With amended laws, fast ruling on cases of foreign-owned firms, FDIs surge seen

FOLLOWING enactments of the Foreign Investments Act (FIA), the Public Service Act (PSA) and the Retail Trade Liberalization Act (RTLA), the Securities and Exchange Commission (SEC) now has more authority to hasten the ruling of pending cases pertaining to companies with foreign ownership.

“Instituting these game-changing reforms is a step in the right direction,” former SEC commission secretary Gerard Lukban said. “Now more than ever, it is imperative to further liberalize the Philippine economy and open its doors to foreign investments to spur economic growth amid the lingering impact of the…pandemic.”

The regulatory body addresses these concerns via a special unit under the Corporate and Partnership Registration Division established in 2021.

The favorable decision on pending cases complements the reformed laws, and will further boost the country’s image as a new “haven for foreign investments,” according to Lukban.

Based on data from the Bangko Sentral ng Pilipinas (BSP), the Philippines posted an all-time high foreign-direct investment (FDI) amounting to $10.3 billion in 2021, as it exceeded its full-year target of P7 billion, and the 2017 record of $10.3 billion. This was also 54-percent higher than the $6.8 billion registered in 2020.

Lukban sees a surge in FDIs with the passage of the amended laws, enabling the country to bounce back from the negative effects of the ensuing health crisis.

“Foreign investors were previously cautious of the implications of their foray into the Philippines because of the old and antiquated laws, which made it hard for us to attract larger investments in the country,” he said. “Resolving pending cases swiftly will allow us to show investors that the Philippines is now a haven for foreign investments.”

Enacted by President Duterte, the three measures streamline and relax restrictions for foreign retailers to open and operate a shop in the Philippines, while making the country more competitive than its Southeast Asian neighbors.

Most recent of which was Republic Act (RA) 11659 signed by the Chief Executive on March 21, which lists the amendments to the 85-year-old PSA. It allows 100-percent foreign ownership across economic sectors such as telecommunications, railways, expressways, airports, and shipping industries, except for entities engaged in the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public-utility vehicles.

On the other hand, RA 11647, which amended the RA 7042 or the FIA of 1991, was enacted on March 2. It states that, except as otherwise provided under RA 8762, micro and small domestic market enterprises with paid-up equity capital of $200,000 are still reserved for Philippine nationals.

Foreign nationals are allowed a minimum paid-up capital of $100,000 under certain conditions: if they use advanced technology as determined by the Department of Science and Technology; are endorsed as start-up or start-up enablers by the lead host agencies in accordance to RA 11337; and the majority of direct employees are Filipinos, the number of which shall be at least 15.

Meanwhile, RA 11595, which amended the RTLA of 2000, was inked on December 10, 2021. It lowers the minimum paid-up capital of foreign retailers to P25 million, and the needed funding of no less than P10 million per store.

With the removal of the categorization of enterprises, foreign retailers are mandated to keep the minimum paid-up capital. The SEC, Department of Trade and Industry, as well as the National Economic and Development Authority, are tasked to review the compliance of foreign entities every three years.

Likewise, they are required to submit a certification from the BSP of the inward remittance of the capital investment, or other proof certifying their capital investment is deposited and maintained in a Philippine bank.

“Allowing more players to jump-start their business in our country, as evidenced by the record-high improvement in investor sentiment, can help drive economic recovery. The implementation of loose restrictions on foreign entrants will lead to the creation of more jobs and unlock more opportunities, ultimately leading to higher income and spending power of households,” Lukban said.

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