Bicam approves P25-M foreign retailer’s minimum investment

Published September 1, 2021, 5:47 PM

by Bernie Cahiles-Magkilat


The bicameral body in Congress has approved the amended minimum investment hurdle for foreign retailer at P25 million with per store minimum of P10 million, industry sources said.

The amended Retail Trade Liberalization minimum investment hurdle for foreign retailers is up for formal approval of Congress before signing by President Duterte. Amendment to the 20-year old Retail Trade Liberalization Act is among the priority economic reform bills of the Duterte administration. It is aimed at attracting higher foreign direct investments and creating more jobs.

Earlier, the Senate approved an investment hurdle of P50 million while the House agreed for a lower P10 million minimum investment requirement for foreign retailers. The Philippine Retailers Association (PRA) said the P25 million minimum capital requirement at the bicam was seen as a compromise by both houses.

“With the present economic realities, this is not the right time to implement this,” protested

Samie Lim, co-founder and chairman emeritus of the Philippine Franchising Association (PFA) and the Philippine Retailers Association (PRA).

PFA Founder Dr. Samie Lim (Photo credit: http://www.pfa.org.ph/)

Aside from the legitimate small and micro enterprises that will be affected, Lim, said the smaller medium size retailers will also be most affected. This is because, these retailers have to compete now with new foreign retailers which are equipped with efficient lower cost supply chain and government support.

They will also compete with the other sectors in the retailing industry that are not paying taxes.

For instance, he cited, the underground micro small retailers who do not pay the right taxes and wages. In addition, foreign e-commerce sites who do not even pay for rent, taxes/duties/VAT.

Local small and medium-sized retailers will have to face these foreign e-commerce sites that enjoy all the efficiencies of buying and selling from foreign suppliers.

In addition, the small and medium retailers will have to slug it out with large local retail chains, which have adopted all the modern tools and best practices of modern retailing.

Lim said Filipino retailers still “cannot accept the ‘million peso’ reasons/ actions of some of our lawmakers who pushed for the further opening up of the retail trade.”

The unemployment in both the retail sector and the manufacturing sector will wipe out whatever gains we have made in the past decades.

The current Retail Trade Liberalization Act (RA8762) was passed in 2000 to amend the Retail Trade Act of 1954, which for 46 years absolutely prohibited foreign nationals from participating in domestic retail trade.

RA 8762 was enacted to allow foreign investors to own domestic retail enterprises with a minimum capitalization of $2.5 million. Deemed much higher than ASEAN members, foreign retailers stayed away.

The move to further reduce the investment requirement for foreign retailers is meant to usher in more foreign direct investments and create jobs. The current law was seen as ineffective in attracting foreign retailers.

Since 2000, only an average of two foreign retailers per year, have invested in the Philippines.

Foreign business chambers have pointed out that little has changed in foreign ownership in the Philippine retail sector since over 20 years ago when the Retail Trade Liberalization Act (RA 8762) was passed.

The Joint Foreign Chambers have strongly batted for further liberalization of the domestic retail trade stressing that the entry of more foreign retail investors will create jobs at every stage of the retail
process as well as in firms servicing the retail sector.

“One new retail job is not just the employees whom customers see in a store or restaurant. These are the tip of the retail
iceberg; the hidden part includes jobs in advertising, agriculture, construction, design, logistics, media, telecommunications, and wholesale retail, among others,” JFC said in a statement.

In other words, the foreign businessmen said, foreign investment in retail cascades through the economy.

“More foreign retail players create more competition, which is good for the Filipino consumer, especially the fast-growing middle class, who can purchase higher quality and more variety of goods at lower cost. Foreign retailers can introduce better technologies for their logistics, inventory management, sales, accounting, and other
business operations,” JFC said.

 
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