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After 20 months of negotiations and contentious public hearings, the Congress of the Philippines adopted the Foreign Investments Act of 1991 on June 6. The Act, which is the first major revision of Filipino investment legislation since the late 1960s, was signed by President Corazon Aquino on June 13. It should be viewed as an important signal to foreign investors that the Philippines is now serious about attracting and utilizing foreign investment capital.
Although the Act states that it will become effective 15 days after publication in two newspapers, the Act's provisions will not in fact be implemented until the implementing rules and regulations for the new law are issued. The National Economic and Development Authority (NEDA), under the Department of Trade and Industry, is to issue the rules within 120 days of the Act's effective date, or by November 1991.
The Act states that it is the government's policy to attract, promote and welcome productive investments from foreigners in activities that significantly contribute to national industrialization and socioeconomic growth, consonant with constitutional and legal restraints.
The legislation will permit qualifying investments to be made without prior government approval and will allow greater foreign equity in many areas than under the old law--especially during an initial three-year "transitory period" that starts after the Act's implementing rules are issued. The Act uses a so-called negative list approach, intended to make the Filipino investment regime more transparent by telling foreign investors clearly which areas are not open to unrestricted foreign investment and by reducing bureaucratic discretion regarding investment entry. The negative list will be kept to a bare minimum during the transitory period, after which domestic businesses can petition NEDA to receive protection from foreign investments, as discussed below.
More Liberal Entry Rules
Technically, the Act replaces all but certain penal provisions of Book II of the Omnibus Investment Code of 1987 (the Code) relating to foreign investments that do not seek special incentives. Accordingly, foreign investors that wish to make use of certain tax and other incentives must still apply to the Board of Investments (the BOI) and go through the registration procedures outlined in Book I of the Code.
Under the Act, foreigners can in general own up to 100-percent equity in enterprises that...