bpls reformguide promoting local bpls reform in the phils

December 2011

This publication was produced by Nathan Associates Inc. for review by the United States Agency for International Development.

BPLS REFORM PROGRAM GUIDE Promoting Local Business Permit and Licensing System Reform in the Philippines

BPLS REFORM PROGRAM GUIDE Promoting Local Business Permit and Licensing System Reform in the Philippines

DISCLAIMER

This document is made possible by the support of the American people through the United States Agency for

International Development (USAID). Its contents are the sole responsibility of the author or authors and do

not necessarily reflect the views of USAID or the United States government.

Contents Acronyms v

Acknowledgements vii

1. Global Competitiveness and BPLS Streamlining 1

1.1 Competitiveness Defined 1

1.2 Global Surveys on Competitiveness 1

1.3 National Surveys on Competitiveness 3

1.4 Awards and Incentives 6

2. Understanding BPLS Reforms 9

2.1 What is BPLS streamlining? 9

2.2 Legal Basis for BPLS Reforms 10

2.3 The Government BPLS Program 11

2.4 Institutional Structures and Mechanisms 17

3. Past BPLS Reforms in the Philippines 21

3.1 BPLS Initiatives Between 20012010 21

3.2 BPLS Initiatives Since 2010 26

3.3 Lessons Learned 29

4. Accelerating BPLS Reforms 33

4.1 Challenges 33

4.2 Next Steps 35

References 39

Appendix A. BPLS Unified Form

Appendix B. Assessing Business Processes

Appendix C. Milestones in the BPLS Reforms Program

I V

Illustrations

Figures Figure 2-1. Macro-View of BPLS Processes 9 Figure 2-2. BPLS Streamlining Program Coverage by LGU Level 16 Figure 2-3. Institutional Support for BPLS Reforms 18

Tables Table 1-1. Philippine Ranking in Global Competitiveness Surveys, 2006-2012 2 Table 1-2. Global Competitiveness Rankings of ASEAN Nations, 2011 2 Table 1-3. Ease of Doing Business for Select ASEAN Countries, 2010-2011 3 Table 1-4. Comparison of Philippine Cities in Processing Business Start-Ups 4 Table 1-5. Top Three Ranked Cities in the PCCRP, 2009 6 Table 2-1. Regional Allocation of Cities and Municipalities in the BPLS Program 16 Table 3-1. BPLS Implementation in Central Luzon 22 Table 3-2. BPLS Pilot Areas in the Visayas 24 Table 3-3. Status of BPLS Streamlining in Targeted LGUs by Region, July 2011 27 Table 3-4. Summary of BPLS Accomplishments in Butuan and Cagayan de Oro 28 Table 3-5. Summary of Official Development Assistance to BPLS Reforms 30

Acronyms AECID Agencia Espaola de Cooperacin Internacional para el Desarrollo (Spanish

Agency for International Development Cooperation) APC Asian Institute of Management Policy Center ARTA Anti-Red Tape Act ASEAN Association of Southeast Asian Nations BFP Bureau of Fire Protection BPLS Business Permitting and Licensing System BOSS Business One-Stop Shop BPLO Business Permitting and Licensing Office CDA Cooperative Development Authority CESO Career Executive Service Board CLIPC Central Luzon Investment Promotion Center CLICC Central Luzon Investment Coordinating Council CLGCFI Central Luzon Growth Corridor Foundation Inc. CICT Commission on Information and Communication Technology CSC Civil Service Commission CSOs Civil Society Organizations DBS Doing Business Survey DILG Department of the Interior and Local Government DLG Working Group on Decentralization and Local Government DP Decentralization Project DTI Department of Trade and Industry eBPLS Electronic Business Permitting and Licensing System eGov4MD Electronic Governance for Municipal Development FSIC Fire Safety Inspection Certificate GCI Global Competitiveness Index GCY Global Competitiveness Yearbook GIC Working Group on Growth and Investment Climate GIZ Deutsche Gesellschaft fr Internationale Zusammenarbeit (German Technical

Cooperation Agency) IEC Information, Education and Communication IFC International Finance Corporation ISO International Organization for Standardization IMD International Institute if Management Development JMC 2009 Joint Memorandum Circular No. 01 Series of 2009 JMC 2010 Joint Memorandum Circular No. 01 Series of 2010

V I

JDAO Joint Department Administrative Order LCE Local Chief Executive LCP League of Cities of the Philippines LGA Local Government Academy LGU Local Government Unit LINC-EG Local Implementation of National Competitiveness for Economic Growth LIR Local Investment Reform LMP League of Municipalities of the Philippines LRED Local Regional Economic Development MAP Management Association of the Philippines MDC Mayors Development Center MOA Memorandum of Agreement MOC Memorandum of Commitment NCR National Capital Region NEDA National Economic Development Authority NERBAC National Economic Research and Business Center NGA National Government Agencies NCC1 National Competitiveness Council NCC2 National Computer Center MCC Millennium Challenge Corporation PCCI Philippine Chamber of Commerce and Industry PCCRP Philippine Competitiveness Ranking Project PDF Philippine Development Forum PhilHealth Philippine Health Insurance Corporation. PBR Philippine Business Registry PSP Private Sector Promotion RSP Regulatory Simplification Project SEC Securities and Exchange Commission SBRP Simplified Business Registration Process SNDB Sub-National Doing Business SSS Social Security System TAG Transparency Accountable Governance TOT Training of Trainers TWG Technical Working Groups USAID United States Agency for International Development WEF World Economic Forum

Acknowledgements Managed for USAID/Philippines by Nathan Associates Inc., LINC-EGLocal Implementation of National Competitiveness for Economic Growthis a three-year project that began in 2008. LINC-EG assists policymakers in improving the environment for private enterprise to establish, grow, create jobs, and help reduce poverty.

This guide was developed under the LINC-EG Project to assist the Philippine government in improving subnational systems for business permitting and licensing (BPLS). It is intended as a reference document for national and local governments and builds on the work of the Philippine government and other development partners, noting some past achievements. More significantly, the guide explains recent policy developments that provide for the cross-departmental, legal and institutional basis for BPLS reform and how these can help to support and fast track further improvements in the interface between government and business.

Consultant Lucy Lazo conducted extensive research and writing, Ofie Templo provided administrative oversight of the information gathering stage, Alid Camara and Mikela Trigilio of Nathan Associates provided additional analysis and editing of the report. Executive Director Marivel Sacendoncillo and the staff of the Local Government Academy, an arm of the Department of the Interior and Local Government, were particularly supportive with their time and advice on what to include in this document.

1. Global Competitiveness and BPLS Streamlining 1.1 COMPETITIVENESS DEFINED Competitiveness encompasses the institutions, policies, and other factors that determine a countrys level of productivity (World Economic Forum 2010). The level of productivity, in turn, determines the level of prosperity that a country can sustain. Thus, competitive countries tend to produce higher incomes for their citizens. Productivity also determines an economys rate of return on investments. Because investmentsphysical, human, and technologicalare fundamental drivers of economic growth, a competitive economy is one that is likely to grow faster in the medium to long term.

Institutions have a strong bearing on competitiveness and growth because they influence investment decisions and the organization of production.1 Of relevance in this report is the institutional aspect of operations efficiency as manifested in excessive bureaucracy and red tape involved in the granting of business permits.

1.2 GLOBAL SURVEYS ON COMPETITIVENESS Since 2008 the Philippines has been falling in the ranks of annual competitiveness surveys, a fact that has given impetus to efforts to streamline business permitting and licensing systems in the country. The three main surveys that measure competitiveness across countries are

The Global Competitiveness Index (GCI) published by the World Economic Forum (WEF),

The Doing Business Survey (DBS) of the World Bank (WB) and the International Finance Corporation (IFC), and

The Global Competitiveness Yearbook (GCY) of the International Institute of Management Development (IMD).

Published annually since 2005, the GCI has about 111 indicators covering 12 categories of the microeconomic and macroeconomic foundations of national competitiveness. The DBS analyzes regulations that apply to domestic small and medium-size companies using sets of 11 indicators.

1 Institutions are one of the 12 pillars of competitiveness in the Global Competitiveness Report 2010-2011 (World Economic Forum 2010).

2 B P L S R E F O R M P R O G R A M G U I D E

In 2011 the DBS covered 183 economies. The GCY has 331 criteria in 5 economic areas and covered 59 countries in 2011.

The Philippines has always ranked in the bottom third of countries covered in these surveys (Table 1-1). From 2008 to 2011, the country's rank deteriorated across the board, although the GCI for 2011-2012 reported a 10 point improvement for the Philippines. According to the GCI the Philippines is weakest in indicators for corruption, bureaucracy, infrastructure efficiency, and policy stability. The GCY cites weakness in international investment, infrastructure, and education; and DBS calls for improvement in starting a business, dealing with construction permits, and protecting investors.

Table 1-1 Philippine Ranking in Global Competitiveness Surveys, 2006-2012

Survey 2006 2007 2008 2009 2010 2011 2012

GCI 71 (125)

75 (122)

71 (131)

71 (134)

87 (133)

85 (139)

75 (142)

GCY 42 45 40 43 39 41 -

DBS 121 (175)

126 (175)

133 (178)

141 (181)

144 (183)

148 (183)

-

SOURCES: Compiled from the Global Competitiveness Reports, 2006-2011, IIMD and DB surveys.

In gauging its competitiveness, the Philippines must benchmark itself against developing economies and its Association of Southeast Asian Nations (ASEAN) neighbors who are all vying for foreign investment. Unfortunately, the Philippines is lagging behind its ASEAN neighbors in competitiveness surveys, even against newcomer Vietnam (Table 1-2). In the 2011 DBS, the Philippines and Thailand were the only ASEAN countries to decline in the rankings. Malaysia, Indonesia, and Vietnam all recorded improvements, with Vietnam outperforming all others with a jump from 93 in 2010 to 78 in 2011. The Philippines dropped four places from the previous year.

Table 1-2 Global Competitiveness Rankings of ASEAN Nations, 2011

Survey Malaysia Thailand Indonesia Vietnam Philippines

GCI, 2011-2012 21 39 46 65 75

GCY, 2011 10 26 35 - 39

DBS, 2011 21 19 121 78 148

SOURCES: Compiled from WEF, IMD and DB survey 2011 Reports.

How the Philippines performs in comparison with its ASEAN neighbors in starting a business, dealing with construction permits, and registering a property is shown in Table 1-3. The gap in rank between the Philippines and the other ASEAN countries is widest in dealing with construction permits and in registering property, where Thailand has so far been trailing only Singapore, which is the best performer in the region. The number of procedures followed in the Philippines is generally more than in its neighbors and the cost of securing the permit is higher.

G L O B A L C O M P E T I T I V E N E S S A N D B P L S S T R E A M L I N I N G 3

The countrys cumbersome process for business start up has proven to be a strong disincentive for entrepreneurs. Reducing the number of procedures will shorten processing time. Hence, to move closer to the ranking of its ASEAN neighbors, the Philippines must prioritize these two areas for reform. Using ASEAN as a benchmark is vital as it raises the bar for improving the Philippines competitiveness.

Table 1-3 Ease of Doing Business for Select ASEAN Countries, 2010-2011

Criteria Singapore Thailand Malaysia Vietnam Indonesia Philippines

Ease of Doing Business (rank) 1 19 21 78 121 148

1. Starting a business (rank) 4 95 113 100 155 156

a. Procedures (number) 3 7 9 9 9 15

b. Time (days) 3 32 17 44 47 38

c. Cost (% of income per capita) 0.7 5.6 17.5 12.1 22.3 30.3

d. Minimum Capital (% of Income) 0 0 0 0 53.1 6.0

2. Dealing w/ construction permits (rank)

2 12 108 62 60 156

SOURCE: Doing Business Survey, 2011,

One caveat about these surveys is that they are based on a combination of statistics and perception surveys that sometimes leads to puzzling results. On some indicators, the Philippines ends up ranking lower than we would like to believe. This tells us that perception (and communication to correct any misperception) is an element that does not receive enough attention (Luz 2011).

1.3 NATIONAL SURVEYS ON COMPETITIVENESS Global surveys may be a good indicator of a countrys competitiveness, but many reforms critical to generating investment are needed at the sub-national level. This is especially so in the Philippines which has been decentralizing since 1991. The microeconomic foundation of competitiveness pertains not only to sectors but also to geographical development. Hence, the desire to improve competitiveness spurred the conduct of two city-level competitiveness surveys in 2011: the IFCs Sub-National Doing Business Survey (SNDB) and the Philippine Cities Competitiveness Ranking Project (PCCRP). The Asian Institute of Management Policy Center (APC) conducted both surveys.

Sub-National Doing Business Survey Conducted in 2011 with support from USAIDs through the Local Implementation of National Competitiveness for Economic Growth (LINC-EG) project, the SNDB is based on the DBS but covers only 3 of the 11 areas of business regulation that pertain to municipal and city governments, and where local differences exist (i.e., starting a business, dealing with construction permits, and registering property).


According to the 2011 SNDB, a business applicant has to follow 15 to 22 steps to start a business in major cities, with Cebu City and Manila requiring the least number of steps (Table 1-4). The average number of steps in East Asia and the Pacific is 7.8, while the average number in member countries of the Organisation for Economic Co-operation and Development (OECD) is 5.6.2 On average it takes 30 days to process applications in the Philippines but only 13.8 days in OECD countries. And, on average, the Philippines has only two fewer procedures than Equatorial Guinea, the country with the most procedures among the 183 countries surveyed (DGB 2011). Certainly this is not a salutary situation for the Philippines.

Table 1-4 Comparison of Philippine Cities in Processing Business Start-Ups

Financial & Private Sector Development

Too many requirements to start a business

SOURCE: Doing Business 2011: Making a Difference for Entrepreneurs.

2 The OECD has 34 member countries, mostly advanced economies with some emerging countries like Mexico, Chile and Turkey.


Local requirements for some cities add to the time it takes to start a business. Examples of these requirements include the notarization of the business permit applications and securing of environmental permits and location clearances. Some cities require the verification of real property tax payments (e.g., Cagayan de Oro, Lapu-Lapu and Mandaue), while others require a stamp of approval for the Certificate of Occupancy (i.e., Muntinlupa), or police clearance as in Zamboanga.

In addition to local requirements, firms have to meet the requirements of National Government Agencies (NGAs). The National Internal Revenue Code and Bureau of Internal Revenue (BIR) require entrepreneurs to buy special accounting books, obtain authorization to print receipts, and have the printed receipts stamped by the BIR (Doing Business Philippines 2011).

Philippine Cities Competitiveness Ranking Project Conducted by the APC since 1999, the Philippine Cities Competitiveness Ranking Project (PCCRP) is based on the IMDs World Competitiveness Yearbook (WCY) and uses Michael Porters diamond theory as framework. The indicators used in the project are government efficiency, economic performance, business efficiency, and infrastructure. The 2009 PCCRP covered six competitiveness drivers, weighted as follows:

1. Dynamism of the local economy (20 percent) 2. Cost of doing business (15 percent) 3. Infrastructure (17.5 percent) 4. Responsiveness of the LGU to business needs (20 percent) 5. Human resources and training (10 percent) 6. Quality of life (17.5 percent).

The 2011 PCCRP was supported by the German Agency for International Cooperation (GIZ)3 , USAIDs LINC-EG (APC 2009, 11-16) and other partners. It covers 29 cities categorized into the three groups on the basis of level of development: emergent cities, growth centers, and metropolitan growth centers.4 Table 1-5 presents the top three cities in these categories. In the overall standings, Cebu City, Cagayan de Oro, Dagupan City ranked the highest in their respective categories.

In the PCCRP, the complexity of business registration is reflected in the criterion of responsiveness of city government to business needs, which has a weight of 20 percent. There are five subcategories under this criterion, one of which pertains to the degree of ease of doing business, which is measured by (1) the length of time to renew business permits and (2) rating of the process and procedures for renewing business permits. The former is based on hard data while the latter is based on perception. By this criterion, the cities that ranked the highest were Davao, Bacolod, and Tacloban.

3 Formerly the German Agency for Technical Cooperation (GTZ). 4 Levels of development were measured on the basis of population and income (excluding internal revenue allotment).


Table 1-5 Top Three Ranked Cities in the PCCRP, 2009

City Overall Rank

Ranking according to PPCRP Criteria

Dynamism of Local Economy

(20%)

Cost of Doing

Business

(15%)

Infrastructure

(17.5%)

Human Resources Training

(10%)

LGU Responsiveness

(20%)

Quality of Life

(17.5%)

M E T R O P O L I T A N G R O W T H C E N T E R S

Cebu 1 1 2 1 1 2 2

Davao 2 2 1 2 2 1 1

G R O W T H C E N T E R S

Cagayan de Oro 1 1 3 2 3 3 3

Bacolod 2 5 6 7 3 1 2

Zamboanga 3 7 1 4 3 6 5

E M E R G E N T C I T I E S

Dagupan 1 7 5 1 11 2 5

Tacloban 2 8 13 10 1 1 5

San Fernando 3 9 2 3 6 3 1

SOURCE: AIM. 2010 Cities and enterprises, Competitiveness and Growth: Philippine Cities Competitiveness Ranking 2009.

1.4 AWARDS AND INCENTIVES Awards are given to motivate local governments to make the reforms necessary to attract investment. The Philippine Chamber of Commerce and Industry (PCCI) sponsors the annual Most Business-Friendly Local Government Units (LGUs) Award, which complements the national government initiative to benchmark outstanding reforms in governance that promote local trade and investment and ensure accountability, transparency, and efficiency in public service. There are two levels of award. Level One covers all highly urbanized cities and higher income LGUs (1st to 3rd class), while Level Two includes lower income LGUs (4th to 6th class). In 2010 winners were selected on the basis of self-assessment reports and interviews conducted by a distinguished panel of judges chaired by former Senator Aquilino Pimentel Jr. Winners received a certificate of donation for one school building from officers of the Federation of Filipino-Chinese Chamber of Commerce and Industry, Inc.

In the 36th Philippine Business Conference in 2010, five LGUs received awards for being business-friendly:

1. City of San Fernando, Pampanga (city level 1) 2. Candon City, Ilocos Sur (city level 2) 3. Municipality of Carmona, Cavite (municipal level 1) 4. Municipality of Guimbal, Iloilo ( municipal level 2) 5. Leyte for (province level 1).

Six LGUs received special citations for outstanding efforts in each of the award criteria:

1. La Union Province - trade, tourism and investment promotions


2. Talavera, Nueva Ecija - quality customer service 3. San Nicolas, Ilocos Norte - public-private sector partnership 4. Tarlac - micro, small, and medium enterprise development 5. Olongapo - investment promotions 6. Pangasinan - quality management and systems innovation.

Another incentive is the EXCELL Awards, a project of Department of the Interior and Local Government (DILG) Region 6 to recognize the best managed local governments in the region. Awardees follow best practices and demonstrate achievements and innovations in governance, administration, social services, economic development, environmental management, and local legislation. The project also aims to advocate for transparency and accountability in governance, reinforce good performance, popularize replicable best practices, and identify interventions to improve LGU performance. Each major awardee receives P50,000 and special awardees each receive P10,000.

The 2010 awardees were as follows:

1. Negros Occidentalbest performing province and all special awards in the provincial category

2. San Carlos CityNegros Occidental best performing city and excellence in environmental management, economic development, social services

3. Oton, Iloilobest performing 1st to 3rd class municipality and excellence in local legislation

4. Anilao, Iloilobest performing 4th to 6th class municipality and excellence in local legislation, administrative governance, social services.

Special awardees were as follows:

1. Bacolod City and Kabankalan Cityexcellence in local legislation (city category)

2. San Jose de Buenavista, Antique and Iloilo Cityexcellence in administrative governance for 1st to 3rd class municipalities and cities, respectively

3. Miagao, Iloiloexcellence in social services 1st to 3rd class municipalities

4. Miagao, Iloilo and Guimbal, Iloilo excellence in economic development for 1st to 3rd class and 4th to 6th class municipalities, respectively

5. Panay, Capiz and Guimbal, Iloiloexcellence in environmental management for 1st to 3rd class and 4th to 6th class municipalities, respectively.

2. Understanding BPLS Reforms 2.1 WHAT IS BPLS STREAMLINING? Streamlining the business permitting and licensing system (BPLS) means implementing systematic and purposeful interventions to ease business start-up (e.g., simplifying registration process by reducing the number of steps and procedures and reducing processing times and cost). Streamlining can accelerate revenue mobilization, improve expenditure management, and increase access to finance for better service delivery and growth promotion.

As shown in Figure 2-1, complying with the requirements of NGAs directly affects LGU processes. Such requirements include approval of business name registration by the Department of Trade and Industry (DTI) for single proprietorships, by the Securities and Exchange Corporation (SEC) for corporations, and by the Cooperative Development Authority (CDA) for cooperatives. During the renewal period, applicants must also obtain certifications from social security agencies. Streamlining must therefore happen at the national as well as the local level. However, for the purposes of this paper, we will focus on local BPLS reforms.

Figure 2-1 Macro-View of BPLS Processes

NGA

DTI, SEC, CDA LGU

BPLO

NGA

SSS, PHILHEALTH

Taxes, Clearances, Fees, Mayors Permit

Business name, BIR registration

Registration for medical insurance and social security

1 0 B P L S R E F O R M P R O G R A M G U I D E

2.2 LEGAL BASIS FOR BPLS REFORMS The policy platform for BPLS streamlining dates back to the 1990s. Republic Act 7470, signed in 1992, created the National Economic Research and Business Assistance Center (NERBAC), which was envisioned as a center to facilitate the processing of all government requirements necessary for the establishment of a business. This directive was the basis for organizing NERBACs as registration centers that help applicants meet requirements for business start-ups.

The momentum for BPLS reforms started in earnest during the term of then-President Macapagal-Arroyo. In her first State of the Nation Address in 2001, she directed national government agencies to reduce red tape by cutting in half the number of signatures required for their services. For LGUs, her message was to streamline their operations, slash red tape. There must be continuity between the national and local governments in their efforts to be investor-friendly. DTI Region 3 took this directive seriously and began streamlining business registration procedures (see BPLS Initiatives Between 20012010 ). Two years later, on September 15, 2003, Memorandum Order No. 117 was issued. It mandated local authorities to simplify and rationalize their civil application systems and for the Secretaries of DILG and DTI to facilitate the streamlining of procedures for permits and licenses, particularly business permits, building permits, certificates of occupancy, and other clearances.

But the legal basis for the current BPLS reform program is RA 9485 or the Anti-Red Tape Act (ARTA) of 2007. In compliance with the Philippine Constitution provision that calls for simplifying government services, ARTA requires government instrumentalities and LGUs to deliver public services efficiently by reducing red tape. It identifies five aspects of service to be simplified: (1) steps in providing the service, (2) forms used, (3) requirements, (4) processing time, and (5) fees and charges. It also limits the number of signatories to five per request, application, or transaction and provides legal sanctions for noncompliance with the standards.

Since the passage of ARTA, there have been a number of government policy issuances on BPLS reforms. Joint Memorandum Circular No. 01 Series of 2009 (JMC 2009) was signed on February 18, 2010 by the DILG, DTI, the Department of Public Works and Highways, the Social Security System and the mayors of the National Capital Region (NCR). It requires all LGUs to undertake a reengineering of their transaction systems, including time and motion studies, and mandates each LGU to prepare a Citizens Charter which will contain their respective service standards. The JMC was the first attempt to standardize registration procedures at the NCR for new business applications. Its recommendations were formulated by a Technical Working Group organized by the League of Cities of the Philippines (LCP) consisting of the Business Permits and Licensing Officers (BPLOs) of the NCR. This circular was superseded by two policies signed on August 6, 2010:

The DTI-DILG Joint Memorandum Circular No. 1, series of 2010 on the Guidelines in Implementing the Standards in Processing Business Permits and Licenses in All Cities and Municipalities (JMC 2010).

The Joint DTI-DILG Department Administrative Order No. 1, series of 2010 on the Guidelines in Implementing the Nationwide Upscaling of Reforms in Processing Business Permits and Licenses in all Cities and Municipalities in the Philippines (JDAO).

U N D E R S T A N D I N G B P L S R E F O R M S 1 1

The first circular is a landmark directive that sets standards for processing new applications and renewals consistent with ARTA. To ensure implementation of these standards, the second circular defines institutional support for the reforms by specifying the roles of DTI and DILG. It also organizes national and local committees to oversee the reform process.

On January 31, 2011, the DILG issued a supplementary memorandum to further streamline BPLS. Memorandum Circular No. 2011-15 reiterates the basis for setting business fees and the issuance of conditional business permits in cases where the only lacking requirements are those of the social security agencies.

2.3 THE GOVERNMENT BPLS PROGRAM BPLS streamlining as a government program began in 2009 when the DILG and DTI convened two working groups under the Philippine Development Forum (PDF): the working group on decentralization and local government (DLG) and the working group on growth and investment climate (GIC). Initially, the program was to streamline BPLS in as many LGUs as possible. But to do this the program had to

Set service standards for BPLS that LGUs can follow,

Develop and implement capacity building programs for LGUs as they streamline their business registration systems,

Organize government departments at the regional level to work with LGUs in implementing the BPLS reforms, and

Harmonize development partners reform initiatives on BPLS streamlining.

This project laid the groundwork for scaling up reforms in 2010. When the new administration took over in 2010, no less than President Benigno Aquino III called on LGUs to look for more ways to streamline our processes to make business start-ups easier. Responding to this call, the DTI and the DILG scaled up the program and launched the Nationwide Streamlining of Business Permits and Licensing Systems (BPLS) Program on August 6, 2010, with the signing of the JMC 2010. Hence, BPLS streamlining is associated with compliance with the service standards set in the JMC for processing business registration applications.

Program Components The governments BPLS program has five components, which are described below.

Component 0: Mobilizing Champions for the BPLS Reform Process Implementing reforms requires securing the support of various sectors of society, namely:

Local chief executives. As reform implementers, it is important that LCEs act as local champions and provide financial and manpower support for the program.

LGU leagues. BPLS reforms involve cities and municipalities that issue the Mayors permits. Support from the League of Cities of the Philippines (LCP) and the League of Municipalities of the Philippines (LMP) is needed to encourage their respective members to participate in the program. These leagues can also provide capacity building support to


members as the LMP did through its Electronic Governance for Municipal Development (eGov4MD) project.

Private sector. National and local businesses, academia, and civil society organizations are important contributors to reform processes. As major beneficiaries of reforms, private business groups will be encouraged to monitor the progress of the program and participate as service providers to assist LGUs in the reform process.

Concerned NGAs and their regional offices. The BPLS process involves securing permits from NGAs, so it is important that these agencies streamline their own processes, provide manpower support to LGUs business one-stop shops (BOSS), and provide coaching assistance to LGUs during the reform process.

Development partners. Support is needed from development partners to scale up the BPLS reforms and conduct studies for the next wave of process streamlining.

Component 1: Simplification and Standardization of the BPLS Process Using the ARTA as a framework, BPLS streamlining starts with process re-engineering that will enable LGUs to meet four service standards in processing registration applications: (1) use one application form; (2) limit the number of signatories; (3) reduce the number of steps; and (4) speed up processing time (see Performance Standards for a more detailed discussion of standards).

Component 2: Computerization of the BPLS Process Efficient re-engineering requires some form of computerization. Government is encouraging LGUs to use information technology in streamlining BPLS. Existing BPLS software includes programs widely promoted by government (e.g., e-BPLS by the National Computer Center (NCC2). With the new BPLS standards in place, government intends to redevelop e-BPLS and will review BPLS software now in the market. The objective is to assist LGUs in choosing appropriate IT solutions for streamlined BPLS processes. The NCC2 is taking the lead in this component.

Component 3: Institutionalization of BPLS Reforms To ensure the sustainability of BPLS reforms, legal instruments such as local regulations should be issued to support the streamlined processes. Otherwise, every change in administration will lead to a return to old practices. The government will therefore assist in (1) setting up a monitoring and evaluation system at the LGU and at the regional and the national offices of DTI and DILG; (2) organizing local business chambers and civil society organizations for process improvements and monitoring; (3) enjoining LGUs to work for International Organization for Standardization (ISO) certification of their BPLS; and (4) developing incentive systems to promote best practices.

Component 4: Improvements in Customer Relations The BPLS program also addresses complaints of poor service in the permitting process. Hence, after the LGUs have completed process re-engineering, they are encouraged to keep improving how they deal with the public. This entails complying with consumer protection laws, such as the Anti-Fixing Act; setting up a complaints desk; and implementing the Citizens Charter. Other


areas of reform that can lead to a more customer-friendly BPLS include establishing Business One-Stop Shops (BOSS); conducting information, education, and communication campaigns; and training LGU staff in customer relations.

Performance Standards The most significant policy pronouncement in this decade on BPLS reform may well be JMC 2010 because it established the service standards against which LGU performance in BPLS reforms can be measured. JMC 2010 stipulates four performance standards for business registration: (1) use of a unified registration form, (2) limit on the number of steps that an applicant must take in applying for a permit, (3) limit on the processing time, and (4) limit on the number of signatories.

Unified Business Registration Form An LGU must issue the Unified Business Registration Form (see Appendix A. BPLS Unified Form). That form contains all information and approvals needed for registration and facilitates exchange of information among LGUs and NGAs. In the past, every department in the LGU required applicants to fill out separate forms. The unified form was developed by a technical working group organized by the LCP. It is based on the form used by the Philippine Business Registry (PBR), a project of the DTI that aims to centralize data from NGAs involved in business registration (e.g., DTI, BIR, Securities and Exchange Commission, and the social security agencies).

Standard Steps JMC 2010 enjoins cities and municipalities to ensure that applicants follow five steps in securing a mayors permit, whether for new applications or for business renewals:

1. Get an application form from the city or municipality. 2. File or submit the filled in form with required documents attached. 3. Undergo one-time assessment of taxes, fees, and charges. 4. Make one-time payment of taxes, fees, and charges. 5. Secure the mayors permit.

To be able to comply with these standard steps, JMC 2010 also recommends that LGUs adopt the following measures:

Conduct inspections in accordance with zoning and environment ordinances and building and fire safety, and health and sanitation regulations, which have been undertaken during the construction stage, within the year since issuance of the business permit.

Organize joint inspection teams (JIT) composed of the BPLO, the city/municipal engineer, the city/municipal health officer or representative, the city/municipal planning officer or designated zoning officer, the city/municipal environment and natural resources officer or representative, the city/municipal treasurer, and the city/municipal fire marshal.


Forge a memorandum of agreement between the Bureau of Fire Protection (BFP) and the city/municipality, as necessary, to implement streamlined procedures for assessing and paying fire safety inspection fees that will enable the LGUs to implement the steps above.

In addition, DILG Memorandum Circular No. 2011-15 encourages LGUs to issue a conditional permit to a business in cases where the only lacking clearances are those of the SSS, Phil Health and PAG-IBIG, conditional upon the submission of the clearances after one month and the revocation or non-renewal of a business permit for failure to do so."

Standard Processing Time Consistent with ARTA, cities and municipalities are enjoined to comply with prescribed times for processing and releasing business registrations:

Process and release new business permits in 10 days. LGUs are encouraged to strive for 5 days or less, which is the average processing time in LGUs with streamlined BPLS. This processing is classified as a complex transaction following ARTA.

Process and release business renewals in 5 days. LGUs are encouraged to strive for one day or less, which has been achieved in many LGUs that have streamlined their BPLS. This processing is classified as a simple transaction.

Signatories Cities and municipalities shall follow the prescribed number of signatories required in processing new business applications and business renewals based on the provisions of the ARTA, which limits the number of signatures in any document to five. However, LGUs are encouraged to require only two signatories, the Mayor and the Treasurer or the BPLO. To avoid delay in the release of permits, the Mayor may deputize alternate signatories (e.g., the Municipal or City Administrator or the BPLO).

Proposed BPLS Procedures DTI and DILG have produced a manual that details the steps that LGUs may follow in streamlining BPLS. These steps include the following:

1. Pre-streamlining Activities. These activities solicit the support of stakeholders and the commitment of LCEs for the reforms. They consist of conducting orientation workshops on the reforms, securing the commitment of LCEs to making the reforms, and organizing technical working groups to make the reforms.

2. Diagnosis. This step is usually taken in self-assessment" workshops in which the LGU (1) creates a current BPLS flowchart for new registrations and renewals, (2) assesses the process vis-a-vis the standards set by government, and (3) identifies gaps and strategies for bridging the gaps.

3. Process Design. This step involves preparing the BPLS action or reform plan, which assigns responsible persons and defines budget requirements for the reforms.

4. Institutionalization. This step ensures that the legal requisites for the reforms (e.g., executive orders and ordinances) are prepared and legislated at the local level.


5. Implementation. Implementation starts with preparation of the work plan and financial plan, and dry-runs of the streamlined process.

6. Sustaining Reforms. Ensuring the sustainability of reforms involves setting up a monitoring system that includes client satisfaction surveys and engages stakeholders, such as local business chambers and civil society groups, to monitor LGU compliance with reforms. The more progressive LGUs have sought ISO certification for their BPLS.

Target LGUs While all cities and municipalities are enjoined to streamline their BPLS, not all LGUs can be assisted with streamlining due to limited resources. Hence, it was agreed that the program will assist only a critical mass of LGUs. An LGU will be included on the basis of

The number of business establishments in the LGU.

The LGUs investment potential, especially in relation to the governments four priority sectors of 2009 (i.e., agribusiness, tourism, business process outsourcing and information technology (BPO-IT), and mining).

The LGU's being on the list of 120 sparkplugs identified by NCC1.

The LGU's inclusion in the governments commitments to the Millennium Challenge Corporation.

The LGUs being a recipient of projects in the development community.

LGUs will not be automatically enrolled in the program unless (1) the LCE has expressed willingness to undertake the reform considering the investments associated with the program; and (2) there is private sector commitment in the locality to participate in the reform process.

Figure 2-2 lists the coverage of the program according to levels of LGUs. Level 1 refers to the 17 highly urbanized cities/municipalities in the NCR, most of which have streamlined BPLs. Level 2 refers to LGUs with the most business establishments (excluding NCR), those identified by national government agencies as having good potential for attracting in the four priority sectors, and those named in the country's commitment to the Millennium Challenge Corporation. Level 3 refers to LGUs not in Levels 1 and 2 but in the 120 "sparkplug list. Level 4 refers to LGUs with ODA on BPLS streamlining. Level 5 refers to all remaining cities and municipalities.

The government has identified 480 cities and municipalities in the BPLS program (Table 2-1). Originally, government support through capacity building and coaching assistance was limited to 480 LGUs, mostly from Levels 1-3 and some in Level 4, which were expected to be fully compliant with the BPLs standards by 2014. The program, however, has been fast tracked in 2011, with 2012 targeted as the program completion year.


Figure 2-2 BPLS Streamlining Program Coverage by LGU Level

Proposed Coverage of BPLS Streamlining

Level 1NCR LGUs

(16 Cities, 1 Municipality)

Level 2High density of

businesses

Sector Priorities in BPO-IT, Tourism, Agribusiness &

Mining

LGUs included in the MCC

commitments

Level 3

Remaining LGUs from NCC List of 120 Sparkplug

LGUs not covered in Levels 1 & 2

Level 4

LGUs with existing ODA projects

Targeted AssistanceBy Government

By Enrollment

Level 5

All other LGUs

Table 2-1 Regional Allocation of Cities and Municipalities in the BPLS Program

Region 2010 2011 2012 2013 2014 Total

NCR 1 1

CAR 3 3

1 8 6 14

2 3 2 2 2 9

3 23 26 29 29 23 130

4A 16 25 31 35 35 142

4B 5 4 5 14

5 6 2 1 2 11

6 6 3 3 2 4 18

7 9 17 2 1 29

8 4 4 9 6 8 31

9 4 4 8

10 4 4 4 12

11 7 1 5 5 2 20

12 7 4 12 9 32

13 2 3 1 6

Total 108 103 98 90 81 480


Government Assistance to LGUs The government identified the following assistance packages to LGUs (outside of NCR) that would like to streamline their BPLS:

Self-Assessment Workshop. DTI and DILG will join forces to assist LGUs in conducting a workshop to document and assess their current system in relation to standards and to propose reforms for presentation to the mayor. Participation will be by enrollment and expenses will be borne by the LGUs. Appendix B. Assessing Business Processes details steps for assessing the BPLS process of LGUs and preparing a reform action program.

Technical Assistance Services. The DTI and DILG will organize coaching teams from the government, BPLOs, and the private sector to assist LGUs in implementing their BPLS streamlining plans.

Automation (Computer-Aided) BPLS. LGUs interested in automating their BPLS will be assisted in acquiring the e-BPLS software and related training. The National Computer Center (NCC2) has drafted guidelines on BPLS computerization that will soon be disseminated to interested LGUs. It is planning to redevelop e-BPLS and create a system of accreditation for private software developers who will be producing BPLS solutions for LGUs.

2.4 INSTITUTIONAL STRUCTURES AND MECHANISMS As streamlining experiences accumulate, structures that ensure proper and prompt implementation of reforms will be needed. At the same time, support for reforms from different stakeholders is critical to the success of the project. This is articulated in Component 0 of the government program on BPLS.

National Structures and Mechanisms Two groups promote reforms in business registration. The BPLS Oversight Committee (BOC), which is co-chaired by DTI and DILG, was organized under the Philippine Development Forum. The Working Group on Transaction Costs and Flows (TCF) is under the National Competitiveness Council (NCC1). Figure 2-3 shows the links between these committees.

BPLS Oversight Committee The BOC is directly responsible for managing BPLS reforms. It was organized in June 2010 and officially established on August 6, 2011 through JMC 2010. As stated in the JDAO, the BOC is to (1) oversee implementation of nationwide scaling up of BPLS reform, particularly service standards; (2) mobilize resources for implementation of various components of BPLS reforms; (3) coordinate various initiatives of government, the private sector and the development community on BPLS reforms; (4) assist national government agencies, DTI, SEC, SSS, Phil Health, Bureau of Fire Protection in streamlining procedures; (5) assist government in building the capacity of governments to implement the BPLS reforms; and (6) ensure that BPLS reforms are aligned with other reforms that enhance the competitiveness of the country and LGUs.


Figure 2-3 Institutional Support for BPLS Reforms

Following the PDF structure, the BOC includes development partners. Composed of the LGU Leagues (LCP and LMP), NCC1, NCC2, and USAID, GIZ, IFC and the Spanish Agency for International Development Cooperation (AECID), the BOC plans and implements BPLS-related activities. In 2010, it organized a multidonor project that trained DTI and DILG coaches who have been rolling-out reforms to the targeted LGUs. The BOC has been proposed to be subsumed as a committee under the Sub-Working Group on Local Investment Reforms, a new group under the working groups on decentralization and local government and growth and investments.

BOCs 2011 work plan includes (1) stepping up the LGUs that have streamlined to the automation level; (2) ensuring the completion of process re-engineering of LGUs now making BPLS reforms; (3) establishing an effective monitoring and evaluation system; (4) building a BPLS advocacy and marketing program; and (5) establishing a BPLS certification system.

National Competitiveness Council Chaired by the DTI Secretary and co-chaired by a private sector representative, NCC1 supports the BOC through its Transaction Costs and Flows (TCF) working group, also co-chaired by a DTI undersecretary and a private sector representative. NCC1 was reconstituted through Executive Order 44 issued on June 3, 2011. It is the primary collection point of investor issues that need to be addressed to improve the country's competitiveness in industry, services, and agriculture; advises the President on policy matters affecting business competitiveness; and provides input to the Philippine Development Plan, the Philippine Investments Priority Plan (PIPP), and the Philippine Exports Priority Plan (PEPP). Its members include the Secretaries of Finance, Energy

Philippine Development Forum

Conveners: DOF & WB

National Competitiveness Council

Chairs: DTI Secretary & Private SectorRepresentative

Working Group onGrowth & Investment

ClimateConveners: DTI & IFC

Working Group onDecentralization & Local Government

Conveners: DILG & WB

Sub Working Group in Local Investment Reforms

Conveners: DTI, DILG & USAID

BPLS Oversight CommitteeCo-Chairs: DTI & DILG

BPLS Coordinator CommitteeCo-Chairs: DTI & DILG

Regional Directors

Education & Human Resources Anti-Corruption

Performance Governance System

I.T. Governance System

Infrastructure for Competitiveness Judicial System

Transaction Costs & Flows

Chairs: DTI

Competitive Agriculture

Transparency in Budget Delivery Power and Energy


and Tourism, and Education, the Director-General of National Economic Development Authority (NEDA), and five private sector representatives.

Even before its recent reorganization, NCC1 was active in BPLS reforms, focusing on monitoring and influencing the NGAs to streamline BPLS processes. For instance, the TCF focused on the use of a common database and application form for the social security agencies. It has also examined the permitting processes of agencies giving special permits to business enterprises (e.g., environment clearance certificate of the Department of Environment and Natural Resources.

In 2011, NCC1 plans to support BOC initiatives by (1) showcasing successful reformers in road shows in seven regions; (2) designing a BPLS customer satisfaction survey to be conducted in early 2012 to validate LGUs reforms; and (3) providing training for LGU front liners on service excellence and values reorientation.

Local Institutions and Mechanisms The BPLS Coordination Committee (BCC) is the local counterpart of the BOC mandated in the JDAO of August 6, 2010. The BCC is co-chaired by the regional directors of the DILG and DTI and consists of local chambers, the LGUs, and academics. Following the JDAO, the BCCs functions include

Providing direction in implementing BPLS reforms at the local level.

Organizing training for priority LGUs that will be streamlining the BPLS.

Organizing a pool of BPLS trainers in the region (from the BPLOs of LGUs, the academic community, and the local chamber) that can be tapped to coach LGUs in streamlining registration processes.

Monitoring LGU compliance with BPLS standards.

Soliciting support from the private sector.

Liaising with the National BOC on implementation of BPLS reforms.

The BCCs have been responsible for organizing the roll-out of BPLS standards to targeted LGUs. Action plans for the 2011 roll-out were in fact prepared by the regional BCCs and submitted to DTI and DILG.

3. Past BPLS Reforms in the Philippines In the Philippines, the government has only recently been deeply engaged in business registration reform, but reform efforts can be traced back over the past 10 years. Those efforts offer valuable lessons in governance and development for the current BPLS program of DTI and DILG. The program can be considered a model of convergence and coordination among government agencies, and of the harmonization of official development assistance, following the principles of aid effectiveness (OECD 2005/2008).

Business registration reform began through the uncoordinated and independent efforts of various entities. A good deal of BPLS reform was pursued through donor-supported projects focused on transparent and accountable governance, decentralization, local economic development, small enterprise promotion, and private sector participation. Some LGUs initiated and funded their own registration reform; others were prodded by the regional offices of government agencies.

Reforms were made in Luzon, Visayas, and Mindanao without the benefit of service standards, which were not put in place until the formal launch of the nationwide BPLS streamlining program in August 2010. A chronological account of BPLS reforms is in Appendix C; various BPLS projects of the past ten years are summarized below.

3.1 BPLS INITIATIVES BETWEEN 20012010 There have been a number of significant programs to simplify business registration procedures since 2001. Most were conducted through development assistance projects and spanned the different island groupings of the country. These programs paved the way for the formulation of extensive scaling up of business registration reforms in 2010.

BPLS Reforms in Central Luzon, 2001 In 2001, the Central Luzon Investment Promotion Center Region 3 (CLIPC) and the provincial offices of DTI Region 3, DILG, and LGUs campaigned to simplify business licensing5 in response to the state of the nation address of then-President Macapagal-Arroyo. On November 23, 2001, BPLS reform was adopted as a flagship project of the Central Luzon Coordinating Council (CLICC). The Region 3 initiative was driven by provincial governors on the Central

5 This discussion is based on a presentation by Judith Angeles (2009), Streamlining the Business Processes in the Issuance of Mayors permit in Central Luzon.


Luzon Growth Corridor Foundation Inc. (CLGCFI). On March 22, 2002, a memorandum of commitment on implementation of the streamlined business processes of critical frontline services in Central Luzons W Growth Corridor was signed and eight municipalities committed to streamlining the issuance of their mayors permit: Balanga City in Bataan; Sta. Maria & Meycauyan in Bulacan; San Jose & Cabanatuan cities Nueva Ecija; Angeles City in Pampanga; Tarlac City in Tarlac; and Olongapo City in Zambales.

Memorandum Circular 117 of 2003 provided impetus for the region to accelerate streamlining. Its program enjoined LGUs to (1) establish internal monitoring systems and internal audits, (2) establish a BOSS, and (3) automate their BPLS and connect to the Philippine Business Registry (PBR).6 By 2007, all 130 LGUs in Region 3 had completed streamlining reforms three years before performance standards were officially promulgated in August 2010 (Table 3-1). Two cities even had their business registration process certified under ISO 9000.

Table 3-1 BPLS Implementation in Central Luzon

Province No. of Cities/ Municipalities

Cities/Municipalities Implementing Streamlined BPLS

2002 2003 2004 2005 2006 2007-2009

Aurora 8 1 2 2 8 8

Bataan 12 1 1 4 12 12 12

Bulacan 24 2 2 3 7 23 24

N. Ecija 32 2 2 3 7 32 32

Pampanga 22 1 2 3 14 22 22

Tarlac 18 1 1 2 2 17 18

Zambales 14 1 2 3 14 14 14

TOTAL 130 8 11 20 58 127 130

SOURCE: DTI, Region III. 2009 Presentation.

The Region 3 initiative is a model of political resolve to make reforms and the persistence of a government agency in following the instructions of the President. Leading the project, DTI Region 3 had provincial governors champion reform, secured financial support through the foundation organized by the governors, coordinated technical support provided to LGUs from NGAs and the development community, and instituted an award system that encouraged LGUs to compete with each other in improving how mayors permits were issued.

6 The PBR is a business registry database managed by DTI under Executive Order 587 issued on December 8, 2006. It has evolved to streamline registration procedures through a web-based registry that links the databases of various agencies (i.e., the Securities and Exchange Commission, the Cooperative Development Authority, the Bureau of Internal Revenue, the Social Security System, the Home Development Mutual Fund, the Philippine Health Insurance Corporation, e-ready LGUs, and e-ready licensing agencies). While a number of LGUs have been linked to PBR since 2009, the system is being enhanced and tested.

P A S T B P L S R E F O R M S I N T H E P H I L I P P I N E S 2 3

BPLS Reforms in Mindanao, 2003 One of USAIDs early initiatives to promote business registration reform in Mindanao was the Transparent Accountable Governance (TAG) project. TAG was designed as an anticorruption and good governance project that adopted increasing transparency and accountability in government transactions as a theme (Asia Foundation 2008). The Business Permit and Licensing Study, a five-year activity under the project, initially covered 7 cities but expanded to 16.7 Assistance focused on procedural reforms that covered steps, processing time, forms, clearances, permitting fees, signatories, personnel, and corruption. The end-of-project report covered results, city case studies, and recommendations. Sustainability in reform is always an ongoing concern with BPLS reform and TAG was not directly an investment climate improvement project. However, TAG had some success in streamlining the business permitting system in the target cities and some of the beneficiary cities won awards (e.g., Koronadal).

BPLS Reforms in the Visayas, 2004 The GIZ spearheaded BPLS reforms in the Visayas through two projects: the Private Sector Participation (PSP) Project and the Decentralization Project (DP). While PSP helped improve the business and investment climate for micro, small, and medium enterprises, DP helped improve national and local governance. DP supported the harmonization and streamlining of processes in and between local governments and thus fostered local planning, financial management, inter-local cooperation, and capacity developments.

The PSP project, with DTI, piloted BPLS reform in Bacolod (Region 6) and in Ormoc and Palompon (both in Region 8) in 2005. A third pilot regionRegion 7was selected in 2007. There, DP and PSP joined forces and selected the municipalities of Barili and Consolacion as pilots. The pilots were later replicated in various municipalities in Regions 6, 7 and 8 (see Table 3-2).

As in Central Luzon, GIZ assistance covered a good number of municipalities. In the absence of standards, GIZs approach enabled municipalities to determine areas for reform, but basically covered number of steps, amount of processing time, documentation requirements, and signatures. Manuals, toolkits, and learning modules were produced under the two projects. The good documentation of project experiences and accomplishments contributed to the design of the governments BPLS project.

Reforms in the Visayas were concentrated in small and medium size municipalities (except for Iloilo, Cebu City) as compared to those in Mindanao and Luzon. Yet the reforms led LCEs to understand that they can raise revenue by improving service delivery, particularly business permitting and licensing. In some LGUs, such as Iloilo, GIZ assistance also covered the introduction of iTax, software with a module for tracking business fees, in addition to other LGU operations like real property taxes.8

7 The 16 cities were Cotabato, Dapitan, Marawi, Iligan, General Santos, IGaCoS, Surigao, Butuan, Dipolog, Koronadal, Malaybalay, Oroquieta, Ozamiz, Panabo, Tacurong and Zamboanga.

8 GIZ later developed an iBPLS to complement its BPLS reform assistance in Mindanao.


Table 3-2 BPLS Pilot Areas in the Visayas

Region 6 Region 7 Region 8

Pilots Bacolod Barili, Consolacion Ormoc, Palompon

Replicators Iloilo Escalante Silay Sagay Cadiz Kabankalan Talisay San Carlos Bago Victorias Buenavista Dumangas Estancia Oton Pototan Kalibo Malay Roxas City San Jose Passi

Cebu City Tanja Liloan Larena Danao Siquijor Talisay Minglanilla Naga Argao Dumaguete Bayawan Valencia

Burauen Palo Isabel Naval Catbalogan City Borongan Calbayog

BPLS Reforms in the National Capital Region, 2008 Most early initiatives to simplify business permitting focused on municipalities and small cities. The first to involve highly urbanized cities was the IFCs Regulatory Simplification Project (RSP), which focused on procedures for new business permits. Started in 2008, RSP extended technical assistance for reducing the time, cost, and procedures for starting a business to four cities in the NCR: Mandaluyong, Marikina, Manila, and Quezon City. Four principles characterized the project: adoption of one business application form; implementation of a one-time assessment and one-time payment, and creation of a joint inspectorate system. All four cities adopted the single registration form and one-time assessment and one-time payment schemes. As a result, the 14 steps in the standard business registration process were reduced to eight, and the processing time was reduced to one day.

To complement the RSP, the IFC started the Standard Business Registration Process (SBRP) project with the League of Cities of the Philippines (LCP). The league was headed by then-Mayor Benhur Abalos, who was also chair of the Union of Local Authorities of the Philippines. A technical working group on business regulation (entry) reform was organized to advocate business regulation reform in the NCR. The project was conceived with the following outputs in mind: (1) legal and procedural review of local and national regulations, (2) standard business registration procedures, (3) issuance of department orders and local ordinances to implement standard procedures, (4) action and advocacy plans, and (5) compliance monitoring. Activities culminated in the signing of the Joint Memorandum Circular by DILG, DTI, SSS, and NCR mayors in February 2009 (see Legal Basis for BPLS Reforms). While the focus was on new


business applications, the recommendations were also considered in setting the BPLS standards in the JMC 2010.

Streamlining of Business Renewal Processes, 2009 In 2009, the BPLS Streamlining Project was implemented nationwide as a joint undertaking of the PDF working groups on growth and investment climate and the working group on decentralization and local government, with DTI and DILG as conveners, respectively. Both working groups wanted to put into place practical measures to enhance national and local competitiveness. The focus was on reforming the business renewal processes of key cities and municipalities in highly urbanized areas where the bulk of businesses are located. In contrast to earlier BPLS initiatives that had focused on poor municipalities, this program recognized that reforms would have the greatest impact in areas with a high concentration of firms. The program also marked the first attempt to develop service standards for business renewals, which account for the majority of annual business applications.9 On the basis of process recommendations in earlier studies of BPLS, benchmarks were set for number of steps, processing time, and the use of a single, unified form.

Twenty-eight LGUs from six regions (3, 4A, 7, 10, 11, 12) were chosen to participate in four workshops in November-December 2009 to enable them to streamline their business renewal processes in time for the January 2010 renewal period. This training was the first multidonor project on BPLS (i.e., involving GIZ, IFC, USAIDs LINC-EG). Despite the short notice, a third of the LGUs reportedly implemented at least one of the four standards for processing business renewals.

Development of eBPLS, 2006 Separate from the projects of development partners, the National Computer Center (NCC2) with the Development Academy of the Philippines, developed eBPLS software as part of an e-governance project that included the eRPTS. The software is free to municipalities with training provided by NCC staff. NCC2 targeted municipalities under the program because cities were seen as having the financial capacity to automate their operations. The eLGU BPLS covers the full business processing cycle (i.e., application, assessment, approval, payment and release). Twenty-one LGUs are fully implementing the system.

In 2006, NCC2 joined with the Mayors Development Center (MDC)a training arm of the League of Municipalities of the Philippines (LMP) and the eGov project of the Canadian International Development Agency (CIDA) to form the eGov4MD project. The purpose of the project was to improve local governance and business climates by making public service delivery more efficient and revenue generation more effective by providing training in information and communication technology. It sought to build the capacity of e-ready municipalities for e-governance using the NCCs eLGU system, known as the Business Permit and Licensing, Real Property Tax and Treasury Operations Management System. Outputs included a package of user

9 In the Philippines, business renewals are scheduled in the first 20 days of January every year (Section 167 of the Local Government Code of 1991).


guides, technical training, and technical assistance and advisory services through a Career Executive Service Board (CESO) of volunteer advisers.

Several organizations shared the cost of the project. The NCC developed the software, provided free of charge to qualified municipalities. The CESO provided Canadian volunteer advisers using CIDA funding, and the LMP-MDC/eGov4MD program extended technical support. The LGUs covered staff training fees, technical support fees, and if needed, hardware, accommodations, and transport for the CESO adviser and eGov4MD technical staff for one to two weeks. LGU training expenses ranged from 150,000 to 180,000 pesos.

The project initially covered selected provinces in Luzon, Visayas, and Mindanao.10 In 2009, LMP received Presidential citations on issuance of mayors permits in Talavera and Aliaga, and Nueva Ecija. In October 2009, the PCCI recognized Carmona as the most business-friendly municipality for its streamlined business permit licensing and renewal services, or its business one stop shop, made possible through computerization. Carmona was later presented with an eGov4MD award in September 2010. By 2010, eBPLS had been set up in 60 municipalities, resulting in a 5 percent to 6 percent increase in business revenue, faster and more transparent processing, and increased customer satisfaction.

3.2 BPLS INITIATIVES SINCE 2010 Momentum for BPLS reforms accelerated during the administration of President Benigno Aquino III. New secretaries of the DTI and DILG personally championed scaling up the BPLS program, which was launched barely a month after the Presidents oath taking in July 2010. This renewed interest triggered activities that gave the program a new perspective: clear policy directives set service standards for business registration, identified targeted LGUs, and set up an institutional mechanism to oversee the program. Some of the BPLS-related activities undertaken during the Aquino administration are described below.

Training of BPLS Coaches With a goal of having 108 LGUs reform their BPLS systems, DTI and DILG agreed to conduct massive training of staff expected to roll out the reforms. Coordinated by the Local Government Academy, the training of trainers project was funded by USAID, GIZ, AECID, and IFC. A total of 453 personnel from DTI, DILG, business permit and licensing offices (BPLOs), private businesses, and academia participated in the workshops, which were conducted in the second semester of 2010. This training was the first to disseminate BPLS standards and related policy directives. To prepare for the workshops, a team of consultants and facilitators produced operations manuals and training modules.

10 Luzon: Region 1- Pangasinan, Ilocos Sur and Ilocos Norte; Region 2- Cagayan, Isabela, Nueva Vizcaya, Quirino; Region 3-Aurora, Bulacan, Pampanga, Bataan, Zambales, Tarlac, Nueva Ecija; Region 4-A- Cavite, Quezon; Visayas-Northern Samar & Palawan; and Mindanao- Zamboanga Sibugay, Surigao del Norte, Davao del Sur, Davao del Norte, Davao Oriental, Agusan del Sur, Bukidnon, Compostela Valley.


Expanded BPLS Implementation BPLS standards were rolled out in the third and fourth quarters of 2010. Table shows the progress of streamlining as of July 31, 2011; the overall accomplishment rate is 38 percent. NCR and Regions 5 and 13 have completed reforming the targeted LGUs. Regions 2, 3, 11 have completed 50 percent to 75 percent of their work and are expected to complete reforms by the end of 2011.

The other regions, however, will need to step up activity to meet goals, especially Regions 1, 4A, 8, 9, and 10 whose level of accomplishment was only 13 percent or less by the end of July 2011. Based on the meeting of the BOC on August 18, 2011, the DTI and DILG are targeting the completion of the 480 LGUs by the end of 2012. To support this accelerated schedule, both agencies have a budget to cover expenses for staff rolling out the reforms.

Table 3-3 Status of BPLS Streamlining in Targeted LGUs by Region, July 2011

Region

Targeted LGUs/ Region

Percentage Complete (Targeted Region)

Completed Ongoing Not yet Started

Target Non-

target Target Non-

target Target

NCR 1 100% 1

CAR 3 33% 1 2

Region 1 16 19% 3 2 5 8

Region 2 7 57% 4 1 3

Region 3 130 71% 92 38

Region 4A 142 9% 13 10

Region 4B 15 27% 4 1 10 1

Region 5 9 100% 9 6

Region 6 19 42% 8 3 1

Region 7 29 45% 13 20 3 10 2

Region 8 31 10% 3 10 2 1

Region 9 8 13% 1 3

Region 10 12 8% 1 8 2

Region 11 20 75% 15 1 1

Region 12 32 19% 6 1 1

Region 13 6 100% 6 10 7

Total 480 38% 180 41 89 30 13

SOURCE: Local Government Academy (LGA), DILG, as of 31 July 2011.

BPLS Reforms in Key Mindanao Cities, 2010 Given the new service standards set by the government, USAIDs LINC-EG supported BPLS reforms in four Mindanao cities, complementing the work of DTI and DILG. The citiesDavao, General Santos, Cagayan de Oro and Butuanwere chosen to serve as models to surrounding LGUs. Butuan and Cagayan de Oro, where LINC-EG assistance has been completed, have


reported impressive accomplishments (Table 3-4). The number of business registrations increased after the reforms by 9 percent to 6,996 in Butuan and by 10 percent to 15,405 in Cagayan de Oro. This improvement translated into a 14 percent in increase in fee-related revenue (P66 million) in Butuan, and a 10 percent increase (P214.8 million) in Cagayan de Oro City.

Table 3-4 Summary of BPLS Accomplishments in Butuan and Cagayan de Oro

Metrics/Cities Steps Processing Time (days)

2010 2011 % Changes 2010 2011 % Change

P R O C E S S I N G N E W P E R M I T S

Butuan 10 5 (50) 152 19 (88)

Cagayan de Oro 12 3 (75) 720 15 (98)

P R O C E S S I N G B U S I N E S S R E N E W A L S

Butuan 6 5 (17) 80 min 19 min (76)

Cagayan de Oro 7 3 (57) 520 min 15 min (97)

New BPLS Studies The successful roll-out of BPLS reforms encouraged the government to extend the reform process to other registration processes and to think of measures to sustain the reform process. Accordingly, the following studies were started soon after the Aquino administration took over:

Study of Proposed Business Models for BPLS. In support of the BOC, the GIZ commissioned a study to develop a business model to advance BPLS reform. Recommended strategic steps include publicizing BPLS gains and successes; applying streamlining in all LGUS; accrediting trainers and coaches; computerizing BPLS as appropriate to LGU circumstances; incentivizing BPLS reform; strengthening monitoring and evaluation; institutionalizing a feedback mechanism from the business sector; and ensuring sustainability.

eBPLS Planning and Implementation Guide. The National Computer Center, with funding from USAIDs LINC-EG, is preparing guidelines to aid LGUs in managing automation. The Center, DTI, and DILG are expected to disseminate the guidelines to LGUs through forums and information materials.

eBPLS Baseline Design Guide. The BPLS baseline design developed by the National Computer Center with funding from USAIDs LINC-EG will facilitate the formulation of a software package compliant with service standards set by LGU and private sector developers.

BPLS Reform Program Guide. Prepared with funding from USAIDs LINC-EG, this guide will document the BPLS program to aid the government in devising reform advocacy programs.

BPLS Reforms Communication Plan. This plan will help the Local Government Academy prepare communication materials and plan advocacy programs for the regional offices of DTI and DILG. The goal is to encourage LGUs to participate in the BPLS program.


3.3 LESSONS LEARNED Over the past ten years the knowhow or technology of BPLS reform has been defined and crystallized in the course of various reform initiatives. Many tools are now available for implementing, monitoring, and evaluating reforms. A variety of approaches have produced positive results. Several useful lessons learned in the experience are presented below.

Identifying Reforms Champions The success of the BPLS program can be attributed partly to the leadership exerted by DTI and DILG at the national level since 2009 and by LCEs at the local level. DTI and DILG harmonized BPLS initiatives and organized them into a coherent program that included standards for business registration processes and mechanisms for sustaining the program. Each agency had clearly delineated responsibilities. DTI engaged the private sector, such as local business groups, while DILG engaged LCEs, such as the LGU leagues. Together, their local offices implemented the program based on the functional delineation in the JDAO.

Equally important was the support of the LCEs, who needed to be convinced to contribute manpower and financial resources to the program. The LCEs facilitated the support of the local council and other public stakeholders in the LGU (i.e., the BPLO, the Office of the Building Official, the Health and Sanitation Office, the Planning and Development Office, among others) and the offices of the national government agencies (i.e., the Bureau of Fire Protection).

LCEs were convinced to support the program through one-on-one meetings, multimedia, and advocacy events. In sum, generating interest among LCEs and other stakeholders requires a deliberate information, education, and communication (IEC) campaign. IEC in the BPLS process involves informing potential and existing customers about the requirements, procedures, and service delivery levels involved in the business permit and renewal process.

Harmonizing Assistance from the Development Community In addition to the home-grown projects of LGUs with DTI and DILG were the reform projects of development partners. These projects played a catalytic role and helped achieve consensus on the direction of BPLS reforms. Improvements in business registration processes attributable to donor assistance were adopted by the government in designing the current BPLS program. Donors technical and financial assistance jumpstarted the streamlining of business processes in LGUs, especially those with capacity and resource constraints. At the national level, the BPLS program was piloted with the funding of several donors and then later through the national budget. The project aligned government priorities with development assistance and harmonized donor assistance to prevent the duplication and competition typical of other official development assistance programs. Table 3-5 summarizes BPLS assistance from development partners.


Table 3-5 Summary of Official Development Assistance to BPLS Reforms

Development Partner

Form of Assistance

Capacity Building Activities

Knowledge Products Others

AECID (Support for Local Reform Project)

Training of Trainers (TOT) in Region 5 including hiring of training team (2010) Training of selected LGUs in Region 5 and CARAGA (2010)

BPLS training modules for the TOT BPLS Manual

Hiring of software developer to review e-BPLS

CIDA (Local Government Support Program for Local Economic Development)

Training of Local Government Academy for the maintenance of the BPLS Help Desk

GTZ/GIZ (Decentralization Project & Private Sector Participation Project)

Piloting in Visayas LGUs (2006-2007) Workshops for DTI and DILG on streamlining of processes for business renewals in Regions 3 and 4A and the Visayas (2009) BPLS M&E of 12 pilot LGUs (2010) TOT in Luzon, Visayas, and CARAGA

Streamlining Business Registration in LGUs: Good Practices (2006) Simplifying Business Permits and Licensing Process (Red Book) (2008) Towards ONE Business Permit and Licensing System (2008) BPLS Inspectorate Team Operations Manual: A Guide for Local Government Units (2009) Streamlining BPLS in LGUs (Learning Modules & Training Manual) (2010) Training Modules of TOT

Study on the Proposed Business Model for BPLS (2011) Hiring of BPLS Coordinator and Training Teams for BPLS TOT (2010)

IFC (Regulatory Simplification Project & Simplified Business Registration Process)

BPLS streamlining of Quezon City, Marikina, Mandaluyong and Manila TOT for NCR, Regions 3 and 4A (2010)

Toolkit on Regulatory Simplification Policy Notes on Inspection

USAID (Local Implementation for National Competitiveness for Economic Growth)

Workshops for DTI and DILG on the streamlining of processes for business renewals in the Mindanao regions (2009) TOT for Mindanao regions BPLS streamlining for Butuan, Cagayan de Oro, General Santos and Davao (ongoing for the last two)

Study on Setting up of Business friendly Local Inspection Study (with guidelines for LGUs) Guidelines on BPLS Computerization Systems Flow and Base Specifications for BPLS BPLS Policy Note BPLS Communication Plan

Developing Institutional Capacities to Implement BPLS Reform In rolling-out reforms to 480 LGUs, the capacity of LGUs to undertake reform needed to be assured. It was too costly to depend on consultants so in 2010 DILG and DTI designed a training the trainers programa difficult task because neither agency is a BPLS practitioner. Still, an institutional mechanism was established to ensure that LGUs can ask for technical assistance as they go through the reform process. An online help desk ensures that DILG and DTI coaches have feedback on problems in rolling out reforms.


Reform-minded local governments also do not need to reinvent the wheel: it is sufficient to start with reforms implemented successfully in other cities. Many LGUs have practices worth emulating. In fact, the DBS 2011 report cites some good practices of Philippine LGUs. These include the one-stop shop in Manila, established through the standard business registration and permit processes; the one-time assessment of fees introduced in Davao City and Valenzuela; and Pasays waiver of separate applications for zoning clearance and fire and mechanical permits when the building in which a new business plans to operate has such permits already.

It is now possible to draw up a menu of model practices for LGU wanting to make BPLS reforms but without full technical capacity just yet. Such a menu can help them decide which sites to visit as part of their pre-reform study program.

Engaging Stakeholders in Reform BPLS reform involves both duty bearers and claim holders. The latter, however, are often left out of reform processes. Claim holders are citizens who directly benefit from better permitting services (e.g., businesses) as well as citizens at large, often represented by civil society groups that seek transparent and accountable governance. Claim holders early engagement in BPLS reform sets a foundation for reform ownership and sustainability.

Early BPLS projects recommended the participation of stakeholders, including civil society groups in addition to the business sector.11 Multisector alliances are needed to advocate for BPLS reforms. Civil society groups and the business community can act as watchdogs to ensure that the reforms comply with service standards and respond to the needs of the private sector. Public-private partnerships can accelerate and sustain BPLS reform.

Setting up Institutional Structures and Mechanisms Reform requires appropriately mandated institutions. The Philippines has a National Competitiveness Council, but its mandate is advocacy not implementation.12 The BPLS experience brought to light the lack of institutions positioned and empowered to oversee reform on a nationwide scale. The gap was filled when the DTI and DILG were selected to lead in their capacity as members of the Philippine Development Forum, particularly the working group on growth and investment climate. The WG-GIC chose BPLS improvement as a way to enhance growth and the investment climate, effectively putting DTI and DILG in charge. A BPLS Oversight Committee (BOC), composed of these two key players plus donor representatives, was then formalized to orchestrate policy actions and programmatic interventions nationwide. Similarly, the BPLS Coordination Committee (BCC) was established at the local level to perform the BOC national oversight and coordination functions on the ground. The BOC was to move for wide scale capacity development of implementing partners in BPLS streamlining and for mobilization of resources and harmonization of external aid to support BPLS reform.

11 Refer to the TAG project recommendations. 12 BPLS-related institutional mechanisms are described in Understanding BPLS Reforms.


Establishing a Monitoring & Evaluation System After piloting reforms of business renewal processes in 2009, DTI and DILG regional offices followed up by monitoring reform implementation at the pilot LGUs. This consisted of monitoring compliance with standards and action plans formulated by LGUs. This simple monitoring kept DTI and DILG aware of the success of the pilot and led to a scaling up of the program to cover 480 LGUs.

Given the programs present scale, DTI and DILG need to advance M&E. The LGA, as coordinator of the BPLS program, did a validation exercise to check the submissions of the BCC on the progress of BPLS implementation. A more elaborate monitoring system is being planned with IFC assistance. The system would establish and define success criteria and indicators based on performance standards now enforceable as a matter of national policy. In setting up the M&E system, three points should be considered:

The business community should be more involved through linkages and engagement of local chambers of commerce or equivalent to ensure institutionalized feedback to LGUs.

The monitoring framework should enable measurement of outcomes and impact in addition to generating information and evidence for future actions.

Cost-effective methods for gathering information should be identified; customer satisfaction surveys are useful but can be expensive.

Using IT solutions for BPLS Reforms Computerization or the use of hardware and software in the BPL process, particularly for purposes of assessment, payment, and data banking, is an advance in reform. Many LGUs that adopted eBPLS and other software have reported impressive accomplishments.

Some words of caution are on order. First, processes must be streamlined before they are automated. Second, the costs and benefits of computerization must be understood before any decision to automate. Small towns and municipalities must be circumspect in purchasing computer hardware, especially if the local business sector is underdeveloped. This is why the National Computer Center has prepared guidelines for LGUs wishing to automate their BPLS.

BPLS reform entails change management involving policy, people, processes, programs, and institutions. But all change begins with the will to change. The key factor in successful BPLS reform is firm political resolve to introduce reforms. This is evident in the cities and municipalities that have reformed, such as San Fernando City in Pampanga, Carmona, Cavite and Sta. Rosa, Laguna. Political will must be matched with institutional knowledge and resources.

4. Accelerating BPLS Reforms Ten years of reform have generated a good store of knowledge, especially of service standards, good practices, lessons learned, expertise, and tools, to guide the adoption of reforms nationwide. But reform has spawned numerous challenges as well. To complete the critical mass of reform in 480 LGUs between 2011-2012, certain implementation issues need to be resolved.

4.1 CHALLENGES

Slow Implementation As of July 31, 2011, only 38 percent (180) of the 480 targeted LGUs have complied with BPLS standards. Another 41 (not targeted) have completed reforms, but an even greater number of LCEs in the more progressive LGUs are indifferent to the central governments call for reforms. Completing reform in the 480 LGUs will require more aggressive measures by the central government. The inaction of some LGUs signals that BPLS reforms are not considered important and/or that there is no awareness of the what, why and how of reform. Some LGUs are not even aware that reforms have occured and that there are concrete examples that can be replicated.

Unresolved Policy Issues at National Level BPLS programs have focused on the procedural inefficiencies of local business permitting. But part of the problem lies with requirements imposed by national government agencies, most of which are prerequisites for filing an application at an LGU. These requirements include the following:

1. Securing a Fire Safety Inspection Certificate (FSIC) before a Mayors permit is granted. The amended Fire Code of 2008 requires business registration applicants to secure an FSIC from the Bureau of Fire before the LGU can issue a Mayors permit. This requirement adds two or three steps to the BPLS standard of five steps, not to mention the processing time. The issue could be resolved by amending the implementing Fire Codes rules and regulations.

2. Getting clearance from the social security agencies like the SSS, Philhealth, and Pag-IBIG. The social security agencies impose requirements and leverage the permitting system to catch erring employers. In the JMC 2009, SSS agreed to work out a database system wherein enrollment of business establishments with SSS will automatically mean membership with Phil Health and Pag-IBIG.

3. Implementing the Philippine Business Registry (PBR), a database system with the DTI that aims to facilitate business registration through a central repository of information


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