SCMAP Perspective is our fortnightly column on PortCalls, tackling the latest developments in the supply chain industry, as well as updates from within SCMAP. On this column, Henrik Batallones looks at other aspects of sustainability throughout the product cycle that we may be overlooking.
The spirit is willing, but the flesh is weak
Last week I was among the many industry and government stakeholders who witnessed the public unveiling of the first Business Ready (or B-READY) report of the World Bank, assessing the business and investment climates of global economies.
This is a new survey, succeeding the World Bank’s previous Doing Business report. One key difference is that it no longer just focuses on the existence of regulations facilitating and ensuring ease of doing business, but also on the strength of the facilities that support ease of doing business, as well as whether these mechanisms are effective and efficient.
The Philippines is among the first fifty countries to take part in this report; the following year’s report will expand the pool to a hundred, and the following year, 180 countries are expected to take part. As such, one should resist seeing this report as a race between countries, and rather as an indicator of where we are and what we should focus on if we are to improve.
In this first report, the Philippines finished with mixed results. We did reasonably well in the first pillar, on regulatory framework, a nod to long-ongoing efforts to streamline regulatory processes and requirements as spearheaded by the Anti-Red Tape Authority and other agencies. (We ranked in the second quintile, and perhaps surprisingly, we’re not far from Singapore and Hong Kong on this front.)
We placed in the third quintile on the second pillar, on public services, which focuses on facilities provided by governments to support compliance with regulations, as well as systems and infrastructure that support business activities. Among other things, this looks at digitalization of stakeholders in ease of doing business, and the promotion of fair competition and transparency.
Finally, we placed in the fourth quintile on the third pillar, on operational efficiency, which looks at the ease and effectiveness of the regulatory framework and public services. To cite one example, the Philippines ranked in the bottom 20% when it came to starting a business, thanks to the high number of documents needed and the long processing time.
To put it very simply, in the case of the Philippines, the spirit is willing, but the flesh is weak. We have established a robust regulatory framework, but it’s in the implementation where we still come up lacking. Not for lack of trying, however. ARTA, empowered by the Ease of Doing Business Law, has long pushed for local governments and national agencies alike to embrace e-government, reduce redundant requirements and make relevant processes easier for business owners and investors. Indeed, some LGUs have made this their selling point – but not all are able to do so as quickly, or perhaps willing to do so at all. Some local governments may not have the capacity to transition as smoothly, and one imagines others may be putting political considerations in the forefront. (One has to look at the unrelated at first glance, but actually consequential, response to the Executive Order banning pass-through fees.)
The B-READY report is very much relevant to the logistics sector, one that is poised to see continued growth as demand for its services grows nationwide. The changing dynamics of both traditional and online retail, as well as continued investment in transport infrastructure, has compelled both manufacturers and logistics providers to expand their footprint.
For instance, our colleagues at real estate consultancy PRIME Philippines note that demand for warehouse space has grown over the past few years, with particular demand in northern provinces such as Tarlac and Pangasinan, no doubt aided by the viability of the Tarlac-Pangasinan-La Union Expressway as a transport route. One imagines that with the completion of other expressway projects in Luzon, as well as other transport projects in Visayas and Mindanao, warehouse demand there will grow, keeping pace with shifting customer preferences.
However, if the regulatory and investment climate continues to be strewn with delays, at the national and especially at the local level, we risk continually playing catch-up. Supply chain networks won’t be able to adapt in time – and we know designing these already takes years of data-crunching and investment from the side of businesses. If the government will throw up further delays, how much will our economy end up losing due to lack of competitiveness? How many products will not be delivered? How many jobs will not be created? How many possibilities will not be realized?