UN(EASE) OF DOING BUSINESS IN PH
By: Euney Marie J. Mata-Perez on November 8, 2018
In the recently published 2019 World Bank Doing Business (DB) Report, the ranking of the Philippines dropped 11 notches from 113th place for the year 2018 to 124th place for the year 2019 out of 190 economies. In 2017, the Philippines was ranked 99th.
The World Bank (WB) noted that while the Philippines improved in terms of starting a business, dealing with construction permits and protecting minority investors, it did not do well when it came to trading across borders. According to the DB Report, “[t]he Philippines made trading across borders more difficult by increasing the number of inspections for importing, thereby increasing the average time for border compliance.” This slide in ranking was also attributed to the steep costs of business registration and policies of lengthy imports inspection.
The Philippines is now trailing far behind its Asian neighbors. Singapore is in second place, Malaysia 15th, Thailand 27th, Vietnam 69th, Indonesia 73rd and India 77th. India leapt 23 places due to great improvements in dealing with construction permits. India implemented an online single window system, introduced deemed approvals and reduced the cost for obtaining permits.
The Department of Finance (DOF) and the Department of Trade and Industry (DTI), in a joint statement, expressed their strong objections to the report. They demanded that the WB review the Philippines’ rating and immediately “make a correction” given the Philippines’ increased Ease of Doing Business (EODB) scores. The DTI and DOF pointed out that the Philippines actually improved its scores in seven out of 10 EODB indicators (starting a business, dealing with construction permits, getting electricity, registering property, protecting minority investors, paying taxes and protecting minority investors) and maintained its scoring in two EODB indicators (enforcing contracts and resolving insolvency).
The DTI and DOF stressed that the Philippines’ drastic slide in the rankings was due to the significant fall from 30 to five in the country’s EODB score for Getting Credit because of the alleged failure of the WB’s survey team to gather the correct information on the country’s credit information database. They claimed that the WB sourced data only from the BAP Credit Bureau Inc. (which has a small database) and excluded data from other bigger credit bureaus, such as TransUnion Information Solutions, Inc. and Microfinance Information Data Sharing Inc.
The DOF and DTI, however, did acknowledge that significant reforms must still be instituted in the country. They proposed the following two-pronged strategy: 1) continue pursuing regulatory reforms, i.e., streamline processes and repeal outdated, redundant or obsolete rules that create undue regulatory burden; and 2) implement an effective communication campaign.
As part of the strategy of pursuing regulatory reform, Republic Act No. 11032 , known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, should thus be strictly
and immediately implemented by government agencies. The Act requires that:
Government agencies shall adopt a ‘citizen’s charter’ specifying the requirements for each application or request and the time and procedure to obtain a particular service.
All applications or requests shall be acted upon within a period not to exceed three working days for simple transactions and seven working days for complex ones.
If an application/request is not acted upon (approved or disapproved) within the prescribed processing time, the same shall be deemed approved, provided all required documents have been submitted and the applicable fees have been paid.
A single or unified business application form shall be used in processing applications for business permits/renewals which shall consolidate all the information required for local taxes, building clearance, sanitary permit, etc.
A business one-stop shop shall be established within each city/municipality to receive and process the application for business license, clearance, etc.
From the tax side, more reforms should also be instituted. So far, the Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Order 19-2018 and Revenue Memorandum Circular No. 30-2018, which 1) specified that registration of the book of accounts shall be done within 30 days and the authority to print receipts should be given together with the certificate of registration, and
2) reiterated the removal of the requirement to submit books of accounts to be issued a certification of registration.
Any “no-contact” policy of government agencies when they process applications should be implemented with reason and due care and should not result in delayed action by the government agencies.
A lesson may be learned from the launch by the Securities and Exchange Commission (SEC) of its new Company Registration System (CRS). The SEC implemented the CRS immediately without providing a transition or testing period or adequately considering its technical capacity and capability. This resulted in significant delays in the SEC’s processing of applications to set up corporations. Delays lasted as long as six months. Now, it appears to take at least three months to incorporate. It also takes the SEC a long time to act on simple requests, like an appeal to use a corporate name that was rejected (many times without good reason) by the CRS.
It is disheartening that every year the Philippines is spiraling towards the bottom of the EODB rankings. As practitioners, we face EODB issues almost daily. Drastic reforms and changes are needed. Red tape and corruption must be eliminated.
Indeed, the Philippines has a lot of catching up to do.
Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at firstname.lastname@example.org or visit MTF website at www.mtfcounsel.com
From The Manila Times website on November 8, 2018