THE SENATE approved in third and final reading a measure to ease restrictions on foreign retailers, with minimum share capital levels adjusted to provide a measure of protection for small and some medium-sized domestic retailers.
With 20 affirmative votes and no negatives or abstentions, the Senate approved Senate Bill 1840, which seeks to amend the Retail Liberalization Act of 2000.
Senator Aquilino L. Pimentel III, chairman of the Commerce Committee and sponsor of the measure, passed an amendment proposed by Senate Pro Tempore Chairman Ralph G. Recto increasing the proposed lower minimum share capital of foreign retailers seeking to enter the market.
The final version of the bill sets the minimum paid-up capital at 50 million pesos, or about $1 million, with people with more than one physical store required to invest at least 25 million pesos per store.
“This amount protects small (businesses), it protects part of the medium (sized businesses). It’s acceptable to me,” he said during the amendment period.
“From the old law of $2.5 million to 50 million pesos is the minimum paid-up capital to enter the Philippine retail market,” he added.
Recto said the minimum paid-up capital should not be set too low in order to attract quality investors.
“We are liberalizing it but not too low for competition to be at the mid level,” he said.
“You want to attract quality and that’s why we suggested that the paid-up capital be at least 50 million pesos, but then they can open two stores at 25 million pesos,” he added.
Senator Risa N. Hontiveros-Baraquel said she was glad the sponsor accepted the proposed amendment, saying the Philippine Retailers Association only wanted the minimum paid-up capital to be cut in half.
“I’m sure they will be very happy that something close has been proposed by the president of the senate pro tempore, accepted by the sponsor and supported by the senate,” she said.
In an earlier statement on Wednesday, ahead of the amendment’s introduction, Ms Baraquel said it was “unwise” to open up the retail sector to foreign investment in a downturn, noting the potential damage to businesses already struggling as a result of the pandemic. , including small businesses.
Ms Baraquel said the change to the Retail Liberalization Act “would only disadvantage Filipino owners of mom-and-pop shops, sari-sari shops, carinderias and even public market stalls”.
“Make second-class citizens the business line of sarili natuloy ang pagbabago sa (Our own business line will become second-class citizens if we change the) Retail Trade Liberalization Act. Right now, that’s not our wisest option. Imbes na makabawi at maka-recover ang ating mga negosyante and manininda, ito ang bubulaga sa kanila (Instead of recovering business lost during the recovery, this measure will disrupt our traders and retailers),” she said.
Ms Baraquel said she is not opposed to foreign investment, but noted the position taken by the Association of Philippine Retailers that micro, small and medium enterprises (MSMEs) will lose out if the minimum capital requirements for foreign investors are lowered.
“These amendments will not help Filipinos,” she said.
She also said that it is MSMEs “who are actually keeping the country afloat despite being one of the hardest hit by the economic downturn,” should be supported.
“Know, remember to manage and negotiate with the MSME sector. Unahin natin sila. Bigyan natin sila ng pagkakataong makabangon (The MSME sector includes many small businesses that should be given priority, have a chance to recover) We should provide them with protective shields in the free market, instead of pitting them against deeper pockets,” she said.
In the committee-approved version of Senate Bill 1840, the minimum paid-up capital for foreign retail investors was to be lowered to $300,000. The bill also originally required retailers with more than one physical store to invest at least $150,000 per store. The bill only covers foreign retailers whose country of origin allows Filipino retailers.
The current law states that companies with a minimum paid-up capital of $7.5 million or more can be wholly owned by foreigners, provided their investment in each store is at least $830,000. Foreign retailers with a minimum paid-up capital of $2.5 million but less than $7.5 million cannot be wholly foreign-owned for the first two years under current law.
The bill removes other qualifying requirements such as $250,000 capital per store for companies engaged in high-end or luxury products, five years of retail experience and five branches retail required.
The retail law amendment is one of three bills aimed at easing restrictions on foreign investment that President Rodrigo R. Duterte called urgent last month.
It is also among the priority actions identified by the Executive Committee of the Legislative-Executive Development Advisory Council that were to be adopted by June 2021. — Vann Marlo M. Villegas
