Sponsorship Speech

April 27, 2022
SPONSORSHIP SPEECH
Senate Bill No. 2226 Under Committee Report No. 668
An Act amending RA 11659 giving the SEC the authority to Review Foreign Entities
investing 100% capital in the Philippines, including qualifications to successfully engage in
100% foreign capital investment in the Philippines, as stated in Section 5 and Section 7 of RA
11659.
Delivered by Hon. (Insert name), Senator of the Republic
Mr. President, my honorable peers. Good afternoon. The Foreign Investments Act, also
known as Republic Act No. 7042, was passed in 1991 with the goal of stimulating the Philippine
economy by significantly liberalizing foreign investment regulations and practices. Foreign
direct investments, or FDIs, are important to us, as they are to any developing country, since
they give us actual economic benefits like technical experience, technological transfer, foreign
exchange, via exports and increased tax revenues, among other things. One of the greatest
benefits of FDI to economies like the Philippines is increased employment. Various studies show
an inverse relationship between FDIs and unemployment, which means that the more FDIs that
flow into a country, the lower its unemployment rate. While FDIs have slightly different effects
on skilled and unskilled labor, the consensus is generally the same. More inward FDIs mean
more jobs in developing economies around the world, especially in those where unskilled labor
makes up a sizable portion of the labor force. At the time of its passage, the 1991 Foreign
Investments Act did an excellent job of fulfilling its mandate of increasing foreign investor
access in the country. According to the Joint Foreign Chambers' 2010 strategy statement,
Arangkada Philippines, FDI inflows into the Philippines increased by 237 percent between 1990
and 1994, from $4.711 billion to $11.183 billion between 2005 and 2009, a 20-year gain.
Despite this development, the World Bank reports that from 2015 to 2017, we had the second
lowest FDI accumulation among the ASEAN 6 countries. For that time span, we received
US$23.98 billion in FDI. Singapore's FDI inflows for the same time was US$208.48 billion, while
Indonesia's were US$45.79 billion, Vietnam's were US$35.5 billion, and Malaysia's were
US$32.84 billion. Only Thailand, with US$19.78 billion in FDI, had a lower total. According to the
Organization for Economic Cooperation and Development's (OECD) FDI Regulatory
Restrictiveness Index for 2018, the Philippines is also one of the most restrictive countries in the
world when it comes to FDI laws. The Philippines rated among the most restrictive in terms of
FDI laws in the business services, telecommunications, media, electricity, and transportation
industries among the 68 nations examined by the index, with a restrictiveness score well above
the OECD average. In the financial services business, we did a little better, but we still
outperformed the OECD average. All in all, the OECD found that the Philippines has the most
restrictive FDI laws out of the 68 countries it looked at. It had a restrictiveness score that was
about six times higher than the OECD average. Despite the fact that the Foreign Investments
Act was enacted 31 years ago, our present foreign investment regulations and policies are still
relatively restrictive, limiting economic attractiveness and job opportunities. Because our
investment rules are less open and generally more inhibitive than those of our ASEAN
neighbors, we remain a rather unattractive investment destination. In light of the current global
and regional economic context, it is necessary to examine the Foreign Investments Act in its
current form and acknowledge that it may not be performing to its full potential as a critical
piece of law.
President Rodrigo Duterte signed Republic Act No. 11647 into law on March 2, 2022, which
amends Republic Act No. 7042, also known as the Foreign Investments Act as amended. To
make sense, this amendment is in line with the state's policy of welcoming productive
investments from people, businesses, and governments from all over the world and their
political subdivisions. These investments should help the state grow its economy in a way that
is long-term, inclusive, resilient, and innovative.
The trade liberalization law allows foreign investors to invest up to 100% of a local enterprise. If
the majority of their direct employees are Filipinos, they may wholly own small and medium-
sized businesses with a minimum paid-up capital of less than $100,000 or PHP 5 million. There
must be at least 15 of the employees. There is a law that says that Filipinos can only invest in
defense-related businesses and small and micro businesses with less than $200,000 in paid-up
capital. It creates a group of government agencies that work together to promote the
Philippines as a good place to invest. The Trade Department is in charge of this group. It will
keep track of foreign investments and local businesses via an online database. Local
governments will also benefit from the agency's assistance in attracting international
investment. Enterprises whose foreign investors fail to meet export ratio requirements should
cut their domestic market sales to not more than 40% of total production, compared with 60%
now, In accordance to Republic Act No. 11647
I am sponsoring today a measure that proposes to amend several provisions of RA 11647 giving
the SEC the authority to Review Foreign Entities investing 100% capital in the Philippines,
including qualifications to successfully engage in 100% foreign capital investment in the
Philippines, as stated in Section 5 and Section 7 of RA 11647, which will help us take advantage
of global and regional economic dynamics. This Act grants the SEC authority to review foreign
entities investing 100% of their capital in the Philippines. To regulate, investigate or supervise
the activities of Foreign Entities to ensure compliance and impose sanctions for the violation of
laws and the rules, regulations and orders provided that the said foreign entities disclose the
facts as well as the names and addresses of the business venture's partners in the application
for registration with the SEC. The proposed amended statement emphasizes the significant
impact of technical improvements, as well as global and regional economic realities, on the
Philippine economy.
The proposal is a review system for foreign investment transactions that may jeopardize
national security, ensuring that the government does not overlook national security concerns in
the pursuit of more FDI. Granting the SEC authority to assess foreign entities investing 100% of
their capital would prevent any risk to national security and penalize any foreign entities found
to have an anomaly in accordance with Philippine laws and other pertinent laws. The SEC, DTI,
and other government agencies will develop a portal website that will serve as a centralized
system for investors to learn about the country's relevant laws, rules, and regulations, as well as
policies on foreign investments, including limits. This will give potential foreign investors access
to the legal and practical challenges they may encounter, delivering a clear statement that the
state values transparency and convenience in doing business just as much as firms and
investors do.
These amendments, when integrated, will result in a foreign investment system that is more
perfectly calibrated to the changing economic framework and the needs that come with it. Our
ability to adapt to these changes may very well determine whether we can reach our full
economic potential or remain stuck in a rut in comparison to our neighbors.
It is an opportune time for our country to reap the economic benefits that our neighbors have
enjoyed for years as a result of foreign investment.
Thank you, Mr. President.

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April 27, 2022

Delivered by Hon. (Insert name), Senator of the Republic

Thank you, Mr. President.

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