WASHINGTON, D.C., September 12, 2005 — Eastern European nations are aggressively courting entrepreneurs with far-reaching reforms that streamline business regulations and taxes, but African and Middle Eastern nations with high youth unemployment rates continue to thwart small and medium businesses with heavy legal burdens and piecemeal reforms, according to a new report from the World Bank Group. Doing Business in 2006: Creating Jobs, cosponsored by the World Bank and International Finance Corporation, the private sector arm of the World Bank Group, finds that such reforms, while often simple, can create many new jobs. "Jobs are a priority for every country, and especially the poorest countries. Doing more to improve regulation and help entrepreneurs is key to creating more jobs--and more growth. It is also a key to fighting poverty. Women, who make up three quarters of the work force in some developing economies, will be big beneficiaries. So will young people looking for their first job. The past year's diverse range of successful reformers - from Serbia to Rwanda - are showing the way forward. We can all learn from their experience," said Paul Wolfowitz, President of the World Bank Group. The annual report, which for the first time provides a global ranking of 155 nations on key business regulations and reforms, finds that African nations impose the most regulatory obstacles on entrepreneurs and have been the slowest reformers over the past year. Meanwhile, every country in Eastern Europe improved at least one aspect of the business environment, and countries such as Serbia and Montenegro and Georgia topped the global rankings for most reforms enacted. The report tracks a set of regulatory indicators related to business startup, operation, trade, payment of taxes, and closure by measuring the time and cost associated with various government requirements. For example, an entrepreneur in Mozambique must undergo 14 separate procedures taking 153 days to register a new business. In Sierra Leone if all business taxes were paid they would eat up 164 percent of a company’s gross profits. In Syria, it takes 63 days, 18 documents, and 47 signatures from the time imported goods arrive in ports until they reach the factory gate. Overall, European nations were the most active in enacting reforms. The top 12 reformers in the past year, in order, were Serbia and Montenegro, Georgia, Vietnam, Slovakia, Germany, Egypt, Finland, Romania, Latvia, Pakistan, Rwanda, and the Netherlands. "Many African countries that desperately need new enterprises and jobs risk falling even further behind other countries that are simplifying regulation and making their investment climates more business friendly," said Michael Klein, World Bank/IFC Vice President for Private Sector Development and IFC Chief Economist. However, the authors of the study did note exceptions: Rwanda is among the biggest reformers in the past year; Mauritius also reformed in several areas and is among the countries with the most business-friendly conditions, as is South Africa. Yet for every three African countries that improved business regulations, another one made them more costly. Governments in conflict-affected countries are especially hard-pressed to create jobs. Continued peace depends on demobilizing rebel armies and finding livelihoods for thousands of refugees and former combatants. This year, for the first time, Doing Business studies five conflict-affected countries: Afghanistan, Eritrea, Iraq, Sudan, and Timor-Leste. Afghanistan was the top reformer among these countries in the past year. The number of start-up procedures for new businesses was cut from 28 to 1, and the time to complete the process from 90 days to 7. Transport infrastructure and property registries are also being improved. Doing Business in 2006 updates the work of last year’s report in seven sets of business environment indicators: starting a business, hiring and firing workers, enforcing contracts, registering property, getting credit, protecting investors, and closing a business. It expands the research to 155 countries and adds three new indicators, dealing with business licenses, trading across borders, and paying taxes. The new indicators in this year’s report further reinforce the overwhelming need for reform, especially in poor countries. The report finds that poor countries levy the highest business taxes in the world. These high taxes create incentives to evade, driving many firms into the underground economy, and do not translate to higher revenues. Similarly, the analysis shows that reforming the administrative costs of trading can remove significant obstacles to exporting and importing. Contrary to popular belief, customs paperwork and other red tape (often called "soft infrastructure") cause the most delays for exporting and importing firms. Less than a quarter of the delays are caused by problems with "hard infrastructure" such as poor ports or roads. For manufacturers in developing countries, the administrative burdens of trading can pose larger costs than tariffs and quotas. The annually published report gives policymakers the ability to measure regulatory performance in comparison to other countries, learn from best practices globally, and prioritize reforms. Now in its third year, the report has already had an impact on business environment reforms around the world. "The Doing Business benchmarking has inspired and supported reforms in more than 20 countries, and since last year, nine governments have asked for their countries to be included in the Doing Business analysis," said Caralee McLiesh, an author of the report. The top 30 economies in the world in terms of the report’s ease-of-doing-business index, in order, are New Zealand, Singapore, the United States, Canada, Norway, Australia, Hong Kong/China, Denmark, the United Kingdom, Japan, Ireland, Iceland, Finland, Sweden, Lithuania, Estonia, Switzerland, Belgium, Germany, Thailand, Malaysia, Puerto Rico, Mauritius, the Netherlands, Chile, Latvia, Korea, South Africa, Israel, and Spain. All the top countries regulate businesses, but they do so in less costly and burdensome ways. The Nordic countries, all of which are on the top 30 list, do not regulate too little. Instead, they have simple regulations that allow businesses to be productive and focus intervention where it counts - protecting property rights and providing social services. Just 8 percent of economic activity in Nordic countries occurs in unregistered (informal sector) businesses. The reason is that regulations are simple to comply with and businesses receive excellent public services for what they pay in taxes. For example, Denmark has the world’s best infrastructure. Norway ranks highest on human development indicators, with Sweden right behind it. "In the Nordic countries, as well as the other top 30, reformers do not have to choose between making it easy to do business and providing social protection. They can do both," said Simeon Djankov, an author of the report. The Doing Business project is based on the efforts of more than 3,500 local experts – business consultants, lawyers, accountants, government officials, and leading academics around the world, who provided methodological support and review. It does not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. The data, methodology, and the names of contributors are publicly available online. Last year’s Doing Business in 2005 report and further information are available at http://www.doingbusiness.org. For more information on Doing Business in 2006, please contact: Nadine Ghannam (202) 458-0482
Cell: (917) 517 0795 Email: nsghannam@ifc.org Or: Corrie Shanahan (202) 473 2258
Cell: (202) 294 4697 Email: cshanahan@ifc.org Or: Nazanine Atabaki (202) 458 1450
Cell: (202) 250 0726, Email: natabaki@worldbank.org For regional specific queries on Doing Business in 2006, please contact: Former Soviet Union
Irina Likhachova (202) 473 1813
Cell: (202) 247 7231 Email: ilikhachova@ifc.org Central & Eastern Europe
Merrell Tuck (202) 473-9516
Cell: (202) 415 1775 Email: mtuckprimdahl@worldbank.org East Asia & Pacific
Desmond Dodd in Hong Kong (852) 2509 8183
Cell: (852) 6478 7749 Email: ddodd@ifc.org Latin America & Caribbean
Adriana Gomez (202) 458 5204
Cell: (202) 294 4698 Email: agomez@ifc.org Middle East and North Africa
Nadine Ghannam (202) 458-0482
Cell: (917) 517 0795 Email: nsghannam@ifc.org South Asia
Ludwina Joseph (202) 473 7700
Cell: (202) 294 4699 Email: ljoseph@ifc.org Southern and Western Europe
Georg Schmidt (202) 458 2934
Cell: (202) 294 4854 Email: gschmidt@ifc.org Sub-Saharan Africa
Timothy Carrington (202) 473 8133
Email: tcarrington@worldbank.org |
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