BY SEN. EDGARDO ANGARA: FINANCIAL REFORMS
MANILA, NOVEMBER 9, 2011 (MANILA BULLETIN) MORE CRITICAL THAN EVER, BY SEN. EDGARDO ANGARA - In its latest Doing Business 2012 report, the International Finance Corporation (IFC) commended the Philippines for putting in place the legal framework for liquidating and reorganizing financially distressed companies – the sole reform instituted over the last year to improve the ease of doing business in the country.
The Financial Rehabilitation and Insolvency Act of 2010 (FRIA) was passed into law on July 18, 2010. I authored and filed this measure in 2007, and subsequently sponsored it on the floor in 2009, in response to the urgent need to update our antiquated Insolvency Law circa 1909.
Before the FRIA became law, insolvency proceedings were severely unresponsive and inadequate. This was felt acutely during the 1997 financial crisis when protracted proceedings exacerbated corporate failures to the point of threatening the survival of the companies concerned. The process of liquidating failed businesses used to take so long that assets get dissipated or become non-performing for an indefinite period.
According to the IFC, the private sector funding arm of the World Bank Group, the reform will help significantly improve the investment climate in the Philippines. However, there remains a huge room for improvement.
Laws passed to improve the regulatory environment must be implemented completely and more quickly for greater impact. For instance, the IFC said the establishment of the Central Credit Information Corporation (CCIC) must be fast-tracked.
The CCIC was created under the Credit Information System Act (CISA), another measure I authored and sponsored. It was signed into law back in 2008. However, the CCIC is hardly operational to this day.
The implementing rules and regulations of the CISA were only promulgated late last year. In addition, President Benigno Aquino III only appointed a CCIC president, Baltazar N. Endriga, in May this year. And the CCIC has yet to complete its total seed budget of P125 million, of which P75 million will come from government and P50 million from the private sector.
The CISA is critical in improving access to financing – a major obstacle in doing business in the country, especially for small- and medium-sized entrepreneurs. It will unlock financing for entrepreneurs, as well as capable consumers and self-employed individuals, by enabling lenders to better assess risk based on shared and centrally managed credit data.
By proof of a good track record, the cost of financing for responsible borrowers will go down in terms of both interest rates and required collateral. It will also lessen Filipinos' reliance on more costly informal credit. In short, the CCIC will help institutionalize credit discipline.
It is unfortunate when red tape, or lack of political resolve, hold up much-needed reforms. As a result, the Philippines barely enhanced its overall business climate. We ranked 136th among 183 economies in terms of the ease of doing business, even dropping from last year's 134th place.
Among 10 indicators, the Philippines slipped in seven (starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, and resolving insolvency) and only improved in three (getting electricity, trading across borders, and enforcing contracts).
Over the last year, 125 economies implemented 245 reforms that made it easier to do business, 13 percent more than in the previous year. The Philippines is counted among these nations for having at least one reform.
But around the world, nations are executing reforms more aggressively. In fact, the top 10 reformers, save for Korea, are all developing, middle-income nations: Morocco, Moldova, Macedonia, São Tomé and Príncipe, Latvia, Cape Verde, Sierra Leone, Solomon Islands, Armenia, and Colombia.
The world is in the throes of another financial crisis. Easing the process of doing business will not only help businesses cope, but also jump-start rapid recovery. In our case, it can revitalize sluggish growth – but only if we act fast enough.
----------------------------------------------------------
Chief News Editor: Sol Jose Vanzi
© Copyright, 2011 by PHILIPPINE HEADLINE NEWS ONLINE
All rights reserved
----------------------------------------------------------
PHILIPPINE HEADLINE NEWS ONLINE [PHNO] WEBSITE
[Non-text portions of this message have been removed]
Follow us on Twitter: http://twitter.com/phnotweet
This is the PHILIPPINE HEADLINE NEWS ONLINE (PHNO) Mailing List.
To stop receiving our news items, please send a blank e-mail addressed to: phno-unsubscribe@yahoogroups.com
Please visit our homepage at: http://www.newsflash.org/
(c) Copyright 2009. All rights reserved.
-------------------------------------------------------------
