This content is from: Local Insights

Philippines: Foreign participation in construction/ property

The Philippine government is aggressively advancing the acceleration of infrastructure and development of industries that will yield robust growth across the Philippines. Infrastructure projects are among the top priorities of the government with public spending on infrastructure projects targeted to reach between PHP8 trillion and PHP9 trillion ($154 billion to $173 billion) between 2017 and 2022.

The existing administration's effort to address the infrastructure gap is encapsulated in its 'Build, Build, Build' programme. Under this initiative, the government intends to build, among other things, roads, bridges, railways, urban mass transport, airports, and seaports nationwide. It is envisioned this will result in a more efficient movement of goods and people, an increase in the productive capacity of the economy, and sustained inclusive growth throughout the country. The government's continued focus on prioritising infrastructure development will allow the Philippines to continue in its position as the fastest growing economy in Asia.

Together with the infusion of funds for infrastructure, foreigners have expressed strong interest in participating in the Philippine construction industry. The Philippine Contractors Accreditation Board (PCAB) has introduced the quadruple A category (AAAA) licence, a new category of the regular licence, which is issued to contractors with more than 40% foreign equity. A 100% foreign-owned domestic construction corporation with at least PHP1 billion in paid-in equity is eligible to apply for an AAAA category licence.

The PCAB also issues special licences to foreign contractors for government infrastructure projects: 1) that are foreign-financed or internationally funded with international bidding; 2) where the participation of foreign contractors is allowed under the terms of a bilateral agreement between the Philippine government and the foreign government or an international financing institution; or 3) that are implemented in accordance with Republic Act number 7718, or the Build-Operate-Transfer Law, as amended.

Foreign contractors can also enter into joint ventures or consortiums with Filipino contractors in order to benefit from the knowledge of the local industry and to share and allocate risks. The PCAB issues special licences to joint ventures or consortiums for a single, specific project or undertaking.

For property development projects, foreigners that wish to own land in the Philippines must do so in partnership with a Filipino or a qualified Philippine entity. Land ownership is restricted to Filipinos or corporations that are at least 60% Filipino-owned. Foreigners may generally lease private land for 25 years, renewable for another 25 years. If the foreigner is investing in the Philippines, it may lease private land for up to 75 years (50 years, renewable for another 25 years).

This article is intended for informational purposes only and should not be considered legal advice.

Sylvette Y TankiangMaria Concepcion P Simundac

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial