‘Glaring flaws and inconsistencies’ in Doing Business 2016 report
The Department of Finance has raised concern over the Philippines’ plunge in the World Bank’s business rankings, claiming “glaring flaws and inconsistencies” in the multilateral lender’s latest report.
In a letter to World Bank Group President Jim Yong Kim, Finance Secretary Cesar V.
Purisima said mistakes in the Doing Business Report 2016 did the Philippines a “great disservice by damaging investor perceptions.”
The annual report, released last month, saw the Philippines dropping six notches to 103rd out of 189 economies, lower compared to a downwardly revised 97th in the previous report. The International Finance Corp., the World Bank’s private sector lending arm, said methodologies had been changed to include not just reforms but also measures of how these reforms were being implemented.
In the letter, Purisima took note of the sample size, saying the World Bank had only selected one or two cities as its sample for a country.
“The report fails to provide an accurate representation of the country,” he said, adding: “It disregards the fact that countries like the Philippines have islands of excellence such as those operated by the Philippine Economic Zone Authority, which were precisely established in order for investors to easily do business in the Philippines.”
Purisima also criticized “erratic methodology”, saying the report “changes methodologies year after year and ranks/scores are subsequently retroactively revised a year after publication.”
“These changes are done unilaterally and retroactively, defeating the purpose of the report as a helpful benchmark for improvement, as the baseline measures keep shifting,” he said.
He compared the World Bank’s processes to the World Economic Forum (WEF), saying that the WEF, which has its own competitiveness ranking, consults economies in advance as to changes in methodology.
Purisima also claimed the report was incongruent with reality, citing inconsistencies with regard to the duration of getting a business permit.
Other inconsistencies cited were:
• non-consideration of reforms, in particular the report’s counting “deposit of paid-in capital at the bank” as one procedure for the Starting a Business indicator even as the Corporation Code notes that while firms can open a business with a minimum capital of P5,000, there are no obligations requiring them to deposit P5,000 in a bank;
• failure to recognize other parties, where the report noted the streamlining of the Securities and Exchange Commission (SEC) and Social Security System (SSS) but overlooked its connectivity with other agencies such that registrations with the SEC, SSS, Bureau of Internal Revenue, Philhealth, and Pag-IBIG are done in one step and can be completed in a day; and
• a disparity in the past two years between the numbers indicated in advance copies of the report to the NCC from the published version.
“We are not alone in voicing critiques on the report. Many countries such as Malaysia, and even the private sector community in South Korea, have also expressed the same sentiment,” Purisima said.
“Even the Independent Review Panel of the Doing Business Report in 2013 expressed serious concern on the fundamentals of the report. With the chorus of criticism against the report’s conduct and methodology—we wonder why the World Bank has failed to respond to serve its members better,” he added.
The government had expected an improvement for the Doing Business 2016 report following a decline last year.
The country was originally ranked 95th in the 2015 report, released in October last year. This was lowered to 97th in the latest list as the World Bank changed its methodology.
Changes to the way the rankings were made had benefited the country last year, when its ranking of 108th in the 2014 report was revised to 86th.
Singapore remained the best country in the world to do business out of 189 economies studied, with Eritrea taking last place.