Highlights
- New law amends Foreign Investments Act of 1991.
- It allows foreigners to do business in the country — or invest in a domestic enterprise up to 100% of its capital.
- Investor and experts’ visas in the works.
Manila: A law that further opens the Philippines to foreign investors and aimed at enabling the country to become Asia’s start-up hub was announced Friday.
The new legislation amends the Foreign Investment Act (FIA), and seeks to bolster the Philippines’ ability to woo foreign talent and capital, alongside accompanying amendments to the visa system for investors and foreign-born talents.
President Rodrigo R. Duterte signed Republic Act (RA) 11647 into law on Wednesday (March 2), and was unveiled Friday, March 4, 2022.
Amendment
RA 11647, which amends RA 7042 or the Foreign Investments Act of 1991, provides for the following:
- It allows foreign nationals to do business in the country — or invest in a domestic enterprise up to 100% of its capital.
- Liberalises the practice of professions not governed by existing special laws.
- Allows foreign investors to set up 100% ownership of all small- and medium-sized enterprises.
Given the new legal environment, tech start-up companies should consider the Philippines given its highly educated workforce and vastly improved infrastructure.
Joey Salceda, a legislator from Albay who was a principal author of the House version of the law, told the official Philippine News Agency that the legislation could boost the country’s bid to be “a leading startup hub in Southeast Asia” — especially tech and fintech sectors.
The fact of the matter is that disruptions in the global economy now come from small, tech-driven startups. Under the FIA (Foreign Investments Act) amendments, tech startups would be able to locate in the Philippines with less friction, move their professionals and experts in, and teach Filipinos and improve conditions in lagging sectors of the economy
It also seeks to attract investors in agriculture, health, and other key services.
“The fact of the matter is that disruptions in the global economy now come from small, tech-driven startups. Under the FIA (Foreign Investments Act) amendments, tech startups would be able to locate in the Philippines with less friction, move their professionals and experts in, and teach Filipinos and improve conditions in lagging sectors of the economy,” Salceda said.
Special investors visa
Salceda said the law could be complemented by the establishment of special investors and experts’ visas for tech startups of the size that the FIA amendments now allow in the country.
“The current special investors’ resident visa allows in foreigners who seek to invest $75,000 or more in the country. I strongly suggest that we alter that a bit — to also allow startup founders who may not have met that investment criterion yet, but are willing to locate their desirable startups in the country,” he said.
Expert visa for foreign-born geniuses
He said the effect of a tech startup founders’ visa in the country is that while they may not necessarily be investors themselves, they may potentially attract investors with capital to invest in their own startups, which will be Philippine-based.
Salceda also said the FIA amendments pave the way for “expert and highly technical personnel visas,” similar to the EB-1 or "Einstein Visas” granted by the United States for people who are highly acclaimed in their field as well as respected academic researchers and multinational executives.
Liberalising professions
“Encouraging the world’s best to live and work in the Philippines could only mean well for knowledge transfer in the country. And the FIA amendments pave the way for that by liberalising the practice of professions not governed by special laws," he said.
Congresswoman Sharon Garin said the update to the Foreign Investments Act is the needs of the hour in order to boost job creation and the country’s overall competitiveness.
“Definitely, Foreign Direct Investments (FDI) will play a big role in our post-pandemic economic recovery measures. This is part of the effort to gain more capital or investments and help grow ailing industries,” she said.
Win-win situation
Creation more job opportunities will result in faster post-pandemic economic recovery.
"Hopefully, the time when we are ranked as the third-most restrictive economy in the world based on the 2020 Organisation for Economic Cooperation and Development (OECD) report, is now behind us,” Garin said.
She said that as the country’s investment scene further opens up and more jobs are created, it will also boost innovation in industries that need to compete in the international market.
“Ultimately, you’ll have better buying power for everybody and will help the government provide better quality of goods and services. It’s definitely a win-win situation,” Garin said.
The top foreign sources of investment pledges last year were Singapore at Php80.17 billion, the Netherlands with Php26.9 billion, and Japan with Php24.47 billion.
On the other hand, the Bangko Sentral ng Pilipinas reported that foreign direct investments rose 52.5 percent from January to November last year at $9.2 billion.
