CAIRO: According to a World Bank survey of 100 countries, Egypt ranked as the number one economy in terms of trade policy reforms. Actual GDP growth was estimated by the report at 4.9 percent for 2005, up from 4.2 percent for 2004 and 3.1 percent for 2003. There are expectations for GDP growth to reach 5.5 percent, 5.8 percent and 6.0 percent from 2006 to 2008, respectively.
According to the latest Doing Business report by the World Bank, reforms, even the simplest ones, can create many new jobs. However, while eastern European nations are aggressively courting entrepreneurs with far-reaching reforms that streamline business regulations and taxes, African and Middle Eastern nations with high youth unemployment rates continue to thwart small and medium businesses with heavy legal burdens and piecemeal reforms.
“Jobs are a priority for every country, and especially the poorest countries. Doing more to improve regulation and help entrepreneurs is key to creating more jobs and more growth. It is also a key to fighting poverty. Women, who make up three quarters of the work force in some developing economies, will be big beneficiaries. So will young people looking for their first job. The past year s diverse range of successful reformers, from Serbia to Rwanda, is showing the way forward. We can all learn from their experience, said Paul Wolfowitz, president of the World Bank Group.
In poor, high unemployment rate countries, reforms are still lagging. For example, in Syria, it takes 63 days, 18 documents and 47 signatures from the time imported goods arrive in ports until they reach the factory gate. In Yemen, it takes over $15,000 in required capital, or 27 times the annual income per capita, to start a new business. In Oman, it takes 7 years to close an insolvent company.
However, among its Middle Eastern and African counterparts, Egypt is the exception. According to the results of the study, Egypt has been among the biggest reformers in the past year, with reforms in the company registry, the credit registry, the property registry and the customs office.
Egypt has cut the fees for registering commercial property by a third, from 4.5 to 3 percent of the property value. Egypt was also hailed by the report as the world’s top reformer of customs procedures, establishing a single window for trade documentation and merged 26 approvals into 5. Improvements at customs were part of a broader reform that cut the number of tariff bands from 27 to 6 and simplified inspection procedures at the border.
The single most active Arab nation in enacting reforms, the country was one of the 12 European reformers in the past year, in a list that includes Serbia and Montenegro, Georgia, Vietnam, Slovakia, Germany, Finland, Romania, Latvia, Pakistan, Rwanda, and the Netherlands.
According to the report, which for the first time provides a global ranking of 155 nations on key business regulations and reforms, Middle Eastern and North African nations impose many regulatory obstacles on entrepreneurs and have been the second-slowest reformers over the past year, after Sub-Saharan Africa.
“Many Middle Eastern and North African countries that desperately need new enterprises and jobs risk falling even further behind other countries that are simplifying regulation and making their investment climates more business friendly, said Michael Klein, World Bank/IFC vice president for private sector development and International Finance Corporation’s (the private arm of the World Bank) chief economist.
Yet, while Egypt leads the pack of Middle Eastern and African nations in its trade policy reforms, the continued growth of the informal sector is the roadblock to further success.
“In Egypt, the informal sector is extraordinarily large, amounting to approximately 35 percent of the country’s GDP, Frank Sader, chief strategist and senior operations manager at the IFC, told The Daily Star Egypt during a 2006 Doing Business in Egypt conference. “When people go into the informal sector, the government loses out, because things like taxes are not being paid. Companies are also affected because they cannot grow significantly in the informal sector.
“As a company in the informal sector, you stay small. You cannot get loans from commercial banks, you cannot engage in public sector contracts, you cannot get export licenses, all of which thwarts your opportunities, said Sader. “So why do people go into the informal sector? Why do they not formalize? [That’s] because it’s either too costly, or too burdensome.
In order to encourage companies to enter the formal economy, the Egyptian government must simplify and streamline all its procedures, not just the ones in relation to trade policy, according to Sader.
“What the country needs is expectations management, creating an environment where investors take all the opportunities as entrepreneurs, he said.
