After a huge drop in the latest Ease of Doing Business (EODB) Report, the government has managed its expectations for 2020, lowering its target amid a “tough” competition against other countries, a top official said.
Trade and Industry Secretary Ramon Lopez said in a press briefing yesterday that the government wants to be within the top 20 percent of the economy, or within the top 38 bracket of countries in the report.
The target is lower from what was earlier announced. In June this year, Lopez pegged the target within the top 20 economies by 2020.
This develops as the Philippines suffered its largest drop in the EODB report since 2012, falling 14 notches to reach the 113th rank from 99th, previously. The report surveys companies in the country’s largest business economy, which, in this case, is Quezon City.
EODB measures aspects of business regulation and their implications in business operations based on ten indicators such as starting a business, enforcing contracts, dealing with construction permits, among others.
While the EODB does not cover all issues relevant for business decisions, “it does cover important areas that are under the control of policy makers,” the report read.
To address this, the government is implementing a set of changes, some of which would require legislative amendments to critical laws such as the Corporation Code. Lopez said that he expects the changes to be felt in three years.
When asked if the government is still keeping its target to be part of the top 20 economies in the report by 2020, Lopez said that the target is now “top 20 percent.”
“The top 20 percent is the target to be more realistic. At least before the Duterte administration leaves, we should be hitting that number. [In] 2020, that’s the ambitious target. We’ll try to commit [to that], but at the latest [it should be hit] in 2022,” he said.
“There will be a set of survey starting January next year. All these reforms must be undertaken and felt by [investors]. Hopefully, we can get back the 14 notches that we lost,” he added.
The decline in ranking, which covered more or less the first year of the Duterte administration, reverses the country’s improvement in the ranks during the 2017 report that covered the January to May period in 2016. In that EODB report, the Philippines moved up to 99th place from 103rd previously.
The country fell in its ranking in spite of a “marginal” improvement in its Distance to Frontier (DTF) score, which shows the gap of a country’s performance against the best global practice across ten doing business indicator sets. The country scored 58.74 points, up from 58.32 points.
To leapfrog towards the top 38 economies means that the Philippines needs to jump at least 75 ranks from its current standing. A check at past ranks showed that the country took six years in order to move up 48 notches since 2011.
In the same breath, Lopez downplayed the importance of the ranking, noting that the government should focus on improving the DTF score instead. He said he wants to hit 70 points to over 80 points eventually, the latter being the range of scores for the report’s top ten countries.
Nevertheless, the latest ranking went against the government’s expectations last year.
“The source of optimism at that time was all these reforms that have been started or about to start during the early start of the year. We were hoping all those reforms would be credited. Unfortunately, not all were considered,” he said.
Out of 17 recommendations submitted to the World Bank, he said only three were credited, namely reforms in getting electricity, and in paying taxes for PhilHealth and the Pag-IBIG fund through an electronic payment system.
Under current rules, Lopez said that submitted reforms should be felt by at least half of survey respondents in order to be deemed credited.
Guillermo M. Luz, private sector co-chairman of the National Competitiveness Council (NCC), blamed the drop on “timing” of the implementation of the reforms, which may have fallen outside the time window allotted for the survey.
He also said there was a “change in some of the methodology,” which led to “computational changes” that may have “negatively affected us.”
The Philippine Competition Commission, which has a separate mandate from the NCC, said in a statement that that the report is a “sobering account of our performance in attracting new investors and putting up new businesses in the country.” /je
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