Philippines is 95th ‘best place’ to do business – WB report

MANILA, Philippines – Setting up business in the Philippines seems not improving, as it slid down from 86^th to 95^{th place}, the latest “Doing Business” report of the World Bank showed.

In 2013, the Philippines leapfrogged 30 notches in the global survey to 108^th. But due to data corrections in methodology changes, the Philippine ranking moved to 86^th, and now to 95^th spot in terms of ease of doing business, according to the latest report.

The “Doing Business” 2014 reference, though, is not last year’s published ranking but a comparable ranking for “Doing Business” 2014, capturing the effects of data corrections in methodology changes in the report, the World Bank clarified.

The report released Wednesday, October 29, showed that in the Philippines, it would take 34 days to open a business; 42 days to get electricity power; and 15 days and $915 to import a container.

In contrast,  in the world’s best place to run a business such as Singapore, entrepreneurs need just 2.5 days to open a business, 31 days to get electric power, and 4 days and $440 to import a container. (READ: Singapore, New Zealand, Hong Kong best for business)

On the opposite extreme is Eritrea – ranked 189^th and the world’s worst place to run a business – where a businessman would need on average 84 days to start a company and 59 days to get electricity, while importing goods takes 59 days at a cost of $2,000 per container.

The “Doing Business” report aims to “shed light” on how easy or difficult it is for a local entrepreneur to open and run a small- to medium-sized business when complying with relevant regulations. It covers 189 economies, including the 31 Organization for Economic Co-operation and Development (OECD) high income economies.

The report measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: 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.

Downward rankings

The Philippines showed downward rankings in areas of starting a business, protecting minority investors, paying taxes, and trading across borders, the World Bank report showed.

The World Bank covered Quezon City for this latest report.

Starting a business index covers the bureaucratic and legal hurdles an entrepreneur will go through when incorporating and registering a new firm in Philippines. It includes the procedures, time, and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy’s per-capita gross national income.

Globally, the country ranked 161 from 154, citing that in the Philippines, it takes 16 procedures from verifying and reserving with the Securities and Exchange Commission (SEC) to registering with Home Development Mutual Fund (Pag-IBIG) when starting a business.

In East Asia and the Pacific, it takes to complete 7.3 procedures; and 4.8 in OECD economies.

The country’s ranking dropped 11 notches to 154 – from 143 – in protecting minority investors indicator, which covers the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain, the World Bank outlined.

The Philippines scored 4.2 out of 10 on the strength of the minority investor protection index, with a higher score indicating stronger protections.

In East Asia and the Pacific, a score of 5 was recorded while OECD countries registered a 6.3 score in strength of minority investor protection index.

In terms of paying taxes, the Philippines stands at 127, from 121. On average, Philippine firms make 36 tax payments a year; spend 193 hours a year filing, preparing, and paying taxes; and pay total taxes amounting to 42.5% of profit.

Other East Asia and the Pacific economies have an average of 25.9 tax payments annually; and spend 204.3 hours a year filing, preparing, and paying taxes. These economies also average 34.4% of total taxes paid.

OECD economies, meanwhile, make 11.8 payments a year; spend 175.4 hours of filing, preparing, and paying taxes; and have a total tax rate of 41.3% of profit.

Worldwide, the Philippines stands at 65 among 189 economies on the ease of trading across borders, 12 spots down from 53.

The “Doing Business” report showed that in the Philippines, exporting a standard container of goods requires 6 documents, takes 15 days and costs $755. Importing the same container of goods requires 7 documents, takes 15 days and costs $915.

For East Asia and the Pacific, exporting a standard container of goods requires also 6 documents, takes 20.2 days and costs $864. Importing the same container of goods requires also 7 documents, takes 21.6 days and costs $895.6.

For OECD countries, exporting a standard container of goods requires 4 documents, takes 10.5 days and costs $1080.3. Importing the same container of goods requires 4 documents, takes 9.6 days and costs $1100.4.

Other indicators

In dealing with construction permits index, the Philippine slid one notch down from 123 to 124, showing that a business would have to undergo 24 procedures, takes 94 days, and costs 1.2% of the warehouse value.

The country’s ranking for getting electricity remained unchanged at 16. In enforcing contracts, the Philippines ranking remained at 124.

In registering a property, the Philippines ranked from 107 to 108.

From a rank of 99 to 105, getting credit in the country scored 5 of 8 on the depth of credit information index and scored 3 of 12 on the strength of legal rights index.

The country also slid two notches from 48 to 50 in terms of resolving insolvency, citing that it takes 2.7 years on average and costs 32% of the debtor’s estate, “with the most likely outcome being that the company will be sold as piecemeal sale,” the World Bank wrote.

Overall, the Philippines’ distance to frontier score remains at 62.08% points. The “distance to frontier” measure aids in assessing the absolute level of regulatory performance and how it improves over time. – Rappler.com