SIXTEENTH CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES)
First Regular Session )

CEIVED *
1. sep 2013 |

HOUSE OF REPRESENTATIVES’

H.B.No.2818

INTRODUCED BY HONORABLE MARK A. VILLAR

EXPLANATORY NOTE

In 1991, Republic Act No. 7042 was passed, otherwise known as the
Foreign Investments Act of 1991 (FIA). The law was intended to attract
investments from foreign sources, and in so doing expand livelihood and
employment opportunities for Filipinos.

However, in the practical application of the law, there are two areas
that appear inconsistent with the objectives of the FIA and merit a second
look.

First, while the FIA is meant to encourage foreign equity
investments, the "practice of all professions" is, oddly enough, an included
item in the Foreign Investment Negative List (FINL) under the heading "No
Foreign Equity". Considering that certain laws governing each profession
allow foreign nationals to practice in the Philippines under reciprocity
arrangements, it is misleading to include such item in the FINL as a
nationalized activity. This effectively discourages foreign professionals
who would otherwise be allowed to practice here by virtue of reciprocity
from coming in and sharing their ideas and technical know-how, contrary
to the inclusive policy of the FIA.

Second, the FIA allows non-Philippine nationals to invest in small
and medium-sized domestic market enterprises (DME) with a minimum
paid-in capital of US$100,000 if they employ at least 50 direct employees
However, operationally speaking, a US$100,000 enterprise - only a little
over PhP 4.3 million - cannot immediately sustain a labor force of 50
persons. So as not to render pointless this provision of the law, and to
align it with the spirit of the FIA, there is a need to retain the employment
requirement but lower the threshold to a more reasonable number

Therefore, this bill seeks to amend the Foreign Investments Act by
excluding the practice of professions from the FINL by providing that the
same shall not be covered by the scope of the FIA, and by lowering the
employment threshold requirement to 15 direct employees for a
US$100,000 foreign investment in small and medium-sized DMEs.


In view of the foregoing, immediate passage of this bill is earnestly
sought

Ee a

MARK A. VILLAR


SIXTEENTH CONGRESS OF THE
REPUBLIC OF THE INT
First Regular Session

HOUSE OF REPRESENTATIVES
H.B.No._ 2818

INTRODUCED BY HONORABLE MARK A. VILLAR

AN ACT AMENDING REPUBLIC ACT NO. 7042, AS AMENDED BY REPUBLIC
ACT NO. 8179, OTHERWISE KNOWN AS THE FOREIGN INVESTMENTS ACT
OF 1991, AND FOR OTHER PURPOSES

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

SECTION 1. Section 4 of Republic Act No. 7042, as amended by Republic Act No.
8179, otherwise known as the Foreign Investments Act of 1991, is hereby amended
to read asfollows:

"Sec. 4. Scope. - This Act shall not apply to THE PRACTICE
OF PROFESSIONS, OR 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.”

SECTION 2. Section 8 of Republic Act No. 7042 is hereby amended to read as
follows:

"Sec. 8. List of Investment Areas Reserved to Philippine
Nationals (Foreign Investment Negative List). - The Foreign
Investment Negative Listshall have two (2) component 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
regulatedpursuant to law:

4) which are defense-related activities, requiring prior clearance
and authorization from Department of National Defense (DND)
to engagein 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

Small 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)] FIFTEEN (18) direct
employees, then a minimum paid-in capital of one hundred
thousand US dollars (US$1 00,000.00) 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

The Transitory 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 Listshall be prospective in operation and
shall in no way affect foreign investment existing on the date of
its publication


‘Amendments 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”

Sec. 3. Repealing Clause. - Sections 4 and 8 of Republic Act No. 7042, as
amended by Republic Act No. 8179, and all laws, decrees, orders, rules and
regulations or other issuances or parts thereof inconsistent with the provisions of this
Act are hereby repealed or modified accordingly

Sec. 4. Separability Clause. - If any portion or provision of this Act is
declared unconstitutional, the remainder of this Act or any provisions not affected
thereby shall remain in force and effect.

Sec. 5. Effectivity. - This Act shall take effect fifteen (15) after publication in
two (2) newspapers of general circulation in the Philippines.

Approved,

MARK A. VILLAR