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Doing Business in the Philippines - A brief history

• The Philippines was first included in the global Doing Business series in 2004.

• Quezon City represents the Philippines in the global study.

Financial & Private Sector Development2

• Quezon City represents the Philippines in the global study.

• Doing Business in the Philippines 2011 is the second subnational report of the Doing Business series in the Philippines. The first subnational report was released in 2008.

What does Doing Business measure?

Doing Business indicators:

� Focus on regulations relevant to the life cycle of a small to medium-sized domestic business in the largest business city

� Are built on standardized case scenarios

Financial & Private Sector Development

� The objective: efficient regulations, accessible to all, and simple to implement

DO NOT measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or of regulation specific to foreign investment or financial markets.

3

Doing Business indicators – 11 areas of business regulation (9 included in the ranking)

Start-up Expansion Operations Closing� Starting a

business

Minimum capital requirement,

procedures, time and cost

� Registering property

Procedures, time and cost

� Getting credit

Credit information systems

Movable collateral laws

� Protecting investors

� Dealing with construction permits


� Paying taxes

Payments, time and Total Tax Rate

� Trading across

� Closing a business

Time, cost and recovery rate


� 1 Footnote goes here (add tab after number for proper alignment). 10 pt Arial regular.� Source: Place here. 10 pt Arial regular.

� Protecting investors

Disclosure and liability in related party transactions

� Enforcing contracts

Procedures, time and cost to resolve a commercial dispute

� Trading across borders

Documents, time and cost

� Getting electricity (annex I)


� Employing workers (annex II)

Property rightsInvestor protectionAccess to credit

Entry Administrative burden Flexibility in hiring

Recovery rateReallocation of assets

Doing Business - Philippine Ranking

TopicDoing Business 2010 Rank

Doing Business 2011 Rank

Change in Rank

Global Rank 146 148 - 2

Starting a Business 162 156 + 6

Dealing with

Construction Permits124 156 - 32

Registering Property 102 102 No change


Registering Property 102 102 No change

Getting Credit 125 128 - 3

Protecting Investors 131 132 - 1

Paying Taxes 133 124 + 9

Trading Across Borders 68 61 + 7

Enforcing Contracts 118 118 No change

Closing a Business 153 153 No change

Closer to an apples-to-apples comparison

Expands Doing Business beyond the largest business city

Captures local differences in regulations or enforcement

Gives specific locations an opportunity to tell their story and

Why expand Doing Business to the subnational level?


Gives specific locations an opportunity to tell their story and

provides a tool for locations to compete globally

Provides information on good practices within the same country

that can be easily replicated

Goals of the Doing Business subnational report

� Provide information that can be reviewed, debated and measured.

� To create friendly competition to reform.

� To motivate reformers by showing that with the adoption and efficient implementation of simple reforms, specific locations can


become more competitive nationally and internationally.

� To support broader policy reform through dialogue and advocacy with national and local government and the private sector.

� To measure progress over time by repeating the benchmarking to capture improve performance spurred by the competition created by the initial benchmarking.

Doing Business in the Philippines 2011 covers 25 cities

Doing Business in the Philippines 2011 updates 2008 data and expands the analysis to 25 cities. The study measures national and local regulations across the country in 3 areas of the life of a business:

1. starting a business 2. dealing with construction permits

Luzon: Batangas City, Caloocan, Las Piñas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Navotas, Parañaque, Pasay, Pasig, Quezon City, San Juan, Taguig,


3. registering property

Second in a series of reports undertaken in partnership with the Asian Institute of Management Policy Center

Data collected with the help of more than 500 private sector contributors and public sector officials

Valenzuela

Visayas: Cebu City, Iloilo City, Lapu-Lapu, Mandaue

Mindanao: Cagayan de Oro, Davao City, General Santos, Zamboanga City

65% of cities benchmarked reformed from 2008 to 2010

Key Findings:

• Computerization and multiple service providers make it easier to do business, lower transaction costs and increase transparency across the Philippines.

Doing Business in the Philippines 2011 - Key findings


Philippines.

• The high number of procedures continues to be a challenge for entrepreneurs.

• Wide variation in local business regulation across the country points to ample room for further business reforms.

• National level business reforms are needed for more results.

• Cities can learn from the existing good practices of their peers and become more competitive nationally and globally.

Too many requirements to start a business


Davao, General Santos and Valenzuela each leads one area measured by Doing Business 2011


19 business reforms since 2008 made it easier to do business in the Philippines

City or departmental reforms Implementation of national reforms

Starting a business

Dealing with construction permits

Registering property

Starting a business

Dealing with construction permits

Registering property

Caloocan ��

Cebu City ��

Davao City ��

Las Piñas

Makati

Malabon ��

Mandaluyong ��


Mandaluyong ��

Mandaue ��

Manila ��

Marikina

Muntinlupa

Navotas ��

Parañaque ��

Pasay ��

Quezon City ��

San Juan ��

Taguig

Valenzuela ��

Easier business entry means more new firms: evidence from empirical research

MexicoImpact of the reduction of registration procedures through the introduction of One-Stop Shops and the elimination of federally required procedures

� Increase in the number of new firms of about 6%� Increase in employment by 2.6%� Consumer Price Index decrease by 1% due to competitive pressures of new

Why business regulation reform matters


� Consumer Price Index decrease by 1% due to competitive pressures of new entrants

ColombiaImpact of the introduction of One-Stop Shops in 6 cities:

� Increase of 5.2% in the number of new firms

IndiaImpact of the elimination of License Raj in 16 states over 64 industries:

� Increase in the number of new firms by 6%

Starting a Business

• Records all procedures that are officially required for an entrepreneur to start up and formally operate a commercial business, including:

• Incorporation and registration with the Securities and Exchange Commission (SEC);

• Obtaining the local business permit (mayor’s permit);

Doing Business 2011 - Starting a Business


• Obtaining the local business permit (mayor’s permit);• Obtaining clearances from the Bureau of Fire Protection (BFP);• Tax registration with the Bureau of Internal Revenue (BIR); and• Social security registration with the Social Security System

(SSS) and Philippine Health Insurance Corporation (PhilHealth).

• Sub-indicators consist of procedure, time, cost, and minimum paid-in capital.

Too many requirements to start a business


Starting a business - what to reform

1. Simplify business permit requirements.

• Streamline application by eliminating unnecessary certificates, permits, and clearances.


• Classify businesses in terms of risk and remove/minimize inspections for low-risk businesses.

Starting a business - what to reform

2. Create a central office able to issue all regist ration requirements.

• Integrate corporate registration with tax registration, social services registration, and local government


social services registration, and local government business registration through the Philippine Business Registry (PBR).

• Good practice: File and Pay -- One time assessment and one time payment,

• Consolidate procedures for the issuance of the business permits at the local government level.

ProcedureTime (days) Cost (PHP)

Fastest Slowest Average Lowest Highest Average

Obtain the authority to print receipts and invoices from the 1 3 1 no cost no cost no cost

Starting a Business - what to reform

3. Eliminate the registration of books and receipts at the Bureau of Internal Revenue (BIR).


receipts and invoices from the BIR

1 3 1 no cost no cost no cost

Print receipts and invoices at the print shops 3 14 7 1,200 4,000 2,934

Have books of accounts and Printer’s Certificate of Delivery (PCD) stamped by the BIR

1 1 1 no cost no cost no cost

Starting a Business - Impact

Reform Results: Quezon and Manila

Days Steps Interface Registration Change Savings

Manila 19 to 1 4 to 2 15 to 2 10.6K to 12.8K +20%

4.00 M

USD


Quezon 11 to 1 6 to 2 28 to 2 9.9K to 13.1K +32%

1.92 M

USD

Dealing with Construction Permits

• Measures the procedures, time, and cost to build a standardized commercial warehouse, hook it up to basic utilities, and formally register it.

These include:• Obtaining the locational clearance from the City Planning and

Doing Business 2011 - Dealing with Construction Permits


• Obtaining the locational clearance from the City Planning and Development Office (CPDO);

• Obtaining the building permit and ancillary permits from the Office of the Building Official (OBO);

• Obtaining the Fire Safety Evaluation Clearance (FSEC) and Fire Safety Inspection Certificate (FSIC) from the Bureau of Fire Protection (BFP);

• Obtaining the Certificate of Occupancy and Certificate of Final Electrical Inspection from the OBO;

• Obtaining electricity, water, and telephone connections from utilities.

Majority of permit requirements during pre- and post-construction phases


Dealing with construction permits - what to reform

1. Introduce risk-based approvals.

• Complex and risky structures should have stricter standards for security and control. Simple low-risk buildings should have easier compliance rules.

• Smart regulations help ensure safety while encouraging


• Smart regulations help ensure safety while encouraging efficiency.

• Revise the rules on the Fire and Life Safety Assessment Report and sanitary inspections to adjust to the risk factors and enforcement constraints of every city.


City Procedure

Mandaue Mayor’s clearance from the City Mayor's Office (CMO)

Cebu Parking compliance from the City Mayor's Office (CMO)

Cagayan de Oro Submission of one set of building plans to CAO

Procedures that can be eliminated if risk-based app rovals are practiced.


Cebu and General Santos Preliminary inspection from the OBO

Parañaque, Cebu City,

Lapu-Lapu, and Mandaue

Evaluation of architectural, civil, line and grade plans,

sanitary and plumbing plans, and electrical plans from the OBO

Pasig Environmental clearance from the City ENRO

Mandaluyong and Pasay Certificate of non-coverage from DENR

Muntinlupa Fault line survey report from Muntinlupa City Disaster Coordinating Council (MCDCC)

Iloilo City Special permit from the zoning board

San Juan Development permit from the city council


2. Improve the efficiency of inspections.

• Change the current practice of conducting random inspections.

• Offices should conduct joint, simultaneous inspections for


• Offices should conduct joint, simultaneous inspections for different requirements.

• There must be an adequate number of building officials who are properly trained to enforce National Building Code standards, and whose supervision and reporting lines are clear.

Dealing with Construction Permits - what to reform

2. Improve the efficiency of inspections.

Inspections are currently required for:

Locational clearance

Building permit (preliminary inspection and

inspection during construction)

Sanitary inspection certificate

Certificate of Final Electrical

Inspection


inspection during construction)

Fire Safety Evaluation Clearance (FSEC)

Fire Safety Inspection Certificate (FSIC)

Certificate of Occupancy

Zoning and land use

compliance/Certificate of conformance

Inspection

Electricity connection

Water connection

Tax declaration of improvement

Fault line survey report (Muntinlupa

only)

Registering Property

• Records the sequence of procedures, time, and costs necessary for a business to purchase property from another business and to transfer the property title to the buyer’s name so that the property can be used as a guarantee in taking out loans or for sale to another firm.

Doing Business 2011 - Registering Property


These include:

• Preparing the deed of sale and related documents;• Completing tax-related requirements at the BIR, City

Treasurer’s Office (CTO), and City Assessor’s Office (CAO);• Registering with the Register of Deeds.

Variation in time and cost to register property


Fees Minimum (PHP)

Maximum(PHP)

Average(PHP)

Ave. cost as % of the average total cost

Notarized deed of sale

41,700 125,100 73,395 39%

Registering property - what to reform

1. Convert the stamp, transfer taxes and notary fee s into fixed fees.


Documentary stamp tax and creditable withholding tax

62,550 62,550 62,550 33%

Transfer tax 13,761 34,402 26,907 14%

RD fees 20,726 24,322 22,930 12%

Procedure and Agency

Minimum (days)

Maximum (days)

Average (days)Ave. time as % of the average total time

Obtain CAR 5 25 15 41%

2. Introduce fast-track procedures.



Obtain CAR from BIR

5 25 15 41%

Secure registration from RD

3 60 13 37%

List of documentary requirements Additional requirements by other cities

a. Copy of deed of absolute sale; Articles of incorporation of the buyer and by-laws;

b. Official receipt evidencing payment of transfer tax;

Certificate from the SEC that the articles of incorporation of the buyer have been registered.

c. Certificate Authorizing Registration (CAR) from

3. Standardize requirements at the Register of Deed s and the Land Registration Authority.



c. Certificate Authorizing Registration (CAR) from the BIR, including official receipts for payment of DST and CWT;

d. Real property tax clearance from the City Treasurer’s Office;

e. Original copy of owner's duplicate of TCT (in the name of the seller);

f. Original or certified true copy of the latest tax declaration;

g. Notarized secretary's certificate containing resolution of the board of directors of the seller approving the sale;

h. Notarized secretary's certificate containing resolution of the board of directors of the buyer approving the sale;

i. Articles of incorporation of the buyer and by-laws.

CitiesProcessing time (days) of RD in 2008 (prior to computerization)

Processing time (days) of RD in 2010 (start of computerization)

Cebu 10 5

Davao 10 14

Lapu-Lapu 10 30

Las Piñas 14 14


4. Complete the Land Registration Authority compute rization project and monitor performance under the new syste m.


Las Piñas 14 14

Makati 10 10

Mandaluyong 5 5

Marikina 10 10

Parañaque 14 14

Pasay 10 10

Pasig 10 10

Quezon 10 10

San Juan 3 3

Taguig 10 10

Thank youThank you


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