Doing Business in the Philippines: The Most Problematic Factors

We had an informal survey on which among two factors is more needed for Philippine progress — more entrepreneurs or more opportunities. An overwhelming majority (83.3%), to date, says that we need more entrepreneurs. The survey, however, took into consideration only two factors, which we could argue as constituting a problem — a roadblock, if you will — to Philippine progress. We are aware, of course, that the two factors mentioned are grossly inadequate if we are to discuss Philippine progress.

Just recently, the World Economic Forum released its Global Competitiveness Report for 2007-2008. The Philippines is ranked 71 in the Global Competitiveness Index rankings. This is definitely not something to be happy about, as the Philippines is 71 out of 131 countries/economies ranked, and lagging behind its neighbors, including Korea (11), Taiwan (14), Malaysia (21), Thailand (28), India (48), Indonesia (55), Vietnam (68) and Sri Lanka (70). The more interesting aspect of the Report is the portion on The Most Problematic Factors for Doing Business in the Philippines.* Half of the fourteen (14) identified most problematic factors (with the corresponding percentage) are:

Corruption (22.30)
Inadequate supply of infrastructure (17.80)
Policy instability (15.20)
Inefficient government bureaucracy (14.80)
Government instability/coups (9.60)
Tax rates (4.60)
Tax regulations (3.60)

The bottom 7 factors are: access to financing (3.30%), restrictive labor regulations (3.60%), crime and theft (2.30%), poor work ethic in national labor force (1.30%), inflation (1.10%), inadequately educated workforce (0.70%) and foreign currency regulations (0.50%).

It’s very significant to note that half of the perceived problems — the worst problems — are attributable to the government. We are not here to denounce the government, although you could very well do that if you want. What we are after is for our government to do something about it. The problems, even if perceived ones, have been identified. The challenge of the government, therefore, is to address each and every one of them. While the Pinoy Entrepeneurs, and the Filipino people in general, could choose adhere to the words “ask not what your country can do for you – ask what you can do for your country,” it’s not unreasonable to ask our government what it can do — specially if the worst problems are attributable to it. I would like to believe that PGMA, who is an economist, would see these “problems” as “challenges,” just like how any entrepreneur would look at any problem.

Our informal poll, which was closed on 10 March 2008, garnered 36 votes with the following distribution: Corruption (63.9%); Inefficient government bureaucracy (13.9%); Government instability/coups (8.3%); Access to financing (5.6%); Poor work ethic in national labor force (2.8%); Policy instability (2.8%). The rest of the factors did not receive any votes.

* The report contains the following note: “From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.” You may have your opinion on which are the most problematic factors and you are very much welcome to state your opinion at the comment section below.

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