Major cities in the Philippines generally take longer to issue business-related permits and licenses compared to most cities in the world, thus constraining their growth and competitiveness, a recent study shows.

Twenty-one cities in the country are able to authorize numerous and varying procedures in starting businesses in their jurisdictions because, according to a private sector representative, they were given "too much autonomy" under the Local Government Code of 1991.

A representative to the government-created National Competitiveness Council suggested then that some of the taxation powers of local government units (LGUs) be reverted to the national government.

In a study conducted by the International Finance Corp. (IFC) and the World Bank on the ease of doing business in cities worldwide, the Philippines ranked 133rd out of 178 countries.

‘Redundant, outdated’

Dealing with a Philippine city to start a business takes an average of 18 procedures and 35 days and costs 27 percent of the income per capita, according to the study. The number of procedures is only two less than the figure for Equatorial Guinea, the country with most procedures to start a business.

"Cities should cut down on unnecessary, redundant, and outdated procedures, and they should take a look at all the procedures that their customers have to go through," said Vincent Lazatin, executive director of the Transparency and Accountability Network, during the presentation Monday of the Doing Business in the Philippines 2008 study at Intercontinental Hotel in Makati City.

Zenaida Hernandez of IFC said LGUs should minimize the number of procedures in doing business to facilitate the entry of new businesses, which would reduce unemployment and employment in the informal sector.

"There is a need to bring down the number of face-to-face interactions, which are opportunities for corruption," Hernandez said. She explained that the number of procedures is indicative of the number of opportunities for corruption.

Direct impact

The Doing Business study covered all 16 cities in Metro Manila; Tanauan City in Batangas (Luzon); the cities of Cebu, Mandaue, and Lapu-Lapu in Cebu province (the Visayas); and Davao City (Mindanao).

The 21 cities were measured according to three indicators: starting a business, dealing with licenses, and registering a property. These indicators were selected because they cover areas of national and local government jurisdiction.

Three variables were taken into account: procedures or the number of interaction between company representative and third parties; time, which is recorded in calendar days but excluded factors like relationships or bribes; and cost or the official fees recorded as percentage of gross net income per capita.

"Their (local government units’) efficiency and approach in enforcing the regulations, which vary significantly across the country, have a direct impact on how easily businesses enter and survive the market," the study said.

Where it’s easy

Among the 21 cities in the study, Taguig in Metro Manila got the highest rank in the ease of starting a business. Starting a business in this city has 15 procedures, takes 27 days only, and costs 22.8 percent of income per capita.

The study showed that it is most difficult to start a business in San Juan because the process consists of 21 procedures, takes 39 days, and costs 27.5 percent of income per capita. (Click here to see the table comparing data on ease of starting a business)

The study noted that there are wide differences across Philippine cities in the number of procedures, time, and money required of an entrepreneur to complete the business registration process.

For instance, Manila, along with Marikina and Taguig, has only 15 procedures in starting a business—the least number among the 21 cities. However, it will take 52 days—the longest time among the cities—to complete the process.

The process of securing licenses among 21 Philippine cities, meanwhile, consists on average of 28 procedures that take 129 days and cost 243.1 percent of income per capita. (Click here to read the rankings on ease of dealing with licenses)

The average for the East Asia and the Pacific region is 19 procedures, 175 days, and a cost of 177 percent of income per capita.

Getting a license and construction-related approvals is easiest in Marikina and Makati.

The same process is most difficult in Pasig and San Juan.

Property registration

The study showed, however, that Philippine cities are competitive in terms of the time and costs required to register a property. The process takes only an average of 32 days in the 21 cities, placing the Philippines 56th among 178 countries.

The easiest place to register property in the Philippines is Mandaluyong. The process consists of 8 procedures, takes 21 days to complete, and costs only 4.5 percent of the total property value.

The same process is most difficult in Quezon City, where it consists of 8 steps, takes 39 days, and costs 4.7 percent of the property value. (Click here to read the rankings of ease of registering properties)

Still, there are areas to be addressed. IFC’s Hernandez said the Bureau of Internal Revenue and the registry of deeds are major bottlenecks in the processing of papers for registering properties. She estimates that 75 percent of the time spent in registering property goes to obtaining the certificate of authorizing registration (CAR) and registration at the registry of deeds.

Recommendations

David Balangue, private sector representative to the National Competitiveness Council, said the lack of standardized procedures in businesses registration among LGUs is due to the very vast powers given to them by the Local Government Code of 1991. The law devolved to LGUs certain powers in taxation, revenue generation, and registering businesses.

"The Local Government Code has given autonomy to the LGUs, but it seems it may have pushed the envelop too far and granted them too much autonomy," Balangue said. "We need to amend the LGC so that we can give back some procedures to the national government."

The Doing Business study made recommendations for LGUs to obtain higher ranking in the ease of doing business. These include consolidating and cutting fees and taxes, introducing single access points, using new technology like computerizing application and processing, and consolidating ownership and tax revenue records. (abs-cbnNEWS.com/Newsbreak)

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