Charmaine A. Tadalan | BusinessWorld | November 8, 2019
A Senate technical panel tackling proposed amendments to the retail trade law on Thursday zeroed in on the provision that will reduce the minimum paid-up capital for foreign entrants and possible safeguards for small local businesses.
The Senate Trade, Commerce and Entrepreneurship technical working group tackled Senate Bill Nos. 14 and 921, which will amend Republic Act No. 8762, or the “Retail Trade Liberalization Act of 2000.”
Its proposals include reduction of the minimum paid-up capital for foreign companies entering the retail sector to $200,000.
The law currently allows foreign entrants to set up wholly owned enterprises with minimum paid-up capital of $7.5 million; while enterprises with $2.5 million to $7.5 million will be wholly owned by foreigners except for the first two years.
The Joint Foreign Chambers of the Philippines, represented by American Chamber of Commerce of the Philippines, Inc. Senior Adviser John D. Forbes, supported the provision, while the Department of Trade and Industry (DTI) proposed a higher limit at $300,000.
“For DTI, what we are proposing is $300,000 which translates to P15 million,” Assistant Director Alice M. Opeña of the DTI-Bureau of Micro, Small & Medium Enterprise Development said during the hearing, Thursday.
“What we want is a kind of protection for the sector.”
The Philippine Competition Commission (PCC), for its part, proposed to impose the reduction in tranches as a safeguard for micro, small and medium Enterprises (MSMEs). PCC Legislative and Policy Officer Christina Faye Condez-de Sagon said the commission recommends to “lower the current limit eventually.”
“Obviously the concern here is MSMEs — allow them to eventually catch up, absorb the necessary technology and know-how as these new retailers or businesses come in.”
This was supported by Laban Konsyumer, Inc. member Joaquin Tamano, Jr., who said the group was more concerned about the impact of the abrupt adjustments than the amount that will be proposed in the final version. “Whatever the amount, whatever the limit, I agree that we go by tranches, and then at a certain level, we stop and reassess and then decide whether we want to move down again.”
Both bills also provided to remove the $250,000 capital per store requirement for enterprises, engaged in high-end or luxury products.
It also removes other requirements such as the five-year track record in retailing and five retailing branches or franchises in operation anywhere in the world or at least one store capitalized at a minimum of $25 million, among others.
Senate Minority Leader Franklin M. Drilon’s version proposed to also reduce the proportion of locally manufactured products required to be carried by foreign retailers to 10% of the aggregate cost of their stock inventory from the 30% currently.
The said measure is among the bills pushed by the Cabinet economic cluster for approval in the first regular session of the 18th Congress, which closes June 5 next year. It is also on the list of measures which 14 local and foreign business groups submitted to Malacañang and Congress last July.
Its counterpart measure, House Bill No. 59, sponsored by Valenzuela-1st district Rep. Weslie T. Gatchalian, bagged approval by the Committee on Trade and Industry and now awaits plenary action in the chamber.
The House version proposed to reduce the minimum paid-up capital to $200,000 and the minimum percentage of locally manufactured products to be sold by foreign retailers to 10% from the current 30%.
The House bill also eliminates the required net worth, number of retailing branches and retailing track record conditions for foreign firms to enter the country’ retail industry.