Doing Business Blog - The World Bank Group

The Kyrgyz Reform, Big Time

On Thursday the Kyrgyz parliament adopted 4 reforms that will significantly improve the business environment in the country. Changes were introduced to the joint stock companies law, the state registration of legal entities law, the Civil Code, and the town planning and architecture law. See details (in Russian) here.

Prime Minister Chudinov (picture) and Minister of Economy Japarov led the reform effort. The reforms will make it easier to start a business, increase the protection of minority shareholders, simplify the procedures for obtaining construction licenses, and increase credit information.

The reforms happened quickly. In April the government announced a "100-days of reforms" plan, led by Minister Japarov. Inter-ministerial committees were organized on several topics of interest to businesses. Most prominent among these were the four cited above. Ideas on how to reform were debated, and drafts proposed. The proposals were then discussed at an investors forum.

Most important, the media was invited to all discussions and actively covered the debates and progress. This gave the government little room for delays. Hence the new, made-in the Kyrgyz Republic, slogan: What gets committed to in front of TV cameras, gets done.

The Kyrgyz media gets a high mark for its role in making the reforms happen.

Reforming France's Ports

On May 21st, the French Senate passed the government's port reform bill, which foresees the transfer of cargo handling activities at France's ports to the private sector. Initiated by President Sarkozy shortly after his inauguration, the port reform is part of the government's ambitious reform agenda. The objective of the reform, as announced by Prime Minister Fillon last January, is to triple container capacity at French ports by 2015 and create 30,000 new jobs.

In spite of the significant gains expected from the reform, not everyone is happy about it. Since April, France's ports have had to endure a series of 24-hour rolling strikes by port workers unhappy at the prospect of transferring to the private sector. Organized by the National Federation of Ports and Docks, part of the powerful Confédération Générale du Travail, the strikes have increased port congestion causing long delays.

Nigeria Aims For 48-hour Customs Clearance

The Kirikiri Lighter Terminal in Lagos was recently the scene of a curious incident. The chairman of the local chapter of the Association of Nigerian Licensed Customs Agents (ANCLA) came in to discuss a complaint by one of the association's members that a certain customs official had refused to clear his container because he had failed to pay a bribe. Discussions became heated and ended with the chairman being thrown out of the official's office by force. This led to a small riot as association members - fed up with corruption at the terminal - invaded the premises and inflicted considerable damage. See the full story here.

The Nigerian government has set itself the objective of clearing all imports within 48 hours - an ambitious target indeed given that it currently takes 12 days to clear import goods into Nigeria. By creating delays and increasing the costs of trading, corruption makes consumers and entrepreneurs worse off, limits export competitiveness and reduces overall trade volumes.

Business Entry in Bulgaria, Still Slow Going

Last week I visited the business register in Sofia. Since January, it has become an administrative agency, albeit still responsive to the Ministry of Justice. The latter is the reason why the transition hasn't been as smooth as many had hoped.

In an earlier blog, I had opined on the unfortunate decision to keep business registration as part of the judiciary. Now some of the results of this decision have become obvious. First, the registrars were required to have significant legal experience, to match that of judges. Yet, since registration is now an administrative process, their pay scale is that of court clerks (about 450 leva a month, $360) instead of that of judges (1,200 leva). Guess what? Few applicants have come forward to join the new agency.

The Next Singapore?

Georgia's government won a decisive victory at the polls this week - the parliamentary election yielded 120 seats (of 150) for the ruling party.

This is a great success for reform too. Previous Doing Business analyses suggest that in transition economies (those that started from central planning) two terms are needed for reforms to count. Examples include Slovakia's reforms under Ivan Miklos (1998-2006); and Estonia under Mart Laar who served as prime minister in 1992-94 and again in 1999-2002).

Now Georgia has the chance to repeat the success of Estonia and Slovakia. The government should have a higher goal, however: to overtake Singapore as the easiest place to do business in the world.

Kicking In An Open Door

“You never know what to expect,” a Surinamese entrepreneur said to me, describing the unpredictable situation at the port of Paramaribo (see picture). “Before we know it, we’re not allowed to enter the port area because someone woke up that morning and had the idea that we need some additional device, or piece of clothing. Everyone will be sent away off to the store to buy that piece of clothing or equipment. It is never announced in advance, it is so random that no one could see it coming. It is frustrating because we never know what to expect. When requirements change that unexpectedly, we cannot prepare for it and thus, besides the frustration of another, useless change, we lose time in getting our goods from the port, which costs us money. We’re in the port area every day, so why is it that they could not tell us before?”

This is only one example where authorities fail to communicate and the entrepreneur is directly disadvantaged. The information is nowhere to be found until an officer decides to communicate the details at a time that is convenient to him. The rule is implemented immediately without advance notice and the entrepreneur all of a sudden finds himself barred from entering the port area unless he fulfills the unforeseen requirements on the spot.

Top Reformer Votes Today

Georgia, the top reformer in Doing Business 2007, and also the country that has improved the most on the ease of doing business since 2003, is busy voting Wednesday.

The ruling party is expected to win a majority. A second term will cement the big advances in the business environment made during the first mandate.

The theme of the campaign is job creation. The economy has grown at a brisk pace - over 9% in each of the last 4 years. Yet the number of jobs has increased by less: mainly because the large job increases in the private sector were pitted against reducing the size of government and government employment. Also, new technology in some sectors, for example in wineries, allow for a more capital-intensive process.

As the economy continues its growth, the services and agriculture sectors are growing too and more jobs are opening. The banking sector creates the most opportunities for high-paying jobs, and many young graduates go there.

The new prosperity has allowed the government to finance large infrastructure projects, linking regions that were previously hard to do business with. This brings more road construction jobs to poorer regions. Most importantly, it will bring other employment once the roads are opened.

Still, a lot remains to be done and a second term in office will be as busy as the first.

What Would You Do With $400 billion?

As with so many things related to China, the numbers are just staggering. The Chinese government intends to invest $400 billion in trade logistics infrastructure by 2010. A sizeable amount of this will be used to improve port infrastructure in cities such as Dalian, Tianjin and Qingdao.

These infrastructure investments are timely and sensible. With the ongoing growth in Chinese trade - exports increased by more than 21% for the first three months of 2008 - port capacity has to keep pace. The Chinese clearly understand that to pursue a strategy of export-led growth, trade logistics have to be in order. In an integrated global economy, supply chains have to be reliable and fast. It is therefore not surprising that all of the so-called Asian tiger economies - which succeeded through export-led growth - score in the top 30 on the Doing Business Trading Across Borders indicator.

Be Smart, Be On Top

The widely used phrase “getting to the top is hard, staying there is harder” is apparently what authorities in Hong Kong-China had in mind when they conceived the “Be a Smart Regulator Programme” in mid-2007.The program is a large scale improvement plan for granting business licenses across multiple business sectors.

Under this initiative, several procedures to obtain a construction license were either eliminated or expedited. This was achieved not by creating new agencies or structures, but instead by creating working groups with the agencies and bureaus involved in the construction area. These groups found redundant procedures, improved communication and coordination schemes, and identified regulatory “easy fix” changes that could be implemented in order to foster a more efficient construction process in Hong Kong-China.

Going Dutch

About 18 months ago the Doing Business team was asked to study the Dutch regulatory reform program and make some suggestions about its future focus. The resulting report listed several ideas. Most important among those: to conduct surveys of businesses and ask what their main constraints are; to combine the (then) four different units in the Ministries of Finance and Economy into one regulatory reform group; to study the costs of some existing regulations, not just of new regulation; and to communicate the reforms through the views of business people, not the minister or other government officials.

I visited the Dutch Ministry of Finance recently and was shocked to find that all these ideas were implemented. It's so rare!

On second thought, I shouldn't be so surprised. The Dutch are already leaders in regulatory reform in Western Europe. They mean business.