‘The name of the game is survival’

retail sector’s performance in the second quarter compared with the same period last year, notably in electronics and house furnishing (30%), food (10%), and clothing and durables (20%).

With a prevailing “value-formoney” consumer attitude, Mr. Claudio said the country’s commitment to reduce tariff rates under the ASEAN ( Association of Southeast Asian Nations) Free Trade Area (AFTA) and the World Trade Organization ( WTO) would be the best response to lower prices. “You do not need a foreigner to bring down the price. By bringing down the tariff structure, prices will naturally go down.”

But Sen. Sergio Osmeña said the bottom line is “efficiency.” He said competition would eventually cut prices as foreigners can offer lower rates. He added pegging the minimum capitalization at P400 million for foreign entry will not result in cheaper goods as this would practically eliminate the establishment of chain stores — which comprise three-fourths of the sector — that would sell brand items at lower prices.

“Don’t base competition on the level of capital. Competition can only be based on the kind and price of goods that come into play when you open up. As it is, the branded goods are all here except that they are priced so high,” said Mr. Osmeña, author of the retail trade liberalization bill.

Meanwhile, most of the major retailers seem resigned to the fact that they would eventually face stiff competition from foreign counterparts.

“The name of the game is survival,” said an official at Uniwide Sales, Inc. in an interview with BusinessWorld. “Since last year, the situation has been ‘to each his own.’ It would reach to a certain point wherein it would be a makeor-break thing.”

He said market niching would be resorted to by major retailers if only to survive competition. In Uniwide’s case, it has set up Family Stores in certain areas of Metro Manila to reach a wider consumer base.

Mr. Claudio said some of the safeguards asked by the sector are the imposition of a holding period of at least five years prior to full liberalization to assist retailers in recovering from the economic crisis; an initial 60- 40 sharing setup in favor of Filipinos, and gradually increasing foreign ownership to 100%; that the foreign retailers should go public after five years of operation so that they can share their gains with local retailers; and the foreign retailers must have at least a 50% inventory reserved for local products.

None of the safeguards are present in either of the bills filed in the two chambers of Congress, but Mr. Osmeña said there may be leeway in providing a moratorium. He cautioned, however, that the grace period may backfire on local retailers who may be unprepared against foreign counterparts earlier exposed to competition under AFTA or WTO’s timetable.

In which case, Mr. Claudio said there is no choice but for joint ventures or strategic alliances — an inevitable consequence of liberalization — with foreigners to materialize.

“Merger is the trend now. You have to look on the side of transnational corporations. It is to their advantage if they have a local partner to facilitate their operation, to familiarize themselves with domestic conditions,” said Ronnie Ong, general manager at Robinson’s Supermarket, Inc.

Mr. Osmeña said local retailers should look at liberalization as a way to improve efficiency. As an example, he said Watsons, a grocery in Hong Kong, has cheaper prices than competitors since it sources goods directly from producers. The store owner teaches the producer efficient packaging methods to make items more appealing to the consumer at low cost.

On the local front, he cited the success story of Jollibee Foods Corp. which was able to withstand the competition brought by United States-based food giant McDonald’s, to emerge as one of the dominant players in the fastfood industry, and was even able to open branches in neighboring Asian countries and, recently, in the US itself.

The opening of retail trade is one of the steps in allowing market forces to determine the country’s growth. Much has yet to be done, however, in the immediate future.

Epictetus Patalinghug, a University of the Philippines professor, said: “An effective competition policy... requires effective legislation that provides substantive authority to assess pre- merger notification, regulate natural monopolies, determine misuse of market power by large firms and monitor restrictive and anti-competitive practices. In addition, an effective competition law regime requires clear objectives: efficiency or equity.”