RP one of 10 hardest places to start a business

DESPITE the tax and credit reforms the Philippines instituted the past year, the country fell three ranks to place 144th in a list of 183 economies in the 2010 Doing Business Report as it remains one of 10 places in the world investors find most difficult to start and close a business.

The report, released by the World Bank and the International Finance Corp. on Wednesday, said a record 131 economies or over 70 percent of the countries covered changed business regulations in 2008 and 2009.

The report analyzed an economy’s regulations that affect the life cycles of a business, from start-up and operations,to paying taxes, trading across borders and closing the business.

“Business regulation can affect how well small and midsize firms cope with the crisis and seize opportunities when recovery begins,” said Penelope Brook, acting vice president for financial and private sector development at the World Bank Group.

“The quality of business regulation helps determine how easy it is for troubled firms to survive difficult times, how fast local entrepreneurs will start investing again and how quickly new business can get started.’’

But the report did not measure other aspects of a business environment that matter to firms and investors, such as security, corruption, skills level, macroeconomic stability and strength of financial systems.

In Asia and the Pacific, the Philippines was fourth from last and ahead of Cambodia, East Timor and Laos when it came to Reforming Through Difficult Times, the report said.

Singapore, a consistent reformer, was the top economy for the fourth year in a row when it came to ease of doing business. New Zealand ranked second. Singapore introduced online and computer-based services to ease the process of starting a business, getting construction permits and transferring properties.

The WB-IFC report also listed Hongkong in third place, Thailand 12th, Malaysia 23rd, Taiwan 46th, Vietnam 93rd and Indonesia 122nd.

“As a result of its reforms, Indonesia—the region’s most active reformer—moved up to 122 from 129 on the global ease of doing business rankings. Indonesia cut the time required to start a business by 16 days and the time to transfer a property by 17 days. The country also strengthened disclosure requirements for related-party transactions to protect investors,” the report said.

By comparison, the Philippines remains one of 10 countries with the most number of steps in starting a business. It takes 15 steps to start a business in the Philippines, compared with only one in Canada and New Zealand.

It is also one in 10 countries where it is most difficult to close a business, and where claimants—creditors, tax authorities and employees—recover only 4.4 cents per dollar of claim against an insolvent firm. By comparison, claimants recoup up to 92.5 cents in Japan and 91.3 cents in Singapore.

It takes 5.7 years to close a business in the Philippines, and only 0.4 year in Ireland.

The Philippines, despite its shortcomings, is doing its best by implementing reforms to ease the way a business may get credit, pay taxes and close shop.

“The Philippines enhanced access to credit with a new credit information act that regulates the operations and services of a credit information system. The government also cut the corporate income tax rate from 35 percent to 30 percent and promoted reorganization procedures by introducing prepackaged reorganizations and regulating the receiver profession,” the report said.

The Philippines ranked 162nd in starting a business because it takes 15 steps and 52 days to open a business in the country, and 111th in securing construction permits that takes 24 steps and 203 days to complete. –Roderick T. dela Cruz, Manila Standard Today