The climb to 95 and higher

We’ve gotten greedier. Not that it means we’re losing our sense of reality. The next target, according to members of the economic team, is to be ranked 76, or thereabouts, bringing us closer to where Indonesia and Vietnam are today.

All this ambitious goal-setting is the doing of the World Bank’s recently-released “Doing Business 2020 Report” that compares business regulation in 190 countries from May 2018 to May 2019 where the Philippines’ rank jumped to 95 from 133 in the previous year’s report.

In terms of grading, where 100 is the perfect score, the Philippines also improved to 62.8 from 57.7. The highest grade, 86.8, went to New Zealand, which has also been ranked as the top economy in the list that offers investors the best environment when doing business.

Two things account for the ambitious target. First is the laying down of a series of laws that have actually paved the way for the Philippines’ improved score not just last year, but also for the years coming. The second would be laws that had been passed, but were not considered during the review period, plus new laws that are expected to pass in the 18th Congress.

Top three measures

Using Quezon City as basis, the World Bank noted how start-up domestic companies actually benefited from the abolition of the minimum capital requirement when lawmakers passed the Revised Corporation Code early this year.

More than the removal of the P5,000 minimum paid-up capital, though, it is the transitioning of single proprietorships and partnerships to corporations that held most potential for the growth of small and medium enterprises without the hassle of having at least five people as incorporators.

As World Bank Group president David Malpass says, “Removing barriers facing entrepreneurs generates better jobs, more tax revenues, and higher incomes, all of which are necessary to reduce poverty and raise living standards.”

Starting a business is one of the 10 measures in the World Bank report. The others that contributed to the Philippines’ improved ranking were in dealing with construction permits and strengthened minority investor protection.

Acquiring construction permits with more ease should be expected with the ramping up of infrastructure projects under the current administration’s Build Build Build program, although the World Bank report specifically noted the better coordination and streamlining of processes for obtaining occupancy certificates was what won points.

Strengthened minority investor protection, on the other hand, was made possible with the required greater disclosure of transactions and the enhanced director liability for transactions with interested parties.

Reforms underway

The second reason why our government officials are hopeful of an even improved ranking in next year’s 2021 report would be the activation of the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 (EODB) and the operationalization of the Anti-Red Tape Authority (ARTA).

Ironically, an ARTA director general, who had to sign the EODB law’s implementing rules and regulations (IRR), was named after more than a year after the law was passed. This could be the reason why, despite the World Bank citing initiatives in starting a business on a positive note, ranking here dropped to 171 from 166.

The EOBD Law would have significantly cut red tape in government offices and made it easier to start and operate a business in the country with the introduction of automation in business registration processes and its consolidation into one readily available online platform.

With the signing of the EODB Law’s IRR, the government is looking at better scores in next year’s World Bank report, especially if ARTA would be able to police local government units and national agencies to implement transactions within the mandated number of days.

Other initiatives that stand to be counted, according to our government executives, would be the Personal Property Security Act (PPSA) that would allow micro, small and medium-sized enterprises (MSMEs) to register movable assets and use them as collateral when getting a loan from banks.

The PPSA’s IRR, though, will still need to be finalized to enable MSMEs to securitize assets when accessing formal sources of financing. Implementation of the PPSA will hinge on the establishment and operation of an electronic registry where notices of security interest and a lien in personal property may be registered.

Other areas for improvement

Aside from improving on the area of starting a business, the Philippines would be able to see a much improved ranking if reforms to better enforce contracts are initiated.

The World Bank noted that it takes an average of almost three years for Philippine courts to rule with finality on commercial disputes, whereas other countries take less than two years on average.

Introducing electronic courts where complaints are filed electronically, according to the World Bank, would significantly reduce the judicial time processing. The Philippines currently has a zero score in the court automation index.

Further improvement in ranking may also be achieved in the area of registering property and trading across borders. The country’s performance in both indicators had even deteriorated from the previous year, accounting for the slip in ranking.

More improvements are definitely needed if we can dare to hope for that leapfrog by approximately 20 ranks. This means not just getting new laws passed, enforced, and delivering results.

Getting a 95 this year has been touted as a data correction by the World Bank after our government officials formally complained about last year’s drop in ranking to 113th. What this simply means is there has been very little meaningful reforms done.

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