Jovee Marie de la Cruz | BusinessMirror | November 28, 2019
An economist-lawmaker on Wednesday said opening the retail trade sector to foreign competition through passage of the amendments of Retail Trade Liberalization Act will lower the prices for Filipino consumers.
In a news conference, Marikina Rep. Stella Luz Quimbo said competition in the retail sector is needed to broaden consumers’ choices.
“Let us embrace competition particularly in the retail sector as this will discipline the huge retail firms and conglomerates,” she said.
On Tuesday, the House started plenary deliberations on House Bill 59 or the proposed amendments to Republic Act 8762 (Retail Trade Liberalization Act) to remove the barriers to foreign investments in the local retail sector.
“Despite a law that was passed in 2000 to liberalize retail trade, in the last 19 years, only 43 foreign retail investments have been recorded. Their investments have generated approximately 22,000 jobs, equivalent to only 0.6 percent of the total jobs generated in wholesale and retail from the time liberalization was enacted,” Quimbo said.
PRA against bill
The Philippine Retailers Association (PRA) is against the bill.
“If it comes intro fruition, however, the proposed amendments will instead upset a careful balance first struck 19 years ago between government, the economy, foreign investors, consumers and especially Filipino entrepreneurs,” said the PRA in a position paper submitted to the House Committee on Trade and Industry.
“In other words, [the proposal] intends to strip the protection extended by law to micro, small and medium sized retail enterprises against foreign competition, which many are unprepared against,” it added.
The amendatory bill opens up the Philippine retail industry, resulting in greater variety of products, more choices of goods for consumers, inflow of new technology and employment of more Filipinos.
The bill allows foreign-owned partnerships, associations and corporations formed and organized under the laws of the Philippines, upon registration with Securities and Exchange Commission (SEC) and the Department of Trade and Industry, or in the case of foreign-owned single proprietorships, with the DTI, to engage or investment in the retail trade business with a minimum paid-up capital of the equivalent in Philippine peso of $200,000.
The measure removes RA 8762’s requirement for foreign investors acquiring shares of stock of local retailers.
It also deletes the requirement under RA 8762 for public offering of shares of stock by foreign-owned retail enterprises. The bill eliminates the required net worth, number of retailing branches and retailing track record conditions for foreign retailers to engage in retail trade in the Philippines.
It permits only nationals from, or judicial entities formed or incorporated in countries which allow the entry of Filipino retailers, to engage in retail trade in the Philippines.
The bill also reduces the required locally manufactured products carried by foreign retailers—from 30 percent to 10 percent of the aggregate cost of their stock inventory.
“One important obstacle is the substantial minimum paid-up capital requirement. Currently, a foreign entity that wishes to participate in our retail markets will have to put up $2.5 million in paid-up capital plus a minimum investment of $830,000 per retail store,” Quimbo said.
“This is large, especially in comparison with our Asean neighbors. For instance, the paid-up capital requirement for foreign corporations is only $66,300 in Thailand and a meager $10,000 in Vietnam, while Brunei has no such requirement,” she added.
According to Quimbo, the proposed threshold of $200,000 balances the need to be competitive in the Asean region and at the same time, to continue to protect micro and small establishments from foreign competition.
“Based on PSA data, only medium and large establishments would be directly affected by increased foreign competition under these amendments,” she said. This makes up less than 1 percent of all establishments that will possibly face stiffer competition from foreign retail firms, she said.
With the anticipated competi-tion, Quimbo urged the DTI to formulate and implement a road map for the retail sector.
She said the DTI must identify retail market niches where possibly disenfranchised retail firms could redeploy their labor and capital. “Our government must also ensure that both skills training and credit are made available for purposes of helping local retail firms re-shape their businesses, so they can be fully capacitated to face growing international competition,” she added.
She also urged other government agencies to ensure that existing anti-competitive structures in the retail sector be dismantled. For his part, House Committee on Trade and Industry Chairman Rep. Weslie Gatchalian, principal sponsor of the bill, said the Philippines’s wholesale and retail trade industry is one of the most important sectors of the Philippine economy.