The Philippines slid six notches in the latest annual rankings by the World Bank in terms of the ease of doing business among 189 countries around the globe, prompting the government to question the revised methodology used in producing the results.
The Philippines ranked 103rd in World Bank’s Ease of Doing Business 2016 Report, (based on the countries’ 2015 performance), falling from the 97th place the previous year, the International Finance Corp. (IFC) told reporters in a briefing on Wednesday.
The World Bank explained that the country’s 97th ranking last year was a revision of its original 95th slot as a result of the refinement of its methodology to improve its measurement of the performance of each country in terms of the set criteria.
“This year, the Development Economics team of the World Bank Group has decided to include measures of the quality of the implementation, rather than just the presence of the regulations themselves,” said Roberto Galang, operations officer at the trade and competitiveness global practice group of the International Finance Corp. (IFC), the World Bank’s private sector lending arm.
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 placing last.
“This year, the Development Economics team of the World Bank Group has decided to include measures of the quality of the implementation, rather than just the presence of the regulations themselves,” Galang said.
He told a briefing on Wednesday that the country’s overall ranking decline was “reflected in most of our other indicators, as the Philippines has also experienced slight drops in most of the 10 sub-indicators of the Doing Business program, except for getting electricity.”
The country fell eight places in terms of starting a business (165th from 157th), but it was also in this area that the World Bank noted that reforms had been made: streamlining communications between the Securities and Exchange Commission and the Social Security System and thereby expediting the process of issuing an employer registration number.
The declines were not as steep with regard to:
• dealing with construction permits (down five to 99th);
• registering property (down two to 112th);
• getting credit (down four to 109th);
• protecting minority investors (down one to 155th);
• paying taxes (down one to 126th);
• trading across borders (down one to 95th);
• enforcing contracts (down one to 140th); and
• resolving insolvency (down two to 53rd).
In the area of getting electricity, the Philippines gained two places to 19th.
Govt blames methodology
The Philippines’ National Competitiveness Council (NCC), which had forecast an improvement to 65th in the 2016 report, criticized the Washington-based lender for using “erratic and unsound methodology,” and questioned the relevance of the annual rankings moving forward.
“Despite our efforts to introduce reform projects to improve the ease of doing business in the Philippines, IFC shows different sets of scores and rankings every year due to a change in methodology,” Guillermo Luz, private sector co-chairman of the NCC, said during the briefing.
“The changes are applied retroactively so even prior years’ results are changed without our knowledge. This makes it difficult to tell whether we are on the right track or not using this instrument. It has become unreliable,” he added.
Luz claimed that the NCC, through its Gameplan for the Ease of Doing Business, has made steady improvements by streamlining processes and introducing reform across a wide range of the indicators.
He said significant reform measures had been implemented with regard to the starting a business indicator, claiming that firms now have to go through just six steps and wait eight days instead of the 16 steps and 29 days set in the 2016 report.
“We have done so much to improve doing business in the Philippines. However, the Doing Business Report doesn’t capture these initiatives and the constant methodology change and recalculation of ranking every year is of no help,” Luz said.
He said there was a need for consistency in the diagnostic tool for the Philippines to better monitor and measure its performance, but also noted that further improvements had to be made.
“We recognize we need to continue introducing reforms and improvements in the ease of doing business and will continue to do so. Continuous improvement will take place through high levels of collaboration and cooperation across government agencies and between the public and private sectors,” Luz said.
The Department of Finance, meanwhile, criticized the Doing Business survey methodology of collecting sample data from only one or two cities, saying this was not reflective of an entire economy.
“This is considering that starting a business and registering property vary across cities, since local governments have varying procedures and processing times for the various activities involved therein,” the department said in a statement.
The World Bank, in its summary for the Philippines, notes that the city covered for the 2016 report was Quezon City.
“Finally, the erratic methodological changes year after year, affecting even the findings of the past reports (as seen most recently in revisions applied retroactively to the 2015 report), severely threatens the report’s credibility as a reliable global measure of competitiveness,” the Finance department said.
WB urges more reforms
Going forward, the IFC said the Philippines should be able to seize the momentum by concentrating on a number of regulatory reforms, many of which do not require the passage of new laws.
“For this, I would like to illustrate in detail a few of the indicators where there could be strong movements for the Philippines,” Galang said, pointing to the starting a business indicator.
“It takes 16 steps to do this in the country, which is higher than average in the region. However, in some of the other indicators, such as the number of days it takes to start a business, our performance is much better relative to our neighbors,” he added.
A combination of improvements in items under the main starting a business indicator could help the Philippines perform better and be among the top Association of Southeast Asian Nations countries, he said.
Motoo Konishi, World Bank’s country director for the Philippines, noted that while the country may have made reforms, others had done better.
“Even Hong Kong, which is third ranked, had four reforms last year. The top is moving all the time, therefore we have to move faster for the Philippines to gain ground,” he said.