LOWERING the minimum capital investment for foreign retailers from $2.5 million to $300,000, or around P15 million, would effectively “kill” small and medium local traders, Senator Risa Hontiveros warned on Wednesday.
Taking the floor during the period of interpellation on proposed amendments to the Retail Trade Liberalization Act, the minority senator warned that lowering the minimum capital investment for foreign investors will blow out the domestic retail market, airing concerns the impending influx of foreign competition will hit hard already-struggling local small and medium enterprises.
At the outset, Hontiveros assured: “I support measures that will help the economy bounce back, create jobs and bring prices down for consumers.”
She, however, voiced apprehensions over the proposal lowering the minimum paid-up capital investment for foreign investors, warning the move “may further hurt small local businesses still reeling from the pandemic, adding that “this sudden drop can mean the difference between life and death for our Filipino retailers.”
Hontiveros pointed out that reducing the minimum capital requirement for foreign retailers from US$2.5-million to US$300,000 or around P15M, would be a “death knel” for small and medium Filipino entrepreneurs hardest-hit by pandemic-related lockdowns.
For instance, she added: “Technically, an enterprise worth P15 million in asset size is still a small enterprise. The head-to-head competitor of the foreign retail industries that will come in are our small enterprises: example, a small grocery in Cabanatuan started by an OFW from his 10-year earnings in Saudi; a souvenir store in Mandaue, Cebu; rice retailers in Nueva Ecija, stores in Baclaran and Quiapo run by our brother and sister Muslim Filipinos.”
The senator also cited reports that “these are the stores that according to Asian Development Bank’s study have suffered the most from the pandemic—how will they be protected from the sudden competition from small but numerous foreign retailers?”
Moreover, Hontiveros asserted that “given the limited capacity of a small enterprise, [the incoming foreign retailers] might end up employing their own citizens,” thus negating the supposed “unemployment-reducing effects for Filipinos” which will then be “actually…smaller than what was hoped for.”
She wondered aloud: “How any people can be hired by a small firm with P15-million capital? What is the assurance the jobs will go to Filipinos? My bigger fear is that these enterprises would just be the Bangladeshi and Chinese shops in Divisoria—shops that employ their own nationals living and working illegally in the country. Our MSMEs are decimated, and yet job creation is minimal. We are on the losing end here.”
The senator voiced concern that “this measure may create an uneven playing field for local micro, small and medium enterprises [MSMEs]” as foreign counterparts are more likely given export assistance by their governments and trade associations.
She added: “Our local MSMEs do not receive the same level of government aid and do not have access to low-cost manufacturing facilities. Imagine, Chinese companies are able to procure goods at a lower price because they have direct access to manufacturers in Mainland China.” Hontiveros lamented that “the subsidies we give to our small businesses are just enough to keep the lights on” but not enough for them to gear up and compete against a sudden influx of small foreign retailers. Do we just allow them to swallow up our small businesses?”
The senator signaled she intends to propose an amendment increasing the minimum required paid-up capital to an amount that is cognizant of the benefits of foreign investment, affirming that “whatever measure we propose to boost the economy, it should be on the side of our local SMEs…We cannot leave our SMEs flailing in the ocean. Especially not at this time.”