Doing business in Phl: How easy?

In our school days, vividly, we can easily recall how honor rolls (as students/pupils) are determined.  All grades are averaged to create a grade point average (GPA) during the grading periods.  Likewise, among aspiring Certified  Public Accountants, lawyers, doctors, nurses, etc., the same approach is used.  Since, in reality, not anyone of these students or aspirants could master all subjects, some may perform well in most but fare miserably in the others.  Or, worst, perform well in a few but could be mediocre in the rest.  Therefore, the GPA maybe pushed up by the subjects where the students/aspirants do well but pulled down by the subjects where they fared miserably. 

The same is true with the World Bank’s Ease of  Doing Business Index.  In 2014, the World Bank ranked 189 economies as to the overall “Ease of Doing Business.”  A nation's or economy’s ranking on the index is based on the average of ten (10) sub-indices.  These are as follows:  (1) Starting a business, (2) Dealing with construction permits, (3) Getting electricity, (4) Registering property, (5) Getting credit, (6) Protecting investors, (7) Paying taxes, (8) Trading across borders, (9) Enforcing contracts and (10) Resolving insolvency. 

To recall, we went up by thirty (30) places in this year’s ranking.  From last year’s 138th place, we are now ranked 108th among 189 economies.  This 108th place summarizes our performances in the ten (10) sub-indices.  Notably, we performed really well in the following areas:  resolving insolvency (from 164th to 100th), paying taxes (though still ranked a low 131st, it is still an improvement from last year’s 144th) and getting credit (from 126th to 86th).  Moreover, though we haven’t improved in these areas like dealing with construction permits (from 95th, we went down to 99th), getting electricity (at 33rd for both years) and trading across borders (from last year’s 41st to this year’s 42nd), at least, we have maintained our rank in the above 100th range.  What brought us down are our performances in the areas of  starting a business (it has really worsened as we are now ranked a low 170th from last year’s 166th), registering property (from last year’s 119th to this year’s 121st), protecting investors (from last year’s 127th to this year’s 128th) and enforcing contracts (from last year’s 112th to this year’s 114th).

The marked improvement in resolving insolvency was brought about by the passage of  Republic Act No. 10142, otherwise known as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010."  Among others, it “encourages debtors, both juridical and natural persons, and their creditors to collectively and realistically resolve and adjust competing claims and property rights.” It also stresses that “the State shall ensure a timely, fair, transparent, effective and  efficient  rehabilitation  or  liquidation  of  debtors.”  Though passed in 2010, the benefits of this law were felt in 2012 onwards. 

Apparently, however, it was in “starting a business” sub-index that  the country was at its worst.  At 170th place, we are among  the  bottom 20 (together with Libya, Swaziland, Mauritania, Bosnia and Herzegovina, Indonesia, Ecuador, Central African Republic, Angola, India, Bolivia, Suriname, Republic of Congo, Chad, Cambodia, Equatorial Guinea, Democratic Republic of  Congo, Haiti, Eritrea and Myanmar) of  the 189 countries/economies included in the survey.

The reason is very obvious.  You can see and feel it.  Part and parcel in starting a business is the involvement of  local government units (LGUs).  While the cities and municipalities have improved, the barangays (except for a few) have worsened.  For one, Barangay Captains are sometimes hard to find.  Their presences in the barangay halls are so scarce.  Thus, when one gets a barangay permit, it’s either you or your staff wait for the entire day or you have to either see them in their workplace or in their houses after office hours.  In the meantime, outside of  the delay, you pay your staff for a day achieving nothing.  Worst, you have to pay him overtime for working beyond regular hours.

Terribly, with vote-buying rampantly done (therefore, conclusively expensive) during the just recently concluded barangay election, we can expect more red tapes along the way.  Whether these red tapes shall translate to additional cost of  doing business, we will never know.  What is certain though is, these barangay captains and councilmen are businessmen.  Therefore, they just don’t spend because they shall serve.  As businessmen, they invest.  Therefore, they shall expect returns on their investments.  Whether returns shall be earned ethically, that remains to be seen.  In the meantime, let us bear the consequences in the difficulties of starting a business. 

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