By Genshen L. Espedido
A PRIORITY MEASURE that aims to further open up the retail sector to foreign companies was approved on second reading at the House of Representatives on Wednesday.
House Bill (HB) No. 59 amends Republic Act (RA) No. 8762 or the Retail Trade Liberalization Act of 2000 by lowering the required minimum paid-up capital for foreign retail investors to $200,000 (around P10 million). Under the present law, enterprises with a minimum capital of $2.5 million or more may be fully owned by foreigners.
HB 59 also reduced the required locally manufactured products of foreign retailers to 10% of the aggregate cost of their stock inventory, from the current 30%.
“This bill is a priority measure of Malacañang and has the support of both the DTI (Department of Trade and Industry) and the DOF (Department of Finance). We are of the assumption that it will be passed on 3rd reading by next (week),” Valenzuela Rep. Weslie T. Gatchalian, chairman of the House Committee on Trade and Industry, said in a text message to BusinessWorld.
Mr. Gatchalian in a separate statement said the Retail Trade Liberalization Act had to be amended since it had “failed to meet its objective.”
“Over the course of its 19-year life, only 43 foreign retail investments have been recorded by the DTI (Department of Trade and Industry) creating only 22,000 jobs. Despite opening retail to foreign establishments, the prohibitive minimum capital requirement of $2.5 million prevented foreign retailers from investing in the Philippines. Thus, the expected job generation did not materialize and local goods and services did not become globally competitive because there was a lack of competition,” Mr. Gatchalian said in a statement.
Mr. Gatchalian also defended the lowering of the minimum paid-up capital to $200,000, saying “this amount puts foreign retailers beyond the scope of micro businesses which, according to the DTI, are valued only up to P3 million.”
The approved measure also removes the requirements under RA 8762 for foreign investors to acquire shares of stock of local retailers and for a public stock offering to be conducted by foreign-owned retail companies.
HB 59 also eased qualifications for foreign retailers to enter the Philippines. It removed the current law’s required net worth, number of retailing branches and five-year retailing track record conditions for foreign firms to enter the country’s retail industry.
At the same time, the bill allows 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.”
“These amendments would open up the Philippine retail industry which would result in greater variety of products, more competitive players, inflow of new technology, and more importantly, more jobs for Filipinos,” Tarlac Rep. Victor A. Yap, HB 59’s author, said in the bill’s explanatory note.
The measure is among the bills pushed by the Cabinet economic cluster for approval in the first regular session of the 18th Congress, which closes on June 5.
Counterpart measures in the Senate are still pending at the committee level.