Working on competitiveness

Six steps and eight days. This is what 12 government agencies had been working on and seem quite proud enough to give it the budget for limited print ads in the national dailies recently.

It should make those thinking of setting up new businesses jump with joy since this would mean a marked improvement from the old system that needed 16 steps and at least 34 days to accomplish.

Assuming the registration process when dealing with government would indeed be shorter, the shortened version would definitely be a welcome move. But we all know that the measure of ease in starting a business in the Philippines does not rest alone on the outlined start-up steps.

In other words, doing business in the Philippines is not just about starting a business. The real challenges especially for small entrepreneurs come when the business has been given the permits and then, voila! the inspectors from the sanitary, health, and other departments come knocking with their own “assessments.”

And this happens every year. Small entrepreneurs complain that these “assessments” never decrease even if there is valid evidence that the business had not done well during the previous year – unless, of course, you are able to “negotiate” for a stay in the assessments.

Petty corruption

In their desire to continue doing business without unnecessarily burdening their operating costs, small businessmen shrug their shoulders and just give in to the more convenient method, which usually means currying favor from local inspectors and government officials through unethical means.

In fact, petty corruption at the local government level is the biggest problem often cited by small businessmen that force them to look the other way when confronted with petty but troublesome requirements imposed by local government authorities.

The only way for such acts of corruption to stop, they say, is to force local governments to be transparent in the assessment of all fees, making inspections an issue that deals mainly with conformance to set standards of operations.

Of course, that would be easier said than done given the fact that most of our local government personnel and officials are underpaid, and thus are severely tempted to find other means to augment their incomes.

Increasing cost of fiscal compliance

For larger businesses, though, there are bigger problems when dealing with government. The cost of conformance to local and national regulatory taxes and other fees has been creeping up, bringing the cost of doing business to levels that are far higher than their counterparts in neighboring countries.

This is a major reason why the Philippine manufacturing sector is not as vibrant as in other more business-friendly countries, and it makes sense to import the same goods from abroad where lower business costs have helped manufacturers.

We have lost our garments and textile industry already. If our electronics industry were not in export processing zones – which offer a lot of incentives, we would have seen an exodus also in the manufacture of electronic chips and other parts.

Same in agriculture

This is also the same in the agriculture sector where government support in irrigation and other infrastructures is much less than what their counterparts in other countries get. The result? The country is slowly being flooded by importations of lower priced agricultural produce.

Garlic producers were the first to feel the heat. Our rice farmers are in danger, and only the import quotas are keeping the docks from being filled with rice imported from Thailand and India.

The local fishing industry is facing its own problems too. Now, it’s easier to get scud fish or galunggong from the big trawlers whose ownership is based in other countries, although at a higher price. Our aquaculture industry is facing stiff competition from their foreign counterparts.

Global liberalization

Ironically, even foreign businesses who want to operate in the Philippines have their own set of problems. As one of the countries in a region that’s growing at enviable rates, plus with its own set of operating advantages such as a pliable work force, many foreign investors are interested in setting up here.

But the attractiveness is somewhat spoilt by the difficulties of doing business, and somehow negates the prospects of harvesting good profits every year and for the longer term.

In fairness to these foreign businesses, they have come up with a wish list of sorts and have organized themselves to work hard on each of the items that would tremendously help them realize better incomes.

Wish list

Not surprisingly, corruption is at the top of their list of advocacies. This is bundled up under the heading of creating a level playing field so that they can better compete. Among the items included here are proposed amendments to the Constitution specific to restrictions for foreign businesses.

These foreigners have a host of concerns that they have elevated to and continuously work on with the concerned government agencies. It puts to shame the stuff and effort that our local chambers give to improve local firms’ competitiveness.

These foreign investors have lined up a whole gamut of issues ranging from improving transparency at the Customs level, rationalizing fiscal incentives, retail trade liberalization, judicial reform, smuggling, high cost of electricity, intellectual property rights, opening of the banking market for foreign investments, etc.

Sariling sikap

Filipino businesses have to learn from this and be galvanized to act cohesively and decisively. If we rely only on the government’s initiative, which foreign chambers are not doing, there will be nothing to harvest at the end of the day.

Thank you for the shortened process in starting a business (though the effectiveness of this remains to be seen since it is being rolled out in Quezon City on a pilot basis), but Filipino entrepreneurs cannot wait for this kind of snail’s pace of action from our government. –Rey Gamboa (The Philippine Star)