PHL lowers minimum investment threshold for foreign trading companies

Through Alyssa Nicole O. Tan and
Revin MIkhael D. Ochave, reporter

PRESIDENT Rodrigo R. Duterte has signed a law thatfiSignificantly lowers the minimum investment barrier for foreign retailers, which the government hopes will attract more FDI to the Philippines.

Republic Act (RA) No. 11595 reduced the minimum deposit requirement for overseas retailers from previously $ 2.5 million (around 125 million pesos) under the 20-year-old Retail Liberalization Act of 2000 (RA 8762) to 25 million pesos.

Mr Duterte signed the bill on December 10, 2021, but a copy of the bill was not released until Thursday.

The law does not allow the foreign retailer’s country of origin to prohibit Filipino retailers from entering the country.

Foreign retailers who have more than one physical store should also have a minimum investment per store of at least 10 million pesos.

Asked for comment, Roberto S. Claudio, vice chairman of the Philippine Retailers Association (PRA), said in an email interview that micro, small and medium-sized enterprises (MSMEs) operating in the retail sector are the most prominent willffaffected by the law as they now have to compete with overseas retailers.

“The rest of the retail sector (of the country) has prepared and adjusted to overseas retailers since RA 8762 was introduced in 2000. We have approved foreign retailers since 2000 … We offer to help with the drafting of the implementing rules and regulations “of RA 11595 in order to be able to present a clear implementation of this amended law,” said Mr. Claudio.

The President of the Philippine Chamber of Commerce and Industry (PCCI) George T. Barcelon said on a cell phone message that the minimum deposit capital of 25 million pesos is “more realistic” compared to the original proposal of just 10 million pesos.

Chris Nelson, Executive Director of the British Chamber of Commerce Philippines, said in a mobile phone interview that the group plans to highlight this development in their network and based in the UK firms with business opportunities in the philippines.

“We are very happy that the law has been signed. We believe this will lead to increased investment and foreign direct investment, ”said Nelson.

Asian Institute of Management economist John Paolo R. Rivera said the new law will benefit consumers through lower prices and more products.

“On the supply side, this creates competition with the local retail companies. This could lead them to increase their efficiency and improve their productffering and quality. You can also use this to learn more of the tools of the trade from overseas retailers, ”he said Business world in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Business world in a Viber message that increased competition from overseas retailers will lead to more product offerings, competitive prices and better service for consumers.

It is likely, he added, that this would complement “the increasingly digitalized way of doing business for both consumers and retailers, or the shift to more local and global online stores in addition to brick and mortar stores.”

More FDI in retailing would create more jobs and stimulate economic activity, said Mr Ricafort.

“This would also help to better align the country’s laws with other ASEAN or Asian countries as part of ASEAN’s economic integration initiatives in recent years,” he added.

However, Mr Rivera said it is important to ensure that adequate safeguards are in place for local retailers and smaller businesses that do not have economies of scale and scope to compete with overseas businesses.

“We don’t yet know the exact size of effEffects on the economy, but what is definite is (the) bigger competition the government must have expected, ”he added.

Under the new law, foreign retailers must give priority to Filipino workers before hiring a foreigner. The law also required overseas retailers to keep stocks of products made in the Philippines.

Foreign retailers should also maintain a paid-up capital of 25 million pesos at all times, which is monitored by the Commerce Department or the Securities and Exchange Commission.

Those who do not hold the required paid-up capital will be penalized or restricted to future trading activities in the country.

The DTI, the SEC, and the National Economic and Development Authority are also mandated to report to Congress every three years to review the required paid-up capital.

Violations of the law are punishable by imprisonment of a maximum of six years and more fine of a maximum of 5 million p.

This law, along with amendments to the Civil Service Law and the Foreign Investment Law, is one of the primary economic measures promoted by the government.

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