Nowhere to go but up…

Published June 4, 2018, 12:05 AM

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By Dr. Jaime C. Laya

Accurate or exaggerated, the Philippines’ low rating in the doing business study influence international investment decisions. R.A. No. 11036 is a great move, but its Chinese philosopher Laozi’s first step in a journey of a thousand miles.
Accurate or exaggerated, the Philippines’ low rating in the doing business study influence international investment decisions. R.A. No. 11036 is a great move, but its Chinese philosopher Laozi’s first step in a journey of a thousand miles.

…hopefully, that is. The 2018 World Bank Doing Business Report ranked us number 113 out of 190 economies in ease of doing business. Among our neighbors, Singapore ranked number 2, Malaysia was 24th; Thailand, 26; Brunei, 56; Vietnam, 68; and Indonesia, 72.  Behind us were Cambodia, 135; Laos, 141; and Myanmar, 171. Last year we were no. 99—we were overtaken by 14 economies.

R.A. No. 11032 recently signed by President Rodrigo Duterte should help. The President explained that it’s intended to reduce red tape and requires agencies to process transactions within 3-20 days, mandates LGUs to establish one-stop shops, automate permit and licensing systems, and use online unified application forms.

Actually World Bank rankings are based on ten criteria: ease in starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency.

Thanks, no doubt, to Meralco and PEZA, we ranked high in getting electricity (number 31) and trading across borders (99). However, it is alarming that we ranked poorly in starting a business (number 173 out of 190); enforcing contracts (149); protecting minority investors (146); and getting credit (142).

It seems that starting a business here requires 16 steps and 28 days, compared to three steps and 2.5 days in Singapore, five steps and 4.5 days in Thailand, and 8.5 steps and 18.5 days in Malaysia.

That’s only the tip of the iceberg. Permits are needed to operate, construct, occupy, etc., each of which could require clearances from barangay, environmental, tax (national and local), engineering, zoning, agricultural, legal, fire, health, and other authorities whose initialing and signing functionaries might be on leave, sick, or at meetings, seminars, inspection. Application forms and supporting papers sometimes vanish. Then, too, the three to 20 days deadline starts ticking when required documents are complete.

Our aggregate 2018 ranking on contract enforcement was number 149. Singapore rated 2nd; Thailand, 34th; and Malaysia, 44th.  On a scale of 0-18, the World Bank ranked the quality of our judicial processes at 7.5, compared with Thailand’s 8.5; Malaysia’s 12.0, and Singapore’s 15.0. Our ranking declined from 2017 when we were number 136, which was low enough but we were still overtaken by 13 countries.

The acknowledgement section of the Report cites law and consulting firms among the World Bank’s sources. This gives credibility to the published findings that, bluntly put, declares that the Philippines is in the lowest 25 percent of the world’s economies in terms of living up to signed and sealed agreements. In plain terms, we are characterized as making commitments that we do not fulfill and that much needs to be done in law enforcement and judicial processes.

Accurate or exaggerated, the Philippines’ low rating in the doing business study, highlighting in particular the low scores in startup, contract enforcement, protecting minority (i.e., including foreign) interests, etc., influence international investment decisions. R.A. No. 11036 is a great move, but it’s Chinese philosopher Laozi’s first step in a journey of a thousand miles.

 

Notes: (a) The Report diplomatically ranks “economies” and not “countries” presumably to finesse awkward issues like the status of Taiwan and Hong Kong; (b) The 2018 and 2017 rankings are based on 2017 and 2016 data, respectively, gathered from official statistics and interviews of government officials, law and consulting firm, business people, and other sources; and (c) R.A. No. 11032 is entitled “Ease of Doing Business and Efficient Government Service Delivery Act.”

 

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