The figure of processs required to get down a concern, and trade with building licenses shows broad fluctuation across the 25 metropoliss included in this survey. This is non surprising in a state of over 7,000 islands, where the Local Government Code of 1991 granted important powers to the 80 provincial, 122 metropolis, and 1,497 municipal governments- while retaining other powers within the cardinal national authorities. While the power of local authoritiess to modulate commercial activities is capable to certain restrictions prescribed under the Local Government Code and other national Torahs, the national authorities can merely oversee local authoritiess to guarantee that they do non transcend their powers, harmonizing to the constitution. As a consequence, national authorities enterprises to establish unvarying criterions and best patterns in metropoliss can non merely be imposed top-down. National enterprises must be implemented with buy-in from the local authoritiess, which requires considerable clip and attempt. The multi-level regulative and legal model is farther complicated by the fact that local authoritiess must strike a balance between their authorization to advance local economic development, on the one manus, and their authorization to advance public public assistance, wellness, and safety, on the other. Local authoritiess frequently resort to raising revenue enhancements and fees, which may move as economic deterrences for local houses. In add-on, national bureaus retain duty over their local subdivisions ‘ processs and, therefore, are important to the procedure of cut downing the load on local enterprisers. Decentralization is non without jobs in any big and complex economic system. A recent reappraisal in Indonesia found that most local ordinances were inconsistent with national Torahs and uncomplete or falsifying to economic activity. Local authoritiess and national authorities bureaus must work together to make an environment where concerns can boom.
Get downing a concern In Manila and Cebu City, 15 processs are necessary to get down a business-compared to 22 in Pasig. It takes enterprisers 22 yearss to get down a concern in General Santos, while it takes more than double in Iloilo City ( 56 yearss ) . The cost to entrepreneurs scopes from 15 % of income per capita in General Santos to 36 % in Makati. The fluctuation in the figure of processs, clip, and costs among the 25 metropoliss are due to local concern enrollment demands every bit good as differences in the efficiency of local subdivisions of national bureaus. Completing concern enrollment is faster where local concern start-up demands are consolidated at one-stop stores. It is besides faster in those metropoliss where certain demands, such as reviews, can be fulfilled after the metropolis has issued the concern license based on a low-risk or bad appraisal. Cost differences are driven chiefly by concern revenue enhancements and refuse fees levied by local authoritiess, which local houses pay when using for a concern license. Covering with building licenses Taguig requires merely 25 processs for a license to construct a warehouse. To compare, Cebu City and Pasig require 36 processs. The differences are due to extra demands imposed by certain metropoliss on top of National Building Code ‘s criterion demands. The clip needed varies from 46 yearss in Zamboanga City to 169 yearss in Manila. The longest holds in Manila are the 63 yearss needed to acquire a edifice license and the 56 yearss it takes to link to electricity. Wide fluctuations besides exist in footings of cost. Davao City is the least expensive metropolis to obtain building licenses at 94.2 % of income per capita. In Iloilo City, the cost is more than 10 times higher: 1,035.3 % of income per capita. The difference is driven largely by the high cost of an electricity connexion in Iloilo City. Registering belongings Registering belongings involves 8 criterion processs. Nine out of the 25 metropoliss add a locally required review for a sum of 9 processs. In footings of clip, Mandaluyong offers the fastest belongings enrollment in 22 yearss. Meanwhile, Cagayan de Oro and Lapu-Lapu offer the slowest, at 81 yearss and 64 yearss, severally. The clip differences can be attributed chiefly to the public presentation of the Register of Deeds and the regional territory offices of the Bureau of Internal Revenue. Cities besides vary on belongings enrollment costs. Zamboanga City, General Santos, and Cagayan de Oro charge the most-with enrollments bing 5.8 % , 5.6 % , and 5.3 % of the belongings value, severally. The metropoliss with the lowest costs are Mandaue, Navotas, and Valenzuela-with enrollments bing 3.3 % , 3.5 % , and 3.5 % of the belongings value, severally. Variations in the belongings transportation revenue enhancement and notarization fees, both of which are assessed as a per centum of the belongings value, drive the differences in costs across metropoliss. Learning from each other Benchmarking exercisings like Making Business inspire authoritiess to better concern ordinances. They uncover possible challenges and place where pol- icy shapers can look for good patterns. Subnational comparing between metropoliss within the same state can be stronger drivers of reform than international comparings, because local authorities hold a difficult clip explicating why making concern in their metropolis may be harder than in adjacent locations. The good intelligence is that sharing a national legal model facilitates the execution of bing good local patterns within a state. National authoritiess can besides utilize Making Business informations to supervise how expeditiously the local subdivisions of their bureaus implement national ordinances. Local authoritiess can compare their ordinances with those of their neighbours. The illustration of Colombia is stating. Making Business in Colombia 2008 identified good patterns in 13 metropoliss, pointed out constrictions, and provided recommendations for concern reform. Two old ages subsequently, a new study tracked advancement over clip. The consequences were impressive. All 13 metropoliss showed betterments in at least 1 of the countries measured, thanks to local-level reforms. Similarly, Making Business in India 2009 showed that 9 out of 10 Indian provinces benchmarked for the 2nd clip had introduced concern reforms. As a consequence of these reforms, the mean clip to get down up a company dropped from 45 to 35 yearss and the clip to obtain a edifice license was reduced by 25 yearss, on norm. The decision: what gets measured gets reformed. Progressive local authoritiess can utilize Doing Business indexs to actuate and prolong concern reform attempts. There is no demand to reinvent the wheel: it is sufficient to get down by presenting the concern reforms that have been successfully implemented in other metropoliss. In fact, metropoliss in the Philippines have a batch to derive from following the best ordinances and patterns that already exist in the state ( table 1.3 ) . A good illustration is the one-stop store in Manila, established through the Standard Business Registration and Permit Processes. Another is the erstwhile appraisal of fees that Davao City and Valenzuela have introduced. Yet another good pattern is found in Pasay, where separate applications for districting clearance and fire and mechanical licenses are no longer necessary in instances where the edifice in which a new concern programs to run has them already. Concrete consequences can be obtained by retroflexing the best local patterns. In concern start-up, if a conjectural Philippine metropolis followed the illustration of General Santos-where the Certificate Authorizing Registration10 is processed by the Bureau of Internal Revenue in 1 twenty-four hours, enrollment with the Social Security System takes 1 twenty-four hours, and the print store prints the receipts-in merely 3 days-starting a concern could take merely 22 yearss, similar to Chile. Start-up costs would come 15.3 % of income per capita, comparable to Spain or Colombia. Sing building licenses, following the processs in Zamboanga City, where it takes 46 yearss, would rush up the edifice of a warehouse in this conjectural Philippine metropolis so that it ‘s faster than in Hong Kong SAR ( China ) where it takes 67 yearss. Adopting the belongings enrollment patterns found in Mandaluyong would let our conjectural metropolis to register belongings in 22 days-thus ranking 49th in enrollment celerity worldwide, in front of Indonesia and Malaysia. If enrollment costs were cut to merely 3.35 % of the belongings value, as seen in Mandaue, our conjectural metropolis could rank 24th globally for property-registration costs, aboard Peru. In footings of the figure of processs required for the 3 Doing Business indexs measured here, even the best-performing metropoliss in the Philippines slowdown behind their equals abroad. Cuting processs remains the figure one challenge for future concern reforms.The ayoffs of concern reforms can be big. Higher rankings on the easiness of making concern are associated with more growing, more occupations, and a smaller informal sector.11 Business reforms expand the range of ordinance by conveying houses and employees into the formal sector. There, workers can hold wellness insurance and pension benefits. Businesss pay revenue enhancements. Merchandises are capable to quality criterions. In add-on, formal houses have greater entree to bank recognition to fund enlargements and tribunals to decide differences. Business reforms that cut down informality and enforce belongings rights benefit adult females particularly, because they make up a big portion of the informal sector. For the first clip in 8 ears, Making Business 2011 finds that economic systems in East Asia and the Pacific were among the most active in doing it easier for local houses to make concern. Eighteen of 24 economic systems in the part reformed concern ordinances and institutions-more than in any other twelvemonth. These concern reforms include the debut of a one-stop store in Manila and betterments in its electronic imposts systems. The Philippines can look internally and to neighbours to larn from positive reform experiences. Surveies from other states suggest that 85 % of concern reforms occur in the first 15 months of a new disposal. 12 With the national presidential elections holding merely taken topographic point in May 2010, this may be the best clip for the Philippines to increase the gait of concern reforms.
There, workers can hold wellness insurance and pension benefits. Businesss pay revenue enhancements. Merchandises are capable to quality criterions. In add-on, formal houses have greater entree to bank recognition to fund enlargements and tribunals to decide differences. Business reforms that cut down informality and enforce belongings rights benefit adult females particularly, because they make up big portion of the informal sector.
For the first clip in 8 old ages, Making Business 2011 finds that economic systems in East Asia and the Pacific were among the most active in doing it easier for local houses to make concern. Eighteen of 24 economic systems in the part reformed concern ordinances and institutions-more than in any other twelvemonth. These concern reforms include the debut of a one-stop store in Manila and betterments in its electronic imposts systems. The Philippines can look internally and to neighbours to larn from positive reform experiences. Surveies from other states suggest that 85 % of concern reforms occur in the first 15 months of a new disposal. 12 With the national presidential elections holding merely taken topographic point in May 2010, this may be the best clip for the Philippines to increase the gait of concern reforms.
The creative activity of new houses is closely linked to economic development. New concerns are an index of entrepreneurial activity:1 they offer new jobs,2 provide added value, and present innovations3 accordingly exciting economic growing. It is, hence, imperative to breed an environment favorable to the creative activity of new houses. In the Philippines, this is peculiarly critical among little and moderate-sized endeavors which represented 99.6 % of all concerns registered in the state and employed 69.9 % of the entire labour force in 2006. They contributed 32 % of the state ‘s gross domestic merchandise that year.4 New houses are created and occupation chances multiply when get downing a concern is made easier. Research shows that when enrollment becomes faster and costs are cut, more houses enter the market.5 For illustration, after Malaysia reduced its company enrollment fees as portion of the authorities ‘s economic stimulation bundle, 320,000 new concerns were registered in 2009.6 In Mexico, the figure of new houses increased by 5 % and employment grew by 2.8 % following the debut of a one-stop store for concern registration.7 Get downing a concern in a Filipino metropolis takes an norm of 18 processs and 33 yearss, and it costs 24.4 % of income per capita. In 2008, it took on mean 2 yearss longer and be 2.6 % more to make the same. The mean figure of processs measured in the 2008 and 2011 studies has non changed ; it remains more than double the regional norm of 8 processs. To compare globally, Equatorial Guinea, the state that requires the highest figure of processs for get downing a concern among all 183 economic systems measured by Making Business 2011-requires merely 2 processs more. In footings of concern start-up clip, the Filipino norm of 33 yearss is below East Asia and the Pacific ‘s regional norm of 39 yearss but more than 10 times that of worldleader Singapore ( 3 yearss ) . The mean cost is higher than Indonesia ‘s 22 % of income per capita ( figure 2.1 ) . Among Filipino metropoliss studied, get downing a concern is easier in General Santos, Davao City, and Taguig and more hard in Las Pi & A ; ntilde ; as and San Juan ( table 2.1 ) . The minimal paid-in capital demand to get down a concern in the Philippines is PHP 5,000 ( USD 107 ) , tantamount to 6 % of income per capita. While a minimal paid-in capital demand is intended to deter shell and deceitful houses, companies can merely retreat it one time the Securities and Exchange Commission has issued the certification of enrollment, get the better ofing the intent of protecting investors in the event of insolvency. International experience shows that minimal capital demands can be a barrier to entry and can deter companies from registering. Economies uch as Australia, Canada, France, Germany, Hong Kong SAR ( China ) , Singapore, Thailand, the United Kingdom, and the United States do non mandate any minimal capital. Business enrollment can be grouped into 5 major stages: ( 1 ) incorporating and registering with the Securities and Exchange Commission ; ( 2 ) obtaining the local concern license or city manager ‘s license to run and other local authorities offices ; ( 3 ) obtaining clearances from the Bureau of Fire Protection ; ( 4 ) registering to pay revenue enhancements with the Bureau of Internal Revenue ; and ( 5 ) registering with the Social Security System and Philippine Health Insurance Corporation ( PhilHealth ) .
Differences in the processs across the 25 metropoliss derive chiefly from local demands and patterns ( figure 2.2 ) . Manila and Cebu City require the fewest figure of processs: 15. Las Pi & A ; ntilde ; as, Navotas, and San Juan each require 21 processs to get down a concern, while Pasig requires 22-the most of any Philippine metropolis measured. Local demands specific to some metropoliss merely include notarization of the concern license application, healthful and environmental licenses, impermanent Fire Safety Inspection Certificate, and locational clearance. Cagayan de Oro, Lapu-Lapu and Mandaue require confirmation of existent belongings revenue enhancement payment.
Muntinlupa requires a cast of blessing for the Certificate of Occupancy and Zamboanga requires police clearance. These extra processs add to the clip it takes to get down a concern. In add-on to local demands, houses have to finish national degree demands. The Filipino national Internal Revenue Code and Bureau of Internal Revenue policies require enterprisers to purchase pecialized accounting books, obtain mandate to publish grosss, and have the printed grosss stamped by the Bureau of Internal Revenue. It has been argued that holding books and grosss registered and stamped minimizes revenue enhancement equivocation. However, this is non needfully the instance as companies can happen alternate agencies of accounting to conceal gross from the Bureau of Internal gross. Across all 25 metropoliss, General Santos is fastest with 22 yearss, while Iloilo City is slowest with 56 ays. Obtaining a concern license and holding necessary grosss and bills printed are the chief causes of holds ( figure 2.3 ) . Get downing a concern is less dearly-won outside Metro Manila. General Santos, Zamboanga City, and Davao City in Mindanao are the cheapest metropoliss while Cagayan de Oro is the most expensive metropolis outside Metro Manila ( 27.8 % of income per capita ) . This metropolis has higher healthful review fees than other metropoliss outside Metro Manila and requires an business license, an curse fee, and a wellness certification. Firms within Metro Manila wage more, because of higher concern license fees, but are besides burdened with higher concern revenue enhancements and refuse fees. Comparing internationally, nevertheless, mean costs of get downing a concern in 20 out of the 25 Filipino metropoliss are lower than the East Asia and Pacific norm of 27.1 % of income per capita. Since publication of Making Business in the Philippines 2008, single metropoliss have taken stairss to ease the concern start-up load on local houses ( table 2.2 ) . One major enterprise is the debut of the Standard Business Registration and Permit Process, a joint enterprise of the League of Cities of the Philippines, the Department of the Interior and Local Government, and the Department of Trade and Industry. The Standard Business Registration and Permit Process was launched in February 2009 to simplify and standardise concern enrollment and license procedures in Philippine metropoliss. To accomplish this, 5 major reforms were implemented: ( 1 ) the incorporate and individual concern enrollment application signifier, ( 2 ) the strengthening of the Business Permits and Licensing Office to organize the Standard Business Registration and Permit Process, ( 3 ) the erstwhile appraisal for all concern registrationrelated fees and charges, ( 4 ) the erstwhile payment at the City Treasurer ‘s Office, and ( 5 ) the creative activity of a joint review coordination squad to be composed of the Business Permits Licensing Office, the Planning and Development Office, the Health/Sanitary Office, the Office of the Building Official/City Engineer ‘s Office, the Waste Management Office/Environment Protection and Waste Management Office, and the Bureau of Fire Protection. The fifth and concluding reform is to be implemented every bit shortly as issues environing the new Fire Code are resolved. The first 4 of these reforms were piloted in Mandaluyong, Manila, Marikina8, and Quezon City. Manila set up a physical one-stop store, called the Business One-Stop Shop ( BOSS ) , where erstwhile appraisals are conducted and erstwhile fees are paid. The Business Permits and Licensing Office and the City Treasurer ‘s Office deputize staff to the Business One-Stop Shop so that the enterpriser does non hold to go forth the one-stop store to finish these minutess. Manila besides did off with an review from the Licensing Section of the city manager ‘s office. As a consequence of this reform Manila cut concern start-up clip by 15 yearss ( figure 2.4 ) . Mandaluyong, the other metropolis with a one-stop store, cut the clip needed to obtain a concern license at the Business Permits and Licensing Office from 3 yearss to 1 twenty-four hours. Quezon City besides initiated important reforms by manner of the Standard Business Registration and Permit Processes which were implemented after the cutoff day of the month for the survey. However, within the period of the survey, Quezon City eliminated 2 requirements-notarization of the application signifier for concern enrollment and the Fire Safety Inspection Certificate. The attempts in the 4 pilot metropoliss are consistent with the Philippine Business Registry, which aims to go an on-line single-access point to get down a concern. In December 2006, the President directed the Department of Trade and Industry to set up and administrate the Philippine Business Registry.9 This concern portal is intended to let for online concern applications with all national authorities bureaus involved-such as the Securities and Exchange Commission, the Bureau of Internal Revenue, the Social Security System, and PhilHealth. As of November 2009, merely 19 of 28 targeted bureaus had signed the memoranda of understanding with the Department of Trade and Industry formalising their committedness to the undertaking. Many of the bureaus have yet to finish the interface between their several enrollment systems and the Philippine Business Registry.10 Other metropoliss have independently introduced introduced reforms inspired by the Standard Business Registration and Permit Process, Caloocan eliminated the demand for notarization of signifiers. It is by and large believed that necessitating appliers to do statements under curse serves as a deterrence to lying on their concern license applications lest they be found apt for bearing false witness. However, merely Navotas and General Santos have really filedany instances against appliers who were found to hold lied on their application forms.11 Davao City cut 7 processs and 16 yearss in the issue of the concern license, leting reviews and certain demands to take topographic point after the concern is up and running, but before reclamation of the concern permit the undermentioned twelvemonth. Similarly, in Cagayan de Oro, Ca- loocan, Lapu-Lapu, Mandaue, Valenzuela, Las Pi & A ; ntilde ; as, Malabon, and Taguig, reviews are conducted after the issue of the concern license, but before the reclamation of the license the undermentioned twelvemonth. Cebu City farther streamlined concern start-ups by incorporating antecedently separate stairss into a individual process. Cebu City uses the Department of Trade and Industry ‘s National Economic Research and Business Action Center ( NERBAC ) , which has been operational in the metropolis since May 2008. Notarized application signifiers are now submitted to a metropolis hall representative at NERBAC Region 7 for confirmation, appraisal, and payment of the concern license fees and revenue enhancements. Cebu City reviews are conducted by a joint squad, dwelling of representatives from the Zoning Department, Office of the Building Official, City Health Department, Bureau of Fire Protection, and the city manager ‘s office. The Local Government Code requires Filipino enterprisers to obtain a clearance from their barangay ( the smallest political unit ) before they can make concern in the area.12 The barangay clearance has by and large been a requirement to acquiring a concern license, although the regulative intent for this demand is non wholly clear.13 Because of the differences in barangay and community set-ups coupled with the liberty granted by the Local Government Code, barangays within the same metropolis may hold different processs and fees for publishing barangay clearances, which may promote houses to use in those barangays where conditions are more favourable. A figure of metropoliss recognize the possible holds created by the barangay clearance and have taken steps to turn to this.14 Cebu City allows enterprisers to procure the barangay clearance after the issue of the Business Tax Payment Certificate, while Taguig imposes bounds on the fees that barangays can bear down. Pasay eliminated 2 processs and saved enterprisers PHP 956 ( USD 21 ) by no longer necessitating houses to obtain a zoning clearance and electrical and mechanical licenses, if the new concern operates in a edifice whose proprietor already obtained these clearances and licenses. A photocopy suffices. Since 2008, 7 out of the 21 metropoliss measured used application signifiers for the concern license that could be downloaded from the metropolis authorities web site. This survey finds that 3 more metropoliss introduced this service. In Davao City, nevertheless, appliers must subject the completed application signifier to the metropolis ‘s Business Bureau for encoding and delay for the print-out of the encoded application signifier, before they can continue with the remainder of the concern license application procedure. This therefore cancels out the possible clip saved from holding the concern application signifier available online. Local authoritiess offer good patterns that their equals could emulate. The following recommended reforms could ease concern start-ups across the Philippines. What to reform
Simplify local concern license demands
Local authoritiess could follow the illustrations of Cebu City, Davao City, Manila, and Valenzuela, which significantly streamlined their concern enrollment procedures by extinguishing unneeded certifications, licenses, and clearances antecedently required of low-risk concerns particularly. Another manner to do enrollment more efficient is to extinguish the reviews before a low-risk house commences concern operations. Cebu City has a joint squad of inspectors sing concerns after they receive their license. The joint squad classifies concerns by hazard degrees and, alternatively of inspecting all concerns, focuses the reviews on those of higher hazard to the populace.
Make a one-stop store for local- and national-level enrollment demands
One-stop stores can cut down the figure of processs, clip, and cost to get down a concern. In 2005, it took 11 processs and 78 yearss to get down a concern in Portugal. After the one-stop store was set up, Portugal became one of the easiest topographic points in the universe to get down a concern. It now requires merely needed 6 processs and costs 6.5 % of income per capita.15 Egypt introduced a one-stop store for concern start-up that brings together 30 authorities bureaus. In Indonesia, the debut of one-stop stores helped salvage clip: the procedure that used to necessitate 12 processs and 105 yearss in 007/08 requires merely 9 processs and 47 yearss in 2010.16 In the Philippines, corporate enrollment ( with the Securities and Exchange Commission ) could be integrated with revenue enhancement enrollment ( with the Bureau of Internal Revenue ) and with societal services enrollment ( with the Social Security System and PhilHealth ) . Further reform could besides incorporate local concern licenses with national processs. While one-stop store is one of the ends of the Philippine Business Registry, it will take some clip for it to go operational. Many of the agencies- most notably, the Security and Exchange Commission-are still in the procedure of developing or bettering their several systems. The Department of Trade and Industry ‘s NERBAC offices besides have a long manner to travel to interface with all regional and local permit/license issue bureaus. For the Philippine Business Registry to win, it is critical that the concerned bureaus commit to this enterprise. Existing attempts of the assorted national bureaus to overhaul their information and communicating engineering systems should be aligned with the Philippine Business Registry system, get downing with the full execution for the individual enrollment procedure for the Social Security System and PhilHealth. In the interim, local authoritiess can get down consolidating processs to obtain concern licenses at their local degree. Cities can follow the Standard Business Registration and Permit Process criterions now being adopted in Manila, Mandaluyong and Quezon City, and Cebu City ( through NERBAC ) in taking stairss toward uniting the processs into one-stop stores.
Extinguish the enrollment of books and grosss at the Bureau of Internal Revenue
The legalisation of books and grosss is an out-of-date pattern as houses progressively use electronic agencies of accounting. Among 183 economic systems measured by Making Business, merely 25 ( less than 14 % ) require freshly created limited liability houses to obtain certified books or legalise books.17 The other 86 % no longer necessitate this process. While the Philippines ‘ Bureau of Internal Revenue gives companies the option to register their computerized accounting system, this process really takes longer. Therefore, even if an enterpriser intends to utilize a computerized accounting system from the really beginning, a new concern in the Philippines has to buy the particular books of histories and have these registered with the Bureau of Internal Revenue, merely to acquire up and running.
