Philippines: "Cutting the red tape" with new systems

The term "red tape" comes from the 16^th century process of binding with red ribbon official documents for government use.

In the 21^st century, businesses are constrained by the figurative red tape, with protracted, confusing, and redundant government processes causing delays and wastage, deterring would-be investors from setting up shop in a particular jurisdiction. 

Recognizing that red tape is a primary concern of foreign investors, the Philippines has recently introduced systems that aim to make government processes simpler and faster. In this article, we provide an overview of these new systems. We also provide comments on how these systems can be further improved.

Ease of Doing Business Law

Republic Act No. 11032, otherwise known as the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018" or "EDB Law" for short, institutes reforms at both the national and local government levels that promote greater efficiency and transparency in government processes.

Highlighting the EDB Law is the creation of the Anti-Red Tape Authority  or "ARTA", a government agency attached to the Office of the President tasked with monitoring compliance by government officials with the provisions of the EDB Law, initiating investigations of reported violations of the EDB Law, and preparing regulatory management manuals for all government agencies. 

Other reforms introduced by the EDB Law include a "zero-contact policy" whereby government officers are generally prohibited from interfacing with an applicant except during the preliminary assessment of the request and evaluation of sufficiency of submitted requirements, a requirement for local government units to make use of a unified business application form in processing new applications for business permits and business renewals which consolidates all information needed for permits related to taxes and property-related clearances, and a requirement for LGUs to establish a business one-stop shop or "BOSS" with which an investor would only need to deal with for all local government permits.

Energy Virtual One-Stop Shop

The Energy Virtual One-Stop Shop or "EVOSS" is a web-based filing and monitoring system which provides a single decision-making portal for applications of new national power, generation, transmission, or distribution projects in the Philippines. Implemented by the Department of Energy, EVOSS provides a secure and accessible paperless system wherein proponents may obtain and submit application forms and related documents, pay the pertinent filing fees, monitor the status of their application, and submit complaints concerning inaction on submitted electronic documents. 

EVOSS promotes transparency and accountability among all parties involved by providing an interface wherein the parties can easily identify the status of each deliverable, the government agency accountable to a particular deliverable, and the number of days a particular deliverable has been pending before a government agency. Government agencies that are integrated into the EVOSS in addition to the Department of Energy include the Department of Justice, Department of Labor and Employment, National Electrification Administration, National Transmission Corporation, National Power Corporation, and the National Commission on Indigenous Peoples.

One of the drawbacks of the EVOSS is that local government systems are not yet integrated into the system. Investors have long complained of delays and obscurity in connection with the processing of permits at the local government level, causing the failure to meet project timelines and consequent hit on the profitability of a project. Encouragingly, the Department of Energy has stated that it is eying the integration of energy-related permits that are processed by local government units into the EVOSS soon.   

Philippine Business Hub

Launched in June 2022, the Philippine Business Hub (PBH) is a one-stop shop business registration platform where applications requiring action by the Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and other national agencies involved in the new business registration process can be processed through a single digitized system. 

Through the PBH, starting a business in the Philippines can be done in one step within seven (7) days as compared to the previous process which involved 13 steps and a processing time of 33 days. Prior to the PBH, registrants had to separately approach each of the agencies involved in the business registration process and generally file their applications manually. 

There is, however, room for improvement of the PBH. First, similar to EVOSS, there is a lack of integration of LGU systems into the PBH framework. For the PBH to be a true "one-stop shop" for investors, full integration at both the national and local levels of government must be achieved. Second, it would be ideal for PBH to integrate systems of other national government agencies that issue secondary licenses as well. For instance, it would be ideal for the system of the Philippine Contractors Accreditation Board for obtaining a contractor's license or the Bangko Sentral ng Pilipinas (Central Bank) process for banking-related permits be integrated into PBH. 

Green Lanes for Strategic Investments

Under the "Green Lanes" initiative, a One-Stop-Action-Center for Strategic Investments (OSAC-SI) has been established under the auspices of the Philippine Board of Investments that will serve as the single point of entry for projects classified as strategic investments. Strategic investments are those aligned with the Philippine Development plan or any similar national development plan that would create a significant positive impact on the economy and will result in improvement in the country's infrastructure capabilities. The OSAC-SI will serve as the sole contact of the proponent and will endorse the project to the pertinent national government and local government agencies for the expedited processing of the necessary permits and licenses. 

Having only a single agency liaising with an investor for all permits, whether from local or national government authorities, would alleviate the problem of unnecessary bureaucracy in the registration system that has plagued the country for decades. The enhanced coordination among government units that the Green Lanes has jumpstarted could also serve as a catalyst for the development of a streamlined licensing system that would be available to proponents of even non-strategic investments.

Looking ahead 

The new systems discussed in this article are certainly welcome developments for foreign investors. It is hoped that the current administration, with the guidance of the ARTA, will improve these systems by integrating local government processes and promoting constant coordination among the government agencies involved. 

Withers continues to monitor further developments in the Philippine regulatory environment. The Withers team in Singapore led by Yutaka Sakashita and Luis Seña, who is qualified in the Philippines, regularly advises clients investing in the Philippines. For more detailed and curated advice regarding to any of the matters discussed in this article, including assistance in navigating through related regulatory issues, you may contact Luis.