Reforms pushed to attract more FDI, local retailers oppose RTLA

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Photo from: canva.com

By: Business World

The Department of Trade and Industry is making a renewed push for the passage of bills that would further open up the economy to foreign direct investments (FDI), after Philippine rules on such were again deemed among the most restrictive in the world.

The Philippines ranked fourth out of 84 economies on the FDI Regulatory Restrictiveness Index compiled by the Organization for Economic Cooperation and Development (OECD), based on 2019 data.

Ramon M. Lopez, Trade secretary and chairman of the Board of the Investments, said in a mobile message on Friday that the Philippines’ dismal ranking is the reason behind the urgent need for more reforms such as amendments to the Retail Trade Liberalization Act (RTLA) and the Public Service Act (PSA).

Changes to the RTLA include reducing the required minimum paid-up capital for foreign companies that seek to enter the Philippine retail sector, while amendments to the PSA would lift foreign ownership restrictions in certain sectors.

Mr. Lopez said the country also should work to improve the ease of doing business. He also backed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which would immediately cut corporate income tax to 25%.

However, local retailers are opposing the measure amending the RTLA, particularly the provision that would significantly lower foreign entrants’ minimum investment from the current $2.5 million.

[READ: PRA seeks stricter rules vs foreign SME retailers]

House Bill No. 59, which was passed on third reading in March, reduced the required minimum paid-up capital for foreign retail investors to $200,000 (around P10 million).

“Low minimum investment will only destroy our micro-, small-, and medium-sized enterprises (MSMEs),” Philippine Retailers Association Vice-Chairman Roberto S. Claudio said in an e-mail on Friday.

Due to the pandemic, Mr. Claudio noted major global retailers are downsizing and few foreign retailers will venture into the Philippines even if the threshold is reduced.

“We will only subject our Filipino MSME retailers to unfair competition. Also, this will negate our program of ‘BUY LOKAL’ initiative launched to help our local industries to recover from the negative economic effects of this pandemic,” he said, adding that the group is looking into compromise positions with the government.

MSMEs make up 99.5% of the total business establishments operating in the country, based on 2018 government statistics. The businesses account for 63% of the country’s total employment.

 

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