeline transmission systems; (iv) water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; (v) seaports; and (vi) public utility vehicles. These public utilities are subject to forty percent (40%) foreign equity restriction under the Philippine Constitution. With the amendment, the Philippines allows full foreign ownership on other entities traditionally considered as public utility. These sectors include subways, airports, airlines, railways, expressways, and tollways.

Click here to read more on the amendment of the Public Service Act.

DivinaLaw is a full-service law firm in the Philippines with offices in Metro Manila and Metro Cebu.

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