PH climbs in list of business-friendly economies

By Melissa Luz Lopez, CNN Philippines

The Philippines tallied big gains in terms of being more business-friendly as permits and requirements have been relaxed, according to the World Bank.

The Philippines climbed to the 95th spot in the global lender’s latest Ease of Doing Business report, improving from 124th place last year. The country’s raw score improved to 62.8 from 57.68 previously, with the World Bank citing three game-changers for new businesses.

The index compares the business climate across 190 economies in terms of starting a business. The list saw New Zealand, Singapore, Hong Kong, Denmark, and South Korea as the most business-friendly locations, little changed from 2018 results.

The report factored in changes implemented between May 2018 and May 2019, taking note which of these reforms made business transactions simpler. Quezon City was used as the benchmark for the Philippines.

The World Bank said the removal of the minimum capital requirement for local firms made it easier for startups. Meanwhile, tighter rules that mandate the disclosure of transactions with interested parties and enhanced director liability have protected minority investors better, the World Bank said.

“The Philippines made dealing with construction permits easier by improving coordination and streamlining the process for obtaining an occupancy certificate,” the report added.

The latest report covers 10 areas affecting companies, with the Philippines faring relatively better than other states in terms of getting electricity (32nd), resolving insolvency (65th), protecting minority investors (72nd), dealing with construction permits (85th), and paying taxes (95th).

The country lags in terms of trading across borders (113th), registering property (120th), getting credit (132nd), enforcing contracts (152nd), and starting a business (171st). Two other metrics on employing workers and contracting with the government were not measured in the latest review.

Based on the World Bank’s tally, a person putting up a new corporation needs to talk to six government agencies for registration and clearances, which involves up to 13 procedures. The process is longer for construction permits, which take up to 22 steps.

Meanwhile, the Philippines lagged in the Getting Credit metric compared to its neighbors with a 40.0 score, largely due to a lack of a national credit registry and weak legal rights. This, however, was a big leap from the 5 raw score which the country previously received in terms of access to credit, which prompted the Department of Finance and the Department of Trade and Industry to write a letter to the World Bank protesting last year’s supposedly “inaccurate” results.

Local authorities are in the process of setting up a national credit bureau, which would assess the standing of borrowers in terms of settling debts.

Catching up

World Bank President David Malpass said the latest Doing Business results bared that developing economies “are catching up with developed nations,” but noted that legal rights remain the weakest among low and middle-income areas.

“An entrepreneur in a low-income economy typically spends about 50 percent of income per capita to launch a company, compared to just 4.2 percent for an entrepreneur in a high-income economy,” according to the report.

The report noted that economies scoring well in Doing Business benefit from increased entrepreneurial activity, which means better jobs, higher state revenue collections, and improved personal incomes.

Malpass added that resolving insolvency cases has been the “least reformed” among indicators.

Libya, Yemen, Venezuela, Eritrea, and Somalia were the five least business-friendly countries on the World Bank list.

Road ahead

Trade Secretary Ramon Lopez said the 95th spot is the highest for the Philippines has ranked since 2014, adding that it was similar to a “climb to Mount Everest.” For the next year, the goal is to go nowhere but up.

“The target in the PDP (Philippine Development Plan) for 2020 is [to rank in the] top 40 percent, which would be around rank 76,” Lopez said in a press briefing, adding that “bolder and smarter reforms” will be rolled out in the coming years.

Among the priorities are the creation of a virtual one-stop shop called the Philippine Business Portal, a property registration portal, an online corporate registration system, a unified employee reporting system for social security agencies, and a modern collateral registry.

In a separate statement, Finance Secretary Carlos Dominguez III said implementing the Personal Property Security Act to aid small-scale companies would boost the country’s chances to rise in the Doing Business ranks.

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