THE SENATE approved on third and final reading a measure seeking to ease restrictions for foreign retailers, with minimum paid-up capital levels adjusted to afford a measure of protection for small and some medium-sized domestic retailers.
With 20 affirmative votes and no negatives and abstentions, the Senate approved Senate Bill No 1840, which seeks to amend the Retail Trade Liberalization Act of 2000.
Senator Aquilino L. Pimentel III, chairman of the committee on trade and the measure’s sponsor, adopted an amendment proposed by Senate President Pro Tempore Ralph G. Recto increasing the proposed lower minimum paid-up capital of foreign retailers seeking to enter the market.
The final version of the bill sets the minimum paid-up capital at P50 million or around $1 million, with those with more than one physical store required to invest at least P25 million per store.
“That amount protects small (enterprise), it protects a portion of the medium (-sized companies). That’s acceptable to me,” he said during the period of amendments.
“From the old law of $2.5 million to P50 million pesos, that’s the entry minimum paid-up capital to enter the Philippine retail trade market,” he added.
Mr. Recto said the minimum paid-up capital should not be set too low in order to attract quality investors.
“We are liberalizing it but not too low so that the competition will be at the medium level,” he said.
“You want to attract quality and that’s why we suggested that the paid-up capital should be at least P50 million but then they can put up two stores at P25 million, he added.
Senator Risa N. Hontiveros-Baraquel said she was glad the sponsor accepted the proposed amendment, saying the Philippine Retailers Association only wanted the minimum paid-up capital to be cut by half.
“I’m sure that they will be very glad that something close to it has been proposed by the Senate President Pro Tempore, accepted by the sponsor and supported by the senate,” she said.
In an earlier statement Wednesday, before the amendment was introduced, Ms. Baraquel said that it was “unwise” to open up the retail industry to foreign investment during a downturn, noting the potential damage done to companies already struggling in the wake of the pandemic, including small businesses.
Ms. Baraquel said amending the Retail Trade Liberalization Act “would only put Filipino owners of mom-and-pop shops, sari-sari stores, carinderias, and even public market stalls at a disadvantage.”
“Magiging second class citizens ang sarili nating business sector kapag natuloy ang mga pagbabago sa (Our own business sector will become second-class citizens if we amend the) Retail Trade Liberalization Act. Right now, this not our wisest option. Imbes na makabawi at maka-recover ang ating mga negosyante at manininda, ito ang bubulaga sa kanila (Instead of making up for lost business during the recovery, this measure will disrupt our traders and retailers),” she said.
Ms. Baraquel said she does not oppose foreign investment but noted the position taken by the Philippine Retailers Association that micro, small, and medium enterprises (MSMEs) will lose if minimum capital requirements for foreign investors are lowered.
“These amendments will not help Filipinos,” she said.
She also said it is MSMEs “who are actually keeping the country afloat despite being one of the hardest hit by the economic downturn,” should be supported.
“Sa ngayon, napakarami nating mga manggagawa at maliliit na negosyante ang sakop ng sektor ng MSMEs. Unahin natin sila. Bigyan natin sila ng pagkakataong makabangon (The MSME sector includes many small businesses who should be given priority, given a chance to recover). We should provide them with protective shields in the free market, instead of pitting them against deeper pockets,” she said.
In the committee-approved version of Senate Bill 1840, the minimum paid-up capital for foreign retail investors was set to be lowered to $300,000. The bill also originally required retailers with more than one physical store to invest at least $150,000 per store. The bill only covers foreign retailers whose country of origin allows Filipino retailers.
The current law states that enterprises with a minimum paid-up capital of $7.5 million or more may be wholly owned by foreigners, provided that their investment in each store is at least $830,000. Foreign retailers with minimum paid-up capital of $2.5 million but less than $7.5 million cannot be wholly-owned by foreigners in the first two years under the present law.
The bill removes other qualification requirements such as the $250,000 capital per store for enterprises engaged in high-end or luxury products, the five-year track record in retailing and the required five retailing branches.
Amending the retail trade law is among the three bills seeking to ease foreign investment restrictions certified as urgent by President Rodrigo R. Duterte last month.
It is also among the priority measures identified by the Legislative-Executive Development Advisory Council Executive Committee that were targeted for passage by June 2021. — Vann Marlo M. Villegas
