(As amended by RA 8179)

AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR

REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES, AND

FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:

SECTION 1. Title. - This Act shall be known as the ?oreign Investments Act of 1991?

SEC. 2. Declaration of Policy. - It is the policy of the State to attract, promote and welcome

productive investments from foreign individuals, partnerships, corporations, and governments,

including their political subdivisions, in activities which significantly contribute to national

industrialization and socio-economic development to the extent that foreign investment is

allowed in such activity by the Constitution and relevant laws. Foreign investments shall be

encouraged in enterprises that significantly expand livelihood and employment opportunities

for Filipinos; enhance economic value of farm products; promote the welfare of Filipino

consumers; expand the scope, quality and volume of exports and their access to foreign

markets; and/or transfer relevant technologies in agriculture, industry and support services.

Foreign investments shall be welcome as a supplement to Filipino capital and technology in

those enterprises serving mainly the domestic market.

As a general rule, there are no restrictions on extent of foreign ownership of export

enterprises. In domestic market enterprises, foreigners can invest as much as one hundred

percent (100%) equity except in areas included in the negative list. Foreign owned firms

catering mainly to the domestic market shall be encouraged to undertake measures that will

gradually increase Filipino participation in their businesses by taking in Filipino partners,

electing Filipinos to the board of directors, implementing transfer of technology to Filipinos,

generating more employment for the economy and enhancing skills of Filipino workers.

SEC. 3. Definitions. - As used in this Act:

a) the term ?hilippine National?shall mean a citizen of the Philippines or a domestic

partnership or association wholly owned by citizens of the Philippines; or a

corporation organized under the laws of the Philippines of which at least sixty percent

(60%) of the capital stock outstanding and entitled to vote is owned and held by

citizens of the Philippines or a corporation organized abroad and registered as doing

business in the Philippine under the Corporation Code of which one hundred percent

(100%) of the capital stock outstanding and entitled to vote is wholly owned by

Filipinos or a trustee of funds for pension or other employee retirement or separation

benefits, where the trustee is a Philippine national and at least sixty percent (60%) of

the fund will accrue to the benefit of Philippine nationals: Provided, That where a

corporation and its non-Filipino stockholders own stocks in a Securities and

Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of

the capital stock outstanding and entitled to vote of each of both corporations must be

owned and held by citizens of the Philippines and at least sixty percent (60%) of the

members of the Board of Directors of each of both corporations must be citizens of

the Philippines, in order that the corporation shall be considered a Philippine national;

(as amended by R.A. 8179).

b) the term ?nvestment?shall mean equity participation in any enterprise organized or

existing under the laws of the Philippines;

c) the term ?oreign investment?shall mean an equity investment made by a non-

Philippine national in the form of foreign exchange and/or other assets actually

transferred to the Philippines and duly registered with the Central Bank which shall

assess and appraise the value of such assets other than foreign exchange;

d) the phrase ?oing business?shall include soliciting orders, service contracts, opening

offices, whether called ?iaison?offices or branches; appointing representatives or

distributors domiciled in the Philippines or who in any calendar year stay in the

country for a period or periods totaling one hundred eighty (180) days or more;

participating in the management, supervision or control of any domestic business,

firm, entity or corporation in the Philippines; and any other act or acts that imply a

continuity of commercial dealings or arrangements, and contemplate to that extent

the performance of acts or works, or the exercise of some of the functions normally

incident to, and in progressive prosecution of, commercial gain or of the purpose and

object of the business organization: Provided, however, That the phrase ?oing

business?shall not be deemed to include mere investment as a shareholder by a

foreign entity in domestic corporations duly registered to do business, and/or the

exercise of rights as such investor; nor having a nominee director or officer to

represent its interests in such corporation; nor appointing a representative or

distributor domiciled in the Philippines which transacts business in its own name and

for its own account;

e) the term ?xport enterprise?shall mean an enterprise wherein a manufacturer,

processor or service (including tourism) enterprise exports sixty percent (60%) or

more of its output, or wherein a trader purchases products domestically and exports

sixty percent (60%) or more of such purchases;

f) the term ?omestic market enterprise?shall mean an enterprise which produces

goods for sale, or renders services to the domestic market entirely or if exporting a

portion of its output fails to consistently export at least sixty percent (60%) thereof;

and

g) the term ?oreign Investments Negative List?or ?egative List?shall mean a list of

areas of economic activity whose foreign ownership is limited to a maximum of forty

percent (40%) of the equity capital of the enterprises engaged therein.

SEC. 4. Scope. - This Act shall not apply to banking and other financial institutions which are

governed and regulated by the General Banking Act and other laws under the supervision of

the Central Bank.

SEC. 5. Registration of Investments of Non-Philippine Nationals. - Without need of prior

approval, a non-Philippine national, as that term is defined in Section 3 a), and not otherwise

disqualified by law may, upon registration with the Securities and Exchange Commission

(SEC), or with the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the

Department of Trade and Industry in the case of single proprietorships, do business as

defined in Section 3 d) of this Act or invest in a domestic enterprise up to one hundred

percent (100%) of its capital, unless participation of non-Philippine nationals in the enterprise

is prohibited or limited to a smaller percentage by existing law and/or under the provisions of

this Act. The SEC or BTRCP, as the case may be, shall not impose any limitations on the

extent of foreign ownership in an enterprise additional to those provided in this Act: Provided,

however, That any enterprise seeking to avail of incentives under the Omnibus Investment

Code of 1987 must apply for registration with the Board of Investments (BOI), which shall

process such application for registration in accordance with the criteria for evaluation

prescribed in said Code: Provided, finally, That a non-Philippine national intending to engage

in the same line of business as an existing joint venture, in which he or his majority

shareholder is a substantial partner, must disclose the fact and the names and addresses of

the partners in the existing joint venture in his application for registration with SEC. During

the transitory period as provided in Section 15 hereof, SEC shall disallow registration of the

applying non-Philippine national if the existing joint venture enterprise, particularly the Filipino

partners therein, can reasonably prove they are capable to make the investment needed for

the domestic market activities to be undertaken by the competing applicant. Upon effectivity

of this Act, SEC shall effect registration of any enterprise applying under this Act within fifteen

(15) days upon submission of completed requirements.

SEC. 6. Foreign Investment in Export Enterprises. - Foreign investment in export

enterprises whose products and services do not fall within Lists A and B of the Foreign

Investment Negative List provided under Section 8 hereof is allowed up to one hundred

percent (100%) ownership.

Export enterprises which are non-Philippine nationals shall register with BOI and submit the

reports that may be required to ensure continuing compliance of the export enterprise with its

export requirement. BOI shall advise SEC or BTRCP, as the case may be, of any export

enterprise that fails to meet the export ratio requirement. The SEC or BTRCP shall thereupon

order the non-complying export enterprise to reduce its sales to the domestic market to not

more than forty percent (40%) of its total production; failure to comply with such SEC or

BTRCP order, without justifiable reason, shall subject the enterprise to cancellation of SEC or

BTRCP registration, and/or the penalties provided in Section 14 hereof.

SEC. 7. Foreign Investment in Domestic Market Enterprises. - Non-Philippine nationals

may own up to one hundred percent (100%) of domestic market enterprises unless foreign

ownership therein is prohibited or limited by the Constitution existing law or the Foreign

Investment Negative List under Section 8 hereof. (As amended by R.A. 8179)

SEC. 8. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment

Negative List). - The Foreign Investment Negative List shall have two (2) components lists;

A, and B.

a) List A shall enumerate the areas of activities reserved to Philippine nationals by

mandate of the Constitution and specific laws.

b) List B shall contain the areas of activities and enterprises regulated pursuant to law:

1) which are defense-related activities, requiring prior clearance and authorization

from Department of National Defense (DND) to engage in such activity, such as

the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal

weapons, military ordinance, explosives, pyrotechnics and similar materials;

unless such manufacturing or repair activity is specifically authorized, with a

substantial export component, to a non-Philippine national by the Secretary of

National Defense; or

2) which have implications on public health and morals, such as the manufacture

and distribution of dangerous drugs; all forms of gambling; nightclubs, bars,

beerhouses, dance halls; sauna and steam bathhouses and massage clinics.

?mall and medium-sized domestic market enterprises, with paid-in equity capital less than

the equivalent two hundred thousand US dollars (US$200,000) are reserved to Philippine

nationals, Provided that if: (1) they involve advanced technology as determined by the

Department of Science and Technology or (2) they employ at least fifty (50) direct employees,

then a minimum paid-in capital of one hundred thousand US dollars (US$100,000.00) shall be

allowed to non-Philippine nationals.

Amendments to List B may be made upon recommendation of the Secretary of National

Defense, or the Secretary of Health, or the Secretary of Education, Culture and Sports,

endorsed by the NEDA, approved by the President, and promulgated by a Presidential

Proclamation.

?ransitory Foreign Investment Negative List?established in Sec. 15 hereof shall be replaced

at the end of the transitory period by the first Regular Negative List to be formulated and

recommended by NEDA, following the process and criteria provided in Sections 8 of this Act.

The first Regular Negative List shall be published not later than sixty (60) days before the end

of the transitory period provided in said section, and shall become immediately effective at the

end of the transitory period. Subsequent Foreign Investment Negative Lists shall become

effective fifteen (15) days after publication in a newspaper of general circulation in the

Philippines: Provided, however, That each Foreign Investment Negative List shall be

prospective in operation and shall in no way affect foreign investment existing on the date of

its publication.

?mendments to List B after promulgation and publication of the first Regular Foreign

Investment Negative List at the end of the transitory period shall not be made more often than

once every two (2) years? (As amended by R.A. 8179)

SEC. 9. Investment Rights of Former Natural-born Filipinos. - For the purpose of this Act,

former natural born citizens of the Philippines shall have the same investment rights of a

Philippine citizen in Cooperatives under Republic Act No. 6938, Rural Banks under Republic

Act No. 7353, Thrift Banks and Private Development Banks under Republic Act No. 7906, and

Financing Companies under Republic Act No. 5980. These rights shall not extend to

activities reserved by the Constitution, including (1) the exercise of profession; (2) in defense

related activities under Section 8 (b) hereof. Unless specifically authorized by the Secretary of

National Defense; and, (3) activities covered by Republic Act No. 1180 (Retail Trade Act).

Republic Act No. 5187 (Security Agency Act), Republic Act No. 7076 (Small Scale Mining

Act), Republic Act No. 3018. As amended (Rice and Corn Industry Act). And P.D. 449

(Cockpits Operation and Management)? (As amended by R.A. 8179)

SEC. 10. Other Rights of Natural Born Citizen Pursuant to the Provisions of Article XII,

Section 8 of the Constitution. - Any natural born citizen who has lost his Philippine

citizenship and who has the legal capacity to enter into a contract under Philippine laws may

be a transferee of a private land up to a maximum area of five thousand (5,000) square

meters in the case of urban land or three (3) hectares in the case of rural land to be used by

him for business or other purposes. In the case of married couples, one of them may avail of

the privilege herein granted: Provided, That if both shall avail of the same, the total area

acquired shall not exceed the maximum herein fixed.

In the case the transferee already owns urban or rural land for business or other purposes, he

shall still be entitled to be a transferee of additional urban or rural land for business or other

purposes which when added to those already owned by him shall not exceed the maximum

areas herein authorized.

A transferee under this Act may acquire not more than two (2) lots which should be situated in

different municipalities or cities anywhere in the Philippines: Provided, That the total land area

thereof shall not exceed five thousand (5,000) square meters in the case of urban land or

three (3) hectares in the case of rural land for use by him for business or other purposes. A

transferee who has already acquired urban land shall be disqualified from acquiring rural land

and vice versa? (As amended by R.A. 8179)

SEC. 11. Compliance with Environmental Standards. - All industrial enterprises regardless

of nationality of ownership shall comply with existing rules and regulations to protect and

conserve the environment and meet applicable environmental standards.

SEC. 12. Consistent Government Action. - No agency, instrumentality or political

subdivision of the Government shall take any action in conflict with or which will nullify the

provisions of this Act, or any certificate or authority granted hereunder.

SEC. 13. Implementing Rules and Regulations. - NEDA, in consultation with BOI, SEC and

other government agencies concerned, shall issue the rules and regulations to implement this

Act within one hundred and twenty (120) days after its effectivity. A copy of such rules and

regulations shall be furnished the Congress of the Republic of the Philippines.

SEC. 14. Administrative Sanctions. - A person who violates any provision of this Act or of

the terms and conditions of registration or of the rules and regulations issued pursuant

thereto, or aids or abets in any manner any violation shall be subject to a fine not exceeding

one hundred thousand pesos (P100,000).

If the offense is committed by a juridical entity, it shall be subject to a fine in an amount not

exceeding ?of 1% of total paid-in capital but not more than five million pesos (P5,000,000).

The president and/or officials responsible thereof shall also be subject to a fine not exceeding

two hundred thousand pesos (P200,000.00)

In addition to the foregoing, any person, firm or juridical entity involved shall be subject to

forfeiture of all benefits granted under this Act.

SEC shall have the power to impose administrative sanctions as provided herein for any

violation of this Act or its implementing rules and regulations.

SEC. 15. Transitory Provisions. - Prior to effectivity of the implementing rules and

regulations of this Act, the provisions of Book II of Executive Order 226 and its implementing

rules and regulations shall remain in force.

During the initial transitory period of thirty-six (36) months after issuance of the Rules and

Regulations to implement this Act, the Transitory Foreign Investment Negative List shall

consist of the following:

A. List A:

1. All areas of investment in which foreign ownership is limited by mandate of

Constitution and specific laws.

B. List B:

1. Manufacture, repair, storage and/or distribution of firearms, ammunition, lethal

weapons, military ordnance, explosives, pyrotechnics and similar materials required

by law to be licensed by and under the continuing regulation of the Department of

National Defense; unless such manufacturing or repair activity is specifically

authorized, with substantial export component, to a non-Philippine national by the

Secretary of National Defense;

2. Manufacture and distribution of dangerous drugs; all forms of gambling; nightclubs,

bars, beerhouses, dance halls; sauna and steam bathhouses, massage clinics and

other like activities regulated by law because of risks they may pose to public health

and morals;

3. ?mall and medium-sized domestic market enterprises with paid-in equity capital less

than the equivalent of Two-hundred thousand US dollars (US$200,000.00), reserved

to Philippine nationals: Provided, That if: (1) they involve advanced technology as

determined by the Department of Science and Technology or (2) they employ at least

fifty (50) direct employees, then a minimum paid-in capital of One hundred thousand

US dollars (US$100,000.00) shall be allowed to non-Philippine nationals.

SEC. 16. Repealing Clause. - Articles forty-four (44) to fifty-six (56) of Book II of Executive

Order No. 226 are hereby repealed.

All other laws or parts of laws inconsistent with the provisions of this Act are hereby repealed

or modified accordingly.

SEC. 17. Separability Clause. - If any part or section of this Act is declared unconstitutional

for any reason whatsoever, such declaration shall not in any way affect the other parts or

sections of this Act.

SEC. 18. Effectivitiy. - This Act take effect from fifteen (15) days after approval and

publication in two (2) newspapers of general circulation in the Philippines.

Approved,

(SGD) JOSE DE VENECIA, JR. (SGD) NEPTALI A. GONZALES

Speaker of the House of Representatives President of the Senate

This Act, which is a consolidation of Senate Bill No. 1399 and House Bill No. 5029 was finally

passed by the Senate and the House of Representatives on March 25, 1996.

CAMILO L. SABIO HEZEL P. GACUTAN

Secretary General Secretary of the Senate

House of Representatives

Approved: March 28, 1996

(SGD) FIDEL V. RAMOS

President of the Philippines