It is mid-November in Metro Manila. On Edsa, the Metro’s main thoroughfare, orange barriers line the lanes meant to prioritize delegates for the 2015 Asia-Pacific Economic Cooperation meetings. This week, the first of the many meetings among leaders of the 21 member-economies of Apec begin. The theme for Apec 2015 is “Building Inclusive Economies, Building a Better World.”
The APEC 2015 meetings come on the heels of the release of the World Bank’s 2016 Doing Business report, in which the Philippines drops 6 ranks from 97 to 103 (of 188 economies).
Focusing on small
Apec 2015 focuses on four key priorities: (a) enhancing the regional economic integration agenda, (b) fostering small and medium enterprises’ participation in regional and global markets, (c) investing in human capital development, and (d) building sustainable and resilient economies.
The heart of the Apec 2015 theme lies in that all-important word: inclusive. This theme, of course, must be understood within the reality of Apec’s identity as well as current realities.
Like similar organizations, Apec essentially exists to further economic growth of its member-economies through trade and investment liberalization and regional economic integration. Within this essential theme of economic growth, the 2015 theme injects inclusion. In fact, the priority of fostering the participation of small and medium enterprises in regional and global markets is precisely about inclusion.
In September of this year in Iloilo, Apec once again affirmed its efforts to ensure that not only large enterprises benefit from Apec efforts. In Iloilo in September, Apec noted that micro, small and medium enterprises make up over 97 percent of all enterprises and over 70 percent of jobs in Apec.
The thrust towards building sustainable and resilient economies is an acknowledgment that the region’s growth is challenged by disasters, both natural and man-made.
The goal of inclusive growth is particularly nuanced for emerging economies such as the Philippines. Emerging economies are often at the forefront of economic growth. In fact, the Philippines is one of the fastest growing countries in the world, growing double the world average in the period from 2010 to 2014. However, inequity and widespread poverty continues to plague the country.
MSMEs are a particular focus for emerging markets for two reasons. First, every large global enterprise began its life as an MSME. A vibrant MSME sector means that there are many opportunities for those with innovative ideas and entrepreneurial drive to spur growth. Second, MSMEs are indelibly linked to the disadvantaged. A vibrant MSME sector means more jobs for those whom large enterprises would likely pass over.
Enterprise
In fact, entrepreneurship is, in general, seen as a key engine for growth for all economies. This explains why one of this current Philippine administration’s key metrics has been the World Bank’s Ease of Doing business measures.
The general theory is that a country that eases business activity is more likely to encourage business investments and hence, higher growth. From the 2011 through the 2015 rankings, the Philippines gained 53 steps in the Doing Business rankings, ending 2015 at 95 (using old methodology) among 189 economies. When the country’s National Competitiveness Council reported the results of the 2015 rankings, it pointed out that the Philippines was number 5 in the Asean. Of course, to those who truly understand this, that ranking was not anything to provoke celebration. In the 2015 rankings, the Philippines was outranked by Singapore (1 worldwide), Malaysia (18), Thailand (26), and even Vietnam (78). In the 2016 rankings, Brunei overtook the Philippines.
In the most recent rankings (2016 report), the Philippines slid to 103 of 188 countries. The country slide in rankings from 2015 to 2016 in virtually every measure except for getting electricity, in which we advanced from rank 21 to 19. The worst slide was for the measure starting a business, where we sank from rank of 157 (never stellar) to 165. The country does particularly badly in the measures of: protecting minority investors (rank 155), enforcing contracts (140), paying taxes (rank 126), registering property (112), and getting credit (112).
CNN reported that Roberto Galang of the International Finance Corp. pointed out that up to 36 tax payments need to be made in any one year. This is only one matter. Imagine then having to manage a small enterprise and having to deal with all of the compliance requirements of this government.
Reality check
The reality, of course, is that economic inclusion is about ease of accessing opportunities. There are certain basics—adequate and relatively free basic education, access to health services and basic infrastructure among them. We already know that, except possibly for health, we lag in many of these basics. Our government does not invest enough in infrastructure. Among our comparators in the region, we have the worst broadband speeds.
Large companies can spread the compliance burden of running a business over a large revenue base. MSMEs cannot. It is MSMEs that are most disadvantaged by the high cost of doing business. This is simple truth.
Interestingly, the Philippine National Competitiveness Council, on its official site, points out methodological changes in the last five years which, it says, makes the doing business measures “confusing and unreliable” for measuring change. One wonders, of course, why these changes did not make the measures “confusing and unreliable” in the years when there where changes but the country’s rankings rose. Notably the Council points to the reduction of the steps and time to set up a business from 16 steps and 34 days to the current 6 steps and 8 days. Someone might wish to remind the Council that there was a time when the country’s aim for the time required to start up a business was one day – which is the world best practice standard.
Yes, of course, it is good that we have had improvements. However, the entire point of comparative rankings is to show what is feasible. Competitiveness is, after all, about comparisons.
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