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Gov’t urged to amend retail trade law

High equity limit deters flow of new investments

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10:36 PM September 11th, 2013

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By: Amy R. Remo, September 11th, 2013 10:36 PM

The government should amend the retail trade law as it imposes various restrictions to foreign retail investors wanting to do business in the country.

Aside from deterring investment inflow, these restrictions also put the country at a serious competitive disadvantage compared to its neighbors in the region.

John Forbes, senior adviser of the American Chamber of Commerce and Industry (AmCham), Wednesday said that it was time to review the law because the country has failed to attract many players in the retail market.

One of the provisions deemed “restrictive” by foreign investors under Republic Act No. 8762 or the Retail Trade Liberalization Act of 2000 stated that enterprises with paid-up capital of less than $2.5 million “shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.” Only enterprises with a minimum paid-up capital of $2.5 million or more may be wholly-owned by foreigners.

“I don’t think there’s reason to protect the retail trade sector. If you look throughout Asia, you’ll find that the Philippines has one of the most protectionist regimes on retail trade, while others are much open,” Forbes explained.

“And keep in mind that if the goal of the government is to have 10 million tourists by 2016, it would be good to have in retail trade as many restaurants as possible, serving different kinds of food, and as many bars as possible,” he said in a briefing Wednesday.

To make the Retail Trade Act more liberal, Forbes said that their best proposal was to reduce the equity limit and make it more consistent with the minimum provisions set in other existing laws such as the Foreign Investment Act.

In a letter sent to the Senate in October 2011, the Joint Foreign Chambers of Commerce reiterated that the Retail Trade Act has not achieved its objective of liberalizing foreign ownership in the retail trade sector due to various restrictions.

It pointed out that the capital requirement of $2.5 million was “not only the highest in Asia after Malaysia, but is also uncommon among the economies examined.”

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