Philippines slips in World Bank ranking on doing business

The Philippine Star

MANILA, Philippines - The Philippines slipped six notches in the World Bank’s latest report gauging economies in terms of ease of doing business despite reforms made by the government in expediting ways of starting businesses.

In the World Bank Group’s Doing Business 2016 report released yesterday, the country’s ranking dropped six notches to 103rd from last year’s 97th spot across 189 economies. The Philippines ranked 95th from the original report published last year but was revised to 97th to reflect a change in methodology.

The decline in the latest rankings likewise pulled the Philippines down one place to the 5th spot from the previous 6th among the Association of Southeast Asian Nations (ASEAN).

Singapore, which emerged on top of the ease of doing business list for the 10th consecutive year, Malaysia (18th), Thailand (49th), Brunei Darussalam (84th), and Vietnam (90th) were the top five Asean economies where doing business is easier than the Philippines.

Aside from Singapore and Malaysia, other countries in the East Asia and Pacific which were in the top 20 rankings are New Zealand (2nd), Republic of Korea (4th), Hong Kong (5th), Taiwan (11th) and Australia (13th).

East Asia and the Pacific is the second most represented region in the Doing Business 2016 report after Europe in the world’s top 20 economies.

Despite slipping in the rankings, the Philippines was recognized by the World Bank Group for making starting a business easier by streamlining communications between the Securities and Exchange Commission and the Social Security System and thereby expediting the process of issuing an employer registration number.

“A majority of economies in East Asia and the Pacific are undertaking reforms to further improve the regulatory environment for small and medium-sized enterprises. During the past year, 52 percent of the region’s 25 economies implemented 27 reforms to make it easier to do business,” the World Bank said.

The Doing Business ranking provides an idea on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

The report measures and tracks changes in regulations affecting 11 areas in the life cycle of a business namely, starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation.

It does not, however, measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, as well as regulation specific to foreign investment or financial markets.

The World Bank said this year’s Doing Business report completes a two-year effort to expand benchmarks that measure the quality of regulation, as well as the efficiency of the business regulatory framework, in order to better capture the realities on the ground.

NCC expresses disappointment

The National Competitiveness Council (NCC), however, is not too pleased with this year’s ease of doing business outcome, saying the report has undergone methodological changes in four of the last five years which made it confusing and unreliable for measuring change.

“Despite our efforts to introduce reform projects to improve the ease of doing business in the Philippines, the International Finance Corp. shows different sets of scores and rankings every year due to a change in methodology,” NCC co-chairman Guillermo Luz said.

“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,” Luz said, questioning the relevance of the report’s diagnostic tool moving forward.

According to Luz, the NCC has made steady improvements by streamlining processes and introducing reforms across a wide range of the indicators.

“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. We need consistency in the diagnostic tool to monitor ourselves, and better measure our performance,” Luz said.

“We’re not junking a too just because it tells us it’s getting worse. What we want is a tool that tells us accurately if we did well or worse,” he added.

With the Philippines’ five-spot plunge in this year’s ranking, World Bank official said the country remains a good place as far as doing business is concerned but it needs to step up further its game to address the tougher competition.

“I want to emphasize the Philippines has risen and you are now in a much tougher, much competitive environment. 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,” World Bank Philippines country director Motoo Konishi said.

“There are questions on methodology, but one thing to emphasize though is the Philippines has been doing reforms, it simply needs to accelerate to compete with others in the neighborhood,” Konishi said.

IFC operations officer Roberto Galang said the Philippines going forward should be able to seize momentum by concentrating on a number of regulatory reforms in which many do not require the passage of new laws.

“Our rise from the 130s to our present position has put us in a very competitive neighborhood. The World Bank Group will intensify our cooperation with the NCC in further  streamlining the ease of doing business in the country,” Galang said.

Purisima calls survey erratic, unsound

The Philippines lambasted yesterday  the World Bank after its ranking in an annual gauge of business environment slumped to one of the lowest in Southeast Asia, calling the measure an “inappropriate” reflection of the country’s business climate.

Calling the World Bank-International Finance Corp.’s Doing Business (DB) Report “erratic” and “unsound,” Finance Secretary Cesar Purisima expressed dismay on the country’s six-notch slip— to 103rd from 97th— in the survey.

“The Philippines firmly believes that the Doing Business survey methodology of collecting sample data from one or only two cities makes it inappropriate to present the report as reflective of the state of doing business for an entire economy,” Purisima said.

“Countries, especially developing ones like the Philippines, will have bright spots of promise in some areas and not in others,” he added.

A case in point are the country’s special economic zones, which the finance chief said are not being captured by the survey. These locators, managed by the Philippine Economic Zone Authority (PEZA), are granted numerous fiscal incentives in their operations.

The World Bank, for its part, has recognized this as one of the “limits” of the survey, which focuses only on each economy’s “largest business city.” Survey questionnaires were sent to businesses in covered areas.

A total of 14,233 respondents participated in the global survey in the latest report. In the Philippines, the survey was conducted in Quezon City.

“With this methodology, the DB survey should be more aptly titled as ‘Doing Business Across Cities’ to provide a better representation of the results of the report,” Purisima said.

Purisima, who is the country’s governor in the World Bank Group, also criticized the survey’s “erratic methodological changes year after year” which tended to affect even the previous years’ results.

An example is the Philippines’ place last year, which changed to 97th in the current report from 95th when it was first reported. The country ranked 134th in 2011, the first full year of the Aquino administration. – with Prinz Magtulis

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