Foreign Investments Act of 1991 (Republic Act No. 7042)
Definition
The Foreign Investments Act of 1991, Republic Act No. 7042, is the foundational law governing foreign investment in the Philippines. It allows foreign nationals to invest in any domestic business enterprise, in any form and amount, except in areas reserved for Philippine nationals listed in the Foreign Investment Negative List, which the law requires to be periodically updated.
Identities (Wikipedia/Wikidata/DBpedia)
- Wikipedia: N/A
- Wikidata: N/A
- DBpedia: N/A
Also Known As
FIA of 1991; RA 7042; An Act to Promote Foreign Investments.
Examples and Analogies
A foreign firm wanting full ownership of a Business Process Outsourcing company may do so because outsourcing is generally outside the Negative List, whereas a foreign investor in a mass media company is limited by constitutional restrictions reflected in List A. The Negative List functions like a bouncer’s clipboard, admitting investors to most rooms of the economy while barring a few reserved doors.
Usage Scenarios
Foreign investors register enterprises with the Securities and Exchange Commission or DTI, and those seeking incentives file with investment promotion agencies like the Board of Investments. The law also provides for registration of foreign loans and technology agreements, while the Negative List is issued by regular executive issuance.
Strategies
Multinationals structure entry through joint ventures in restricted sectors, or wholly-owned subsidiaries in open ones, and plan around incentive laws. Government policy since the 1990s has progressively shortened the Negative List, most recently through the 2022 amendments easing retail and public service participation.
Security and Safety Measures
Screening occurs through registration requirements and sector regulators, with national-security sensitivities handled by specialized committees, including investment screening introduced for critical infrastructure and strategic industries.
Historical Context
RA 7042 broke from the nationalist economic framework of earlier decades that tightly limited foreign equity, part of the liberalization wave of the early 1990s. Amendments, including Republic Act No. 11647 of 2022, modernized the regime by adjusting capital thresholds and encouraging foreign enterprises to hire Filipinos in supervisory and technical roles.
Challenges and Controversies
Constitutional limits on land ownership, mass media, and public utilities remain barriers critics say deter investors, while nationalists warn of deregulating strategic sectors. Implementation gaps, red tape, and inconsistent local enforcement often matter more to investors than the statute itself.
Related Topic
Board of Investments Philippines