WASHINGTON, September 8, 2004 – Slovakia
was the world’s top reformer in improving its investment climate over
the past year, allowing it to join the top 20 economies in the world on
ease of doing business, according to a new report from the World Bank Group.
The report also finds that, while new entrants into the European Union
were also among the top reformers of investment climate, several economies
in Europe and Central Asia (ECA) continue to rank among the world’s least
friendly for business.
In Slovakia, the amount of time required to start a business was
cut in half, time to recover debt fell by three quarters, a new private
credit registry opened, and employment regulation was made more flexible.
The country witnessed a jump of 12 percent in new business registrations
after simplifying its entry procedures and a 10 percent increase in credit
to the private sector after its collateral law reforms.
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 such reforms, while often
simple, can help create job opportunities for women and young people, encourage
businesses to move into the formal economy, and promote economic growth.
The report, however, 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.
On average, it takes a business six procedures, 8 percent of income per
capita, and 27 days to get started in high-income OECD countries; in ECA
countries, the same process takes 10 procedures, 15 percent of income per
capita, and 42 days. Among the worst regional performers in time
of business registration were Belarus (79 days) and Azerbaijan (123 days).
Potential investors in Canada and the United Kingdom enjoy all seven main
types of access to the ownership and financial information of publicly
listed companies, while investors in Bosnia and Herzegovina, Bulgaria,
and Turkey have less than half as much access.
Overall, rich countries undertook three times as many investment climate
reforms as poor countries last year. European Union members were
especially active in enacting reforms, with almost two reforms per country.
The top 10 reformers for the most recent survey year were Slovakia,
Colombia, Belgium, Finland, India, Lithuania, Norway, Poland, Portugal,
Other findings related to ECA economies:
· Of the 58
countries that reformed business regulation or strengthened the protection
of property rights in the last year, 16 were in ECA. EU entrants
reformed the most; Central Asian economies reformed the least.
· Five economies
in the region ranked in the top quartile of 145 countries on the ease of
doing business: Lithuania, Slovakia, Latvia, Czech Republic, and Estonia.
Belarus, Ukraine, Romania, and Uzbekistan scored lowest in the region.
· Among countries
enacting reforms, Turkey streamlined the process for starting a
new business, cutting the time from 38 days to 9 and making the list of
top 10 reformers in entry regulation.
Lithuania, Russia, and Hungary were also among those improving business
Hungary, Latvia, and Poland introduced more flexible employment regulation,
making it easier for businesses to expand production.
and Armenia established public credit registries, and Bulgaria established
a private credit bureau to facilitate lending.
and Herzegovina introduced a summary proceeding in courts, cutting
the days to enforce contracts in half. In Lithuania a summary proceeding
now takes one-third of the regular procedure’s time.
their reforms, several ECA countries entered the top 10 lists on specific
areas of business regulation, for example: Lithuania and Armenia
on the ease of registering property; Albania, Slovakia, and Latvia
on legal rights of borrowers and lenders; and the Czech Republic and
Slovakia on protecting investors. However, Serbia and Montenegro,
Slovenia, and Poland now rank worse on the time required to enforce
“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; it expands the research to 145 countries
and adds two new indicators, registering property and protecting
investors. Since last year, 13 governments have asked for their
countries to be included in the Doing Business analysis.
“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,”
said Simeon Djankov, an author of the report.
For example, this year’s report catalogs wide variances in hiring and
severance costs across countries and shows that high severance costs can
discourage job creation. The report also shows that poor regulation of
bankruptcy can cause business loans to dry up: in 50 countries, creditors
can expect to recover less than 20 cents on the dollar when a business
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 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.
Doing Business in 2005 finds that reform took place last year mainly
in countries that faced competition and had incentives to measure regulatory
burdens. In the enlarged European Union, accession countries reformed
in anticipation of the new competitive pressures on their businesses; existing
members reformed to maintain their advantage against the lower-wage producers
from accession countries.
In developing countries, performance targets set by the International Development
Association and donor country aid programs spurred poor countries to examine
regulatory obstacles and propose reforms. Most reforms focused on
simplifying business entry and improving credit information systems. African
countries reformed the least of all regions and had the most regulatory
obstacles to doing business, followed by Latin American countries.
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 provided methodological support and review.
The data, methodology, and names of contributors are publicly available
The full report is available under embargo 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, will be available on the Doing Business website: http://rru.worldbank.org/doingbusiness