Executive Order No. 113: What the 13th Foreign Investment Negative List Means for Businesses in the Philippines

The Philippines has updated its rules on foreign ownership through Executive Order No. 113, which adopts the 13th Regular Foreign Investment Negative List (RFINL).

For local businesses, foreign investors, and companies planning to enter the Philippine market, this is an important development.

The new list explains which industries remain restricted, which allow partial foreign ownership, and which now offer more room for foreign participation.

In simple terms, the Foreign Investment Negative List tells investors where foreign ownership is limited or prohibited under the Constitution and specific laws. If an industry is not on the list, it is generally open to foreign investment, subject to other applicable laws and regulations. EO 113 confirms this framework and updates the restrictions under both List A and List B.

What Is the Foreign Investment Negative List?

The Regular Foreign Investment Negative List is an official list of business activities where foreign ownership is either banned or limited in the Philippines.

It exists because Philippine law does not treat all industries the same. Some sectors are reserved for Filipinos due to constitutional rules, while others are restricted for reasons such as national security, public health, defense, and protection of small and medium enterprises. EO 113 explains that the 13th RFINL covers the investment areas or activities that are open to foreign investors and those reserved to Philippine nationals, consistent with the Foreign Investments Act and related laws.

Why Executive Order No. 113 Matters

This new executive order matters because it gives businesses a more current guide on foreign ownership limits in the Philippines.

It also reflects the government’s effort to align the negative list with changes in existing laws and policies. EO 113 states that the 12th RFINL needed to be amended to reflect changes to Lists A and B and to ease restrictions in certain investment areas or activities where allowed by law.

For investors, that means the updated list is not just a legal formality. It is a practical roadmap for deciding:

• whether a business can be fully foreign-owned

• whether a Filipino ownership partner is required

• what ownership ceiling applies to a specific industry

• whether a sector remains closed to foreign equity

  
  

What Are the Two Main Parts of the 13th RFINL?

The 13th RFINL is divided into List A and List B.

List A: Restrictions Based on the Constitution and Specific Laws

List A covers business areas where foreign ownership is restricted because of the Constitution or specific Philippine statutes. This includes sectors where there is:

• no foreign equity allowed

• limited foreign equity, such as 25%, 30%, or 40%

• in a few cases, up to 100% foreign equity subject to conditions set by law

  
  

List B: Restrictions Based on Security, Defense, Health, Morals, and SME Protection

List B covers sectors where foreign ownership is regulated for reasons of:

• national security

• defense

• public health and morals

• protection of small- and medium-scale enterprises

  
  

This distinction is important because List A restrictions usually come from higher-level legal rules, while List B restrictions are tied more closely to policy concerns recognized by law.

Industries With No Foreign Equity Allowed

Under List A, several activities remain fully reserved to Filipinos, meaning foreign ownership is not allowed at all.

Examples listed in EO 113 include:

• mass media, except recording and internet business

• cooperative practice of profession in architecture

• cooperatives

• private security agencies

• small-scale mining

• utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zone, as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons

• ownership, operation, and management of cockpits

• manufacture, repair, stockpiling, and distribution of nuclear, biological, chemical, radiological, and anti-personnel weapons

• manufacture and retail of firecrackers and pyrotechnic devices

  
  

These are among the most heavily restricted sectors under the new list.

Sectors With Limited Foreign Ownership

EO 113 also identifies industries where foreign ownership is allowed, but only up to a certain level.

Up to 25% Foreign Equity

The order lists the following under the 25% cap:

• private recruitment, whether for local or overseas employment

• contracts for the construction of defense-related structures

  
  

Up to 30% Foreign Equity

The list places advertising under a 30% foreign equity limit.

Up to 40% Foreign Equity

A number of industries continue to follow the familiar 40% foreign ownership ceiling, including certain areas involving:

• retail trade enterprises with paid-up capital below the statutory threshold

• exploration, development, and utilization of natural resources, subject to stated exceptions

• ownership of private lands, subject to legal exceptions

• operation of public utilities

• educational institutions, except those established by certain religious groups and mission boards, and some foreign diplomatic or temporary resident exceptions

• culture, production, milling, processing, and trading of rice and corn, subject to the conditions stated

• government procurement of goods

• government procurement of infrastructure projects, where foreign participation may be allowed up to 75% in cases stated in the list

• government procurement of consulting services

• operation of commercial fishing vessels

• ownership of condominium units

  
  

For many businesses, this 40% ceiling remains one of the most important rules in structuring investments in the Philippines.

Areas That Now Allow Up to 100% Foreign Equity

One of the most notable items in the 13th RFINL appears on page 5 of the attached list. It states that operation and management of telecommunications may allow up to 100% foreign equity in case the country of the foreign national accords reciprocity to Philippine nationals, and up to 50% foreign equity in the absence of such reciprocity.

This is a significant point because it shows how foreign investment rules in the Philippines are increasingly being shaped by more recent liberalization measures, while still keeping conditions such as reciprocity.

Key Restrictions Under List B

List B deals with industries restricted for reasons tied to security, defense, health, morals, and SME protection.

Under page 6 and page 7 of the attached list, examples include:

• manufacture, repair, storage, and distribution of firearms, ammunition, explosives, and related items requiring Philippine National Police clearance

• development, production, manufacturing, assembly, servicing, or operation of defense-related materiel by an in-country enterprise

• distribution and manufacture of dangerous drugs as authorized by law

• sauna and steam bathhouses, massage clinics, and similar activities regulated due to public health and morals concerns

• all forms of gambling, except those covered by specific investment agreements

• micro and small domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000

• certain startup-related or advanced technology domestic market enterprises with lower thresholds, subject to the conditions stated, including Filipino employee requirements and minimum paid-in capital rules

  
  

These restrictions matter especially for foreign investors targeting smaller domestic enterprises or highly regulated sectors.

What Businesses Should Do Before Accepting Foreign Investors

If your corporation is considering foreign investment, the 13th RFINL should be part of your initial legal and business review.

Before finalizing your structure, it is wise to check:

1. Whether your business activity appears in List A or List B

Even a small difference in business description can affect the applicable foreign ownership cap.

2. Whether the restriction is absolute or partial

Some industries are fully closed to foreign equity, while others allow 25%, 30%, 40%, 50%, 75%, or 100% foreign participation depending on the law and conditions.

3. Whether reciprocity or other special conditions apply

Telecommunications is one example where reciprocity matters. Other sectors may also require close reading of the governing statute.

4. Whether your articles, capitalization, and SEC records match the ownership rules

A company structure that violates foreign ownership limits can lead to regulatory and legal problems.

Why This Matters for Corporate Structuring

The 13th Foreign Investment Negative List is not just for multinational corporations. It also affects:

• Philippine companies planning to admit foreign shareholders

• startups looking for foreign funding

• joint ventures between Filipino and foreign investors

• real estate and infrastructure projects

• regulated industries that may need licenses or sector-specific approvals

  
  

In many cases, a business may appear open to foreign investment in general, but the actual ownership cap depends on the exact activity listed in the RFINL and the law cited in the executive order.

Effectivity of Executive Order No. 113

EO 113 provides that it will take effect 15 days after publication in the Official Gazette or in a newspaper of general circulation. It also states that amendments to Negative List A may be made at any time to reflect changes in specific laws, while amendments to Negative List B may not be made more often than once every two years, subject to the Foreign Investments Act and its implementing rules.

That means businesses should continue monitoring later amendments, especially if they operate in highly regulated sectors.

Final Takeaway

Executive Order No. 113 is an important update for anyone dealing with foreign investment in the Philippines. It adopts the 13th Regular Foreign Investment Negative List, which identifies which industries are closed to foreign investors, which are partially open, and which now allow broader foreign participation under current law.

The biggest practical lesson is simple:

Before forming a company, accepting foreign investors, or restructuring ownership, businesses should first determine whether the planned activity falls under List A or List B and what ownership cap applies. A careful review at the start can help avoid compliance issues later.

Executive Order No. 113.pdf

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