COMPARING BUSINESS REGULATION IN 25 CITIES AND 183 ECONOMIES COMPARING BUSINESS REGULATION IN 25 CITIES AND 183 ECONOMIES A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION ©2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 5 09 08 07 06 A copublication of the World Bank and the International Finance Corporation This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. 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Copies of Doing Business 2011: Making a Difference for Entrepreneurs, Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org. About the Investment Climate Advisory Services of the World Bank Group The Investment Climate Advisory Services of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor partners working through the multi-donor FIAS platform. Contents Doing Business in the Philippines 2011 Doing Business investigates the reg- is the second subnational report of the ulations that enhance business activity Doing Business series in the Philippines. and those that constrain it. Regulations In the first, Doing Business in the Philip- affecting 3 stages of the life of a local pines 2008, quantitative indicators on business are measured at the subnational business regulations were analyzed for level in the Philippines: starting a busi- 21 cities in 3 regions: Luzon, the Visayas, ness, dealing with construction permits, About Doing Business and and Mindanao. This year, the report ex- and registering property. These indica- Doing Business in the Philippines 1 pands the analysis to 25 cities across the tors were selected because they cover Executive summary 7 nation, including 15 cities from Metro areas of local jurisdiction or practice. The Starting a business 13 Manila (Luzon) that were also covered indicators are used to identify business Dealing with construction permits 19 in 2008: Caloocan, Las Piñas, Makati, reforms and the extent to which these Registering property 25 Malabon, Mandaluyong, Marikina, have been effective in simplifying the Muntinlupa, Navotas, Parañaque, Pasay, procedures, saving time, and lowering Pasig, Quezon City, San Juan, Taguig, the cost of doing business. The data in Data notes 31 and Valenzuela. In addition, Batangas Doing Business in the Philippines 2011 City tables 36 City (Luzon), replaces Tanauan for this are current as of June 1, 2010. Doing Business indicators 40 edition. In the Visayas, 3 cities—Cebu The methodology for this report has List of procedures City, Lapu-Lapu, and Mandaue—that its limitations. Doing Business does not Starting a business 42 were analyzed in 2008 are measured directly study the security of property Dealing with construction permits 86 for the second time, and a new city— from theft and looting, proximity to Registering property 136 Iloilo—is included. In Mindanao, 3 new major markets, quality of infrastructure cities—Cagayan de Oro, General Santos, services, transparency of government Acknowledgments 163 and Zamboanga City—are studied while procurement, macroeconomic condi- Davao City is studied for a second time. tions, the quality of institutions, and Manila, which represents the Philippines other areas important to businesses. To in the global Doing Business 2011 report, make the data comparable across econo- is also included. The selection of the 25 mies, the indicators refer to a specific type cities was based on the level of urbaniza- of company—generally a limited liability tion, population size, economic activity, company (or its legal equivalent)—in political and geographical diversity, and a standardized case scenario and may other factors. not be representative of the issues facing Comparisons with other econo- other types of businesses or other busi- mies are based on Doing Business 2011: ness transactions. Making a Difference for Entrepreneurs, This study is part of IFC's Advi- the eighth in a series of annual reports sory Service program in the Philippines, published by the World Bank and the which seeks to support private sector International Finance Corporation. The development and sustained economic indicators in Doing Business in the Philip- growth in the Philippines. IFC's Advisory pines 2011 are also comparable with 339 Service programs are consistent with the cities in 43 economies benchmarked in World Bank Group's Country Assistance other subnational Doing Business stud- Strategy for the Philippines. ies. All data and reports are available at http://subnational.doingbusiness.org and www.doingbusiness.org. 1 About Doing TheDoing Business project, initiated regulation, such as stricter disclosure re- 9 years ago, goes one step further. It looks quirements in related-party transactions. Business at domestic small and medium-size com- Some give a higher score for a simplified panies and measures the regulations ap- way of implementing existing regulation, and Doing plying to them through their life cycle. such as completing business start-up Doing Business and the standard cost formalities in a one-stop shop. Business in the model initially developed and applied in Doing Business in the Philippines the Netherlands are, for the present, the 2011 encompasses 2 types of data. The Philippines only standard tools used across a broad first come from readings of laws and range of jurisdictions to measure the regulations. The second are time and impact of government rule-making on motion indicators that measure the ef- business activity.1 ficiency and complexity in achieving a The firstDoing Business report, pub- regulatory goal (such as granting the lished in 2003, covered 5 indicator sets legal identity of a business). Within the and 133 economies. This year’s report time and motion indicators, cost es- covers 11 indicator sets and 183 econo- timates are recorded from official fee Governments committed to the eco- mies. Nine topics are included in the schedules where applicable. Here, Doing nomic health of their country and op- aggregate ranking on the ease of doing Business builds on Hernando de Soto’s pi- portunities for its citizens focus on more business. The project has benefited from oneering work in applying the time and than macroeconomic conditions. They feedback from governments, academics, motion approach first used by Frederick also pay attention to the laws, regula- practitioners and reviewers.2 The initial Taylor to revolutionize the production of tions and institutional arrangements that goal remains: to provide an objective the Model T Ford. De Soto used the ap- shape daily economic activity. basis for understanding and improving proach in the 1980s to show the obstacles The global financial crisis has re- the regulatory environment for business. to setting up a garment factory on the newed interest in good rules and regu- outskirts of Lima, Peru.3 lation. In times of recession, effective WHAT DOING BUSINESS IN THE business regulation and institutions can PHILIppINES 2011 COVERS WHAT DOING BUSINESS IN THE support economic adjustment. Easy PHILIppINES 2011 DOES NOT entry and exit of firms, and flexibility Doing Business in the Philippines 2011 COVER in redeploying resources, make it easier provides a quantitative measure of the to stop doing things for which demand national, and local regulations for start- Just as important as knowing what Doing has weakened and to start doing new ing a business, dealing with construction Business in the Philippines 2011 does is things. Clarification of property rights permits, and registering property—as to know what it does not do—to under- and strengthening of market infrastruc- they apply to domestic small and me- stand what limitations must be kept in ture (such as credit information and dium-size enterprises. mind in interpreting the data. collateral systems) can contribute to con- A fundamental premise of Doing fidence as investors and entrepreneurs Business is that economic activity re- LIMITED IN SCOPE look to rebuild. quires good rules. These include rules Doing Business in the Philippines 2011 Until recently, however, there were that establish and clarify property rights focuses on three topics, with the specific no globally available indicator sets for and reduce the costs of resolving dis- aim of measuring the regulation and red monitoring such microeconomic factors putes, rules that increase the predictabil- tape relevant to the life cycle of a domes- and analyzing their relevance.