The number 13 is often associated with a sense of dread, and such a feeling may be appropriate in the Philippines as it publishes its own 13.th Foreign Investment Negative List (FINL). The FINL identifies sectors where foreign equity participation remains limited or prohibited. Against the general backdrop of opening up the economy through the Public Service Act (PSA), the Trade Liberalization Act, and the Foreign Investment Act, the FINL is a useful indicator of a country’s progressive approach to economic liberalization.
Promulgated by President Ferdinand R. Marcos, Jr. by Executive Order (EO) No. 113, 13th FINL came into effect on May 2, officially replacing the 12th FINL released in 2022. In accordance with the long-standing “negative list” framework adopted under the Foreign Investment Law, all investment activities not expressly included in the FINL are considered open to 100% foreign equity participation, subject to applicable licensing, regulatory, and capitalization requirements.
13th FINL maintains a bifurcated structure consisting of List A and List B restrictions. List A contains industries subject to restrictions imposed by the 1987 Constitution or specific laws. These industries include the media, advertising, exploitation of natural resources, educational institutions, and public services. The 13th FINL also incorporates developments from recent legislative changes and clarifies the scope of activities that remain subject to foreign constitutional restrictions.
List B, on the other hand, continues to include activities restricted for reasons of national security, defence, public health and morals, and the protection of micro, small and medium enterprises (MSMEs). Unlike list A, these restrictions are policy-driven and can be adjusted by the Executive branch every two years. 13th FINL introduces significant changes under List B, which reflects the government’s approach to regulating strategic and emerging industries.
In particular, the 13th FINL now allows foreign ownership of up to 100% (previously 40%) in telecommunications companies, in accordance with the PSA amendments, subject to uniformity requirements. Where there is no match, foreign ownership is set at 50%.
The revised FINL also legalized renewable energy projects. Although the previous FINLs left some uncertainty due to the foreign equity ratio of 40 percent which was historically related to the constitutional limitation of exploration and exploitation of natural resources, 13.th FINL clearly affirms that solar, wind, and marine energy projects may now be completely outsourced. This development is in line with the administration’s drive to ensure energy security and sustainability, which has been critical during the power crisis. The gates were opened by the Ministry of Justice Opinion No. By defining these resources as kinetic and unlimited rather than the inexhaustible natural resources limited by the 1987 Constitution, the vision effectively opened the sector to 100% foreign ownership. Interestingly, however, unlike other renewable energy sources, hydroelectric projects involving the allocation of natural water resources remain below the constitutional limit of 40%.
In contrast, the 13th The FINL is moving back slightly in some sectors and is reinstating some restrictions on defense-related industries. Although certain activities were exempted from the previous issuance, the revised FINL reimposes a 40% foreign investment limit on the manufacture, maintenance, maintenance, and operation of military equipment, including weapons systems, ammunition, and military technology. This change appears to be intended to be in line with the objectives of the Defense Independence Posture Renewal Act, which encourages technology transfer and domestic capacity building through greater local participation.
13th The FINL also specifies other areas that have given rise to different interpretations. In retail trade, for example, 13th FINL ensures that businesses with a paid-up capital of less than P25 million are not completely closed to foreign investors, but may participate up to 40% of foreign capital. Full foreign ownership remains available only upon compliance with the capital limits set by the Retail Trade Liberalization Act.
Another important clarification is related to the business practice of construction. While the 12th FINL refers broadly to professional practice limits, 13th The FINL now expressly prohibits foreign equity participation in real estate companies, emphasizing the position that professional degrees cannot be used by business entities with foreign ownership. This treatment appears to be more restrictive than other controlled activities where adaptive mechanisms may still be active.
Finally, the 13thth FINL maintains MSME capitalization thresholds while continuing to recognize the low capitalization requirements of innovation-driven businesses. Businesses in the domestic market with a paid capital of less than $200,000 are usually subject to less than 40% of the foreign currency, with a reduced limit of $100,000 also remaining for businesses that use advanced technology as approved by the Department of Science and Technology, are recognized startups, or employ at least 15 Filipino workers. These statues reflect the government’s intention to promote innovation, technology transfer, and job creation while maintaining a level of protection for domestic businesses.
13th The FINL reflects the government’s ongoing effort to address global economic pressures, changing priorities, technological advances, and increasing competition for foreign capital. By incorporating legislative changes and addressing longstanding ambiguities in foreign ownership rules, the revised FINL aims to balance investment liberalization, national security considerations, and constitutional protections. In its mind, the 13th The FINL is a policy instrument that reflects the country’s broad direction towards a more competitive and investment-friendly economy.
With several industries now open to foreign participation – especially telecommunications and renewable energy – the coming years will be crucial in determining whether the 13th FINL can effectively support economic growth, innovation, and investor confidence. In the end, whether the 13 proves a boon for foreign investors or a warning will depend not only on the breadth of freedom, but also on the consistency, predictability, and clarity of the regulatory environment that governs foreign investment in the Philippines.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Aubrey Gayle T. Diaz is a manager in the Tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers’ global network.
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