The Small Islands Example

Last week I was invited to speak at the Small Islands Developing States (SIDS) roundtable, sponsored by the Government of Iceland. SIDS are 51 small economies facing similar sustainable development hurdles, including shortage of human and natural resources, remoteness from major markets, susceptibility to negative effects of global warming and dependence on international trade.

32 SIDS are included in the Doing Business report. While SIDS share common environmental, financial and geographical challenges their performance and ease of doing business vary greatly. If your company were to comply with all tax requirements in Jamaica, it would take 72 separate payments and 414 administrative hours per year. The same firm would make only 1 payment in Maldives. And if you needed to take a customer to court in Timor-Leste, resolving the dispute would take an average of 1,800 days. If you were opening a new business in Guinea-Bissau, the startup procedures would take 233 days. In Mauritius, it takes only 7 days. Mauritius, the best performing SIDS economy, ranks 27th on the ease of doing business, while Guinea Bissau is at 176 out of 178 countries.

The government that took office in July 2005 embarked on a bold economic reform program aimed at moving Mauritius from reliance on trade preferences to global competitiveness. Over the last two years Mauritius has reformed in 7 of the 10 areas Doing Business measures—one of the most dedicated government reform efforts that the project has seen worldwide. Out of 18 reforms affecting business regulations in SIDS introduced between April 2006 and June 2007, 6 were implemented by Mauritius.

Reforms pays off. Over the past two years, Mauritius's economy has enjoyed a steady increase in the annual growth rate – from 2.2% in 2005 to 5.4% in 2007. This is consistent with Doing Business research finding - a hypothetical improvement on all aspects of the Doing Business indicators to reach the level of the top quartile of countries is associated with an estimated 1.4 to 2.2 percentage points in annual economic growth. This is after controlling for other factors, such as income, government expenditure, investment, education, inflation, conflict, and geographic regions.

Reforms are also associated with faster job creation. In Mauritius, overall the unemployment rate dropped by 1.1% from 9.6% in 2005 to 8.5% in 2007. Doing Business research also shows that women and young workers benefit the most from reforms. Mauritius is no exception. Female unemployment was reduced by 2% from 16.4% in 2005 to 14.4% in 2007.

SIDS countries can learn from each other and Mauritius is not the only success story. If they were to adopt the practices of each top performer in the region on the ten areas measured by Doing Business, they would rank second globally on the overall ease of doing business. This means adopting St. Vincent and the Grenadine's licensing requirements, Marshall Islands’ flexible labor regulations, Palau’s efficient property transfer, Singapore’s credit regulations, trade practices and court procedures, Maldives’ tax regulations and Jamaica’s bankruptcy practices and Mauritius's company start-up regulations and investor protections. The best practices of SIDS countries combine to make a globally competitive economy-truly a top place for doing business.