It’s one of the key measures of our competitiveness and a report titled “The Ease of Doing Business,” prepared by the International Finance Corp. (IFC, a part of the World Bank Group), measures precisely that for the last 10 years. The report tracks the ease of doing business across 10 important processes or transactions which any business must undertake with a government agency or agencies. The key measures are the number of steps, the amount of time (measured in days), and the cost of going through these transactions. In some cases, it simply measures the presence or absence of a mechanism that offers investors some protection or access to information.
The Philippines’ overall rank in this report is No. 138 out of 185 countries in the world. We are now No. 8 out of nine in Asean, just ahead of Laos but behind Cambodia, Indonesia, Vietnam, Brunei, Thailand, Malaysia, and Singapore. Moreover, our position in the world has remained unchanged for the last three years. We have carefully analyzed this situation and created what we call a “game plan for competitiveness.”
The Doing Business report tells us exactly where we rank in 10 different government processes. I call the report a measure of the efficiency or inefficiency of the bureaucracy. I also call it a direct measure of the amount of red tape that businesses need to cut through to get a permit or license.
The 10 processes and their respective ranks are: 1) How to start a business, No. 161; 2) Dealing with construction permits, No. 100; 3) Getting an electricity connection, No. 57; 4) Registering property, No. 122; 5) Getting credit information, No. 129; 6) Protecting investors, No. 128; 7) Paying taxes, No. 143; 8) Trading across borders, No. 53; 9) Enforcing contracts (through our courts), No. 111; and 10) Resolving insolvency (filing for bankruptcy and shutting down a company), No. 165.
To create the game plan, we benchmarked ourselves against each of our competitors in Asean in each process to see what it takes to get to the top levels of Asean for each particular activity. For instance, to incorporate a business here, it typically takes 16 steps and 36 days, as against three steps and six days in Malaysia and three steps and three days maximum in Singapore (where we have seen companies incorporated in a matter of hours). In the Philippines, paying taxes can take as many as 47 transactions a year, as against only five in Singapore, 13 in Malaysia, and 22 in Thailand.
The National Competitiveness Council (NCC) has set up a task force to analyze all the steps, time, and cost per transaction. After this was done, we reported to the Economic Cluster of the Cabinet and contacted every government agency responsible for each part of a whole transaction. For instance, in Step No. 1 (How to start a business), one must work with at least six agencies—the Department of Trade and Industry, Securities and Exchange Commission, Social Security System, Bureau of Internal Revenue, PhilHealth, and Pag-Ibig—plus the local government unit where a business is located.
We work directly with IFC Manila and set up video-conference calls with the IFC Washington office to allow us to have conversations with the analysts in charge of each indicator. These video-conferences are useful for digging deeper into the details of each process and transaction. They also give us an opportunity to personally update the IFC on the latest reforms in the Philippines, which we feel it may not capture accurately in its reports.
To cover all the bases, the Philippine Embassy in Washington under Ambassador Jose Cuisia is also in close contact with the IFC Washington office. A constant exchange of information between our NCC staff and the Philippine Embassy ensures that we are all on the same page with respect to our strategy and game plan for competitiveness.
Finally, we have met with all the audit firms, law offices, consultants, and government agencies who need to submit information to the IFC for the Doing Business report. This helps ensure that the right information is getting to the right people so that the report will accurately reflect what is going on in the Philippines. At the same time, these meetings allow us to solicit suggestions from the private sector to streamline and improve government processes to make these more business-friendly.
As all these pieces come together—agencies, processes, solutions—to make doing business in the Philippines easier, we will actively track the progress and make it public through an online dashboard which Microsoft is creating for us. This will allow work teams to collaborate and track their work online and enable the public to track the progress of each team. The public will also be able to provide suggestions online on how to improve work processes.
You may be wondering why all this matters when the Philippines can exhibit high growth rates in spite of low rankings. The main reason is that there appears to be a high correlation between higher rankings (which reflect greater ease of doing business) and the ability to attract investments and generate consistent growth. Improving the ease of doing business will certainly help us in the long run.
Guillermo M. Luz is the private-sector co-chair of the National Competitiveness Council. E-mail gm.luz@competitive.org.ph for comments and feedback.