Brasilia, November 12, 2003 — Michael
Klein, vice president for Private Sector Development at the World Bank
and International Finance Corporation, is visiting Brazil November 11-13,
2003, to launch the report Doing Business in 2004: Understanding
Regulation. Mr. Klein, who is also chief economist of IFC, will
consult with senior government and industry leaders on ways to improve
the private sector investment environment in Brazil.
Doing Business in 2004, the first edition of a new annual publication
from the World Bank Group, presents a database that benchmarks business
regulations in over 130 countries, including Brazil. The database focuses
on regulations that enhance or constrain business investment, productivity,
and growth around the world.
Mr. Klein is hosting seminars in Brasilia on November 12 and in Sao Paulo
on November 13 to help identify where the country is lagging on reform
of business regulation and what steps should be taken to improve its regulatory
performance. The seminars are organized jointly by the World Bank Group,
Brazil’s Ministry of Industrial Development and Foreign Trade, the Brazilian
Confederation of Industries (CNI), and Bovespa.
Mr. Klein noted, “The report provides policy makers and the public with
quantitative measures on business regulations—data that will facilitate
the reform efforts of governments.”
The Doing Business database and report are based on assessments of each
country's laws and regulations, with input from and verification by local
experts who assist entrepreneurs in starting a business, hiring and firing
workers, enforcing contracts, getting credit, and closing a business.
In Latin America, dramatic differences highlight challenges for each country
and the region. For example, in Chile you can register a business in 28
days; in Haiti you need 203. In Brazil you pay 11 percent of the country’s
income per capita to start a business, while in Bolivia you pay almost
200 percent. In Paraguay, you can enforce a contract in 188 days; in Guatemala
this takes more than four years. The cost to enforce a contract in Brazil
accounts for 2.4 percent of income per capita, the lowest in Latin America.
In Hong Kong, New Zealand, and the United Kingdom, laws provide creditors
with considerable powers to recover bad debts, while creditors in Brazil
and Argentina have only weak legal powers and those in Mexico and Colombia
have no such rights. Resolving bankruptcy takes two years in Mexico
and Peru, but 10 years in Brazil.
These findings suggest that the cost of doing business can be reduced by
acting directly on the sources of problems – be it impediments to business
registration or the lack of bankruptcy provisions – whereas indirect approaches
such as offsetting subsidies, tax exemptions, or special privileges are
costly and tend to create new problems.
Findings of Doing Business in 2004
• Poor countries regulate business the most. Regulation in poor countries
is more cumbersome for all aspects of business activity. A group of poor
countries—Bolivia, Burkina Faso, Chad, Costa Rica, Guatemala, Mali, Mozambique,
Paraguay, the Philippines, and Venezuela—regulate the most heavily. A
much wealthier group—Australia, Canada, Denmark, Hong Kong (China), Jamaica,
the Netherlands, New Zealand, Singapore, Sweden, and the United Kingdom—regulate
• Heavier regulation brings bad outcomes. Heavier regulation is generally
associated with greater inefficiency in public institutions – longer delays
and higher cost – and results in higher unemployment, increased corruption,
less productivity and investment, but not better quality of private or
public goods. The countries that regulate the most – poor countries –
have the least enforcement capacity and the fewest checks and balances
in government to ensure that regulatory discretion is not used to abuse
businesses and exact bribes.
• Best Practice Exist. Many times what works in developed countries works
well in developing countries too, defying the common perception that "one
size doesn't fit all." In entry regulations, countries can reduce
the number of procedures to those that are truly necessary – statistical
registration and tax and social security registration – and use the latest
technology to make the registration process electronic. These changes have
produced excellent results in wealthy countries such as Canada and Singapore,
in middle-income countries including Latvia and Mexico, and in poor countries
including Honduras, Moldova, Pakistan, and Vietnam. Similarly, designing
credit information registries has democratized credit markets not only
in Belgium and Turkey, but also in Mozambique and Nicaragua.
What the report covers
Doing Business in 2004 focuses on five topics: starting a business,
hiring and firing, enforcing contracts, getting credit, and closing a business.
Over the next two years, Doing Business will expand its data and analysis
to another half dozen topics on the business environment. Doing Business
in 2005: Obstacles to Growth will introduce three new topics: registering
property, dealing with licenses and inspections, and protecting investors.
Doing Business in 2006: Services for Business will add three further
topics: trading across borders, improving law and order, and paying taxes.
The indicators will be updated every year, with each yearly edition including
case studies of reform. The case studies document recent experiences, the
pressures underpinning reform, and the factors responsible for the ultimate
success or failure of specific reforms.
Indicators and analysis, and information on ordering the report, are available
on the Doing Business website: http://rru.worldbank.org/doingbusiness/doingbusiness2004.aspx
The full report will be available to journalists online at the World Bank's
Media Briefing Center http://media.worldbank.org/
IFC’s mission (www.ifc.org)
is to promote sustainable private sector investment in developing countries,
helping to reduce poverty and improve people's lives. IFC finances private
sector investments in the developing world, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY03, IFC has committed more than $37
billion of its own funds and arranged $22 billion in syndications for 2,990
companies in 140 developing countries. IFC's worldwide committed portfolio
as of FY02 was $16.7 billion for its own account and $6.6 billion held
for participants in loan syndications.