Retailers warned the government that the planned further liberalization of the retail sector—as embodied in a forthcoming executive order (EO) and a proposed bill—will kill the country’s small and medium enterprises (SMEs), as they will be left to compete for mere “bread crumbs.”
Samie Lim, chairman emeritus of the Philippine Retailers Association (PRA), said House Bill (HB) 4595, in particular, will “literally” sell the SME sector to foreigners.
HB 4595 intends to amend crucial provisions of Republic Act 8762, or the Retail Trade Liberalization Act, in a bid to improve the country’s investment climate. Aside from this proposed measure, the government also wants to ease the retail-industry barriers for foreigners on the Foreign Investment Negative List through an EO.
HB 4595, authored by Rep. Arthur C. Yap of the Third District of Bohol, will remove barriers to foreign investment by erasing the equity and capitalization requirements under the law. In his explanatory note, Yap said these requirements hindered the country from taking advantage of the fruits of liberalization.
“Currently, the law has a $2.5-million capital requirement before a foreign entity may 100-percent own a retail establishment. On the other hand, countries like Indonesia and Singapore allow FDI [foreign direct investment] in the retail-trade sector without
setting minimum capital requirements and without limits on foreign equity participation,”
“These requirements, together with other barriers, have resulted in the Philippines ranking dead last in terms of having a regulatory regime favorable to foreign investment, behind Singapore, Vietnam, Malaysia, Thailand and Indonesia,” he added. A totally open retail industry, Yap argued, will not only drive investments growth but also job creation.
However, Lim disagreed. He believes HB 4595 will kill the SME sector, which is just in its developing stage. With this, he said retailers will lobby against the government’s plan to totally liberalize the retail industry. What they can only concede is to lower the paid-up capital requirement to at least $2 million.
“That is the only concession we are willing to give because the moral is very simple: If the government is after investments, we should focus on investment amount. For the foreign chambers to say that we should liberalize down to $200,000, that is petty cash to foreign retailers,” Lim told the BusinessMirror.
“Whereas the Congress, I would like them: Are they here to look after the interest of Filipinos or of the foreigners? Diretsuhan na lang tayo [Let us be straightforward]. Now, what they are saying is, we let them all come and then let [foreign retailers] compete with our SMEs? That is like leaving bread crumbs to the Filipinos, [while] the foreigners take all the bread,” he added.
If the government is really bent on attracting foreign investors, the PRA chairman emeritus said it should just allow the “big guys” to compete with themselves because they can “take care of themselves.” However, further liberalization of the retail sector only means another obstruction for small businesses to develop, he added.
“I think this [measure] will wipe out the middle class, and we will go back to all small enterprises. The bill will, in effect, kill the manufacturing sector, and, in effect, will create unemployment,” Lim said.
The Duterte administration is keen on lifting existing restrictions on foreign participation in certain industries. The plan is to liberalize the economy to further attract foreign investors to the country.
Yap said the trade department and antitrust regulator agreed with him that the trade-liberalization law, ironically, is biased against foreign investors. “The DTI [Department of Trade and Industry] BOI [Board of Investments] and the PCC [Philippine Competition Commission], along with the joint foreign chambers, are all on the same page, stating that Philippine retail laws are too restrictive and impede the growth of the economy and, [if] left unchanged, work against the interests of millions of Philippine consumers,” Yap told the BusinessMirror.
“Innovation and technology is disrupting the economy. We must invite companies that have something new to offer, that are imaginative and out of the box in product offerings to come and set up shop in the Philippines. This will make the Philippines more attractive to tourists and offer Philippine consumers better-priced quality goods. This will not happen if we continue to have restrictive investments laws,” he added.
For the Bohol representative, the retail-liberalization law has yet to fulfill its stated objectives when it was enacted into law in 2000. “Clearly, the law’s intention of inviting retail trade investors, creating jobs and making goods more price and quality competitive has not been realized,” Yap said.
With Jovee Marie N. dela Cruz