A STEP TOO SMALL

The Philippine Star
04/13/09

If there is anything worth highlighting about the Philippines in the latest World Bank publication “Doing Business” that compares government regulatory initiatives and standards in 181 countries, it is the fact that we have advanced in our efforts with regards helping businesses in their export and importing needs.

In the 211-page cover-to-cover report, the Philippines is cited specifically for having introduced new scanners in port operations, thus reducing the level of physical inspection. Also given special mention is the introduction of value added service providers that traders may employ to electronically submit customs declarations.

But that’s about all. No wonder, by having done so little (or almost nothing at all), we have found ourselves slipping four notches below the 136th rank in 2007 to 140th last year.

Measuring ease of doing business

The document “Doing Business” is a treasure trove that any well-meaning bureaucrat must read cover to cover, and this includes supporting documents, plus all of its past publications starting in 2003.

Aside from giving readers a credible measurement of how the economies included in the studies have progressed through the years, the report is rich in details of what countries have done to specifically improve regulation to help businesses.

There are ten indicators that are measured in the report, now on its sixth year: 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 report is not big on controversies, and avoids measuring indicators such as corruption or macro-economic stability.

Commitment

The underlying success of those that have done well in the report is commitment – a sustained commitment to introducing reforms. The size of initiative does not matter much; it is the number of initiatives introduced. The more the merrier.

The benefits of undertaking reform have been no less dramatic. In Egypt for example, of their 25 million land titles, only 7 percent were formally registered in 2005. Six months after introducing reforms, those that were registered reached 39 percent.

In China, by focusing on access to credit, more than 340 million of its citizens acquired credit histories for the first time after a new credit registry was formed in 2006.

Benchmarking

It’s interesting how we compare to the top achieving countries mentioned in the most recent World Bank report. Yemen was cited as most reformed in encouraging business start-ups, something that we have wanted to do for years.

In 2007, Yemen had the second largest minimum capital requirement in the world; it is now reduced to zero. They also have a true one-stop shop where an aspiring entrepreneur may form a company under just one roof.

They had reduced procedures in starting a business to just five steps, and the time by 50 days to just 13. Compare this to the Philippines, which logs 15 procedures and an average of 52 days to open a business.

In terms of accessing credit, Cambodia topped the list. Before its new secured transaction law took effect, business owners could only use immovable collateral as property. Getting a loan for many was impossible under conditions where few owned land.

With the new law, a broad range of movable assets that include inventory and accounts receivables are now permissible. Three other countries – Vanuatu, China and Taiwan – also facilitated the use of movable assets as acceptable collateral in securing loans.

No hassle tax payment

In the area of tax reform, the Dominican Republic’s initiatives have encouraged businesses to leave the informal sector, opening opportunities for bigger growth. By lowering profit tax from 30 percent to 25 percent, and reducing the property transfer tax, their government was able to create a better enabling environment for businesses.

Like other top performing countries in tax reform, extensive use of online filing and payment had been done. Many others also reduced the number of payments.

The World Bank report noted that economies known for their ease of paying taxes tend to have lower and less complex business taxes. They also have simple administrative processes for paying the taxes and filing tax returns. In effect, this means less hassle for businesses – and often, higher revenues for government.

Compared to the Philippines, the Dominican Republic requires businesses to file and pay taxes only nine times; the Philippines chalks an average of 47 times per year. Take a look at our tax calendar!

Social and economic outcomes

More than a benchmark and guide to best practices, our bureaucrats must be able to truly appreciate the deeper value that this World Bank project seeks to achieve.

Among the more important contributions of the report is the lowering of barriers to start-up businesses associated with the smaller informal sector. Lower costs of entry likewise encourage entrepreneurship, and reduce corruption. Simpler start-up also translates into greater employment opportunities.

In the last six years, many economies have been using “Doing Business” as a guide to transforming their country’s business environment into real contributors of wealth. It is not too late for us to start now.

FilOil Flying V Pre-Season Invitational

The start of this year’s collegiate basketball season is just around the corner. And to formally launch it, the FilOil Flying V Pre-season MVP Invitational Cup will get the ball bouncing on Saturday, April 18, 2009, 1 p.m., at the FilOil Flying V Arena (formerly San Juan Arena).

Our congratulations to the Villavicencio group of companies headed by Chito Villavicencio and his sportsman son, Raffy, for their continuing support to the promotion and development of collegiate basketball in the country.

The FilOil Flying V companies are also the main sponsors of the recently concluded 2008 Philippine Collegiate Championship games awarding scholarship grants to the eventual winners in the amount of P500,000 (for the 2008 National Collegiate Champion De La Salle Green Archers), P200,000 (for Runner-up Ateneo Blue Eagles), P100,000 (for third placer Letran Knights) and P50,000 (for fourth placer San Beda Red Lions).
Watch the FilOil Flying V Pre-season tournament games and get first taste of the exciting collegiate games for season 2009.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.