Drilon: Amend retail trade liberalization law to stop ‘Cha-cha train’ in House

MANILA, Philippines — Senate Minority Leader Franklin Drilon has called for the immediate passage of a bill amending the Retail Trade Liberalization Act, saying this would take off the “steam that powers the Charter Change train” in the House of Representatives.

According to Drilon, the proposal to amend the Retail Trade Liberalization Act aims 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.

“The immediate passage of this law will remove the steam that powers the Cha-cha train in the House of Representatives,” Drilon said during Tuesday’s plenary session as the Senate tackled Senate Bill No. 1840.

“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.”

“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,” he added.

The House is currently holding plenary debates on the proposed economic amendments to the 1987 Constitution.

The lower chamber is tackling Resolution of Both Houses No. 2 filed by Speaker Lord Allan Velasco.

Under the Resolution of Both Houses No. 2, the phrase “unless otherwise provided by law” would be added to the constitutional restrictions that limit the participation of foreign investors in the governing body of entities based on their proportionate share in the capital.

The same phrase would likewise be added to provisions saying only Filipino citizens can control, own, and/or lease public utilities, educational institutions, mass media companies, and advertising companies in the country.

“The proposed Cha-cha in the House of Representatives simply seeks to add the phrase ‘unless otherwise provided by law’ to address the so-called economic provisions of the Constitution,” Drilon pointed out.

“But 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,” he added.

‘Foreign investment roadblocks’

Drilon, the principal author of the trade liberalization bill, said the passage of the measure “will address a number of foreign investment roadblocks.”

He noted that 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, he said, removes the investment categories and sets a minimum paid-up capital investment equivalent of US$300,000 in Philippine peso for foreign retailers.

Drilon then lamented that even after over 20 years since the passage of the Retail Trade Liberalization Act, the Philippines “still has a very poor retail trade investments portfolio.”

“Like an ostrich, for 66 years, we have buried our head in the sand, refusing to fully recognize that retail trade liberalization is not bad as an economic policy,” he added.

Further, Drilon said the country continues to adhere to the same “protectionist policy” under the 1954 Retail Trade Nationalization Law despite the passage of the Retail Trade Liberalization Act in 2000.

This resulted in the Philippines lagging behind in terms of foreign investments, he pointed out.

Since the enactment of the trade law, Drilon said the share of wholesale and retail trade to total net foreign direct investments (FDI) indicates that net investment inflows to the Philippines have been “very minimal” with an average annual growth of only 5 percent.

The minority leader also said that over a five-year period – from 2012 to 2016, Southeast Asian nations receive an average of US$17 billion in foreign retail sector investment.

The share of the Philippines during the same period averaged $107 million or 0.006 percent, he noted.

In 2016 alone, Drilon said the Philippines received only US$101 million in foreign retail sector investment while Thailand had $3.2 billion; Malaysia, $2.5 billion; Indonesia, $2 billion; and Vietnam, $2 billion.

On the other hand, Singapore received over $8 billion, which the senator said is almost more than all other Southeast Asian economies combined.

Singapore has no restrictions on foreign investment in retail and enjoys a per capita income of US$88,000, he said.

As of 2021, there are only 46 foreign retail corporations registered with the Department of Trade and Industry, or a growth of two retailers per year since 2000, according to Drilon.

The amendment to the Retail Trade Liberalization Act is among the identified 11 priority measures by the Legislative-Executive Development Advisory Council, Drilon said.

KGA