Improving the ‘Ease of Doing Business’

By now, everybody knows that the Philippines ranks No. 138 out of 185 economies in the world measured on the “Ease of Doing Business” by the International Finance Corporation (IFC) and the World Bank. This global report, due for release at the end of October, measures the basic steps and amount of time it takes for business enterprises to undergo a government process across the lifetime of a business—from the day it starts (e.g., incorporates) to the day it closes (e.g., files for insolvency or closure). The 10 processes measured also include access to credit information and the level of investor protection, particularly of minority investors. It even measures the time a business takes to go to court to file a case and get a court decision to enforce a contract.

Our goal for the year 2016 is to take the country to the top third of the global tables, a considerable jump given the inertia we have experienced over the last three years in the Ease of Doing Business report. We have remained at the 134th to 138th position since 2010. To address this challenge, the National Competitiveness Council prepared the “Game Plan for Competitiveness” (written up in my column of Feb. 23, 2013) that was approved by the Economic Cluster of the Cabinet in September 2012 and became the basis for the issuance of Administrative Order No. 38, released this year in May.

As part of this Game Plan, we organized a task force specifically dedicated to making improvements in each of the Ease of Doing Business indicators, and established one work team per indicator for greater focus. Each work team was composed of representatives of all government agencies including a local government unit, as well as of the private sector. They were responsible for performing the government process.

After several months of work early this year, each work team submitted its reforms to the task force. However, rather than a pure recommendation, they were asked to submit actual changes or improvements to the process in the form of a regulatory document, such as an executive order, administrative order, department order, circular, or city ordinance. Those that required legislative amendments obviously could not be accomplished (Congress was not in session at the time and elections were just taking place). These have instead been listed and will be submitted to Congress now that it is in session.

All reforms were then submitted to the IFC for consideration and evaluation for the October release of the report. The reforms represent what we call the “evolution” stage of reforms—that is, changes have been made by manually cutting and streamlining steps and saving time. The real “revolution” phase starts when we start reengineering entire processes and automating them.

In any case, here are the results of the Game Plan:

• For starting a business—from 16 steps and 36 days, down to 11 steps and 11 days.

• For dealing with construction permits—from 29 steps and 84 days, down to 17 steps and 61 days.

• For getting electricity—from five steps and 50 days, now four steps and 36 days.

• For registering property—from 39 days, down to 23 days.

There was also a reduction in time to import goods from 14 to 12 days.

The number of tax and contribution payments has also been trimmed down to 14 from 47 through the installation of electronic payment systems in PhilHealth, Pag-Ibig and the Social Security System.

The reviews of Philippine systems, laws, and cases on credit access and investor protection also pointed toward higher scores on the IFC-constructed indices on depth of credit information (from three to five out of six), strength of legal rights (from four to nine out of 10), extent of disclosure (from two to seven out of 10), extent of director liability (from three to nine out of 10), and ease of shareholder suits (from eight to 10 out of 10).

These changes were designed to make us improve by 15-25 ranks this year. Of course, we cannot tell what our competition has done yet, so there is no way for us to determine the extent of gains we have made in the actual rankings. That lies in the hands of the IFC. What is important is that reforms have been introduced and that entrepreneurs and investors feel it.

If you also feel it, we will be happy to hear your feedback so we can congratulate the agencies responsible (their annual bonuses are tied to their success in implementing reforms). If you don’t see the reforms working, please let us know so we can do some troubleshooting. Either way, we appreciate hearing from our customers.

Guillermo M. Luz is private-sector cochair of the National Competitiveness Council. Comments and questions may be sent to [email protected].