Retail trade measure seen to hurt MSMEs

By Jenina P. Ibañez, Reporter

THE MEASURE that seeks to lower the minimum investment hurdle for foreign retailers to P25 million would likely bring in the competition that could damage many local small businesses, a retailers group said.

Congress approved the Bicameral Conference Committee report on the conflicting provisions of Senate Bill No. 1840 and House Bill No. 59, which amends the 20-year-old Retail Trade Liberalization Act (RTLA). It will be forwarded to Malacañang for President Rodrigo R. Duterte’s signature.

Under the reconciled version, the minimum paid-up capital requirement for foreign retailers is now set at P25 million or around $500,000, with a per store requirement of P10 million. This is lower than existing law’s minimum paid-up requirement for foreign retailers of P125 million or $2.5 million.

“With the small minimum amounts, our MSME (micro-, small-, and medium-sized enterprises), will be the most affected by foreign competition, from foreigners already in the country, and from small informal retailers from outside the country,” Philippine Retailers Association Vice-Chairman Roberto S. Claudio said in an e-mail on Wednesday.

There were 957,620 business enterprises operating in the country in 2020 of which 952,969 or 99.5% are MSMEs, according to the Philippine Statistics Authority (PSA) survey.

Foreign business groups have been supporting changes to the RTLA in a bid to increase foreign direct investment.

The foreign business groups had supported the House version setting a minimum paid-up capital of $200,000 or P10 million, calling the Senate version which set the minimum at $1 million or P50 million an impediment to new foreign direct investment needed amid the global economic downturn.

Mr. Claudio said that P25 million, or the small investment limit, will mean that the economy will not gain substantial foreign investments, especially while the global health crisis is ongoing.

“But a decision has been (made) and we understand that the liberalization bills are ready for signature by the President,” he said.

“While the Philippine Retailers Association has agreed to the removal of the other limitations of the original bill, we continue to emphasize that the P25-million minimum investment is too low to benefit from any meaningful foreign investment and may just create damage to our micro, small and medium enterprises! We hope our economic managers and legislators will achieve the objectives of liberalization legislations.”

House Deputy Minority Leader and Marikina Rep. Stella Luz A. Quimbo, who was part of the Bicameral Conference Committee, expressed optimism the new version of the RTLA will succeed in boosting foreign investments in retail trade.

In a statement, she said the minimum requirement of P10 million per store is “consistent with the objective to protect the MSMEs and to open up medium and large corporations to foreign competition.”

Ms. Quimbo also noted the measure directs the Trade department, Securities and Exchange Commission and National Economic and Development Authority to review the required minimum paid-up capital which was set at P25 million every three years.

“This is to ensure that the threshold upholds the spirit of liberalizing the retail sector,” she said, noting this will help create more jobs and lead to better quality and more affordable products.

Amendments to the RTLA is one of the priority economic measures being pushed by the government, alongside the amendments of the Public Service Act and the Foreign Investments Act. — with inputs from Russell Louis C. Ku