How not to grow our economy

It has been a recurring theme in my articles over the years how our government and the bureaucrats who run it at all levels seem to have turned obstructionism into an art. And while one feels this wherever government front-line services are involved, it’s in the process of starting an enterprise where this seeming obstructionist mindset probably inflicts the worst harm. True, laws have been passed to make it easier to start, operate, and sustain a business. Yet little seems to have changed in how things work in actual practice. The Barangay Micro Business Enterprises Law of 2002 (Republic Act No. 9178) provided incentives and credit facilities to encourage small businesses. The Anti-Red Tape Act of 2007 (RA 9485) mandated greater transparency and imposed maximum processing times for government transactions. Congress later saw the need to amend it in 2018 with the Ease of Doing Business and Efficient Government Service Delivery Act (RA 11032). But it has become clear that while rules can be legislated, good governance can’t. For all their good intentions, these laws appear to have had little effect on realities on the front lines. Stories still abound on the travails of small entrepreneurs and would-be entrepreneurs who find the hurdles that government bureaucrats throw in their way so intimidating and exasperating, that many just choose to give up and forget it.

The active online chat group of the Management Association of the Philippines has lately seen members share stories on their dealings with government. Someone told of his city government’s requirement for his firm to install a multimillion-peso sewage treatment system, supposedly based on a Department of Environment and Natural Resources regulation. “We decided to bite the bullet and had a system installed … One year after installing, it still isn’t running because of delays in issuing permits from City Hall! Note that this same City Hall requires my staff to annually attend a food safety seminar and pass physical exams, even if we are an IT company. Talk about ease of doing business!”

Another member shared their difficulties with a small nursery-kindergarten school started 44 years ago by his mother, and taken over by his wife when the mother passed away. “She had been okay for more than 13 years until the pandemic forced us to close the school … After we re-opened in (a neighboring city) in 2022, the red tape it takes to formally close the school in (the old location) and open in the new location is still ongoing! Despite the stellar performance of the school with a 99.9 percent acceptance rate of its students to big schools that have accredited it, DepEd still insists on ‘protocol’ … Very sad not only for entrepreneurs but educators as well!”

Another member chimed in: “It took my friend and me three months to register a nongovernment organization for her, and a social enterprise for me … Now that our documents have been finally approved, I don’t know if I still have any energy left to start operating, because we still have to go to other offices to complete the approval process, including opening a corporate bank account. I approached a bank that promotes itself as the best digital bank, but it asks for a list of 15 documents to submit! I have not returned to it. We will still have to go to the local government unit, the Bureau of Internal Revenue, etc. My friend and I now have first-hand experience on why we can’t attract more investors … Why do we self-flagellate?” she asked.

A veteran banker responded with what he described as “the tyranny of business registration.” He noted that of those who want to register a business, 95 percent probably have good intentions, while some 5 percent don’t.“ To prevent the 5 percent from registering, government makes it hell for everyone to register, including the 95 percent. And yet the 5 percent are still likely to be able to register because they know all the shortcuts, while many of the 95 percent will get fed up and give up. When finally the ‘registered’ bad guys mess up big time, government asks ‘how did these guys even get registered?’—and its ‘solution’ is to add more registration requirements, making it even more difficult for the 95 percent. But the additional requirements do not keep the bad guys away. And each new mess by the 5 percent gives birth to an additional registration requirement for everyone. The bigger the mess, the more cruel the new requirement becomes for the 95 percent. The hapless entrepreneur, who only meant to invest in his country, provide employment to his fellowmen, create value for his customers, and contribute to his country’s GDP, is punished. In the meantime, his government goes on expensive roadshows to invite foreign investors to join the 95 percent.”

And that could well sum up how we keep punishing ourselves needlessly, year after year.