Marcos allows up to 40% foreign ownership in small retailers

By Chloe Mari A. Hufana, Reporter

PRESIDENT Ferdinand R. Marcos, Jr. has eased foreign investment rules for retail trade by allowing overseas investors to own as much as 40% of enterprises with paid-up capital of less than P25 million, under the Philippines’ 13th Regular Foreign Investment Negative List (RFINL).

The change, introduced through Executive Order (EO) No. 113, marks a shift from the previous list issued in 2022, which barred foreign equity in small retail trade, and reflects a broader effort to align foreign ownership rules with recent legislative reforms.

Under the updated negative list, retail trade enterprises below the P25-million capital threshold are no longer fully reserved for Filipinos but remain subject to a 40% foreign equity cap.

Control of such firms must still rest with Philippine nationals, in line with the Retail Trade Liberalization Act.

In the April 13 order, Mr. Marcos cited the need to update the foreign investment framework “to reflect changes… consistent with the policy to ease restrictions on foreign participation in certain investment areas or activities,” following recommendations from the Department of Economy, Planning, and Development.

The new order also introduced a higher equity ceiling for infrastructure projects.

Procurement for public works was capped at 40% foreign equity in the 12th RFINL under EO No. 175 signed by former President Rodrigo R. Duterte in 2022.

The 13th RFINL now permits up to 75% foreign ownership in government infrastructure projects but limited only to projects that need special skills or technologies that local companies lack.

The latest RFINL also permits government procurement of goods with up to 40% foreign equity.

Foreign bidders are eligible to participate if allowed under a treaty or international agreement, if their country grants reciprocal rights to Philippine suppliers, if the required goods are not locally available or if their participation is necessary to prevent anti-competitive or trade-restricting conditions.

Government procurement of consulting services can now include up to 40% foreign ownership under the new rules, allowing foreign consultants to be hired when local consultants do not have the needed skills and expertise, as decided by the Head of the Procuring Entity.

The Marcos administration also codified new rules for the defense sector to bolster national security through domestic production as tensions rise in the South China Sea.

The 13th RFINL introduced a category allowing up to 40% foreign equity for the development, production, manufacturing, assembly or operation of materiel (military materials and equipment), by in-country enterprises.

Under Republic Act (RA) No. 12024, or the Self-Reliant Defense Posture Revitalization Act, this provision covers military technology, weapons systems and armor, aiming to foster a local defense industry with limited international partnership.

The new rules also came with wider liberalizations in the telecommunications and renewable energy sectors.

While the 12th RFINL capped radio networks at 40% equity, the 13th RFINL permits 100% foreign ownership in telecommunications management, provided there is reciprocity from the investor’s home country.

The update is in line with RA No. 11659, which allowed up to full foreign ownership in key sectors such as telecommunications, shipping and railways by narrowing the definition of “public utility.”

A Department of Energy’s 2022 circular also allowed full foreign participation in solar, wind, and hydro energy projects.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said easing rules on retail trade will encourage more foreign investment.

“This development would indeed help provide a more conducive business/economic environment for more foreign investments to come to the local retail trade industry that would give Filipinos more choices/variety, lower prices, and better products/services,” he said via Facebook Messenger.

He also noted that the Philippines’ consumption-driven economy, where household spending accounts for more than 70% of the gross domestic product, combined with a population of over 114 million, makes the retail sector particularly attractive to foreign investors.

The 13th RFINL will take effect 15 days after its publication.

The RFINL is divided into two categories: List A and List B.

List A covers industries where foreign participation is limited by the Constitution and specific national laws. This includes mass media, small-scale mining, and the use of marine resources in archipelagic waters and the country’s exclusive economic zone. Foreign nationals are also barred from owning or managing cockpits, as well as from engaging in the manufacture of nuclear, biological, and chemical weapons.

On the other hand, List B restricts foreign ownership to a maximum of 40% in areas deemed sensitive for reasons of national security, public health, and the protection of small- and medium-sized enterprises. These include the manufacture and distribution of firearms, explosives, and military hardware, as well as the operation of gambling facilities and massage clinics.