Republic Act No. 11647: Amendments to Foreign Investments Act (FIA) of 1991

On 02 March 2022, President Rodrigo Duterte signed into law Republic Act (RA) No. 11647 amending the Foreign Investments Act.

A brief description of the amendments is as follows:

(1) Foreign Investments:

(a) in Domestic and Export Enterprises

RA 11647 reiterates that one hundred percent (100%) foreign capital investment in domestic enterprises is allowed unless foreign participation is prohibited or limited by other laws or the Constitution. This also applies to foreign investments in export enterprises whose products and services do not fall within Lists A and B of the Foreign Investment Negative List. These foreign export enterprises shall register with the Board of Investments (BOI) and shall submit reports on export ratio requirements.

Failure to comply with the export ratio requirements will result to reduction of the enterprise’s domestic market sales to not more than forty percent (40%) of its total production. The registration of the foreign export enterprises from the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) will be cancelled should they fail to comply with the order to reduce domestic sales.

The newly signed law, which took effect on 17 March 2022, also requires these foreign export enterprises to register and comply with the export requirements under Title XIII of the National Internal Revenue Code (NIRC) for purposes of availing any tax incentive or benefit.

(b) Public Utilities

The Philippine Constitution requires that public utilities be at least sixty percent (60%) Filipino-owned.

Section 4 of RA 11659 or the amendatory law defines public utilities as:

“Public utility refers to a public service that operates, manages, or controls for public use any of the following:

1. Distribution of Electricity
2. Transmission of Electricity
   
3. Petroleum and Petroleum Products Pipeline Transmission Systems
   
4. Water Pipeline Distribution Systems and Wastewater Pipeline Systems, including sewerage pipeline systems
   
5. Seaports
   
6. Public Utility Vehicles.

Furthermore, Section 4 of RA 11659 provides:

“xxx

A public service which is not classified as a public utility under this Act shall be considered a business affected with public interest for purposes of Section 17 and 18 of Article XII of the Constitution.

Notwithstanding any law to the contrary, nationality requirements shall not be imposed by the relevant Administrative Agencies on any public service not classified as public utility.

xxx.” (Emphasis supplied)

Based on the above, only those listed as public utilities under RA 11659 are required to have the 60% Filipino nationality requirement.

(c) in Micro and Small Domestic Market Enterprises (MSMEs)

RA 11647 reserves to Philippine nationals those enterprises with paid-in equity capital of less than the equivalent of Two Hundred Thousand US Dollars (US$200,000). However, the amendment now allows foreign nationals to invest a minimum paid-in capital of One Hundred Thousand US Dollars (US$100,000) in the following MSMEs: (1) those with advanced technology as determined by the Department of Science and Technology, or (2) those endorsed as startup or startup enablers by the lead host agencies pursuant to Republic Act No. 11337, otherwise known as the Innovative Startup Act; or (3) majority of their direct employees are Filipinos, but with not less than fifteen (15) Filipino employees. With regard to employees hired prior to the effectivity of RA 11647, RA 11647 cannot be used as basis or cause for termination.

(2) Administrative Review of Foreign Investments in Strategic Industries

RA 11647 created the Inter-Agency Investment Promotion Coordination Committee (IIPCC), under the Department of Trade and Industry, which will be in charge of promoting and facilitating efforts in encouraging foreign investments in the country.

Some of the powers and functions of IIPCC are to establish a Foreign Investment Promotion and Marketing Plan (FIPMP) and to establish an online database including a directory of local partners as a tool for promoting investments and business matching in local supply chains. IIPC is also granted the power to review foreign investments involving military-related industries, cyber infrastructure, pipeline transportation, or such other activities that may threaten territorial integrity and the safety, security, and well-being of Filipino citizens.

(3) Anti-Graft Practices in Foreign Investment Promotions

Any public official or employee involved in foreign investment promotions who will commit acts under Section 3 of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, will additionally be punished by a fine of not less than two million pesos (P2,000,000) but not more than five million pesos (P5,000,000).

You can read the full text of RA 11647 here.