Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

( 4595

House Bill No.

Introduced by REPRESENTATIVE ARTHUR C. YAP

EXPLANATORY NOTE

In March 2000, the Philippines passed the Retail Trade Liberalization law to allow the entry
of foreign investment in the retail sector with a view toward stimulating economic growth,
creating more jobs and providing the Filipino consumer with better choices and higher
quality goods at lower prices.

Sadly, in the ten-year period since the passage of the law, the goals of liberalization have yet
to be achieved. Our unemployment rate is at 5.4% as of July 2016, and while a robust retail
trade industry could have been a vehicle for job creation, without such investments, the
opportunity for employment is lessened.

‘These issues need to be addressed by revisiting the Retail Trade Liberalization Law in order
to make the Philippines truly competitive in the world stage. Currently, the law has a
US$2,500,000 capital requirement before a foreign entity may 100% own a retail
establishment. On the other hand, countries like Indonesia and Singapore allow FDI in the
retail trade sector without setting minimum capital requirements and without limits on
foreign equity participation.

These requirements, together with other barriers, have resulted in the Philippines ranking
dead last in terms of having a regulatory regime favorable to foreign investment, behind
Singapore, Vietnam, Malaysia, Thailand, and Indonesia.

Considering that the entry of more market players will mean more job opportunities for the
Filipino, and market competition will lead to higher quality goods and services being
delivered to the Filipino public at lower costs, this bill therefore proposes to do away with
these barriers to foreign investment by removing the equity and capitalization requirements in
the Retail Trade Liberalization law to create a more favorable investment climate in the
country.

Representative


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

595

House Bill No.

Introduced by REPRESENTATIVE ARTHUR C. YAP

AN ACT AMENDING REPUBLIC ACT NO. 8762, OTHERWISE KNOWN AS

THE RETAIL TRADE LIBERALIZATION ACT, AND FOR OTHER
PURPOSES,

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Section 5 of Republic Act No. 8762 is hereby amended to read as

follows:

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“Sec. 5. Foreign Equity Participation. - Foreign-owned
partnerships, associations and corporations formed and organized under
the laws of the Philippines may, upon registration with the Securities
and Exchange Commission (SEC) and the Department of Trade and
Industry (DTD, or in case of foreign owned single proprietorships, with
the DTI, engage or invest in the retail trade business. [, subject to the
following categories:]

[Category A - Enterprises with paid-up capital of the equivalent
in Philippine Pesos of less than Two million five hundred thousand US
dollars (US$2,500,000,00) shall be reserved exclusively for Filipino
citizens and corporations wholly owned by Filipino citizens.]

[Category B - Enterprises with a minimum paid-up capital of the
equivalent in Philippine Pesos of Two million five hundred thousand


US dollars (US$2,500,000.00) but less than Seven million five hundred
thousand US dollars (US$7,500,000.00) may be wholly owned by
foreigners [except for the first two (2) years after the effectivity of this
‘Act wherein foreign participation shall be limited to not more than sixty
percent (60%) of total equity,]

[Category C - Enterprises with a paid-up capital of the equivalent
in Philippine Pesos of Seven million five hundred thousand US dollars
(USS 7,500,000.00) or more may be wholly owned by foreigners
Provided, however, That in no case shall the investments for
establishing a store in Categories B and C be les than the equivalent in
Philippine Pesos of Eight hundred thirty thousand US dollars
(US$830,000.00).]

[Category D ~ Enterprises. speci

ing in high-end or luxury
products with a paid -up capital of the equivalent in Philippine Pesos of
Two hundred fifty thousand US dollars (US$250,000.00) per store may
be wholly owned by foreigners.

‘The foreign investor shall be required to maintain in the
Philippines the full amount of ITS [the prescribed minimum] capital,
OR, IN CASE ANY PART OF THE CAPITAL IS SOLD TO A
CITIZEN OF THE PHILIPPINES, OR TO A PARTNERSHIP,
ASSOCIATION OR CORPORATION OWNED AND
CONTROLLED BY CITIZENS OF THE PHILIPPINES, THE
UNSOLD AMOUNT OF ITS CAPITAL, unless the foreign investor
has notified the SEC and the DTI of its intention to repatriate its capital
and cease operations in the Philippines. The actual use in Philippine
operations of the inwardly remitted [minimum] capital [requirement]
shall be monitored by the SEC,

Failure to maintain the [full] amount of [the prescribed
minimum] capital REQUIRED IN THE IMMEDIATELY
PRECEDING PARAGRAPH, prior to notification of the SEC and the
DTI, shall subject the foreign investor to penalties or restrictions on any

future trading activities/business in the Philippines.


ON OUR ON =

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Foreign retail stores shall secure a certification from the Bangko
Sentral ng Pilipinas (BSP) and the DTI, which will verify or confirm
inward remittance of ITS [the minimum required] capital investment.
Sec. 2. Section 6 of Republic Act No. 8762 is hereby deleted
Sec. 3. Section 7 of Republic Act No. 8762 is hereby deleted
Sec. 4, Section 8 of Republic Act No. 8762 is hereby amended to read

as follows:

“See. 8. Qualification of Foreign Retailers. — (No foreign retailer
shall be allowed to engage in retail trade in the Philippine unless all the
following qualifications are met:

(a) A minimum of Two hundred million US dollar
(US$200,000,000.00) net worth in its parent corporation for Categories
B and C, and Fifty million US dollar (US$50,000,000,00) net worth in
its parent corporation for category D;

(b) (5) retailing branches or franchises in operation anywhere
around the word unless such retailer has at least one (1) store capitalized
at a minimum of Twenty-five million US dollars (US$25,000,000,00),

(c) Five (5)-year track record in retailing; and

(d)} Only nationals from, or juridical entities formed or
incorporated in countries which allow the entry of Filipino retailers shall
be allowed to engage in retail trade in the Philippines.

‘The DTI is hereby authorized to pre-qualify all foreign retailers,
subject to the provisions of this Act, before they are allowed to conduct
business in the Philippines.

‘The DTI shall keep a record of qualified foreign retailers who
may, upon compliance with law, establish retail stores in the Philippine.
[It shall ensure that parent retail trading company of the foreign investor
complies with the qualifications on capitalization and track record
prescribed in this section.]

‘The Inter- Agency Committee on Tariff and Related Matters
Authority (NEDA) Board shall formulate and regularly update a list of


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foreign retailers of high-end or luxury goods and render an annual report

on the same to Congress.

Sec. 5. Repealing Clause. — Republic Act No. 8762, and all laws, decrees,
orders, rules and regulations or other issuances or parts thereof inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.

Sec. 6. Separability Clause. — If any portion or provision of this Act is declared
unconstitutional, the remainder of this Act or any provisions not affected thereby shall
remain in force and effect.

Sec. 7. Effectivity. — This Act shall take effect fifteen (15) days after
publication in two (2) newspapers of general circulation in the Philippines.

Approved,