‘Too many rules changed too often’ among SME problems

Small and medium enterprises (SMEs) in the Philippines continue to be burdened by policy gaps that thwart efforts to promote integrity in government transactions and improve ease of doing business, according to a new report.

The newly released policy report is part of a project, Small Business Advocacy to Reduce the Space for Corruption, being carried out by the Ramon V. Del Rosario Sr. Center for Corporate Responsibility (RVR Center), in partnership with the Center for International Private Enterprise (CIPE) in Washington, DC.

The report is the result of policy consultations with SMEs in Manila, Cebu, and Davao concerning legislation implemented to uphold government integrity and improve ease of doing business.

Results of the consultations showed “the persistence of issues raised by the stakeholders despite the presence of these laws,” which “demonstrates gaps in policy implementation on the part of the government.”

Furthermore, the policy study said “constant amendment and passage of laws with the same content not only makes the policy redundant but also creates opportunities that may be exploited for corrupt practices.”

The issues raised by SME owners and associations at these stakeholder consultations were grouped into three areas: the long and conflicting processing of permits and licenses; proliferation of public agencies dealing with SMEs; and lack of integrity and transparency.

Processing of applications for permits and licenses takes too long because enforcing agencies have overlapping lists of requirements. “Businesses are forced to prepare multiple copies of documents beforehand, which can be cumbersome to their operations,” said the report.

When processing a business license, the assessment office would come up with supposed deficiencies, or they would subject the company to technicalities.

“The assessment office would then offer to fix the supposed deficiencies via an ‘ayos-gusot (smoothen a wrinkle),’ a colloquial term for a bribe,” added the report.

Complicated and conflicting procedures are reportedly coupled with the billing of unofficial fees without any receipts. “Furthermore, public officials at times deliberately delay the processing of papers to intimidate and force business owners to pay grease money,” said the study.

At the same time, SMEs said they have to deal with 36 public agencies, and this can “contribute to becoming ineffective due to a disorganized or decentralized distribution of tasks and priorities.”

There is also a lack of dissemination as out of the 36 agencies, only a handful are known to SMEs, said the report. “This shows the lack of streamlined communication between the public and private sectors concerning SMEs,” said the paper.

Furthermore, while there are around 25 financing agencies to cater to SMEs, “these agencies are neither fully operational nor well managed by a particular public bureau.”

On the lack of integrity and transparency, the report describes the different “creative” terms used by different agencies to hide corrupt practices.

The “ulo ng aso” (head of a dog) pertains to a P1,000 bribe; “department share” means that every person in a particular department has to get a share of the bribe; and “processing” means SMEs have to pay a bribe in order for the transaction to move forward.

Although government agencies are required to make public their procedures, there are still loopholes because not all transactions are made in the office. Compromise agreements with government agencies, although legal, are made outside the office. These meetings can also be a source of corruption FROM THE SMALL BUSINESS ADVOCACY TO REDUCE THE SPACE FOR CORRUPTION REPORT