Group says retail trade lib step in right direction

The European Chamber of Commerce of the Philippines (ECCP) wants market forces in the retail industry to decide the entry of foreign firms without having to comply with any minimum threshold in paid-in capital, a top official said.

This is how it should be in an ideal market, according to ECCP president Guenter Taus. However, he said that the chamber still believed that the government’s plan to substantially lower the capital threshold for foreign companies that wanted to enter the local retail market was a “step to the right direction.”

Socioeconomic Planning Secretary Ernesto M. Pernia said earlier this week that the 11th foreign investment negative list (FINL) would include the reduction in the minimum paid-up capital from the current threshold of $2.5 million to $200,000. The biennial list, which outlines the industries where foreign companies have limited participation, is expected to receive President Duterte’s approval within the year.

Foreign business and local companies have reacted differently to the announcement, with the latter expressing reservations regarding the move’s potential harm on local micro-, small- and medium-sized enterprises (MSMEs), which may not be equipped to compete against foreign players.

The Retail Trade Liberalization Act of 2000 reserves the minimum paid-up capital below $2.5 million exclusively to Filipino businesses, a form of protection that provides a space for MSMEs to grow in. Foreign players, on the other hand, are allowed to enter once their minimum paid-up capital exceeds that threshold.

However, Taus said that it was time that “we finally end this protectionism” that favors local MSMEs at the expense of having better competition, and thus better goods and services for Filipino consumers.

“That’s the crux of the matter. Isn’t competition what we want especially for ordinary Filipinos? I do not think that you need to put any amount there,” the ECCP official said.