[OPINION] Making investors happy

November 17, 2017 at 17:45

Making investors happy

Various foreign groups have reported that their member companies are packing up and leaving the Philippines for other countries because not only is it cheaper, but it is also easier to do business elsewhere.

The Korean Chamber of Commerce of the Philippines said its members are complaining that the cost here, especially labor, is three times higher than in Vietnam, especially the logistics cost. While they want to invest in domestic enterprises, they are saying that government rules and regulations are too tight, including the limitation on foreign ownership of some industries.

The Joint Foreign Chambers of the Philippines, for its part, has complained about the peace and order situation in the country as well as the instability of policies.

The recent World Bank Business Survey Report 2018 seems to mirror these apprehensions. The Philippines ranked only 113th among 190 countries included in the survey in terms of ease of doing business. We used to be at 99th, though according to WB, the methodology of the survey was refined.

The survey covered 11 areas of business regulation, namely: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency and labor market regulation.

In the survey, New Zealand ranked first, followed by Singapore, Denmark, Republic of Korea and Hongkong. Others in the top 10 are the United States, United Kingdom, Norway, Georgia and Sweden. Malaysia was 24th, Thailand 26th, Brunei Darrusalam 56th, Vietnam 68th, Indonesia 72nd, Cambodia 135th, Lao PDR 141 and Myanmar 171,

According to the survey, which covered the period June 2016 to June 2017, among the top improvers, Brunei, India and Thailand implemented the highest number of business regulation reforms in 2016/17, with eight reforms each.

The economies that showed the most notable improvement are Brunei Darussalam, Thailand, Malawi, Kosovo, India, Uzbekistan, Zambia, Nigeria, Djibouti and El Salvador.

Thailand is among those countries that have undertaken significant reforms. While starting a business in Thailand used to take 27.5 days, now the process takes only 4.5 days.

In the case of the Philippines, the WB pointed out two changes that were implemented. First, the country reduced the time to get an electricity connection by implementing a new asset management system and by creating a new scheduling and planning office. It also made paying taxes easier by introducing a new electronic system for payment and collection of housing development fund contributions.

But the Philippines’ efforts pale in comparison to those adopted by its neighbors in the ASEAN region.

Indonesia has reduced its transfer tax to make registering property easier. It has also strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions and requiring greater corporate transparency. Indonesia has also lowered its capital gains tax rate and has made importing faster by introducing an electronic single billing system.

Malaysia meanwhile has strengthened access to credit by adopting a new law that establishes a modern collateral registry. It has also strengthened minority investor protections by requiring greater corporate transparency.

For its part, Singapore has made resolving insolvency easier by establishing a new scheme of arrangement procedure with features of the debtor-in-possession reorganization regime and introducing provisions applicable to pre-packaged restructurings.

Thailand has adopted a number of changes. It has strengthened access to credit by adopting new legislation that broadens the scope of assets that can be used as collateral. It has strengthened minority investor protections by making it easier to sue directors in case of prejudicial related-party transactions, increasing shareholder rights and role in major corporate decisions and clarifying ownership and control structures. It has also made paying taxes easier by introducing an automatic risk-based system for selecting companies for a tax audit, and has reduced the transfer tax rate.

Meanwhile, Vietnam has adopted a new civil code that broadens the scope of assets that can be used as collateral, has made paying taxes easier by abolishing the 12-month mandatory carry forward period for VAT credit and by introducing an online platform for filing social security contributions.  It has also made enforcing contracts easier by adopting a new code of civil procedure and by introducing a consolidated law on voluntary mediation.

A lot needs to be done if we are to improve our rankings and to attract foreign investors, and more importantly, keep them here. We can start by looking at how our neighbors are doing it.


In a recent item that I wrote, I commented about the alleged statements made by US President Donald Trump when asked about Sen. Antonio Trillanes’ visit to the US published in the Pilipino Star Ngayon column of Mr. Al Pedroche. At that time, I found the Pedroche column interesting since of course it involved public personalities in the US and the Philippines and since it was published, I had no reason to doubt its truthfulness and correctness at that time. But subsequent developments show that the basis of my column, which is Mr. Pedroche’s piece, may have been fake and that President Trump did not refer  to Sen.  Trillanes as “the little narco who met with Marco.” And as an advocate of responsible press freedom, I do apologize to Sen. Trillanes for the said article. If the source of my article has already apologized, then it becomes incumbent upon me to similarly apologize.

Source: http://www.philstar.com/business/2017/11/12/1757920/making-investors-happy

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