Retail trade law amendments to take off steam from Cha-cha train–drilon
THE immediate passage of the proposed amendments to the Retail Trade Liberalization Act will boost economic recovery and remove the justification for Charter change in the House of Representatives, which wants to relax economic provisions in the Constitution, Senate Minority Leader Franklin M. Drilon said.
“The immediate passage of this law will remove the steam that powers the Cha-cha train in the House of Representatives,” Drilon said on Wednesday as the Senate plenary discussed Senate Bill 1840, or the proposed amendments to RA 8762.
The amendatory legislation seeks to further relax foreign restrictions by removing investment categories and setting an across-the-board minimum paid up capital investment equivalent of $300,000 in Philippine peso.
The retail trade law amendments is part of a trio of far-ranging reforms that Senate leaders have said would do far more to liberalize the environment for foreign investors than politically risky Charter changes. The other two are the amendments to the Foreign Investments Act and the 80-year-old Public Services Act.
On Wednesday, as the chamber tackled the bill amending retail trade law, Drilon said that “by amending the Foreign Investments Act [FIA], further relaxing retail trade restrictions and amending the Public Service law, the Philippines will generate up to $30 billion in foreign direct investment [FDI] a year,” Drilon said.
“We are all bombarded with questions about the so-called economic charter change. Well, we do not need to be bothered by such talks because we can immediately better the investment climate,” Drilon said.
The proposed Charter change in the House, which seeks to insert the catch-all provision “unless otherwise provided by law” and gives Congress flexibility to tweak Charter provisions through mere legislation, is not necessary, Drilon said, “What we need now [to] address the economic slowdown is a concrete solution through the enactment of various economic measures such as the amendments to the Retail Trade Liberalization Act and the Public Service Act.”
Drilon is the principal author of Senate Bill 1840. The measure is sponsored by Senate Committee on Trade Chairman Sen. Aquilino Pimentel III.
“Amending the Retail Trade Liberalization Act will address a number of foreign investment roadblocks,” he said.
Under the current Retail Trade Liberalization Act, enterprises with a paid-up capital below $2.5 million in peso equivalent are reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.
The bill removes the investment categories and sets a minimum paid-up capital investment equivalent of $300,000 in Philippine peso for foreign retailers.
Drilon said that 26 years after the passage of R A 8762, “the Philippines still have a very poor retail trade investments portfolio.”
He likened the Philippines to “an ostrich” that for 66 years buried its head in the sand, “refusing to fully recognize that retail trade liberalization is not bad as an economic policy.”
Drilon said the country continues to adhere to the same protectionist policy under the 1954 Retail Trade Nationalization law despite the passage of the 2000 retail trade liberalization law.
Only 5% growth
THAT, he added, resulted in the Philippines lagging behind in terms of foreign investments.
Since the enactment of the law, the share of wholesale and retail trade to total net FDI indicates that net investments inflows to the Philippines have been very minimal with an average annual growth of only 5 percent, according to Drilon.
Over a five-year period from 2012 to 2016, Southeast Asian nations received an average of $17 billion in foreign retail sector investment. The share of the Philippine total during the same period averaged $107 million or 0.006 percent, he added.
According to Drilon, in 2016 alone, the Philippines received only $101 million in foreign retail sector investment, while Thailand had $3.2 billion, Malaysia got $2.5 billion, Indonesia secured $2 billion, and Vietnam received $2 billion. Singapore received over $8 billion, almost more than all other economies combined, Singapore has no restrictions on foreign investment in retail and enjoys a per-capita income of $88,000, he added.
As of 2021, there are only 46 foreign retail corporations registered with Department of Trade and Industry, or a growth of 2 retailers per year since 2000, he noted.
The amendment to the Retail Trade Liberalization Act is also among the identified 11 priority measures by the Legislativeexecutive Development Advisory Council (Ledac).
The other priority measures include the Government Financial Institutions Unified Initiatives for Distressed Enterprises (Guide), Package 3 (Valuation Reform), Package 4 (Passive Income and Financial Intermediaries Taxation Act), Public Service Act, Foreign Investment Act, Agriagra Law, Medical Reserves Corps Act, Creation of a Disease Prevention and Control Authority, Tax regime for Philippine Offshore Gaming Operators and for Off-cockpit Betting Stations (OCBS) and Pension reform for military and uniformed personnel.