African Nations Push Through Regulatory Reforms - Report

Doing business became easier worldwide in 2005/06, according to a new report by the World Bank and the International Finance Corporation (IFC), the private sector arm of the World Bank Group. Two hundred and thirteen regulatory reforms- in 112 economies- reduced the time, cost, and hassle for businesses to comply with legal and administrative requirements.

The report also finds that Africa is reforming and ranks the region's progress ahead of Asia, Latin America, and the Middle East.

The report found that the top-10 reformers on the ease of doing business, in order, are Georgia, Romania, Mexico, China, Peru, France, Croatia, Guatemala, Ghana, and Tanzania. Thirteen other economies- Armenia, Australia, Bulgaria, Czech Republic, El Salvador, India, Israel, Latvia, Lithuania, Morocco, Nicaragua, Nigeria and Rwanda- had three or more reforms.

Reformers simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit, and reduced the cost of exporting and importing.

"The report points out that in many economies the costs of doing business are so prohibitive that most entrepreneurs are forced to operate outside the formal economy," said Paul Wolfowitz, President of the World Bank Group. "The report is a critical tool for developing countries to determine where more reforms are needed," he said.

The rankings track indicators of the time and cost to meet government requirements in business startup, operation, trade, taxation, and closure. They do not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.

"The annual Doing Business updates have already had an impact. The analysis has inspired and informed at least 48 reforms around the world. The lesson- what gets measured gets done." said Caralee McLiesh, an author of the report.

Georgia was the top reformer in 2005/06, improving in 6 of the 10 areas studied by Doing Business.

For the first time, Africa makes the top-three among reforming regions, after Eastern Europe and the OECD countries. Two-thirds of African countries made at least one reform, and Tanzania and Ghana rank among the top 10 reformers. In Cote d'Ivoire registering property took 397 days in 2005. Reforms eliminated a requirement to obtain governmental consent to transfer property, decreasing the time to 32 days. Burkina Faso cut the procedures for starting a business from 12 to 8 and the time from 45 days to 34. Madagascar reduced the minimum capital for start-ups from 10 million francs to 2 million. Tanzania introduced electronic data interexchange and risk-based inspections at customs. The time to clear imports fell by 12 days. Gambia, Nigeria, and Tanzania reduced delays in the courts.

"Such progress is sorely needed. African countries still have the most complex business regulations. They would greatly benefit from new enterprises and jobs, which can come with more business-friendly regulations," said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development and IFC Chief Economist. "Big improvements are possible. If an African country adopts the region's best practices in the ten areas covered by Doing Business, it would rank 11th globally."

Whatever reformers do, they should always ask the question, "Who will benefit the most?" If reforms are seen to benefit only foreign investors, or large investors, or bureaucrats-turned-investors, they reduce the legitimacy of the government. "Reforms should ease the burden on all businesses: small and large, domestic and foreign, rural and urban. This way there is no need to guess where the next boom in jobs will come from. Any business will have the opportunity to thrive," said Simeon Djankov, an author of the report."

Posted to the site on 7th September 2006