Foreign chambers: Senate bill on retail trade liberalization ‘still protectionist’

While the Senate approved lower capital requirements for foreign retailers, the Joint Foreign Chambers (JFC) said this showed a “still-protectionist” stance as opposed to the country’s neighbors in Southeast Asia.

The foreign chambers, in a news statement issued on Wednesday, said that the Senate’s version of retail trade liberalization may prevent new foreign direct investments in the local retail sector as the capital requirements, albeit lower, remain high in the region.

Last week, the senators approved on third and final reading the Senate Bill 1840. This lowers the required capitalization to $1 million or P50 million from the current $2.5 million. Earlier, the proposed amount for the measure was $300,000.

“This [$1 million] still-protectionist level is far higher than in Cambodia, Indonesia, Singapore, Vietnam, and others, who also have large numbers of MSMEs [micro, small and medium enterprises] like the Philippines,” the JFC said.

With this, the JFC said they sent a letter to the House and Senate expressing support for the version pegging the capital requirement to $200,000 for foreign companies, which is covered in the approved House Bill 59.

The signatories of the letter are American Chamber of Commerce of the Philippines, Australian-New Zealand Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce of the Philippines and Philippine Association of Multinational Companies Regional Headquarters Inc.

Still, the JFC threw its support behind the Senate version on removal of requirements for inward remittance and pre-qualification; and the revision on documentation proving paid-in capital and promotion of locally made products.

“We encourage legislators to look beyond the current crisis and consider the major impact this amendment can contribute to make the Philippine economy quickly recover post-pandemic,” the business groups said.

“Little has changed in foreign ownership in the Philippine retail sector since over 20 years ago when the Retail Trade Liberalization Act [RA 8762] was passed in 2000 to amend the Retail Trade Act of 1954, which for 46 years absolutely prohibited foreign nationals from participating in domestic retail trade,” they added.

The foreign chambers said that RA 8762, which sets minimum capitalization for foreign retailers at $2.5 million, has been tagged as “highly restrictive” by the World Bank and Organization for Economic Cooperation and Development. Since 2000, JFC noted that only an average of two foreign retailers invested in the country annually.

More foreign retailers investing in the Philippines will mean job creations not only for the said sector but for the support industries as well, the business groups said. These include advertising, agriculture, construction, design, logistics, media, telecommunications and wholesale retail.

In addition, the foreign chambers said that additional foreign retail players would create more competition in the local industry. This is beneficial for the Filipino consumers, they said, noting that the fast-growing middle class can buy higher quality and more variety of goods at lower cost.

“Foreign retailers can introduce better technologies for their logistics, inventory management, sales, accounting and other business operations,” the JFC added.

Previously, Philippine Chamber of Commerce and Industry Chairman Alegria Limjoco expressed some concerns over the amendments to retail trade law. Lowering the capital requirements for foreign firms will hurt the local micro and small businesses, Limjoco said, pointing to competition.

“I want to Filipino micro and small retailers to thrive and grow,” Limjoco, who is also the vice chairman for Philippine Franchise Association and Philippine Retailers Association, told the BusinessMirror earlier.

The amendments to the Retail Trade Liberalization Act, along with Public Service Act and Foreign Investments Act, were certified as urgent in April.

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