Relaxed retail trade law pushed to stimulate foreign investments

Senator Sherwin Gatchalian on Sunday pushed for the passage of a measure that would ease the entry of foreign firms in the retail trade sector.

Gatchalian, chairperson of the Senate committee on economic affairs, is referring to Senate Bill No. 1639, or an Act Amending Republic Act No. 8762, otherwise known as the Retail Trade Liberalization Act.

According to the Gatchalian, the existing equity and capitalization requirements under the Retail Trade Liberalization Law or Republic Act No. 7042 must be lifted in order to reduce the minimum requirements for interested foreign enterprises to engage in the local retail trade.

These amendments, he said, shall be aligned with the foreign investment guidelines stipulated in the Foreign Investments Act, and would also be harmonized with similar regulations observed in other Asian countries.

He said the stringent requirements, along with other barriers, have made the Philippines lag far behind other Asian countries when it comes to drawing foreign direct investments.

“I believe it is high time we rethink the restrictive legal framework that is deterring the inflow of potential investments,” said Gatchalian.

He said the Retail Trade Liberalization Act of 2000 currently requires a minimum paid-up capital of US$2.5 million for a 100 percent foreign ownership of a retail business.

“This serves as an onerous requirement to discourage participation of investors,” he pointed out.

Citing a study of the Department of Trade and Industry-Bureau of Investments (DTI-BOI), the lawmaker noted that only 22 foreign retail firms have invested in the country’s retail sector in the 18 years since the law was passed.

Unlike the Philippines, Gatchalian said countries like Singapore, Indonesia and Cambodia are not imposing minimum capital requirements or limits on foreign equity participation in the retail trade sector.

If passed into law, Gatchalian said the amendments would stimulate market competition and growth that could highly benefit Filipinos through greater job creation and lower prices for quality goods and services available in the market.

“We are easing the process and opening the retail trade market for competition. Greater competition results into more opportunities, more choices and better goods and services offered for our people,” he stressed.

“There is so much to learn from embracing diversity in the marketplace which a protectionist mindset cannot provide,” he further said.