PRA seeks stricter rules vs foreign SME retailers

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Photo by Fancycrave.com from Pexels

By: Bernie Cahiles-Magkilat

As retailing continues its growth trajectory in the country, local retailers have called on national and local government units (LGUs) to reign in foreign retailers and ensure they comply and meet the law’s requirements saying these migrant retailers are competing unfairly and stifling the growth of Filipino small and medium establishments.

Atty. Paul A. Santos, chairman of the Philippine Retailers Association (PRA), said this in an interview at the 26th National Retail Conference and Stores Asia Expo 2019 as he noted the sprouting of migrant retailers in the country.

Domestic retailing is expected to grow a little bit higher than last year’s growth. The industry has been growing between 2-4 percent annually.

“Government should ensure they comply and meet the requirements of the law because these businesses are stifling Filipino entrepreneurs who cannot compete against their well established supply chain where they can source cheaper supplies,” Santos said.

“We want DTI [Department of Trade and Industry] and the LGUs to impose the law because the small and medium retailing is reserved for Filipinos,” he pointed out.

He, however, noted that the government may have a hard time regulating these foreign retailers because these small and medium businesses may have indeed complied with the requirements and their papers are in order. But some of these migrant retailers could be using dummies.

It is also difficult to act on these establishments when their host community benefits from them like jobs generation, he added.

As such, only those flagrantly violating the rules on sanitation, signages, among others can be padlocked by the LGUs, which have more power when in comes to enforcement as they are the ones that granted licenses or permits for these establishments to operate.

“If only the LGUs are very thorough,” said Santos. Earlier, Trade and Industry Secretary Ramon M. Lopez ordered closure of a Chinese-owned restaurant in Las Piñas on certain issues, including sanitation.

Santos noted that there have been an influx of foreign SME retailers even if the government has yet to liberalize domestic retailing by amending the Retail Trade Liberalization Act of 2000.

The proposed bill seeks to reduce the minimum paid-up capital requirement of foreign firms engaging in retail trade business to $200,000 from $2.5 million currently.

“If these foreign SME retailers operate illegally, passage of the proposed law will just legitimize their existence,” he noted.

Santos already anticipates the re-filing of the proposed measure, which was passed in the Lower House but was killed in the Senate in the previous Congress. In pushing for the opening up of the domestic retail trade, which is the entry point of most Filipino entrepreneurs, the government hopes to attract more foreign direct investments into the country.

According to Santos, further liberalization of the industry will not hurt the big retailers but it will adversely impact on the small and medium ones.

He explained that the reason no big foreign retailers invested in the country since the domestic retail law was enacted in 2000 was not because of the capital requirement, but they objected the required investment per store of $800,000, the 30 percent local content, and the IPO requirement after 7-8 years of operation in the country. The big foreign retailers don’t think they can compete here under these rules.

Big foreign retailers like Walmart and Carrefour have different business model also.

Should the government pushes through with the further opening up of the retail industry, Santos said it will only benefit the foreign SME retailers, but will not attract the big ones.

“The $200,000 capital requirement will put right smack into the medium scale retail category as defined under the Magna Cart for Micro Small and Medium Enterprises,” he said.

He urged for balance stressing the government seeks to assist the local entrepreneurs and yet the proposed measure stifles them and making it harder for them to compete against these SME foreign retailers.

So far, local retailers are now carrying multi-brands to ensure they can stay afloat. Santos said that domestic retailers have at least three brands with one anchor brand.

“This is a risk reduction strategy by spreading the risk,” he said.
Retailers are crowding out in the food, footwear, and apparel categories, which are also getting more segmented. For instance, in the case of food, it used to be just pure Japanese, Chinese or Korean cuisine, but now there are Japanese restaurants that offer only ramen.

One growing category is pet care, which has grown by a spectacular 20 percent as more Filipinos can now afford to provide care for their pets. As such, more community-based veterinary clinics are being established. There are also pet care services such pet grooming, and hotels for pets.

“As the number of pet ownership increases, the more people need vaccines as a consequence,” he added.

The article is first published HERE.