Just implement Arta
That old familiar promise to make it easier for foreign investors to set up shop in the Philippines has been dusted off once more, when Malacañang announced last week that President Marcos Jr. would soon sign an executive order (EO) requiring government agencies and local government units (LGUs) to cut unnecessary red tape to hasten the entry of badly needed big-ticket investments.
The aim is to make the Philippines more attractive to foreign investors who have so far been putting more of their massive, job-generating investments in neighboring countries. Singapore, Indonesia, and even Vietnam attracted $15.7 billion in foreign direct investments in 2021, almost 50 percent more than the $10.5 billion that the Philippines managed to get.
Press Undersecretary Cheloy Velicaria-Garafil said the proposed EO called for the establishment of a “green lane” for “strategic” investments to speed up the process and streamline the requirements for the issuance of permits and licenses, including the resolution of pertinent issues. Under the EO, government agencies and LGUs only have up to three days to act on permit or license applications for simple transactions, seven for complex transactions, and 20 working days for highly technical ones. The order covers national government agencies and their regional and provincial offices, as well as local governments and quasi-judicial bodies involved in issuing permits and licenses necessary for “nationally significant” or “highly desirable” projects.
The EO “will immediately address concerns about ease of doing business that has always been the complaint about us,” said Mr. Marcos, who had declared that making the Philippines more business-friendly was one of his administration’s priorities, along with hastening the country’s recovery from the pandemic, and improving the agriculture sector.
The directive is nothing new, with previous administrations posting mixed results. While the Duterte administration improved the country’s ranking from 124th in 2019 to 95th in 2020 among 190 economies on the now discontinued Ease of Doing Business list of the World Bank, the Philippines still came in last among the founding members of the Association of Southeast Asian Nations (Asean) on a similar index. The Asean ranking measured economies against 10 indicators that represent the life cycle of a business, from its start to its application for construction permits, getting electricity, registering the property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and finally, resolving insolvency.
Not surprisingly, Singapore led the pack at 2nd place. Malaysia was 12th, followed by Thailand at 21st, and Indonesia at 73rd place. The Philippines lagged behind, with the World Bank noting that it takes an average of 13 procedures to start a business, 22 steps to build a physical establishment, and nine procedures to register property. Established firms also have to make 13 annual tax payments. In case of disputes, it takes about 962 days for issues to be resolved through the courts.
The Duterte administration sought to address these issues through the passage of the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, which was geared toward helping private firms—from entrepreneurs to micro, small, and medium-sized businesses, and big ticket investors—do business in the country. With the law still in place, why the need for a new executive order on the same concerns?
Aside from prescribing the ideal processing times for business applications and technical evaluations, the Duterte-era law also called for the setup of an online central business portal where all permits and needed licenses can be completed. It also created the Anti-Red Tape Authority (Arta) to implement the Ease of Doing Business Act. Arta articulated late last year its plan to come up with the Philippine Ease of Doing Business Reporting System, a “localized version of the Doing Business Report” to help further improve the country’s competitiveness ranking by using the same indicators studied by the World Bank.
“Investors look at our competitiveness ranking in their decision to invest in the country or not. Because investors would like their investments to be protected, and once they come in, that their return of investments is secured. We want to provide a healthy business environment that will generate more employment opportunities, improve our country-wide development, and of course our inclusive growth,” said Ernesto Perez, who had been promoted as Arta’s new director general. He was its deputy director general for operations from 2019.
Considering that taxpayer money is already being spent on fulfilling Arta’s mandate, perhaps it would be better for the President to just double down on what it has been tasked to do, as a new executive order may just add another layer of unwanted and unnecessary bureaucracy.
