IT’S more difficult to do business in the Philippines than in Sudan, Syria or even the West Bank and Gaza, according to the World Bank and its private-sector arm International Finance Corp. (IFC)
While many countries have improved their respective business climates, the Philippines seems to be at a standstill, slipping two notches to No. 136 in the latest Doing Business Report 2012 from last year’s rankings. There were a total of 183 economies included in the World Bank-IFC report.
Palace officials appeared to take the report in stride.
The World Bank study might have “overlooked” the work that the Aquino administration had done so far in improving the business climate, said Secretary Ricky Carandang of the Presidential Communications Development and Strategic Planning Office.
“As a general rule, we are doing what we can to try to improve the business climate. The World Bank study indicates we still have some work to do on this. But investors can rest assured that we’re working on it.”
Resolving insolvency is particularly difficult in the Philippines, which was ranked No. 163 in this category. Starting a business is also not easy as shown in its No. 158 standing.
Also cited was the slow and tedious process of instituting reforms to improve the Philippines’s business environment.
The Philippines ranked the highest in terms of trading across borders (No. 51 overall) and getting electricity (No. 54).
But compared with its 2011 scores, the biggest decline was seen in the accessibility of credit, where the Philippines plunged 10 notches to No. 126. In the area of paying taxes, the country dropped 9 notches to No. 136, while in terms of registering property, there was an 8-notch drop to No. 117. Securing construction permits also became more difficult, with the country sliding to No. 102 from No. 98 in the previous report.
“While the Philippines has passed several laws and initiated programs to improve its regulatory environment, it is imperative that implementation has to happen more quickly and in full,” Jesse Ang, IFC resident representative in the Philippines, said in a briefing on Thursday.
“In particular, improvements such as setting up the Credit Information Corp. and fully operating the Philippine Business Registry, have to be sped up to make a real difference for domestic entrepreneurs,” he said.
The only reform that was recently instituted to improve the country’s business climate was the Financial Rehabilitation and Insolvency Act (FRIA) in 2010. But the law does not play any role in the 2012 rankings as it was not yet included in the survey.
During Thursday’s presentation of the report, IFC Senior Operations Officer Hans Shrader explained that the FRIA has not yet been practiced by the sample population used in the survey, thereby; negating any positive impact it may have on the country’s ranking.
While the Philippines was not alone in terms of the slow pace of reforms, Shrader said speedy but well-thought of solutions to addressing bottlenecks in doing business should be crafted by the government.
Because of this, the Philippines was only able to eclipse Cambodia, Laos and Timor Leste among Southeast Asian countries in the rankings. Cambodia was at No. 138, just two notches below the Philippines, while Laos was at No. 165 and Timor Leste at No. 168.
Singapore topped the latest Doing Business survey followed by Hong Kong, New Zealand, the United States and Denmark.
Among Asean members, Thailand was at No. 17; Malaysia at No. 18; Brunei Darussalam at No. 83; Vietnam, No. 98; and Indonesia, No. 129. There were no data on Myanmar.
“The Philippines and Singapore have not been reforming as fast as others. Singapore is not reforming simply because its already No. 1, and it has been No. 1 in the rankings for a number of years. Unfortunately the Philippines has also been slow to enact reforms, slower than its neighbors, Malaysia, Indonesia, and then China [ranked No. 91],” Shrader said.
In Malacañang, Carandang said that as far as the government was concerned, there have been “concrete developments” in its effort to improve the business climate.
“Nevertheless, if that’s their assessment, even though that we have claimed that there have been improvements and even though they might have been overlooked, the message has been received and we are working on it,” Carandang said.
He expressed confidence that government efforts “will bear fruit” in the next Doing Business report.
The country’s ranking was affected not only by the performance of the country but also the changes in making the report. The Doing Business survey now made “Getting Electricity” a separate indicator and for the Philippines, the proxy city was changed to Quezon City from Manila.
The change in proxy city was suggested by the government, since the report aims to measure how easy it will be for small and medium enterprises (SMEs) to open a business, conduct business, and close a business.
This is done through 10 indicators, starting a business, dealing with construction permits, getting electricity, registering a property, getting credit, protecting investors, paying taxes, trading across boarders, enforcing contracts and resolving insolvency.
Chad was at the bottom of the list, followed by Central African Republic, Republic of Congo, Eritrea and Guinea.
The World Bank said around 14 of the Asia-Pacific region’s 24 economies improved business regulations in the past year. The Solomon Islands, Tonga, Vanuatu and Malaysia improved in three or more areas measured by Doing Business.
Malaysia rose five places in the global ranking, to No. 18, by implementing regulatory reforms—including a new one-stop shop for start-ups, computerization of commercial courts, and improved insolvency proceedings. Brunei’s rank climbed to No. 83, partly because the country made it easier for businesses to get an electrical connection.
The Doing Business report analyzes regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and resolving insolvency. The aggregate ease of doing business rankings are based on 10 indicators and cover 183 economies.
(With Mia Gonzalez)
