Applauding two new business-friendly laws

Hopefully, President Duterte would sign into law the Secured Transactions Systems bill soon enough to be able to trumpet two business-friendly laws during the forthcoming State of the Nation (Sona) in July.

Our Philippine GDP, as we know, has been anchored on bullish consumption patterns coupled with intense government spending through the ambitious “Build, Build, Build” program.

It is investment that has been relatively lackluster. The country has one of the lowest direct foreign investments in the Association of Southeast Asian Nations due partly to the uncompetitive “ease of doing business” here. For local investors, it has been the lack of credit facilities in this capital-starved nation.

Our integration into the Asean  has exposed policy-makers to the “Asean Regional Principles for Good Business Registration Practices,” which painfully highlighted how the country is the third slowest in processing business papers (at 28 days) in the Asean, better only than Lao  PDR (67) and Cambodia (90).


While Singapore requires only three steps to file business papers, the Philippines has the worst process at 16 steps — even worse than countries like Indonesia (11 steps) and Vietnam (11 steps). One conjures images of applicant-investors waiting under the scorching summer heat while the governor, mayor, the Department of Environment and Natural Resource and (good gracious) even the barangay captain wants a piece of the action even before approval.

It has come to such an awful point that the Philippines slipped nine notches in the 2018 World Competitiveness Yearbook—the worst decline among Asia-Pacific nations. A shot in the arm, therefore, is the recent signing into law by the President of Republic Act 11032, or “The Ease of Doing Business and the Efficient Government Service Delivery Act”—a virtual amendment of the Anti- Red Tape Act of 2007.

The law mandates the local government units (LGUs) to put up a “single one-stop shop” for business permits (an electronic one in three  years from the law’s passage) providing a single form (instead of many forms) governed by a standardized government deadline of three days for a simple transaction; seven for more substantial transactions and 20 for highly technical ones.

The Department of Information and Communication Technology, in the meantime, will have a central business portal recording all business applications. Likewise, the law mandates the establishment of an Anti-Red Tape Authority under the Office of the President.

Violations, therefore, can easily be documented and reported for sanctions, especially since the law also prohibits any government official from being in contact with the applicant-investor for the registration and other permit purposes.

The happy days of the crooked LGU officials could be nearing their end.

The other legislation—the Secured Transactions  Systems Bill (already passed by the House)—was approved by the Senate last week and is waiting for signature into law and the required implementing rules and regulations.

Many of the MSMEs have suffered stifled growth mainly because of a banking system that puts a premium on hard assets like land and building as collateral for a loan. The new law could provide the answer in terms of perfecting a single electronic registry that can facilitate the use of current assets (account receivables, inventories) movable items like tractors and equipment and even intangibles like a purchase order and intellectual property as bank collateral.

Initiated by the International Finance Corp.-World Bank and backed up by government institutions like the Department of Finance (DOF), Department of Trade and Industry (DTI) and the Securities and Exchange Commission (SEC), the law is expected to be met with enthusiasm by a highly liquid banking system in search of viable clients and a diversified collateral pool.

According to the World Bank, the approval into law will move the Philippines 100 places in the ranking of “getting credit” under the World Competitiveness category. Thus, from the present rank of No. 142 among 190 countries considered, the Philippines can move to No. 42.

Ten years ago when China implemented the movable assets-as-collateral lending mode, some $4 trillion in new loans were generated and now accounts for 45 percent of its total national loan portfolio. Mexico, on the other hand, used its development bank to set up an Account Receivables Finance Platform to service 130,000 applicants with Vietnam reporting 400,000 approved loans for the first four years of operation.

Of course, this is just one of the silver bullets that will ensure wider acceptability of the concept and result in financial inclusion. Rep.  Arthur Yap, chairman of the House Committee of Economic Affairs, says that he sees the erection of a viable insurance system (one that also includes a provision for the vagaries of the weather), a guarantee system and a new Warehouse Receipt Law as antecedents to grow the lending business on movable assets.

The Bangko Sentral ng Pilipinas is also in pursuit of a biometrics-based identification system to cover those without banking records and will soon have a matrix commending banks with a record of good-paying clients rather than the kind of collateral they are holding. The SEC is, likewise, drafting the provisions for the foundation of the Warehouse Receipt facility even as the DOF and DTI have openly endorsed the new bill to be passed into law to help the MSMEs, which contributed 35 percent of the country’s GDP. The Land Registration Authority will provide the unified single collateral registry.

Very clearly, this is one bill that united the private and public sectors in one harmonious voice. Together with the “Ease of Doing Business” law, this will signal a new chapter in the evolution of the road toward financial inclusion amid burgeoning prosperity.


Bingo Dejaresco, a former banker, is a financial consultant, media practitioner and book author. He is a life member and chairman of the Broadcast Media of Finex. His views here, however, are personal and do not necessarily reflect those of Finex. [email protected]


Turning Points 2018
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