What is Executive Order (EO) No. 65 all about?
executive order 65

What is Executive Order (EO) No. 65 all about?

In October 29, 2018 EO65 was signed by Philippine President Rodrigo Duterte    EO65 promulgates the 11th Regular Foreign Investment Negative List (FINL).  Every 2 years, the government releases the FINL, which lists down sectors where foreign investors have only a limited participation.  The 10th FINL was signed by former President Benigno Aquino III in 2015 under EO No. 184 and it practically kept intact the list of activities and sectors restricted to foreign equity and participation as per ninth FINL.

The restriction is based on foreign equity limits based on existing laws, administrative issuances and department opinions.  All promulgations are based on t he “Foreign Investments Act of 1991” or RA 7042 which aims to promote foreign investments by prescribing the procedures for registering enterprises doing business in the Philippines.

In March 1996, RA 7042  was revised by RA8179.

Link for EO 65

https://www.officialgazette.gov.ph/downloads/2018/10oct/20181029-EO-65-RRD.pdf

It now allows up to 100% foreign ownership of 5 investment areas and activities, including internet businesses.

The 5 investment areas and activities that can now be 100% owned by foreigners are the following, according to the National Economic and Development Authority (NEDA):

  • Internet businesses
  • Teaching at higher education levels provided the subject being taught is not a professional subject
  • Training centers that are engaged in short-term high level skills development that do not form part of the formal education system
  • Adjustment companies, lending companies, financing companies, and investment houses
  • Wellness centers

Other major changes include allowing foreigners to own up to 40% of contracts for the construction and repair of locally-funded public works, except for infrastructure or development projects covered in Republic Act No. 7718, and projects which are foreign-funded or assisted and required to undergo international competitive bidding.

This, however, is subject to applicable regulatory frameworks, reads the EO.

Previously, foreigners could only have up to 25% equity in such contracts.

It also increased participation of up to 40% on two sectors:

  • Contracts for construction and repair of locally-funded public works (except those that are foreign-funded or assisted and required to undergo international competitive auction), which used to have 25% foreign equity cap; and
  • Private radio communication networks (previously only up to 20% equity). 

However, the new Negative List removed the following sectors from the list (where up to 40% foreign equity was previously allowed):

  • Facility operator of an infrastructure or a development facility requiring a public utility franchise; and
  • Adjustment companies. 

List A

No Foreign Equity

  • Mass media, except recording and internet business
  • Practice of professions, including radiologic and x-ray technology, law, criminology, and marine deck officers and marine engine officers
    • Subject to the Annex on Professions indicating professions where foreigners are allowed to practice in the Philippines subject to reciprocity and where corporate practice is allowed; and 
    • Foreigners may teach at higher education levels if subject being taught is not a professional subject (included in a government board or bar examination).
  • Retail trade enterprises with paid-up capital of less than US$2.5 million
  • Cooperatives
  • Organization and operation of private detective, watchmen or security guards agencies
  • Small-scale mining
  • 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
  • Ownership, operation, and management of cockpits
  • Manufacture, repair, stockpiling, and/or distribution of nuclear weapons
  • Manufacture, repair, stockpiling, and/or distribution of biological, chemical, and radiological weapons and anti-personnel mines
  • Manufacture of firecrackers and other pyrotechnic devices

Up to 25% Foreign Equity

  • Private recruitment, whether for local or overseas employment
  • Contracts for the construction of defense-related structures

Up to 30% Foreign Equity

  • Advertising

Up to 40% Foreign Equity

  • Contracts for the construction and repair of locally-funded public works, except:
    • Infrastructure/development projects covered in Republic Act (RA) No. 7718; and
    • Projects which are foreign-funded or assisted and required to undergo international competitive bidding.
  • Exploration, development, and utilization of natural resources
  • Ownership of private lands
  • Operation of public utilities, except power generation and the supply of electricity to the contestable market and similar businesses or services not covered by the definition of public utilities
  • Educational institutions other than those established by religious groups and mission boards, for foreign diplomatic personnel and their dependents and other foreign temporary residents, or for short-term high-level skills development that do not form part of the formal education system as defined in Section 20 of Batas Pambansa (BP) No. 232 (1982)
  • 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
  • Contracts for the supply of materials, goods, and commodities to Government-Owned and Controlled Corporation (GOCC), company, agency or municipal corporation 
  • Operation of deep-sea commercial fishing vessels
  • Ownership of condominium units
  • Private radio communications network

List B

Up to 40% Foreign Equity

  • Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) clearance:
    • Firearms (handguns to shotguns), parts of firearms and ammunition therefor, instruments or implements used or intended to be used in the manufacture of firearms; 
    • Gunpowder;
    • Dynamite;
    • Blasting supplies;
    • Ingredients used in making explosives:
      • Chlorates of potassium and sodium;
      • Nitrates of ammonium, potassium, sodium barium, copper (11), lead (11), calcium, and cuprite;
      • Nitric acid;
      • Nitrocellulose;
      • Perchlorates of ammonium, potassium, and sodium;
      • Dinitrocellulose;
      • Glycerol;
      • Amorphous phosphorus;
      • Hydrogen peroxide;
      • Strontium nitrate powder;
      • Toluene; and
    • 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 No. 7042 as amended by RA No. 8179). 

  • Manufacture, repair, storage, and/or distribution of products requiring Department of National Defense (DND) clearance:
    • Guns and ammunition for warfare;
    • Military ordinance and parts thereof (e.g., torpedoes, depth charges, bombs, grenades, missiles);
    • Gunnery, bombing, and fire control systems and components;
    • Tactical aircraft (fixed and rotary-winged), parts, and components thereof;
    • Space vehicles and component systems;
    • Combat vessels (air, land, and naval) and auxiliaries;
    • Weapons repair and maintenance equipment;
    • Military communications equipment;
    • Night vision equipment;
    • Stimulated coherent radiation devices, components, and accessories;
    • Armament training devices; and
    • 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 No. 7042 as amended by RA No. 8179).

  • Manufacture and distribution of dangerous drugs (RA No. 7042 as amended by RA No. 8179)
  • Sauna and steam bathhouses, massage clinics, and other like activities regulated by law because of risks posed to public health and morals, except wellness centers
  • All forms of gambling, except those covered by investment agreements with Philippine Amusement and Gaming Corporation (PAGCOR)
  • Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000
  • 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

Source: Official Gazette of the Philippines


Updated: November 8, 2019

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