Wanted: enabling government

“Why is it that government wants to put every obstacle it could possibly think of in the way of small businesses?” an exasperated young entrepreneur asked me the other day. I had been quietly pleased to see him pursue entrepreneurship after having spent several years working for different companies. For many years, I have been calling on young people not to be content with getting a job to work for someone else, but rather to aspire to create jobs for others; and not to settle for earning a salary, but rather to create wealth. Thus, I was glad to see one more young person heeding the call.

Some time back, he had narrated to me his experience in obtaining various permits from the local government to do major renovations on his premises. Among those he needed was the usual fire safety clearance from the local fire marshal. In anticipation of the requirements, he had purchased in Manila a good quality fire extinguisher of a reputable national brand, with a five-year warranty on its chemical charge. But he was told by the local fire marshal that to obtain his fire clearance, he should use a fire extinguisher acquired from an accredited supplier—and it turns out there is only one obscure local firm with such accreditation. When he reasoned with the fire marshal that he had already bought a good quality one in Manila, the answer he got was, “Tell that company to first apply for accreditation with us.” To make things worse, a friend who had been through the same process before warned him that the fire extinguisher he bought from that same “accredited” local supplier lost its charge a year after he bought it.

His story got me really angry. Having spent decades teaching students the importance of market competition and advocating for a competition law, I was incensed to learn that a local government was effectively coddling a local monopoly, through rules of its own making. And it’s easy for anyone to suspect why.

The incident also brought to mind a certain local mayor who had once approached me for advice after hearing me speak at a forum on local government finance. He had just obtained a loan from a government bank to build a public market and commercial building near his town’s municipal hall. But they were having difficulty attracting tenants for the new building, as a privately owned market and commercial building on the other side of the municipal hall seemed to be attracting all the business. His question to me was, could he revoke the business permit of the private commercial building so that his town could recover its investment on the new building and pay back its loan? I was aghast that he would even ask me that question, but I naturally advised him against doing something that could amount to abuse of authority.

I have always welcomed our 1991 Local Government Code for rightly giving due power and authority to the units of government closest to the people and most intimately familiar with development challenges and resources on the ground. I believe that subsidiarity, devolution and decentralization are critical principles of good governance. But the authority to make whimsical rules in defiance of basic and instinctive principles of ethics and good economics is certainly not part of the intent of the law.

While much positive change has already been happening and there are indeed many “islands of good governance” out there, one wonders why too many local government officials still can’t seem to get it. I would have thought that local officials could readily understand that promoting and encouraging vibrant job-creating local

enterprises would be the best way to uplift the living conditions of their constituents. But from the above story and from countless other accounts I’ve heard through the years, the actuations of many local governments toward small businesses have been all but encouraging. Is it any wonder that our unemployment rate has consistently been much higher than in most of our neighbors?

We actually have a law—Republic Act No. 9178 or the Barangay Micro Business Enterprise (BMBE) Law of 2002—that seeks to attract small businesses with less than P3 million in assets to come out from the shadows of the informal or underground economy. Qualified enterprises may apply for inclusion in the BMBE Registry of a town or city, and be issued a certificate of authority that would entitle the BMBE to various benefits. These include exemption from income tax, minimum wage, and local taxes, fees and charges. BMBEs are also entitled to training and assistance on technology transfer, production, management and marketing, and access to credit programs of government banks mandated to lend to small businesses.

That is all good in theory, but it turns out that in most places, the BMBE Law is the best-kept secret in town, especially in the city or municipal hall itself. In our own barangay office, no one has even heard of it (or at least that’s what the people there claimed). I once wrote in this column about the travails of a colleague who tried to register her business under the law at Quezon City Hall, but was given the classic runaround until she eventually gave up on the idea.

And so, I go back to my young friend’s question: Why is government seemingly intent on making things hard for small, struggling entrepreneurs like him? I could only console him with the assurance that I have heard the same lament countless times from people all over the country. But that certainly doesn’t make it right.

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