Erratic, unsound methodology questioned– risks hurting credibility and reliability of report

MANILA, 28 October 2015— The Philippines today issued its strongest and loudest critique yet of the World Bank-International Finance Corporations’ Doing Business Report, the 2016 edition of which was released today showing the Philippines sliding down despite improvements across all indicators having been implemented.

The Philippines was reported to be the most improved economy in the Ease of Doing Business Report – moving up a total of 53 notches from 2011 to 2015. In time for the 2016 report, the Philippines undertook game changing reforms last April to hasten the process of starting a business—reducing the process from 16 steps and 34 days to 6 steps and 8 days. E-government initiatives launched also last April reduced the number of payroll-related payments from 36 to 13, a marked improvement on the “Paying Taxes” category.

Reforms were also undertaken to shorten the number of steps and days to process construction permits and registering property, with the latter reduced to 7 steps for the issuance of land titles. The same improvements were seen across other indicators, such as getting electricity (reduced to approximately 35 days).

The Philippines firmly believes that the Doing Business (DB) survey methodology of collecting sample data from only one or two cities makes it inappropriate to present the report as reflective of the state of doing business for an entire economy. This is considering that starting a business and registering property vary across cities, since local governments have varying procedures and processing times for the various activities involved therein.

“Countries, especially developing ones like the Philippines, will have bright spots of promise in some areas and not in others. For example, we have our economic zones managed by PEZA, which will give investors a drastically different landscape than other areas. With this methodology, the DB survey should be more aptly titled as ‘Doing Business Across Cities’ to provide a better representation of the results of the report,” Finance Secretary Cesar V. Purisima remarked.

“More importantly, this title will avert the tendency of the report to be construed as providing a depiction of the state of doing business for an entire economy, which it could not do given the survey’s sampling bias,” he added.

Purisima has been consistently voicing out critiques against the DB methodology, most recently in his World Bank Governor’s Statement delivered in Lima, Peru. He assailed the methodology’s inability to provide a proper reflection of the state of doing business with the very limited information source and poor data collection process. Warning against unintended consequences, Purisima stressed that flawed conclusions adversely impact not only rankings but also investors’ perception of the country as an investment destination–imperiling much needed job creation and capital formation.

Further, while the DB Report assesses regulations affecting domestic small and medium size enterprises, unintentionally, its immediate audience is, in fact, offshore businesses planning to set up an enterprise in the economies covered in the report.

Given this, the Philippines suggests the DB Report may be more informative to this audience by conducting the survey on foreign enterprises that are already based or in the process of establishing their presence in the economy. As these foreign businesses operate mostly at the economy’s free trade zones and/or major business districts, these locations are more fitting sampling sites for the survey instead of the economy’s largest business city.

Finally, the erratic methodological changes year after year, affecting even the findings of the past reports (as seen most recently in revisions applied retroactively to the 2015 report), severely threatens the report’s credibility as a reliable global measure of competitiveness.

Without listening to its very own stakeholders, the DB Report may risk being seen as another document in which developing countries are evaluated and judged by people sitting in comfortable offices too far away to fully understand contexts and appreciate reforms being undertaken. The Philippines fears the DB Report may emerge to mirror the symptoms and hallmarks of past international development failures spawned by tone-deaf prescriptions and interventions incongruent with realities on the ground.

Nonetheless, Purisima emphatically stressed that the Philippines continues to undertake reforms to ease the conduct of doing business despite the inconsistent and ill-advised report methodology. “Make no mistake: while we maintain the firm position we have long taken against the flawed methodology, we are committed to the continuous work of reform that catapulted the Philippines up by 53 places in the last 5 years. We refuse to be held hostage by flippant and unreasonable methodologies others insist upon us. We will persevere in rolling out more reforms to boost our competitiveness across various indicators.”