Reforms seen yielding competitiveness boost

OFFICIALS are hopeful of a competitiveness ranking boost for the Philippines given a recent reform simplifying processes for firms doing business in the country.

A law providing the framework for the closure of insolvent firms has been cited by the World Bank (WB) and the International Finance Corporation (IFC) as they finalize work on the Doing Business 2012 report due out this October.

“I am confident we can raise our ranking. The key is to simplify our processes,” National Competitiveness Council (NCC) co-chairman Guillermo M. Luz told BusinessWorld yesterday.

The Financial Rehabilitation and Insolvency Act identified by the WB and the IFC does just that as it addresses bottlenecks encountered by bankrupt firms seeking to close shop, Mr. Luz explained.

Businesses, a legislator yesterday said, could also benefit from a host of other reforms in the pipeline.

“The amendment of the Labor Code provision prohibiting night work for women enables BPOs (business process outsourcing firms) and other enterprises to employ women at night without needing to get permission from DoLE (Department of Labor and Employment),” Aurora Rep. Juan Edgardo M. Angara told BusinessWorld.

The Palace-backed priority bill is set to be signed into law by President Benigno S. C. Aquino III after it secured the approval of both chambers of Congress last week.

“There are also many bills amending the laws on government procurement to eliminate some loopholes. Making processes transparent also results in greater competitiveness, ultimately,” Mr. Angara added.

The NCC is likewise focusing on improving the country’s education, infrastructure and governance to make the Philippines a more attractive destination for investors, Mr. Luz said.

The Philippines is seeking to move out of the bottom half of world competitiveness rankings where it has perennially placed. The country came in 148th out of 183 economies in the Doing Business 2011 report of the WB and the IFC, down two places from the prior year.

Work is underway for this next report and the WB and the IFC are in the process of listing reforms that could have changed countries’ rankings.

“For the countries in your constituency, we have updated our data and identified the reforms that became effective between June 2, 2010 and June 1, 2011 that affect the Doing Business indicators. These reforms will provide the basis for changes in the indicators in this year’s report,” they said in an e-mail to the Department of Finance.

The Insolvency Act, which was passed last July, was the only reform identified. It was classified under the “closing a business” indicator.

The law “provides a legislative framework for liquidation and reorganization proceedings of financially-distressed companies”. It amended the previous insolvency law enacted in 1909.

The insolvency act provides failing businesses with four different remedies: fast-track rehabilitation, court-supervised rehabilitation, pre-negotiated rehabilitation and dissolution-liquidation. It also set procedures so that creditors will have better chances of collecting their claims.

“The reorganization plan must also be approved by the court within 120 days after the date of submission of the petition; otherwise, the reorganization plan will be deemed approved,” the WB and IFC noted.

Last year’s Doing Business report said Philippines had one of the most difficult procedures for closing a failing business. The country’s was ranked 153rd in terms of this indicator.

It takes a firm five to seven years here to declare bankruptcy while creditors recover just 4.5% from an insolvent firm, the report said.

“This was the legislative intent of the [insolvency act], to really speed up and modernize processes as our bankruptcy laws were 100 years old and had little regard for time and efficiency concerns,” Mr. Angara, one of the bill’s proponents, said.

The WB and the IFC are now reviewing the implementation of the insolvency act to ensure that it speeds up the reorganization and liquidation processes of firms, IFC senior program manager Hans Shrader told BusinessWorld yesterday.

“The Doing Business team in Washington, D.C. is in the process of verifying information related to this and the other indicators for the Doing Business report and thus is making a determination as to if, and then how, the [law] may impact on the indicator,” he said in an e-mail.

Mr. Shrader declined to comment on the possibility of the Philippines’ competitiveness ranking improving in the upcoming Doing Business report. –DIANE CLAIRE J. JIAO, Reporter, Businessworld