P15-B worth of foreign retailers’ projects seek DTI registration

Published June 23, 2021, 4:08 PM

by Bernie Cahiles-Magkilat

Some P15-billion worth of investments from foreign retailers are seeking registration with the Department of Trade and Industry (DTI), but the potential foreign direct investment (FDI) inflow could be multiplied once amendments to the Retail Trade Liberalization Act (RTLA) is passed.

Senator Aquilino Martin “Koko” Pimentel III, chair of the Senator committee on trade, commerce and entrepreneurship, cited the DTI figure at the virtual “Unlocking the Economy to Create Jobs and Investments” forum of the European Chamber of Commerce of the Philippines to respond to question if they have a target FDI amount from foreign retailers if the RTLA amendment is passed.

Senator Aquilino Martin “Koko” Pimentel III

Pimentel replied that they were not really setting any FDI target in the liberalization of the domestic retail trade, but said “DTI gave us also an idea of the pending applications under existing law.”

The senator believes these pending applications under the more stringent existing law can be “multiplied a couple of times over” under an amended RTLA, which was enacted in 2000 to liberalize the domestic retail industry.

Pimentel cited the proposed two levels of liberalization in the current RTLA law in the Senate Bill No. 1840.

First, the bill seeks to lower the capitalization requirement from the current $2.5 million (P125 million) to $1 million (P50 million) and the reduction of the first store capital requirement of P41.5 million ($830,000) under the existing law to P25 million.

The second level of liberalization in the bill is the removal of the retail exclusivity to Filipinos because the rule now is that below the threshold amount, retail trade is reserved to 100 percent Filipino equity, 0 percent foreign equity.

But under the proposed amendment, foreign retailers are going to be allowed up to 40 percent equity for projects falling below the threshold amount.

However, Pimentel, who once served as Senate President just like his late father Senator Nene Pimentel, said that while the first bicameral meeting with the Lower House last May 31 was able to reconcile their two versions, both Houses could not yet agree on one crucial amendment on the threshold amount of investments.

“I am on track on having such a measure but am aware that not everybody will be happy with the final product because we are talking about threshold amounts which can legitimately and honestly differ as to what is the best amount, but still it is towards liberalizing the said industry,” he said.

This is because the RTLA House Bill version calls for dramatic cut in the capitalization requirement of only $200,000 as against $1 million in the Senate version.

Pimentel, who topped the 1990 BAR exam, said he is reaching out to his colleagues in the Lower House panel if they are available to continue bilateral meetings during this congressional break.

He, however, expressed confidence to be able to finish the bicameral meetings in August this year because all issues have been agreed on except the threshold amounts that still need to be harmonized and tackled.

Meantime, other proposed salient features in the RTLA amendments include the removal of most of the pre qualification and other requirements in the current law, except the reciprocity provision, but event hat has a very liberal interpretation that for as long as the country of the national who wants to engage in retail trade here in the Philippines does not prohibit a Filipino from engaging in retail trade in his own country, then that is already, that is already reciprocity.

Another proposed amendment is a review of the minimum paid up capital every three years. The Senate Bill also inserted a provision on labor policy upon the insistence of Senator Joel Villanueva that employment of foreign nationals shall be in accordance with the provisions and requirements of the labor code of the Philippines on the determination of non availability of competent, able and willing Filipinos.

The bill also seeks the promotion of locally manufactured products in these foreign owned retail stores is encouraged.

Lastly, there have been changes as to the penalties for violating the law, but Pimentel stressed that the overall objective is to make these “penalties lighter, because the purpose of the law is not really to punish it is to create jobs, among the other objectives.”