Transcript Slide 1

Doing Business in Africa: Regional Overview
Mary Agboli, Operations Officer
Investment Climate, PEP Africa
May 22, 2006
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Doing Business Indicators
Doing Business 2006 is third in a series of annual reports investigating
the regulations that enhance business activity and those that constrain it
2004
2005
2006
•Regulation of Entry
• Corporate Governance
• Business Licensing
•Labor Regulations
• Property registration
• Taxation
• Contract Enforcement
• Trade Infrastructure
• Transport
• Customs
• Standards
• Credit Markets
• Credit information
• Collateral
• Bankruptcy
•Updates of ‘04 topics
•Updates of ‘04 and ‘05
Products: Report, academic papers, country summaries, website database
www.doingbusiness.org
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What is new this year?
In 2006, three indicators were added to further analyze economic
outcomes and identify what reforms have worked, where and why
Focus is on creating jobs as this is a priority for most countries. In
Africa, jobs in the formal sector is a priority.
 Three new indicators:
 Dealing with licenses: reducing the cost and hassle of obtaining licenses
keeps more businesses in the formal economy, which may improve safety
 Paying Taxes: burdensome taxes generate undesirable outcomes, such as
corruption
 Trading across borders: countries with more efficient customs and trade
transport (fewer documentation and signatures) export and import more
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How the Indicators are derived
The methodology: time and motion study
1. Follow the entrepreneur from the beginning to the end of a
basic transaction
2. Record every step of the process, and the associated time
and cost
3. Gather all the relevant laws, regulations, decrees, fee
schedules
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1. Obtain certification of unique name
2. Open a provisional bank account
3. Incorporate through public deed
4. Register provisionally with the Commercial Registry
5. Publish articles in official gazette
6. Final commercial registration
7. Apply for operation license
8. Inspection from Ministry of Health
Cost (% of GNI per capita)
Time (Number of days)
Starting a business in Mozambique 2005
9. Inspection from Fire department
10. Declare activity at tax department
11. Register for VAT
12. Declare activity at Employment center
13. Register with Social Security
14. Subscribe worker’s compensation insurance
Source: Doing Business database
Procedures
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Improvement in Starting a Business in Mozambique
2005
180
Time reduced from
153 days to 113
160
140
120
100
2006
80
60
40
Procedures reduced
from 14 to 13
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0
1
2
3
4
5
6
7
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Procedures
9
10
11
12
13
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Source: Doing Business database
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Time to start a business (in days)
192
146
95
35
35
38
46
153
108
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Starting a business: some best practices and reforms
• Single access point for businesses
Colombia, Nicaragua, Turkey,
Makes start-up on twice as fast
Belgium
• Standardized articles of incorporation
Facilitates document processing at
registry and prevents errors
Slovakia, Singapore, Sweden,
• Simplify license requirements
•Eliminate the mandatory publication in
the Official Gazette
Norway
Honduras (temporary license),
Mexico (SARE), Peru
Ethiopia, Germany,
Serbia and Montenegro,
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Top 30 economies on the ease of doing business
High ranking countries have created a regulatory environment conducive to the operations of
business. All the top countries regulate businesses but do so in less costly and burdensome
ways.
1. New Zealand
2. Singapore
3. United States
4. Canada
5. Norway
6. Australia
7. Hong Kong, China
8. Denmark
9. United Kingdom
10. Japan
11. Ireland
12. Iceland
13. Finland
14. Sweden
15. Lithuania
16. Estonia
17. Switzerland
18. Belgium
19. Germany
20. Thailand
21. Malaysia
22. Puerto Rico
23. Mauritius
24. Netherlands
25. Chile
26. Latvia
27. Korea
28. South Africa
29. Israel
30. Spain
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Bottom 30 economies on the ease of doing
business
Entrepreneurs face more regulatory obstacles in Africa than in any other region.
155. Congo, Dem. Rep
154. Burkina Faso
153. Central African Republic
152. Chad
151. Sudan
150. Niger
149. Togo
148. Congo, Rep.
147. Lao PDR
146. Mali
145. Cote d’Ivoire
144. Guinea
143. Burundi
142. Timor-Leste
141. Egypt
140. Tanzania
139. Rwanda
138. Uzbekistan
137. Eritrea
136. Sierra Leone
135. Angola
134. Haiti
133. Cambodia
132. Senegal
131. Madagascar
130. Cameroon
129. Benin
128. Algeria
127. Mauritania
126. Zimbabwe
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Top reformers in 2004-2005
Reform s affecting Doing Business indicators on:
Country
Serbia
Georgia
Vietnam
Slovakia
Germany
Egypt
Starting Dealing
a
with
business Licenses
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Latvia
Pakistan
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Registering Getting
Property
Credit
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Finland
Romania
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Hiring
and
Firing
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Paying
Taxes
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Enforcing Closing a
contracts business
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Trading
acroos
borders
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Rwanda
Netherlands
Protecting
Investors
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Why reform?
Improving the investment climate can lead to more employment. How
much more?
Reforms to reach the
top quartile of countries
could cut 3.7 percentage
points off
unemployment
3.7%
7.6%
5.7%
Implied rate
after cut
Bottom
quartile
Top
quartile
Ease of Doing Business indicator
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Economic Growth
Better investment climate can contribute to economic growth.
Reforms to reach the
top quartile of
countries would add
2.2 percentage
points annual growth
+ 2.2%
2.6%
1.0%
Actual Growth
1994-2004
Bottom
quartile
Top
quartile
Ease of Doing Business indicator
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Informality
Informality causes firms to remain small and create few jobs. Unlocking
this can reduce poverty
Reforms to reach the
top quartile of
countries could cut 9
percentage points off
the share of informal
sector as a % of GDP
9.1%
32.3%
18.9%
Implied rate
after cut
Bottom
quartile
Top
quartile
Ease of Doing Business indicator
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Africa has the lowest reform intensity
Africa can do more..
Sub-Saharan Africa
Middle East & North
Africa
Latin America &
Carribean
East Asia & Pacific
South Asia
OECD high income
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
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Taxes are highest in Africa
World
Sub-Saharan Africa
Latin America & Caribbean
Eastern Europe & Central Asia
Corporate income tax
VAT or Sales tax
OECD high income
0ther taxes
South Asia
Middle East & North Africa
East Asia & Pacific
0.0% 10.0 20.0 30.0 40.0 50.0 60.0 70.0
%
%
%
%
%
%
%
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Who is reforming?
There are some success stories in Sub-Saharan Africa
• Rwanda - a top reformer - abolished mandatory pre-shipment
inspections and created specialized court chambers for business and tax
matters, reducing court delays.
• Mozambique cut the property transfer tax from 10 to 2.4% of the
property value, the largest cost reduction in the world.
• Kenya and Mauritius improved credit information sharing by
amending their banking acts. This makes it easier for lenders to
evaluate creditworthiness.
• In Mauritania, the Nouakchott port now operates around the clock,
compared with only 60 hours a week previously.
• Burundi introduced a new summary procedure for debt recovery and
allowed private bailiffs to operate, reducing delays in the courts.
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Not all reforms are business friendly
Some reforms have made it harder to do business.
• Madagascar increased the minimum capital requirement
for starting a new business to $5,350, or 25 times the
average annual income.
• Kenya added a procedure for paying stamp duty.
• Chad increased notary fees, transfer and registration taxes
to raise total cost of registering property from an already
steep 17% to 22% of the property value.
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Stimulating reforms
Doing Business can be used to generate reforms
• Simpler business entry in Brazil, Bulgaria, El Salvador,
Ethiopia, Indonesia, Peru, Serbia and Montenegro, Yemen
• Faster court enforcement in Jordan, Serbia and Montenegro
• New credit registries in Afghanistan, Chengdu (China),
Russia
• Fewer licenses and approvals required in Georgia and
Poland
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Doing Business supports reforms
Doing Business can be used to generate reforms
• Trigger: governments have used the rankings to get targets
– For example, Mauritius wants to move from its current
ranking of 24 to top 10 in 5 years
– Mozambique wants to be at par with the rest of SADAC
countries in 10 years
• Focus: The indicators can be used to focus on a particular
issue. For example, in Mozambique, we can identify
specifically the delays in business start up.
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Implementing reforms
Doing Business Better in Burkina Faso: PEP Africa is working with the government of
Burkina to improve the investment climate and the country’s ranking on some of the
Doing Business Indicators
• Doing Business consistently ranked Burkina Faso
low, despite otherwise strong record in economic
management
• Doing Business stimulated dialogue between
government and World Bank Group
• IFC responded with technical assistance program
targeting areas highlighted by Doing Business
• Doing Business Better in Burkina Faso program will
operate over 2.5 years, use DB indicators as outcome
measure
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The African story may change in 2007
• Some countries are reforming the indicators and may
move up in the ranking (Burkina Faso, Malawi)
• However other regions are also reforming
• More countries will be included in the ranking
(Swaziland, Cape Verde, Guinea Bissau)
Also..
• Doing Business is looking to including an index to
capture corruption
• World Bank Group is exploring state level Doing
Business Indicators in Nigeria. Similar exercise in
Latin America has created pressure for reforms at the
sub-national level.
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Who are Africa’s top performers?
• Ranked in top 40 on ease of doing
business
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–
–
–
Mauritius – 23
South Africa – 28
Namibia - 33
Botswana - 40
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Contact Doing Business
www.doingbusiness.org/
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Thank you
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