The World Bank reports that the Philippines has ways to go in actually reducing red tape—and addressing these will benefit the logistics industry.
Written by Henrik Batallones
In the last few years, a focus of both the public and private sectors in making our economy more competitive is reducing red tape: making transactions, particularly between government and business, faster and easier, allowing players to take advantage of new opportunities much more quickly. To this end, the passing of the Ease of Doing Business Act in 2018, and the resulting establishment of the Anti-Red Tape Authority, has been a strong signifier in the accomplishment of these goals.
The focus has mostly been on encouraging national agencies and local government units to shorten processes, reduce and harmonize documentary requirements, and utilize available technologies to further streamline processes a business needs to undertake throughout its lifespan. Ordinary citizens are also empowered to make complaints, while the private sector has consistently called for the application of regulatory impact assessments on proposed changes introduced by various government agencies.
Last year, one of the key indicators of how we are progressing in reducing red tape and improving ease of doing business was released. The World Bank released the first ever Business Ready (or B-READY) report, which assesses the business and investment climate of countries around the world, initially focusing on fifty countries, including the Philippines. It expands on the focus of its predecessor, the Doing Business report, diving not just into the regulatory burden on firms, but also on the quality of public services and ease of compliance with regulations.
With this expanded scope, the Philippines’ performance shows a more complex picture, albeit one that can be easily summarized: we have robust regulations in place, but are not necessarily equipped to effectively implement them.
The broad scope of the B-READY report can be summarized into three pillars:
• Regulatory framework, which covers the rules and regulations that a firm must follow as it opens, operates, expands, and closes or reorganizes. Strong policies can encourage the starting and expansion of businesses, support innovation, and better promote job growth.
• Public services, which covers the facilities and mechanisms provided by the government to support a firm’s compliance with regulations. This includes aspects such as digitalization and interoperability of government services.
• Operational efficiency, which covers how easy it is to comply with regulations and how effectively the services provided to ensure such are used.
The report is set up so that no one country can claim to be on top of everyone else. The World Bank notes that countries who perform well in one pillar may not necessarily do the same in others. A key finding is that a country does not necessarily have to be rich to be able to have a strong regulatory framework or robust support for its implementation. It is also worth noting that future reports will expand the number of countries covered to 100 in 2025, and 180 in 2026; thus one should resist seeing the results as a race, but rather as a benchmark indicating what can be improved on and what should be continued.
The Philippines performed strongly on the first pillar, on regulatory framework. Among 50 surveyed countries, we fall in the second quintile, indicating strong performance but still with some room for improvement. Notably, we are in the same quintile as two leading economies in the region, Singapore and Hong Kong.
Our performance in the second pillar, on public services, is more mixed. The pillar emphasizes digitalization, interoperability, transparency and adequacy of services, particularly online. We are in the third quintile in this front, alongside countries such as Vietnam and North Macedonia.
The World Bank views this as an indicator that the systems and services that should support a firm as it grows are not fully in place or maximized, and could therefore be hindering a business’ growth. However, it also notes that many of the surveyed countries showed weak performance in this pillar, illustrating the challenges in building regulatory support infrasatructure.
Finally, our performance in the third pillar, on operational efficiency, is worse. Here we are in the fourth quintile, alongside fellow ASEAN members Cambodia and Indonesia (both of which outperform us score-wise). This reflects a continuing reality in the Philippine business landscape: transactions can take a long time and have a higher cost.
The Philippines performed particularly dismally in particular topics that the B-READY report covers. We are at the lowest 20% when it comes to starting and registering a business—thanks to the long list of required documents and long processing time—and in the fourth quintile when it comes to locating a business, like acquiring or renting land and getting permits to build facilities. We are, however, on the top quintile when it comes to labor protection and regulations. We are also on the second quintile when it comes to facilitiating imports and exports.
Indeed, there remains a lot of room for improvement, especially considering the work already laid out by various government agencies, particularly ARTA, aimed at reducing the regulatory burden on firms. Implementation has been uneven, with some local governments more successful than others—and these governments are using these reforms as a selling point to entice businesses to invest. That said, whether for cost or other reasons, building and maintaining the systems and structures that support our regulatory framework continues to face challenges.
However, in light of the continued expansion of several sectors of the Philippine economy—particularly retail, logistics and IT-BPM—work should continue on developing the aforementioned infrastructure. In recent years major manufacturers and logistics providers have expressed interest in expanding their supply chain networks and building new facilities in underserved areas, particularly those now being served by major road infrastructure projects. Ideally the development of these faciilities would be in tandem with the construction of new transport links, but the length of time it takes to acquire the necessary approval and permits to start construction, for example, delays not just the growth of a business, but the entry of new career opportunities, as well as potential prosperity for a town or city.
We in supply chain management understand that decisions to expand one’s supply chain network are not taken lightly. Often these put in consideration years of forecasts and projections, as well as data on potential locations and, most importantly, how they can contribute positively to the overall profits of a company. Thus, government should exert more effort to reduce friction and delays that prevent a business from expanding once it chooses to do so. ARTA has long advocated for further digitalization of government records, so various local units can easily access records that may be held in another jurisdiction, without the need for a firm to submit duplicate copies—reducing both costs as well as carbon footprint.
In addition, government should also make sure that the regulations it issues do not also detrimentally impact the ease of doing business for firms that are already operating. Additional cost and regulatory burdens can impact the competitiveness of any business and can prevent it from fully contributing to a locality’s economy.
As the first B-READY report shows us, building a positive business climate does not end with putting in place the appropriate regulations: work should constantly be done to make sure they are effective and, ultimately, enticing for both new and existing businesses.