How to stimulate the retail industry

How can we attract more foreign investments that can create more jobs for our labor force and create competition that can benefit consumers through lower prices? 

          One way, according  to a Senate bill, is to remove barriers to foreign investors’ entry in the country's retail trade.

          Senate Bill 1639 seeks to remove existing equity and capitalization requirements under the retail trade liberalization law, or Republic Act 7042, which already reduced the minimum requirements for foreign enterprises to engage in the local retail trade.

          At present, the Retail Trade Liberalization Act of 2000  requires a minimum paid-up capital of $2.5 million for a 100-percent foreign ownership of a retail business.

          According to the Department of Trade and Industry-Bureau of Investments, in the 18 past years following the passage of RA 7042, only 22 foreign retail firms had invested in the country’s retail sector. In contrast, our neighboring countries such as Singapore, Indonesia and Cambodia do not impose minimum capital requirements or limits on foreign equity participation in their retail-trade sectors.

          The strict requirements of RA 7042, along with other economic restrictions in the 1987 Constitution, have made the Philippines lag far behind its neighbors when it comes to foreign direct investments (FDIs)        SB 1639, once enacted into law, is seen to promote market competition and growth that could benefit Filipinos through creation of more jobs. In addition, it could result in lower prices for high-quality goods and services.

          We anticipate resistance to this bill from small retailers who fear that the entry of big foreign retailers would  drive them out of business. It's a valid fear, to be sure. But if the benefits to consumers far outweigh the social costs, perhaps it's a gamble worth taking for the greater good.

         



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