By Fernando Alvarez: Ex IMF Economist
A new IFC and World Bank report finds that economies continued to implement reforms that enhance local firms’ ability to do business, with transparency and access to information playing a key role in the reforms. Released on October 20, Doing Business 2012: Doing Business in a More Transparent World assesses regulations affecting domestic firms in 183 economies and ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency and trading across borders. This year’s report data cover regulations measured from June 2010 through May 2011. The report rankings on ease of doing business have expanded to include indicators on getting electricity. The report finds that getting an electrical connection is most efficient in Iceland; Germany; Taiwan, China; Hong Kong SAR, China; and Singapore.
The global report shows that governments in 125 economies out of 183 measured implemented a total of 245 business regulatory reforms—13 percent more reforms than in the previous year. In Sub-Saharan Africa, a record 36 out of 46 economies improved business regulations this year. Over the past six years, 163 economies have made their regulatory environment more business-friendly. China, India, and the Russian Federation are among the 30 economies that improved the most over time.
This year, Singapore led on the overall ease of doing business, followed by Hong Kong SAR, China; New Zealand; the United States; and Denmark. The Republic of Korea was a new entrant to the top 10. The 12 economies that have improved the ease of doing business the most across several areas of regulation as measured by the report are Morocco, Moldova, the former Yugoslav Republic of Macedonia, São Tomé and Príncipe, Latvia, Cape Verde, Sierra Leone, Burundi, the Solomon Islands, the Republic of Korea, Armenia, and Colombia. Two-thirds are low- or lower-middle-income economies.
“At a time when persistent unemployment and the need for job creation are in the headlines, governments around the world continue to seek ways to improve the regulatory climate for domestic business. Small and medium businesses that benefit most from these improvements are the key engines for job creation in many parts of the world,” said Augusto Lopez-Claros, Director, Global Indicators and Analysis, World Bank Group.
Against the backdrop of the global financial and economic crisis, more economies strengthened their insolvency regimes in 2010-11 than in any previous year. Twenty-nine economies implemented insolvency reforms, up from 16 the previous year and 18 the year before. Most were in Eastern Europe and Central Asia, or were high-income economies that are part of the Organization for Economic Co-operation and Development (OECD). In low- and lower-middle-income economies, more than 40 percent of regulatory reforms measured by the report improved institutions such as courts, credit bureaus, and insolvency regimes.
New data show that improving access to information on business regulations can aid entrepreneurs. Fee schedules and documentation requirements are most easily accessible in OECD economies and least accessible in Sub-Saharan Africa and the Middle East and North Africa. However, e-government initiatives are on the rise. “More than 100 economies use electronic systems for services ranging from business registration to customs clearance to court filings,” said Sylvia Solf, lead author of the report. “This saves time and money for business and government alike. It also provides new opportunities for increasing transparency.”
Latin America
The report finds that 17 of 32 economies in Latin America and the Caribbean implemented regulatory reforms in the past year to make doing business easier for local entrepreneurs. Chile, Peru, Colombia, and Mexico remain in the lead in improving business regulations in the region, with new technologies playing a key role in improving transparency and access to information across the region. The report shows Chile as the regional leader in the ease of doing business, ranking 39thglobally. Chile improved by introducing immediate temporary operating licenses for new companies and launching an electronic data interchange system for trade. Peru, which ranks 41st, strengthened investor protections and abolished the start-up capital requirement for small businesses.
Colombia is among the top 12 economies worldwide that have improved the ease of doing business the most in 2010/2011. Colombia, ranked 42nd, made it easier to start a business, pay taxes, and resolve insolvency. Over the past six years, Colombia, Mexico, and Peru have been among the 40 economies worldwide that have done the most to improve their regulatory environments for entrepreneurs. This year, Mexico continued its consistent efforts to improve regulation for businesses by easing the administrative burden of paying taxes, enhancing access to credit, and easing the process of getting construction permits, and improved in the global rankings to 53.
“Governments in Latin America and the Caribbean continue to adopt new technologies to make life easier for local businesses,” said Augusto Lopez-Claros, Director, Global Indicators and Analysis, World Bank Group. “They have made it easier to pay taxes, get credit, trade across borders, and register property.”
Five of the seven regional economies that made paying taxes easier did so by improving electronic filing systems. Paraguay and Uruguay improved their credit information systems by introducing online platforms allowing access to credit reports for financial institutions. Technology supported trade reforms in Chile and Honduras.
“Economic activity is supported by rules that increase efficiency and transparency and are accessible to all,” said Sylvia Solf, lead author of the report. New data show that governments around the world are making use of new technologies to facilitate access to relevant information and increase transparency in business regulation. In Latin America, 25 economies make documentation requirements for trade available either online or via public notices. Transparency and efficiency often go hand-in-hand. Globally, trade processes are on average twice as fast in economies where documentation requirements are easily accessible.
About the Doing Business report series
Doing Business analyzes regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and resolving insolvency. The aggregate ease of doing business rankings are based on 10 indicators and cover 183 economies. Previous year’s rankings are back-calculated to account for the addition of new indicator(s), data corrections, and methodology changes in existing indicators so as to provide a meaningful comparison with the new rankings. Doing Business does not measure all aspects of the business environment that matter to firms and investors. For example, it does not measure security, macroeconomic stability, corruption, the level of skills, or the strength of financial systems. Its findings have stimulated policy debates in more than 80 economies and enabled a growing body of research on how firm-level regulation relates to economic outcomes across economies.
