Doingbusiness in 2006 Creating Jobs

1
Doingbusiness in 2006Creating Jobs

• Desmond Dodd
• International Finance Corporation
• Kuala Lumpur, Malaysia
• Feburary 28, 2005

2
Doingbusiness indicators
2005
2004
2006

• Business Licensing
• Taxation
• Trade Infrastructure
• Transport
• Customs
• Standards
• Updates of 04 and 05

• Corporate Governance
• Property registration
• Updates of 04 topics

• Regulation of Entry
• Labor Regulations
• Contract Enforcement
• Credit Markets
• Credit information
• Collateral
• Bankruptcy

Products Report, academic papers, country
summaries, website database www.doingbusiness.org
3
Why is Doingbusiness important

• Demonstrate need for reform
• Indicators are a benchmark

4
Methodology a time and motion study

• Follow the entrepreneur from the beginning to the
  end of a basic transaction
• Record every step of the process, and the
  associated time and cost
• Gather all the relevant laws, regulations,
  decrees, fee schedules

5
Starting a business in Pakistan (Jan. 1st, 2002)
Cost (right axis)
Cost, of per capita income
1. Pay bank fee for procs 2, 3 and 4 2. Check
name for uniqueness 3. Stamp memorandum and
articles 4. Register at Registrar of Companies 5.
Make a company seal 6. Apply for a National Tax
Number 7. Register for sales tax 8. Register for
professional tax 9. Register with Social Security
10. File for old age benefits
Time, days
Time (left axis)
Procedure
6
Tracking reform Pakistan (Jan. 1st, 2003)
Cost (right axis)
1. Pay bank fee for procs 2, 3 and 4 2. Check
name for uniqueness 3. Stamp memorandum and
articles at Treasury 4. Register at Registrar of
Companies 5. Make a company seal 6. Apply for a
National Tax Number 7. Register for sales tax 8.
Register for professional tax 9. Register with
the Employee Social Security Institution 10. File
for old age benefits
Cost, of per capita income
Time, days
Time (left axis)
Procedure
7
Documenting the process Example, Licensing
Procedures 22 Time 230 days Cost 38.5 per
capita income
Warehouse Project Hong Kong (China) Date
January 2005 City Hong Kong Regulatory
Requirements and Procedures
8
Registering Property

• Full sequence of procedures necessary when a
  business purchases land and a building to
  transfer the property title from the seller to
  the buyer.
• Assumptions about the business
• Assumptions about the property
• Measurements
• Procedures
• Time
• Cost

9
Protecting Investors

• Measures the strength of minority shareholder
  protections against directors misuse of
  corporate assets for personal gain
• Assumptions about the business
• Assumptions about the transaction
• Measurements
• Extent of disclosure index
• Extent of director liability index
• Ease of shareholder suits index
• Strength of investor protection index

10
Enforcing Contracts

• Measures the judicial or administrative system in
  the collection of overdue debt
• Assumptions about the case
• Measurements
• Procedures
• Time
• Cost

11
Closing a business

• Studies the time and cost of bankruptcy
  proceedings involving domestic entities
• Assumptions about the business
• Assumptions about the case
• Measurements
• Time
• Cost
• Recovery rate

12
Trading across borders
Days to import
Hard infrastructure is only 25
13
Strong incentives to evade tax means less revenue
Increase in gross profit from evading 20 of the
tax bill
Tax revenues relative to tax payable
14
Top 30 economies on the ease of doing business

• New Zealand
• Singapore
• United States
• Canada
• Norway
• Australia
• Hong Kong, China
• Denmark
• United Kingdom
• Japan
• Ireland
• Iceland
• Finland
• Sweden
• Lithuania

• Estonia
• Switzerland
• Belgium
• Germany
• Thailand
• Malaysia
• Puerto Rico
• Mauritius
• Netherlands
• Chile
• Latvia
• Korea
• South Africa
• Israel
• Spain

15
Bottom 30 economies on the ease of doing business

• 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 dIvoire
• 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
16
East Asia and Pacific performs well on the ease
of doing business
17
Low reform rate in East Asia in 2004-2005
Percentage of countries with at least one reform
18
Top reformers in 2004-2005
19
How much more growth?
Reforms to reach the top quartile of countries
would add 2.2 percentage points annual growth
Actual Growth 1994-2004
Bottom quartile
Top quartile
Ease of Doing Business indicator
20
How much more employment?
Reforms to reach the top quartile of countries
could cut 3.7 percentage points off unemployment
Implied rate after cut
Bottom quartile
Top quartile
Ease of Doing Business indicator
21
How much less informality?
Reforms to reach the top quartile of countries
could cut 9 percentage points off the share of
informal sector as a of GDP
Implied rate after cut
Bottom quartile
Top quartile
Ease of Doing Business indicator
22
Heavy regulations exclude the vulnerable
Greater Informal Sector to GDP
Lesser Womens Share of Private Employment
23
Using Doingbusiness

• Demonstrate need for reform
• All DB data publicly available
• Thailand targeting top 10 spot
• India Committee to improve ranking
• Fiji Discussion accelerated efforts to
  streamline business entry regulations
• China Endorsing impact of company law reform
• Provides focus for reform efforts
• Malaysia strong on getting credit, protecting
  investors weak on licenses and contracts

24
Using Doingbusiness

• Indicators are a benchmark
• Evaluating proposed reforms
• Simulate impact of reforms
• Advance demonstration of reform impact can help
  lessen opposition
• Regional reform
• New Zealand DB to promote business environ.
  reform in APEC

25
Doing Business

• www.doingbusiness.org
• Regional reports
• East Asia and the Pacific
• South Asia
• International Finance Corporation
• Hong Kong Desmond Dodd, ddodd_at_ifc.org
• World Bank Group, Private Sector Dev., Principal
  Authors
• Washington, DC Simeon Djankov,
  sdjakov_at_worldbank.org
• Washington, DC Caralee McLeish, cmcleish_at_ifc.org