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Gatchalian wants to boost foreign direct investment in retail trade

PARANAQUE CITY, Philippines – A crew member of a popular Filipino chain of bakery-cafes prepares for work at a mall in Paranaque City, 14 Feb 2017 file image. Senate Committee on Economic Affairs chair Senator Win Gatchalian said the government should reduce the minimum requirements for interested foreign enterprises to engage in the local retail trade in order to stimulate market competition and growth. Photo by Mark Cayabyab/OS WIN GATCHALIAN

Senator Win Gatchalian is pushing for the removal of barriers of entry for foreign firms in the retail trade sector that would boost foreign direct investment and develop a more progressive investment climate in the country.

Under his Senate Bill No.1639, the existing equity and capitalization requirements under the Retail Trade Liberalization Law (RA7042) shall be removed in order to reduce the minimum requirements for interested foreign enterprises to engage in the local retail trade. These amendments shall be aligned with the foreign investment guidelines stipulated in the Foreign Investments Act, and will also be harmonized with similar regulations observed in other Asian countries.

“These requirements, along with other barriers, have made us lag far behind our Asian peers when it comes to FDI. I believe it is high time we rethink the restrictive legal framwork that is deterring the inflow of potential investments,” said Gatchalian, the chairman of the Senate Economic Affairs Committee.

The Retail Trade Liberalization Act of 2000 currently requires a minimum paid-up capital of US$2.5-million for a 100% foreign ownership of a retail business. This, according to Gatchalian, serves as “an onerous requirement to discourage participation of investors”.

In the 18 years since the passage of the law, only 22 foreign retail firms have invested in the country’s retail sector, according to the Department of Trade and Industry – Bureau of Investments (DTI-BOI).

Unlike the Philippines, countries like Singapore, Indonesia and Cambodia are not imposing minimum capital requirements or limits on foreign equity participation in the retail trade sector.

Once passed, Gatchalian said the amendments to the law would stimulate market competition and growth that could highly benefit Filipinos through greater job creation and lower prices for quality goods and services available in the market.

“We are easing the process and opening the retail trade market for competition. Greater competition results into more opportunities, more choices and better goods and services offered for our people. There is so much to learn from embracing diversity in the marketplace which a protectionist mindset cannot provide,” he concluded.