Foreign chambers of commerce in the Philippines are in turmoil after President Duterte signed into law two pieces of legislation this month that would open the door wider for foreign investment to enter the country.

The first is Republic Act 11647 amending the 85-year-old Civil Service Act, which excluded telecommunications, inland waterways, railroads and subways, airlines, highways and tolls and airports from the definition of a public service.

Under the 1987 Constitution, no franchises, certificates or any other form of permission for the operation of any public utility shall be granted except to citizens of the Philippines or corporations or associations organized under our laws, of which at least 60% of the capital is owned by these citizens.

This 60% capital, as held by the Supreme Court in the 2011 Gamboa v. Teves case involving PLDT, refers only to the shares giving the right to vote in the election of directors, and not to the total capital in outstanding including both common stock and non-voting preferred stock.

The Supreme Court declared that mere legal title was insufficient to meet the 60% Philippine capital required by the Constitution. Full beneficial ownership of 60% coupled with 60% voting rights is required. Legal and beneficial ownership of 60% of the outstanding share capital must be in the hands of Filipino nationals. Otherwise, the company is considered a non-Filipino national.

But while RA 11647 no longer included telecommunications in the list of utilities, telco was classified as critical infrastructure. And under the new law, entities controlled or acting on behalf of a foreign government of foreign state-owned companies are prohibited from holding equity in any utility classified as a utility or critical infrastructure.

The ban will not apply to Dito Telecommunity, a telecommunications joint venture between Davao businessman Dennis Uy’s group and state-owned China Telecom, as well as the Philippines’ National Grid Corporation. , which is engaged in power transmission business and is partly owned by State Grid Corp. of China, since the rule applies prospectively. Electric transmission is classified as a public utility under the new law.

The term telecommunications, however, excludes passive telecommunications infrastructure and components such as poles, fiber ducts, dark fiber cables and other passive telecommunications tower infrastructure, as well as value-added services, which may be foreign-owned, even foreign-controlled entities. States and state enterprises.

Under RA 11647, those who carry passengers and/or goods for a fee and provide services to the public such as rental trucks, UV express service, public service buses and jeepneys, tricycles, filcabs and taxis with internal combustion engine vehicles, are considered public utility vehicles. Transport vehicles accredited and operated through transport network companies are not considered PUVs.

Another key trade legislation signed into law by President Duterte is RA 11647 amending RA 7042 or the Foreign Investment Act of 1991 on March 2 last.

Except as otherwise provided by the Retail Trade Liberalization Act and other laws, domestic market micro and small enterprises with paid-up registered capital of less than $200,000 are now restricted to Filipino nationals. The threshold is lowered to $100,000 if they are advanced technology as determined by DOST, or if they are approved as start-ups or start-up facilitators by major host agencies in accordance with the Innovative Startup Act, or if the majority of their direct employees are Filipinos, but in no case less than 15.

Under the old law, “domestic small and medium-sized enterprises with paid-up share capital of less than the equivalent of $500.00 are restricted to Filipino nationals, unless they involve technology of peak determined by the Department of Science and Technology. Export enterprises that use raw materials from the depletion of natural resources, with paid-up registered capital of less than the equivalent of $500,000, are also restricted to Filipino nationals.

RA 11647 now defines “investment” as equity participation in any business organized or existing under the laws of the Philippines and duly registered in the company’s stock and transfer register, or any equivalent ownership register.

The old law defines the term “investment” as equity participation in any business organized or existing under the laws of the Philippines.

RA 7042, as previously amended by RA 8179, provides that former citizens born in the Philippines will have the same investment rights as a Filipino citizen in cooperatives, rural banks, savings banks, and commodity banks. private development, as well as finance companies. These rights do not extend to activities reserved by the Constitution, including the exercise of the profession.

The new FIA now defines the term “practice of a profession” as an activity or engagement performed and performed by a registered and duly licensed professional or holder of a special temporary permit as defined in the scope of practice of a professional regulation law. The term was previously undefined.

RA 11647 is made specifically inapplicable to the practice of professions covered by specific laws and within the jurisdiction of various Professional Regulatory Boards or other regulatory bodies, or subject to reciprocal agreements with other countries.

The FIA, under its latest amendments, is also rendered inapplicable to banks and other financial institutions under the supervision of the Bangko Sentral ng Pilipinas.

Does this mean that investments in rural banks, savings banks and private development banks by former born citizens who acquired foreign citizenship will now be classified as foreign investments? Under current laws, rural banks and savings banks are now allowed to be owned by non-Filipino citizens up to 60% of the voting shares.

A new section is also included regarding anti-corruption practices in foreign investment promotion.

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