CAIRO: Egypt is the world’s top reformer of regulations for the ease of doing business this year, outpacing other reformers worldwide and in the region with improvements in five out of ten areas, says the “Doing Business 2008 Report.
According to this year’s report, the World Bank’s fifth annual series, “Egypt is the top reformer for 2006/07. Its reforms went deep.
Egypt made starting a business easier by slashing the minimum capital requirement from LE 50,000 to LE 1,000 and cutting start-up time and cost in half. Fees for registering property were reduced from three percent of the property value to a low fixed fee. Moreover, new one-stop shops were established for traders at Egyptian ports, cutting import time by seven days and export time by five.
With more properties registered and less evasion, the report pinpoints, revenue from title registrations jumped by 39 percent in the six months after the reform. The country also managed to ease bureaucracy that builders face in getting construction permits. Moreover, a new private credit bureau was established and will be inaugurated soon, making it easier for borrowers to get credit.
“The report finds that equity returns are highest in countries that are reforming the most, said Michael Klein, the World Bank’s vice president for financial and private sector development. “Investors are looking for upside potential, and they find it in economies that are reforming – regardless of their starting point.
The Doing Business report states that large emerging markets that are reforming fast – namely Egypt, China, India, Vietnam, and Turkey – have all improved in the ease of doing business. The report also finds that more entrepreneurs go into business as countries simplify regulations.
Doing Business reports are a co-publication of the World Bank and the International Finance Corporation. They investigate regulations that enhance or constrain business activity. They also present quantitative indicators on business regulations and the protection of property rights that can be compared across 178 economies – from Afghanistan to Zimbabwe.
Regulations affecting ten stages of a business’s life are measured by the reports: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. These indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why.
Saudi Arabia is the region’s runner-up reformer and the seventh fastest worldwide. It made reforms in three of the ten areas studied by the repot. “Saudi Arabia has made starting a business more accessible by eliminating what had been, in US dollar terms, one of the highest minimum capital requirement in the world.
Saudi entrepreneurs once had to set aside $124,464, the fifth largest minimum capital requirement in the world. “Now, new business owners can put that capital to work immediately hiring staff, renting office space, and marketing new products.
Saudi Arabia also reduced days needed for company start-up from 39 to 15. It established a commercial credit bureau whose reports include the credit exposure of companies. It also accelerated trade, reducing the number of documents required for importing and cutting time required for handling at ports and terminals by two days for imports and exports.
Besides Egypt and Saudi Arabia, other top reformers this year include Croatia, Ghana, Macedonia, Georgia, Colombia, Kenya, China, and Bulgaria. Other notable reforms found in the region are in Tunisia, Djibouti, Israel, Jordan, Kuwait, Morocco, and the West Bank and Gaza.
In all, the report reads, 200 positive reforms – in 98 economies – were introduced between April 2006 and June 2007.
Reforms to ease the entry of new firms were the most popular in 2006/07, as 39 countries made start-up simpler, faster or cheaper. The second most popular were reforms to cut taxes and simplify their administration.
“Some reforms are harder, requiring new legislation and the political tradeoffs that come with it, according to the report. Only 10 countries worldwide revised their bankruptcy laws, and the fewest positive reforms took place in the area of employing workers.
Doing Business 2008 ranks 178 economies on the ease of doing business. Singapore tops the rankings for the second year running. Egypt ranks 126, surpassed by countries such as Saudi Arabia (23), Israel (29), Kuwait (40), Oman (49), United Arab Emirates (68), Jordan (80), Lebanon (85), and Tunisia (88).
“While the business environment is improving worldwide, entrepreneurs in the Middle East still face major challenges, said Simeon Djankov, lead author of the report. “These are in such areas as minority shareholder protections, court efficiency, and insolvency procedures and laws.
“For example, on one measure of investor protections, the ease of shareholder suits, Iran scores zero out of 10, while Morocco scores 1 and the United Arab Emirates 2, highlights the report. “In Lebanon, resolving a commercial dispute in the courts takes 721 days on average, and in the United Arab Emirates the process involves 50 procedures from the moment the plaintiff files a lawsuit in court until the moment of payment.
In Egypt, despite sizeable reforms, more improvements need to be made in areas including employing workers, protecting investors, paying taxes, enforcing contracts, and closing a business.
Higher rankings on the ease of doing business are also associated with higher percentages of women among entrepreneurs and employees. “Increased regulatory reform leads to especially large benefits for women, said Dahlia Khalifa, Doing Business spokesperson. “Women often face regulations that may be aimed at protecting them, but that instead force women into the informal sector, where they have little job security and few social benefits.
The indicator is limited in scope, as it covers only business regulations, and does not reflect areas such as macroeconomic policies, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
Rankings on the ease of doing business do not tell the whole story. “Still, a high ranking on the ease of doing business does mean that the government has created a regulatory environment conducive to operating a business, reads the report.
