Room for Improvement

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The Philippines' global ranking in terms of the ease of doing business tumbled even further this year, according to a recent International Finance Corporation study.



The Doing Business Survey 2008 (DB 2008) placed the Philippines at 133 out of 178 economies, down from 126 in 2007. They also finished in the bottom three of the East Asia and Pacific region just ahead of Cambodia (145) Lao (164) and Timor-Leste (168). Their poor ranking can be attributed to their inability to implement meaningful reforms.



"The Philippines did not [implement] any reforms in the past year while many countries were reforming," survey author Justin Yap told the local media. "If a country cannot keep up with reforms, it will really fall behind."



In contrast, regional neighbour Singapore topped the list for the second straight year while other member countries of the Association of Southeast Asian Nations (ASEAN) - Thailand (ranked 15), Malaysia (24), Brunei (78), Vietnam (91) and Indonesia (123) also ranked higher than the Philippines.



In the overall list New Zealand finished second, followed by the US, Hong Kong, Denmark, the UK, Canada, Ireland and Australia with Iceland rounding out the top 10.



Egypt topped the list of reformers that are making it easier to do business. The ranking is determined by the number of reforms implemented and the change in ranking on the ease of doing business. Negative reforms are valued at -1 while positive reforms receive a value of +1. Egypt received a net score of 5. The other top 10 reformers were in the following order: Croatia, Ghana, Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China and Bulgaria. The Philippines achieved a net value of 0.



The DB 2008 is the fifth in a series of annual reports investigating the regulations that enhance business activity and those that constrain it. The survey analyses 10 elements of the life cycle of a business: starting up, licensing, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contract and closing the business. The indicators are used to analyse economic outcomes and identify what reforms have worked.



"The Doing Business Report measures regulatory performance that allows policymakers and reformers to pinpoint reform areas and design a reform agenda," said Jesse Ang, IFC acting country manager.



Ang was quick to point out the positive though. "In the Philippines' case, the challenges have been identified and reforms are starting to be implemented. Like in most cases, however, it takes a while for the impact of reforms to be felt and reflected," he said. "Through more strategic and focused implementation, the Philippines can quickly lower the cost of doing business and attract more private sector capital."



Among the reforms in the pipeline are a credit information system bill, a land administration and reform act, anti-red tape legislation, a business registry and a one-time tax transaction project being implemented by the bureau of internal revenue.



National Competitiveness Council co-chairman Cesar B Bautista is confident the effects of the changes will be seen in the year to come. He said, "We will need another year to see significant changes, but there have been improvements. What's important is that we have identified the problem and there are solutions."



Overall, the Philippines still ranked very poorly in starting a business (144), protecting investors (141), and closing a business (147).



Among all of the countries in East Asia that were ranked, the Philippines placed last in the number of procedures to start a business. The report explains that cumbersome entry procedures are often associated with corruption as each procedure is an opportunity to extract a bribe.



When it comes to protecting investors, the Philippines placed 10th out of 13 ASEAN countries. As a result, the report concludes that entrepreneurship is often suppressed and fewer profitable investment projects are undertaken.



The indicator for closing a business gauges the efficiency of bankruptcy laws, which can encourage entrepreneurship. Such laws can give people the freedom to fail and to do so through an efficient process. Amongst Southeast Asian nations, the Philippines was in the bottom four of the three benchmarking measures: cost of insolvency, recovery rate and time to get through insolvency.

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