Business
DTI-DOF JOINT STATEMENT on
the 2019 World Bank Doing
Business Survey
T
he Department of Finance (DOF) and
the Department of Trade and Industry
(DTI) unequivocally express their
strong objections to the 2019 World
Bank Doing Business (DB) report,
which shows a drop in the Philippines’
ranking by 11 notches from 113 (2018)
to 124 (2019).
We demand that the World Bank
review the Philippines’ rating, and
make a correction immediately given
our country’s increases in the Ease of
Doing Business (EODB) scores, which was, unfortunately, offset by
the grossly inaccurate and understated findings in the Getting Credit indicator of the Report.
This correction should be done soon as the Report could unduly compromise the
Philippines’ standing among the investment community and negatively impact the
country’s development, considering that this document is widely used as a reference by
investors and survey organizations. As a highly respected institution, the World Bank has a
responsibility to ensure that an economy is not unduly disadvantaged and that its report
reflect the realities on the ground.
The DOF has submitted a letter to the World Bank challenging the data used in the
report. We believe that the World Bank has gotten this one wrong. This is regrettable
considering the significant headway made by the Philippines on the other indicators. The
Philippines registered a +1.36 increase in the Ease of Doing Business (EODB) score at 57.68
yet received a lower ranking.
While the World Bank has taken governments to task by fostering an enabling
environment characterized by efficient business regulations, so must the World Bank
exercise responsibility and greater transparency in its methodology.
The Philippines’ drastic slide in the rankings was attributed mainly to the country’s
Getting Credit indicator where the EODB score significantly fell from 30 to 5, because
of the failure of the World Bank’s survey team to gather the correct information on the
country’s credit information database. As a result, the country registered a substantial
decrease in the credit bureau coverage (from 8 in 2018 to 2.7 in 2019), and reduced scores
on depth of credit information (from 5 to 0).
Considering that higher borrower coverage is associated with larger share of adults
with credit cards and borrowing from financial institutions, we find the report grossly
inaccurate and the coverage severely understated.
The Philippines should have obtained a higher score if the World Bank included data
from all the credit bureaus—the BAP Credit Bureau Inc., TransUnion Information Solutions,
Inc., and Microfinance Information Data Sharing Inc. (MIDAS), to name a few. Instead, it
obtained its data only from the BAP Credit Bureau Inc, which has the smallest database of 1.7
million borrower-entrepreneurs. The Philippines could easily have hurdled the 5% coverage,
if the World Bank selected the largest credit bureau, as its methodology prescribed. The
major credit bureaus with high coverage were included in previous year’s survey.
Moreover, it is ironic that the Philippines’ Getting Credit score slumped from 30 points in
the 2018 survey to only 5 points in the 2019 survey when credit is growing year-on-year by
19% mostly to micro, small and medium enterprises, the highest among the ASEAN-5.
Unfortunately, this drop in the EODB Score reflected a 42-notch slide in the Getting
credit ranking, with the Philippines now at the bottom tier at 184/190 (from 142). This
is the reason for our very low overall EODB score of 57.68, and contributed to the steep
decline in the country’s overall ranking of 124 (2019), from 113 (2018).
2019 DB performance generally improved
In contrast, the rest of the DB 2019 report for the Philippines showed the country
posting increases in the EODB scores on 7 out of 10 indicators, namely (1) starting a
business, (2)dealing with construction permits, (3) getting electricity, (4) registering
property, (5)protecting minority investors, (6) paying taxes, and (7) protecting minority
investors, while it retained previous scores on two indicators, namely (1) enforcing
contracts and (2)resolving insolvency.
The DTI has been monitoring the Distance to Frontier (renamed as EODB) scores
because these scores benchmark economies with respect to regulatory best practices.
The DTF/EODB scores assess the absolute level of regulatory performance over time, and
measures the distance of each economy to the “frontier.” An economy’s distance to frontier
is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100
represents the frontier.
Accordingly, the DTI simulation shows a much favorable scenario if the Getting Credit
scores are adjusted, or remained the same as last year - the Philippines’ EODB score for
62
2019 should be at least 60 (vs 57.68) and the country’s rank would be in the range of 101-
108 (vs #124). Compared with other countries, the Philippines could have fared better with
an improvement of at least +5 notches.
Lest we be misconstrued, we recognize that the Philippines needs to improve access
to credit information. Borrowers must have the (1) right to access their data, (2) banks
and financial institutions must have online access to credit information, and (3) credit
scores are offered as a value added service. Both positive and negative credit information
must be reported and the credit registry must have data from retailers, utility companies,
telecommunication companies.
We also acknowledge the fact that while instituting significant reforms, we must also let
the public become aware of them.
Thus, for the 2020 DB Report, our strategy is two pronged: One, we shall continue to
pursue regulatory reforms i.e.– streamlining of processes, repeal of outdated/redundant
and obsolete rules and regulations that create undue regulatory burden; and Two,
implement an effective communication campaign.
The DTI and DOF, in coordination with other agencies concerned, will launch an
aggressive communication campaign in the next three months so that the planned
regulatory reforms that the agencies have started to implement will be credited in the
2020 DB report cycle.
We must, among others:
•Inform the public about Revenue Memorandum Order 19-2018 and Revenue
Memorandum Circular No. 30-2018 issued by the Bureau of Internal Revenue (BIR), which
(1) specified that registration of the book of accounts can be done 30 days, authority
to print receipts should be given together with the certificate of registration, and (2)
reiterated the removal of the requirement to submit books of accounts to be issued a
certification of registration, respectively;
•Inform the clients of QC of the issuance of Executive Order 11, and EO-11A, which
created the One-Stop Shop of Quezon City; and
•Encourage citizens to have the titles digitized. We must scale up the implementation
of the Land Titling Computerization Project, which should convert almost 25 million
certificates of title into digital form.
We must also conduct a massive information campaign on the recently enacted Ease
of Doing Business/Efficient Government Service Delivery Act, and the Personal Property
Security Act which are expected to directly impact the competitiveness ranking.
Table 1. Comparison of Distance to Frontier Scores among the Doing Business Scores for
the Philippines
Indicator
2019 DB Report 2018 DB Report Difference
1
Getting Electricity
87.45
84.31
3.14
2
Starting a Business
71.97
68.88
3.09
3
Paying taxes
71.80
69.27
2.53
4
Trading Across Borders
69.90
69.39
0.51
5
Dealing with Construction
68.58
66.84
1.74
Permits
6
Registering Property
57.56
57.55
0.01
7
Resolving Insolvency
55.22
55.22
0
Reforms Slowly Bearing Fruits but We Must Sustain Our Momentum
Each year, the Government strives to improve ease of doing business by implementing
significant reforms that will bring us closer to the frontier. Last year, we have been
relatively aggressive in instituting regulatory reforms. For the 2019 report, the Philippines
submitted 18 reforms and 1 data correction, resulting in improvements in the EODB scores
in 10 sub-indicators (compared to only 5 in 2018). Unfortunately, not all reforms were
considered because as reminded by the World Bank, the Doing Business Report:
• measures procedures as they occur in practice (de facto) in addition to those
required by law (de jure); and
• that for a reform to be accepted, it must be fully implemented during the period
June 2, 2017 – May 1, 2018.
Not all of the reforms submitted were effectively implemented by government, hence
most respondents were not aware of these initiatives.
Confident but never complacent
Since the start of the Duterte administration, government agencies have been hard at
work in implementing initiatives to increase the country’s competitiveness. We believe
we are on the right track, and expect upward trajectory in our competitiveness ranking.
And we recognize the efforts of the following agencies that have shown commitment and
tenacity:
• Local Government of Quezon City
• Securities and Exchange Commission
• Bureau of Internal Revenue
• Bureau of Customs
• Land Registration Authority
• Bureau of Fire Protection
• Social Security System
• Pag-IBIG Fund
• PhilHealth
• MERALCO, and the
• Supreme Court of the Philippines
WEF Global Competitiveness Index for Philippines Improved
We are particularly appreciative that these efforts have started to impact, with the
recent jump in the World Economic Forum (WEF) Global Competitiveness Index, up by 12
notches. We believe that this fairly reflects the impact of the government’s efforts.
The Philippine Government urges the World Bank to immediately correct this error in data
gathering, and to prevent such errors from happening in future surveys as well. www.dti.gov.ph