Senate eyes scrapping minimum capital for foreign retail enterprises

Senator Sherwin Gatchalian said the Senate Bill No. 1639 aims to amend the Retail Trade Liberalization Act by scrapping the minimum capitalization requirement for foreign investors for them to enter the local market. (Photo:
Senator Win Gatchalian/Facebook)

MANILA — The Senate aims to further open the country’s retail sector by removing the USD2.5-million minimum paid up capital for foreign retail enterprises to operate here.

During the advocacy forum on retail competition of the European Union-Philippines Business Network Friday, Senator Sherwin Gatchalian said the Senate Bill No. 1639 aims to amend the Retail Trade Liberalization Act by scrapping the minimum capitalization requirement for foreign investors for them to enter the local market.

Gatchalian said this bill targets to attract more foreign direct investments (FDIs) in the retail sector by removing the barrier to entry for foreign players as well as creating more jobs for Filipinos.

He noted that the Philippines lagged behind its ASEAN neighbors in terms of attracting FDIs in the retail industry, with only USD101.5 million worth of FDIs in sector of wholesale and retail trade and repair of motor vehicles and motorcycles in 2016.

The country only shared 0.54 percent of the total FDI inflows in the region in the retail sector.

This is lower compared to Thailand’s FDI inflows in retail amounting to USD3.2 billion, sharing 17 percent of the region’s total; Malaysia’s USD2.5 billion, sharing 13 percent; Indonesia’s USD2 billion, sharing 10.6 percent; and Vietnam’s USD1.97 billion, sharing 10.4 percent.

The lawmaker said since the country further cut the minimum paid up capital to USD2.5 million in 2000, only 22 foreign retailers entered the Philippine market.

The minimum requirement then was USD10 million and was further lowered to USD5 million before the current minimum paid up capital level.

Despite eliminating the minimum capitalization for foreign investors, Gatchalian said the investors are “required to maintain in the Philippines the full amount of its capital or the unsold amount of such capital”.

He said foreign retail enterprises shall also employ Filipinos in their stores and source some of their products locally.

On the other hand, Board of Investment (BOI) Legal and Compliance Service Director Atty. Marjorie Ramos-Samaniego said the Department of Trade and Industry (DTI) supports the liberalization of the retail trade, but she stressed that the country’s micro and small enterprises should still be protected from the influx of foreign retailers.

In a separate interview, DTI Secretary Ramon Lopez echoed the agency’s support to liberalize the retail industry.

Lopez, however, said a minimum capitalization requirement is still needed to protect the micro and small retail segment.

He said DTI is looking at lowering the minimum requirement at a range of USD200,000 to USD500,000.