On March 2, 2022, President Rodrigo Duterte signed the Republic Act No. 11647 (Act 11647), which amends the Foreign Investment Act (FIA), also known as the Republic Act No. 7042.
The amendment aims, for the first time, to promote and attract foreign investment by allowing international investors (including small and micro enterprises in the Philippines) to establish and fully own domestic enterprises.
Under the FIA, micro, small and medium-sized enterprises (MSMEs) with a paid-up capital of less than US $ 200,000 are reserved for Filipino citizens. However, under the amendments, foreign nationals may own an MSME with a minimum paid-up capital of US $ 100,000, but enterprises meet the following conditions:
Under the revised FIA, the government will create the Inter-Agency Investment Promotion Coordination Committee (IIPCC), an organization that integrates all promotional and facilitation efforts to encourage foreign investment. An inter-agency agency will provide a unified approach to promoting foreign investment, as different government agencies may have different strategies for promoting and facilitating foreign investment.
In the national interest, the revised FIA authorizes the President of the Philippines to direct the IIPCC to review foreign investment that could threaten the safety, security and well-being of Filipinos. Examples include cyber infrastructure, military-related industries, and pipeline transportation, among other foreign investments.
Foreign businesses that employ foreign nationals and enjoy financial incentives must create a study or skills development program that benefits Filipino workers. This ensures that local workers receive knowledge and skills from their overseas colleagues.
The programs that companies develop will be overseen by the Department of Labor and Employment.
The Philippines has long struggled to attract foreign investment, and a 2019 Organization for Economic Cooperation and Development Index shows that the country had one of the most restrictive foreign investment laws in Asia.
The Philippines is also plagued by problems such as policy uncertainty, corruption, red tape and weak infrastructure. Moreover, its economy is dominated by aggregates (many family-owned) who have expanded their industry to include telecommunications, real estate and retailers, and strict foreign investment rules have served as a form of protectionism to protect these local brands.
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