WHEN global brands enter a new market, they bring in two things—job opportunities and wider options for consumers.
However, their entry also means intense competition among local players.
The country’s plan to open up the retail market to global players is seen to benefit Filipino consumers, said a study by Colliers International Philippines.
The research firm believes that the proposed liberalization of entry of foreign retailers is “a step in the right direction,” as more foreign brands can enter the food and beverage (F&B) and home furnishing categories, which are dominated by local players.
F&B and hotels are among the fastest-growing consumer spending sub-segments in the country, according to the Philippine Statistics Authority (PSA).
By attracting more investments, foreign players’ entry would result in job generation among Filipinos and a decrease in consumer prices.
The government is planning to lower the paid-up capital requirement for foreign retailers setting up shop in the country to $200,000 from $2.5 million.
This, however, was opposed by the local retail industry, which says the move would hurt the micro, small and medium enterprises (MSMEs), considered the backbone of the economy.
In Metro Manila alone, the food and beverage mix has already seen foreign brands such as Denny’s Diner, Paradise Dynasty, Wolfgang’s Steakhouse, Harry’s, and Pink’s Hotdogs. Sarabeth’s, a popular bakery from New York, is reportedly opening a branch in the country’s capital while Wolfgang’s opened a new branch in the Podium mall. New York’s Magnolia Bakery recently opened a branch in Bonifacio Global City, the first in Southeast Asia.
These brands are seen to branch out in other urban centers in the Philippines, particularly Cebu, said Colliers.
Philippine Retailers Association (PRA)-Cebu chapter president Robert Go said the retail industry is facing a tougher challenge, as the entry of foreign brands will challenge the survival of MSMEs, already dealing with issues of the high cost of doing business.
He cited prime spots in malls, which are reserved for foreign brands, leaving areas with less foot traffic for local brands.
Go said the government has to arrive at a win-win situation without compromising the potential growth of MSMEs.
Citing the country’s record-setting foreign direct investment (FDI) inflows in 2017, Sen. Sherwin Gatchalian vowed to continue to champion the passage of Senate Bill 1639, which seeks to remove the existing equity and capitalization requirements provided by the Retail Trade Liberalization Law of 2000 (Republic Act 8762).
He said the restrictions provided by the law have kept the Philippine retail trade sector from reaching its full potential in driving inclusive economic growth and stimulating job creation.
Gatchalian said only 25 foreign retail firms have invested in the country during the 18 years since the passage of RA 8762.