House panel backs retail trade bill for plenary okay

The House Committee on Trade and Industry on Tuesday endorsed for plenary approval the chamber’s priority measure amending the Retail Trade Liberalization Act to remove the barriers to foreign investments in the local retail sector.

Valenzuela First District Rep. Weslie Gatchalian, the panel chairman, said the committee invoked House Rule 10, Section 48, or the “one-day hearing only” rule in approving the consolidated bill. The rule covers all bills that have been approved on third reading during the previous Congress.

Gatchalian said the bill amending the Republic Act (RA) 8762, or the Retail Trade Liberalization Act, will be transmitted to the plenary for another round of deliberations.

The lawmaker said the bill seeks to further open up the Philippine retail trade industry. He said easing barriers to investing in the sector will result in a greater variety of products, inflow of new technology and the availability of more jobs. 

The bill allows foreign-owned partnership, associations and corporations formed and organized under the laws of the Philippines, upon registration with Securities and Exchange Commission and the Department of Trade and Industry (DTI), 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 the Philippine peso of $200,000.

The measure removes the requirement under RA 8762 for foreign investors to acquire shares of stock of local retailers. However, it deletes the requirement for the public offering of shares of stock by foreign-owned retail enterprises.

The bill also eliminates the required net work, number of branches and track record conditions for foreign retailers to engage in retail trade in the Philippines.

Under the measure, 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 reduces the required locally manufactured products carried by foreign retailers to 10 percent, from 30 percent of the total cost of their stock inventory.

Bill champions

House Ways and Means Chairman Joey Sarte Salceda, one of the authors of the bill, said amendments to RA 8762 will help boost the foreign direct investment (FDI) performance of the Philippines.

In a position paper, Trade Undersecretary Ireneo Vizmonte said the DTI supports the immediate passage of the bill as it will boost foreign investments in the Philippine retail industry.

Vizmonte, citing data on FDI inflows into the retail sector, noted the initial success of the passage of RA 8762, with investments surging to $31.3 million in 2000 from a zero base the previous year. 

However, he said inflows fell drastically to $1.8 million the following year.

“Reforms in the Philippine retail sector are timely given the significant changes in the investment pattern in the Association of Southeast Asian Nations [Asean] with wholesale and retail trade receiving the largest FDI at $38.9 billion in 2017,” said Vizmonte.

“This sharp growth of 75 percent from $22.2 billion allowed this industry to overtake traditional main recipients of FDI, namely finance and manufacturing, which recorded investments of $31.6 billion and $15.6 billion, respectively,” he added.

Vizmonte noted that the current foreign equity restrictions on retail trade have contributed to the unfavorable investment environment and effectivity shielded domestic enterprises from competition. 

“Efforts at further liberalizing this sector would not only encourage greater investments into the country but also create a competitive environment that encourages continuous innovation,” he said.

In line with the bill’s proposal to set a lower minimum paid-up capital requirement for retail enterprises at $200,000, Vizmonte said the department recommends a higher threshold of $300,000.

Vizmonte said the DTI is proposing the promotion of locally manufactured products by requiring that at least 20 percent of the aggregate cost of the stock inventory of foreign retailers is made in the Philippines. At least 10 percent of Philippine goods in their inventory, he said, should be sourced from micro, small and medium enterprises (MSMEs).

Objectors

The Philippine Retailers Association (PRA) registered its opposition to the bill in a position paper.

“If [the bill] comes into fruition, the proposed amendments will upset a careful balance first stuck 19 years ago between the government, the economy, foreign investors, consumers and especially Filipino entrepreneurs,” said the PRA. “In other words, [the proposal] intends to strip the protection extended by law to MSMEs against foreign competition, of which many are unprepared against,” it added.

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