Foreign investment is when a company or individual from one nation invests in assets or ownership

stakes of a company based in another nation.

As increased globalization in business has occurred, it's become very common for big companies to
branch out and invest money in companies located in other countries. These companies may be opening
up new manufacturing plants and attracted to cheaper labor, production, and fewer taxes in another
country. They may make a foreign investment in another firm outside of their country because the firm
being purchased has specific technology, products, or access to additional customers that the
purchasing firm wants.

Republic Act 7042 as amended by RA 8179, also known as the Foreign Investments Act of 1991, is the
basic law that governs foreign investments in the Philippines. It is considered a landmark legislation
because it liberalized the entry of foreign investments into the country.

Under this law, foreign investors are allowed to invest 100% equity in companies engaged in almost all
types of business activities subject to certain restrictions as prescribed in the Foreign Investments
Negative List (FINL).

The FINL is a shortlist of investment areas or activities which may be opened to foreign investors and/or
reserved to Filipino nationals. The Foreign Investments Negative Lists (FINL) are classified as follows:

1. List A - consists of areas of activities reserved to Philippine nationals where foreign equity
participation in any domestic or export enterprise engaged in any activity listed therein shall be limited
to a maximum of forty percent (40%) as prescribed by the Constitution and other specific laws.

2. List B - consists of areas of activities where foreign ownership is limited pursuant to law such as
defense or law enforcement-related activities, which have negative implications on public health and
morals, and small and medium-scale enterprises.

The FIA clearly states that if the activity to be engaged in: is not included in the FINL, is more than 40%
foreign-owned, and will cater to the domestic market, the capital required is at least two hundred
thousand dollars (US$200,000.00). The capital may be lowered to one hundred thousand dollars
(US$100,000.00), if activity involves advance technology, or the company employs at least 50 direct
employees.

If the foreign company will export at least 60% of its output, or a trader that purchases products
domestically will export at least 60% of its purchases, the required capital is only Php5,000.00.

If the company is at least 60% Filipino-40% foreign-owned and will cater to the domestic market, paid-in
capital of the corporation can be less than US$200,000.00.

Overall, foreign investment in a country is a good sign that often leads to growth of jobs and income. As
more foreign investment comes into a country, it can lead to even greater investments because others
see the country as economically stable.