A Senate bill relaxing the investment limits multinational retailers drew mixed reactions from local and foreign businesses.
The Senate approved on May 19, 2021 Senate Bill No. 1840 or An Act Amending the Retail Liberalization Act of 2000 increasing the minimum investment for foreign retailer to enter the Philippine market from $300,000 (P15 million) to $1 million (P50 million) with the provision that each store will have a $500,000 (P 25,000,000) minimum investment. The House version 9057 approved in 2019 set the minimum paid up capital at $200,000 from the present $2.5 million for foreign-owned retail entities. The bill also removed the minimum investment requirement of $830,000 per store.
Local retailers have expressed hope the House of Representatives will align its version of the amendments to the Retail Liberalization Law to that of the Senate which adopted higher thresholds.
“The House should now appreciate that their version is too low that it will encroach into MSMEs (micro, small and medium enterprises) all over the country,” said Roberto Claudio, vice chairman of the Philippine Retailers Association (PRA).
With the approval of SB 1840, PRA welcomes the foreign investments without sacrificing our MSMEs,” said Claudio.
He said MSMEs which represent 96 percent of registered businesses in the Philippines will be the biggest beneficiary to this amendment of the law.
But the Joint Foreign Chambers (JFC) in a separate statement said the $1-million capitalization restriction in the approved Senate version poses a major impediment to new foreign direct investments in retail during a global recession.
JFC said the $1-million still-protectionist level is far higher than in Cambodia, Indonesia, Singapore, Vietnam, and others, which also have large numbers of MSMEs like the Philippines.
The group cited Indonesia which has 5 million retail firms but without such a high barrier to foreign retail investors.
JFC had supported the House version which was certified urgent by President Duterte.
“We encourage legislators to look beyond the current crisis and consider the major impact this amendment can contribute to make the Philippine economy quickly recover post-pandemic, “ JFC said in a letter to Congress.
It added 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. In other words, foreign investment in retail cascades through the economy.,” JFC said.
It said 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.
But the JFC expressed support for the Senate version on the deletion of requirements for inward remittance and pre-qualification; and, the amendments on documentation to prove paid-in capital and promotion of locally manufactured products. These are all expected to lower barriers to entry of foreign retailers.
The other JFC proposed amendments were on the per store requirement of $100,000, reciprocity and penalty provisions. – Irma Isip
