Opening our doors wider to foreign investors
President Rodrigo Duterte recently signed a law easing restrictions on foreign investments. The newly signed Republic Act No. 11647 entitled “Act Promoting Foreign Investments” aims to make the Philippines a more attractive destination for foreign investments. The Philippines has been tagged as the most restrictive in Southeast Asia and the world.
According to the ASEAN Investment Report 2020-2021, foreign direct investments (FDI) in the Philippines declined by 25 percent, to $6.5 billion. Key factors hampering investment were the impact of the pandemic and economic challenges. All components of FDI (equity, intracompany loans, and reinvested earnings) were down. Injections of equity investment, while low, occurred mainly in manufacturing, real estate, and finance. Japan, the Netherlands, Singapore, and the United States were the main investors.
FDI inflows are critical to a robust economic recovery from the pandemic. More investments mean more jobs and more income opportunities for the Filipino workforce.
The small and micro domestic market enterprises are now more attractive since the new law reduced the paid-up capital requirement for foreign equity to $200,000.00. Before, no foreign equity was allowed for enterprises with a capitalization of less than $500,000.00. The law also allows 100% foreign ownership of startups or startup enablers, enterprises involving advanced technology, and enterprises where most direct employees are Filipinos (at least 15).
RA 11647, along with all other related laws such as the TRAIN Law and CREATE Law that rationalized the tax rates and made them comparable to our ASEAN counterparts and the Ease of Doing Business Act, provide an investor-friendly environment that may attract more investments.
We have various good laws with the intention of making our country great. We do not fail in this regard. But our good laws are one for the books only. Implementation is not consistent and subject to different interpretations, confusing the investors. The most challenging roadblocks for the Philippines to become an investment mecca that continue to hound our struggle to carve a mark in international business are graft and corruption, as well as bureaucratic red tape. So far, none of the past and present administrations has effectively wielded a silver bullet to eradicate these social ills.