World Bank must correct PH business ranking

WE strongly agree with the view of the Department of Finance ( DoF) and the Department of Trade and Industry ( DTI) that the poor showing of the Philippines in the World Bank’s Ease of Doing Business ( EoDB) 2019 report appears to be the result of an oversight by the institution’s researchers, and must be corrected immediately.

The DoF and DTI issued a joint statement on Wednesday strongly protesting the World Bank’s findings that placed the Philippines 124th out of 190 economies in the latest EoDB report. The ranking represented an 11- place decline from the 113th rank the Philippines occupied in the 2018 EoDB report. The drop in the ranking occurred despite a 1.36- point increase in the Philippines’ overall score to 57.68 ( out of 100), compared with the 2018 report.

The government departments traced the decline in the Philippines’ ranking to its very poor result in the “getting credit” component of the survey, in which the country was ranked just 184th out of 190 economies. In the other major areas of the report, the Philippines ranked 29th in getting electricity; 63rd in resolving insolvency; 94th in dealing with construction permits; 94th in paying taxes; 104th in trading across borders; 116th in registering property; 132nd in protecting minority investors; 151st in enforcing contracts; and 166th place in starting a business.

The EoDB report is widely used as a basic guide to the country’s business environment by prospective investors, and as a reference for other policy and social research. The Philippines and other countries rely on a good ranking in the EoDB to support their other efforts to attract investment, so obviously a low ranking or one that has declined from the previous year is very bad news.

If the lower ranking is due to an error on the part of the World Bank’s research and analysis in compiling the report, then that error must be corrected immediately and a clear explanation of the correction published by the World Bank.

That is apparently precisely the case with respect to the World Bank’s research on the availability of credit in the Philippines. The DoF and DTI claimed that the World Bank’s research team only gathered information from one of the three credit bureaus operating in the Philippines — the BAP Credit Bureau Inc. — while overlooking the other two, TransUnion Information Solutions Inc. and Microfinance Information Data Sharing Inc.

This led to the World Bank grossly underestimating the number of borrowers whose credit information was managed by formal credit reporting systems, as BAP Credit Bureau only has 1.7 million borrower records. As a result, the Philippines received low scores on credit bureau coverage and depth of credit information, which dragged down the overall score for the “getting credit” category.

That something was missing should have been obvious from “realities on the ground,” the two departments’ joint statement said. “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,” they said.

Certainly, there is much more to the EoDB report than the state of credit management in the country. A basic, obvious error in this one part of the report, however, tends to put the credibility of the entire assessment in doubt. In order that the EoDB report can be reliably used as intended — as a guide to both investors and policymakers about what is working and what still needs improvement in the Philippines’ business environment — and in the spirit of fairness and accuracy, the World Bank should immediately review its work and make the appropriate revisions.