ASSOCIATION of Southeast Asian Nations (ASEAN) members -- the
Philippines, Indonesia, Malaysia, Singapore, Thailand, Brunei, Cambodia, Laos,
Myanmar and Vietnam -- aim to have an ASEAN Economic Community (AEC) by 2015.
AEC is premised on four pillars.
These are: a single market and production base, highly competitive economic
region, equitable economic development, and full integration in global economy.
The objective is to have a
competitive market by turning ASEAN into a single market and production base.
There will be a free flow of goods, services and investment capital among the
member countries, e.g., tariff on most goods will be reduced, certain customs
procedures will be streamlined, among others.
To have a competitive advantage
and maximize the benefits of AEC, the Philippines needs to address a lot of
issues, among these is the ease in doing business. In the survey on Doing Business
2012 released by International Finance Corp. (IFC), the Philippines’ rank slid
to 136th from 134th place in the 2011 survey -- although this has improved
compared to the previous years (i.e., ranks 141th and 144th in 2009 and 2010,
respectively).
The factors considered in the
ranking were: starting a business, dealing with construction permit, getting
electricity, registering properties, getting credit, protecting investors,
paying taxes, trading across borders, enforcing contracts and resolving insolvency.
The Philippines still ranked far
behind other ASEAN countries such as Singapore, Thailand and Malaysia which are
all in top 20. Even Vietnam is far better than us at 98th place.
I think you would agree with me
that main factors for our low ranking are corruption, inefficiencies in
government and infrastructure. In fact, in the Global Competitiveness Report
2011-2012, these are the top three most problematic factors for doing business
in the Philippines.
It is comforting to know that our
current administration is serious in addressing these issues.
One of its projects to reduce
corruption and improve the efficiency at the Bureau of Customs (BoC) is the
implementation of the National Single Window (NSW).
NSW is part of our governments’
commitment in achieving AEC by 2015. With the NSW, importers and exporters can
submit the forms electronically and they are processed and cleared by different
agencies in a single integrated process. The NSW will, hopefully, expedite
customs processing and enhance efficiency and transparency on transactions with
BoC.
Reducing human interference in
customs transactions may also diminish the corruption at the BoC.
Tax regulations also play a
critical role in doing business in the Philippines.
Consistent application of
regulations is important to business. This is one area where recent actions of
the tax bureau has caused so much apprehension in the business community.
Notably, there are various tax matters
on which the Bureau of Internal Revenue (BIR) has issued new interpretations
and reversed previously implemented tax positions. Among these issues are the
tax treatment of importation of petroleum and petroleum products; transactions
covered by the tax-free exchange; and computation of Improperly Accumulated
Earnings Tax (IAET).
These uncertainties on the BIR’s
positions prompted businesses to think twice before expanding their business
operations in the Philippines. Some even thought of transferring their
businesses to other ASEAN countries (Thailand and Vietnam are their top
priorities). Hence, it is imperative that our tax authorities ensure
consistency in the application, implementation and interpretation of tax laws
and regulations.
On the other hand, businesses,
especially the small- and medium-scale enterprises, should start to have a
global mindset. They should be able to identify the impact of AEC on their
businesses and be able to adjust their business strategies to address the risk
and maximize the opportunities that will be brought about by globalization.
There are a lot of issues, both
policy and political, that each member country of the ASEAN needs to address
and sort out. There are even doubts that AEC will be really achieved by 2015.
But the AEC offers a lot opportunities and challenges that we have to be
thinking about and preparing for. It is for this reason that ASEAN integration
will be the focus of the 2012 Annual CEO Business Forum of Punongbayan &
Araullo (P&A) scheduled on Oct. 23, 2012.
In fact, in the World Economic
Forum’s Global Competitiveness Report 2011-2012, these are the top three most
problematic factors for doing business in the Philippines.
As said in Proverbs 27:12"A
prudent person foresees the danger ahead and takes precautions. The simpleton
goes blindly on and suffers the consequences."
Sources:
Achieving the ASEAN Economic
Community 2015: Challenges for the Philippines by Jennu Balboa et al; and
Edward D. Roguel
The author is a tax partner at the Tax Advisory and Compliance Division
of Punongbayan & Araullo, a leading audit, tax and advisory services firm
that is the Philippine member of Grant Thornton International Ltd.
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