Red tape reduced in 100 countries

Wednesday, 19 November 2008

It is easier to do business than ever before in more than 100 global economies thanks to regulatory reform, according to a recently released report.

The World Bank's Doing Business 2009 says a record 239 reforms were recorded between 2007 and 2008, creating better business environments in large parts of the world. Eastern Europe, led by Azerbaijan, and Central Asia did more than any other regions to make it simpler to start new businesses.

The lead author of the report has told Pathfinder Business that while the report is not designed specifically for those looking at emerging markets from abroad, the reforms could have far reaching benefits. ‘Doing Business focuses on business regulation affecting local companies during their life cycle, from starting to closing a business,’ said Sylvia Solf.‘In many countries similar regulation applies to joint ventures, particularly if no restrictions apply to foreign ownership of companies.

‘In this sense, Doing Business reforms can indicate less bureaucratic hassle and greater property and investor rights protections for any such companies. Depending on the areas of reform, this means more time and resources for entrepreneurs to start and run their business and an environment where regulations facilitate greater access to credit.’

Of the 10 criteria used to assess improvements in regulatory reform, Azerbaijan ticked seven boxes, including helping to ‘operate a one stop shop in January 2008 that halved the time, cost, and number of procedures to start a business.’ According to recent reports, the reforms have already contributed to a 40 per cent increase in start-ups in the first six months of the year. Solf says:‘While Doing Business does not measure other important aspects of the business climate, such as macroeconomic stability or proximity to markets, governments that reform in the areas measured by it send a signal to investors and businesses that they are paying attention to regulatory burden for companies and are committed to creating a more favourable environment for business.

‘Particularly in many emerging markets, which tend to still have more red tape and less property rights protection, the benefits of reform can be great.’ While Azerbaijan is the leading reformer, other emerging markets compare favourably against more established business nations for ease of doing business. While Singapore tops the World Bank’s list in 2009, with the USA third and United Kingdom sixth, Thailand and Georgia are 13th and 15th respectively, ahead of the likes of Switzerland and Germany. These leading emerging markets could also soon benefit from multimillion investment from a division of the World Bank.

The International Finance Corporation, a part of the World Bank Group that ‘finances and provides advice for private sector ventures and projects in developing countries’ is reported to be ready to approve a plan to invest several hundred million dollars into emerging economies.