Is liberalization a threat or opportunity?

According to IDEA’s Industry Trends, the promise of finally loosening the reins of government protection of local retailers fell short of what RA 8762 or the Retail Trade Liberalization Act has brought. Signed by then President Joseph Estrada on March 2000, RA 8762 repealed RA 1180 or the Retail Trade Nationalization Act, which has been in force since 1954.

Instead of opening the gates for foreign retailers, however, RA 8762 drove them further away as the general investment climate (such as the shifting government policies, ownership caps, and the inefficient bureaucracy) heavily disappointed the big investors. Furthermore, small foreign retailers were effectively barred from entering the country with stringent requirements outlined by the law.

Furthermore, the said report revealed that “in the meantime, in defense of RA 8762, which is the country’s last liberalizing act for the retail industry, the Philippine Amalgamated Supermarkets Association, in fact, was hoping to prevent the entry of small foreign retailers, commenting that the latter could give rise to issues such as dumping of cheap products and unsafe goods in the domestic market.

Retailing is one of the most dynamic and competitive industries in the Philippines, but there is much room for growth. Foreign investors, when allowed to access the domestic market, will not only rake in more products but also drive the competition up a notch and possibly bring down prices. The government may likewise turn its eyes on tourism because with more tourists in the country, local products could be marketed as souvenirs.

With proper regulations and policies, local licensed retailers can also sell foreign products to foreigners at a lower price than when bought abroad. Caution, however, must be observed. In times of crisis, retailers must be aware that consumers will choose to cut expenses on non-basic commodities and suspend purchase of appliances and other durable goods. Nevertheless, the upcoming Christmas season may be seen as an opportunity for retailers as consumer expenditure peaks and remains high until early next year”.

Finally, “the robust competition in the retail trade industry is benefiting both consumers and producers. It can be expected that the industry will maintain its rapid growth with the trend it is currently exhibiting. The most significant change in landscape would most likely come from liberalization and increased openness to foreign players. It is also expected that increasing consumption expenditure and demand will be taken advantage of by suppliers. The decreasing number of total retail establishments could be taken in a positive light: that small retailers are now amalgamating to form bigger establishments that cease to specialize in one sub-sector but instead extend to cover more services and retail options” according to the same published report.

Incidentally, IDEA’s Industry Trends, is a regular digest produced by the Institute for Development and Econometric Analysis, Inc. (IDEA) whose Chairman, Dr. Cayetano W. Paderanga Jr., is my former President/CEO.

For credit & collection (C&C) questions, comments and rejoinders you want to share or inquire, you can reach him at 0917-7220521 or at [email protected]