Business registration process better but compliance cost remains steep for MSMEs

The business registration process has improved for micro, small and medium enterprises (MSMEs), but differences still remain among local government units (LGUs) and the cost of transactions remains high, according to an academic expert.

Aleli B. Bawagan, UP professor and director of the UP Institute for Small-Scale Industries (ISSI), in a recent talk said that “there is indeed a positive change in the registration process towards becoming more efficient,” especially with the passage of the Ease of Doing Business Act of 2018, or Republic Act No. 11032.

But she also noted that the process continues to vary across LGUs & municipalities.

Moreover, while processes have generally been shortened, “these have not resulted to lower costs of transactions,” she said in a presentation at a forum organized by AIM on the impact of red tape and cost of regulatory compliance for MSMEs.

“What is not mentioned is the amount of time and money needed to prepare documentary requirements for registration and renewal of business permits,” she added.

“It just says, for example, like from three pages before, it’s now just half a page to fill up before you could apply for a business permit. However, that half a page does not also include the thick number of attachments that you need to comply with before you could even make your first step in [getting] the mayor’s permit.”

Bawagan said that for small enterprises, this can be quite cumbersome and takes time away from the owner in overseeing the enterprise operations, as it is often the owner doing all the legwork since hiring a professional is expensive.

She commented further that while it may take just one to three days for entrepreneurs to comply with the mayor’s permit, “before they can do that they have to comply with health permits for all of their employees, they have to comply with pest control permits, sanitation permits especially in their food business.”

She added that the least number of forms needed is in retail and trading but for other sectors such as food, pharmaceuticals, construction, real estate, “more and more papers are needed,” making compliance harder and costlier, particularly for exporters, who face more stringent compliance requirements.

Bawagan also shared some MSME sentiments from a survey on business processing and licensing system in NCR that the ISSI did for the trade department from 2015 to 2017.

She said results showed a relatively high satisfaction rating for LGU services including quality of processing and delivery services; speed; number of steps, forms, and signatories; and cost of fees.

However, the 17 LGUs’ service scores varied, with some LGUs registering higher than the average score and others falling behind it.

“Based on the results of this survey, all local government units in NCR exhibited improvements in the satisfaction rating compared with their ratings in 2016. This result is an indication of the LGUs’ attempts to comply with the nationally mandated standards,” said Bawagan.

In general, the attitude towards regulatory requirements from business is that they are “necessary but need serious improvement,” she continued.

She said the top three recommendations of those surveyed are to simplify the process of compliance, develop new or improve existing electronic processing methods, and reduce the amount of payment.

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