The hidden costs of doing business

At the recent Pilipinas Conference organized by the Stratbase ADR Institute, we asked the country’s top corporate leaders what they felt was the single biggest reason for investors’ hesitation about pouring capital into the Philippines.

The overwhelming answer was stability of the business environment.

The president and CEO of Ayala Corp., Cezar Consing, said: “If you really want investment, if you really want growth, you have to play the long game. And if you’re the government, and you want the private sector to play the long game, you got to be fair, right? You better be consistent.”

Nina Aguas, executive chair of Insular Life, talked about the importance of accountability, transparency, agility, simplicity, and consistency. “[They are] the things that we look out for in terms of regulations,” she said.

Christian Gonzales, executive vice president and global corporate head of International Container Terminal Services, Inc., said that while there is a relationship of trust between the private sector and national regulators, the problem is friction regulation from intertwined bodies of government—everything down to the barangay level.

“The national government must realize what problems are in these weak links in the chain that are caused by this intertwined relationship between local government and national government,” he said. “Understand what is creating the weakness in those particular links and use political will to solve them.”

Meanwhile, Peter Maquera, the CEO of Microsoft Philippines, said: “We need speed, we need accountability, we need simplicity.”

Stability in the business environment goes hand in hand with transparency. If business policies are carefully crafted, and evenly and fairly implemented, then there would be no need for opacity in government-business transactions, and all processes will be transparent. This, in turn, inspires confidence among investors. They want some form of assurance that the rules will not change midstream, and that they will not get stuck in a country that beckoned to them for their investment but saddled them with hidden costs and other problems when they finally brought their business here.

Hidden costs, of course, come from unofficial activities that bloat a company’s projected expenses—for instance, bribery and red tape at all levels of the bureaucracy. Even as the national government declares a policy of transparency in its transactions, greed at the local government level undermines such pronouncements. It is, after all, in the local government units where businesses set up shop, and their processes that businesses have to deal with.

There are also hidden costs that come with undue delays and inefficiency in the processing of multiple permits and licenses.Unfortunately, when investors get appalled by brazen corruption and are stumped by these hidden costs, the community is directly affected because of the jobs and economic activities that should have been generated by those investments. A recent survey conducted by PwC in partnership with the Management Association of the Philippines in 2023 revealed that 97 percent of Filipino CEOs feel that the government is not doing enough to fight corruption, and this has affected investment confidence.

We bear this in mind as we commemorate International Anti-Corruption Day on Dec. 9. This day marks the 20th year of the passage of the United Nations Convention Against Corruption. This year’s theme, “Uniting the World Against Corruption,” acknowledges the detrimental effects of corruption on societies and nations, but also the efforts of governments and the private sector in combating it.

One crucial effort is the digitalization of government and the pursuit of ease in doing business. Digitalization, specifically, aims to drastically reduce opportunities for corruption by employing technology and minimizing human discretion in transactions.Maquera said there is already so much innovation happening in the world, and the key to digitalizing is skilling and reskilling the public and private workforce.

This was echoed by Rubén Camba, regional director of infrastructure in Southeast Asia, Acciona, SA who committed to investing in people to overcome challenges. “What I would [do is] go back to labor, to people, to the capacity of the people. We must work on developing those skills,” he said.

Jaime Augusto Zóbel de Ayala, the chair of the Ayala Corp., said: “Imagine the impact we can create with a truly collaborative effort among businesses and civil society, as well as between government and the broader private sector.”Transparency is the cornerstone of a truly democratic government. We have suffered the consequences of corruption for so long. It has impeded our growth as a nation and deprived our people of services and opportunities due to them. It’s time we took a collaborative, whole-of-society approach to eradicating the menace of corruption.

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Dindo Manhit is founder and CEO of the Stratbase Group.