Nationalized Industries (No Foreign Equity)

1. Mass media except recording (Art. XVI, Sec. 11 of the

Constitution; Presidential Memorandum dated 04 May 1994)
2. Practice of all professions (Art. XII, Sec. 14 of the Constitution,
Sec. 1 of Republic Act (RA) 5181) Example: Engineering, Law,
Medicine
3. Retail trade enterprises with paid-up capital of less than
US$2,500,000, except, that full foreign participation is allowed for
retail trade enterprises: (a) with paid-up capital of US$2,500,000
or more provided that investments for establishing a store is not
less than US$830,000; or (b) specializing in high end or luxury
products, provided that the paid-up capital per store is not less
than US$250,000 (Sec. 5 of RA 8762)
4. Cooperatives (Ch. III, Art. 26 of RA 6938)
Retail trade encompasses the department store,
bookstore, and grocery store you stopped at, along with
many others who sell new or used goods to the public for
personal or household use. That could include new and
used clothing from specialty or consignment stores and
even food and beverages from the grocery.

Paid-up capital is the amount of money a company has

received from shareholders in exchange for shares of
stock. Paid-up capital is created when a company sells its
shares on the primary market directly to investors, usually
through an initial public offering (IPO).
Nationalized Industries (No Foreign Equity)
5. Private security agencies (Sec. 4 of RA 5487)
6. Small-scale mining (Sec. 3 of RA 7076)
7. Utilization of marine resources in archipelagic waters, territorial
sea, and exclusive economic zone as well as small-scale utilization
of natural resources in rivers, lakes, bays, and lagoons (Art. XII,
Sec. 2 of the Constitution)
8. Ownership, operation and management of cockpits (Sec. 5 of
PD 449)
9. Manufacture, repair, stockpiling and/or distribution of nuclear
weapons (Art. II, Sec. 8 of the Constitution), or biological,
chemical and radiological weapons and anti-personnel mines
(various treaties to which the Philippines is a signatory and
conventions supported by the Philippines)
10. Manufacture of firecrackers and other pyrotechnic devices
(Sec. 5 of RA 7183)
CHEMICAL, BIOLOGICAL, RADIOLOGICAL, AND NUCLEAR
(CBRN)

Examples: mortars, artillery shells, missiles, bombs, mines or

spray tanks.

Anti-personnel mine means a mine designed to be exploded by

the presence, proximity or contact of a person and that will
incapacitate, injure or kill one or more persons.
Partially Nationalized Industries (Limited Foreign Equity)

Up to Twenty Percent (20%) Foreign Equity

11. Private radio communications network (RA 3846)

Up to Twenty-Five Percent (25%) Foreign Equity

12. Private recruitment, whether for local or overseas
employment (Art. 27 of PD 442)
13. Contracts for the construction and repair of locally-funded
public works (Sec. 1 of Commonwealth Act No. 541, Letter of
Instruction No. 630) except:
a. Infrastructure/development projects covered in RA 7718 (PPP
or BOT); and
b. Projects which are foreign funded or assisted and required to
undergo international competitive bidding (Sec. 2 (a) of RA 7718).
14. Contracts for the construction of defense-related structures
(Sec. 1 of CA 541)
 Partially Nationalized Industries (Limited Foreign Equity)

Up to Thirty Percent (30%) Foreign Equity

15. Advertising (Art. XVI, Sec. 11 of the Constitution)

 Partially Nationalized Industries (Limited Foreign Equity)

Up to Forty Percent (40%) Foreign Equity

16. Exploration, development and utilization of natural resources,

except, that full foreign participation is allowed through financial
or technical assistance agreement with the President (Art. XII,
Sec. 2 of the Constitution) – this includes mining

17. Ownership of private lands (Art. XII, Sec. 7 of the Constitution;

Ch. 5, Sec. 22 of CA 141; Sec. 4 of RA 9182)
Question: We aim to own a land and build
structures in the Philippines, and we are aware of
the 60% ownership restriction for Filipinos. Are
there mechanisms to protect our assets in the
Philippines? For instance, can we have an agreement
where the majority owner can be replaced by
another local resident in case of problems?
ANSWER:
The Philippines has specific restrictions when it
comes to land ownership by foreign entities and
individuals. However, there are certain structures
and mechanisms to protect investments while
adhering to local regulations:

1. Land Ownership Restrictions:

The Philippine Constitution and the Public Land Act
prohibit foreign individuals from owning land. Only
Filipino citizens or corporations or partnerships
wherein at least 60% of its capital stock is owned by
Filipinos can acquire and own land.
2. Mechanisms for Asset Protection:
Lease Agreements: Foreigners can lease private land. Lease
agreements can be made for an initial period of up to 50 years,
renewable for another 25 years.

Condominium Units: While foreigners are prohibited from owning

land, they can own units in condominium projects, as long as
Filipino ownership in the condominium corporation is at least
60%.

Creation of a Corporation: One common method used by

foreigners to invest in land is through the creation of a Philippine
corporation where 60% of the shares are owned by Filipino
citizens. The corporation, being a juridical entity, can own the
land. It's crucial to ensure that the arrangement is legitimate and
not a mere front (or "dummy") to circumvent the law, as
"dummy" arrangements are illegal and can lead to penalties.
Changing the Board Members: To address concerns
about asset control, remember that even if the
foreign investor owns only up to 40% of the shares,
they can draft the corporation's by-laws or other
internal agreements in a way that allows them a
significant degree of control in terms of
management decisions. For instance, certain crucial
decisions could require a supermajority vote,
ensuring foreign investors have a say. Additionally,
board members (who can be replaced) need not
necessarily be the major shareholders.
3. Consider Joint Ventures:
Engaging in a joint venture with a local partner can
provide a foreign investor with more control and
oversight. Careful crafting of the joint venture
agreement can ensure that both parties' interests
are protected.
4. Legal Agreements:
To protect assets and investments, parties can enter
into various legal agreements stipulating conditions,
roles, rights, and mechanisms for dispute resolution.
These agreements can define terms on how board
members or shareholders can be replaced, ensuring
the foreign investor's continued influence or control
over the company.
 Partially Nationalized Industries (Limited Foreign Equity)

Up to Forty Percent (40%) Foreign Equity

16. Exploration, development and utilization of natural resources,
except, that full foreign participation is allowed through financial
or technical assistance agreement with the President (Art. XII,
Sec. 2 of the Constitution) – this includes mining
17. Ownership of private lands (Art. XII, Sec. 7 of the Constitution;
Ch. 5, Sec. 22 of CA 141; Sec. 4 of RA 9182)
18. Operation and management of public utilities (Art. XII, Sec. 11
of the Constitution; Sec. 16 of CA 146) – such as (but not limited
to) the following:
a. Telecommunications
b. domestic public transportation
c. logistics
d. operation of toll roads
e. transmission and distribution of electricity
 Partially Nationalized Industries (Limited Foreign Equity)
19. Ownership/establishment and administration of educational
institutions (Art. XIV, Sec. 4 of the Constitution)
20. Culture, production, milling, processing, trading except
retailing, of rice and corn and acquiring, by barter, purchase or
otherwise, rice and corn and the by-products thereof (Sec. 5 of PD
194), except, that full foreign participation is allowed provided
that within the 30-year period from start of operation, the foreign
investor shall divest a minimum of 60 percent of their equity to
Filipino citizens (Sec. 5 of PD 194; NFA Council Resolution No. 193
s. 1998)
21. Contracts for the supply of materials, goods and commodities
to government-owned or controlled corporation, company,
agency or municipal corporation (Sec. 1 of RA 5183)
 Partially Nationalized Industries (Limited Foreign Equity)

22. Project proponent and facility operator of a Build-Operate-

Transfer Project requiring a public utilities franchise (Art. XII, Sec.
11 of the Constitution; Sec. 2 (a) of RA 7718)
23. Operation of deep sea commercial fishing vessels (Sec. 27 of
RA 8550)
24. Adjustment companies (Sec. 323 of PD 612 as amended by PD
1814)
25. Ownership of condominium units where the common areas in
the condominium project are co-owned by the owners of the
separate units or owned by a corporation (Sec. 5 of RA 4726)
Adjustment companies - Adjusting firms are entities formed to
coordinate and organize the services of Adjusters for the Insured
and Insurance Adjusters.

Adjusters : one that adjusts. especially : an insurance agent who

investigates personal or property damage and makes estimates
for effecting settlements.
Partially Nationalized Industries (Limited Foreign Equity)
Up to Forty-Nine Percent (49%) Foreign Equity
26. Lending companies (Sec. 6 of RA 9474)

Up to Sixty Percent (60%) Foreign Equity

27. Financing companies regulated by the SEC (Sec. 6 of RA 5980
as amended by RA 8556), provided that, no foreign national may
be allowed to own stock in lending companies, financing
companies or investment houses unless the country of which he
is a national accords the same reciprocal rights to Filipinos (Sec. 6
of RA 9474; Sec. 6 of RA 5980 as amended by RA 8556)
'Financing companies' hereinafter called companies, are
corporations, except banks, investments houses, savings and loan
associations, insurance companies, cooperatives, and other
financial institutions organized or operating under other special
laws, which are primarily organized for the purpose of extending
credit facilities to consumers and to industrial, commercial, or
agricultural enterprises, by direct lending or by discounting or
factoring commercial papers or accounts receivable, or by
buying and selling contracts, leases, chattel mortgages, or other
evidences of indebtedness, or by financial leasing of movable as
well as immovable property
"Sec. 6. Form of organization and capital requirements. —
Financing companies shall be organized in the form of stock
corporations at least forty percent (40%) of the voting stock of
which is owned by citizens of the Philippines and shall have a
paid-up capital of not less than Ten million pesos (P10,000,000) in
case the financing company is located in Metro Manila and other
first class cities, Five million pesos (P5,000,000) in other classes of
cities and Two million five hundred thousand pesos (P2,500,000)
in municipalities: Provided, however, That no foreign national may
be allowed to own stock in any financing company unless the
country of which he is a national accords the same reciprocal
rights to Filipinos in the ownership of financing companies or
their counterpart entities in such country: and Provided, further,
That financing companies duly existing and in operation before
the effectivity of this Act shall comply with the minimum capital
requirement within one (1) year from the date of the said
effectivity."
 Partially Nationalized Industries (Limited Foreign Equity)

Up to Sixty Percent (60%) Foreign Equity

28. Investment houses regulated by the SEC (Sec. 5 of PD 129 as

amended by RA 8366), provided that, no foreign national may be
allowed to own stock in lending companies, financing companies
or investment houses unless the country of which he is a national
accords the same reciprocal rights to Filipinos (Sec. 6 of RA 9474;
PD 129 as amended by RA 8366)
Investment house means any enterprise which primarily engages,
whether regularly or on an isolated basis, in the underwriting of
securities of another person or enterprise, including securities of
the government and its instrumentalities.

In the securities market, underwriting involves determining the

risk and price of a particular security. It is a process seen most
commonly during initial public offerings, wherein investment
banks first buy or underwrite the securities of the issuing entity
and then sell them in the market.

For instance, an insurance company uses underwriting to judge

applicants for coverage and decide whether to accept or deny
their application. Similarly, a mortgage lender relies on
underwriting to evaluate a loan application and determine
whether to approve or reject a home loan.
FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY,
DEFENSE, RISK TO HEALTH AND MORALS AND PROTECTION OF
SMALL- AND MEDIUM-SCALE ENTERPRISES
Up to Forty Percent (40%) Foreign Equity

1. Manufacture, repair, storage, and/or distribution of products and/or ingredients

requiring Philippine National Police (PNP) clearance:
a. Firearms (handguns to shotguns), parts of firearms and ammunition therefore,
instruments or implements used or intended to be used in the manufacture of
firearms
b. Gunpowder
c. Dynamite
d. Blasting supplies
FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY,
DEFENSE, RISK TO HEALTH AND MORALS AND PROTECTION OF
SMALL- AND MEDIUM-SCALE ENTERPRISES
Up to Forty Percent (40%) Foreign Equity

e. Ingredients used in making explosives:

i. Chlorates of potassium and sodium
ii. Nitrates of ammonium, potassium, sodium barium, copper (11), lead (11), calcium
and cuprite
iii. Nitric acid
iv. Nitrocellulose
v. Perchlorates of ammonium, potassium and sodium
vi. Dinitrocellulose
vii. Glycerol
viii. Amorphous phosphorus
ix. Hydrogen peroxide
x. Strontium nitrate powder
xi. Toluene
FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE,
RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL- AND
MEDIUM-SCALE ENTERPRISES

Up to Forty Percent (40%) Foreign Equity

f. Telescopic sights, sniper scope and other similar devices

However, the manufacture or repair of these items may be authorized by

the Chief of the PNP to non-Philippine nationals; Provided that a
substantial percentage of output, as determined by the said agency, is
exported. Provided further that the extent of foreign equity ownership
allowed shall be specified in the said authority/clearance (RA 7042 as
amended by RA 8179)
FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE,
RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL- AND
MEDIUM-SCALE ENTERPRISES
2. Manufacture, repair, storage and/or distribution of products requiring Department of National
Defense (DND) clearance:
a. Guns and ammunition for warfare
b. Military ordinance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades,
missiles)
c. Gunnery, bombing and fire control systems and components
d. Guided missiles/missile systems and components
e. Tactical aircraft (fixed and rotary-winged), parts and components thereof
f. Space vehicles and component systems
g. Combat vessels (air, land and naval) and auxiliaries
h. Weapons repair and maintenance equipment
i. Military communications equipment
j. Night vision equipment
k. Stimulated coherent radiation devices, components and accessories
l. Armament training devices
m. Others as may be determined by the Secretary of the DND
However, the manufacture or repair of these items may be authorized by the Secretary of
National Defense to non-Philippine nationals; Provided that a substantial percentage of output, as
determined by the said agency, is exported. Provided further that the extent of foreign equity
ownership allowed shall be specified in the said authority/clearance (RA 7042 as amended by RA
8179).
FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE,
RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL- AND
MEDIUM-SCALE ENTERPRISES

3. Manufacture and distribution of dangerous drugs (RA 7042 as amended by RA 8179)

4. Sauna and steam bathhouses, massage clinics and other like activities regulated by
law because of risks posed to public health and morals (RA 7042 as amended by RA
8179)

5. All forms of gambling (including casinos), except those covered by investment

agreements with PAGCOR pursuant to RA 9487 (RA 7042 as amended by RA 8179)

6. Domestic market enterprises with paid-in equity capital of less than the equivalent of
US$200,000 (RA 7042 as amended by RA 8179)

7. Domestic market enterprises which involve advanced technology or employ at least

fifty (50) direct employees with paid-in equity capital of less than the equivalent of
US$100,000 (RA 7042 as amended by RA 8179)
Dangerous drug as defined under Republic Act 6425 or the Dangerous Drugs Act, as
amended, refers to either:

(1) “Prohibited drug” which includes opium and its active components and derivatives,
such as heroin and morphine; coca leaf and its derivatives, principally cocaine; alpha
and beta eucaine; hallucinogen drugs, such as mescaline, lysergic and diethylamide
(LSD) and other substances producing similar effects; Indian hemp and its derivatives;
all preparations made from any of the foregoing; and other drugs and chemical
preparations whether natural or synthetic, with the physiological effects of a narcotic or
hallucinogenic drug; or

(2) “Regulated drug” which includes, unless authorized by the Department of Health
(DOH) and in accordance with the Dangerous Drugs Board, self-inducing sedatives, such
as secobarbital, phenobarbital, pentobarbital, barbital, amobarbital or any other drug
which contains a salt or a derivative of salt of barbituric acid; any salt, isomer, or salt of
an isomer, of amphetamine such as benzedrine or dexedrine, or any drug which
produces a physiological action similar to amphetamine; and hypnotic drugs, such as
methaqualone, nitrazepam or any other compound producing similar physiological
effects.

Secobarbital is used on a short-term basis to treat insomnia (difficulty falling asleep or

staying asleep)
OTHER INDUSTRIES WITH LIMITED FOREIGN OWNERSHIP
ALLOWED

Up to Forty Percent (40%) Foreign Equity

1. Exploration, development and utilization of renewable energy resources

and actual operation of renewable energy systems or facilities (Section 19,
B. of Rule 6, Part IV of Department of Energy Circular No. DC2009-05-0008)

2. Foreign individuals and non-bank corporations can only own up to 40%

of the voting stock of a domestic bank (Section 11, GBL) while foreign
banks can own up to 60% of the voting stock of only one domestic bank
(Section 2, Republic Act No. 7721 or An Act Liberalizing the Entry and Scope
of Operations of Foreign Banks in the Philippines and for Other Purposes)

In connection with the Negative List, the distinction must be made

between an Export Enterprise and a Domestic Market Enterprise.