Starting a business in the Philippines is a struggle and one of the biggest reason is regulatory friction. This makes the process more complicated for entrepreneurs.

I previously wrote about how corruption discourages Foreign Direct Investments (FDIs) in the Philippines, especially judicial and regulatory corruption. While true, that’s just the surface of a much bigger problem. The reality is that starting and operating a business is a struggle for everyone, including local Filipino entrepreneurs.

There’s a massive barrier to entry that most people simply accept as “part of doing business.” For many entrepreneurs, regulatory friction and “SOPs” (which we’ll call bribery or grease money) are normalized as necessary operating costs. Furthermore, this normalization is the true hurdle for the ease of doing business in the Philippines.

Regulatory Friction: The Core Problem for Philippine Businesses

Regulatory friction refers to the slow, complicated process of securing the necessary government permits and clearances to operate. 

A Philstar article from last year reported an initiative from the private sector to review our regulatory processes. Specifically, this refers to the process of securing the necessary permits and clearances to operate a business.

The interesting part is this statistic that they quoted – in the Philippines, it takes up to 75 days for local firms and more than 100 days for foreign firms just to complete registration for their businesses. As per the article, these numbers are above global averages and even those in other Southeast Asian countries.

To summarize::

  • Registration Time: It takes local firms around 75 days and foreign firms over 100 days just to complete basic business registration. (Source: 2024 report from World Bank on Doing Business in the Philippines)
  • Global Comparison:
    • Worldwide Average: Approximately 20 days. (Source: World Bank Data)
    • ASEAN Regional Average: 20-30 days (Source: 2018 report from the Organization for Economic Co-operation and Development (OECD) that show that the regional average in ASEAN is 20-30 days (for Singapore, ~2-3 days only; for Indonesia, ~23 days; and for Vietnam, ~20 days). 

Empirical data confirms that excessive regulatory friction is a major reality for anyone trying to do business here. When the legal route takes too long, people naturally look for shortcuts.

Bribery and “Grease Money” as the Practical Shortcut

When procedures become too lengthy and confusing, paying “grease money” becomes a “practical” workaround. Reports from industry groups confirm a strong perception that bribery is necessary for securing basic services or permits and is often used to “grease the wheels.”

For example, a business that pays a “facilitation fee” may get their permits much sooner than a business that goes the legitimate, weeks-long route.

This situation arises because lengthy, unclear, and non-standardized processes create discretionary power for government officials. Instead of being bound by rigid rules, these officials can “fix” processes and engage loopholes. This is the very source of the “grease money” problem.

This system disproportionately hurts Micro, Small, and Medium Enterprises (MSMEs)—which make up over 99% of Philippine businesses. These MSMEs lack the resources to fund these corrupt practices.

It is All a Matter of Implementation

The legal framework to fight this already exists:  R.A. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018. This law mandates strict processing timelines: 3 days for simple transactions, 7 days for complex ones, and 20 days for highly technical requests.

However, the data shows that implementation of R.A. 11032 remains uneven. This is particularly true at the local government unit (LGU) level.

The core issue isn’t the absence of reform, but the inconsistent and often reluctant implementation.Digitization: The National Competitiveness Imperative

The Anti-Red Tape Authority (ARTA),  is pushing for all 1,642 LGUs to fully automate their business registration systems. Full digitization is essential because it eliminates face-to-face interactions where bribery most often occurs.

  • Current Status (March 2025):
    • Only 115 LGUs have fully automated systems.
    • 1,203 LGUs are “partially automated,” leaving plenty of opportunities for manual processes and corruption.

Excuses like “poor internet” or “lack of budget” are common, but ARTA points out that the necessary platform (e-gov.ph) is free. Therefore, this suggests there is a clear incentive for some LGUs to stick to the old, manual, and corrupt ways of processing applications.

Digitization as a National Competitiveness Imperative

Reducing regulatory friction is not just an anti-corruption measure; it is a vital economic competitiveness strategy for the Philippines. Regulatory friction is simply a corruption multiplier.

The solution is clear: the government must treat the full digitization and strict enforcement of R.A. 11032 as a national priority. We must fix the process, enforce the law, and remove discretionary power where it enables abuse. In doing so, we support MSMEs, lower the cost of doing business, and make the Philippines truly competitive in the ASEAN region.