The rising prices of fuel and electricity in the Philippines are major roadblocks to foreign investors who may want to do business in the country.
This was pointed out by Dr. Jamil Paolo Francisco during his presentation at the 4th International Symposium on Asian Development Studies held recently at the Philippine Institute for Development Studies (PIDS) in Quezon City.
Using data from the National Competitiveness Council for the period 2011 to 2015, Francisco and his co-authors Dr. Tristan Canare and Mr. Jose Fernando Morales, tested the relationship between business creation and the ease and cost of doing business in cities and municipalities.
To establish the relationship between the aforementioned variables, the authors focused on two factors, namely, cost of doing business and ease of doing business. The indicators for cost of doing business included prices of electricity, water, diesel, amount of minimum wage, and cost of land or rental of business space. The indicators for ease of doing business, on the other hand, referred to the number of processing days in getting a permit for a new business, number of steps in securing a permit, number of days and steps for business permit renewal, and number of days and steps in getting a building permit.
Based on the overall outcome of their study titled “Firm Creation and the Ease and Cost of Doing Business”, Francisco noted that the “lower cost of doing business is a stronger driver of business creation than the ease of doing business.”
“For instance, in the Philippines, high prices of electricity and fuel are a huge barrier [to foreign investments], not to mention our current situation of a higher-than-expected inflation rate,” Francisco said, adding that ‘’when [business] creation is difficult at the local level, it discourages entrepreneurship, [which is] a critical component of inclusive development in developing countries.”
Moreover, Francisco explained that lower foreign direct investments and the technological growth of a country can affect the productivity in both macro and micro levels. He added that the lack of business competitiveness can lead to the growth of informal economy in the grassroots.
The findings of the study also suggested that potential business owners are “discouraged more by high operating costs than by cumbersome processes of regulatory compliance in running and starting a business”.
To encourage business creation in cities and municipalities, the authors urged policymakers to implement policy reforms that will decrease the cost of doing business in the country, such as legislations that will lower the cost of electricity, water, and land or business space rental. They also proposed the creation of a business-friendly environment for investors in the power industry to increase power production that will address the high cost of electricity.
The symposium, which carried the theme “Development Cooperation in ASEAN”, was jointly organized by the Korea Association of International Development and Cooperation and the PIDS. ###

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