HONORABLE
MANNY VILLAR
Chairman
Committee on Trade and Commerce
Philippine Senate
Pasay City

Dear Mr. Chairman:

Thank you for the opportunity to appear before the Senate Trade and Commerce Committee to express the position of the Joint Foreign Chambers on Senate Resolution 476 -- Urging a Review of the Retail Trade Act (RA 8762).

It is particularly appropriate that you are chairing this hearing because the law we are discussing was passed almost 12 years ago in February 2000 when you were serving as Speaker of the House of Representatives.

In summary the Joint Foreign Chambers of Commerce do not believe that Act has achieved its objective of liberalizing foreign ownership in the retail trade sector due to various restrictions it imposes requiring 100% local ownership for most retail businesses with capitalization below USD 2.5 million and other conditions which deter many investors. We have found very few similar restrictions elsewhere in Asia, a situation that results in the Philippines being at a serious competitive disadvantage in seeking foreign investment for medium-sized businesses which should be the backbone of the Philippine economy and employment generation. To rectify this situation we recommend that the current legislation be amended to reduce the threshold at which foreign investment is allowed to the level of the Foreign Investments Act (Republic Act 7042, as amended by RA 8179) and otherwise to remove conditions not found in RA 7042, as amended. Our analysis and commentary on this situation with the current legislation is given in detail below.

Retail trade is one of the most important business sectors in the Philippine economy. Yet the retail sector remains one in which foreign investment is extremely low, because of historical protectionism of the sector and a very limited liberalization policy since 2000 in RA 8762, a law entitled "Liberalizing the Retail Trade Business," which the last decade has proven in practice to have imposed conditions that were anything but "liberal."

Accordingly, today's hearing -- called for the purpose of reviewing whether the current policy is still in the best national interest - is highly appropriate to review whether the sector should remain protected or liberalized more in order to attract more foreign investment, create more jobs, and enhance consumer welfare.

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