CAIRO: After ranking as the world’s top reformer in the Doing Business Report 2008, Egypt still needs to simplify license registration, contract enforcement, tax procedures, as well as arbitration of economic and trade disputes, said the World Bank.
“Egypt had a very broad sense of reforms, and hence scored top on the list of reformers, explained Michael Klein, World Bank’s vice president for private sector development. “But still there is a lot of scope for reform.
He added that in Egypt, despite sizeable reforms, more improvements needed to be made in areas including employing workers, protecting investors, paying taxes, enforcing contracts, and closing a business.
Doing Business 2008 ranks 178 economies on the ease of doing business procedures including starting a business, running a business, as well as closing a business in case of bankruptcy. This year, Egypt ranks 126, up from last year’s 165.
According to the report, Egypt’s most improved area is trading across border, whereby the country has significantly reduced time and cost of procedures required to import and export commodities.
On the other end of the spectrum, Klein said, Egypt doubles the rest of the world in enforcing contracts in terms of number of procedures, cost, and time. “There are long delays in the system, and there is a need to establish specialized courts that might speed that up.
Establishing a credit bureau is another way Egypt can enhance its business start-up procedures. “Credit bureaus are important because they create information on people and whether or not they pay back their loans. And when banks have this information, they get more aggressive on lending.
He pointed out that when a country facilitates its business environment by, for example, cutting costs of property registration or reducing tax rates, business expands. In turn, this means more revenues for the country.
“There exists a positive correlation between reform efforts and investment returns in a country, he said. “The easier the business environment is, the more companies are created in a country year after year.
“The more reforms, the higher the returns for investors. And investors like to go to a country where the business environment is improving, he said. “The trick is to pick a country where the system is still difficult but where the country is aggressive on reform.because more reforms mean higher equity returns.
When a country facilitates its business procedures, he added, it also creates more employment at better salaries because people can get out of the informal sector. “More complexity gives rise to more corruption, while a simpler business environment helps people move from the informal to the formal.
Indeed, Egypt’s efforts to facilitate business in the last years are starting to bear fruit, attracting investors and generating growth. Foreign direct investment, in particular, has grown from a few millions to $11.1 billion, which constitutes 8.6 percent of GDP.
“Every business procedure that gets improved such as paying taxes is in the public’s best interest, regardless of whether they are business people or not, said Minister of Investment Mahmoud Mohieldin. “Improving our ranking will deliver more jobs, generate more income, and eventually alleviate poverty.
Next year’s Doing Business Report will broaden its range to include new indicators: transparency and procurement laws, corruption rates, and infrastructure, measuring what it takes for a business to connect to telecommunication, electricity, and water facilities.
“If the reform process is sustained, Egypt will have a very good chance to go up the ladder in next year’s ranking, Klein said. “Egypt jumped 39 places in one year, and thus it is very realistic for Egypt to jump from the current 126 to the [early] 100s in a very short time.
