WASHINGTON, D.C., September 26, 2007 – This year Eastern Europe and the former Soviet Union surpassed East Asia on the ease of doing business, according to Doing Business 2008—the fifth in an annual series issued by the World Bank and IFC. Several of the region’s countries have even passed many economies of Western Europe on this score. Results from the region show that as business regulation eases, businesses are starting up at unprecedented rates.

Croatia is the region’s top reformer. Along with three other countries in the region, it also ranks among the top 10 reformers worldwide. Those top 10 are, in order, Egypt, Croatia, Ghana, FYR Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China, and Bulgaria. Reformers made it simpler to start a business, strengthened property rights, enhanced investor protections, increased access to credit, eased tax burdens, and expedited trade while reducing costs. Worldwide, 200 reforms—in 98 economies—were introduced between April 2006 and June 2007.

Eastern Europe and Central Asia saw 59 reforms over the past year—52 positive and seven negative—that affected the regulatory ease of doing business. “Results show that as governments ease regulations for doing business, more entrepreneurs go into business; and this is especially evident in Eastern Europe,” said Simeon Djankov, lead author of the report. “Eastern Europe has witnessed a boom in new business entry that rivals the rapid growth in East Asia in the past.”

Georgia now has 15 registered businesses per 100 people (the same as Malaysia). The Czech Republic and Slovakia each have 13 (the same as Singapore), while Estonia and Poland each have 12 (the same as Hong Kong, China). “Many of the new companies are becoming global leaders, such as the Estonian-born software company Skype and the Czech car maker Skoda,” Djankov added.

Across the region, Croatia, FYR Macedonia, Georgia, Belarus, Turkey, and Bulgaria improved the most in the rankings on the ease of doing business. Hungary made the biggest jump among European Union countries. Estonia, the most business-friendly country of the former socialist bloc, ranks 17th worldwide on the ease of doing business. Georgia and Latvia are also in the top 25.

Globally, the report finds that higher rankings on the ease of doing business are associated with higher percentages of women among entrepreneurs and employees. “Increased regulatory reform leads to especially large benefits for women,” said Dahlia Khalifa, Doing Business spokesperson. “Women often face regulations that may be aimed at protecting them, but that instead force women into the informal sector, where they have little job security and few social benefits.”

Top reformers in Eastern Europe and Central Asia

Croatia reformed in four of the 10 areas studied by Doing Business. Two years ago, registering property in Croatia took 956 days. Now it takes 174. Company start-up also became faster, with procedures consolidated at a “one-stop shop” and pension and health services registration now online. Credit became easier to access: a new credit bureau was launched, and a unified registry now records charges against movable property in one place. In its first two months, €1.4 billion in credit was registered. In addition, amendments to the country’s insolvency law introduced professional requirements for bankruptcy trustees and shorter timelines.

Hungary made it easier for entrepreneurs to start a business. Its new Company Act and Corporate Procedure Act introduced standard forms for incorporation, a “silence is consent” rule, and electronic company registration. The changes cut the time to start a business from 38 days to 16 and cut the cost as well. Hungary also sped up the process for registering property and amended its Bankruptcy Act to give secured creditors greater priority to the proceeds from their collateral.

FYR Macedonia eliminated the minimum capital requirement for business start-up, sped up the process for getting construction permits, lowered the corporate income tax rate to 12 percent (with another cut to 10 percent planned for 2008), and simplified tax payment procedures. Its ranking on the ease of doing business rose from 96 to 75.

Georgia reformed in six areas. It strengthened investor protections, including through amendments to its securities law that eliminate loopholes that had allowed corporate insiders to expropriate minority investors. It adopted a new insolvency law that shortens timelines for reorganization of a distressed company or disposition of a debtor’s assets. Georgia sped up approvals for construction permits and simplified procedures for registering property. It made starting a business easier by eliminating the paid-in capital requirement. In addition, the country’s private credit bureau added payment information from retailers, utilities, and trade creditors to the data it collects and distributes.

Bulgaria eased the tax burden on businesses and made it easier to pay taxes online. Bulgaria also introduced private bailiffs to improve efficiency in enforcing judgments. And it made building inspections less burdensome.

Uzbekistan established a special procedure for voluntary liquidation of private companies and cut the corporate income tax to 10 percent. It also reduced the cost of property transfers by cutting notarization fees from 10 percent of the property value to a fee based on surface area. And the country eased business start-up by clarifying registration rules and removing burdensome procedures.

Armenia introduced a new law that improves bankruptcy procedures. A new private credit bureau started up, offering online access to credit data. And a new electronic data interchange system (Direct Trader Input) allows customs brokers to submit declarations electronically. The system cuts the time needed to prepare and submit customs documents by three days.

The Czech Republic reformed its labor law, ranking as the top reformer in this area worldwide. Its new labor code provides greater flexibility on working hours and eases restrictions on dismissals. Similar reforms elsewhere have boosted employment. The Czech Republic also sped up construction approvals and new business registrations.

Other notable reforms in the region

• Albania eased the tax burden by amending depreciation rates and reducing labor taxes and contributions.
• Azerbaijan cut the time to start a new business from 52 days to 30. It also lowered the corporate income tax.
• Belarus improved investor protections and set up a one-stop shop for business registration.
• Bosnia and Herzegovina made trading easier through a new customs law and customs administration. 
• Estonia amended its commercial code, introducing standard articles of association for new businesses. It also cut the procedures for business start-up from six to five, reducing the time needed from 35 days to seven and lowering the cost by half.
• Kazakhstan eased the tax burden by amending depreciation rates.
• The Kyrgyz Republic cut the corporate income tax and abolished social security contributions. It also reduced pension contributions and cut the value added tax to 14 percent. 
• Moldova enacted a new civil procedure code for its courts and cut taxes, including the corporate income tax and labor taxes paid by businesses.
• Poland cut the cost for registering property and introduced reforms to improve the efficiency of procedures for enforcing judgments.
• Romania lowered several labor taxes paid by the employer, including social security, unemployment, and health fund contributions. It also improved access to credit by allowing borrowers and creditors to agree to out-of-court enforcement of collateral. 
• Russia streamlined the construction permitting process, and a new private credit bureau started up. 
• Slovenia lowered payroll taxes, cut the corporate income tax rate, and strengthened investor protections.
• Turkey lowered its corporate income tax to 20%, and introduced and implemented online filing. It also reduced the time required for preparing trade documentation.

Doing Business 2008 ranks 178 economies on the ease of doing business based on 10 indicators of business regulation. Singapore, for the second year, tops the aggregate rankings across 178 economies. The top-ranked countries in Eastern Europe and Central Asia are Estonia (17), Georgia (18), Latvia (22), Lithuania (26), Slovakia (32), Armenia (39), Hungary (45), Bulgaria (46), and Romania (48). The rankings track indicators of the time and cost to meet government requirements in business startup, operation, trade, taxation, and closure. They do not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003 Doing Business has inspired or informed over 113 reforms around the world.

The top 25 in the overall aggregate rankings, in order, are Singapore, New Zealand, the United States, Hong Kong (China), Denmark, the United Kingdom, Canada, Ireland, Australia, Iceland, Norway, Japan, Finland, Sweden, Thailand, Switzerland, Estonia, Georgia, Belgium, Germany, the Netherlands, Latvia, Saudi Arabia, Malaysia, and Austria.

http://www.doingbusiness.org