Sep. 10, 2008 - Regulatory reforms in South Asia continued this year. The report records reforms that eased the regulatory burden of doing business in four of the region’s countries—Bangladesh, Bhutan, India, and Sri Lanka—between June 2007 and June 2008.
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Highlights for South Asia
- Sri Lanka, the region’s leading reformer of business regulations, made it easier to obtain credit by strengthening the legal rights of creditors and enhancing the availability of credit information.
- Bangladesh reduced the time for registering property by almost half and simplified business start-up.
- Bhutan made contract enforcement through the courts easier.
- India continued to make import and export procedures easier. A separate subnational Doing Business report on the country will track the time and cost required to meet government regulations in 16 Indian cities and states. The aim is to encourage cities to bring about changes that improve their competitiveness nationally and globally and that attract more businesses.
- No reforms were recorded in Pakistan this year, but the government has a Doing Business study underway to track business regulations in 12 cities. The goal is to facilitate the sharing of best practices locally and foster cooperation among various levels of government.
South Asia - Aggregate Rankings
Global Economies are ranked on their ease of doing business, from 1 - 181, with first place being the highest. The ease of doing business index averages the economy's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. The rankings are from the Doing Business 2009 report, covering the period June 2007 to June 2008.
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 Construction Permits
Construction companies are under constant pressurefrom government to comply with inspections, with licensing and safety regulations, from customers to be quick andcost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protectingpeople (construction workers, tenants, passersby) and keeping the cost of building affordable.
Governments all over the world face the challenge of finding the right balance between worker protection and labormarket flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers andworkers into the informal sector.
Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property fromanother business (seller) and to transfer the property title to the buyer’s name. The property of land and building willbe transferred in its entirety. The transaction is considered complete when the buyer can use the property as collateralfor a bank loan.
Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Businessconstructs two sets of indicators of how well credit markets function: one on credit registries and the other on legalrights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information onborrowers, can greatly expand access to credit.
Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allowscompanies to expand without the need to provide collateral and repay bank loans. But investors worry about theirmoney, and look for laws that protect them. To document some ofthe protections investors have, Doing Business measures how economies regulate a standard case of self-dealing, useof corporate assets for personal gain.
Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and serviceswhich are crucial for a properly functioning economy. But particularly for small and medium size companies, theymay opt out and choose to operate in the informal sector. One way to enhance tax compliance is to ease and simplifythe process of paying taxes for such businesses.
Trading Across Borders
Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Everyprocedure and the associated documents, time and cost, for importing and exporting the goods is recorded, startingwith 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. The data is collected through study of the codes of civilprocedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in aquarter of the countries, by judges as well).
Closing a Business
The Doing Business indicators identify weaknesses in the bankruptcy law as well as the main procedural andadministrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient thatcreditors hardly ever use it. In countries such as these, reform would best focus on improving contract enforcementoutside bankruptcy. The data on closing a business are developed using a standard set of case assumptions to track a company goingthrough the step-by-step procedures of the bankruptcy process.