Why More Filipino Entreps Would Rather Stay in the INFORMAL Sector of the Economy

I’d like to share with you a special feature I read in Business World’s EntrepreNEWS last July 6, 2007.

In a recently published joint report by the World Bank and the International Finance Corporation (IFC) entitled “Doing Business in 2006”, the Philippines scored quite low on the following areas covered by the survey:

  • Starting a business
  • Dealing with licenses
  • Registering property
  • Getting credit
  • Protecting investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Closing a business

The low survey scores we garnered placed us 126th in the overall ranking…. which explains WHY MORE FILIPINO ENTREPRENEURS OPT TO STAY IN THE INFORMAL SECTOR THAN REGISTER A BUSINESS. This is all the more compounded by the fact it is harder to OFFICIALLY close a business in the Philippines than to start one.

Hope is not lost though.

The National Competitiveness Council (NCC) has identified six (6) focus areas that we can concentrate on so as to push the country up the top third in the rankings by 2010. Identified as points of major improvements were:

  • Developing competitive human resources
  • Instituting efficient public and private sector management
  • Creating effective access to financing
  • Improving transaction cost and flows
  • Providing seamless infrastructure network
  • Developing energy cost competitiveness and efficiency

Further, the Bureau of Small and Medium Enterprise and Development (BSMED) has been tasked to come with a program to streamline the business registration process, following as models those used by Singapore, Canada, and Hong Kong (Top 10 placers in the recent ranking).

According to BSMED Assistant Director, Jerry Clavesillas, the major challenges confronting the Philippines’ march to competitiveness and transparency are the following factors that contribute to the agonizingly slow and bureaucratic business registration process:

  • Numerous points requiring human intervention
  • Government agencies use different sets of software and systems

The 1st factor leaves every step in the registration procedure exposed to instances of graft and corruption.

The 2nd factor poses a dreaded problem to data coordination, creating islands of disconnected information which are valuable for monitoring consistency of data among various agencies. One agency keeps its own set of records, with no obvious guarantee of consistency across all others.

If the BSMED ever hopes to accomplish its self-imposed goals for 2010, it must be able to address these two major hindrances.

In simplistic terms, BSMED must be able to put together a streamlined and automated process to eliminate the need for human input. Further, BSMED must be able to find a way to make the seemingly incompatible systems of the various government agencies to talk to one another, linking each island of information via standard interfaces through the use of existing technologies.

These technologies, which are required to help BSMED in its crusade, are already available in the market. It is just a matter of “connecting the dots” for BSMED.

I will write how, in a separate follow up post to this, BSMED can accomplish such, without the attendant difficulty of confronting issues on cost, adoption, and ease of use.


One response to “Why More Filipino Entreps Would Rather Stay in the INFORMAL Sector of the Economy

  1. Pingback: The Market is Learning III: Globe’s SME Online Portal « Knightly News

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