The TEMU Effect: Why Filipino Businesses Are Failing and How the Government Can Stop It

An Open Letter to the Philippine Government: The Unseen Economic Threat of TEMU and a Call for Urgent Action

Attention: The Honorable Senators and Representatives of the Republic, with a special appeal to Senator Juan Miguel Zubiri
Senator Zubiri, your recent comments on the struggles of mall businesses and the role of online gambling are a welcome acknowledgment of the retail sector's pain. However, as local sellers from both online and brick-and-mortar stores, we must bring a more critical issue to your attention—one that is causing a far more devastating and widespread impact. The real, systemic threat to our businesses, our livelihoods, and the very foundation of our economy is the aggressive and unchecked operation of a single platform: TEMU.

We are calling on the Philippine government to initiate a serious investigation into TEMU and to immediately implement a strategic foreign policy, similar to those that saved domestic markets in Indonesia and Vietnam. We do not need to alter the balikbayan box privilege, which is a cherished lifeline for millions of our kababayans. Instead, we must create a separate, targeted policy that addresses the predatory practices of cross-border sellers and restores fair competition.

The Domino Effect: A Tale of Two Sellers

The current situation is a race that local sellers, both online and in malls, are destined to lose. The numbers tell a clear story:

• The Local Seller's Burden: We, the Filipino entrepreneurs, operate under a heavy and complex financial burden. We purchase our stock, often from China, at a wholesale cost. Using your example of a metal detector, we might buy it for PHP 5,000, and that's before shipping, customs duties, and a 12% VAT. We then have to add our operational costs—marketing, labor, local shipping, and a significant percentage in platform fees from local marketplaces like Shopee or Lazada. This makes it impossible for us to sell a product for anything less than a competitive retail price, which can easily be double our initial purchase price.
  
  
• The TEMU Seller's Advantage: TEMU's business model flips this on its head. The TEMU seller is a manufacturer or a major distributor in China. They sell directly to the Filipino consumer, eliminating every single middleman. By exploiting the de minimis rule for small, individual shipments, they bypass the very taxes and duties that we, local sellers, must pay. Your example is a perfect illustration: I buy a product for PHP 5,000 plus costs, and TEMU can sell the same item for PHP 5,000 or even less because they are the source and are not encumbered by our local tax system. Their prices are not just low; they are predatory.

This isn't an exaggeration. The impact on our economy is a domino effect. As TEMU invests billions in aggressive advertising, capturing a massive audience with unbelievably low prices, local sellers are forced to close their shops. This isn't just happening online; it is directly impacting the foot traffic and sales in our malls. Why would a customer pay a premium at a mall when they can get the same or a similar product for a fraction of the cost from TEMU?

Unlike Lazada, Shopee, and TikTok Shop, which have thousands of Filipino sellers providing jobs and contributing to our economy, TEMU has virtually no local sellers. This means every peso spent on TEMU is a peso that leaves the country, bypassing our tax system and hurting our local businesses.

A Call for a Replicable, Strategic Solution

The U.S. approach, while valid, is not a model we can feasibly adopt. However, Indonesia and Vietnam have shown us a clear and effective path forward that is within our reach:

• Mandate Local Registration and Compliance: The government, through the Department of Trade and Industry (DTI) and the Bureau of Internal Revenue (BIR), must mandate that TEMU and all other cross-border platforms register as official business entities in the Philippines. This simple act will subject them to the same tax laws and regulations that local sellers abide by, including paying a percentage of their sales in VAT and other applicable taxes.
  
  
• Impose a "Parity Tax" on Cross-Border Sellers: To directly address the price imbalance, the government should consider imposing a new policy that adds a fixed percentage "cross-border tax" to all foreign-sourced, non-essential goods sold on these platforms. This add-on tax would level the playing field, making the final prices of TEMU products more comparable to those of local sellers.
  
  
• Investigate TEMU's Business Practices: We urge the government to launch a formal investigation into TEMU's business model. This investigation should examine how the company utilizes its direct-from-manufacturer model to undercut local sellers, and whether its products meet Philippine safety and quality standards. The findings should be made public to inform consumers of the risks they are taking for the sake of low prices.

Senator Zubiri, your call to investigate the struggles of our malls is an opportunity to get to the root of the problem. We implore you to expand this investigation beyond online gambling and to focus on the seismic economic shift caused by platforms like TEMU. The thousands of Filipino entrepreneurs whose shops are closing, whose investments are failing, and whose livelihoods are at risk are not just statistics; they are the heart of our economy. The time for the government to step in and protect us is now.