The heads of the Philippine Chamber of Commerce and Industry (PCCI) have warned the government’s economic team to tread lightly on the suggestion to lower the minimum retail capitalization for foreign investors from the current $2.5 million to $200,000.

They noted that such an amount will attract foreign micro and small retailers into the country and crowd out the already struggling local micro and small enterprises.

“We’ve been flooded by questions from our members, and we don’t know how to answer it. We still don’t have the details. What I’m saying is, if you don’t have sufficient reason to lower it, then why do it?” PCCI Chairman Sergio R. Ortiz-Luis Jr. said, as he questioned the announcement made last week by Socioeconomic Planning Secretary Ernesto M. Pernia that the retail sector will be liberalized further. PCCI President George T. Barcelon pointed out that a minimum paid-up capital of only $200,000 may attract foreign investors who will just make the Philippines a testing ground and really have no long-term plans to contribute to the economy.

“We do want to attract investments, but let’s be prudent in the sense that we want to attract the legitimate companies with substantial capital and technology to come in,” Barcelon stressed. 

Ortiz-Luis added that having a higher minimum foreign investment cap will attract the strategic foreign investments with accompanying technology and innovation in the retail space. The smaller retail players, he said, will just be unnecessary competitors. 

“[That] $200,000 for foreign investors is the capitalization of their micro businesses. Foreign retailers that will come in here will probably borrow that money here, too, and crowd out our small and medium businesses. It’s difficult enough that our entrepreneurs have problems in locations and credit, why crowd them out too?” the PCCI chairman emphasized.

Pernia earlier said the planned lowering of ceiling for foreign retail investments will form part of the shortened list of economic activities and areas reserved for Filipinos due to be out by year-end. Pernia reasoned this will be an incentive for local businesses to ramp up their competitiveness. It will also benefit Filipino consumers. The Philippines’s Retail Trade Liberalization Act spreads foreign participation in retail activity into four categories. 

Category A, covering enterprises with a minimum paid-up capital of less than $ 2.5 million, is closed to any kind of foreign equity and is reserved to Filipinos.  Category B is for enterprises whose capitalization exceed $2.5 million, but less than $ 7.5 million, and may be fully foreign owned. Category C raises the minimum to $ 7.5 million, while Category D imposes the $ 2.5-million requirement on a per-store basis for enterprises selling high-end and luxury products. 

The government is required to issue a Foreign Investment Negative List every two years. Pernia is eyeing to come out with the first under the Duterte administration before the end of 2017.  

Source: https://businessmirror.com.ph/planned-lowering-of-minimum-capital-for-foreign-retailers-to-make-local-enterprises-suffer-pcci/