The Philippines ranked a dismal 138th out of a total 185 nations in a study that ranked nations according to ease of doing business. The Philippines remain bogged down by red tape when it comes to the administrative nitty-gritties of opening and operating businesses there. It ranks among the top three countries with the largest number of procedures required for setting up shop and registering a business is an almost 40-day slog for the average entrepeneur.
Despite the good start, the ease of doing business still varies sharply among APEC members. Consider the process for starting a business. In New Zealand it requires only 1 procedure and 1 day and costs 0.4% of income per capita; in the Philippines it takes 16 procedures and 36 days and costs 18.1% of income per capita. Similarly, while dealing with construction permits in Singapore takes 26 days and costs 16.7% of income per capita, in Russia it takes 344 days and in Mexico it costs 322.7% of income per capita.
Worst of all, going bankrupt is a double whammy for the average businessman operating in the Philippines. Compared to advanced nations where bankruptcies take less than one year to resolve, it takes almost six years to resolve bankruptcies in the Philippines after which almost half of the value of one’s estate will have been lost. In other countries, the relatively efficient processes associated with filing for bankruptcy assures most investors that the value of their estate would remain largely intact.
Thus, stifling bureaucracy and inefficient processes contribute to the high risk profile of the Philippine business environment and, as a consequence, the reluctance of potential investors both domestic and foreign to park capital in the country. The cost of both set-up and failure in the Philippines, by themselves, are exceedingly high and many entrepeneurs also lament the arbitrary way that regulators apply their guidelines to the few lucky businesses that find success there.
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No major southeast Asian nation ranked below the Philippines in terms of ease of doing business with Singapore, not surprisingly, topping the list. The ranks of the Philippines’ major trading partners and competitors in the region are as follows (ranking enclosed in parentheses):
Singapore (1)
Hong Kong (2)
New Zealand (3)
Australia (10)
Malaysia (12)
Taiwan (16)
Thailand (18)
Japan (24)
Brunei Darussalam (79)
China (91)
Vietnam (99)
Indonesia (128)
Bangladesh (129)
It is hardly surprising then that business in the Philippines continues to be dominated by pretty much the same set of elite oligarchs, politicians, and taipans. Because of the oppressive scale of the inefficient regulatory processes and weak legal framework of the Philippines, personal connections and relationships with the powers-that-be remain a key asset of successful businessmen there. Obviously this state of affairs favours deeply-entrenched Filipino clans and dynasties making it difficult for fresh ideas brought in by new blood to gain a foothold in the business community.
These grim findings serve as a backdrop to the much-hyped efforts of the government of Philippine President Benigno Simeon “BS” Aquino III to curb corruption and issue hyped-up “reports” on the supposed abundance of promise the country has to offer to investors. Roel Landingin blogging for the Financial Times writes, “While going after suspected wrongdoers of the past administration has begun to change investors’ perceptions, it does little to cut red tape or inertia in regulatory offices and courts across the country.” As expected, Malacañang was quick to issue statements downplaying the relevance of these findings…
The Palace isn’t at all worried, because the reforms now in place have made Philippines attractive to investors, Presidential Spokesperson Edwin Lacierda told reporters in a briefing.
“… We have already started the one-stop processing center and we have more interest in the Philippines… [Investors] are eyeing the Philippines as an investment haven,†the Palace official said.
As always it comes down to results, all of which remain to be seen.
[Sources of facts: World Bank. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0]
benign0 is the Webmaster of GetRealPhilippines.com.
Gundam it, politicos!
Y U NO OPEN ECONOMY??!
THANK YOU for telling the truth about our Banana Republic. I am SO SICK of the happy-bappy lemmings – our compatriots! – who bully me with their false positivity.
I think there is reason to believe that the Philippines is on tract with the rest of its ASEAN neighbors to move up in the worlds economic rankings inspite of its bureaucratic inefficiency.
James Wolfensohn, former World Bank president in a speech, have sounded the alarm that by 2016 China could possibly replace the US as the worlds largest economy. He said that the present global income of 80% from the rich countries and 20% from the developing nations could dramatically change to 50% vs 50% by 2020 and by 2040-2050, the world economy would shift 65% to Asia with China and India becoming the two largest economies, 35% going to the western nations. Chinas middle class would be 1 billion people with a per capita income of $40,000. He said nobody could have predicted this tectonic shift and said he is afraid for the future of Americas young people. According to him, there are now 11,000 Americans enrolled in Chinese universities.
Where does the Philippines figure out in all of these changes? According to IMF statistics, the Philippines could become the 14th largest economy by 2035. Interesting?
Pathetic, depending again on windfall from probable new economic powers instead of dictating one’s own economic development, and reaping the rewards earlier than 2035
Now, some Bicolano points to this PersiNoynoy talking persistently in Tagalog is PersiNoynoy being retrogressive and provincial and parochial. As the Bicolano said:
Tagalog is not well understood in the Visayas and Mindanao provinces since we have several regional districts with their preferred dialects numbering over 30. This is who we are, a proud and resilient people, not parochial but global, respecting our cultural differences.
If the incumbent President Aquino were president of the Tagalog region alone of which Tarlac is but a part, then, he has every right to continuously speak in his very fluent and deep Tagalog. But I am a Bicolano and a lawyer and I don’t want to reinvent myself to Mr. Aquino’s preferred language. I am proud to be a global Filipino who is very comfortable with English.
As Ecclesiastes wisely advocates, there is a time for all seasons—a time to speak in Tagalog and a time to use English. This, President Aquino must learn to do as he is the president of the Republic of the Philippines. Otherwise, he is a retrogressive and parochial leader.
My mom used to tell me “start small, think big”. But does the government support starting small businesses? daming lagay, daming requirements, ang mahal ng bayaran, ang daming pupuntahan and many more. How will that motivate someone to do business?
Ang problema kasi, assuming masyado ang gobyerno naten na big time agad ang mga nag uumpisa ng negosyo. Which in fact is not.
No business means no jobs. no jobs means jobless people. jobless people mean more tambay at inom alak sa kalsada which in turn ay magiging salot sa bayan.
Well, its not like they are going to do a serious manhunt against illegal businesses as long as you’re small time. they don’t have time for small timers. what they have time with is like what happened that certain anti-mining cyber libel crap. mining is seriously big time.
This MATTERS.
Yet there is not the slightest trace of any intention on the part of the President do anything about it.
On the lighter side, Guatemala ranks at 93rd, way higher than our 138th. Yet, I hear or read no significant investments in their country because of the security situation their… If our country is in their rank, we would probably “slightly” better off….