DTI vows protection for sari-sari stores from full retail trade lib
The Department of Trade and Industry (DTI) is open to further liberalization of domestic retail trade to full foreign ownership, but seeks to impose minimum capital requirement for the small and micro retailers to protect the lowly sari-sari stores.
This was stressed by DTI/Board of Investments Director for legal and compliance service Marjorie O. Ramos-Samaniego at the Euro-Philippines Retail Market Competition Advocacy Forum where she stressed the need to continue safeguarding the SMEs.
Under the current law, RA 8762 or the Domestic Retail Trade Liberalization Act of 2000, a full foreign-owned retailer is required a minimum capitalization of $2.5-million minimum. But the retailer is required to invest $830,000 per store which would allow him only four stores based on the capital requirement.
Samaniego said that the $2.5-million capital requirement is not even the problem among interested foreign retailers, but the $830,000 per store capital requirement that they want removed.
As such, the BOI is also toying with the idea of removing the $2.5 million capital requirement but simplify it to a per store investment requirement.
What the DTI has committed though so far is to safeguard the small and micro retailers. She said they are consulting with the Philippine Retailers Association (PRA) to come up with the right proper threshold for the minimum capital requirement. They are also studying the definition of big and medium retailers.
“We support liberalization but what is true is we want to protect the mom and pop so these neighborhood stores will not be displaced,” Samaniego said adding that they also recognized that even the big local are also displacing the small ones.
“There should really be a safeguard measure for small and micro retailers.”
In his keynote speech at the forum, Senator Sherwin Gatchalian, said Senate Bill 1639, which authored, seeks to remove all barriers to entry to foreign retailers.
The Senate, however, is yet to calendar the bill for deliberation in May this year. The Lower House is set to tackle the bill by Rep. Arthur Yap this month, March 20.
Gatchalian, however, said the Senate version seeks to remove all barriers of entry to foreign direct investments as he blamed these hurdles as the reason for the country’s very low FDI inflow compared to other ASEAN countries. He also seeks to simplify processes for foreign retailers to limit it to two agencies – local government units and the Securities and Exchange Commission. At present, the prequalification alone already requires four agencies – BOI, Securities and Exchange Commission and the Bangko Sentral.
Thus, Gatchalian is advocating for the full foreign ownership in the sector to cut bureaucratic redtape. He noted that if a threshold capital requirement is still imposed on the pop and pop foreign retailers, there will be a need to monitor and regulate this sector.
The only requirements he would like to impose on foreign retailers are capital retention, local sourcing (which is at 30 percent local products under the current law) and local hiring. His bill also pushes for reciprocity treatment from the foreign retailer’s home country to Filipino retailers.
Gatchalian said that further liberalization of the domestic retail trade will invite big retailers, the likes of TESCO and TARGET.
He also allayed fears raised by the PRA that the sari-stores and small convenience stores will die if restrictions to foreign retailers are removed, saying the foreign retailers will not engage in this retailing category where margin is only 5 percent. “It is a small market to fight over,” he pointed out.
In addition, he noted that most convenience stores are already invading the small barangays and even what used to be big supermarkets like Puregold are now putting up small community stores.
Gatchalian said that the argument of the PRA that the sari-sari stores would be displaced by further liberalization of the industry is based on “emotion” rather data.
According to the ASEAN data, Gatchalian said, the region was able to attract $18-billion investments in the retail sector in 2016 of which $8.4 billion come from the EU. But the Philippines only captured $100 million as against Thailand’s $3.1 billion. Singapore, the most liberal country in terms of trade with OECD countries, got the largest share at 48 percent of total.
“Our restrictions have been going down since 1985, but other countries are going down at faster pace,” he said.
The data also showed 31 countries that abolished the minimum capital requirement to foreign retailers have increased their annual FDI inflows with average gain of 144.7 percent.
Comment here