To appreciate all the hype surrounding retail liberalization in the Philippines and the recent passage of a law amending the Retail Liberalization Act of 2000 (RTLA), one has to go back to the parent law, that is. ie the Retail Nationalization Act 1954. (RTNA).
Few people remember or will recall that before the adoption of the RTNA, nationalist fervor was at an all time high against what was perceived to be the dominance of Chinese interests in retail. Grocery stores, hardware stores, and many companies involved in the distribution and sale of consumer goods were fearful by the Filipino nationalists of being under the control of more and more Chinese foreigners, and therefore risked subversion. Filipino interests.
So when the RTNA was enacted, the retail sector was dictated by fairly restrictive foreign ownership rules designed to protect Filipino-owned retail businesses.
For nearly half a century under the RTNA, liberalization gradually watered down strong protectionist sentiments. Incidentally, too, during those long years, Chinese merchants married Filipinos to circumvent property laws in the retail trade. Indeed, the RTNA has become a silent law.
At the turn of the century, when RTLA was under deliberation, lawmakers had to reckon with a still strong voice of nationalists supporting protectionism. However, the new law, which repealed the RTNA and ushered in a “liberalized” retail business, continued to be protectionist in many ways, with strict requirements on foreign ownership.
Over the next two decades, less than 50 foreign retail companies registered with the Department of Trade and Industry (DTI), a paltry average of about two per year. Obviously, RTLA has not brought in the desired competition to further develop the retail sector.
RTLA’s amended promises
The passage of Republic Law 11595, which amends the RTLA of 2000, hopes to attract much-needed investment in the country’s retail trade and, as the press releases reveal, lower the cost of consumer goods in further regions of the country.
With the expected entry of more foreign retailers, job creation outside of Metro Manila is also highlighted, as competition in the sector shifts and spreads to provinces, with the amended law giving priority for the employment of Filipino nationals.
The application of new technologies introduced by new foreign retailers is also considered to have a considerable effect, especially on the way goods are produced and packaged. Note that RA 11595 encourages foreign retailers to keep an inventory of products made in the Philippines.
According to the implementing rules and regulations that the DTI will publish, the stock inventory requirement should incentivize SMEs to produce the materials needed by overseas retailers, much like what has happened in other emerging economies. who have aggressively opened their economies to foreign retailers.
Despite concerns expressed by some local retailers, the changes to the law promise protection for small and medium-sized enterprises (SMEs) by transferring technologies and investments that should increase production and improve productivity.
Constraints posed by digital commerce
How the changes introduced will work in the years to come is still very questionable now that the world is leaning more into consumerism that relies on e-stores and digital commerce.
Products manufactured by foreign companies are increasingly entering the country with a click of the mouse pad or via a smartphone. Such sweeping and rapid changes in the retail industry may have been accelerated by the pandemic, but it could escalate further as more people depend on online transactions.
Retail truly transgresses national boundaries, and the Philippines’ amended retail liberalization law may well be already outdated. In fact, as some critics claim, the new law passed is still restrictive compared to what other countries are currently proposing.
RA 11595 reduced the released investment five times to 25 million pesos or about $ 500,000; Thailand only charges $ 66,300, Vietnam $ 10,000, and Brunei none. Changes in global retailing, as online stores become more popular and acceptable, may force these countries to further reduce or even remove their paid-up capital requirements.
Economic aces
Yet the Philippines can count on its large and young population, as well as a growing middle class, with increased purchasing power, to support the growth of retail.
The country also continues to send workers overseas, representing ever-growing overseas remittances that their families rely on to pay for almost everything from food to utilities, housing, and more. other consumer and lifestyle goods.
A number of foreign chambers in the country support the 2000 RTLA amendment, and although the provisions of the new law RA 11595 still fall short of what they had been pushing for, they have expressed more optimism. as to obtaining retail support from their respective countries. investors.
Our economic growth has been hit hard by the toughest foreclosure rules because of this pandemic. The prognosis for the future remains positive, however, even if it is no longer considered the best performance in the region, which was second behind China only in 2019.
Our fundamentals have been severely weakened and the reforms that the current administration’s economic team has advocated are long delayed. The present shows no clear certainty of resuming at full speed as long as this pandemic persists and our government delays providing an adequate and effective response.
Nonetheless, we can be grateful for the aces above that we can still count on, at least when true normalcy is restored.
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