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Doing Business 2008: Egypt Is World’s Top Reformer of Regulation; Saudi Arabia Joins Top 25 on Ease of Doing Business

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WASHINGTON, D.C., September 26, 2007 – Egypt is the top reformer in the world for 2006/07, finds Doing Business 2008—the fifth in an annual series issued by the World Bank and IFC. Egypt outpaced other reformers worldwide and in the Middle East and North Africa in making it easier to do business, with improvements in five of the 10 areas studied by the report.

Saudi Arabia —the seventh-fastest reformer globally and second-fastest in the region—joined the ranks of the top 25 countries worldwide on the ease of doing business. It had reforms in three of the 10 areas studied. The country has made starting a business more accessible by eliminating what had been, in U.S. dollar terms, the highest minimum capital requirement in the world.

 

The Middle East and North Africa saw 25 reforms including three negative changes—in 11 of its economies. The region ranks fourth in the world—behind Eastern Europe and Central Asia, South Asia, and the OECD high-income countries—on the pace of reform.

 

“The report finds that equity returns are highest in countries that are reforming the most,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Investors are looking for upside potential, and they find it in economies that are reforming—regardless of their starting point,” he added. Large emerging markets are reforming fast: Egypt, China, India, Vietnam, and Turkey all improved in the ease of doing business. The report also finds that as more countries simplify regulation to make it easier to do business, more entrepreneurs are going into business.

 

Besides Egypt, the other top 10 reformers this year are, in order, 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. In all, 200 positive reforms—in 98 economies—were introduced between April 2006 and June 2007.

 

“While the business environment is improving worldwide, entrepreneurs in the Middle East still face major challenges,” noted Simeon Djankov, lead author of the report. “These are in such areas as minority shareholder protections, court efficiency, and insolvency procedures and laws.” For example, on one measure of investor protections, the ease of shareholder suits, Iran scores zero out of 10, while Morocco scores 1 and the United Arab Emirates 2. In Lebanon, resolving a commercial dispute in the courts takes 721 days on average, and in the United Arab Emirates the process involves 50 procedures from the moment the plaintiff files a lawsuit in court until the moment of payment.

 

Top reformers in the Middle East and North Africa

 

Egypt, the top reformer in the region and worldwide, greatly improved its position in the global rankings on the ease of doing business. Its reforms went deep. Egypt cut the minimum capital required to start a business, from 50,000 Egyptian pounds to just 1,000 and halved the time and cost of start-up. It reduced fees for registering property from 3 percent of the property value to a low, fixed amount. It eased the bureaucracy that builders face in getting construction permits. It launched new one-stop shops for traders at Egyptian ports, cutting the time to import by seven days and the time to export by five. And it established a new private credit bureau that will soon be making it easier for borrowers to get credit.

 

Saudi Arabia, the runner-up reformer in the region, eliminated the minimum capital requirement of 1,057 percent of income per capita and reduced the days needed for company start-up from 39 to 15. It launched a commercial credit bureau whose reports include the credit exposure of companies. It also sped up trade, reducing the number of documents required for importing and cutting the time needed for handling at ports and terminals by two days for both imports and exports.

 

Tunisia computerized the files in its property registry, reducing the time needed to register a property from 57 days to 49. Tunisia also reduced the corporate profit tax from 35 to 30 percent. And it abolished the minimum loan threshold at its public credit registry, expanding coverage to all loans.

 

Other notable reforms in the region

  • Djibouti made it easier to register property. It also sped up cross-border trade by introducing an e-manifest system that is helping to expedite customs clearance. And it opened the way for private participation in the provision of port services.
  • Israel abolished its stamp duty, reduced employers’ social security contribution, cut the corporate income tax by 3 percent, and lowered the value-added tax from 17 to 16.5 percent. Both the total tax rate for businesses and the number of payments fell.
  • Jordan improved services at its one-stop shop for business start-up, combining company, tax, and chamber of commerce registration. That cut the procedures to start a business from 11 to 10, and the time involved from 18 days to 14.
  • Kuwait set up an automated system in all government agencies responsible for issuing technical approvals for new utility connections. And it expanded the range of information collected by the country’s private credit bureau.
  • Morocco established a one-stop shop for building permits, cutting the delays for construction firms by 10 days. It also streamlined customs clearance by introducing a new risk-based inspections system.
  • The West Bank and Gaza reduced taxes and expanded coverage by the public credit registry.

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.” Women in the United Arab Emirates and Yemen are forbidden to work at night. And now so are women in Kuwait, because of a new law passed in June 2007.

 

Doing Business 2008 ranks 178 economies on the ease of doing business. Singapore tops the rankings for the second year running. The others in the top 25 are, in order, 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. The ranking countries in the Middle East and North Africa are Saudi Arabia (23), Israel (29), Kuwait (40), and Oman (49).

 

The rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. They do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. Since 2003 Doing Business has inspired or informed more than 113 reforms around the world.

 




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