Lopez favors lower capital requirement for foreign retailers

Trade and Industry Secretary Ramon M. Lopez has reconsidered his earlier position against retail trade liberalization as he now favors plan to lower the required minimum capital for foreign retailers from $2.5 million to $200,000 to further allow more investors in the country.

Lopez said that upon further study, he realized that the proposal will not impact so much on the local small and medium enterprises (MSMEs), but in fact create more market and sourcing opportunities for them.

Retail Trade used to be strictly reserved to Filipinos only, but this was relaxed under Republic Act No. 8762 or the Retail Trade Liberalization Act of 2000 which allows foreign retailers to enter into the country provided they meet the minimum capital requirement.

Foreign retailers, however, have come into the country but in joint venture or brought in as franchise.

“Since these retailers are already here but are brought in through franchise, they may be encouraged to invest here on their own because if there is no franchise fee the cost of expanding here may become cheaper,” said Lopez.

Lopez further said that the local SMEs are already competing head on with these foreign retailers.

“I believe there will be more choices and more avenues for SMEs to sell through,” he said.

On top of that, he believes that these foreign retailers will open more opportunities for local sourcing because once they are here they will definitely get supply from local SMEs. One thing, he said, they will have to source local service providers.

“What is important is there will be more retailers to come into the country. In the end, their operation will definitely create jobs, income and new investment inflows,” he said.

Earlier, SocioEconomic Planning Secretary Ernesto Pernia said this will form part of the new Foreign Investment Negative List, but Lopez said that even if the government can come up with an Executive Order for the new list, there is still a need to amend the law. The revised FINL, which is expected to be released by the government by year-end, seeks to shorten the list of investment areas or activities reserved solely for Filipinos.

He, however, said this is not still a priority because it needs a revision in the law. “No matter what, this is an indication that we are willing to liberalize to allow more foreign investors,” Lopez said.