Impact of 11th FINL on online businesses

For many, this author included, what comes to mind when hearing the term internet business are online selling websites. Ever since e-commerce has evolved to make products easier to discover and purchase through online retailers and marketplaces, the Philippines has cashed in on the trend, with emerging websites like Lazada, Zalora, OLX, and Food Panda.

The 11th Foreign Investment Negative List (FINL) was promulgated on 29 October 2018, perhaps in compliance with Memorandum Order No. 16, 2017, which directs the National Economic and Development Authority (NEDA) board and its member agencies to exert utmost effort to lift or ease restrictions on certain investment areas or activities with limited foreign participation. Among the notable changes from the 10th FINL is the exclusion of internet businesses from mass media, an area of investment fully reserved for Filipinos.

By way of background, the 1987 Constitution, under article XVI, section 11(1), prohibited foreign ownership over mass media, saying that it should be 100% Filipino owned. Moreover, the Republic Act (RA) No. 7042, otherwise known as the Foreign Investments Act of 1991, and the 10th Regular FINL provide that, except for recording, no foreign equity is allowed in mass media. When the 1987 Constitution was passed, the internet was not in existence and traditional mass media were limited to print and broadcasting. However, subsequent legislation such as RA No. 7934, known as The Consumer Act, RA No. 9211, known as The Tobacco Regulation Act, as well as the opinions of the Securities and Exchange Commission (SEC), considered the internet as one of the platforms for mass media.

Agustin P Geraldez Jr is an associate of the corporate and special projects department of ACCRA Law Offices.