Washington DC
, October 7, 2003 — In Australia you can register a business in 2 days; in Haiti you need 203. In Denmark, you don't pay anything to start a business, while in Cambodia you pay 5 times income per capita. In Tunisia, you can enforce a contract in 7 days; in Guatemala this takes more than 4 years. Credit information systems have credit histories on almost every adult in New Zealand, Norway, and the United States, but cover less than 1 percent of the population in China, Nigeria, and Pakistan. Resolving bankruptcy takes six months in Ireland but more than 11 years in India.
These dramatic differences are highlighted in a new, annual publication from the World Bank Group,
Doing Business in 2004: Understanding Regulation.
“The report provides policy makers and the public with quantitative measures on business regulations—data that will facilitate the reform efforts of governments,” said Michael Klein, World Bank/IFC vice president for Private Sector Development and IFC chief economist.
Doing Business
collects and analyzes data on over 130 countries, including OECD countries. The analysis is based on assessments of each country’s laws and regulations, with input from and verification by local experts who assist entrepreneurs in starting a business, hiring and firing workers, enforcing contracts, getting credit, and closing a business.
Doing Business in 2004
offers answers to these critical questions:
-
Which countries regulate businesses the most?
-
Is regulation an outcome of efficient social choice, or has it persisted because of inertia and a lack of capacity for reform?
-
What are the main obstacles to regulatory reform?
-
What are the best regulatory models?
Findings of
Doing Business in 2004
•
Poor countries regulate business the most.
Regulation in poor countries is more cumbersome for all aspects of business activity. A group of poor countries—Bolivia, Burkina Faso, Chad, Costa Rica, Guatemala, Mali, Mozambique, Paraguay, the Philippines, and Venezuela—regulate the most heavily. A much wealthier group—Australia, Canada, Denmark, Hong Kong (China), Jamaica, the Netherlands, New Zealand, Singapore, Sweden, and the United Kingdom—regulate the least.
•
Heavier regulation brings bad outcomes.
Heavier regulation is generally associated with greater inefficiency in public institutions – longer delays and higher cost – and results in higher unemployment, increased corruption, less productivity and investment, but not better quality of private or public goods. The countries that regulate the most – poor countries – have the least enforcement capacity and the fewest checks and balances in government to ensure that regulatory discretion is not used to abuse businesses and exact bribes.
•
One size can fit all.
Many times what works in developed countries works well in developing countries too, defying the common perception that
“one size doesn’t fit all.”
In entry regulations, countries can reduce the number of procedures to those that are truly necessary – statistical registration and tax and social security registration – and use the latest technology to make the registration process electronic. These changes have produced excellent results in wealthy countries such as Canada and Singapore, in middle-income countries including Latvia and Mexico, and in poor countries including Honduras, Moldova, Pakistan, and Vietnam. Similarly, designing credit information registries has democratized credit markets not only in Belgium and Turkey, but also in Mozambique and Nicaragua.
“Of course, for governments to undertake reform there needs to be a strong constituency interested in change so that inertia and the lobbying of entrenched political or business groups can be overcome. By bringing concrete evidence to the debate,
Doing Business
highlights the need for change and informs the development of new regulations and institutions,” said Simeon Djankov, manager of the World Bank/IFC monitoring and analysis unit and an author of the report.
What the report covers
Doing Business in 2004
focuses on five topics: starting a business, hiring and firing, enforcing contracts, getting credit, and closing a business
.
“These topics cover the fundamental aspects of a firm’s life cycle,” said Caralee McLiesh, an author of the report, “and the report reflects the study of many public and private institutions.”
Over the next two years,
Doing Business
will expand its data and analysis to another half dozen topics on the business environment.
-
Doing Business in 2005: Obstacles to Growth
will introduce three new topics:
registering property, dealing with licenses and inspections, and protecting investors
.
-
Doing Business in 2006: Services for Business
will add three further topics: trading across borders, improving law and order, and paying taxes.
The indicators will be updated every year, with each yearly edition including case studies of reform. The case studies document recent experiences, the pressures underpinning reform, and the factors responsible for the ultimate success or failure of specific reforms.
Indicators and analysis, and information on ordering the report, are available on the
Doing Business
website:
http://rru.worldbank.org/doingbusiness/doingbusiness2004.aspx
The full report will be available to journalists online at the World Bank’s Media Briefing Center
http://media.worldbank.org/
