Republic of the Philippines
HOUSE OF REPRESENTATIVES
QUEZON City

pare, 12 OCT 2016

Time: ERO
SEVENTEENTH CONGRESS

First Regular Session

House Bit No. 4067

Introduced by Representative ARTHUR C. YAP

EXPLANATORY NOTE

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

However, there are two provisions in the law that appear to be in conflict with the
objectives of the FIA.

First, is the provision related to the “practice of all professions”, which is included 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, which is only a little over Php4.3 Million, cannot immediately sustain a labor
force of 50 persons. Hence, 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 R.A. 7042, by deleting the provisions relating
to the “practice of professions” from among the items listed under the Foreign Investment
Negative List (FINL), and by lowering the threshold of employment requirement to 15 direct
employees for a US $100,000 foreign investment in small and medium-sized domestic
market industries.

Approval of this bill is earnestly urged.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 4067

Introduced by REP. ARTHUR C. YAP

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 as follows:

“Sec. 4. Scope. — This Act shall not apply to banking and other financial
ttions, which are governed and regulated by the General Banking Act and other
laws under the supervision of the [Central Bank] BANGKO SENTRAL NG PILIPINAS, AND
‘THE PRACTICE OF PROFESSIONS.”

Sec. 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 List shall 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 a
to law:

ies and enterprises regulated pursuant

1) Which are defense-related activities, requiring prior clearance and
authorization from the 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.

‘Small and medium-sized domestic market enterprises, with paid-in equity capital
less than the equivalent two hundred thousand US dollars (US $200,000.00) 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
(15) 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.

“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
Section 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 immediately
become 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.

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
than once every two (2) years”.

Sec, 3. Repealing Clause. Section 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 not affected thereby shall remain in force and effect.

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

Approved,