Doing Business Blog - The World Bank Group

Entry Barriers and Growth

A new paper by Antonio Ciccone (picture) and Elias Papaioannou looks at the link between entry regulation and growth. Or, more precisely, between entry regulation and the intersectoral reallocation of resources in the presence of economic shocks. Here is how the authors describe it:

"We study how restrictions on firm entry affect intersectoral factor reallocation when open economies experience global economic shocks. In our theoretical framework, countries trade freely in a range of differentiated sectors that are subject to country-specific and global shocks. Entry restrictions are modeled as an upper bound on the introduction of new differentiated goods following shocks. Prices and quantities adjust to clear international goods markets, and wages adjust to clear national labor markets. We show that in general equilibrium, countries with tighter entry restrictions see less factor reallocation compared to the frictionless benchmark. In our empirical work, we compare sectoral employment reallocation across countries in the 1980s and 1990s with proxies for frictionless benchmark reallocation. Our results indicate that the gap between actual and frictionless reallocation is greater in countries where it takes longer to start a firm."

A worthy read. You may also want to read this related paper.

Real Sign of Success

Georgia has been a top reformer in the last four doing business reports, ever since the Saakhashvili government took office.

Since then, annual growth hovers around ten percent each year, and investment has increased six-fold. Georgia now has more business per adult population than all countries but New Zealand and Singapore.

But the real signs of success are these: in 2007 the number of births increased 3.1 percent relative to 2006; and the number of deaths fell by 2.5 percent. This resulted in a population growth of 8,109 people: higher than any year since 1992. One of the reasons is this: average household income went up by 9.5 percent, while average household expenditure grew by 7.3 percent.

In other words, the standard of living is going up, and with this families decide to have more children. (Interestingly, Bulgaria - another top-10 reformer last year - also registered its first positive population growth since 1985).

The conclusion: if you want your population to grow, reform.

Helpful Governments

Do businesses perceive their government to be "very helpful, mildly helpful, neutral, mildly unhelpful or very unhelpful?" This question is asked in the World Bank enterprise surveys.

A recent paper by Mohammad Amin uses these data to find that "most regulatory measures lower a firm’s perception of how helpful the government is. Hence, it is unlikely that heavier regulation is an efficient or desirable response from the firms’ point of view to disorder."

It is not all that surprising that businesses consider the government to be a drag on their activity, a skeptic may say. After all, the governments make businesses pay taxes and go through all kinds of administrative hoops.

True, but this is the case for businesses in every country. Yet Amin's study sees different levels of satisfaction with the government across countries. So the analysis captures a relationship between the level of regulation and the satisfaction of businesses; not just that businesses are prone to complaining.

G8 Urges Doing Business Reforms, Promotes FIAS

The G8 met finance ministers over the weekend to outline an action plan for growth in Africa. The resulting document is remarkable for its focus on making it easier for African businesses to operate. The text of the G8 communique is here.

The G8 ministers made reforms of the business environment a priority: "8. National regulatory frameworks should be strengthened to attract and retain private capital. Complicated regulatory barriers reduce incentives for African entrepreneurs to enter the formal economy. While a few African countries are making progress in simplifying business regulations, much is still to be done in most others. To this end, we encourage countries to use surveys, such as the World Bank's "Doing Business Reports", as indicators of possible barriers to business and of reform efforts."

The action plan goes on to say: "We renew our commitment to the existing technical assistance facilities focusing on the promotion of anti-corruption enforcement, and the reform of regulations, taxation and customs, such as the IFC (International Finance Corporation)'s PEP (Private Enterprise Partnership) Africa, the World Bank's FIAS (Foreign Investment Advisory Services) and the multi-donor ICF (Investment Climate Facility)."

Most encouraging in the G8 statement is the recognition that widespread informality - in business and in property rights - is the main drag on growth in Africa. "Expanding access to the formal economy" appears three times in the communique. Such access is achieved when barriers to entry are reduced, when it is easier to get credit, trade across borders, pay taxes, and get licenses.

Why are such reforms important? “When legality is a privilege available only to those with political and economic power, those excluded—the poor—have no alternative but illegality,” writes Mario Vargas Llosa in the foreword to de Soto’s The Other Path. It is estimated that 80% of workers in Africa are in the informal sector.

We have our work cut out.

For Whom the Bell Tolls

Last week I partied on the floor of the New York Stock Exchange. Yes, really.

The occasion was the second annual Reformers' Club: an event organized by the Doing Business team to celebrate the most successful reformers of the past year. This year's recipients were: H.E. Dr. Mahmoud Mohieldin, Minister of Investment, Egypt; H.E. Ivan Šuker, Minister of Finance, Croatia; H.E. Nikola Gruevski, Prime Minister, FYR Macedonia; H.E. Ekaterina A. Sharashidze, Minister of Economic Development, Georgia; H.E. Luis Guillermo Plata, Minister of Commerce, Industry and Tourism, Colombia; H.E. Dr. Awwad S. Al-Awwad, Deputy Governor, Saudi Arabian General Investment Authority; and H.E. Plamen Oresharski, Minister of Finance, Bulgaria.

There was an additional reason to celebrate. Mr Gruevski's party had just won parliamentary elections in FYR Macedonia, with a mandate of further reforms. Two weeks earlier, so had the party of Minister Sharashidze. Again, the main platform was further reforms to create more jobs and pull more Georgians out of poverty.

The Pendulum Swings

In a recent forum on Africa, Paul Collier advances a novel idea: Africa is growing faster than ever before because (you guessed it) it has made many mistakes in the past. The full argument goes as follows:

"But the growth we are seeing today is not just a result of commodity booms. There is a process at work that does not depend on democracy and is so simple that analysts generally miss it: learning from mistakes. Since 1970 African societies have accumulated a huge stock of experience in how not to manage an economy. For example, from the mid-1970s until the mid-1980s Tanzania adopted regulatory policies that proved to be ruinous. The knowledge they gained through failure is valuable. Tanzania is now one of the best-managed of all Africa’s economies. The European society with the best record of containing inflation over the past sixty years is Germany. It has the best record because it used to have the worst: the experience of hyperinflation immunized Germans from macroeconomic folly." Read the whole comment here.

Collier's argument makes sense, even outside of Africa. Eastern Europe rivaled Africa in economic mismanagement until the 1990s. Now, the majority of top reformers in Doing Business come from that region.The rationale is simple: people get fed up.

If so, let's predict the top reformers of the future: Zimbabwe, Venezuela, Turkmenistan, who else?

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.

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.

How to Spot a Reformer?

I had a presentation in The Hague on May 14. Someone in the audience asked: how do you recognize committed reformers? I didn't have a good answer.

After working on regulatory reform for the last six plus years, I have met many people interested in reform. And many who were not.

I can list a number of people who instantly struck me as committed reformers: Ivan Miklos (Slovakia), Gerrit Zalm (The Netherlands), Kakha Bendukidze, Zurab Nogaideli and Mikhail Saakashvili (all Georgia), Paul Kagame (Rwanda), Mahmoud Mohieldin (Egypt), the whole government of Macedonia (which is facing elections in 2 weeks), Alvaro Uribe (Colombia), Antoinette Sayeh (Liberia - see picture). And I have met some successful past reformers who were instantly recognizable for their reform zeal: Leszek Balcerowicz (Poland) and Vaclav Klaus (The Czech Republic).

So what makes them reformers? Most importantly: the circumstances. In each case, there is a crisis, of sorts, and someone steps up.

This answer is not very satisfying: why hasn't a committed reformer appeared in, say, Jordan? Or Germany? Or Armenia? Or Burundi?

I don't know the answer, but intend to find out.

Bhutan's Job Creation Plan

How do you go about persuading young people to take up jobs in the private sector when they all aspire to civil service positions? And how do you go about raising skill levels to fill private sector jobs?

This is the not uncommon dilemma the government of Bhutan has been struggling with for the past few years. Young people want only civil service jobs because of the better working conditions, higher starting salaries and perceived prestige of working in the civil service. Yet the civil service has been increasingly unable to absorb all of those who want a job.

Employers, for their part, prefer to hire foreign workers with more relevant skills. The number of unemployed youth in the cities was getting to the point where Bhutan's most important policy objective of Gross National Happiness was being endangered.

In cooperation with the Asian Development Bank, the government resolved to act, adopting the Labor and Employment Act of Bhutan in January of last year.

Panama: Modernizing the Judicial System

Panama's economy grew by a historical 11.2% in 2007 (according to the Economist Intelligence Unit). This is mainly due to a boost in the financial and construction sectors, tourism and the commercial expectations placed in the ongoing expansion of the Canal. The institutional framework, nonetheless, still lacks efficiency. It takes 686 days to solve a simple commercial dispute in court in Panama, in line with the backlog observed in the Latin America & Caribbean region. One might think that, with strong economic activity, the number of disputes would increase in Panama, leading to an even longer delay in the judicial system.

But Law 15 of 2008 might easily reverse this assumption. It all started 2 years ago with a devastating fire in the Maritime Courts in Panama City, where thousands of files were destroyed. Since every cloud has a silver lining, a discussion started to install a more efficient and secure judicial system. The result is Law 15, which introduces several important developments.

Paying Taxes: Easy in Bulgaria

Only 9.72% of managers in Bulgaria identify tax rates as a major constraint. Only 13.74% identify tax administration as a constraint. These are the results of the latest World Bank enterprise survey in Bulgaria, done in late 2007.

On these scores Bulgaria is far ahead of the rest of the region. Among East Europeans, nearly 30% still view tax rates as a major constraint. And as recently as 2005, over 20% of Bulgarian managers thought so.

The difference is a series of reforms on reducing tax rates and making it possible to pay taxes online. In this regard Eastern Europe has led the world over the last decade, with Bulgaria as one of the top reformers. In Doing Business 2008, Bulgaria was named the top global reformer in taxes. Businesses seem to agree.

Honduras: Modern Property Registry System

Let’s imagine that you want to buy and register a warehouse in the industrial area of the city of Comayagua, in the north-west of Tegucigalpa, Honduras. Suppose that you have identified the owner.

First, you have to travel to Comayagua and visit the registry’s office. You have to check if the house is registered under the name of the person who claims to be the owner. It is also recommendable to check for any encumbrances (lien or restriction on use).

Second, you might also visit the office of the cadaster located at the Municipality to check the map of the property and cross-check its size and boundaries with the information obtained at the registry.

This is a costly process. But luckily, this is no longer necessary. Due diligence can now be done on-line from any computer in the world. The city of Comayagua was a pioneer in integrating the register and cadastral information on a single digital support ten years ago. The same reform is currently being introduced in Tegucigalpa.

Mozambique: On Reform Path

Recently, the Doing Business team visited Mozambique, and saw first-hand its path of reform and new policies to ease doing business. Last year Mozambique climbed 6 spots on the global Doing Business ranking, from 140 to 134. In 2006 a new commercial code was implemented. The new code increased minority shareholders protection and made it easier to hold directors and controlling shareholders liable for misconduct. In SADC, only South Africa has better regulations for protecting minority shareholders.

Mozambique also recently passed a new labor code. This is likely to have a positive change to its ranking on the Doing Business employing workers indicator.  The maximum duration of term contracts was extended to 72 months (that is a term contract of up to 2 years renewable twice), allowing workers and employers increased employment options. Mozambique is slowly making its labor market more flexible.

Privatization of Building Control Proceedings

The Dealing with Licenses indicator of Doing Business measures the administrative hurdles associated with building a new warehouse in the main economic center of 181 countries. Every year the Doing Business report records reforms in countries around the world that make it easier for builders to get their new constructions approved faster.

Over the last decade, building control systems in Europe have undergone significant changes. In the past, public building offices were the only ones allowed to establish building standards and issue building permits, perform inspections, and issue completion certificate if new constructions were in compliance with these standards. Fiscal constraints of municipalities and dissatisfaction with lengthy processes initiated a trend towards liberalization of aspects of building control proceedings.

Red Ribbon vs Red Tape

Have you seen the red ribbons on ads, cars, or as a big banner on the outside of the headquarters of the World Bank during the first week of December? It showed support for the global HIV/AIDS campaign. Other than for such limited purposes, red tape is rarely a positive contribution to anything.

The Doing Business report is published once a year in the fall. Each year, more and more governments and institutions realize what red tape is not doing for their country. The EU has created a work program to speed up the diminishing of rules and regulations for its citizens. In January 2008, the European Commission’s Action Programme for Reducing Administrative Burdens reported its results at its first anniversary. In 2007 savings were €500 million Euros.

Bloomberg Markets: India Needs a Bureaucracy Buster

Interesting excerpts from a commentary written by Andy Mukherjee from the May 2008 issue of Bloomberg Markets magazine:

"From earth sciences and public grievances to social justice, urban poverty and the diaspora, the Indian government has a ministry for everything and everyone.  Forming a new agency is its way of legitimizing an activity or an interest group by saying, "We care about you."

...Of course the number of ministries--there are 48 of them, plus "independent departments" of atomic energy and space--also reflects the compulsion of running a coalition government. 

...Including junior ministries, 79 politicians currently hold high office in the federal government.  State governments replicate many of the federal ministries and have some additional ones besides.  Uttar Pradesh, the most populous state, has a minister for gardens.

Amid this plenitude, the office that's badly needed and remains missing in India is the Ministry for Doing Business...  India needs a minister for doing business to reduce the clutter and confusion businesses face when dealing with a very large, and growing executive branch.  Not only that.  The further one moves down the chain of command--from federal to state governments and then to civic management--the denser the web of control becomes, even as the responsiveness of the officialdom turns less predictable.

Oral Justice

I just came back from a visit to Bogota. The Doing Business reform team (see picture) was there this week to learn about progress with business regulatory reforms in Colombia. Several positive reforms are taking place: in trading across borders, in registering property, in taxes, and in enforcing contracts.

The most impressive reform is happening in the courts. The main feature is moving to oral presentation of evidence in commercial (and other civil) disputes. This is done to reduce delays. If reforms in other countries like Mexico (2005) and Georgia (2007) are any indication, Colombian litigants are in for a major improvement.

What's the big deal? Well, now every piece of evidence has to be presented to the judge in writing. Each party to the commercial dispute writes and submits to the judge and their opponent. They, in turn, take time to read and respond. And so it goes.

Who came up with such crazy system? The Spanish colonizers. But that's another story.

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.

Reforming Italy’s Old Insolvency Regime

The long-awaited radical overhaul of Italy’s arcane insolvency regulations came into force when in 2006, parliament replaced a once notoriously cumbersome body of procedures with one resembling key provisions of Chapter 11 in the United States. The new process favors corporate restructuring over the finality of liquidation and strengthens lenders’ rights to stimulate freer flow of credit to small and medium sized firms.

With momentum for reform languishing on the parliamentary agenda for over five years, the financial crises that rocked some of Italy’s leading corporate giants—highlighted by Parmalat’s near overnight demise in 2003—finally brought to bear sufficient political pressure to significantly revisit the bankruptcy law for the first time since 1942. Comprehensive reform saw the light of day when the final set of 2006 regulations demolished the old law’s outdated criminal liability provisions.

Going Portable in Phnom Penh

Up until last year, entrepreneurs in Cambodia who sought to obtain loans to expand their businesses might have found themselves coming up against a brick wall. As the country had no secured transactions law, an entrepreneur—particularly a small or medium-sized one—would likely have found himself with little to offer potential lenders in the way of collateral.

Land was acceptable as collateral—that is, if the entrepreneur was fortunate enough to own any.

Tangible movable property (such as the sewing machines of a clothing maker) was also acceptable—if the entrepreneur handed the property over to the lender. Of course, this would effectively deprive her of her business and negate the whole reason for getting a loan in the first place.

All this changed with the enactment of the country’s new Law on Secured Transactions in 2007. While Doing Business is still evaluating the impact that the new law will have on Cambodia’s score in the Legal Rights index of the Getting Credit indicator, the law looks to be a giant step forward. It creates a Filing Office within the Ministry of Commerce in which lenders can register their security interests in movable property.

The Credit Crunch in Zambia

Commercial banks - mostly subsidiaries of foreign banks - are the most dominant financial institutions in Zambia. The banking system is comprised of 14 commercial banks, holding 90 percent of financial assets. Foreign equity participation is significant, accounting for three quarters of the banking system capitalization with regional leaders such as Standard Chartered, Barclays or Stanbic controlling a sizable part.

However, a financial sector diagnostic carried out by the World Bank Group noted that by the end of 2005, credit to the private sector by banks represented only 8% of GDP in 2005. Furthermore, only 5,000 people hold 90% of loans, and just 8% of Zambia's adult population had a bank account as of 2005.

Credit Registries: Public or Private?

Credit registries are institutions that collect and distribute credit information on borrowers. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. They help good payers differentiate themselves from the bad ones, awarding good payers (even if they are poor or lack collateral) with easier and cheaper access to formal credit.

Credit registries free entrepreneurs from having to rely on personal connections when trying to obtain credit.

Credit registries can either be public institutions or for-profit private companies. Private bureaus distribute broader credit information. Public credit registries are located in general within the Central Bank and are mostly focused on bank supervision and the control of systemic risks in the financial system. Private credit bureaus are focused on providing useful credit information to lenders, so they can properly evaluate the creditworthiness of potential borrowers.

FIGURE 1: PRIVATE BUREAUS DISTRIBUTE BROADER CREDIT INFORMATION Source: Doing Business database. Sample: 178 economies

What’s the Best Minimum?

It depends. However, when it comes to paid-in capital requirement the best minimum is zero. 75 economies in the Doing Business sample of 178 agree with this statement. Nevertheless, the rest do not and impose minimum paid-in capital requirement of up to 36 times the income per capita of the country. However, at least one of those 75 economies is now considering imposing a minimum paid-in capital requirement – Antigua and Barbuda.

Antigua and Barbuda currently has no minimum capital requirement. That is, the shareholders decide on how much to invest initially in the business, depending on the industry and banking financing requirements. However, the Company Registrar feels this solution is not optimal because it promotes the creation of fake companies and it does not provide enough protection to creditors. Consequently, there is a request from the registrar to raise the paid-in minimum capital requirement to EC$ 100,000 (over USD37,000 and over 3 times Antigua and Barbuda’s income per capita). Will this be a step forward?

Aiming for Top 25

In February 2008 in Minsk, the Doing Business team (see picture) met with 45 government officials from 17 different agencies of the Republic of Belarus. Every single one of these representatives expressed their absolute commitment to ease business regulation in the country. Their aim is to be among the top 25 countries in the ease of doing business and top 10 reformers in the World Bank’s Doing Business 2009 report.

One might argue that the goal that Belarus has set seems rather ambitious, not least because this country is currently ranked at number 110.

The M-Word

The Economist recently ran a special report on technology and government (see picture). The report provides valuable lessons on the way developed countries harnessed the use of technology to better provide public goods, foster democracy, reduce corruption and cited examples of what poor countries could do to catch up.

Basic to the Doing Business project has been the advocacy of minimal personal contact with officials, notaries, lawyers in favor of greater use of technology in doing business.

Best practices from the Doing Business Starting a Business indicator recommend completing registration procedures online. Not only to save money, time and efforts of starting up businesses but also empower people to pursue their business ideas free from the potential of being asked for bribes. Technology also offers a tool to monitor government efficiency and transparency and thus put pressure on the government to better function. The government too benefits from increased revenues and enhanced public satisfaction with governance.

Colombia: “We Can Do Better”

“We can do better” was Colombian President Alvaro Uribe’s favorite phrase during the launch of Doing Business Colombia 2008 on January 30 in Bogota.

He is right. During the event, the results of the sub-national study that compared the ease of doing business in 13 cities in Colombia showed that smaller municipalities like Pereira, Manizales or Bucaramanga are doing better than Bogota, the city that represents Colombia in the global ranking.

Bogota does not lead in any of the 5 indicators covered in the Colombian study (starting a business, registering property, paying taxes, trading across borders and enforcing contracts). And, in the case of enforcing contracts it ranks last. For example, in Bogota 1,354 days are needed to resolve a commercial dispute, whereas only 422 days are required in Villavicencio.

This is why, encouraged by the findings of this report, the Colombian government started an initiative lead by the National Planning Department, the office of the High Commissioner for Competitiveness and the Ministry of Commerce, Industry and Tourism, to improve the business environment across the country.

Four Years Early or Four Decades Late?

One EU objective is to cut administrative hurdles for businesses by 25% in 2012. You can hear the business cheer. Cutting red tape is not easy anywhere, but having bureaucrats on the private sector side gives hope to the skeptics. The European Commission created a Fast Track approach to simplify many regulations and procedures for entrepreneurs. Here, Fast Track means that those procedures that can be reduced or eliminated the fastest will be tackled first.

One of the sectors that will see an early impact of this objective is the transportation sector. Last month, the European Parliament adopted the European Commission’s proposal to reduce the paper work that transport companies have to deal with.

EU Executive to Shake up Notaries Services

Last week, the European Commission (EC) published a landmark study by the Centre of European Law and Politics at Bremen University. Legal fees are a small fraction – between 0.34% and 2.94%- of an average real estate transaction, but vary widely across EU member states.

Among other interesting results, this study shows that I would be paying three times more in legal fees in France than in the Netherlands for the same €250,000 house. Why would my French friends be willing to pay more for the same service?

The European Commission is not opposed to all regulation of professional services if there are legitimate arguments for it, e.g. consumer protection. But it requires a strict proportionality test to justify a more restrictive regulation. Not meeting this test could jeopardize the basics of the European single market.

Financial Crises, Scandals and Protecting Investors

During the last months, the US subprime crisis has been a major subject of headlines worldwide. In response to this debacle, shareholder activism may surface through legal actions against individual directors or CEOs involved in the crisis. T