Sep. 26, 2007 - Doing Business 2008 ranks 178 economies on the ease of doing business. South Asia picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the countries of the OECD.
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Highlights for South Asia
- Afghanistan cut the number of procedures for transferring property and began digitizing title deeds.
- Bhutan made it easier to start a business by cutting the number of procedures required. The country also implemented its first labor law. The law prohibits forced labor, discrimination, sexual harassment, and child labor. It also removes the 12-month limit on fixed-term contracts, eases restrictions on night work, and does away with mandatory pay premiums for daytime overtime. Bhutan also sped up property registration by a month by adding more judges to handle property transfers.
- India is now setting the standard for reform in South Asia, with an explicit policy objective to become a leading business-friendly economy. Besides making it easier to trade across borders, India increased access to credit by expanding credit bureau coverage to individuals as well as businesses. It also introduced an electronic registry for security rights granted by companies.
- Pakistan extended overtime limits for retail workers and made working hours more flexible. The country’s private credit bureau now reports both positive and negative information on borrowers and stores more information on loans. The public credit registry eliminated its loan threshold, boosting coverage by a factor of 20.
- Sri Lanka made the most progress in South Asia in easing business start-up. A new company act eliminated burdensome approvals, introduced a flat registration fee, and made company seals and notaries optional. Procedures for start-up were cut from eight to five, and the time from 50 days to 39. Sri Lanka also introduced electronic submission of customs declarations, cutting the time for trading by seven days.
This chapter presents the summary of Doing Business indicators for South Asia. The data used for this regional profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the countries in each region not only with one another but also with the "best practice" country for each indicator.
Starting a business
When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses.
Dealing with licenses
Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure-from government to comply with inspections and with licensing and safety regulations and from customers to be quick and cost-effective.
Every economy has established a complex system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Doing Business examines government regulation in the area of employment and social security laws.
Doing Business measures the ease of registering property based on a standard case of an entrepreneur who wants to purchase land and a building in the largest business city. It is assumed that the property is already registered and free of title dispute. The data cover the full sequence of procedures necessary to transfer the property title from the seller to the buyer.
Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function-one on credit registries and the other on legal rights of borrowers and lenders.
If the rights of investors are not protected, majority ownership in a business is the only way to eliminate expropriation. But then investors must devote more oversight attention to fewer investments. The result: entrepreneurship is suppressed, and fewer profitable investment projects are undertaken.
Taxes are essential. Without them there would be no money to fund schools, hospitals, courts, roads, water, waste collection and other public services that help businesses to be more productive. Still, there are good ways and bad ways to collect taxes. The Doing Business tax survey records the effective tax that a company must pay and the administrative costs of doing so.
Trading across borders
Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every official procedure-and the associated documents, time and cost-for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods.
Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step-by-step evolution of a commercial sale dispute before local courts.
Closing a business
The Doing Business indicators identify weaknesses in the bankruptcy law as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that creditors hardly ever use it. In countries such as these, reform would best focus on improving contract enforcement outside bankruptcy.