A breakdown of the changes to the FIA

REPUBLIC (RA) 11647, which amended the Foreign Investment Act of 1991, was finally enacted on March 2. She introduced significant changes aimed at easing restrictions on foreign investment to help boost economic growth amid the continued impact of the Covid-19 pandemic.

The influx of foreign investment plays a major role in the economic growth of the country. As stated in RA 7042, the “Foreign Investment Act of 1991” (FIA), it is the policy of the state to attract, promote and welcome productive investment in activities that contribute significantly to national industrialization and socio-economic development to the extent that foreign investment is permitted by the Constitution and relevant laws.

The FIA ​​states as a general rule that there are no restrictions on the extent of foreign ownership of exporting companies (ie those that consistently export at least 60% of their products or services). In domestic market enterprises (i.e. those which produce goods for sale or render services entirely to the local market or export less than 60% of their products or services), foreigners may invest up to 100% of the capital, except in the areas of foreign investment. Negative List, which lists business activities subject to nationality requirements or restrictions under the Constitution, applicable laws, and government policy.

RA 11647 provides that, unless otherwise provided by RA 8762 or the “Retail Liberalization Act” and other relevant laws, “domestic micro and small enterprises” with a paid up capital of 200 000 dollars are still reserved for Filipino nationals. The same paid-up capital threshold was provided for before the amendment, only the term used then was “small and medium-sized enterprises of the internal market”.

Philippine nationals are generally defined as including citizens of the Philippines, a partnership or association wholly owned by citizens of the Philippines, or a corporation incorporated under the laws of the Philippines with at least 60% of the outstanding share capital and entitled to vote are owned and owned by citizens of the country.

It should be noted that RA 11647 encourages the development of advanced technologies and encourages the creation of startups or startup facilitators in accordance with the “Innovative Startup Act” (RA 11337) by applying the lower capitalization requirement of $100,000 of the latter.

Additionally, the previous requirement to employ at least 50 direct employees to qualify for the $100,000 capitalization requirement has now been changed. The law now provides that companies eligible for the lower capitalization rule must only have a majority of their direct Filipino employees, but in no case must the number of Filipino employees be less than 15. A training or employee development program skills is also required. on domestic companies benefiting from the lower capitalization requirement in order to ensure the transfer of technology or skills to Filipinos.

Other changes introduced by RA 11647 include the establishment of the Inter-Agency Investment Promotion Coordinating Committee (IIPCC), which is mandated to develop a comprehensive and strategic Foreign Investment Promotion and Marketing Plan (FIPMP ) for the next five and ten years.

The plan should be based on competitive advantages, natural resources, skills and education development, traditional ties and international market potential, and be fully consistent with the strategic investment priorities plan under the Title XIII of the National Tax Code.

The IIPPC is also empowered to review foreign investments involving military-related industries, cyber-infrastructure, pipeline transport or other activities that may threaten territorial integrity and safety, security and well-being. Filipinos. The IIPCC will consult with local chambers of commerce and business groups to develop the FIPMP.

Other changes include the requirement to create a database for the FIPMP to be accessible to local businesses that may be able and willing to partner with potential investors. Ministry of Education, Higher Education Commission, Technical Education and Skills Development Authority, Ministry of Labor and Employment, Professional Regulation Commission and other bodies involved in education are also mandated to develop curriculum and deploy training efforts to meet FIPMP’s workforce needs.

Foreign investment will undoubtedly continue to play a leading role in the development of the economy and in promoting innovation in the internal market. The changes to the FIA ​​introduced by RA 11647 will have the effect of making it easier for foreign investment to enter the country. With the creation of the FIPMP, they will also promote the development of a good marketing plan to attract investment. We have made progress.

Ramon Vaughn F. Dy 3rd is a graduate of the Ateneo de Manila University School of Law and legal assistant at Mata-Perez, Tamayo and Francisco (MTF Counsel). This article is provided for informational purposes only and does not replace professional advice when the facts and circumstances warrant it. If you have any questions or comments regarding this article, you can email the author at [email protected] or visit the MTF website at www.mtfcounsel.com.

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