Immediate passage of the amendments to the Retail Trade
Liberalization Act will boost economic recovery and remove the
justification for Charter change in the House of Representatives,
which wants to relax economic provisions in the Constitution,
Senate minority leader Franklin M. Drilon said.
“The immediate passage of this law will remove the steam the
powers that Cha-cha train in the House of Representatives,” Drilon
said on Wednesday as the Senate plenary discussed Senate Bill No. 1840
or the proposed amendments to RA 8762.
The amendatory legislation seeks to further relax foreign
restrictions by removing investment categories and setting an
across-the-board minimum paid up capital investment equivalent of
US$300,000 in Philippine peso.
The retail trade law amendments is part of a trio of
far-ranging reforms that Senate leaders have said would do far more to
liberalize the environment for foreign investors than politically
risky Charter changes. The other two are the amendments to the Foreign
Investments Act and the 80-year-old Public Services Act.
On Wednesday, as the chamber tackled the bill amending retail
trade law, Drilon said: “By amending the Foreign Investments Act
(FIA), further relaxing retail trade restrictions and amending the
public service law, the Philippines will generate up to $30 billion in
foreign direct investment (FDI) a year,” Drilon said.
“We are all bombarded with questions about the so-called
economic charter change. Well, we do not need to be bothered by such
talks because we can immediately better the investment climate,”
Drilon said.
The proposed Charter change in the House, which seeks to insert
the catch-all provision “unless otherwise provided by law” and gives
Congress flexibility to tweak Charter provisions through mere
legislation, is not necessary, Drilon said. He said, “what we need now
to address the economic slowdown is a concrete solution through the
enactment of various economic measures such as the amendments to the
Retail Trade Liberalization Act and the Public Service Act.”
Drilon is the principal author of Senate Bill No. 1840. The
measure is sponsored by Senate Committee on Trade chairman Senator
Aquilino Pimentel III.
“Amending the Retail Trade Liberalization Act will address a
number of foreign investment roadblocks,” he said.
Under the current Retail Trade Liberalization Act, enterprises
with a paid-up capital below US$2.5 million in peso equivalent are
reserved exclusively for Filipino citizens and corporations wholly
owned by Filipino citizens.
The bill removes the investment categories and sets a minimum
paid up capital investment equivalent of US$300,000 in Philippine peso
for foreign retailers.
Drilon said that 26 years after the passage of RA 8762, “the
Philippines still has a very poor retail trade investments portfolio.”
He likened the Philippines to “an ostrich” that for 66 years,
buried its head in the sand, “refusing to fully recognize that retail
trade liberalization is not bad as an economic policy.”
Drilon said the country continues to adhere to the same
protectionist policy under the 1954 Retail Trade Nationalization Law
despite the passage of the 2000 retail trade liberalization law.
Only 5% growth
That, he added, resulted in the Philippines lagging behind in
terms of foreign investments.
Since the enactment of the law, the share of wholesale and
retail trade to total net foreign direct investments (FDI) indicates
that net investments inflows to the Philippines have been very minimal
with an average annual growth of only 5 percent, according to Drilon.
Over a five-year period from 2012 to 2016, Southeast Asian
nations received an average of US$17 billion in foreign retail sector
investment. The share of the Philippine total during the same period
averaged $107 million or 0.006 percent, he added.
According to Drilon in 2016 alone, the Philippines received
only US$101 million in foreign retail sector investment, while
Thailand had $3.2 billion, Malaysia got $2.5 billion, Indonesia
secured $2 billion, and Vietnam received $2 billion.
Singapore received over $8 billion, almost more than all other
Asean economies combined. Singapore has no restrictions on foreign
investment in retail and enjoys a per capita income of US$88,000, he
added.
As of 2021, there are only 46 foreign retail corporations
registered with DTI, or a growth of 2 retailers per year since 2000,
he noted.
The amendment to the Retail Trade Liberalization Act is among
the identified 11 priority measures by Legislative-Executive
Development Advisory Council (Ledac). The other priority measures
include the Government Financial Institutions Unified Initiatives for
Distressed Enterprises (Guide), Package 3 (Valuation Reform),
Package 4 (Passive Income and Financial Intermediaries Taxation Act),
Public Service Act, Foreign Investment Act, Agri-Agra Law, Medical
Reserves Corps Act, Creation of a Disease Prevention and Control
Authority, Tax regime for Philippine offshore gaming operators (Pogo)
and for Off-cockpit Betting Stations (OCBS), and Pension reform for
military and uniformed personnel.
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