Big leap for PH in Ease of Doing Business rankings

Upon the request of the National Competitiveness Council (NCC), I presented the Philippine paper during the 3rd Apec International Conference on Enforcing Contracts in Seoul, South Korea, on Oct. 29-31, 2013.

The conference is conducted annually as an offshoot of the Ease of Doing Business (EoDB) project  of the World Bank (WB) and the International Finance Corp. (IFC).

The EoDB project measures the ease or difficulty with which a business undergoes in its typical lifecycle: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The conference was sponsored by the South Korean government as the designated country champion for Enforcing Contracts.  As champion, South Korea helps designated countries identify their weaknesses in contract enforcement and makes recommendations which they can then consider to improve their system.

Of course, there are country champions for the other pillars.

For example, the United States and New Zealand are the champions  for starting a business; Japan for getting credit; Singapore and Hong Kong for trading across borders; and Singapore for dealing with permits.

The EoDB report for 2014 was released by the WB and IFC on the eve of my presentation.  Fortunately, I was able to update my paper with the assistance of NCC’s Malou  Gesilva  in time for the next morning’s presentation.

During the conference, I highlighted the fact that in terms of the over-all ranking for 2014, the Philippines moved up 30 notches to rank 108 from rank 138 out of 189 economies.  It was the largest jump recorded in the world this year and our biggest gain in the 11 years of the EoDB project.

The quantum leap for the Philippines  was also reported by Julien Vilquin of the IFC, who pointed out that the Philippines was “among the 10 economies improving the most across 3 or more areas  in Doing Business 2014.”  Upon Julien’s special request, the audience gave the Philippines a round of applause.

The overall improvement is a significant turnaround from a stalemate in the last three years and was the result of teamwork and concentrated efforts by work teams organized under Administrative Order 38 signed by President Aquino which created the EoDB Task Force. The task force implemented the NCC Gameplan for Competitiveness which was submitted to, and approved by, the Economic Development Cluster in September 2012.

Aside from the overall rating, the Philippines  advanced in seven out of the 10 indicators, compared to only three in 2013. Gains were seen in Resolving Insolvency (up 65, from No. 165 to No. 100), Getting Credit (up 43, from No. 129 to No. 86), Getting Electricity (up 24, from No. 57 to No. 33), Paying Taxes (up 12, from No. 143 to No. 131), Trading Across Borders (up 11, from No. 53 to No. 42), Dealing with Construction Permits (up 1, from No. 100 to No. 99), and Registering Property (up 1, from No. 122 to No. 121).

These changes have been attributed to the elimination of certain documentary requirements, guarantee of access to credit information, electronic systems for filing contributions, and impact of laws such as the Data Privacy Act and the Financial Rehabilitation and Insolvency Act. These and other reforms led to a substantial reduction in the procedures, costs, and time associated with doing business.

Not to take away the glory from our sterling performance,  I note that on Enforcing Contracts, the Philippines went down in rank, i.e., from rank 111 to rank 114.  Worse, we went down by 5 notches (from 109 to 114) since 2012.  In fact, the following table demonstrates how poorly the Philippines is fairing vis-a-vis the Asean average and South Korea which ranked No. 2 in the Enforcing Contracts pillar:

To help improve our ranking on Enforcing Contracts, the Philippines has  to work much harder in the foregoing areas.  Fortunately, the Supreme  Court is now implementing the Judicial Affidavit Rule and the Efficient Use of Paper Rule  that are envisioned to shorten court proceedings.  In addition, the  e-filing system is now being partly implemented, at least at the Supreme Court level.

Most importantly, if  Justice Roberto Abad will be successful in persuading his colleagues in the Supreme Court to approve his proposal for a new trial system this  year, that will significantly improve our 2015 ranking.

Difficult as it may seem, this is doable. In fact, our 30-notches quantum leap  highlights the effectiveness of the inter-agency EoDB Task Force and the  continuous public-private collaboration in the implementation of reforms across a range of agencies.

As far as Enforcing Contracts is concerned, the NCC must get the Supreme Court on board. Since this particular pillar essentially involves procedures and cost for resolving cases, its  proactive participation will be essential.

(The author is the Co-Managing Partner  and Head of the Corporate and Special Projects Department of the Angara Abello Concepcion & Regala Law Offices (ACCRALAW).  The views in this column are, however,  solely the author’s and should not in any way be attributed to ACCRALAW.  The author may be contacted through francis.ed.lim@gmail. com)

PH ASEAN

Average     South Korea

No. of Days Required    842   538   220

Filing and service    58 51.5  20

Trial & Judgment       580      339.1      90

Enforcement of        Judgment. 204  147.5      120

Cost (% of claim)   26  48.58      10.3

Attorney Cost 10   39.85      9

Court Cost     6    2.85  0.6

Enforcement Cost     10   6.32       0.7

No. of Procedures 37   37.7  33