DoF, DTI should focus on PH flaws, not WB methodology
THE World Bank has just released the 2019 version of its “Ease of Doing Business” report (EoDB), and the Department of Finance (DoF) and Department of Trade (DTI) and Industry are not happy about it.
In a joint statement issued late Wednesday, the DoF and the DTI slammed the report for the “grossly inaccurate and understated
- cator of the report,” which the two government departments said was responsible for dragging down the Philippines’ overall ranking despite improvements in the country’s overall score and in some of the 10 separate doing business indicators the report comprises.
“We demand that the World Bank review the Philippines’ rating, and make a correction immediately, given our country’s increases in the EoDB scores,” the joint statement said,
realities on the ground.”
“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,” it added.
The problem, the DoF and the DTI said, is that the World Bank’s researchers only gathered data from one of the three credit data bureaus now operating in the Philippines. This makes it appear that coverage of formal credit reporting is much smaller than it actually is. If the researchers had taken the time to note that a much larger part of the adult population has credit cards and that lending through formal financial institutions has increased — the “realities on the ground,” in other words — they would have realized the discrepancy and included information from all three credit agencies.
The Philippines generally does not fare well in the annual EoDB, and every time, the reaction is the
pundits alike hail any improvement in the overall ranking or its sub-indices as scriptural evidence of progress, while any negative
- odology or bias. Even now, others among this town’s better-known columnists — I could probably even name them, but that would be unprofessional — are surely
the World Bank for its unfairness in refusing to recognize that the Philippines ought to be held to a different standard.
And that is exactly what the complaint by the DoF and the DTI boils down to, because the World Bank is very clear about what their research measures, and how they go about collecting the data. In terms of the “getting credit” metric that supposedly ruined the Philippines’ whole ranking, the EoDB assesses four factors: The strength of legal rights of borrowers and lenders, which is scored on a scale from 0 to 12; the depth of credit information, which is scored on a scale of 0-8; the percentage of the adult population whose credit information is covered by the nation’s largest credit bureau; and the percentage of the adult population covered by a credit registry. There are three detailed surveys covering these factors (one for legal experts, one for the largest credit bureau, and one for the credit registry); the
subjective judgment on the part of survey respondents, the second two are based on objective data.
The Philippines did absolutely terribly on all four metrics, manag
- sible 100) for the “getting credit” category, which ranked 184th out of 190 economies covered by the EoDB. The legal index only rated a score of one (out of 12); the depth of credit information received a score of zero. Only 2.7 percent of the adult population is covered by the largest credit bureau, and none at all by the public credit registry, such as it is.
The DoF and the DTI took particular issue with the coverage by credit bureaus measure, which only surveyed the BAP Credit Bureau Inc., and not the other two smaller bureaus, TransUnion Information Solutions Inc. and Microfinance Information Data Sharing Inc. An argument might be made that the World Bank’s limiting the research to the largest credit agency is inad
largest credit bureau only covers 2.7 percent of the population, even if the smaller bureaus have a similar market share, credit bureau coverage would be, at best, about 8 percent.
Among the rest of the Asean countries, credit bureau coverage in Brunei Darussalam is about 8 percent; in Cambodia, 50.4 percent; in Indonesia, 38.1 percent with about 52 percent covered by a credit registry; in Laos, 14.5 percent are covered by a credit registry; in Malaysia, credit bureau coverage is well over 86 percent; in Singapore, 60.9 percent; in Thailand, 60.2 percent; and in Vietnam, about 84 percent of the population is covered by either a credit bureau or credit registry. Only lowly Myanmar, with no credit reporting system to speak of, does worse than the Philippines, and even there the legal rights index is considered stronger, giving Asean’s basket case a higher score than its rising tiger.
The EoDB also notes, pointedly, that the depth of credit information in the Philippines is still