The Duterte administration is set to review in May next year its list of investment activities reserved for Filipinos as it works with the Congress to further open up the economy by lifting economic restrictions in the Constitution, in order to open more business areas to foreign investors.
Finance Secretary Carlos Dominguez III said that, on the side of the Executive Branch, it will review the Foreign Investment Negative List as an administrative measure to open up the economy to foreign investors.
The Regular Foreign Investment Negative List, which was last promulgated by the previous administration in May 2015 through Executive Order No. 184, enumerates the investment areas and activities reserved exclusively for Filipinos as well as industries where foreign equity of up to a maximum of 40 percent is allowed, as mandated in the Constitution.
Under the 2015 Negative List, 100 percent foreign participation is allowed only for retail trade enterprises under certain conditions specified in Republic Act 8762 or the Retail Trade Liberalization Act and also in the rice and corn industry under certain conditions.
The 2015 list also allows full foreign participation in the exploration, development and utilization of natural resources through financial or technical assistance agreements with the President.
“There are two ways we can lift the [economic] restrictions in the Philippines. One is there are administrative restrictions. It’s called a negative list, and these are areas where administratively, the government does not allow more than an “X” amount of percent of foreign ownership. The window will open for us to review that in May of 2017 and certainly, the economic team is going to look at lifting administratively some of those restrictions,” said Dominguez in a recent interview.
Dominguez mentioned this anew during the panel discussion on opening day of the Philippine Development Forum (PDF) in Davao City last week.
“There is a window that is opening for us in May of 2017, and that is where we can administratively remove from the negative list of investment areas,” he said. “That will be the first window by law that we are about to review and remove restrictions. The other restrictions are going to be a little tricky because they require either legislative action or changes in the Constitution.”
Alongside the review of the Negative List as a short-term measure, Dominguez said in the earlier media interview that the Congress will have to enact a long-term approach to further liberalize the economy by amending the provisions restricting foreign ownership in all areas of the economy, except land.
In a recent meeting with Dominguez, the American Chamber of Commerce in the Philippines (AmCham) requested that the government review its Negative List, particularly with regard to the rice and corn industries, where foreign participation is regulated by a 43-year-old presidential decree.
Presidential Decree No. 194 issued in 1973, authorizes foreigners, as well as corporations, partnerships or associations owned in whole or in part by foreigners, to engage in the rice and corn industries, provided that at least 60 percent shall be transferred to Filipino citizens over a period established by the then-National Grains Authority (now the National Food Authority or NFA).
The NFA has set a period of 30 years after which 60 percent of ownership in rice and corn businesses fully owned by foreigners, must be transferred to Filipino citizens. This condition is also spelled out in the 2015 Negative List.
The AmCham said the decree and the condition set in the Negative List is a “disincentive to investment,” and requested that the period of divestment be extended from 30 to 50 years.
“Dominguez said he will look into these concerns by AmCham and will consider it when the economic team reviews the Negative List next year.
As for amending the Constitution, Dominguez said Malacañang cannot commit to a specific timeline as to when the economic restrictions would be lifted, because it is up to the Congress, a co-equal branch of government, to initiate it.
The committee on constitutional amendments of the House of Representatives has already approved a resolution calling for the convening of the 17th Congress as a Constituent Assembly (Con-Ass) to amend the Constitution.
The Senate will start its Charter change debates early next year, and has yet to decide if it will agree to a Con-Ass or call for a duly-elected Constitutional Convention (Con-Con) to review the Constitution.
“Either way, it’s not going to happen tomorrow, it’s going to take a bit of time. Now, according to the President, he wants to open all areas of the economy to foreign investment with the exception of land, which is a very cultural and touchy issue,” Dominguez said.
The 10th Negative Investment List promulgated in 2015 by the Aquino administration allows full foreign participation in retail trade enterprises (a) with paid-up capital of US$2.5 million or more provided that investments for establishing a store is not less than US$830,000; or b) specializing in high-end or luxury products, provided that the paid-up capital per store is not less than US$250,000 as stated under Section 5 of RA 8762.
Under this List, foreigners can own up to 40 percent equity in the “exploration, development and utilization of natural resources,” unless this will involve a financial and technical assistance agreement with the President, in which full foreign participation is allowed.
The list of industries exclusively reserved for Filipinos under the 10th Regular Foreign Investment Negative List remains mostly unchanged from the previous list drawn up in 2012 under EO 98.
These industries where foreign participation is banned, as stated in the Constitution or existing laws, include: mass media except recording; practice of all professions except in certain instances; retail trade enterprises with paid-up capital of less than US$2,5 million; cooperatives; private security; small-scale mining; utilization of marine resources; ownership, operation and management of cockpits; and manufacture of firecrackers and other pyrotechnic devices.
The manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines, is also included in the Negative List, and is also prohibited for domestic investments as stated in the Constitution and in conventions and treaties where the Philippines is a signatory.
