Removing barriers to foreign investors’ entry in retail trade will boost foreign direct investments (FDI) in the country, Sen. Sherwin T. Gatchalian said over the weekend, adding the move is also expected to spur a “more progressive investment climate” in the Philippines.
In filing Senate Bill (SB) 1639, Gatchalian proposes to remove existing equity and capitalization requirements under the retail trade liberalization law, or Republic Act (RA) 7042 reducing the minimum requirements for interested foreign enterprises to engage in the local retail trade.
Gatchalian, who chairs the Senate Economic Affairs Committee, however, assures that “these amendments shall be aligned with the foreign-investment guidelines stipulated in the Foreign Investments Act, and will also be harmonized with similar regulations observed in other Asian countries.”
“These requirements, along with other barriers, have made us lag far behind our Asian peers when it comes to FDI. I believe it is high time we rethink the restrictive legal framwork that is deterring the inflow of potential investments,” he added.
The senator pointed out that the Retail Trade Liberalization Act of 2000 currently requires a minimum paid-up capital of $2.5 million for a 100-percent foreign ownership of a retail business, noting that this serves as “an onerous requirement to discourage participation of investors.”
Citing data from the Department of Trade and Industry-Bureau of Investments, Gatchalian recalls that in the 18 past years following passage of the existing retail trade law, “only 22 foreign retail firms have invested in the country’s retail sector.”
He added that, unlike the Philippines, Singapore, Indonesia and Cambodia impose no minimum capital requirements or limits on foreign equity participation in the retail-trade sector.
Once SB 1639 is enacted into law, Gatchalian foresees it would “stimulate market competition and growth that could highly benefit Filipinos through greater job creation and lower prices for quality goods and services available in the market.”
The senator explains the proposed law, likewise,aims to ease the process and opening the retail-trade market for competition, adding that “greater competition results into more opportunities, more choices and better goods and services offered for our people.”
“There is so much to learn from embracing diversity in the marketplace, which a protectionist mind-set cannot provide,” Gatchalian said.
Image credits: Alysa Salen