Has ARTA complicated things more?

By Rose de la Cruz

The creation of an Anti Red Tape Authority on May 28, 2018 is perceived to have complicated, instead of simplified, the processing of business permits and projects in the country.

Right now, German and Filipino investors have said red tape (and the inconstancy of policies) is still their foremost concern– particularly for companies that have set up shop in the Philippines.

Arta has not made any impact on the government’s efforts to reduce, if not eliminate, red tape in the country. And investors are having a difficult time navigating this situation.

A story of Business Mirror said German firms operating in the country have zeroed in on high energy prices and supply chain disruptions as the risk that could impact future economic growth to the Spring 2024 AHK World Business Outlook Survey of the German-Philippine Chamber of Commerce and Industry (GPCCI).

The GPCCI said economic policy conditions topped the list of their concerns due to “complex regulations, frequent policy changes (or the lack of constancy of policies), and extensive bureaucracy creating an unpredictable environment.”

Another “significant” concern that businesses raised is the high energy prices which they said could impact profit margins and operational costs, particularly for energy-intensive sectors like manufacturing, the report noted.

“Additionally, challenges such as supply chain disruptions and infrastructure are tied for third, with both factors contributing to operational inefficiencies,” the report quoting the statement last Monday.

Despite these risks, the results of the Spring 2024 survey conducted by GPCCI showed that 50 percent of German-Philippine businesses are still optimistic about their business situation.

Around 61 percent of the responding firms, however, are optimistic about their business’ development in the next 12 months.

To capitalize on such “economic optimism,” GPCCI Board Director and Policy and Advocacy Chairperson Marian Norbert Majer said, “it’s imperative that the Philippine government work closely with businesses to resolve these identified challenges.”

“Addressing these issues can help create a more predictable and favorable business environment and ensure that this bullish momentum translates into substantial outcomes that will help the Philippines attain its sustained economic growth,” Majer added.

The GPCCI suggested “diversification” strategies that respondents have taken towards “enhancing” the resilience of their business operations amid the risks on economic policy conditions they mentioned. 

For one, “they have reported expanding their supplier networks and exploring new sales markets to mitigate the risks of future disruptions,” the GPCCI said, adding that these strategies are not spared from challenges.

Their foremost concern is the increased legal and regulatory issues followed by difficulties in finding suitable suppliers or business partners, and the high costs associated with expanding business operations,” said the chamber.

The survey noted that in terms of preparedness in handling international crises and geopolitical risks, the confidence level among these firms shows room for improvement, with 55 percent saying they are only “averagely prepared” to tackle such challenges, indicating a “moderate level of resilience,” with only 34 percent considering their readiness as “good.”

GPCCI Executive Director Christopher Zimmer stressed that “our network continuously assesses the resilience of German companies’ supply chains at their international locations, aiming to significantly mitigate the risk of future disruptions, such as transport interruptions or the sudden loss of production facilities.”

“We see that our respondents in the Philippines are actively enhancing the resilience of their operations by expanding supplier networks and venturing into new markets,” Zimmer added.

The AHK World Business Outlook Spring 2024 Survey in the Philippines was initiated by GPCCI. Almost 70 companies related to German-Philippines business relations are participants.

The participating sectors are from the services (59%), trade (14%), and the manufacturing or construction sectors (27%).