Business-friendly

When President Aquino travels, his anti-corruption message plays well in countries that rank high in the transparency index.

Kiwi business leaders I met in New Zealand seemed genuinely impressed by P-Noy’s reform agenda. They liked his spiel about a level playing field, no more backroom deals, the rule of law. They were impressed by the country’s economic growth figures.

Translating this goodwill into solid investments, however, will require a lot of follow-through on state visit rhetoric.

New Zealand ranks third among 185 economies – behind perennial top performers Singapore and Hong Kong – in ease of doing business, according to the latest annual Doing Business report released by the World Bank and the International Finance Corp.

In contrast, the Philippines has steadily declined in ranking, from 134th when P-Noy assumed office two years ago to 136th in 2011 and 138th this year.

The study rates ease of doing business based on 10 processes: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trding across borders, enforcing contracts, and resolving insolvency.

In Australia yesterday, P-Noy again urged businessmen to take a look at the Philippines under new management.

When he issues such invitations, it is useful to bear in mind what our neighbors can offer to investors. In the Doing Business report, Malaysia jumped to 12th place from 18th last year and 23rd in 2010-2011, while Thailand slipped another notch to 18th. Brunei rose to 79th from 83rd.

Nepal was ahead of us at 108th. The Philippines was way behind even Vietnam, which dropped to 98th place from last year’s 90th, Indonesia (128th) and even Cambodia (133rd). 

In Southeast Asia, we were ahead of only Timor-Leste (169th). Myanmar and Laos are not included in the rankings.

Let’s see how the rest of East Asia fared: South Korea retained its eighth place, Japan slid to 24th and Taiwan jumped to 16th. Mongolia rose to 76th, rating among the 10 economies that improved the most. China stayed at 91st place but was mentioned among the top 50 improvers.

Obviously, the low ranking has not prevented China from becoming the world’s second largest economy. Many of the economies rated way ahead of the Philippines are currently stagnating or mired in financial woes.

Those behind the Doing Business report also emphasize that the results of the study are just one of the indicators of economic performance.

But being surrounded by neighbors with a better business environment, we should be scrambling to find out what others are doing right.

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The 12th place for Malaysia was front-page news in that country when I transited through Kuala Lumpur from New Zealand on my way back to Manila.

Malaysia warranted special mention in last year’s Doing Business report. What did it do? Here’s the summary: Malaysia was one of the economies that took the lead in East Asia and the Pacific, introducing electronic filing in its courts, setting up specialized civil and commercial courts in Kuala Lumpur and merging company, tax, social security and employment fund registrations at the one-stop shop for business start-up.

Transiting through Malaysia’s modern, sprawling premier airport, about 80 kilometers from the capital, reminded me again of the inadequacy of our airport facilities. In airports, size matters.

Apart from the size, there’s the acute lack of direct flights between Manila and much of the world. Air connectivity was one of the issues mentioned to me by Kiwi businessmen.

At a forum in Auckland, business leader Phil O’Reilly asked P-Noy about the possibility of direct flights between the two countries, which could facilitate the movement of people, goods and services.

P-Noy cited the “pocket open skies” outside Metro Manila but did not explain why direct flights to the Philippine capital are limited, which could have given Kiwi businessmen an idea of the real investment environment in this country. O’Reilly probably already knew the situation and did not press P-Noy.

O’Reilly, of Business NZ, has visited Manila and is generally bullish on the Philippines.

“There’s enormous goodwill in the New Zealand business community on the Philippines,” he told me shortly before the Q&A with P-Noy. “Everyone recognizes the great strides being taken.”

O’Reilly is aware of the barriers to direct investments in the Philippines and says “it would be nice if they were freed up,” but adds that Kiwis could “work through the process.”

“It’s still not an extremely easy place to do business,” O’Reilly said.

Several Kiwi businessmen told me they were looking more at Indonesia, because of its size and because Jakarta has also been cleaning up its act longer than the Aquino administration has been in place.

“They’re making it easier to do business. They also talk of a straight path although with different wording,” O’Reilly observed. “You can’t take this for granted and neither can we.”

He said economic ties between the Philippines and New Zealand should be more robust because of shared values, historical ties and Filipinos’ proficiency in English.

“The challenge for the Philippines is to think not just of workers,” O’Reilly said.

In the latest Doing Business report, it was pointed out that “smart regulations” reduced opportunities for corruption.

Filipinos have known for a long time that cutting red tape also cuts opportunities for graft.

Several local governments have made an effort to simplify business procedures to attract investments and create employment for residents. But overall, we’re still waiting for a sea change in the way we do business.