Reforms to improve business climate lifts PHL’s EODB ranking in 2019

Photo: Former Finance Secretaries meet with Secretary Carlos Dominguez (DOF)


The Duterte administration’s implementation of reforms to improve the  country’s business climate  bore fruit in 2019 with the Philippines’ polevault to 95th place in the latest World Bank's Ease of Doing Business (EODB) report, sweeping the country to the ranks of the world’s top 100 competitive economies. 


In the World Bank’s  2020 report on the best places to do business, the Philippines jumped 29 notches from its previous 2019 ranking of 124th out of 190 economies included in the study.


The Philippines got an EODB score of 62.8 in the  2020 report released by the Bank last October,  an improvement over its grade of 57.68 in the previous year.


Finance Secretary Carlos Dominguez III  said this “dramatic improvement is reassuring although, for us, hardly surprising,” given that over the past three years, the Philippines legislated important reforms to improve the business climate in the country. 


Dominguez is upbeat on the Philippines’ chances of further improving its two-digit leap in ranking once a new law expanding the access of micro, small and medium enterprises (MSMEs) to lending facilities is fully implemented in 2020. 


He said Republic Act (RA) No. 11057 or the Personal Property Security Act (PPSA) will help propel the Philippines to a higher ranking in the Doing Business 2021 report with the law’s implementing rules and regulations (IRR) completed last year and published in the Official Gazette.


“With the PPSA in place, MSMEs can register their movable assets such as inventory with the Land Registration Authority (LRA) and use those assets as collateral in accessing formal sources of financing,” Dominguez said. “This is among the reforms we are pursuing to further improve our business climate and empower small entrepreneurs.”


RA 11057 is meant to expand the access to least-cost credit of  MSMEs,  along with farmers and fisherfolk, in keeping with President Duterte’s goal  of improving the lives of all Filipinos.


Under this law, MSMEs, farmers and fisherfolk can  include in the LRA electronic registry  their movable assets such as account receivables, inventory, negotiable instruments, electronic securities, crops, livestock, consumer goods, machinery, equipment, as well as intellectual property rights, to make it easier for them to use these assets as collateral in accessing credit. 


The Department of Finance (DOF) held and allowed the posting online of feedback and comments on the PPSA’s draft IRR last July to speed up the process of crafting the  laws’ rules and regulations. 


While the IRR has already  been completed and published, the implementation of the PPSA has been deferred until the establishment and operation of an electronic registry where notices of a security interest and a lien in personal property may be registered. 


 The release of the IRR will now enable the Department of Budget and Management (DBM)  to release the funds for the establishment of this electronic registry.


The government’s  new US$400-million loan agreement  with the World Bank that aims to, among others, streamline government procedures to simplify the ease of doing business, and  increase access to economic opportunities through the rollout of the national ID and electronic payment systems is likewise expected to help boost the Philippines’ EODB ranking in the coming years. 


This development policy loan will implement the Promoting Competitiveness and Enhancing Resilience to Natural Disasters Sub-Program 1, which is a component of a three-part loan package from the World Bank with a total amount of US$1.2 billion. 


Dominguez pointed out that  the Philippines was able to secure this generous support from the World Bank, which is  three times the US$600 million average lending that the institution has committed to the country over the past decade.


He attributed the World Bank’s  increase in funding support  to the implementation of the EODB  and Efficient Government Services Act (RA 11032), the Rice Tariffication Law (RTL), the Philippine Identification System Act (PhilSys) and the National Payment Systems Act (NPSA), among other reforms. 


The establishment of the Anti-Red Tape Authority (ARTA), one of the requirements under the EODB Law, and the appointment of Jeremiah Belgica as director-general of the body, is expected to help further firm up the Philippines’ goal of improving its ranking on the World Bank's EODB list.


In the 2020 Doing Business Report, the Philippines is included in the list of 42 economies that improved its EODB score the most, as it was able to implement regulatory reforms in 3 or more of the 10 indicators included in the report’s  aggregate EODB score. 


The Philippines: 1) made starting a business easier by abolishing the minimum capital requirement for domestic companies; 2) made dealing with construction permits easier by improving coordination and streamlining the process for obtaining an occupancy certificate; and 3) strengthened minority investor protections by requiring greater disclosure of transactions with interested parties and enhancing director liability for transactions with interested parties.


The country recorded the biggest improvement of 60 notches in the area of protecting minority investors, rising to the 72nd from the 132nd place while improving its score to 60.0 from 43.33 points.


The Securities and Exchange Commission (SEC), which is under the DOF’s supervision, carried out several reforms that enabled the Philippines to reach its 95th ranking in the EODB Report. 


These include the issuance of the Rules on Material Related Party Transaction for Publicly-Listed Companies last April 25, 2019 through Memorandum Circular No. 10, Series of 2019, which includes provisions on the protection of minority investors 


According to the SEC, the World Bank also recognized how the abolition of the minimum capital requirement for domestic companies made starting a business easier in the country. 


This reform, implemented by the SEC,  took off with  the enactment of RA 11232, or the Revised Corporation Code of the Philippines, last Feb. 23.


The Philippines also advanced to the 85th from the 94th place and improved its score to 70.00 from 68.58 points in the area dealing with construction permits, following the improvement of coordination and streamlining of the process for obtaining an occupancy certificate, the SEC said.


In addition, the Philippines’ ranking jumped 52 notches to the 132nd from the 184th place in terms of the ease of getting credit, “as its score zoomed by 35 points to 40.0 from the 5.00 posted last year,”  the SEC added.


On top of these initiatives,  the DOF and other government agencies sealed a new and enhanced memorandum of agreement (MOA) aimed at improving the ease of doing business in the country by facilitating the early resolution of complaints and other concerns raised by investors. 


The new Investment Promotions Unit (IPU) Network (Net) MOA committed 36  agencies to efficiently and swiftly resolve issues raised by investors to avoid delays in the processing of business registrations, permits and   licenses, among other concerns.


With the new MOA in place, the delivery of frontline government services, especially the processing of business transactions, will be monitored by the  ARTA to ensure that any delays are addressed immediately in compliance with the EODB Law.   


The improved MOA also aims to promote the use of the One Window Network (OWN) of the Bureau of Investments (BOI)  and other online facilitation systems available in other government agencies in fast-tracking the submission of investment-related issues, concerns and queries.  


OWN is a cloud-based web portal and mobile application that offers online facilitation of investors’ pre-investment and post investment queries and concerns.


In July,  the DOF and  the Department of the  Interior and Local Government (DILG) issued a joint circular providing the guidelines in setting reasonable   rates for regulatory fees and other service charges imposed by local government units (LGUs) as part of ongoing efforts to improve the EODB at the local government level. 


Joint Memorandum Circular (JMC) No. 2019-01, signed by Secretary  Dominguez and Interior and Local Government Secretary Eduardo Año, was issued to ensure that LGU fees do not unduly burden the public but are imposed only to help local governments recover the costs of services they render while making them more business friendly,  in compliance with  the EODB Law. 


For 2020, President Duterte has approved the proposed regulatory reform spearheaded by the Department of Trade and Industry (DTI) to further improve the country’s business climate. 


According to DTI Secretary Ramon Lopez, these reforms include the strict implementation of the EODB Law and  the full use of the   Philippine business portal, online corporation registration system,  a unified reporting system for Social Security Agencies, a property registration portal, and the electronic collateral registry.