Doing business in Phl: How easy?
The result of the 2015 “doing business” survey conducted by the World Bank was recently released through its flagship publication, “Doing Business 2015: Going Beyond Efficiency”. This is the 12th in “a series of annual reports measuring the regulations that enhance business activity and those that constrain it”. It presents “quantitative indicators on business regulations and the protection of property rights” of 189 economies between June 2013 and June 2014. These economies are compared and ranked in “11 areas of the life of the business”.
Ten out of these 11 areas are included in this year’s “ease of doing business” ranking. These are starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
While, to some, these are just numbers, to those who are so concerned about the country’s competitiveness, these numbers speak volumes. For one, we, after some recalculations of last year’s survey, went down by nine ranks. That is from rank no. 86 to 95. This is the main reason why our National Competitive Council, through Mr. Guillermo Luz, is up in arms against the World Bank because had it not been for the recalculation, we could have been up from rank no. 108 (before recalculation) to 95. To some, they may say, so what?
The truth is, this is one of the most important surveys in the globe. Consistently topped by Singapore, the investors in the entire world are looking at this survey for investment decision purposes. In fact, being on top is the very reason why Singapore, despite its limited size, is attracting a lot of foreign investors all over the globe and is cornering the biggest chunk of foreign direct investments among member states of the Association of Southeast Asian Nations.
Thus, if we make an attempt to understand our performance, then we must try to understand the survey results. First and foremost, the result of this survey can be well understood by analyzing our performance as far as attracting foreign investments is concern. You may not be aware but we are among the laggards in the ASEAN in this respect. Historical data will help us sort this out. As reported by the World Bank through the East Asia Pacific Economic Update earlier this year, the ASEAN region, has been the largest recipient of FDIs, in Asia Pacific. However, since 1952 until 2012, “Singapore accounts for more than half of total FDIs to the whole region at 52percent. Thailand ranks 2nd with 13percent, followed closely by Indonesia at 3rd with 11percent, at 4th is Malaysia with 10percent, Viet Nam (the once war-torn country) ranks 5th with 8percent, and the Philippines is 6th with a miserable 3percent”.
Though, in absolute amount, we increased our FDIs this year when compared against last year, still, among foreign investors in the ASEAN, we are least likely chosen. We continued to be among the least preferred countries in the ASEAN in terms of FDIs. The fact is, weighed against that of other key countries in the ASEAN, ours will still pale in comparison. Take 2013 for instance. We were billions of dollars away from our Southeast Asian neighbors. With just US$3.859 billion in net FDI inflow, we were among the laggards at a consistently disappointing 6th place. Singapore, Indonesia, Thailand, Malaysia and Viet Nam grabbed US$60.645 billion, US$18.444 billion, US$13.000 billion, US$12.297 billion, and US$8.900 billion, respectively.
Truth to tell, this performance directly correlates with our performance in the WB’s “doing business” surveys. For instance, in the recently released survey, when compared against ASEAN countries, we are fifth overall with Singapore on top, followed by Malaysia (no. 18), Thailand (no. 26) and Vietnam (no. 78).
One may ask why Indonesia, ranked no. 114, is way ahead of us in FDI generation despite us being ranked higher at 95. The answer is very simple and direct. If we closely examine the categories, the “starting a business” category explains it all. In this category, we ranked no. 161 while Indonesia is way ahead at rank no. 155. At 161st place, we are among the bottom 30 of the 189 countries/economies included in the survey. It simply means, both domestic and foreign investors have difficulties with our licensing and permitting systems and procedures. Thus, are discouraged to invest.
Left unchecked, we will go farther down next year. This is so, as the survey’s coverage next year shall be expanded to cover these areas: quality of building regulations, reliability of electricity supply, quality of the land administration system, post-filing process in paying taxes and quality of the judicial administration system. As we all know, power supply will be a major problem next year. That alone shall push us to the bottom. Thus, less attractive to both foreign and local investors. That’s a no brainer.
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