THE Department of Finance told potential Japanese investors that the government is working on easing foreign ownership restrictions.

Speaking to Japanese investors at a forum in Tokyo last week, Finance Secretary Carlos G. Dominguez III along with the other economic managers affirmed their stance to liberalize the foreign investment negative list (FINL). 

Japan was the Philippines’ top source of foreign direct investment (FDI) in 2016 at $993.1 billion. In the first half of 2017, however, Japan FDI showed a net outflow of $44.19 billion, according to Bangko Sentral ng Pilipinas data.

Overall, FDI fell 14% year on year as of June to $3.597 billion.

Socioeconomic Planning Secretary Ernesto M. Pernia earlier blamed the drop in actual FDI on foreign investment restrictions.

“President Duterte has committed to open up our economy. There are two ways we open up our economy to more foreign investment,” Mr. Dominguez said in a speech.

The first was to review the 11th FINL, which begun in May, and totally stripped out, or relax sectors currently restricted to foreigners.

“A window opened for us to review that list. We are currently reviewing it with the idea of removing areas such as construction and other areas to foreign investment,” Mr. Dominguez said. 

Mr. Dominguez has said that the FINL will be up for the President’s approval before the year closes.

The second step meanwhile involves further liberalizing foreign ownership rules through an amendment of the constitution.

“The President has called for a revision of our constitution, which we believe will start probably next year or in about 12 months,” Mr. Dominguez said.

In December, President Rodrigo R. Duterte signed Executive Order (EO) No. 10, creating a consultative committee to review the 1987 Constitution.

National Economic and Development Authority Undersecretary Rosemarie G. Edillon has said that the agency will submit to the President a draft EO directing Congress to work on consultations for the Constitution overhaul in the area of foreign ownership.

Mr. Pernia has said that he wants to liberalize retail trade, the professions, public utilities, and contracting for government projects.

Industries where foreign ownership is completely prohibited by the Constitution or specific laws are: the practice of all licensed professions; retail; cooperatives; private security agencies; small-scale mining; utilization of marine resources; ownership, operation and management of cockpits; and manufacture, repair, stockpiling and/or distribution of nuclear weapons.

Those areas where foreigners can own limited stakes of up to 25% are: private recruitment for local or overseas employment and construction and repair of locally funded works like infrastructure and foreign-assisted projects.

The areas where foreigners can own up to 30% are: advertising; exploration, development and utilization of natural resources; private lands; public utilities; education; rice and corn administration; financing and investment companies; suppliers to state-owned corporations and agencies; defense-related structures; public utility franchises; and private domestic and overseas construction contracts.

The list of industries allowing up to 40% foreign ownership include security; defense; those industries that pose a risk to health and morals, such as gambling, bath houses and massage clinics; and certain small-scale and medium-scale enterprises. — Elijah Joseph C. Tubayan

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