Doing Business Blog - The World Bank Group

Smart Regulation: Key to Competitiveness

"Smart Regulation" is a basic concept to many regulatory programs. Canada, for example, set up an External Advisory Committee on Smart Regulation (EASCR) in May 2003 to modernize the regulatory system and support an innovative and dynamic economy. United Kingdom established Better Regulation Executive (BRE) in May 2005 to challenge new legislation and simplify, improve and even scrap existing regulation. Singapore formed Smart Regulation Committee (SRC) in December 2005 to improve the knowledge, awareness and practice of regulation across the public service, too.

Smart regulation is not about regulating less. It is about governments working better to serve the interests of people: better protection, lower costs, faster and more predictable regulatory processes, less overlap and duplication, more rapid alignment with global best practices and greater transparency and accountability. It means "competitiveness" and "efficiency".

It is therefore not surprising that economies rank best in the Doing Business are among the most competitive around the globe. In fact, 19 out of the 25 best performing economies from Doing Business 2008 and 17 from Doing Business 2009 are ranked among the 25 most competitive economies in the Global Competitiveness Report 2008-2009.

Singapore focuses on doing business in APEC

Singapore, ranked 1 out of 181 economies on the ease of Doing Business, is hosting the upcoming Asia Pacific Economic Cooperation (APEC) Conference this spring.  APEC covers 21 countries, and senior APEC officials are making resisting protectionism and accelerating economic integration key priorities for this year’s meeting.

One new feature of the conference is an initiative by Singapore to identify the top areas of regulatory barrier when doing business in economies of APEC. To achieve this, it is introducing an "Ease of Doing Business" survey, based on that of the Doing Business project. It aims to provide suggestions on the areas and types of reforms to regulations that businesses would like to see APEC governments embark on.

Singapore wants to highlight the results from the survey to the APEC governments to help improve the ease of doing business in the 21 member economies. Any business located in one of the 21 APEC countries can complete the survey through this link. 

Tajikistan, in Reform Mode

In the six-year history of Doing Business, it has become evident that indeed what gets measured gets done. Often, the Doing Business data stimulates debate among policymakers prompting them to address challenges in the regulatory environment in their countries. And policy-makers are often inspired by other reformers. Last year, Kyrgyzstan was the first Central Asian country to make it into the top 10 reformers’ list. This year, two of its neighbors – Kazakhstan and Tajikistan – are also in reform mode.

Earlier in March, a Doing Business reform advisory team visited Tajikistan to support the Government’s business climate reform efforts. Ranked 159th out of 181 economies on the ease of doing business – and last in the Eastern European and Central Asian (ECA) region – Tajikistan seems determined to improve its business climate this year, led by the State Committee on Investments and the President’s Office.

Better Practice Comes to New York City Building Codes

On July 1, 2008, Mayor Michael R. Bloomberg announced the launch of the new City of New York Construction Codes, the first modernization of the Building Code since 1968. The Building Code in New York City had not been updated for almost 40 years. Not anymore. The new Codes require the Building Department to revise the Codes every 3 years to incorporate new standards, technologies and materials.  As of July 1, 2009, everyone is required to follow the new rules.

Regulatory Reform – Lessons from the British BRE

The past few years have shown incredible convergence in how many governments implement regulatory reforms. Just between June 2007 and June 2008, 113 economies introduced 239 reforms as recorded by Doing Business, the most recorded in a single year since the project started.

On February 24, I attended a regulatory reform session of the Financial and Private Sector Development Forum 2009, in which Jitinder Kohli, Chief Executive of Better Regulation Executive (BRE), shared with us his experience as BRE leads the regulatory reform agenda across the British government.

Doing Business - How Useful Are These Indicators Anyway?

This was the big question during a sometimes heated panel discussion I recently attended in Miami. With a lawyer, an investor, and a government official present, one can imagine that the views varied. Juan Pablo Capello from Greenberg Traurig, who has advised many international investors, saw the indicators as quite limited as they focus mostly on local, small and medium size enterprises. In his view, sovereign ratings and legal certainly matter much more for foreign investors. Luis Manuel Kolster from GM countered that actually investors do look at tax rates and regulatory burden, but the decision to invest is also foremost driven by market size and cost. What I found most interesting was the government perspective, or should I say reformer perspective, by Liliana Rojas from the Colombian Ministry of Commerce. At the end of the day, it is governments that create and shape the regulatory environment for businesses. So, are they doing this in the sole hope of attracting sudden large foreign investment? She saw the indicators and rankings as a rather useful tool for benchmarking, informing reform agendas and tracking progress. The goal of these reforms? Promote and support local businesses and, in this way, aid job creation and growth. In the end, all participants agreed that, particularly nowadays, this is an important objective to have.

Reforming Outdated Commercial Laws

Three weeks ago I visited El Salvador and Honduras to discuss different aspects of their reform program inspired by the Doing Business (DB) indicators. In San Salvador, representatives from Central American governments met in a two-day workshop to share successful experiences of regulatory reform and learn from each other.

Panama and the Dominican Republic sent participants as did Honduras, Guatemala and Nicaragua. Some of the participating countries – such as the host nation, Guatemala and Honduras – have been reforming for a while and are planning their next steps. The Dominican Republic was a top-10 reformer last year. Others – such as Nicaragua and Panama – are relative newcomers to the reform field. We will see how much they can and will get done.

China: Tax Reform and the Financial Crisis

The financial crisis has brought unprecedented challenges to the global economy, and with it a rising demand for regulatory efficiencies.

As a response to current challenges to China’s domestic economy, the Chinese State Administration of Taxation (SAT) issued a notice announcing that the Value Added Tax (VAT) refund rate for export of textiles and garments would be increased from 14% to 15%, to take effect from 1 February.

The obvious result? As estimated by Jingming Bai, Deputy Director of the Chinese Research Institute for Fiscal Science, increasing the VAT refund rate by 1 percentage point would result in US$731 million for Chinese companies.

What’s more, it would save thousands of jobs in the Chinese textiles industry, where the majority of workers are women.

Should competition agencies care about the informal sector?

Actually, yes. Informal firms can operate in the same product or geographic markets as formal firms and therefore affect the competition level. So what can competition agencies do to address the informal sector?

The OECD recently held a forum on competition that gathered delegates from over 100 competition agencies. One of the sessions had the purpose of increasing the knowledge about the role of the informal sector for competition.

First, can informality be good for competition? On one hand unregistered firms may be unfair competitors to the formally registered companies because informal firms can gain price advantage by not paying taxes and not complying with regulations. Here the competition agencies have very limited power, since the enforcement of these regulations is often outside their jurisdiction. Addressing these non-compliances are normally the job of tax authorities and other regulation agencies. On the other hand, informal firms can increase the degree of competition in a market by reducing the market share of formal firms. Competition agencies are in fact taking informal firms when computing market shares. The challenge in this case is to measure the market share of informal firms. Competition agencies are being creative about it. For instance, in Bulgaria the competition agency use the purchases of cement (i.e., the main input of the industry being analyzed) to assess the market share of informal firms in the ready-mix concrete market.

Looking for Inspiration

The Doing Business project of the World Bank Group, which measures the ease of administrative procedures that matter to businesses such as starting a business, registering a property, enforcing a contract or carrying international trade can be a strong means of holding governments accountable for their work.

Chambers of Commerce, Architects' associations or Law societies may be interested in what a Doing Business-based methodology has to offer. For example, Doing Business data raise simple questions:

- Why does it take 4 days in Armenia but it takes 40 days in Germany and 334 days in Angola to transfer a land title?