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IFC And The World Bank Launch “Doing Business In 2004” In Brazil Visit by Michael Klein, World Bank/IFC Vice President for Private Sector Development and IFC Chief Economist


In Washington:

Corrie Shanahan

Phone: (202) 473 2258

Email:
cshanahan@ifc.org

In Brazil:


Adriana Gomez

Phone:
5511-5185 6892
Email:
agomez@ifc.org


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 the least.


• 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.