Kudos to the National Competitiveness Council (NCC) and the Asian Institute of Management (AIM) Policy Center for partnering with the World Bank Group’s International Finance Corp. (IFC) in putting together a report on doing business in the Philippines, with emphasis on how big cities can actually improve their respective business environments by improving on regulations affecting business and property registration, as well as licensing.

After all, unless areas for possible improvement are bluntly revealed in an independent and nonpartisan report, many local executives tend to prioritize practical initiatives that are more in aid of reelection rather than overall growth of the city economy. And this is unfortunate, for beyond real property taxes, towns and cities make most of their income from business taxes as well as local licenses and permits.

By looking into areas where cities can improve their regulation, particularly in starting a business, issuing licenses and registering property, the new competitiveness report from IFC can help localities move to attract more investments, encourage and support business and thus improve their overall capacity to generate income. All in the hope that such initiatives can also translate to better infrastructure and public services that benefit city residents. And what better way to aid reelection, really. As noted by Bert Hofman, World Bank country director, “Cities that do well in creating a good business climate are also likely to do well in poverty alleviation.”

In explaining the rationale for the Doing Business report, Federico M. Macaranas, executive director of the AIM Policy Center and core member of the NCC, noted: “Doing Business in the Philippines is a diagnostic tool that provides actionable information for designing and implementing reforms to guide local officials in creating competitive environments to attract new investments.”

In a statement, the IFC said the Doing Business report covers 21 cities and three areas of regulation —starting a business, dealing with licenses, and registering property. It also noted city regulations and the interpretation and implementation of national laws varied greatly, thus either constraining or promoting local business activity. Cited as example was Mandaluyong City, where it took three weeks to transfer a property title, compared with six weeks in Mandaue City in Cebu. Also, it requires 23 procedures to build a warehouse and connect basic utilities in Taguig City, but 33 procedures to do the same in Pasig City.

Aside from the IFC, AIM Policy Center and NCC, the Doing Business in the Philippines 2008 report was also supported by the Australian Agency for International Development and the Canadian International Development Agency. It was based on the efforts of more than 200 lawyers, accountants, architects, contractors, engineers, property specialists and national and local public officials. It compared 21 cities against each other, and with 178 economies around the world. It covered 15 cities in Metro Manila, three cities in the Visayas (Cebu, Lapu-Lapu and Mandaue), Davao City in Mindanao and Tanauan City in Batangas in Southern Luzon.

The report highlighted two very important findings: (1) business regulations and their enforcement vary widely across Philippine cities. Even while all local governments share the same legal and institutional framework, they also “interpret and implement national regulations differently,” and (2) much reform, both at the national and local level, is needed to reduce the high number of procedures to start a business, deal with construction-related activities and transfer a property title across Philippine cities. Although most procedures can be completed relatively quickly, the large number of them “increases the hassle for businesses and creates opportunities for corruption.”

And this is the crux of the matter, really. Issues relating to bureaucratic red tape naturally result in creating opportunities for discretion, and thus, possible corruption. Anybody with experience in putting up a business, or registering a property, or securing a license or permit from either a national or local agency, would attest to having dealt with corruption one way or the other. For that is the unavoidable circumstance of dealing with regulators not only in the Philippines but in many other countries, as well.

Unfortunately, the well-intended Doing Business report appears to have intentionally excluded this issue, perhaps as its authors prepare a more comprehensive analysis of the situation for release in the future, and recommend possible reform areas to deal with this particular phenomenon.

Invariably, the pace and ease of doing business in the Philippines can be predetermined not by the number of procedures or the legal framework for regulation. Reducing the number of procedures can simply mean dealing with fewer people, and thus fewer people to pay off. One-stop shops can also mean centralizing the corruption, with a sign on the lead person’s desk clearly and truly stating that, “The buck stops here.” In this part of the world, business-friendly can simply mean easy to talk to, as long as you bring money. 

Comments to matort@yahoo.com

On Thursday, Manila Electric Co. (Meralco) stocks closed at P63 per share—the lowest in 52 weeks. The electricity distributor’s share price actually hit P60, but bargain-hunters raised it a bit just before the end of trading.

Kudos to the National Competitiveness Council (NCC) and the Asian Institute of Management (AIM) Policy Center for partnering with the World Bank Group’s International Finance Corp. (IFC) in putting together a report on doing business in the Philippines, with emphasis on how big cities can actually improve their respective business environments by improving on regulations affecting business and property registration, as well as licensing.

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