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On Monday, the Philippine government again received unsolicited
advice from one of its biggest foreign benefactors, the
International Finance Corporation (IFC): Be more business friendly
to make your country more globally competitive and, for heaven’s
sake, please start implementing the much-publicized Anti-Red Tape
Act which the President signed on June 18, 2007.
The IFC is the World Bank’s investment arm for
the private sector. This 2008-2009 fiscal year, it will lend
Philippine business firms $564 million, which is more than four
times the $130 million it loaned us for FY 2007-2008. The IFC loans
will mainly be given to the infrastructure, agribusiness, power and
financial sectors. These sectors are vital to the country’s
socio-economic development and poverty-eradication effort, areas of
business activity that are most in need of improvement.
The Arroyo administration must pay attention to
and act on what the IFC’s Zenaida Hernandez Uris said in her
presentation of the findings of the World Bank-IFC Doing Business in
the Philippines Subnational Report.
The report was about the results of the IFC’s
survey of Philippine cities to gauge their global competitiveness in
ease of opening businesses, of securing licenses and permits, of
registering property, and of other details covered by the concept of
doing business. Our central government and the local governments
must work to keep on improving these activities because foreign
investors depend on them for decision-making. Perhaps it is because
they know how difficult it is to do business here that few Filipinos
with money are investing.
In sum, the IFC is advising our government to
take up reforms in doing business more seriously—speed up the
introduction of reforms to simplify business regulations and
practices.
IFC’s survey, Ms. Hernandez-Uris said, has
discovered that the Philippines veritably made no reforms in the
area of business registration, the reduction and streamlining of the
list of required permits and licenses and the shortening of the time
it takes to register businesses, to apply for and to receive permits
and licenses.
If it is any consolation, Ms. Uriz also said
that “In East Asia, less than half [of the countries surveyed]
showed reforms.” This means we belong to the majority in the
region who don’t have either the will or the capacity to improve.
She noted that businesses in our country have to
pay multiple fees both at the national and local levels when
starting a business, procuring a license and registering a property.
In the World Bank-IFC 2008 report, the
Philippine ranking fell from 130th to 133rd place out of 178
economies surveyed.
For the IFC’s subnational survey, 21 local
government units (LGUs) were visited and monitored to see how they
ranked compared with other cities in the 178 economies.
Marikina and Taguig
Taguig and Marikina, the IFC said, have
simplified their procedures and reduced regulatory costs for
businesses. The other Philippine cities should learn from their
example.
Uris advised Filipino officials to keep in mind
that “what really matters is the phase of reforms and not the
number of the country’s and the city’s ranking.
“Cities could follow the example of Taguig and
Marikina and cut the requirements to obtain a business permit. Or
even better, why not eliminate the requirement to obtain a business
permit for low-risk general commercial activities altogether,” she
said.
Combine all fees
She also suggested the possibility of combining
all fees into a single charge. She said the cities should do
something about making information about costs and procedures more
easily available.
As before, the IFC pointed to the example of
Australia and Canada. There, for businesses engaged in “general
commercial activities” no licenses separate from business
registration are required. Only businesses engaged in specific
sectors—such as health, environmental protection or exploitation,
and others where special risks are involved—are required to
fulfill additional requirements and secure specific licenses.
Inspections and bribery
The IFC also saw the need in the Philippines to
minimize contact between entrepreneurs and bureaucrats by
eliminating some of the many inspections. It is absolutely right. We
know that in many cities these inspections are seasonal occasions
for bribery. Local government officials issue inspection
certificates without actually doing examinations. That is why, for
example, many fire accidents befall substandard hotels.
Most infuriating of all is that the Anti-Red
Tape Act passed and signed in 2007 remains unimplemented. The law
introduces penalties for fixers, requires the public disclosure of
procedures and fees that government offices may require. It also
calls for systems that will track down the performance (action on
documents and requests) of government employees and officials and
sets deadlines for action to be taken.
Hostile to business
The law, if implemented, will surely speed up
the approval time for licenses and permits. It will also markedly
reduce corruption, which thrives on red tape.
Mrs. Arroyo was widely praised when she signed
the law. She delivered speeches promising the improvement of
Philippine global competitiveness as a result of the Act. That it
has not been implemented nearly a year later proves, sadly, that the
World Bank-IFC report is correct in ranking the Philippines among
the worst countries to do business in.
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