Increasing Business In Municipalities And Cities
I recently made a speech for my boss. This was presented during a gathering of LGUs in Bohol. I might as well share it with you. Thsi is part of what I usually do at the office ...
_______
Honorable guests, ladies and gentlemen, Good Morning.
My talk for today will be divided into 2 topics: SMED Plans and BPLS.
In the recent World Competitiveness Survey conducted by the World Bank, the
On closer look at the details, World Bank considered the business registrations facilitated by Law Firms and Accountancy Firms where in most of these are big companies and not MSMEs. The World Bank referred to
Due to this condition the Office of the President created a National Competitiveness Council with DTI as member to address this very crucial issue. This same condition showed that there is a need to grow closely together at the local level of the region and at the provincial level to make our efforts united and harmonized.
It is widely accepted that small and medium enterprises or MSMEs play a significant role in the economic and social development of a country since it account for 99.7 percent of total establishments and yet they only employ 70% of the labor force and contribute just 32% to GDP. Possible reasons for this occurrence is that the Philippine SMEs may be regionally and globally uncompetitive, productivity and structural limitations may have prevented SMEs from maximizing their potentials, SMEs may have been facing difficulty accessing funds and that SMEs may have limited knowledge about market opportunities and access.
These are problems that all of us in government need to address immediately in order to attain maximum economic growth.
The Small and Medium Enterprise Development (SMED) Plan 2004-2010 envisions making the SME sector the main protagonist in the country’s quest for economic growth by 2010. Launched in July 2004, the Plan is congruent with the 10-point Agenda of President GMA which seek to increase the number of new SMEs, to graduate SMEs to the next level, to create 6-10 million jobs, to triple loans to SMEs, and to increase the value of SME contribution. To achieve these goals and objectives, the plan outlined eight key strategies aimed at developing the SME sector at the firm and industry level and to improve the SME operational environment. These are: promote international competitiveness, promote expansion / diversification of existing industrial structure, promote expansion of growth industries, provide support for linkages between SMEs and leading Philippine industries, help improve access to financing, streamline programs and incentives, streamline implementation of SME policies and build the capacity of institutions assisting SMEs.
Forty-eight activities were identified to carry out these strategies. Partner agencies consisting of government and non-government institutions were organized into Activity Groups (AGs) in accordance with the nature of assistance they provide to SMEs. The 48 activities were streamlined and reduced to only 12 AGs as similarities in their envisioned deliverables were identified. These AGs include the: SME Information Support, SME Counseling and Advisory and Upgrading of SME Centers, Facilitating Partnership/ Linkages for Competitive Support, Enhanced Support for Trade Fairs and Access to Market Services, Product Development and Design Services, Industry Productivity and Quality, Information Technology Appreciation and Application, Entrepreneurship Training, SME Financing Support Program, Streamlining of Business Registration Requirements, Advocacy of SME Related Laws, and SME Institutions Restructuring.
To advocate support and participation in the implementation of the National and Local SMED Plans countrywide, the Bureau of Small and Medium Enterprise Development (BSMED), as Secretariat to the Small and Medium Enterprise Development Council (SMEDC), proposed the “Harmonization of the National and Local SME Development Plans”. In this undertaking, a regional workshop/focused group discussion, and local/provincial consultation and harmonization workshops were conducted in coordination with the Provincial SMED Councils (PSMEDCs) through the DTI Regional/Provincial Offices. In the conduct of said workshops, a local consultant/facilitator was tapped to facilitate, document and integrate the process to come up with Local SMED Action Plans.
It is a reality that all development efforts in the country are anchored on whoever is the incumbent executive, for the local level the provincial governor, for the cities the municipalities are the mayors and therefore a need to get their buy-ins is a must. We have to be realistic and at the same time practical because it’s a waste to be doing strategies which are not getting the cooperation of our local executives.
Our SME development plan went through a process of harmonization because of the many changes that have happened in our political and economic landscape. The specific objectives of the SMED Harmonization Regional Focus Group Discussion Workshops with Stakeholders were to validate the National SMED Plan results framework, validate the Regional SMED Plan results framework, identify a Portfolio Manager and Portfolio Champion.
The succeeding workshops produced proposed solutions such as (1) promote expansion / diversification of existing industrial structure, (2) promote expansion of growth industries, and (3) provide support for linkages between SMEs and leading Philippine industries that are not at the level of the provinces. The fourth solution is (4) to help improve access to financing needs that need LGU’s full support. It was also proposed that assistance be provided to mezzanine-micro enterprises for them to graduate and become SMEs.
The current SMED Plan goal is for the number of SMEs to increase and to generate 6 – 10 million jobs anchored to the 10 point agenda of PGMA. On the other hand the SMED Plan Strategic Development Goals consist an increase from 32% to 40% SME GVA by 2010; there will be more value and volume of production for priority industries, there will be an annual 16% growth of SME-exports and the number of progressive micro-enterprises increased.
Our MSMEs are facing the challenges of globalization that is why the demand for excellence and efficiency is an urgent reality. Technology is fast improving and expanding in its application to enterprise operational management.
It has been asserted that good governance and accountability are preconditions to successful economic development.
In books and papers on accountability, the concept is tied with being answerable,” “capable of being explained,” and “liable to account.” Further, accountability is identified as the central and perhaps the most powerful element of good governance which relies on clear rules of transparency.
A 2006 survey by the World Bank involving 120 cities and 12,400 firms in China discovered that efforts by local governments to improve the business climate is directly related to progress made in achieving social harmony. And, equally relevant, the study proposed that simplifying business licensing and other start-up procedures could result in significant gains in firm productivity and/or foreign investments. All these ingredients revolve around the concepts of accountability and transparency.
Clearly, local governments have a major role to play in business development, job generation and social harmony. One of the key actions is making it easy for the entry of business players. In this aspect, streamlining business permit and licensing system (BPLS) is at the core, although it is only the first among many reforms that need to be put in place to improve the investment climate.
On February 23, 2007, LGU representatives from four cities and 26 municipalities in Cebu province convened at the Parklane Hotel in
The exercise proved that there were, indeed, striking differences in the LGUs’ implementation of their respective licensing systems.
Here are slides to show you the typical process flow for registration and renewal of business permits.
It has been observed that the process for applying for a new business permit and renewing old permits are very similar. Old businesses have to go through the same cumbersome process of getting requirements year after year. As reflected in the slides, a new applicant has to go back and forth from the different offices in the LGU to the Treasurer’s Office.
Expectedly, LGUS should make life easy for those applying for a Mayor’s business permit since it is through local taxation that they can boost their local coffers. Yet, it is perhaps the most bureaucratic, graft-ridden, and time-consuming procedure thereby discouraging business owners from acquiring a permit. This has led prospective investors to simply go “underground” and thus deprive the local government of much needed tax revenues.
Over the years, the processing of the Mayor’s Business Permit has somehow advanced from manual to semi-electronic, thereby making the process a bit faster, yet more simplified. It is also in line with the Presidential agenda of creating an enabling environment for business and the Anti-Red Tape Law.
It is important to understand the basic purpose of the business permit.
For new businesses, the main task of the local government is purely regulatory. For renewal of business permits, the LGUs’ primary purpose is revenue collection and the rest of the year is allotted for its regulatory functions.
Processing for a new application for a Mayor’s Business Permit should be fast and simplified to ensure efficiency for both the attending LGU personnel and the applicant. The latter simply has to follow the prescribed procedures.
In the process of modifying the procedure, the LGUs identified the documentary requirements which are absolutely necessary in the processing of the application for a new business permit
The bigger challenges in business registration present themselves when one requirement is made out as a prerequisite for another. It sets off an almost circus-like state of affairs when the business applicant hops from one agency to another and then back again. This is what usually happens when the process involves interfacing among LGUs and NGAs. The LGUs also complain about the many clearances and signatories required by the NGAs.
Interestingly, all this nearly chaotic situation revolves around only two types of business permit applications: new and renewal.
Application for a new business permit entails more steps, documentary requirements and thus longer processing time. Among the requirements are screening, tax, labor, social security, safety and health and environment-related.
Renewals are almost a breeze compared to new applications, especially with the presence of the Business One-Stop Shop. Some reforms have already been instituted by selected LGUs, as in extending the renewal period for up to six months.
The next two slides show you the results of LGU workshops in
One major result of the BPLS workshops was the streamlining of the BPLS at the National Economic Research and Business Assistance Center (NERBAC), a one-stop shop for business registration and licensing in
DTI hopes that NERBAC will motivate and enable local government units (LGUs) to streamline their respective procedures on business permits and licenses (BPL). We saw that by streamlining business permit and licensing
system (BPLS), LGUs will be able to encourage informal businesses to register, spur the creation of new businesses, and generate more revenues.
Consequently, the aggregate results will lead to the creation of more
employment opportunities and more social services and benefits for the
citizenry.
Already in 1992, the National Economic Research and Business Assistance Center (NERBAC) was created through Republic Act 7470 to fast track investment inflows and strengthen the country’s business and investment climate. However, it was only in 2006 that NERBAC in
The implementation of the NERBAC came on the heels of The World Competitiveness Report in 2006 which revealed that the
arduous process to legitimize business in the
Given that the staff of NERBAC comes from different agencies, DTI saw the need to harmonize the center’s procedures and systems and build the individual and organizational capacities required for the operations of NERBAC.
Through NERBAC, LGUs and the entire government bureaucracy, can see that cutting red tape to improve service delivery to businesses has a far-reaching impact in improving the business and investment climate of the country. In effect, such action is a form of investment that will yield multiple dividends and profits a few years onwards.
There is direct correlation between simplified business registration and
licensing procedures on one hand and business creation and investment
inflows on the other.
As shown by the experience of other countries such as
reduction in the cost of doing business by three percent of the gross
domestic product (GDP), which includes business registration and licensing,
creates an extra USd 1.2 billion that is available for investments.
For the
yearly foreign direct investments (FDIs) over the last five years. Therefore, it makes much sense to reduce the administrative and regulatory burdens on businesses.
In the near future, we envision a “One Region, One System” in the business licensing procedures in all the local government units in
Meanwhile, we have pilot areas in
Our long term goal at the DTI is to increase the contribution of MSMEs as an important engine of economic growth. And with the help of LGUs and private sector, we do believe that this is possible.
While the problems are huge, so is our collective resolve to overcome. I have said this before and I’ll say it again: “I have great faith in the Boholano bayanihan spirit. There have been herculean programs achieved and a multitude of problems resolved through the spirit of teamwork. I am convinced that through the partnership of DTI and LGUs, our determination, commitment and concerted efforts, we will make a positive difference in the prosperity of our towns and in the lives of our people.”
Daghang Salamat ug maayong adlaw kaninyo.
