Key sector updates and clarifications
For foreign investors and Philippine companies considering new capital injections, ownership restructuring, or expansion into regulated sectors, the 13th FINL is best understood as a guide for compliance and investment planning, rather than a standalone liberalization measure. It does not amend constitutional or statutory foreign ownership limits, as any substantive change must originate from the Constitution or the relevant enabling legislation, not from the negative list itself.
Instead, the 13th FINL reflects the evolving direction of Philippine foreign investment policy following recent reforms, including amendments to the Public Service Act※1 and the Retail Trade Liberalization Act,※2 and the enactment of the New Government Procurement Act※3 and the Self-Reliant Defense Posture Revitalization Act,※4 together with their implementing rules. Viewed in this context, the material developments take the form of sector-specific updates, confirmations, and clarifications that align the negative list with the underlying statutes and regulations. The discussion below focuses on selected sectors where these updates are particularly relevant.
a) Telecommunications
For telecommunications, notable updates include the removal of private radio communication networks from the 40% foreign ownership cap and the express treatment of the operation and management of telecommunications as an activity where up to 100% foreign ownership may be permitted, subject to reciprocity. Where Philippine nationals are not granted equivalent rights in the investor’s home jurisdiction, foreign equity participation in telecommunications remains capped at 50%.
These developments reflect amendments to the Public Service Act, which narrowed the definition of “public utility” to a closed list of sectors. As of this writing, the list covers electricity transmission and distribution, petroleum and petroleum products pipeline transmission systems, water pipeline distribution systems, wastewater pipeline systems, seaports, and public utility vehicles. Activities outside this list are not treated as public utilities by default; as a result, telecommunications (including private radio communication networks) is no longer assessed under the traditional 40% public utility foreign ownership limitation.
Where activities are treated as critical infrastructure, restrictions on foreign government or state-owned enterprise participation, and national security review mechanisms under the amended Public Service Act remain relevant.
b) Retail Trade
With respect to retail trade, the 13th FINL revises the treatment of retail enterprises with paid-up capital below Php 25 million. Under the prior negative list, these retail enterprises were categorized as closed to foreign equity. The 13th FINL instead places them within the 40% foreign ownership threshold, reflecting a more consistent approach with the current regulations.
This shift is grounded in the implementing rules issued following the amendments to the Retail Trade Liberalization Act, which clarify that a “foreign retailer” is an entity engaged in retail trade in which more than 40% of the capital stock is foreign-owned, and that the Php 25 million paid-up capital requirement does not apply where at least 60% of the capital stock is owned by Philippine nationals. On this basis, the 13th FINL recognizes that retail enterprises below the Php 25 million capitalization threshold may admit minority foreign participation, provided Philippine nationals retain at least 60% ownership and control.
Investors should note, however, that once foreign ownership exceeds the 40% threshold, the retail enterprise is treated as a foreign retailer and becomes subject to additional requirements under the Retail Trade Liberalization Act, as amended, including minimum per-store investment amounts. These requirements should be taken into account when structuring retail businesses with more than 40% foreign ownership.
c) Renewable Energy
The 13th FINL also reflects the liberalized treatment of certain renewable energy activities. This development draws from Department of Justice (“DOJ”) Opinion No. 21, series of 2022, which clarified the scope of the exploration, development, and utilization of “natural resources” under the Constitution. In particular, the DOJ took the view that renewable energy sources are not susceptible to appropriation in the same manner as limited and exhaustible natural resources. Following this interpretation, the Department of Energy issued Department Circular No. DC2022-11-0034, amending the implementing rules of the Renewable Energy Act to allow full foreign participation in the exploration, development, production and utilization of solar, wind, hydro, and ocean or tidal energy.
Accordingly, the 13th FINL’s reference to full foreign participation in these renewable energy activities confirms an existing regulatory position. It should not, however, be read as eliminating all nationality restrictions that may arise in connection with renewable energy projects, including those relating to land ownership and the transmission and distribution of power.
d) Government Procurement
For government procurement covered by the New Government Procurement Act and its implementing rules, the 13th FINL clarifies and highlights the extent of permissible foreign equity participation under such law. Government procurement of goods, consulting services and infrastructure projects remains generally subject to a 40% foreign ownership cap, and for infrastructure projects, foreign ownership may reach up to 75% where the structures require techniques or technologies not adequately possessed by Filipino entities, subject to other applicable conditions.
However, these provisions of the negative list should be read together with the New Government Procurement Act and its implementing rules, which set out the applicable eligibility requirements and circumstances under which foreign bidders may participate, depending on the nature and terms of the procurement. Investors may also wish to note that certain procurement activities may also be governed by separate laws, treaties or international/executive agreements, grant or financing terms, or other procurement frameworks.
e) Defense-related Production
Under List B of the 13th FINL, foreign equity participation of up to 40% is permitted for in-country enterprises engaged in the development, production, assembly, servicing or operation of “materiel”, a term used in the Self-Reliant Defense Posture Revitalization Act to cover military technology, weapon systems, arms, ammunition, combat clothing, vehicles and similar military equipment and materials.
Separately, List A of the 13th FINL continues to specify that no foreign equity is permitted in the manufacture, repair, stockpiling, or distribution of nuclear, biological, chemical, and radiological weapons, as well as anti-personnel mines. In practice, these activities are not merely subject to foreign ownership limitations; rather, they are prohibited activities, including for domestic investment, in light of the Constitution and the Philippines’ applicable disarmament and non-proliferation commitments. Hence, careful FINL-based classification remains essential when structuring investments in the defense and security sector.
Conclusion
The significance of the 13th FINL lies in its role as a consolidating and clarificatory instrument, bringing together recent legislative and regulatory developments and clarifying the scope and application of existing foreign ownership limitations across sectors.
For investors, the 13th FINL should be treated as a starting point for analysis. In structuring investments, the permissible scope of foreign participation must be assessed alongside the relevant statutory and regulatory framework, including licensing requirements, as well as any applicable reciprocity or national security considerations.
While the 13th FINL is not a definitive statement of all applicable foreign ownership rules, it remains a useful reference point. Together with the broader legal regime, it provides a roadmap for understanding foreign ownership limitations and supports a more informed perspective of the Philippine foreign investment landscape.
Endnotes
*1
Commonwealth Act No. 146, as amended by Republic Act No. 11659, enacted in 2022.
*2
Republic Act No. 8762, as amended by Republic Act No. 11595, enacted in 2021.
*3
Republic Act No. 12009, enacted in 2024.
*4
Republic Act No. 12024, enacted in 2024.
