The trouble with doing business in the Philippines

ariel nepomuceno_1In the inaugural speech by our President, he ordered all his department secretaries and heads of agencies to refrain from changing the rules, contracts and projects that were already approved previously. He also emphasized the need to reduce the requirements and the processing of all applications from submission to release. The President mandated the removal of all redundant requirements and that the compliance with one department shall be accepted as sufficient for all.

This message was emphatically repeated in his State of the Nation Address when he promised reforms to ensure competitiveness and promote ease of doing business. These policy pronouncements were hailed by the investment community and, of course, the general public, who are awaiting genuine change in their daily lives.

Ease of doing business parameters

But what exactly do we mean by “ease of doing business?” Ease of business is actually an index
published by the World Bank Group. When a country ranking is high, it indicates that an individual or entrepreneur will not find it difficult establishing and running a business when complying with local rules and regulations. There are essentially 11 domains in the usual life cycle of a business. For 2016, the World Bank included the following parameters: starting a business, dealing with construction permits, getting electricity, property registration, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. From a ranking of 97 in 2015, the Philippines is down to 103 in 2016. The biggest changes in rank are reflected in starting a business, construction permits, getting credit and resolving insolvency.

End the red tape and move forward

SO when the President mentioned his abhorrence for red tape, inaction and inefficiency in the regulatory space, it only means that it is time for business to be enabled and empowered by government and not hindered nor blocked. For direct foreign investments to increase and, thereby, create more jobs and usher in economic prosperity for the bulk of our populace, one of the most critical decision points is obviously the
presence of a business environment that promotes a good licensing system, a fair-tax regime and an efficient government bureaucracy that promotes inclusive progress.

Add to these low regulatory risks, a predictable legal system and framework where contracts are respected and a level playing field fostered. As federalism is one of the key cornerstones of the current administration, it would be highly advisable to tackle inconsistencies between local and national government policies and how these would impact on the ease of doing business. The review of the Philippine Constitution and some of its antiquated economic provisions is an excellent opportunity to truly assess whether our legal milieu supports the promotion and protection of investments.

The perfect timing is now. Asean integration is happening and our competitiveness rankings have increased consistently through the years . Likewise, we have seen very good marks in global good governance and corruption indexes and we should leverage on the momentum that we are experiencing right now. A new government always brings hope. This renewed optimism should sustain us in moving forward and upward.


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