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Philippines slips in Doing Business rankings

Posted on October 21, 2011

THE PHILIPPINES is lagging in terms of reforms aimed at making it easier for firms to conduct business, with the country ranking lower in a global comparison made by the World Bank and the International Finance Corp. (IFC).

Results of the latest Doing Business report -- which measures regulations applied to businesses over their life cycle -- placed the Philippines 136th out of 183 economies, down two places from last year’s report, with only one positive reform cited from two previously.

The country’s ranking in previous 2011 report was adjusted from 148th due to data corrections. The Doing Business 2012 also added access to electricity as a new indicator. Singapore was again ranked first.

“The Philippines and Singapore are not reforming as consistently as other East Asian and Pacific economies. In the case of Singapore, it’s clearly because it’s already at the top of the rankings, so there’s nothing much it can do in terms of changing its regulations. It’s a different story for the Philippines, because it still has a lot of reforms to make,” said Hans Shrader, IFC senior program manager, at yesterday’s launch of the publication.

The 2012 report focused on 10 areas of business regulation covering the four stages of the business life cycle: start-up, expansion, operations and insolvency. Specifically, the 10 indicators covered starting a business, registering property, getting credit, protecting investors, enforcing contracts, dealing with construction permits, getting electricity, paying taxes, trading across borders and resolving insolvency. An 11th measure, employing workers, was included as an annex.

The Philippines’ rankings were said to have worsened in seven indicators. Among others, the country was ranked 158th in terms of starting a business, down three places, while the getting credit standing fell ten notches to 126th.

Other drops were recorded for registering property (117th, down eight places), protecting investors (133rd, down two), paying taxes (136th, down nine), construction permits (102nd, down four), and resolving insolvency (163rd, down two).

The latter indicator, however, was where the country was cited as having conducted a reform that made it easier to do business. This was identified as the Financial Rehabilitation and Insolvency Act (Republic Act 10142), which became law last year.

“The Philippines was recognized for one reform on insolvency but it does not contribute to a change in ranking because the effects have not been absorbed by the population yet,” Mr. Shrader explained.

In the Doing Business 2011 report, the Philippines was praised for setting up a one-stop shop at the municipal level (starting a business) and improving its electronic customs systems (trading across borders).

Improved 2012 placings, meanwhile, were noted in terms of enforcing contracts (112th, up two places), cross-border trading (51st, up three) and getting electricity (54th, also up three places using data applicable to the 2011 report).

Overall, the country is still considered to have weak institutions and more expensive regulatory processes. Of the nine ASEAN members included, the Philippines outscored only one, Cambodia, which was ranked a close 138th. The only ASEAN member that was not part of the report was Myanmar.

Guillermo M. Luz, National Competitiveness Council (NCC) co-chairman and private sector representative, said at the press conference: “The consensus is for us to work on the simplicity of our business processes and strengthen our institutions to improve our rankings, but we cannot deal with a single factor at a time.”

“This requires applying reforms in a sustained fashion over time and a holistic approach to our problems, which require coordinated efforts with different agencies and the local government,” he added.

Trade Secretary Gregory L. Domingo, in a text message, said: “This (the latest report) indicates that we have to redouble our efforts throughout government to address areas of concern. The NCC is tasked to orchestrate the improvement of our rankings and NCC has been working hard on specific courses of action to address these deficiencies.”

“I have no doubt our scores will significantly improve in the next survey,” he added.

The NCC, which tracks the IFC Doing Business and the World Economic Forum Global Competitiveness reports, has aimed to put the Philippines in the top 30 or 50 by 2016. -- E. J. Diaz