Creating a business-friendly climate

Tuesday, 11 January 2011 07:35

Written by Marvin Bionat

One of the significant indicators of the health of the national economy is the World Bank’s and the International Finance Corporation’s ease of doing business global survey, in which each country is assessed in terms of how government regulations enhance or constrain business activity. The assessment includes ease in starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.

Obviously, we want to create a business-friendly environment that creates jobs and generates tax revenues. It’s a simple general formula for fueling the economy, although it’s clearly not easy to execute.

How does the Philippines fare on this year’s global ease of doing business survey? Very badly! Out of 183 countries, the country ranks 148th overall. This is a decline from last year, when we were at number 146. The country is particularly a laggard in terms of starting a business, trailing behind at 156.

Our ASEAN partners are doing much better. Actually, Singapore is light years away, ranking first overall. Thailand and Malaysia are way ahead at 19 and 21, respectively.

What exactly needs to happen to move the country up the ladder? In the area of starting a business, it requires 15 steps/procedures to start a business in the Philippines, requiring 38 days to complete. Compare that to only nine steps/procedures and 17 days in Malaysia. The best practice country is New Zealand, where it only takes one procedure and one day to launch a business.

Since 2008, the Philippines has actually improved, slashing the number of days required to complete all the required procedures from 59 to 38 days. The actual number of procedures, however, hardly moved from 16 to 15. That we actually dropped in rank clearly indicates that we’re not improving enough.

It’s always convenient to blame external factors (foreign exploiters, for example) for our economic woes, but the reality is we need to be competitive as a nation and “exploit” for our people the benefits of a more engaged economy. Policymakers must look closely at the ease of doing business data (see http://www.doingbusiness.org) to identify the unnecessary constraints and unleash the still largely untapped energy of the Philippine labor force. It is a much more achievable goal (with enormous multiplier effects), if backed by steely political determination. If the Aquino presidency and the Philippine Congress want to leave a real legacy, this is one of those great opportunities.

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