Ang Kape Ni LaTtEX

The Doing Business 2008 report, an annual study conducted by the World Bank and International Finance Corporation, states that the Philippines ranked 133rd out of 178 economies surveyed in terms of ease of putting up and doing business in the country:

Regulations affecting 10 stages of a business life are measured from the perspective of the entrepreneur. The stages are: Starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

According to the survey, the Philippines is lagging behind other Asian markets, including India (120th) and China (83th) whose phenomenal growth has made Asia the fastest growing region in the world. [Inquirer.net]

Any local businessman would affirm the findings of the study; the plethora of requirements and paperwork and the inefficiency of the bureaucracy will squeeze too much available capital and occupy too long a time that many entrepreneurs, including budding ones, consider quitting before day one.

It appears though, that it is even worse when one decides to close a business:

The Philippines scored most poorly in the criterion on closing a business, where it ranked 147th. The country was cited as one of the least efficient places in the world to handle a bankruptcy.

In starting a business, the Philippines ranks 144th, well in the bottom third.

The country also lags in the protection of investors (ranked 141th), ease of employing workers (122nd), paying taxes (126th) and enforcing a contract (113th).

The survey also showed that it takes 195 hours a year and 47 procedural steps to pay taxes here. The total tax rate is at a hefty 52.8 percent. [Inquirer.net]

If only to add insult to injury, a separate article from the same paper talks about the study of a University of Maryland professor which says that our economic malaise is part of a cultural heritage:

Some 330 years of Spanish rule had influenced the Philippines greatly, an impact that survived nearly 50 years of later colonial occupation by the US, the study by Robert Nelson of the University of Maryland said.

This Spanish Catholic influence, in contrast to the US Protestant model, had led to a “dominant political role” by large landholding families in the Philippines just like in Latin America, Nelson said.

A weak government and powerful political oligarchies combined to put the state in the service of private interests, he added.

“If culture is now to be considered an important economic influence, it may be that this common Spanish Catholic heritage is a main contributing factor in the economic histories of the Philippines and most of Latin America,” the study said. [Inquirer.net]

At best, Nelson’s study appears to be confirming something that we’ve already known — ever wonder why Spanish colonies appear to have all become third world countries? While I find it downright xenophobic and preposterous to continue laying blame on colonization — it’s all too long ago, really — it’s likewise important to underscore the fact that long after they’re gone we are still running along the circles that they drew on the ground for us to follow to be well on the path to “civilization”.

Lest this post becomes yet another ramble of the Philippine situation, which I abhor but occasionally do anyway, I will instead ask — is there any correlation between our culture and the difficulty in opening a new business?

Let’s start with some prevalent misconceptions. For example, some people would find the two studies contradictory. The first study shows businesses as being victims of an inefficient bureaucracy, while the second study points to corruption as serving mere private interests. The contradictions exist if people equivocate businesses with private interests, and see no difference between the rich, the business owners, and the oligarchs. If the prevalent culture benefits private interests, doesn’t that mean businesses have it easy?

The clear answer is no — businesses stand to loose a lot of money to corruption because of people who belong in cultures that make sweeping generalizations such as “all entrepreneurs must be rich”. In fact, when my father and aunt set up their sari-sari store some time ago, he made sure it was my aunt’s name that is used in the official documents. The reason for this is because we have a Chinese surname, which always attracts the pencil-pushing vultures. If you’re Chinese, you must have a deep pocket — and thus, you must have a lot of money to spare to their under-the-table antics.

We’re lucky that my wife didn’t experience this when she was setting up our travel agency, despite the surname. Have things changed for the better? Hopefully.

But the real contradiction lies in the fact that the under-the-table vultures at the city hall are not political oligarchs. They are in fact, poor government employees with meager salaries. The same goes for the corrupt policeman, the corrupt fireman, the corrupt soldier, the corrupt baranggay official, ad infinitum. The same people who are “victims” of economic injustice and the great divide between the rich and poor are the same people perpetuating the practices that doom them to such “injustices”.

This of course, is not to say that corrupt political oligarchs don’t exist — I just want to say that anybody, and that means anybody, even the very victims of a corrupt system, can choose to be corrupt when given the opportunity.

Going back to the perceptions of entrepreneurs as being rich and entrepreneurship as something exclusive to the rich, I find that ironic as well. I find the belief that Filipinos not being innately entrepreneurial as untrue — you will find a potential entrepreneur within every vendor, sari-sari store and carinderia owner, and tricycle driver out in the street. It’s just that these small-time entrepreneurs aren’t informed and educated enough to dream and think big, or do not band and help each other become better entrepreneurs, and bureaucratic hurdles like exorbitant fees and corruption only serves to sap that potential.

Unfortunately the sapping effect of entrepreneurship only tends to enforce the misconceptions that only people with deep pockets can legitimize their businesses. Which leads to lowly public servants believing they could easily earn from those people, and so on and so forth. Sad to say that the Filipino bias against entrepreneurship appears to be too deeply entrenched in our own culture.

Perhaps what “ordinary” people, especially those stuck in the “study hard–be a good employee–be promoted–retire with benefits” mindset do not understand is that business is also a public interest. In fact, we tend to demonize business owners as profit-hungry capitalists who care for nothing but money. What we do not understand is that we need them — in as much as they need us, as Jego shares in a comment in Expectorants.

Once when I was working with an NGO (we worked in coastal communities, teaching them how to gather and use information, especially on their resources), I sat down in front of the TV with some of my colleagues and we were watching a Speedo fashion show on TV. Of course, being young NGO-type guys, we sniggered at the fashion industry, thinking they were superficial, good-for-nothings.

Then as I was watching some babe parade in a swimsuit, I told my colleagues, “What have we accomplished? We come up with resource assessments and recommendations and feasibility studies, and we hand it over to the local government who’ll just probably sit on it or thrust it in a drawer til it gets eaten by mold and mildew, while these fashion models parading on the catwalk are selling clothes and might be creating jobs for the very people we want to help. I think they’re doing more for them than we are.”

My colleagues just nodded their heads. They didn’t have to say anything. [Jego in Expectorants]

Businessmen are citizens and part of the public too — and their businesses provide the very jobs many of us are dependent upon, even if they make products only Paris Hilton fans can ever appreciate. If we want to reverse the migration of skilled labor outside our country — if we want to stop the brain drain and turn it into brain gain, we must do anything and everything to shift the bias towards entrepreneurship.

If that bias is successfully changed, then maybe that’s the only time that enough people can apply political pressure to make legitimate businesses easier to set up.