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World Bank Record Level Of Business-Friendly Reforms

Posted in : NEWS

(added few years ago!)

Governments around the world continued to adopt a record number of reforms over the past year despite the global crisis, with some countries incorporating business-friendly measures into their stimulus packages, the World Bank said Tuesday.

In its seventh annual Doing Business report, the bank's International Finance Corp. recorded 287 reforms across 131 economies in the 12-month period that ended in June, up from 239 reforms in 113 economies in the same period a year before.

"What we're really excited to see this year is it was a really tough year for everybody, governments and businesses alike, given multiple crises - the global economic crisis, food crisis and oil crisis," said Sylvia Solf, one of the lead authors of the report, in an interview. "At the same time, in such a tough year, we have a record number of reforms.

Several countries, including China, Russia, South Korea and Malaysia, incorporated measures in their recovery packages to make it easier to run a business.

Some of those hardest hit by the crisis - such as the Baltic nations of Latvia, Lithuania and Estonia - overhauled their bankruptcy laws during the turmoil.

"I wouldn't necessarily say they were motivated by the crisis, but they're certainly timely, because we've seen an increase in the volume of insolvency cases in the courts," said Solf. Such reforms can help reallocate resources quickly during the crisis and better prepare the economy for a recovery, she said.

For the sixth year in a row, Eastern Europe and Central Asia remained the most active region for reform. While in earlier years Eastern European countries were moving up the rankings as part of a broader effort to get in shape for joining the European Union, the reform process has since spread eastward.

After Rwanda, the Kyrgyz Republic, Macedonia and Belarus were the top reformers last year.

"More out of inspiration for their neighbors, they're now implementing the type of reforms that the Baltic countries did a while back," said Solf about the region.

More so than the crisis, the bigger impetus for change has been the positive spillover effect from reform-friendly neighbors, said Solf. Most of the measures taken into account in the latest study had been in the works before the global recession.

"Benchmarking really works, and countries are learning from each other," she said.

Doing Business has gained considerable attention in recent years among developing countries, with hopes that a higher spot on the list could help lure foreign investors.

The report doesn't take into account such things as macroeconomic policy or infrastructure quality, instead tracking indicators more related to the regulatory burden that a small business owner may face. It measures the ease of starting and closing a business, investor protections, and dealing with issues like getting credit and employing workers.

Rwanda is the first country from sub-Saharan Africa to top the list of reformers. In the overall rankings for ease of doing business, it jumped to 67th on the list of 183 countries from 143rd last year. The country, which was devastated by genocide in the mid-1990s, has been steadily pushing through reforms since 2001.

Sub-Saharan Africa remains the least business-friendly region, with its average ranking slipping to 139th from 138th the previous year. Still, Solf said the experiences of Rwanda and Mauritius - which became the first African country to crack the top 20 rankings at 17th - could provide inspiration. She noted that low- to middle-income countries accounted for two-thirds of the reforms last year.

Among other regions, high-income Organization for Economic Cooperation and Development countries had an average ranking of 30, down the list from 27 last year; Eastern Europe and Central Asia moved up to 71 from 76; East Asia and Pacific backed up to 83 from 81; the Middle East and North Africa moved to 92 from 90; Latin America and the Caribbean to 95 from 92; and South Asia to 118 from 111.

There was little change at the top rankings for overall ease of doing business, with the first five spots taken by Singapore, New Zealand, Hong Kong, and the U.K. The U.K. moved up one place, switching positions with Denmark.

The report has drawn some criticism, including from the World Bank's own internal watchdog, that it tends to be biased toward less regulation. But Solf said countries aren't only using the report to cut red tape, but also to figure out areas that need stronger regulations.

"That's actually a big message that has come out of the crisis, is you do need to regulate in certain areas," she said.

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(added few years ago!) / 136 views