OBG talks to Guillermo Luz, Co-Chairman, Private Sector, National Competitiveness Council (NCC)

Interview: Guillermo Luz

What are the current priorities to simplifying business processes and increasing competitiveness?

GUILLERMO LUZ: At the NCC, we track around 10 different reports globally to see where we stand as a country in a broad range of global indices. These include the World Economic Forum (WEF) ranking, which presents a macroeconomic picture, and the World Bank International Finance Corporation (IFC) ranking, which is a process-oriented assessment. The Philippines has made a great effort to fix both micro and macro aspects of the economy, moving up six places to 59th in the WEF’s 2013/14 Global Competitiveness Report and 30 spots to 108th in the IFC’s 2014 Doing Business report.

A major improvement has been the time required to start a business. For instance, incorporating a company used to take 16 steps and 36 days, however we have reduced this to 11 steps and 11 days, which we hope to cut by half every year. Similarly, we have cut the payment of taxes from 47 steps to 14 steps, while construction permits have been reduced from 29 to 17 steps. These changes will attract the entry of local and foreign investors into the country, as well as generate jobs and help meet targets set forth for ourselves.

Similarly, processes for city permits have been reduced from an average of 10 steps to five or less. In the past, a firm would be required to fill up three identical forms to apply for a permit. This now involves just one form. The number of signatures needed has fallen from as many as eight in some cities to two.

Consequently, many cities have generated more income via business permits. For example, Lapu-Lapu City in Cebu increased its income by 7% year-on-year once permit lengths were reduced from 10 days to five days and signatures from four to two. In Butuan City in Mindanao, the number of steps was reduced from six to four and necessary signatures from 10 to two, generating growth of 18% in the city’s income and business permits. Lastly, in San Fernando City, Pampanga, business renewal processes were reduced to less than an hour, which generated income growth of 12.6%.

How can the Philippines ensure that policies encouraging competition are implemented?

LUZ: To ensure nation-wide competitiveness, the Philippines has developed the Cities and Municipalities Competitiveness Index, which consists of 30 indicators measuring ease of doing business, cost of doing business and infrastructure. These indicators address competitiveness in terms of costs which cut across sectors, namely power, water, labour, land and office costs, labour availability, business friendliness, and infrastructure. The NCC has used its new network of 15 regional competitiveness committees to collect data throughout the year for their own respective areas. In total, data was gathered from 285 local government units (LGUs), 122 cities and 163 municipalities. The NCC developed this diagnostic tool to enable LGUs to assess their competitiveness and identify improvements, while providing the business community and investors data to make decisions to locate in business-friendly cities.

For the first time, an objective metric for measuring competitiveness has been crafted through an inter-agency taskforce effort, with data collected by universities, the private sector and public officials. In 2014, we hope to double the number of cities available on the index by inviting more mayors to fill in the data, validating it and then publishing it.

Although the main index presents the overall score, we are also encouraging investors to look at the indicators, as different businesses have separate needs. If one is engaged in a labour-intensive business, for example, one would have to look for data-tracking existing labour pools, labour costs and training, whereas if one is an energy-intensive business, one would shy away from cities with high power costs.

On the other hand, business process outsourcing operators would locate to cities with the greatest number of broadband connections and the fastest internet speeds, as reliable connectivity is a major priority for businesses. Furthermore, there will be a programme to make this searchable for prospective investors.