Doing Business in the PH Easier the Philippines Has Made It Easier for Foreign and Local Investors to Start a Business in the Country
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61 BUSINESS Doing business in the PH easier The Philippines has made it easier for foreign and local investors to start a business in the country. This is according to the latest report of World Bank-International Finance Corporation (WB-IFC) entitled “Doing Business 2017: Equal Opportunity for All.” ased on the 2017 Doing Business report, the Philippines climbed 4 notches from 103rd in 2016 to 99th in 2017 with a 60.40 score among 190 countries worldwide. The increase was driven by changes such as the implementation Bof an online tax payment system. Since 2011, the Philippines has gained 49 spots in the Doing Business report. The WB-IFC report measures and tracks business regulations of 190 countries across 10 indicators namely: h Starting a Business; h Dealing with Construction Permits; h Getting Electricity; h Registering Property; h Getting Credit; h Protecting Minority Investors; h Paying Taxes; h Trading Across Borders; h Enforcing Contracts; and h Resolving Insolvency. Among the 10 indicators, the country performed well on of corporate transparency index, increasing the transparency of 4 indicators including Protecting Minority Investors, Dealing building regulations, and the introduction of an online system for with Construction Permits, Paying Taxes, and Enforcing filing and paying health contributions.“This is important for the Contracts. Minor drops were recorded in Getting Credit, down economy to ensure small and medium enterprises can flourish 9 (from 109 to 118), Starting a Business – down 6 (from 165 and create jobs for millions of Filipinos,” the World Bank added. to 171), Getting Electricity – down 3 (from 19 to 22), and But the Philippines still trails its other ASEAN neighbors, Resolving Insolvency – down 3 (from 53 to 56). The country ranking 7th out of 10 countries. The country was ahead of recorded no change in Registering Property and Trading Across Cambodia (131st), Laos (ranked 139th), and Myanmar (170th) Borders with rankings of 112 and 95, respectively (see table on but was outranked by Singapore (2nd), Malaysia (23rd), PH Performance in 2017 and 2016 Doing Business Report). Thailand (46th), Vietnam (82nd), and Indonesia (91st). The The World Bank said that “authorities have worked toward counry, however, continues to lag behind the regional average simplifying business regulations in the country”, which drove the of 61.97, emphasizing the need for better support from the country’s latest performance in the Doing Business report. Among government in order to compete with other ASEAN countries the reforms introduced this year in the Philippines were the extent (see figure on 2017 ASEAN Countries Doing Business Ranking). Philippine ANALYST BUSINESS October 2016 62 BUSINESS PERFORMANCE IN 2017 AND 2016 DOING BUSINESS REPORT INDICatORS 2016 2017 CHANGE Overall Ranking 103 99 +4 Starting a Business 165 171 -6 Dealing with Construction Permits 99 85 +14 Getting Electricity 19 22 -3 Registering Property 112 112 = Getting Credit 109 118 -9 Protecting Minority Investors 155 137 +18 Paying Taxes 126 115 +11 Trading Across Borders 95 95 = Enforcing Contracts 140 136 +4 Resolving Insolvency 53 56 -3 Source: WB-IFC 2017 Ease of Doing Business Report 2017 ASEAN COUNTRIES DOING BUSINESS RANKING Singapore (Rank 2) 85.05 Malaysia (Rank 23) 78.11 Thailand (Rank 46) 72.52 Brunei (Rank 72) 65.51 Vietnam (Rank 82) 63.83 Regional Average (Rank 94) 61.97 Indonesia (Rank 91) 61.52 Philippines (Rank 99) 60.4 Cambodia (Rank 131) 54.79 Lao PDR (Rank 139) 53.29 Myanmar (Rank 170) 44.56 0 10 20 30 40 50 60 70 80 90 Source: WB-IFC 2017 Ease of Doing Business Report TOP 10 EASE OF DOING BUSINESS RANKING IN 2017 Rank Country Score 1 New Zealand 87.01 2 Singapore 85.05 3 Denmark 84.87 4 Hong Kong 84.21 5 Republic of Korea 84.07 6 Norway 82.82 7 United Kingdom 82.74 The country has climbed 49 spots in the 8 United States 82.45 Doing Business report since 2011. 9 Sweden 82.13 10 Macedonia 81.74 Philippine ANALYST BUSINESS October 2016 63 BUSINESS WB-IFC DOING BUSINESS 2012 2013 2014 2015 2016 2017 74% 56% 60% 60% 60% 60% Ease of Doing Business Rank (136/183) (138/183) 108/183 97/183 103/183 99/190 Starting a Business Rank 86% (158) 66% (161) 66% (170) 67% (157) 69% (165) 69% (171) Procedures (number) 15 16 15 16 16 16 Time (days) 35 36 35 34 29 28 Cost (% of income per capital) 19.1 19.2 18.7 16.6 16.1 15.8 Minimum capital (% of income per capita) 5.2 4.8 4.6 3.6 3.3 3.1 It takes 28 days to start a business in the Philippines. Improvement is being undertaken. Out of the 190 countries covered by this year’s report, The Department of Trade and Industry (DTI) has also signed New Zealand got the top spot, Singapore ranks second, a Joint Memorandum Circular (JMC) with the Department of followed by Denmark; Hong Kong SAR, China; Republic of the Interior and Local Government (DILG) and Department of Korea; Norway; United Kingdom; United States; Sweden; Information and Communication Technology (DICT) directing and Former Yugoslav Republic of Macedonia (see Table all cities and municipalities in the country to streamline business on Top 10 Ease of Doing Business Ranking in 2017). New permits and licensing systems (BPLS) using a revised standard. Zealand was 98 spots ahead from the Philippines in the latest The government’s action in streamlining the processes Ease of Doing Business ranking. Meanwhile, the world’s would bring significant improvement not only on the country’s top 10 improvers, based on reforms undertaken, were Brunei performance on Ease of Doing Business ranking but as well as to Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, the speed and efficiency of services rendered to Filipino citizens. Georgia, Pakistan, United Arab Emirates (UAE), and Bahrain. In terms of starting a business in the Philippines, the country ranks a miserable 171st out of 190 countries. It takes 28 days to start New foreign banks to enter PH banking a business in the country, compared to 21 days on average at the global level. The country requires 16 procedures, costs 15.8% of system income per capita, and a requirement of paid-in minimum capital With the passage of Republic Act (RA) 10641, amending of 3.1% of income per capita. When compared to its ASEAN neighbors, the country lags behind Malaysia (18 days), Vietnam RA 7721, foreign banks are now allowed to fully enter the (24 days), and Indonesia (25 days) in terms of starting a business. Philippine banking system. The implementation of the new Over the past 5 years, the country's performance this year is the RA is expected to improve the banking environment and ‘most improved’ (see Table on PH Doing Business Ranking). encourage greater foreign participation. Meanwhile, National Competitive Council (Philippines) co-chairman Guillermo Luz said that he expects a RA 10641, otherwise known as “An Act Allowing the Full “dramatic” increase in the Philippines’ ranking next year. Entry of Foreign Banks in the Philippines amending for the He cited legislative changes such as the amendments to purpose RA No. 7721” is intended to strengthen the quality of the Corporation Code and tax policies as having a positive competition of banks and develop innovations that will benefit the impact on the country’s future Doing Business ranking. public. Foreign banks can now acquire up to 100% of the voting In addition, the government also intends to implement stock of an existing bank, or invest up to 100% of the voting stock the nationwide online processing of business permits and of a new banking subsidiary incorporated under Philippine laws. licensing systems before the end of 2016. This will reduced Without RA 10641, only the top 150 foreign banks in the the processing time for new business registration from 5 days world or top 5 banks in its country of origin were allowed to to 1 ½ days to encourage more foreign and local investors. establish business in the Philippines. This means that under the old law, only 10 foreign banks were eligible to operate Philippine ANALYST BUSINESS October 2016 64 BUSINESS FOREIGN BANKS APPROVED TO OPERATE IN THE PHILIPPINES AFTER RA 10641 NAME OF BANK COUNTRY OF ORIGIN Date OF APPROVAL 1ST Day OF OPERatiON Sumitomo Mitsui Banking Corp. (SMBC) Japan February 2015 September 1, 2015 Shinhan Bank Co., Ltd. South Korea March 2015 October 19, 2015 Cathay United Bank Co., Ltd. Taiwan April 2015 October 2, 2015 Industrial Bank of Korea South Korea May 2015 November 6, 2015 Yuanta Commercial Bank Co., Ltd. Taiwan July 2015 - United Overseas Bank (UOB) Singapore September 2015 - Woori Bank Co., Ltd. South Korea May 2016 - First Commercial Bank (FCB) Taiwan June 2016 - Hua Nan Commercial Bank, Ltd. Taiwan October 2016 - RA 10641 aims to strengthen the quality of competition of banks. OBJECTIVES OF RA 10641 h Attract foreign investments and serve as channels for the flow of funds and investments into the economy to promote industrialization. h Encourage, promote and maintain a stable, competitive, efficient and dynamic banking and financial system. h Provide a wider variety of financial services to Philippine enterprises, households and individuals. h Contribute to the alleviation of unemployment in the country. NON-MARKetable EQUITY QUARTER & YEAR TOtal ASSETS GROSS TOtal LOAN PORTFOLIO SECURITY-NET 3Q2015 15,916,950.00 12,903,345,719.60 200,000,000.00 4Q2015 31,833,900.00 20,168,338,361.07 358,587,352.39 1Q2016 47,750,850.00 23,425,252,370.09 1,989,364,110.95 2Q2016 47,750,850.00 24,299,823,375.58 13,784,817,368.94 Already 9 banks have gained approval from the BSP, 4 of which are now operating.