How To Do Business In The Philippines In A Restricted Industry?

By: Noel C Ducusin

This is a follow-up blog post to our initial blog post on whether or not foreigners can do business in the Philippines. If you have not yet read that initial post, you can click this link.

As you will find in the said initial blog post, there are some industries for which foreign participation is either totally restricted, i.e. 0% foreign equity allowed, or partially restricted, i.e. up to 40% foreign equity allowed.

Perhaps, you have concluded from your independent research that the industry in which your company participates is a restricted industry in the Philippines.

What to do now? Should you just skip the opportunity of doing business in the Philippines?

Of course not.

In this article, we will discuss some of the more common permissible workarounds that you can avail of in the event that your particular industry is restricted in the Philippines.

Co-Production Arrangements

In this arrangement, the offshore company and the local entity work together to produce the output for sale.

This is one of the more involved methods. The terms and conditions that govern the relations between the parties will be spelled out in a contract including the revenue sharing component.

Production Sharing Arrangements

In this type of arrangement, it is not necessary for the offshore company to do actual production work. It is sufficient that the offshore company simply provides the raw materials or input with the local entity doing the production.

As in the first example, the terms and conditions of the relationship will be governed by the contract including the revenue sharing component.

Financial Assistance Arrangements

In this method, there is no need for the offshore entity to do any kind of production or give any production input. Only financing or funding is provided in exchange for a revenue share.

This is the least involved of all the methods.

However, depending on the local economic situation, there will be times that it will be much easier for the local entity to secure local funding either via local loans or receivables factoring / discounting. This could potentially remove the opportunity for the offshore company to participate or substantially reduce its bargaining power in terms of revenue share allocation.

One way to make offshore funding more attractive is to provide funding not by way of a loan, which must be paid back regardless of whether or not the products are sold, but instead by way of an arrangement that the funding is returned via a revenue share if and only if the products are sold. This substantially lowers the risk of the local entity and makes such offshore funding very attractive.

Technical Assistance Arrangements

In the arrangement, there is no need to do any kind of production, deliver any raw materials or input, or even give financing.

Here, only technical know-how is contributed in exchange for the revenue share.

An analogous situation is when an offshore intellectual property owner licenses the use of intellectual property to a local entity in exchange for royalties.

While this process may be a little bit more involved, the only substantial thing that this expended is time / man-hours.

This can be more advantageous compared to mere financial arrangements mainly because financial arrangements are generic and have a lot of competition from different funding sources the decision is mostly based on the lowest cost of finance.

Technical know-how, on the other hand, can be quite scarce. This leads results in greater value per unit man-hour and precludes easy competition from others.

Export Sale

You might be wondering why the export sale is included in this list since we are discussing ways within which to do business in the Philippines.

The reality on the ground is that many offshore companies that set up shop in the Philippines do so to benefit from the cost-effective and English-speaking local manpower to service offshore clients.

Common examples of these would be customer service representatives, software engineers, architects or engineers for drafting projects, accountants for finance backroom operations, financial analysts, legal and virtual assistants, as well as technical personnel for analytics all of whom service offshore clients via the internet.

In the case of these onshore export companies, the sale is not made domestically and instead done internationally.

Under the present foreign investment negative list, foreigners may own up to 100% of these export companies even though located inside the Philippines.

Better yet, there is no minimum capital requirement for these export companies.

The above are the most common methods to permissively and legally bypass the ownership restrictions indicated in the Foreign Investment Negative List.

Thus, as long as you're willing to do business in the Philippines using the above-mentioned workarounds, you need not lose the opportunity of doing so.

We will address in a separate blog article how to vet/perform due diligence on potential local partners.

We hope that this has been helpful and delivered in a user-friendly manner.

If you would like to comment or make suggestions on additional or related topics to cover, or suggest future related content, please consider becoming a member of our community.

We are presently producing an online course on how foreigners can do business in the Philippines which will include this topic. We will keep you posted on the status of this course and let you know when the course nears the launch date. Members of our community and early enrollees in the course will be entitled to discounts.

 
 
 
 

About the Author

Atty. Noel C. Ducusin is the Director for M&A at DoingBusinessPH, where he works with offshore investors—primarily from Japan, Europe, the US, and Southeast Asia—seeking to enter the Philippine market through acquisitions, joint ventures, and strategic partnerships. He also advises local companies, family offices, and high-net-worth individuals on originating and executing transactions, including preparing businesses to be investment-ready through reverse due diligence.

His work spans the full M&A cycle: identifying counterparties, managing due diligence, leading negotiations, structuring transactions, arranging financing, and coordinating with trusted vendors such as banks, suppliers, and contractors. For startups and new ventures, he helps design fundraising-ready structures and connects them with investors, making DoingBusinessPH a natural bridge between global capital and local opportunity.

Beyond transactions, Noel and his team provide training and digital resources that demystify Philippine business and regulatory frameworks, giving foreign investors the confidence to navigate the local landscape.

A lawyer by training with a degree in Business Management, Noel is also Senior Partner at N. Ducusin & Partners Law Offices, which specializes in Mergers & Acquisitions, Investments, Cross-Border Regulatory, and Corporate Advisory. Over the years, he has developed deep, practical expertise in corporate finance, company valuation, and financial modeling through hands-on involvement as part of the deal team in live transactions. This combination of legal and financial experience allows him to bridge both perspectives seamlessly, ensuring that deals are not only executed but positioned for long-term success.

He is always looking forward to comparing notes with investors, startups, and vendors to explore where his clients’ mandates align with theirs and to uncover potential opportunities and collaborations that benefit both sides. Please feel free to connect with him to continue the conversation and explore where your goals and his clients’ interests may intersect.

His mission for this blog is to help foreign investors, business owners, and managers by breaking down complex legal concepts and dense technical material into simple, straightforward, and actionable insights for better business decisions. Articles and briefs are written in plain everyday language, without jargon or unnecessary academic writing—the simpler and more practical, the better.

“Everything should be made as simple as possible, but no simpler.” – Albert Einstein

 
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Domestic vs Export Sale Regulatory Differences

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