‘Doing business now harder’
AFTER experiencing declines in nine out of 10 indicators, the Philippine ranking dropped three notches to 144 out of 183 economies in the International Finance Corp. (IFC) Doing Business 2010 Report.
The Philippines, however, could be seeing an improved ranking next year after the IFC noted several positive developments in key regulations in the Philippines that would be factored in for the 2011 report, such as the lowering of the corporate income tax (CIT), the enactment of the credit information system law, and the prenegotiated reorganization for businesses.
The IFC report is focused on measuring the ease of doing business for domestic small and medium enterprises (SMEs) and uses 10 indicators: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
The Philippines slipped in all indicators except in the area of closing a business, where the country maintained its previous-year ranking of 153.
Kim Jacinto-Henares, senior private-sector development specialist of IFC-World Bank, said while the Doing Business Report is focused on local SMEs, the study is critical because it is among the first tools that foreign investors will find in determining the business atmosphere in a particular country.
“They would already make an assessment if the Philippines is a country that they would like to go into. We also have a survey on labor, which is important for investors, contract and closing a business. There are indicators here that are relevant even if you are a foreign investor,” she said.
Also, since supply chain is important for big investors, the study will give them an idea if the economy in a country is robust enough to encourage entrepreneurship.
Henares said the Philippine continues to lag behind its neighbors in the ranking, with Singapore, Thailand and Malaysia emerging in the Top 30 at No. 1, No. 12 and No. 23, respectively.
Indonesia, however, made the most reforms among Southeast Asian economies, allowing it to move up to 122 from 129, the IFC noted.
Between July 2008 and June 2009, the IFC said 131 of 183 economies reformed business regulations.
The Philippines was cited by the IFC for the decrease in CIT from 35 percent to 30 percent, although this will only be recognized in the 2011 Report. For the Credit Information Act, Henares said the IFC is still waiting for its actual implementation.
Seven of the 10 indicators concern the national government, and only three are for the local government units (LGUs).
Meanwhile, Mandaluyong Mayor Benjamin Abalos Jr., president of the League of Cities of the Philippines, said Metro Manila mayors have signed a covenant that harmonize and standardize business-permit application, reduce the steps of processing to an average of seven from 19, and reduce the days of processing.
Trade Undersecretary Zenaida Maglaya said the DTI is now helping all local government executives in the country to emulate the initiatives of the Metro Manila mayors in simplifying procedures.
Henares said the simpler the procedure, the simpler it is for businesses to comply, consequently encouraging more entrepreneurs to formalize.
“More business in the formal sector helps the government in its finances because the revenue becomes predictable. It helps in consumer protection, public safety can be properly taken care of, labor becomes more protected, and services will be delivered better because LGUs will have more funds. We want to encourage formality by simplifying regulations,” she said.
William Trant Beloe, head of IFC’s advisory services here, said the Philippines needs to continue reforming because, in the end, what is relevant for business is what is really going on behind the scenes.
“Look at other countries that get good marks, stay proactive and continue pushing forward. The countries that need to reform know that they need to reform and they are [reforming],” Beloe said.
Source: Max V. de Leon
