WASHINGTON, September 8, 2004 – Colombia
made the most progress among Latin American nations in improving its investment
climate last year and was rated the second-fastest reformer in the world,
according to a new report from the World Bank Group. Improvements were
made in starting new businesses, in enforcing contracts through the courts,
and in increasing the flexibility of employment regulation.
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, Colombia witnessed a jump of
16 percent in new business registrations after simplifying its entry procedures.
The establishment of a single-access point for company registration reduced
the time to start a business from 60 to 43 days.
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.
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 Latin American nations:
· Of the 58
countries that reformed business regulation or strengthened the protection
of property rights in the last year, only six were in Latin America
– Colombia, Nicaragua, Argentina, Honduras, Bolivia and Brazil.
· Only one
nation in the region, Chile, ranked in the top quartile of the countries
surveyed on the ease of doing business. Four nations, Ecuador, Guatemala,
Honduras and Venezuela, ranked in the bottom quartile.
· Among nations
enacting reforms, Argentina, Bolivia, and Nicaragua reduced the time
to start a business: In Argentina, from 68 to 32 days; in Bolivia,
from 67 to 59 days; and in Nicaragua, from 71 to 45 days.
scrapped the public sector monopoly on enforcement of judicial decisions,
cutting the time to collect overdue debt by 30 percent.
credit registry implemented wide-ranging reforms by allowing
online access, distributing both positive and negative information, and
offering new products to lenders.
American countries offer the weakest legal protections for lenders and
borrowers of any region in the world. They also have the least-efficient
process for resolving business disputes of any region.
“Poor countries that desperately need new enterprises and jobs risk falling
even further behind rich ones who are simplifying regulation and making
their investment climates 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 their 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 available
The full report is available online to journalists at the World Bank’s
Online 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