More efficient government

In its Ease of Doing Business survey covering 190 economies, the World Bank Group ranked the Philippines 113th overall.

In terms of starting a business, we were ranked 173rd. According to the same study, entitled “Doing Business 2018: Reforming to Create Jobs,” it takes 28 days before one can start a business in the Philippines, from the time one verifies and reserves the company name with the Securities and Exchange Commission (SEC) to the time it registers with the Social Security System, PhilHealth, and PagIbig Fund.

We had a high ranking when it comes to getting electricity (31st) and resolving insolvency (59th), but we rated poorly in terms of dealing with construction permits (101st), registering property (114th), getting credit (142nd), protecting minority investors (146th), paying taxes (105th), trading across borders (99th), and enforcing contracts (149th).

While the study acknowledges reforms done by the Philippine government and the fact that our distance to frontier (DTF) slightly improved to 58.74 from 58.32, still, our overall ranking slipped to 113th from 99th in the previous year. The DTF measures how far economies were to the best performing economy for each indicator.

Malaysia ranked 24th and had a DTF of 78.43, while Thailand was 26th (DTF 77.44). Singapore was ranked 2nd overall, Brunei (56th), Vietnam (68th), Indonesia (72nd), Cambodia (135th), Lao (141st), and Myanmar 171st).

The World Bank noted that while in Canada it would take just two procedures, 1.5 days, and less than one percent of income per capita to start a business (for a potential software entrepreneur), in the Philippines, the business incorporation process would require 16 procedures, take 28 days, and cost around 16 percent of income per capita. Such entrepreneur in the Philippines, it added, would have to make 20 different tax and contribution payments, visit multiple agencies in person, while the business would be expected to pay 42.9 percent of its commercial profits in taxes and contributions annually. In Canada, the same type of business would pay 20.9 percent of profits in terms of taxes and contributions per year.

But if you really think about it, each of these 16 procedures that a new company has to undertake before it can start doing business would require several more procedures. Like registering with the SSS – how many procedures does it take before one actually gets registered?

Just recently, President Duterte signed into law Republic Act no. 11032 or the Ease of Doing Business Act which amended RA 9485 or the Anti-Red Tape Act of 2007.

RA 11032 prescribes specific periods for completing transactions with the government, such as three working days for simple transactions, seven for complex ones, and 20 for highly technical applications. If there is no approval of the transaction within the prescribed period, then the application is deemed approved.

The new law streamlines procedures for securing fire clearances and certificates. A central business portal and an anti-red tape authority will be set up, while an advisory council will be organized to promote ease of doing business.

Aside from reducing the number of days to complete transactions with government, it is also important that the number of requirements, including required documents, be reduced.

If this new law will deliver as envisioned, then it will definitely push the Philippines up the World Bank rankings, but more importantly, this will make our country more attractive to foreign investors.

How it will deliver is another thing.

An Ease of Doing Business Summit will be held today (June 13) to be participated in by representatives from the Department of Trade and Industry headed by Secretary Mon Lopez, members of the Doing Business Task Force, and representatives from the government and the business community. Specifically, the summit will highlight the reforms accomplished by the Doing Business Task Force and the plans moving forward to improve overall service delivery.

Indeed, the devil is in the details. Take, for instance, the time when I needed to secure a Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue which is a requirement to transfer title of property from the seller to the buyer, or from the decedent to the heir. I was told by the BIR that it would take just a few days. I filed my application October 2017 and got the CAR February this year. Every time I followed up the approval by phone, I was told that the examiner in charge was attending a seminar, on leave, or was absent, was on a break. Or maybe the examiner made a mistake and the documents had to be routed again. They couldn’t even tell me what exactly was the problem because, as far as I was concerned, all the documents had been submitted and were in order.

Based on the definition given by the Anti-Red Tape Act, a simple transaction is one which requires ministerial actions on the part of the public officer or employee concerned, or that which present only inconsequential issues for the resolution by said officer or employee. On the other hand, a complex transaction is one which requires use of discretion in the resolution of complicated issues.

So is the issuance of a CAR by the BIR after all the requirements have been complied with or submitted a simple or complicated transaction? When all the requirements are complete, the issuance of a CAR should be ministerial. Let us see if the BIR can do it in three days.

Imagine how many kinds of transactions the BIR processes. Who will determine whether one transaction is simple, complicated, or technical? Is the three days counted from the time the application is submitted, assuming all the documents are complete? Can I tell BIR, hey, three days have passed and, therefore, my application is deemed approved. Now where is my CAR? Who is liable under the new law for the failure to release it after three days?

We really hope the new law will be able to accomplish what the old anti-red tape law was unable to do.

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