Can Mar boost PH’S competitiveness?

MANY governors, mayors and barangay officials may not like it but Presidential Spokesperson Edwin Lacierda hit the nail on the head when he pointed a finger at local government units (LGUs) for the country’s significant drop in the World Bank (WB) and International Finance Corp. (IFC)’s latest global “Doing Business” report. But by doing so, Lacierda has also pointed three fingers back at President Aquino whose job it is to keep local governments in check in the first place.

According to the report, the country’s ranking in the ease of doing business slipped two notches to 138th from last year’s 136th. The country also posted lower scores in seven of 10 indicators monitored, including starting a business where the Philippines dipped to 161st from 158th in the previous year.

It now takes 16 procedures and 36 days (up from 15 procedures and 35 days last year), and costs 18.1 percent of income per capita to set up a business in the Philippines. With the country’s per capita income at around $2,000 (or around 84,000 pesos at today’s exchange rate), that translates to an average cost of 15,000 pesos. Compare that to New Zealand where all it takes is a single procedure in one day and costs 0.4 percent of income per capita (or approximately 5,000 pesos at current exchange rates) to start a business, the report added.

True, the WB/ IFC report appears to have assessed doing business at the local government level —not national—based on indices like construction permits and business permits which, as Lacierda points out, are tackled at the local level.

It’s also quite true, as Lacierda argues, that it’s relatively easier to register a business at the national level. But that’s only because some government agencies like the Department of Trade and Industry ( DTI) of Secretary Greg Domingo and the Securities and Exchange Commission ( SEC) chaired by Teresita Herbosa, have independently taken the initiative to institute measures to speed up the registration process in their respective offices.

Moreover, Lacierda’s swipe at local governments seems to be bolstered by the recent Social Weather Station ( SWS) survey that more Filipinos (68 percent) find city and municipal governments to be more corrupt than previous years. Based on the survey, some of the local offices where corruption is considered widespread are the Mayor’s Office (32 percent) and the Engineer’s Office ( 30 percent)— the same offices where most operating permits are secured.

Anyone who has tried putting up a business will agree that the registration process at the local level is a different matter – and experience— altogether. Aside from the numerous inspections and documents needed for a mayor’s permit, for instance, which already amounts a small fortune for many small businesses and takes several weeks or even months to complete (not including the back and forth trips to City Hall), the ever increasing fees charged by LGUs, particularly those in Metro Manila, has significantly raised the cost of doing business in the country. This does not include other costly start- up requirements imposed by some LGUs like third-party liability insurance from so-called “accredited” companies.

Because of the Local Government Code, LGUs are free to generate additional sources of income and have almost unlimited discretion to raise fees and charges for every imaginable service rendered. The Code also added the barangay to the bureaucratic layer since its “clearance” is needed before any business can be given permits by cities and municipalities. Indeed, the LGU law has institutionalized red tape and some say, corruption, from the barangay all the way to the municipal, city and provincial level.

But Lacierda cannot lay the blame solely on LGUs because, under the constitution, it is his “boss”, President Aquino, who has the power to “exercise general supervision over all local governments”.

Although the constitution uses ‘supervision’ rather than ‘control’, this doesn’t mean the President has no control over local governments. Truth is, this control can and has been exercised by the Palace through the power of the purse, for instance, by withholding the release of the LGUs’ internal revenue allotment ( IRA). Moreover, as the administrative chief, the President also has power of removal—and therefore, control—over elective public officials like governors and mayors.

So with the vast powers at its disposal, what reforms, if any, has Malacañang instituted to make it easier for entrepreneurs to start up a business at the LGU level? Well, none that we know of.

Moreover, since President Aquino has delegated this power of supervision (and control) to the Interior and Local Government Secretary, the responsibility of reforming LGUs to make them more business-friendly falls squarely on the shoulders of Mar Roxas. The big question is: Can Mar crack the whip on LGUs now that elections are coming up? Let’s wait and see.