Finance Secretary Cesar Purisima found the World Bank’s latest edition of Doing Business Report very unflattering, prompting him to write a strong response and express his “grave concerns” on the lender’s scorecard.
He did not mince words in his strongly-worded letter dated Nov 5, 2015 to World Bank Group president Jim Yong Kim. Purisima set aside decorum and dispensed with preliminaries to point out the bank’s “inaccurate” report.
“I write to raise again the Philippines’ grave concerns on the World Bank’s Doing Business Report, the 2016 edition of which again brings to the fore its most glaring flaws and inconsistencies, doing member countries like the Philippines a great disservice by damaging investor perceptions while at the same time serving as an unhelpful and unreliable basis for further improvement,” Purisima said in the very first paragraph of his letter.
“The Philippines is keen to use competitiveness studies as tools for improvement, but reports like the Doing Business Report lose their utility and value if methodologies change almost yearly, and if they are inconsistent with majority of the other reports gauging improvement across a variety of indicators,” he added.
The Philippines lately slid six spots in the World Bank’s global ranking of countries in terms of ease of doing business this year. It ranked 103rd among 189 economies in this year’s survey, dropping six notches from last year’s 97th place. The World Bank said the drop was reflected in nine of the 10 indicators used to compute the index score.
Compared with most of Southeast Asian nations, the Philippines did a poor job in making the country an ideal investment location. Malaysia placed 18th in the global ranking; Thailand, 49th; Brunei, 84th; Vietnam, 90th; Indonesia, 109th; Cambodia, 127th; and Laos, 134th.
The report noted that the Philippines in terms of starting a business slipped eight spots from 157th in 2014 to 165th this year. “In starting a business, the Philippines falls among the lowest ranked countries at 165th. It takes 16 steps to do this in the country, which is higher than the average in the region,” says Roberto Galang, operations officer of International Finance Corp., the investment arm of the World Bank.
The Philippines’ latest poor rating on the ease of doing business came hardly as a surprise. Foreign and local businessmen have often complained about the cumbersome steps required in opening a business in this country, not to mention the corruption one has to deal with in various transactions. Just ask the big and small businessmen who have opened their business in Makati City, for instance, where even the city hall has an issue with the brand of fire extinguishers that must be installed in the business premises.
Erratic methodology
Purisima, meanwhile, considered the World Bank report inaccurate and damaging. Excerpts from Purisima’s letter are as follow:
“First, we question the accuracy of the report’s title, given that it only selects 1 or 2 cities as its sample. For the Philippines, the report collects sample data from Quezon City only, as the most populous city. It disregards the fact that countries like the Philippines have islands of excellence such as those operated by the Philippine Economic Zone Authority, which were precisely established in order for investors to easily do business in the Philippines.
“Apart from fiscal and non-fiscal incentives, businesses accredited to operate in these zones have simpler registration processes—evidence that the experience of doing business in the Philippines, or in any country for that matter, is never homogenous.
“A suggestion made was to rename the report “Doing Business Across Selected Cities,” but was not considered. Thus the report fails to provide an accurate representation of the country, and is misleading to foreign investors who inadvertently use the report in their decision-making.
“We reiterate the more troubling issue at hand: the report’s methodology is erratic and unsound. For one, the sample data collected is not empirical data but based on surveys, whose respondents may not be up-to-date with reforms or active in the city under review. We have given the Doing Business team actual, empirical data to help them understand the procedures and regulations to the conduct of doing business in the sample city, but the Doing Business team discounted these.
“There is also an over-reliance of looking at legislation as evidence of reforms, when in fact most of the effective reforms done in the Philippines have been administrative and executive in nature, and do not even require Congressional or Presidential action.
“The report changes methodologies year after year, and ranks/scores are subsequently retroactively revised a year after publication. These changes are done unilaterally and retroactively, defeating the purpose of the report as a helpful benchmark for improvement, as the baseline measures keep shifting. Repeated changes in the numbers are not only confusing, they undermine the utility of the report as a basis or tool for improvement.”
Purisima gave a parting shot: “We are not alone in voicing critiques on the report. Many countries such as Malaysia, and even the private sector community in South Korea, have also expressed the same sentiment. Even the Independent Review Panel of the Doing Business Report in 2013 expressed serious concern on the fundamentals of the report. With the chorus of criticism against the report’s conduct and methodology—we wonder why the World Bank has failed to respond to serve its members better.”
E-mail: rayenano@yahoo.com or business@thestandard.com.ph or extrastory2000@gmail.com
