THE Department of Finance (DOF) believes a new law expanding the access of micro, small and medium enterprises (MSMEs) to lending facilities may improve the country’s current ranking in the latest World Bank’s Doing Business Report.
Ranked 95th in the “Doing Business 2020 Report,” the Philippines jumped 29 notches from its previous 2019 ranking of 124 out of the 190 economies the World Bank included in its study. The Philippines received an ease of doing business, or EODB, score of 62.8 in the 2020 report, an improvement over its grade in the previous year of 57.68.
DOF officials pointed to Republic Act (RA) 11057, or the Personal Property Security Act (PPSA) as having helped propel the Philippines to a higher ranking in the Doing Business 2021 report.
“With the PPSA in place, MSMEs can register their movable assets, such as inventory with the LRA [Land Registration Authority] and use those assets as collateral in accessing formal sources of financing,” Finance Secretary Carlos G. Dominguez III said.
Dominguez’s tone is markedly different with last year’s EODB report whose results the government “strongly” objected to.
In a joint statement, the DOF and the Department of Trade and Industry expressed their “strong objections” to the WB’s Doing Business 2019 report, which saw Manila drop to 124th from 113th. In a strongly worded letter, they demanded that the Washington-based lender review the country’s rating and to make corrections immediately.
This year’s result saw the Philippines being included in the list of 42 economies that improved its EODB score the most. The 2020 report said the Philippines was able to implement regulatory reforms in three or more of the ten indicators included in this year’s aggregate EODB score.
Finance Undersecretary Gil S. Beltran said it is easier to start a business in the Philippines after the minimum capital requirement for domestic companies was abolished.
He added it is now also easier to secure construction permits after the state issued policies improving coordination and streamlining the process for obtaining an occupancy certificate. Theses policies also strengthened protection to minority investors by requiring greater disclosure of transactions with interested parties and enhancing director’s liability for transactions with interested parties.
The reforms cited in the EODB 2020 report were implemented from May 2018 to May 2019.
Dominguez said the PPSA was included among the reforms presented to the World Bank’s EODB team for the 2020 report. However, the law’s IRR have yet to be completed at the time of submission.
The government deferred the implementation of the law until the establishment and operation of an electronic registry where notices of security interest and a lien in personal property may be registered.
The World Bank’s Doing Business assessment measures the processes for business incorporation, getting a building permit, obtaining an electricity connection, transferring property, getting access to credit, protecting minority investors, paying taxes, engaging in international trade, enforcing contracts and resolving insolvency.
Image credits: Roy Domingo