Mr. Felix N. Opena

October 28, 2003 SEC OPINION NO. 53-03 Mr. Felix N. Opena "K" LINE Maritime Training Corporation ,K-Line Building, 1631 San Marcelino Street, Malate, Manila, Philippines S i r : This refers to your letter dated July 10, 2003 inquiring whether or not aliens are allowed to invest up to 100% equity in a corporation engaged in business as a maritime training center. Please be advised that under RA 7042, otherwise known as the "Foreign Investments Act", foreigners are allowed to invest up to 100% of the equity of a domestic enterprise unless otherwise restricted by the Constitution and other pertinent laws. These constitutional and statutory restrictions on allowable foreign equity are enumerated in what is known as the "Foreign Investments Negative List", updated from time to time by the National Economic and Development Authority (NEDA). Under the said list, foreigners can invest in a partly-nationalized area of activity to the extent of forty percent (40%) of its outstanding capital stock unless further limited to a smaller percentage of participation by existing laws and the provisions of the Act. While it is true that a maritime training agency is not specifically mentioned in the negative list, foreign equity in such an enterprise cannot exceed the maximum allowable foreign equity in a partly-nationalized industry because it is covered by the provisions of the Education Act, which limits alien participation in educational institutions to forty percent (40%). Contrary to your allegation, a maritime training center is covered by the provisions of the Education Act, because it provides "skills development" training in a given occupational area and non-degree programs leading to one, two or three-year certificates in preparation for middle-level occupations under the supervision of the Technical Education and Skills Development Authority (TESDA). HSIaAT Notwithstanding the fact that a maritime training center does not require authorization from the Department of Education Culture and Sports (DECS), it is still considered as an "educational institution" because the law does not limit the coverage of the term exclusively to those entities under the supervision of the DECS. In fact, under Section 27 (B) of RA 8424, otherwise known as the Tax Reform Act of 1997, a "proprietary educational institution" is any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education, Culture and Sports (DECS), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations. Considering that a maritime training center provides its trainees with systematic learning opportunities to acquire or upgrade their ability and knowledge required as qualification for a range of jobs in the maritime industry; and for which it issues certificates of completion of maritime training programs, it can be considered as a "Skills Development Center" under the supervision of the TESDA and governed by the provisions of the Education Act. Consequently, foreign ownership in an enterprise such as a marine training center cannot exceed the forty percent (40%) maximum allowable equity for educational institutions. Very truly yours, (SGD.) RUSSELL I. ILDESA Officer-In-Charge Office of the General Counsel