Draft Bill to Liberalize Foreign Investments

Republic of the Philippines

SENATE OF THE PHILIPPINES

Pasay City

EIGHTEENTH CONGRESS

First Regular Session

SENATE BILL No. ____

Introduced by HON. JUAN MAKABAYAN

_______________________________________________________________________

AN ACT TO LIBERALIZE FOREIGN INVESTMENTS, 

REQUIRE RECIPROCITY IN  FOREIGN PROFESSIONAL PRACTICE, 

AND ESTABLISH A FOREIGN INVESTMENT COUNCIL

EXPLANATORY NOTE

This bill seeks to provide for the omnibus liberalization of foreign investments, require reciprocity in professional practice, and establish a foreign investment council, to promote job creation and consumer price reduction, while protecting the basic securities of the State.

The omnibus lifting of statutory limitations on foreign investments aims to benefit of the middle class and the masa class, by promoting the entry and expansion of foreign owned or affiliated enterprises, that increase the demand for local jobs, as well as the supply of local goods and services.

Notably, the artificial legal barriers benefit only the monopolists and oligopolists of the mayaman class, at the expense of the majority of the workers and consumers, who are consequently deprived of in-country job opportunities and cheaper goods and services.

The bill also promotes the transfer technologies, access to foreign markets and economic growth, by lifting limitations on joint ventures or other commercial arrangements, between Filipino companies and foreign owned or affiliated enterprises.

Finally, the bill seeks to loosen the stranglehold of entrenched cartels over government procurement, by enabling the entry of independent foreign players that may then disrupt rigged biddings and other corrupt practices.

The unfounded fear of foreign domination is raised ironically by both the local elitist  capitalists and their arch-enemy the local communists. This obsolete mindset properly belongs to the colonial times decades and centuries years ago, when foreign investors were protected by a foreign army operating under a foreign government established here in the Philippines. The foreign army and foreign government have long gone. What remains today is the Philippine government and its armed forces to protect the national interests of the Filipino people.

The millions of Overseas Filipino Workers (OFWs) who work for foreign employers in a foreign land under a foreign government, is testament that foreign sources of income benefit the Philippine economy. For the protection and security of the Filipino workers, it is certainly preferred that these foreign employers come instead to the Philippines as foreign investors and employers.

The opening of professional practice, subject to reciprocity, seeks to augment the liberalization of foreign investments, because by experience foreign investors ordinarily come with their own foreign consultants. Nonetheless, since the opening is subject to reciprocity, the measure also opens wider fields of practice for Filipino professionals who time and again have proven to be competent, reliable and innovative by global standards.

Nonetheless, the promotion of foreign investments must be balanced with the protection of the basic securities of the State, including external security, internal security, food security, water security, energy security, environment security, resource security (natural, human, industrial) and cyber security. The balance may be accomplished by establishing a Foreign Investment Council. The blanket limitations on foreign investments are then replaced with sparing government intervention in limited cases where the foreign transaction actually threatens the basic securities of the State.

In view of the foregoing, the immediate approval of this measure is earnestly requested.

Republic of the Philippines

SENATE OF THE PHILIPPINES

Pasay City

EIGHTEENTH CONGRESS

First Regular Session

SENATE BILL No. ____

Introduced by HON. JUAN MAKABAYAN

_______________________________________________________________________

AN ACT TO LIBERALIZE FOREIGN INVESTMENTS, 

REQUIRE RECIPROCITY IN  FOREIGN PROFESSIONAL PRACTICE, AND ESTABLISH A FOREIGN INVESTMENT COUNCIL 

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Title.- This Act shall be known as the “Foreign Investments Liberalization Act of __________”.

Section 2.  Declaration of Policy.- It is the policy of the State to attract, promote and welcome productive investments from foreign individuals, partnerships, corporations, and governments, including their political subdivisions, in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in such activity by the Constitution. Foreign investments shall be encouraged to create jobs (through the establishment of new business enterprises or expansion of existing business enterprises), reduce consumer prices (through the increase in supply of goods and services), transfer technologies, expand access to foreign markets, promote economic growth, strengthen free competition and enhance efficiency. Foreign investments shall also be employed to pursue anti-corruption through systemic change (by facilitating the entry of independent competitors vis-a-vis the existing cartels of government suppliers).

The artificial legal barriers to foreign investments benefit only the few elite monopolists and oligopolists, at the expense of the majority of the workers and consumers, who are unfairly deprived of job opportunities and cheaper goods and services, as a natural consequence of the investment limitations. Pursuant to the Constitutional principle of social justice, the matter of foreign investment policy must hereby be resolved in favor Filipino workers and consumers and their basic needs for jobs and cheaper consumer goods and services, as against the proprietary interests of the Filipino capitalists who have the adequate resources to protect themselves.

Section 3. Omnibus Lifting of Nationality Requirements.- Except as otherwise provided in this Act, and subject to the provisions of the Constitution, all local and foreign investors shall be subject to the equal protection of the laws.

All statutory laws and implementing rules and regulations that impose nationality requirements or foreign investment limitations on various activities and enterprises are hereby repealed, except as otherwise provided in this Act, and subject to the provisions of the Constitution.

Section 4. Limitation of Scope.- Except as otherwise provided in this Act, the omnibus lifting of nationality requirements or foreign investment limitations shall not apply to Micro Enterprises under Republic Act No. 9501, Small-Scale Mining under Republic Act No. 7076, and Public Lands under Commonwealth Act No. 141.


PROFESSIONAL PRACTICE


Section 5. Board Examinations.- Board examinations in the Philippines for all professions regulated by the Professional Regulation Commission shall be open to citizens of the Philippines, and to citizens, subjects or nationals of a foreign state with diplomatic relations with the Philippines, provided that such foreign state grants citizens of the Philippines substantially similar privileges.

Apart from the mandatory requirement of reciprocity, all foreign applicants for board examinations shall comply with the applicable requirements of the Professional Regulation Commission.

Section 6. Professional Practice.- Professional practice in the Philippines for all professions regulated by the Professional Regulation Commission shall be open to citizens of the Philippines, and to citizens, subjects or nationals of a foreign state with diplomatic relations with the Philippines, provided that such foreign state grants citizens of the Philippines substantially similar privileges.

Apart from the mandatory requirement of reciprocity, all foreign applicants for professional license to practice shall comply with the applicable requirements of the Professional Regulation Commission.

Section 7. Criminology.- Section 12 of Republic Act No. 6506 is hereby amended to read as follows:

“Sec. 12. Qualifications for Examination. — Any person applying for examination and for a certificate, shall, prior to admission to examination, establish to the satisfaction of the Board that:
  (a) He is at least eighteen years of age and a citizen of the Philippines, OR A CITIZEN OR SUBJECT OF A FOREIGN STATE THAT PERMITS FILIPINOS TO TAKE BOARD EXAMINATIONS AND PRACTICE CRIMINOLOGY WITHIN ITS TERRITORIES;
  (b) He must be a person of good moral character, as certified to by at least three persons of good standing in the community wherein he resides;
(c) He must not have been convicted of a crime involving moral turpitude; and
  (d) He has graduated in Criminology from a school, college or institute recognized by the Government after completing a four-year resident collegiate course leading to the degree of Bachelor of Science in Criminology (B.S. Crim.): provided, that holders of Bachelor of Laws degree may, within five years after the approval of this Act, take this examination after completing at least ninety-four (94) units Criminology, Law Enforcement, Police Science and Penology subjects.”

Section 8. Merchant Marine.- Section 14 of Republic Act No. 8544 is hereby amended to read as follows:

“Sec. 14. Qualifications of Applicant for Examination. – Every applicant for examination shall establish the following requisites:
[a] He is a citizen of the Philippines, OR A CITIZEN OR SUBJECT OF A FOREIGN STATE THAT PERMITS FILIPINOS TO TAKE BOARD EXAMINATIONS AND PRACTICE MERCHANT MARINE PROFESSION WITHIN ITS TERRITORIES OR WITH ITS REGISTERED MERCHANT MARINE VESSELS;
[b] He is of good moral character;
[c] He has met standards of medical fitness, particularly with good eyesight and hearing as certified by a Department of Health [DOH] accredited medical institution conducting physical and medical examinations for seafarers
[d] In the case of Marine Deck/Engineer Officer, he must be a graduate of Bachelor of Science in Maritime Transportation or Bachelor of Science in Marine Engineering in a school, academy, institute, college or university duly recognized by the Commission on Higher Education [CHED];
[e] For an applicant taking the examination other than that for the Marine Deck/Engineer Officer, he must have completed a course approved by the appropriate government agency, as defined in the rules and regulations implementing this Act.”
Section 9. Pharmacy.- Section 38 of Republic Act No. 10918 is hereby amended to read as follows:

“Sec. 38. Requirements for the Opening and Operation of Retail Pharmaceutical Outlet or Establishment. – The opening of a retail pharmaceutical outlet or establishment shall be subject to requirements provided for in this Act and the rules and regulations prescribed by the FDA.

  The application for the opening and operation of a retail drug outlet or other similar business establishments shall not be approved, unless applied for by a [Filipino] registered and licensed pharmacist, either as owner or as pharmacist-in-charge, pursuant to the provisions of this Act.

Section 10. Radiologic and X-Ray Technology.- Section 19 of Republic Act No. 7431 is hereby amended to read as follows:

“Sec. 19. Qualifications for Examination. — Every applicant for examination under this Act shall, prior to admission for examination establish to the satisfaction of the Board that he:
(a) Is a Filipino citizen, OR A CITIZEN OR SUBJECT OF A FOREIGN STATE THAT PERMITS FILIPINOS TO TAKE BOARD EXAMINATIONS AND PRACTICE RADIOLOGIC AND X-RAY TECHNOLOGY WITHIN ITS TERRITORIES;
(b) Is of good moral character and has not been convicted of a crime involving moral turpitude; and
(c) Is a holder of a baccalaureate degree in radiologic technology from a school, college or university recognized by the Government if he applies for the radiologic technology examination or is a holder of an associate in radiologic technology diploma from a school, college or university recognized by the Government if he applies for the x-ray technology examination.”


BUSINESS ENTERPRISES


Section 11. Fisheries.- Section 5 of Republic Act No. 8550 is hereby amended to read as follows:

“Sec. 5. Use of Philippine Waters. - The use and exploitation of the fishery and aquatic resources in Philippine waters shall be IN ACCORDANCE WITH THE CONSTITUTION. [reserved exclusively to Filipinos: Provided, however, That] Research and survey activities may be allowed [under strict regulations,] for [purely] research, scientific, technological and educational purposes [that would also benefit Filipino citizens].”

Section 12. Retail Trade.- Section 5 of Republic Act No. 8762 is hereby amended to read as follows:

“Sec. 5. Foreign Equity Participation. - Foreign-owned partnerships, associations and corporation formed and organized under the laws of the Philippines may, upon registration with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI), or in case of foreign owned single proprietorships, with the DTI, engage or invest in the retail trade business, [subject to the following categories.]
[Category A – Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two million five hundred thousand US dollars (US$2,500,000.00) [shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens].
[Category B – Enterprises with a minimum paid-up capital of the equivalent in Philippine Pesos of two million five hundred thousand US dollar (US$2,500,000.00) but less than Seven million five hundred thousand US dollars (US$7,500,000.00) [may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than sixty percent (60%) of total equity].
[Category C – Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven million five hundred thousand US dollars (US$7,500,000.00), or more [may be wholly owned by foreigners: Provided, however, That in no case shall the investments for establishing a store in vestments for establishing a store in Categories B and C be less than the equivalent in Philippine pesos of Eight hundred thirty thousand US dollars (US$830,000.00)].
[Category D – Enterprises specializing in high-end or luxury products [with a paid-up capital of the equivalent in Philippine Pesos of Two hundred fifty thousand US dollars (US$250,000.00) per store may be wholly owned by foreigners].
“EXCEPT IN MICRO-SIZED DOMESTIC MARKET ENTERPRISES, AS DEFINED UNDER REPUBLIC ACT NO. 9178 AND OTHER LAWS, WHICH SHALL BE RESERVED TO FILIPINO CITIZENS, OR TO CORPORATIONS, PARTNERSHIPS, ASSOCIATIONS OR COOPERATIVES WHOLLY OWNED BY THEM, AND UNLESS OTHERWISE PROVIDED BY REPUBLIC ACT NO. 7042, AS AMENDED, KNOWN AS THE FOREIGN INVESTMENTS ACT.
“The foreign investor shall [be required to] maintain in the Philippines the full amount of the prescribed minimum capital unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines. [The actual use in Philippine operations of the inwardly remitted minimum capital requirement shall be monitored by the SEC.]
“Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC and the DTI, shall subject the foreign investor to penalties or restrictions on any future trading activities/business in the Philippines.”
[“Foreign retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI, which will verify or confirm inward remittance of the minimum required capital investments.”]

Section 13. Retail Trade.- Section 8 of Republic Act No. 8762 is hereby amended to read as follows:

“Sec. 8. Qualification of Foreign Retailers. - No ALIEN OR FOREIGN ENTITY [foreign retailer] shall be allowed to engage OR INVEST in retail trade in the Philippines unless [all the following qualifications are met:]
[(a) A minimum of Two hundred million US dollar (US$200,000,000.00) net worth in its parent corporation for Categories B and C, and Fifty million US dollar (US$50,000,000.00) net worth in its parent corporation for category D;]
[(b) (5) retailing branches or franchises in operation anywhere around the word unless such retailer has at least one (1) store capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00);]
[(c) Five (5)-year track record in retailing; and]
[d] HE OR SHE IS A [Only] national[s] from, or A juridical ENTITY [entities] formed or incorporated in Countries which allow the entry of Filipino retailers [shall be allowed to engage in retail trade in the Philippines].
“The DTI is hereby authorized to pre-qualify all foreign retailers WHO ARE NATIONALS FROM, OR A JURIDICAL ENTITY FORMED OR INCORPORATED IN COUNTRIES WHICH ALLOW THE ENTRY OF FILIPINO RETAILERS, subject to the provisions of this Act, before they are allowed to conduct business in the Philippine.
[“The DTI shall keep a record of Qualified foreign retailers who may, upon compliance with law, establish retail stores in the Philippines. It shall ensure that parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record prescribed in this section.]
[“The Inter- Agency Committee on Tariff and Related Matters Authority (NEDA) Board shall formulate and regularly update a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress.”]

Section 14. Private Securities Agencies.- Section 4 of Republic Act No. 5487 is hereby amended to read as follows:

“Sec. 4. Who May Organize a Security or Watchman Agency. Any Filipino citizen, OR A CITIZEN OR SUBJECT OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO ORGANIZE A SECURITY OR WATCHMAN AGENCY WITHIN ITS TERRITORIES, or a corporation, partnership, or association, with a minimum capital of five thousand pesos, one hundred per cent of which is owned and controlled by THE FOREGOING [Filipino citizens], may organize a security or watchman agency: Provided, That no person shall organize or have an interest in, more than one such agency except those which are already existing at the promulgation of this Decree: Provided, further, That the operator or manager of said agency must be at least 25 years of age, a college graduate and/or a commissioned officer in the inactive service of the Armed Forces of the Philippines; of good moral character; having no previous record of any conviction of any crime or offense involving moral turpitude and not suffering from any of the following disqualifications:
(1) Having been dishonorably discharged or separated from the Armed Forces of the Philippines;
(2) Being a mental incompetent;
(3) Being addicted to the use of narcotic drug or drugs; and
(4) Being a habitual drunkard.
For purposes of this Act, elective or appointive government employees who may be called upon on account of the functions of their respective offices in the implementation and enforcement of the provisions of this Act and any person related to such government employees by affinity or consanguinity in the third civil degree shall not hold any interest, directly or indirectly in any security guard or watchman agency. (As amended by Pres. Decree No. 11.)”

Section 15. Cockpits.- Section 5(a) of Presidential Decree No. 449 is hereby amended to read as follows:

Section 5. Cockpits and Cockfighting: In General:
“(a) Ownership, Operation and Management of Cockpits. Only Filipino citizens, OR CITIZENS OR SUBJECTS OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO OWN, MANAGE AND OPERATE COCKPITS WITHIN ITS TERRITORIES, AND not otherwise inhibited by existing laws, shall be allowed to own, manage and operate cockpits. [Cooperative capitalization is encouraged.]”

Section 16. Firecrackers and other Pyrotechnic Devices.- Section 5 of Republic Act No. 7183 is hereby amended to read as follows:

“Sec.  5. Qualifications of Manufacturers or Dealers. — A license or permit to manufacture or to deal in wholesale or retail of firecrackers and pyrotechnic devices shall be issued only to: (a) Filipino citizens, OR CITIZENS OR SUBJECTS OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO MANUFACTURE OR DEAL IN FIRECRACKERS AND PYROTECHNIC DEVICES WITHIN ITS TERRITORY, WHO ARE of good moral character; or (b) entities duly registered with the Bureau of Commerce of the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC), one hundred per centum (100%) of the capitalization of which is owned by [Filipino citizens] THE FOREGOING.”

Section 17. Private Radio Communications Network.- Section 4 of Republic Act No. 3846 is hereby amended to read as follows:

“Section 4. No radio station license shall be GRANTED OR transferred to any person, firm, company, association or corporation without express authority of the NATIONAL TELECOMMUNICATIONS COMMISSION. [Secretary of Commerce and Communications, and no license shall be granted or transferred to any person who is not a citizen of the United States of America or of the Philippine Islands; or to any firm or company which is not incorporated under the laws of the Philippine Islands or any state or territory of the United States of America; or to any company or corporation twenty percent (20%) of whose capital stock may be voted by aliens or their representatives, or by a foreign government or its representatives, or by any company, corporation, or association organized under the laws of a foreign country.]”

Section 18. Recruitment and Placement.- Article 27 of Presidential Decree No. 442, as amended, known as the “Labor Code of the Philippines”, is hereby repealed.

[Article 27. Citizenship requirement. Only Filipino citizens or corporations, partnerships or entities at least 75 percent of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall be permitted to participate in the recruitment and placement of workers, locally or overseas.]

Section 19. Government Contracts for Public Works.- Commonwealth Act No. 541 is hereby repealed.

[COMMONHEALTH ACT NO. 541, AN ACT TO REGULATE THE AWARDING OF CONTRACTS FOR THE CONSTRUCTION OR REPAIR OF PUBLIC WORKS

[SECTION 1. All branches, offices, and subdivisions of the Government and all government-owned or controlled companies, authorized to contract and make disbursements for the construction or repair of public works, shall give preference in awarding contracts for such works to Filipino or American contractors and domestic entities when the lowest bid of a domestic bidder is not more than fifteen per centum in excess of the lowest foreign bid: Provided, however, That for the construction of land, air, and seacoast defenses, arsenals, barracks, depots, hangars, landing fields, quarters, hospitals, and all other buildings and structures required for the national defense of the Philippines, no foreign bids shall be allowed.

[SECTION 2. For the purposes of this Act, the following terms shall be taken in the sense herein-below indicated:
(a) The term "Filipino or American contractor" means any citizen of the Philippines or of the United States habitually established in business and engaged in general construction work.
(b) The term "domestic entity" means any corporate body or commercial company duly organized and registered under the laws of the Philippines seventy-five per centum of the capital of which is owned by citizens of the Philippines or of the United States, or by citizens of both countries.
(c) The term "domestic bidder" means any Filipino or American contractor or domestic entity which bids for any public work or work of construction or repair for the Government of the Philippines and/or any of its instrumentalities as enumerated in section one of this Act.
(d) The term "foreign bid" means the bid of any other contractor or entity, not included in Section (a) of this section.

[SECTION 3. This Act shall take effect upon its approval.
Approved: May 26, 1940]

Section 20. Government Infrastructure Contracts.- Section 3(d) of Presidential Decree No. 1594 is hereby repealed.

“Section 3. Prequalification of Prospective Contractors. A prospective contractor may be prequalified to offer his bid or tender for a construction project only if he meets the following requirements.
“(a) Legal Requirements. The prospective contractor must have been licensed as a contractor for the current year pursuant to Republic Act No. 4566, must have paid his privilege tax to practice or engage in the contracting business for the current year, must comply with the Administrative Order No. 66 of the Office of the President of the Philippines, and must comply with other existing pertinent laws, rules and regulations.
“(b) Technical Requirements. The prospective contractor must meet the following technical requirements to be established in accordance with the rules and regulations to be promulgated pursuant to Section 12 of this Decree, to enable him to satisfactorily prosecute the subject project:
1) Competence and experience of the contractor in managing projects similar to the subject project.
2) Competence and experience of the contractor's key personnel to be assigned to the subject project.
3) Availability and commitment of the contractor's equipment to be used for the subject project.
“(c) Financial Requirements. The net worth and liquid assets of the prospective contractor must meet the requirements, to be established in accordance with the rules and regulations to be promulgated pursuant to Section 12 of this Decree, to enable him to satisfactorily execute the subject project. The prospective contractor may be allowed to cover the deficiency in the required net worth through a line of credit fully committed to the subject project by a bank or financial institution acceptable to the Ministry concerned.
[(d) Filipino participation. The Government shall promote maximum participation of eligible Filipino contractors in all construction projects.]”

Section 21.  Government Contracts for Civil Works.- Letter of Instructions No. 630 is hereby amended to read as follows:

“[In order to encourage and promote the development of the domestic construction industry, the] THE following instructions shall be [strictly] observed:
“1.    [Unless specifically authorized by the President of the Philippines in exceptional cases,] Bidding award or negotiations of primarily civil works contracts shall be limited to Filipino individuals, OR TO CITIZENS OR SUBJECTS OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO ENTER INTO GOVERNMENT CIVIL WORKS CONTRACTS WITHIN ITS TERRITORIES, and to corporations, partnership, or associations ONE HUNDRED PERCENT (100%) [seventy-five per sent (75%)] of the capital of which is owned by THE FOREGOING. [citizens of the Philippines; and]
[2.    The contracting government entity shall at all times ensure that no individual, corporation, partnership or association shall enter into any contract, agreement, tie-up, or joint venture arrangement with any non-Filipino entity that would circumvent the provisions of the Anti-Dummy laws.]”

Section 22. Special Purpose Vehicle.- Section 4 of Republic Act No. 9182 is hereby amended to read as follows:

“Sec. 4. Special Purpose Vehicle. An SPV shall be organized as stock corporation in accordance with Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines" and the rules promulgated by the Commission for purposes of registering the SPV [: Provided, That if the SPV will acquire land, at least sixty percent (60%) of its outstanding capital stock shall be owned by Philippine nationals pursuant to Republic Act No. 7042, as amended, otherwise known as "The Foreign Investment Act"].”

Section 23. Public Utilities.- Section 16(a) of Commonwealth Act No. 146 is hereby amended to read as follows:

“Section 16. Proceedings of the Commission, upon notice and hearing.- The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary:
“(a) To issue certificates which shall be known as certificates of public convenience, authorizing the operation of public service within the Philippines whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. [Provided, That thereafter, certificates of public convenience and certificates of public convenience and necessity will be granted only to citizens of the Philippines or of the United States or to corporations, co-partnerships, associations or joint-stock companies constituted and organized under the laws of the Philippines; Provided, That sixty per centum of the stock or paid-up capital of any such corporations, co-partnership, association or joint-stock company must belong entirely to citizens of the Philippines or of the United States: Provided, further, That no such certificates shall be issued for a period of more than fifty years.]”

Section 24.  Rice and Corn.- Section 3 of Presidential Decree No. 194 is hereby amended to read as follows:

“Section 3. The National Grains Authority may authorize the alien or business organization mentioned in Section 1 hereof to engage in the rice and/or corn industry, subject to the following conditions:
[a. The National Grains Authority shall certify that there is an urgent need for foreign investment in the undertaking and that the same will not pose a clear and present danger of promoting monopolies or combination in restraint of trade.]
A[b]. The alien, association, corporation or partnership shall have the necessary financial capability and technical competence.
B[c]. The alien, association, corporation or partnership shall submit a development plan acceptable to the National Grains Authority.”

Section 25.  Rice and Corn.- Section 5 of Presidential Decree No. 194 is hereby repealed.

[Section 5. In connection with the foreign equity participation, at least 60% thereof shall be transferred to Filipino citizens over a period to be established by the National Grains Authority at the time of approval of its authority to engage in the industry, or phase out its operation within the same period.]

Section 26. Government Contracts for the Supply of Goods.- Section 1 of Republic Act No. 5183 is hereby amended to read as follows:

“Section 1. No contract either through a public bidding or negotiated contract for the supply to, or procurement by, any government-owned or controlled corporation, company, agency or municipal corporation of materials, equipment, goods and commodities shall be awarded to any contractor or bidder who is not a citizen of the Philippines, OR IS NOT A CITIZEN OR SUBJECT OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO SUPPLY GOODS TO ITS GOVERNMENT, or which is not a corporation or association [at least sixty percent] ONE HUNDRED PERCENT (100%) of the capital of which is owned by THE FOREGOING [Filipino citizens, except, as to a citizen, corporation or association of a country the laws or regulations of which grant similar rights or privileges to citizens of the Philippines. In the latter case the Flag Law shall continue to be applicable].”

Section 27.  Deep Sea Commercial Fishing.- Section 27 of Republic Act No. 8550 is hereby amended to read as follows:

“Section 27. Persons Eligible for Commercial Fishing Vessel License. - No commercial fishing vessel license shall be issued UNLESS THE APPLICANT COMPLIES WITH THE PROVISIONS OF THIS ACT [except to citizens of the Philippines, partnerships or to associations, cooperatives or corporations duly registered in the Philippines at least sixty percent (60%) of the capital stock of which is owned by Filipino citizens]. No person to whom a license has been issued shall sell, transfer or assign, directly or indirectly, his stock or interest therein to any person not qualified to hold a license. Any such transfer, sale or assignment shall be null and void and shall not be registered in the books of the association, cooperative or corporation.

“For purposes of commercial fishing, fishing vessels owned by [citizens of the Philippines] INDIVIDUALS, partnerships, corporations, cooperatives or associations qualified under this section shall secure Certificates of Philippine Registry and such other documents as are necessary for fishing operations from the concerned agencies: Provided, That the commercial fishing vessel license shall be valid for a period to be determined by the Department.”

Section 28.  Condominium Units.- Section 5 of Republic Act No. 4726 is hereby amended to read as follows:

“Sec. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation: Provided, however, That where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than INDIVIDUALS OR JURIDICAL ENTITIES THAT MAY BE QUALIFIED UNDER THE APPLICABLE PROVISIONS OF THE CONSTITUTION [Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession]. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed [the limits imposed by existing laws] ANY LIMITATION THAT MAY BE IMPOSED BY THE CONSTITUTION.”


OMNIBUS INVESTMENTS CODE


Section 29. Omnibus Investments Code.- Article 11 of Executive Order No. 226 is hereby amended to read as follows:

“ARTICLE 11. "Registered Enterprise" shall mean any individual, partnership, cooperative, corporation or other entity incorporated and/or organized and existing under Philippine laws; OR ANY CITIZEN OR SUBJECT OF A FOREIGN COUNTRY, OR ANY CORPORATION OR OTHER ENTITY FORMED, ORGANIZED AND EXISTING UNDER ANY LAWS OTHER THAN THOSE OF THE PHILIPPINES, WHOSE LAWS ALLOW FILIPINO CITIZENS AND CORPORATIONS TO DO BUSINESS IN ITS OWN COUNTRY OR STATE, AND LICENSED TO TRANSACT BUSINESS IN THE PHILIPPINES UNDER PHILIPPINE LAWS; and registered with the Board in accordance with this Book: Provided, however, That the term "registered enterprise" shall not include commercial banks, savings and mortgage banks, rural banks, savings and loan associations, building and loan associations, developmental banks, trust companies, investment banks, finance companies, brokers and dealers in securities, consumers cooperatives and credit unions, and other business organizations whose principal purpose or principal source of income is to receive deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest in common or preferred stocks, debentures, bonds or other marketable instruments generally recognized as securities, or discharge other similar intermediary, trust of fiduciary functions.”

Section 30. Omnibus Investments Code.- Article 32 of Executive Order No. 226 is hereby amended to read as follows:

“ARTICLE 32. Qualifications of a Registered Enterprises. — To be entitled to registration under the Investment Priorities Plan, an applicant must satisfy the Board that:
(1) He is a citizen of the Philippines, OR A CITIZEN OR SUBJECT OF A FOREIGN COUNTRY THAT PERMITS FILIPINOS TO OWN, MANAGE AND OPERATE ENTERPRISES WITH INCENTIVES WITHIN ITS TERRITORIES, in case the applicant is a natural person[,]; or in case of a partnership or any other association, it is organized under Philippine laws, OR UNDER THE LAWS OF A COUNTRY THAT PERMITS SIMILAR PHILIPPINE ENTITIES TO  OWN, MANAGE AND OPERATE ENTERPRISES WITH INCENTIVES WITHIN ITS TERRITORIES, [and that] at least sixty percent (60%) of its capital is owned and controlled by [citizens of the Philippines] THE FOREGOING, AND AT LEAST SIXTY PER CENT (60%) OF THE MEMBERS OF ITS GOVERNING BODY ARE CITIZENS OF THE PHILIPPINES, OR CITIZENS OR SUBJECTS OF A FOREIGN COUNTRY AS AFORESAID; or in case of a corporation or a cooperative, it is organized under Philippine laws, OR UNDER THE LAWS OF A COUNTRY THAT PERMITS SIMILAR PHILIPPINE ENTITIES TO OWN, MANAGE AND OPERATE ENTERPRISES WITH INCENTIVES WITHIN ITS TERRITORIES, [and that] at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by [Philippine nationals as defined under Article 15 of this Code] THE FOREGOING, and at least sixty per cent (60%) of the members of the Board of Directors are citizens of the Philippines, OR CITIZENS OR SUBJECTS OF A FOREIGN COUNTRY AS AFORESAID. [If it does not possess the required degree of ownership as mentioned above by Philippine nationals, the following circumstances must be satisfactorily established:]
[(a) That it proposes to engage in a pioneer projects as defined in Article 17 of this Code, which, considering the nature and extent of capital requirements, processes, technical skills and relative business risks involved, is in the opinion of the Board of such a nature that the available measured capacity thereof cannot be readily and adequately filled by Philippine nationals; or, if the applicant is exporting at least seventy per cent (70%) of is total production, the export requirement herein provided may be reduced in meritorious cases under such conditions and/or limited incentives as the Board may determine;]
[(b) That it obligates itself to attain the status of a Philippine national, as defined in Article 15, within thirty (30) years from the date of registration or with such longer period as the Board may require taking into account the export potential of the project: Provided, That a registered enterprise which exports one hundred percent (100%) of its total production need not comply with this requirement;]
[(c) That the pioneer area it will engage in is one that is not within the activities reserved by the Constitution or other laws of the Philippines to the Philippine citizens or corporations owned and controlled by Philippine citizens;]

THE BOARD MAY IN THE NATIONAL INTEREST RESERVE TO PHILIPPINE CITIZENS OR TO CORPORATIONS OWNED AND CONTROLLED BY PHILIPPINE CITIZENS, THE GRANT OF INCENTIVES UNDER THIS BOOK, WITH RESPECT TO CERTAIN PREFERRED AREAS OF INVESTMENT, AT THE REASONABLE DISCRETION OF THE BOARD.

NOTWITHSTANDING THE FOREGOING, THE BOARD MAY IN THE REASONABLE EXERCISE OF ITS DISCRETION, PROVIDE EXCEPTIONS TO THE GENERAL RESERVATION, AND GRANT INCENTIVES TO APPLICANTS WHO ARE CITIZENS, SUBJECTS OR CORPORATIONS OF A FOREIGN COUNTRY, IF THE ACTIVITY IS A PIONEER ACTIVITY AS DEFINED IN ARTICLE 17, OR THE ACTIVITY INVOLVES THE EXPORT AS DEFINED IN ARTICLE 23 OF AT LEAST SIXTY PERCENT (60%) OF THE TOTAL PRODUCTION OR SUCH OTHER PERCENTAGE DETERMINED BY THE BOARD, OR THE ACTIVITY IS LOCATED IN A LESS-DEVELOPED-AREA AS DEFINED IN ARTICLE 40.

THE BOARD MAY AT ITS REASONABLE DISCRETION REQUIRE APPLICANT WHO IS A CITIZEN, SUBJECT OR CORPORATION OF A FOREIGN COUNTRY, TO ATTAIN THE STATUS OF A PHILIPPINE NATIONAL AS DEFINED IN ARTICLE 15, WITHIN THIRTY (30) YEARS OR SUCH OTHER PERIOD DETERMINED BY THE BOARD.

IF THE APPLICANT IS NOT A CITIZEN OF THE PHILIPPINES, NOR A CORPORATION OR OTHER ENTITY FORMED, ORGANIZED AND EXISTING UNDER PHILIPPINE LAWS WITH AT LEAST SIXTY PERCENT (60%) OF ITS CAPITAL OWNED AND CONTROLLED BY CITIZENS OF THE PHILIPPINES, THE ACTIVITY OR ACTIVITIES IT WILL ENGAGE IN MUST NOT BE WITHIN THE ACTIVITIES RESERVED TO PHILIPPINE CITIZENS OR TO CORPORATIONS OWNED AND CONTROLLED BY PHILIPPINE CITIZENS.

(2) The applicant is proposing to engage in a preferred project listed or authorized in the current Investment Priorities Plan within a reasonable time to be fixed by the Board [or, if not so listed, at least fifty percent (50%) of its total production is for export or it is an existing producer which will export part of production under such conditions and/or limited incentives as the Board may determine; or that the enterprise is engaged or proposing to engage in the sale abroad of export products bought by it from one or more export producers; or the enterprise is engaged or proposing to engage in rendering technical, professional or other services or in exporting television and motion pictures and musical recordings made or produced in the Philippines, either directly or through a registered trader].

(3) The applicant is capable of operating on a sound and efficient basis of contributing to the national development of the preferred area in particular and of the national economy in general; and

(4) If the applicant is engaged or proposes to engage in undertakings or activities other than preferred projects, it has installed or undertakes to install an accounting system adequate to identify the investments, revenues, costs, and profits or losses of each preferred project undertaken by the enterprise separately from the aggregate investment, revenues, costs and profits or losses of the whole enterprise or to establish a separate corporation for each preferred project if the Board should so require to facilitate proper implementation of this Code.”

Section 31. Omnibus Investments Code.- Article 35 of Executive Order No. 226 is hereby amended to read as follows:

“ARTICLE 35. Criteria for Evaluation of Applications. — The following criteria will be considered in the evaluation of applications for registration under a preferred area:
[(a) The extent of ownership and control by Philippine citizens of the enterprises;]
[(b)] (A) The economic rates of return;
[(c)] (B) The measured capacity Provided, That estimates of measured capacities shall be regularly reviewed and updated to reflect changes in market supply and demand conditions; Provided, Further, That measured capacity shall not result in a monopoly in any preferred area of investment which would unduly restrict trade and fair competition nor shall it be used to deny the entry of any enterprise in any field of endeavor or activity;
[(d)] (C) The amount of foreign exchange earned, used or saved in their operations;
[(e)] (D) The extent to which labor, materials and other resources obtained from indigenous sources are utilized;
[(f)] (E) The extent to which technological advances are applied and adopted to local condition;
[(g)] (F) The amount of equity and degree to which the ownership of such equity is spread out and diversified; and
[(h)] (G) Such other criteria as the Board may determine.”


FOREIGN INVESTMENTS ACT


Section 32. Foreign Investments Act.- Section 6 of Republic Act No. 7042, as amended by Republic Act No. 8179, is hereby amended to read as follows:

“Section 6. Foreign Investments in Export Enterprises.- Foreign investment in export enterprises whose products and services do not fall within [Lists A and B of] the Foreign Investment Negative List provided under Section 8 hereof is allowed up to one hundred percent (100%) ownership.

“Export enterprises which are non-Philippine nationals shall register with BOI and submit the reports that may be required to ensure continuing compliance of the export enterprise with its export requirement. BOI shall advise SEC or BTRCP, as the case may be, of any export enterprise that fails to meet the export ratio requirement. The SEC or BTRCP shall thereupon order the non-complying export enterprise to reduce its sales to the domestic market to not more than forty percent [40%] of its total production; failure to comply with such SEC or BTRCP order, without justifiable reason, shall subject the enterprise to cancellation of SEC or BTRCP registration, and/or the penalties provided in Section 14 hereof.”

Section 33. Foreign Investments Act.- Section 8 of Republic Act No. 7042, as amended by Republic Act No. 8179, is hereby amended to read as follows:

“Section 8. List of Investment Areas Reserved to Philippine Nationals [Foreign Investment Negative List].- The Foreign Investment Negative List shall [have two (2) component lists: A and B: a) List A shall] enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws.

[b) List B shall contain the areas of activities and enterprises regulated pursuant to law:]

[1)  which are defense-related activities, requiring prior clearance and authorization from the Department of National Defense [DND] to engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons, military ordnance, explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is specifically authorized, with a substantial export component, to a non-Philippine national by the Secretary of National Defense; or]

[2)  which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of gambling; nightclubs, bars, beer houses, dance halls, sauna and steam bathhouses and massage clinics.]

[Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollars (US$200,000.00), are reserved to Philippine nationals: Provided, That if: (1) they involve advanced technology as determined by the Department of Science and Technology; or (2) they employ at least fifty (50) direct employees, then a minimum paid-in capital of One hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals.]

“SECURITY-RELATED ACTIVITIES, REQUIRING PRIOR CLEARANCE AND AUTHORIZATION FROM THE PHILIPPINE NATIONAL POLICE TO ENGAGE IN SUCH ACTIVITY, SHALL BE RESERVED TO PHILIPPINE NATIONALS, AND TO CITIZENS, SUBJECTS OR NATIONALS OF FOREIGN COUNTRIES THAT PERMIT FILIPINOS TO ENGAGE IN SECURITY RELATED ACTIVITIES WITHIN ITS TERRITORIES. SECURITY -RELATED ACTIVITIES INCLUDE BUT ARE NOT LIMITED TO THE MANUFACTURE, REPAIR, STORAGE AND/OR DISTRIBUTION OF FIREARMS, GUNPOWDER, DYNAMITE, BLASTING SUPPLIES, INGREDIENTS USED IN MAKING EXPLOSIVES, TELESCOPIC SITES, AND SIMILAR MATERIALS.

“DEFENSE-RELATED ACTIVITIES, REQUIRING PRIOR CLEARANCE AND AUTHORIZATION FROM THE DEPARTMENT OF NATIONAL DEFENSE TO ENGAGE IN SUCH ACTIVITY, SHALL BE RESERVED TO PHILIPPINE NATIONALS, AND TO CITIZENS, SUBJECTS OR NATIONALS OF FOREIGN COUNTRIES THAT PERMIT FILIPINOS TO ENGAGE IN DEFENSE RELATED ACTIVITIES WITHIN ITS TERRITORIES. DEFENSE-RELATED ACTIVITIES INCLUDE BUT ARE NOT LIMITED TO THE MANUFACTURE, REPAIR, STORAGE AND/OR DISTRIBUTION OF GUNS AND AMMUNICATION, MILITARY ORDNANCE, GUNNERY, GUIDED MISSILES, TACTICAL AIRCRAFT, SPACE VEHICLES, COMBAT VESSELS, WEAPONS EQUIPMENT, MILITARY COMMUNICATIONS EQUIPMENT, NIGHT VISION EQUIPMENT, RADIATION DEVICES, ARMAMENT TRAINING DEVICES, AND SIMILAR MATERIALS.

“ACTIVITIES WITH IMPLICATIONS ON PUBLIC HEALTH AND MORALS, SHALL BE RESERVED TO PHILIPPINE NATIONALS, AND TO CITIZENS, SUBJECTS OR NATIONALS OF FOREIGN COUNTRIES THAT PERMIT FILIPINOS TO ENGAGE IN SUCH  ACTIVITIES WITHIN ITS TERRITORIES. ACTIVITIES WITH IMPLICATIONS ON PUBLIC HEALTH AND MORALS INCLUDE BUT ARE NOT LIMITED TO THE MANUFACTURE AND DISTRIBUTION OF DANGEROUS DRUGS; ALL FORMS OF GAMBLING, NIGHTCLUBS, BARS, BEER HOUSES, DANCE HALLS, SAUNA AND STEAM BATHHOUSES AND MASSAGE CLINICS.

“MICRO-SIZED DOMESTIC MARKET ENTERPRISES, AS DEFINED UNDER REPUBLIC ACT NO. 9178 AND OTHER LAWS, SHALL BE RESERVED TO FILIPINO CITIZENS, OR TO CORPORATIONS, PARTNERSHIPS, ASSOCIATIONS OR COOPERATIVES WHOLLY OWNED BY THEM, EXCEPT AS OTHERWISE PROVIDED IN SECTION 9 OF THIS ACT.

[Amendments to List B may be made upon recommendation of the Secretary of National Defense or the Secretary of Health, or the Secretary of Education, Culture and Sports, endorsed by NEDA, approved by the President, and promulgated by a Presidential Proclamation.]

“The Transitory Foreign Investment Negative List established in Section 15 hereof shall be replaced at the end of the transitory period by the first Regular Negative List to be formulated and recommended by NEDA, following the process and criteria provided in Sections 8 and 9 of this Act. The first Regular Negative Lists shall be published not later than sixty (60) days before the end of the transitory period provided in said section, and shall become immediately effective at the end of the transitory period. Subsequent Foreign Investment Negative Lists shall become effective fifteen [15] days after publication in a newspaper of general circulation in the Philippines: Provided, however, That each Foreign Investment Negative List shall be prospective in operation and shall in no way affect foreign investment existing on the date of its publication.”

[Amendments to List B after promulgation and publication of the first Regular Foreign Investment Negative List at the end of the transitory period shall not be made more often than once every two [2] years. (as amended by Republic Act No. 8179)]

Section 34. Foreign Investments Act.- Section 9 of Republic Act No. 7042, as amended by Republic Act No. 8179, is hereby amended to read as follows:

“Section 9. Investment Rights of Former Natural-born Filipinos.- For purposes of this Act, former natural born citizens of the Philippines shall have the same investment rights of a Philippine citizen in MICRO ENTERPRISES UNDER REPUBLIC ACT NO. 9178 AND OTHER LAWS, Cooperatives under Republic Act No. 9520 [6938], Rural Banks under Republic Act. No. 7353, AND Thrift Banks [AND PRIVATE DEVELOPMENT BANKS] under Republic Act No. 7906.” [and Financing Companies under Republic Act No. 5980 as amended. These rights shall not extend to activities reserved by the Constitution, including (1) the exercise of profession: (2) in defense-related activities under Section 8 (b) hereof, unless specifically authorized by the Secretary of National Defense: and, (3) activities covered by Republic Act No. 1180 (Retail Trade Act) [superseded by Republic Act No. 8762 (Retail Trade Liberalization Act of 2000)].  Republic Act No. 5487 (Security Agency Act), Republic Act No. 7076 (Small Scale Mining Act), Republic Act No. 3018. as amended (Rice and Corn Industry Act), and P.D. No. 449 (Cockpits Operation and Management). (as amended by Republic Act No. 8179)]


BANKING INSTITUTIONS


Section 35.  Foreign Banks.- Section 3 of Republic Act No. 7721, as amended by Republic Act No. 10641, is hereby further amended to read as follows:

“SEC. 3. Guidelines for Approval. – In approving entry applications of foreign banks, the Monetary Board shall: (i) ensure geographic representation and complementation; (ii) consider strategic trade and investment relationships between the Philippines and the country of incorporation of the foreign bank; (iii) study the demonstrated capacity, global reputation for financial innovations and stability in a competitive environment of the applicant; (iv) see to it that reciprocity rights are enjoyed by Philippine banks in the applicant’s country; and (v) consider willingness to fully share their technology.

“Only established, reputable and financially sound foreign banks shall be allowed entry in accordance with Section 2 of this Act. The foreign bank applicant must be widely-owned and publicly-listed in its country of origin, unless the foreign bank applicant is owned and controlled by the government of its country of origin.

“In the REASONABLE exercise of this authority, the Monetary Board MAY [shall] IN THE NATIONAL INTEREST adopt such measures as may be necessary to ensure that the control of at least [sixty percent (60%)] A MAJORITY of the resources or assets of the entire banking system is held by domestic banks which are majority-owned AND CONTROLLED by Filipinos.”

Section 36.  Domestic Banks.- Section 73 of Republic Act No. 8791, is hereby amended to read as follows:

“SECTION 73. Acquisition of Voting Stock in a Domestic Bank. — [Within seven (7) years from the effectivity of this Act and] Subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.

“[Within the same period,] The Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the voting stock thereof.

“In the REASONABLE exercise of this authority, the Monetary Board MAY [shall] IN THE NATIONAL INTEREST adopt measures as may be necessary to ensure that [at all times the] MAJORITY control of [seventy percent (70%) of] the resources or assets of the entire banking system is held by banks which are at least majority-owned AND CONTROLLED by Filipinos.

“Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to banks organized under the laws of the Republic of the Philippines.[(Secs. 2 and 3, RA 7721)]”

Section 37.  Thrift Banks.- Section 7 of Republic Act No. 7906, is hereby amended to read as follows:

“SECTION 7.    Directors and Officers. — NON-FILIPINO CITIZENS MAY BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A THRIFT BANK TO THE EXTENT OF THE FOREIGN PARTICIPATION IN THE EQUITY OF SAID BANK [At least a majority of the members of the board of directors of any thrift bank which may be established after the effectivity of this Act shall be citizens of the Philippines]: provided, however, that no appointive or elective official, whether full-time or part-time, shall at the same time serve as officer of any thrift bank, except in cases where such service is incident to financial assistance provided by the government or a government-owned or -controlled corporation to the bank: provided, further, that in the case of merger or consolidation duly approved by the Monetary Board, the limitation on the number of directors in a corporation, as provided in Section 14 of the Corporation Code of the Philippines, shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating banks.”

Section 38.  Thrift Banks.- Section 8 of Republic Act No. 7906, is hereby amended to read as follows:

  “SECTION 8.    Ownership. — UNLESS OTHERWISE PROVIDED BY THE MONETARY BOARD, AT least forty percent (40%) of the voting stock of a thrift bank [which may be established after the approval of this Act] shall be owned by citizens OR NATIONALS of the Philippines, except where a new bank may be established as a result of a merger or consolidation of existing thrift banks with foreign holdings in which case, the resulting foreign holdings shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond sixty percent (60%) of the voting stock of thrift banks.  The percentage of the foreign-owned voting stocks shall be determined by the citizenship of individual stockholders and in case of corporations owning shares, by the citizenship of each stockholder in the said corporations.”[Any provision of existing laws to the contrary notwithstanding, stockholders in a thrift bank shall be exempt from any ownership ceiling for a period of ten (10) years from the effectivity of this Act.]

“EXCEPT AS OTHERWISE PROVIDED BY REPUBLIC ACT NO. 8791, REPUBLIC ACT NO. 7721 AND OTHER LAWS, THE MONETARY BOARD MAY IN THE NATIONAL INTEREST, AND UPON THE REASONABLE EXERCISE OF ITS DISCRETION, RESTRICT, REGULATE OR LIBERALIZE FOREIGN INVESTMENTS IN THE VOTING STOCK OF A THRIFT BANK.”

Section 39.  Private Development Banks.- Section 4 of Republic Act No. 4093, as amended, is hereby further amended to read as follows:

“Sec. 4.  A private development bank shall be organized in the form of a stock corporation and its paid-up capital shall not be less than four million pesos for Class A, two million pesos for Class B, and one million pesos for Class C: Provided, That UNLESS OTHERWISE PROVIDED BY THE MONETARY BOARD, at least FORTY [seventy] percent (40%) of the voting stock OF A PRIVATE DEVELOPMENT BANK [subscribed by the private sector] shall be owned [and held] by [the] citizens OR NATIONALS of the Philippines, except where a new bank is established as a result of the consolidation of existing private development banks in any of which there are foreign-owned voting stocks at the time of consolidation: [Provided, however, That the Monetary Board may, with the approval of the President of the Philippines, reduce the required minimum percentage of Philippine ownership prescribed herein from seventy percent (70%) to sixty percent (60%)]: Provided, further, That if said subscription of private shareholders to the initial capitalization of a private development bank cannot be secured or is not available, the Development Bank of the Philippines on representation of the said private shareholders and with the approval of its Board of Governors shall, within thirty days from date of approval by the Board of Governors, and after compliance by the private stockholders with the conditions of said approval, subscribe to the capital stock of such development bank, which shall be paid in full at the time of subscription out of the trust fund provided in Section three, Paragraph three, of Republic Act Numbered Twenty hundred and eighty-one, in an amount equal to the difference between the required paid-up capital and the fully paid subscribed capital of the private stockholders but not exceeding the latter: Provided, furthermore, That the Board of Governors shall act on the representation made by the private shareholders within thirty days from the date it is filed: Provided, still further, That such shares of stock subscribed by the bank shall be preferred shares entitled to cumulative dividends at the yearly rate of one percent during the first five years, two percent during the following five years, and three percent thereafter shall be preferred as against common and other preferred stockholders in the distribution of assets in the event of liquidation, and shall be entitled to voting privileges: Provided, still further, That such preferred shares of the bank may at any time he paid off at not less than par and retired in whole or in part if, in the opinion of the Monetary Board, the bank has accumulated enough capital strength to permit retirement of such shares, or sold at not less than par [to private individuals who are citizens of the Philippines], and in the sale thereof, the qualified registered stockholders shall have the right of pre-emption within one year from the date of offer in proportion to their respective holdings, but in the absence of such buyers, preference shall be given to residents of the province or city where the development bank is located: Provided, finally, That such preferred shares may be converted to common shares when sold [to private individuals]. NON-FILIPINO CITIZENS MAY BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A THRIFT BANK TO THE EXTENT OF THE FOREIGN PARTICIPATION IN THE EQUITY OF SAID BANK [All members of the board of directors of the private development bank shall be citizens of the Philippines]: Provided, however, That no appointive or elective public official, whether full-time or part-time, shall at the same time serve as officer of any private development bank, except in cases where such service is incident to financial assistance provided by the government or a government-owned or controlled corporation to the bank: Provided, further, That in the case of merger or consolidation of private development banks duly approved by the Monetary Board, the limitation on the maximum number of corporate directors in a corporation, as provided for in Section 12 of the Corporation Code of the Philippines, shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating private development banks.

“EXCEPT AS OTHERWISE PROVIDED BY REPUBLIC ACT NO. 8791, REPUBLIC ACT NO. 7721 AND OTHER LAWS, THE MONETARY BOARD MAY IN THE NATIONAL INTEREST, AND UPON THE REASONABLE EXERCISE OF ITS DISCRETION, RESTRICT, REGULATE OR LIBERALIZE FOREIGN INVESTMENTS IN THE VOTING STOCK OF A PRIVATE DEVELOPMENT BANK.”

Section 40. Rural Banks.- Section 4 of Republic Act No. 7353, is hereby further amended to read as follows:

“SECTION 4.    No rural bank shall be operated without a Certificate of Authority from the Monetary Board of the Central Bank. Rural banks shall be organized in the form of stock corporations. Upon consultation with the rural banks in the area, duly established cooperatives and corporations primarily organized to hold equities in rural banks may organize a rural bank and/or subscribe to the shares of stock of any rural bank: provided, that a cooperative or corporation owning or controlling the whole or majority of the voting stock of the rural bank shall be subject to special examination and to such rules and regulations as the Monetary Board may prescribe. UNLESS OTHERWISE PROVIDED BY THE MONETARY BOARD [With the exception of shareholdings of corporations organized primarily to hold equities in rural banks as provided for under Section 12-C of Republic Act No. 337, as amended, and of Filipino-controlled domestic banks], AT LEAST SIXTY PERCENT (60%) OF the VOTING [capital] stock of any rural bank shall be [fully] owned [and held directly or indirectly] by citizens OR NATIONALS of the Philippines [or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock: provided, that any provisions of existing laws to the contrary notwithstanding, stockholdings in a rural bank shall be exempt from any ownership ceiling for a period of ten (10) years from the approval of this Act: provided, further, that any such exemption shall required the approval of the Monetary Board]. If subscription of private shareholders to the capital stock of a rural bank cannot be secured or is not available, or insufficient to meet the normal credit needs of the locality, the Land Bank of the Philippines, the Development Bank of the Philippines, or any government-owned or controlled bank or financial institution, on representation of the said private shareholders but subject to the investment guidelines, policies and procedures of the bank of financial institution and upon approval of the Monetary Board of the Central Bank, shall subscribe to the capital stock of such rural bank, which shall be paid in full at the time of subscription, in an amount equal to the fully paid subscribed and unimpaired, capital of the private stockholders or such amount as the Monetary Board may prescribe as may be necessary to promote and expand rural economic development: provided, however, that such shares of stock subscribed by the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or controlled bank or financial institution may be sold at any time at market value [to private individuals who are citizens of the Philippines]: provided, finally, that in the sale of shares of stock subscribed by the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or controlled bank or financial institution, the registered stockholders shall have the right of preemption within one (1) year from the date of offer in proportion to their respective holdings, but in the absence of such buyer, preference, however, shall be given to residents of the locality or province where the rural bank is located.

“EXCEPT AS OTHERWISE PROVIDED BY REPUBLIC ACT NO. 8791, REPUBLIC ACT NO. 7721 AND OTHER LAWS, THE MONETARY BOARD MAY IN THE NATIONAL INTEREST, AND UPON THE REASONABLE EXERCISE OF ITS DISCRETION, RESTRICT, REGULATE OR LIBERALIZE FOREIGN INVESTMENTS IN THE VOTING STOCK OF A RURAL BANK.”

Section 41.  Rural Banks.- Section 5 of Republic Act No. 7353, is hereby further amended to read as follows:

“SECTION 5.    NON-FILIPINO CITIZENS MAY BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A RURAL BANK TO THE EXTENT OF THE FOREIGN PARTICIPATION IN THE EQUITY OF SAID BANK [All members of the Board of Directors of the rural bank shall be citizens of the Philippines at the time of their assumption to office]: provided, however, that nothing in this Act shall be construed as prohibiting any appointive or in any capacity in the bank.

“No director or officer of any rural bank shall, either directly or indirectly, for himself or as the representative or agent of another, borrow any of the deposits or funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for money borrowed from the bank or loaned by it except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the appropriate supervising department. The director/officer of the bank who violates the provisions of this section shall be immediately dismissed from his office and shall be penalized in accordance with Section 26 of this Act.

“The Monetary Board may regulate the amount of credit accommodations that may be extended directly to the directors, officers or stockholders of rural banks of banking institutions. However, the outstanding credit accommodations which a rural bank may extend to each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors, or officers shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contributions in the bank.”


FOREIGN INVESTMENT COUNCIL


[NOTE: See US Defense Production Act of 1950, as amended by FINSA, Section 721 (50 U.S.C. App. 2170). Executive Order No. 11858 (as amended by Executive Order No. 13456), re Foreign Investment in the United States.]

Section 42. Policy.- Foreign investment in the Philippines promotes job creation, productivity, competitiveness and economic growth. It shall be the policy of the Philippines to support unequivocally such investment, consistent with the protection of the basic securities of the country, being defense or external security, internal security, food security, water security, energy security, environment security, resource security (human, natural, industrial) and cyber security.

Section 43. Definitions.-

(a) “Control” means the ability to exercise certain powers over important matters affecting an entity; the power, direct or indirect, whether or not exercised, through the ownership of a majority or a dominant minority of the total outstanding voting interest in an entity, board representation, proxy voting, a special share, contractual arrangements, formal or informal arrangements to act in concert, or other means, to determine, direct, or decide important matters affecting an entity; the power to determine, direct, take, reach, or cause decisions regarding important matters affecting an entity, including but not limited to the following:
(1) The sale, lease, mortgage, pledge, or other transfer of any of the tangible or intangible principal assets of the entity, whether or not in the ordinary course of business;
(2) The reorganization, merger, or dissolution of the entity;
(3) The closing, relocation, or substantial alteration of the production, operational, or research and development facilities of the entity;
(4) Major expenditures or investments, issues of equity or debt securities, or dividend payments by the entity, or approval of the operating budget of the entity;
(5) The selection of new business lines or ventures that the entity will pursue;
(6) The entry into, termination, or non-fulfillment by the entity of significant contracts;
(7) The policies or procedures of the entity governing the treatment of non- public technical, financial, or other proprietary information of the entity;
(8) The appointment or dismissal of officers or senior managers;
(9) The appointment or dismissal of employees with access to sensitive technology or classified government information; or
(10) The amendment of the Articles of Incorporation, constituent agreement, or other organizational documents of the entity with respect to the matters described in Paragraphs (a)(1) through (9) of this Section.

(b) “Covered transaction” means any merger, acquisition, or takeover that is proposed or pending as of the date this Act takes effect, by or with any foreign person which could result in foreign control of any person engaged in commerce in the Philippines.

(c) “Critical Infrastructure” means systems and assets, whether physical or virtual, so vital to the Philippines that the incapacity or destruction of such systems or assets would have a debilitating impact on any of the basic securities.

(d) “Critical technologies” mean critical technology, critical components, or critical technology items essential to any of the basic securities.

(e) “Foreign government-controlled transaction” means any covered transaction that could result in the control of any person engaged in commerce in the Philippines by a foreign government or an entity controlled by or acting on behalf of a foreign government.

Section 44. Council.- There is hereby established the Foreign Investment Council (Council) which shall be composed of the following members or the designee of any such member:
(a) The Secretary of the Department of Justice;
(b) The Secretary of the Department of National Defense;
(c) The Secretary of the Department of Interior and Local Government;
(d) The Secretary of the Department of Agriculture;
(e) The Secretary of the Department of Environment and Natural Resources;
(f) The Secretary of the Department of Energy;
(g) The Secretary of the Department of Labor and Employment;
(h) The Secretary of the Department of Trade and Industry;
(i) The Secretary of the Department of Information and Communications Technology;
(j) The Director-General of the National Economic Development Authority;
(k) The Governor of the Bangko Sentral ng Pilipinas;
(l) The Chairman of the Securities and Exchange Commission;
(m) The Solicitor-General;
(n) The heads of any other executive department, agency, or office, as the President determines appropriate, generally or on a case-by-case basis.

The Secretary of the Department of Justice shall be the Chairman of the Council. The Chairman of the Council shall have the authority, exclusive of the heads of departments or agencies, to act, or authorize others to act, on behalf of the Council, and to communicate on behalf of the Council with the legislative branch of government and the public.

The resolutions of the Council shall be approved by a majority vote of all its members.

Section 45. Secretariat.- The Council is hereby authorized to establish a secretariat. The Council shall determine the composition, prescribe the qualifications and fix the compensation of the members of the secretariat.

Section 46. Lead Agency.- The lead agency or agencies (lead agency) shall have primary responsibility, on behalf of the Council, for the review and investigation of a specific covered transaction.

The following shall be the lead agency for the review and investigation of the particular transaction indicated:

(a) The Department of National Defense for any covered transaction that poses a risk to defense or external security;

(b) The Department of National Defense for any covered transaction that poses a risk to internal security; the Department of Interior and Local Government as co-lead agency for any covered transaction that poses a risk to internal security;

(c) The Department of Agriculture for any covered transaction that poses a risk to food security;

(d) The Department of Environment and Natural Resources for any covered transaction that poses a risk to water security;

(e) The Department of Environment and Natural Resources for any covered transaction that poses a risk to natural resource security;

(f) The Department of Environment and Natural Resources for any covered transaction that poses a risk to environment security;

(g) The Department of Energy for any covered transaction that poses a risk to energy security;

(h) The Department of Labor and Employment for any covered transaction that poses a risk to human resource security;

(i) The Department of Trade and Industry for any covered transaction that poses a risk to industrial resource security;

(j) The Department of Information and Communications Technology for any covered transaction that poses a risk to cyber security.

The Chairman of the Council shall designate the lead agency or agencies whenever a covered transaction poses a risk to two or more basic securities.

Section 47. Review.- Upon notice by any party to any covered transaction, or upon its unilateral initiative without such notice, the Council shall review the covered transaction to determine the effects of the transaction on any basic security of the Philippines, and shall consider the relevant factors for such purpose as appropriate.

If the Council determines that the covered transaction is a foreign government-controlled transaction, the Council shall conduct an investigation of the transaction.

Any review under this section shall be completed within thirty (30) calendar days beginning on the date of notice or initiation of review.

Section 48. Investigation.- The Council shall immediately conduct an investigation of the effects of a covered transaction on any basic security of the Philippines, and take any necessary action in connection with the transaction to protect the affected basic security of the Philippines, in each case in which a review of the covered transaction results in a determination that:
(a) the transaction threatens to impair any basic security of the Philippines and that threat has not been mitigated during or prior to the review of a covered transaction;
(b) the transaction is a foreign government-controlled transaction;
(c) the transaction would result in control of any critical infrastructure of or within the Philippines by or on behalf of any foreign person, if the Council determines that the transaction could impair any basic security, and that such impairment to a basic security has not been mitigated by assurances provided or renewed with the approval of the Council during the review period; or
(d) the lead agency recommends that an investigation be undertaken.

Any investigation under this section shall be completed within forty-five (45) calendar days beginning on the date on which the investigation commenced.

Section 49. Relevant Factors.- The Council, or any lead agency acting on behalf of the Council, taking into account the requirements of the basic securities, shall consider:
(a) domestic production needed for the projected requirements of the basic securities,
(b) the capability and capacity of domestic industries to meet the requirements of the basic securities, including the availability of human resources, products, technology, materials, and other supplies and services,
(c) the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the Philippines to meet the requirements of the basic securities,
(d) the potential effects of the proposed or pending transaction on sales of military goods, equipment, or technology to any country identified by the Secretary of National Defense as a country that supports terrorism, or to any country identified by the Secretary of Defense as posing a potential military threat to the interests of the Philippines;
(5) the potential effects of the proposed or pending transaction on Philippine international technological leadership in areas affecting the basic securities of the Philippines;
(6) the potential basic security-related effects on Philippine critical infrastructure, including major energy assets;
(7) the potential basic security-related effects on Philippine critical technologies;
(8) whether the covered transaction is a foreign government-controlled transaction;
(9) as appropriate, and particularly with respect to a foreign government-controlled transaction, a review of the current assessment of the relationship of such country with the Philippines, specifically on its record on cooperating in counter-terrorism efforts, and the potential for transshipment or diversion of technologies with military applications;
(10) the long-term projection of Philippine requirements for sources of energy and other critical resources and material; and
(11) such other factors as the Council, or any lead agency acting on behalf of the Council, may determine to be appropriate, generally or in connection with a specific review or investigation.

Section 50. Risk Mitigation.- The Council, or any lead agency acting on behalf of the Council, may seek to mitigate any basic security risk posed by a transaction that is not adequately addressed by other provisions of laws, by entering into a mitigation agreement with the parties to a transaction or by imposing conditions on such parties.

The Council, or any lead agency acting on behalf of the Council, may negotiate, enter into or impose, and enforce any agreement or condition with any party to the covered transaction in order to mitigate any threat to any basic security of the Philippines that arises as a result of the covered transaction.

Prior to taking risk mitigation measures, the Council shall identify the basic security risk posed by the transaction based on factors including the threat, vulnerabilities, and potential consequences. The Council shall also set forth the risk mitigation measures that it believes are reasonably necessary to address the risk.

Any agreement entered into or condition imposed under this section shall be based on a risk-based analysis, conducted by the Council, or any lead agency acting on behalf of the Council, of the threat to a basic security of the Philippines of the covered transaction.

The Council shall ensure that adequate resources are available for the purpose of monitoring a risk mitigation measure.

Section 51. Suspension or Prohibition.- The Council, by a majority vote of all its members, may suspend or prohibit a covered transaction if in the reasonable exercise of its discretion it determines that such action is necessary to address risk.

Section 52. Confidentiality of Information.- Any covered transaction report, relevant documentary material or information, shall be confidential and exempt from disclosure. No such report, material or information may be made public, except as may be relevant to any administrative or judicial action or proceeding. Nothing in this section shall be construed to prevent disclosure to the legislative branch of government.

Section 53. Control and Supervision.- The Council shall be under the control and supervision of the President.

Section 54. Rules and Regulations.- The Council, by a majority vote of all its members, shall issue the rules and regulations to implement the applicable provisions of this Act.

Section 55. Appropriation.- The Council shall be provided with an initial appropriation of ______________ Philippine Currency (Php__________) drawn from the national government. Appropriations for the succeeding years shall be included in the General Appropriations Act.


MISCELLANEOUS PROVISIONS


Section 56. Interpretation.- Nothing herein shall be construed to modify the requirements or otherwise liberalize the issuance of working visas or investor's visas under the immigration and investment laws, or of alien employment permits under the labor laws.

Section 57. Rules and Regulations.- The National Economic Development Authority (NEDA), in consultation with the Securities and Exchange Commission (SEC), the Board of Investments (BOI), the Philippine Economic Zone Authority (PEZA) and other government agencies concerned, shall prepare and promulgate the rules and regulations to implement the provisions related to foreign investments, within ninety (90) days after the approval of this Act.

The Professional Regulation Commission, together with representatives of the various Professional Regulatory Boards and accredited professional organizations, shall prepare and promulgate the rules and regulations to implement the provisions related to foreign professional practice, within ninety (90) days after the approval of this Act.

The respective government agencies vested with authority to issue the implementing rules and regulations of the various statutory laws cited in this Act, shall within ninety (90) days after the approval of this Act, prepare and promulgate the appropriate implementing rules and regulations.

Section 58. Repeal.- All laws, presidential decrees, executive orders, letters of instruction, proclamations, rules and regulations, and other issuances, or any part thereof, which are inconsistent with or contrary to the provisions of this Act, are hereby repealed, amended or modified accordingly.

Section 59. Separability.- If, for any reason or reasons, any part or parts of this Act shall be declared unconstitutional or invalid by any competent court, other parts of this Act shall be thereby shall continue to be in full force and effect.

Section 60. Effectivity.- This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette, or in at least two (2) national newspapers of general circulation.

Approved: 

HON. JUAN MAKABAYAN

Senator