Retail trade liberalization can be good for PH business, says Concepcion

Presidential adviser for entrepreneurship Jose Concepcion III said that further liberalizing the retail trade sector in favor of foreign investors would lead foreigners to put up franchises in the country, which would need local partners “to navigate” the domestic market.

“To me, we should open it up. Let’s say they come here in Manila. Would they own every store? That’s very difficult. So they would franchise it. It would provide opportunities,” Concepcion told reporters on Friday.

This develops as Socioeconomic Planning Secretary Ernesto Pernia announced that the government was planning to lower the paid-up capital requirement for foreign retailers setting up shop in the country to $200,000 from $2.5 million at present.

The threshold was set to protect local micro, small, and medium enterprises (MSMEs). The lowering of the amount would mean foreign MSMEs could enter the country with a capital of just about P10 million.

“Whether it’s [$200,000 threshold] there or not, it doesn’t matter. It doesn’t bother me at all. But is it going to be a bane for our people here? No,” he said.

He said that regardless if the government would push through with the plan, “lousy” business concepts would still die in the face of competition.

Concepcion, who heads food and beverage company RFM Corp., joins the debate on the retail trade issue among business leaders who see the government policy differently. Some think the move would harm small local enterprises while others think it would be beneficial to business and the local market.
Those who opposed the move said local MSMEs were still not prepared enough to compete with foreign rivals.

Concepcion said such a move would mean that more business concepts would enter the Philippines.
Even Filipino companies adopt the franchising strategy when they go and expand abroad, he said.

“No one’s going to put up their own stores because it’s too risky,” he said. “Why did Jollibee [enter franchising]? It can easily afford [owning each store). That’s because you are better off franchising it.”

The threshold was provided under the Retail Trade Liberalization Act of 2000. Lowering it would require an amendment to the said law, according to Trade and Industry Secretary Ramon Lopez.

The proposal to liberalize the retail market formed part of the drafting of the 11th foreign investment negative list (FINL) to be approved within the year. The FINL, which is updated every other year, specifies industries that would be reserved for Filipinos and those that would not be fully opened to foreign ownership.