Doing Business 2007How to reform

Private Sector Development in Small States

Michael KleinVice President, Financial and Private Sector Development and

IFC Chief Economist

September 18, 2006

Doing Business indicators

• Starting a business

• Dealing with licenses

• Employing workers

• Registering property

• Enforcing contracts

• Getting credit

• Trading across borders

• Protecting investors

• Paying taxes

• Closing a business

2006 2007 2008

www.doingbusiness.org

• Update of 2006

• Add 20 countries

- 19 Small States

• How to reform

- 50 case studies

• Update of 2007

• Add Paying bribes

• Add Using infrastructure

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8

0

50

100

150

200

250

300

Starting a business in Gambia in January 2006

1. Check the uniqueness of the company name

2. Notarize the company statutes

3. Payment of stamp duty and deposit of corporate tax with commissioner

4. Register with commercial registry

5. Obtain operational licenses

6. Register with Labor department

7. Register employees for Social security

8. Make a company seal

Procedures

Tim

e (

Nu

mb

er

of

days)

Cost (%

of G

NI p

er c

ap

ita)

Cost(right axis)

Time (left Axis)

Top 30 on the ease of doing business, 2007

16. Lithuania 17. Estonia18. Thailand 19. Puerto Rico20. Belgium21. Germany22. Netherlands23. Korea24. Latvia25. Malaysia26. Israel27. St. Lucia28. Chile29. South Africa30. Austria

1. Singapore2. New Zealand3. United States4. Canada5. Hong Kong, China6. United Kingdom7. Denmark8. Australia9. Norway10. Ireland11.Japan12. Iceland13.Sweden 14.Finland15.Switzerland

Top reformers in 2005/06

CountryStarting

a business

Dealing with

licenses

Employing workers

Registering property

Getting credit

Protecting investors

Paying taxes

Trading across

borders

Enforcing contracts

Closing a business

Georgia √ √ √ √ √ √

Romania √ √ √ √ √ √

Mexico √ √ √

China √ √ √ √

Peru √ √ √ √ X

France √ √ √ √ √

Croatia √ √ √

Guatemala √ √ √

Ghana √ √ √

Tanzania √ √ √ √

Reforms affecting Doing Business indicators on:

As a group, small states near global average

OECD

East

Asia

East

Eur

ope

Latin

Am

erica

Small S

tate

s

Mid

dle

East

South

Asia

Africa

Average ease of Doing Business

…But there is large variation

1727 31 32 33

41 4451 53 56 58 59 60 62

69 72 73 7684 85 87

106113

122125132136138

144150

161169173174

Esto

nia

St. Lu

cia Fiji

Mau

ritius

Antigua

& B

arbu

da

Samoa

St. Vin

cent

& th

e Gre

nadine

s

Tong

a

Maldive

s

Belize

Vanua

tu

Trinid

ad a

nd T

obag

o

Kiriba

ti

Palau

Solom

on Is

land

s

Dominica

Grena

da

Swaz

iland

Seych

elles

St. Kitt

s & N

evis

Mar

shal

l Isla

nds

Micr

ones

ia

Gambia

Surinam

e

Cape

Verde

Gabon

Guyan

a

Bhuta

n

Comor

os

Equa

toria

l Guine

a

Djibou

ti

São T

omé

& Prin

cipe

Guine

a-Biss

au

Tim

or-L

este

Doing Business 2007 ranking

Small states average ranking by indicator

56 62 68 7382

8997

109 114125

Dealin

g with

licen

ses

Payin

g ta

xes

Emplo

ying

worke

rs

Tradin

g ac

ross

bord

ers

Starti

ng a

bus

ines

s

Closin

g a

busin

ess

Prote

ctin

g in

vesto

rs

Regist

erin

g pr

oper

ty

Enfor

cing

contr

acts

Get

ting

cred

it

Average ranking for small states

Small states did not reform much this year

89%82%

67%61% 58%

35%26% 25%

Percentage of countries with at least one reform, 2005/06

Small states reformers in 2005/06

CountryStarting a business

Dealing with

licenses

Employing workers

Registering property

Getting credit

Protecting investors

Paying taxes

Trading across borders

Enforcing contracts

Closing a business

Antigua and Barbuda

√ √

Estonia √ √Mauritius √ √Micronesia √ √Gambia √Guinea- Bissau

√

Guyana √Seychelles √Swaziland x √

Reforms affecting Doing Business indicators on:

Decreases in time and cost to comply with regulations

Country Doing Business topic Nature of reform Improvement in indicators

Antigua and Barbuda

Starting a business Separated company registry from high court

Time decreased from 31 to 21 days

Gambia Enforcing contracts Introduced specialized commercial court

Time decreased from 766 to 247 days

Micronesia Starting a business New Companies Law eliminated minimum capital requirement

Minimum capital requirement from 50% of income per capita to 0.

Seychelles Registering property Stamp duty decreased Cost reduced from 11.89% to 7% of property value

Large improvements are possible―SmallStateStan would be #3 overall

The hypothetical country “SmallStateStan” has the ease of:

• Starting a business in Marshall Islands (#13)• Licensing (construction) in St. Vincent (#1)• Employing workers in Tonga (#4)• Registering property in Palau (#13)• Getting credit in Fiji (#21)• Protecting investors in Mauritius (#11)• Paying taxes in Maldives (#1)• Trade in Cape Verde (#20)• Enforcing contracts in Estonia (#20)• Closing a business in Belize (#24)

Heavy regulations exclude the vulnerable

Countries ranked by procedures to register property, quintiles

Leastprocedures

Mostprocedures

Greater Informal Sector to GDP

Countries ranked by rigidity of employment index, quintiles

Leastrigid

Mostrigid

Greater Share

Lesser Share

Lesser Women’s Share of Private Employment

Reform payoff: creating jobs

0

5

10

15

20

Countries ranked by ease of doing business, quintiles

HigherLower

Un

em

plo

ym

en

t (%

)

Note: Relationship is statistically significant at the 1% level and remains significant when controlling for income per capita