By Jovee Marie N. dela Cruz & Catherine N. Pillas
THE country’s plunge to near-bottom in the World Bank’s Ease of Doing Business (EODB) ranking prompted a readjustment of target and the enactment of a law as panacea to the fetters of doing business in the Philippines.
Likewise, officials of the National Competitiveness Council (NCC) is looking at speeding up the automation of processes to make doing business in the country easier.
Unfazed by the recent drop in rankings in the World Bank’s EODB Report, the NCC has readjusted its target to getting into the top 20 percent of economies.
The NCC, cochaired by the Department of Trade and Industry (DTI), previously aimed to have the Philippines land on the list of top-20 economies.
“That’s still the target, at least top 20 percent,” Trade Secretary Ramon M. Lopez told reporters on Thursday. “What we see is that we should be hitting that number at least before the present administration finishes. Hopefully by 2020, but the latest is 2022.”
“Asean is one of the most competitive regions, and our competitors are already there in the top 20 percent,” added NCC Private Sector Cochairman Guillermo Luz. “We want to be on a par with them.”
Target shift
ACCORDING to the NCC chairmen, the readjustment of targets signals a shift in mind-set from incremental improvement to a “leapfrog” improvement.
The Philippines plunged by 14 spots in the World Bank’s EODB report for 2018, from the 99th spot last year to 113th spot among 190 economies polled.
In its EODB report, the World Bank looks at 10 indicators involved in setting up an enterprise in a country, such as starting a business, dealing with construction permits, getting electricity and so forth.
Luz explained the Philippines dropped several rungs because the World Bank rejected the majority of 17 government reforms for the related indicator that the country submitted for the report.
Only three government reforms under the “Getting Electricity” indicator were accepted by the World Bank. Other government initiatives under “Registering Property,” “Getting Credit” and “Dealing with Construction Permits” were rejected.
Luz also blamed the Philippines’s lackluster ranking to the combination of change in methodologies used by the World Bank and improvements by other economies.
Automation aims
ACCORDING to Lopez and Luz, automation holds the key for the country’s getting into the top 20 percent. “We have to look [at] automation now if we want to move from the incremental mind-set to leapfrogging,” Lopez said.
In securing permits to set up a business, there has to be a move on migrating these online or managed via mobile devices, he added.
In December Lopez said the government would be able to link all agencies involved in setting up a business, such as the DTI, Securities and Exchange Commission, Bureau of Internal Revenue, Social Security System, PhilHealth, etc. The DTI chief added the requirements of these agencies would be placed in a single online portal.
“Moving forward, in the medium term, like in two to three years, we can look at goals, such as a one business-number system or a one-form system,” Luz added.
This year the Philippines improved in one indicator—“Paying Taxes”—but lagged in nine others. The country lagged in the “Starting a Business,” “Dealing with Construction Permits,” “Getting Electricity,” “Registering Property,” “Getting Credit,” “Protecting Minority Investors,” “Trading across Borders,” “Enforcing Contracts” and “Resolving Insolvency” indicators.
The report surveys businesses in a single city per economy across the world, with Quezon City as the Philippines’s representative city. The findings are a result of a survey of roughly 150 consultants, lawyers and businessmen.
HB 6579
THE drop in the ranking in the EODB prompted Rep. Henry C. Ong of the Second District of Leyte to urge for the passage of the proposed EODB Act when session resumes this month.
“I am deeply concerned about the significant slippage in the Philippines’s ranking in the latest [EODB] report of the World Bank,” Ong, also the vice chairman of the House Committee on Banks and Financial Intermediaries, said on Thursday. “The Philippines’s latest results are disappointing.”
The lower chamber has already approved House Bill (HB) 6579 on second reading last month. The Senate already passed its version of the bill (“Expanded Anti-Red Tape Act of 2017”) on third and final reading.
The leadership of the lower chamber said it expects HB 6579 to be approved on third reading when Congress resumes on November 20.
“Good news first: The Philippines ranks 31st among 190 countries evaluated mainly because it takes only four procedures [to put up a business],” Ong said. “Now the bad news: The glaring effects of our legendary bureaucratic red tape are revolting!”
The Philippines ranked 173 on starting a business, 101 on dealing with construction permits, 114 on registering property, 105 on paying taxes and 149 on enforcing contracts, according to the lawmaker.
With this, Ong said local governments and national agencies “must do much, much more than they are doing now.”
Costs cited
BASED on the EODB report, the Philippines garnered a score of 68.88, which was lower than the East Asia and Pacific regional average score of 82.32.
Data from the World Bank showed it takes an average of 28 days to complete 16 procedures in starting a business. This process is estimated to cost a businessman at least P21,923.
The cost depends on variable amounts that will depend on a business’ authorized capital stock, paid-up capital, the assessed value of the company’s property and the local government where the business is being set up.
The Philippines also ranked low in terms of enforcing contracts (149th), protecting minority investors (146th), getting credit (142nd) paying taxes (105th) and dealing with construction permits (101st).
The World Bank said the data was obtained between June 2016 and June 2017. It measures 190 economies worldwide and documented 264 business reforms.
The Philippines is the 12th-largest population and the 43rd-largest economy in the world. The country ranks as the second-most favored destination for foreign direct investments in Southeast Asia.
However, Rep. Luis Raymund F. Villafuerte Jr. of the Second District of Camarines Sur lamented that it still takes 24 procedures to build a basic physical establishment in the country compared to East Asia and the Pacific’s average of 15 procedures.
“Worse, it takes 16 procedures and 28 days to start a business compared to the region’s average of seven procedures and 23 days,” said Villafuerte, who is also the vice chairman of trade and industry committee and one of the authors of HB 6579.
New Commission
HB 6579 coauthor and Rep. Ferjenel Biron of the Fourth District ofIloilo, said the proposed bill is needed to simplify issuances of licenses, clearances or permits to business entities.
“The purpose of this bill is to provide an easy, simple, straightforward and trouble-free avenue for entrepreneurs, micro, small and medium businesses and ordinary citizens who would like to venture into business in the country,” said Biron, who is also chairman of the House Committee on Trade and Industry.
The substitute bill calls for the creation of an EODB Commission. This body is expected to continue the review and repeal of existing executive issuances and recommend the repeal of existing laws and local ordinances that are outdated, redundant and add undue regulatory burdens to business entities.
The commission shall be composed of a chairman, the secretaries of finance and trade as ex-officio members and one private-sector representative each for the micro-, small- and medium-enterprise and large-industry sectors.