House body eases retail trade rules further

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By Elijah J. C. Tubayan

THE HOUSE of Representatives Committee on Trade and Industry approved on Tuesday a bill reducing the minimum paid-up capital requirement of foreign retailers to engage in business here.

The bill amends Republic Act No. 8762, or the Retail Trade Liberalization Act of 2000, by reducing the minimum paid-up capital requirement of foreign firms engaging in retail trade business to $200,000 from $2.5 million currently.

Although the move has been anticipated by foreign businesses chambers, it is frowned upon by local retailers.

Philippine Retailers Association (PRA) President Paul A. Santos said that the measure removes the protection of micro, small, and medium enterprises (MSMEs) from better-funded foreign counterparts.

“For many Filipinos, retail entrepreneurship is the most accessible path way out of poverty. Famous Philippine brands owe a great deal of their prosperity and success today to a benevolent government policy that protected them of foreign competition,” Mr. Santos said during the hearing.

The PRA asked the committee to revise the minimum threshold to $1.5 million.

“We manifest that the capital requirements be increased to maintain a balance between Filipino entrepreneurs, Filipino retailers, the government and foreign investors,” said Mr. Santos.

Deputy Speaker Arthur C. Yap of Bohol’s 3rd district said there is still room for negotiation to adjust the minimum paid-up capital requirement for foreign retailers as the bill moves to the plenary.

“… Pag umabot ’yan sa second reading sa plenary debates, puwede pa ’yan mapalitan (That provision can still change as the bill moves towards second-reading approval in plenary). But, for now, we can see na reasonable naman ’yung $200,000,” said Mr. Yap in an interview after the hearing.

He said foreign businesses who will come in will not be competing against community sari-sari stores and similarly sized businesses.

However, Nerissa de Jesus, a lawyer with the Philippine Competition Commission’s legal division, told lawmakers in the same hearing that “[a] minimum capital requirement will not be effective in protecting domestic MSME retailers.”

“In fact, maintaining regulatory entry barriers against physical foreign retailers in the form of a capital requirement will do little to insulate MSME retailers from competition with foreign online retailers, with the latter becoming more prominent as the digital market continues to develop,” she said.

Ms. de Jesus added that local MSME retailers even have a competitive advantage versus foreign counterparts in terms of geographical proximity, ability to sell products in smaller volumes and extension of informal credit lines to customers.

American Chamber of Commerce of the Philippines senior adviser John D. Forbes told lawmakers in the hearing: “We are very supportive of the draft substitute bill.”

“I don’t think there is a challenge to micro and small entrepreneurs. It actually levels the playing field for medium enterprises,” he said, noting that since the original law was enacted in 2000, only about 28 foreign retailers have set up shop in the Philippines.

Julian H. Payne, president of the Canadian Chamber of Commerce of the Philippines, also said that foreign retailers will not crowd out locals.

“This is not a zero-sum game that every foreign investor will crowd out the market. The Philippines is the fastest growing economy. The number of small businesses is growing. It’s not a zero-sum game. There’s room for both to share [the market],” he said.

“There would be greater variety of new products, inflow of new technology, expansion of employment for the Philippines. In fact, there should be no minimum investment.”

The bill is part of a broader government effort to further liberalize the investment environment in a bid to boost economic growth and give more people jobs in order to lift them out of poverty.

President Rodrigo R. Duterte issued Memorandum Order No. 16 in 2017, which ordered state agencies to “exert utmost efforts” in reducing foreign investment restrictions.

Malacañang issued the 11th Regular Foreign Investment Negative List in October that, among others, allowed foreigners to take on regular teaching jobs in higher education institutions, except for courses that require graduates to secure licenses, as well as 100% participation of foreigners in wellness centers, Internet businesses, training centers outside the formal education system, adjustment companies, lending companies, financing companies and investment houses.

It also increased to up to 40% allowed foreign participation in contracts for construction and repair of locally funded public works, and private radio communication networks.

The government is also seeking to amend special laws like the 82-year-old Public Service Act in order to open up the telecommunications sector for 100% foreign equity.