September 8, 2004 – Jordan made the most progress among Middle
Eastern nations in improving its investment climate last year but still
maintains along with other nations in the Middle East and North Africa
some of the largest capital requirements for startup businesses anywhere
in the world, according to a new report from the World Bank Group.
Doing Business in 2005: Removing Obstacles to Growth, a report cosponsored
by the World Bank and International Finance Corporation, the private sector
lending arm of the World Bank Group, finds that investment climate reforms,
while often simple, can help create job opportunities for women and young
people, encourage businesses to move into the formal economy, and promote
Between 2003 and 2004, for example, Morocco witnessed a jump of
21 percent in new business registrations after simplifying its entry procedures.
However, the report, which benchmarks regulatory performance and reforms
in 145 nations, finds that poor nations, through administrative procedures,
still make it two times harder than rich nations for entrepreneurs
to start, operate, or close a business, and businesses in poor nations
have less than half the property rights protections available to businesses
in rich countries.
Jordan reduced the time it takes to register a new business by nearly nine
weeks and is one of the few nations that gives regulators an incentive
to maximize the value recovered for creditors when a business must close.
Yet the government still requires a new business to have minimum capital
equivalent to 11 times the nation’s average per capita income. In Saudi
Arabia and Yemen, the minimum capital requirement is 15 times average income;
in Syria, the requirement is 50 times average income. By comparison, more
than 40 nations worldwide have no minimum capital requirement for a startup
Worldwide, rich countries undertook three times as many investment climate
reforms as poor countries last year. European nations were especially
active in enacting reforms. The top 10 reformers for the most recent survey
year were Slovakia, Colombia, Belgium, Finland, India, Lithuania, Norway,
Poland, Portugal, and Spain.
Other findings related to Middle Eastern nations:
· Of the 58
countries that reformed business regulation or strengthened the protection
of property rights in the last year, only seven were in the Middle East.
· Only two
nations in the region, Tunisia and Israel, ranked in the
top quartile of the countries surveyed on the ease of doing business. Both
countries improved further last year. Tunisia improved the recovery rate
in bankruptcy and increased the coverage of borrowers in its public credit
registry. Israel established a new procedure for debt recovery in the courts,
which takes less than seven months. Previously, it took a year for creditors
to collect overdue debt.
· Among nations
enacting reforms, Jordan improved the process for starting a new
business the most, by cutting the number of procedures from 14 to 11 and
the number of days from 98 to 36.
· Still, Jordan
is one of six Middle Eastern countries, together with Morocco, Egypt,
Saudi Arabia, Yemen, and Syria, in the list of 10 countries with the
highest minimum capital requirement for starting a business.
Morocco, and Yemen also reduced the number of days necessary to start
a business. Saudi Arabia reformed its public credit registry, nearly
doubling the number of borrowers with information available at the registry.
“Poor countries that desperately need new enterprises and jobs risk falling
even further behind rich ones who are simplifying regulation and making
their investment climate more business friendly,” said Michael Klein,
World Bank/IFC Vice President for Private Sector Development and IFC Chief
Doing Business in 2005 updates the work of last year’s report on five
sets of business environment indicators: starting a business, hiring
and firing workers, enforcing contracts, getting credit,
and closing a business; expands the research to 145 countries; and
adds two new indicators, registering property and protecting
investors. “This year, Doing Business gives policymakers an
even more powerful tool for measuring regulatory performance in comparison
to other countries, learning from best practices globally, and prioritizing
reforms. Since last year, 13 countries have asked to be included in the
Doing Business analysis,” said Simeon Djankov, an author of the
The main research findings of Doing Business in 2005:
in poor countries face larger regulatory burdens than those in rich countries.
Poor countries impose higher costs on businesses to fire a worker, enforce
contracts, or file for registration; they impose more delays in going through
insolvency procedures, registering property, and starting a business; and
they afford fewer protections in terms of legal rights for borrowers and
lenders, contract enforcement, and disclosure requirements. In administrative
costs alone, there is a threefold difference between poor and rich nations.
The number of administrative procedures and the delays associated with
them are twice as high in poor countries.
payoffs from reform appear to be large. The report estimates
that an improvement from the bottom to the top quartile of countries in
the ease of doing business is associated with an additional 2.2 percentage
points in annual economic growth. An indication of the payoff comes from
Turkey and France, each of which saw new business registration increase
by 18 percent after the governments reduced the time and cost of starting
a business last year. Slovakia’s reform of collateral regulation helped
increase the flow of bank loans to the private sector by 10 percent. The
payoff comes because businesses waste less time and money on unnecessary
regulation and devote more resources to producing and marketing their goods
and because governments spend less on ineffective regulation and more on
regulation and weak property rights exclude the poor – especially women
and younger people – from doing business. The report finds
that weak property rights and heavy business regulation conspire to exclude
the poor from joining the formal economy. “Heavy regulation not only fails
to protect women, young people, and the poor – those it was intended to
serve – but often harms them,” said Caralee McLiesh, an author of the
report. Doing Business shows that countries with simpler regulations
can provide better social protections and a better economic climate for
business people, investors, and the general public. The report builds on
noted economist Hernando de Soto’s work, showing that while it is critical
to encourage registration of assets, it is as important – and harder –
to stop them from slipping back into the informal sector.
The top 20 economies in terms of ease of doing business are New Zealand,
United States, Singapore, Hong Kong/China, Australia, Norway, United Kingdom,
Canada, Sweden, Japan, Switzerland, Denmark, Netherlands, Finland, Ireland,
Belgium, Lithuania, Slovakia, Botswana, and Thailand.
The Doing Business project is the product of more than 3,000 local
experts – business consultants, lawyers, accountants, and government officials
– and leading academics, who provide methodological support and review.
The data, methodology, and names of contributors are publicly
The full report is available online to journalists at the World Bank’s
Media Briefing Center http://media.worldbank.org/
Investment climate indicators and analysis, along with information on ordering
the report, are available on the Doing Business website: http://rru.worldbank.org/doingbusiness