Sent: Wednesday, September 08, 2004 11:44 AM
Subject: WB NEWS RELEASE: Doing Business In 2005: Latin American Nations
Doing Business In 2005: Latin American Nations Struggle To Reduce Red
Tape For Business, Miss Large Growth Opportunities
WASHINGTON, September 8, 2004 - Colombia made the most progress among Latin
American nations in improving its investment climate last year and was rated
the second-fastest reformer in the world, according to a new report from the
World Bank Group. Improvements were made in starting new businesses, in enforcing
contracts through the courts, and in increasing the flexibility of employment
regulation.
Doing Business in 2005: Removing Obstacles to Growth, a report cosponsored by
the World Bank and International Finance Corporation, the private sector lending
arm of the World Bank Group, finds that investment climate reforms, while often
simple, can help create job opportunities for women and young people, encourage
businesses to move into the formal economy, and promote growth.
Between 2003 and 2004, for example, Colombia witnessed a jump of 16 percent
in new business registrations after simplifying its entry procedures. The establishment
of a single-access point for company registration reduced the time to start
a business from 60 to 43 days.
However, the report, which benchmarks regulatory performance and reforms in
145 nations, finds that poor nations, through administrative procedures, still
make
it two times harder than rich nations for entrepreneurs to start, operate, or
close a business, and businesses in poor nations have less than half the property
rights protections available to businesses in rich countries.
Worldwide, rich countries undertook three times as many investment climate reforms
as poor countries last year. European nations were especially active in enacting
reforms. The top 10 reformers for the most recent survey year were Slovakia,
Colombia, Belgium, Finland, India, Lithuania, Norway, Poland, Portugal, and
Spain.
Other findings related to Latin American nations:
Of the 58 countries that reformed business regulation or strengthened the protection
of property rights in the last year, only six were in Latin America-Colombia,
Nicaragua, Argentina, Honduras, Bolivia and Brazil.
Only one nation in the region, Chile, ranked in the top quartile of the countries
surveyed on the ease of doing business. Four nations, Ecuador, Guatemala, Honduras
and Venezuela, ranked in the bottom quartile.
Among nations enacting reforms, Argentina, Bolivia, and Nicaragua reduced the
time to start a business: In Argentina, from 68 to 32 days; in Bolivia, from
67 to 59 days; and in Nicaragua, from 71 to 45 days.
Colombia scrapped the public sector monopoly on enforcement of judicial decisions,
cutting the time to collect overdue debt by 30 percent. Brazil's credit registry
implemented wide-ranging reforms by allowing online access, distributing both
positive and negative information, and offering new
products to lenders.
Latin American countries offer the weakest legal protections for lenders and
borrowers of any region in the world. They also have the least-efficient process
for resolving business disputes of any region.
"Poor countries that desperately need new enterprises and jobs risk falling
even further behind rich ones who are simplifying regulation and making their
investment climates more business friendly," said Michael Klein, World
Bank/IFC Vice President for Private Sector Development and IFC Chief Economist.
Doing Business in 2005 updates the work of last year's report on five sets of
business environment indicators: starting a business, hiring and firing workers,
enforcing contracts, getting credit, and closing a business; expands the research
to 145 countries; and adds two new indicators, registering property and protecting
investors. "This year, Doing Business gives policymakers an even more powerful
tool for measuring their regulatory performance in comparison to other countries,
learning from best practices globally, and prioritizing reforms. Since last
year, 13 countries have asked to be included in the Doing Business analysis,"
said Simeon Djankov, an author of the report.
The main research findings of Doing Business in 2005:
Businesses in poor countries face larger regulatory burdens than those in rich
countries. Poor countries impose higher costs on businesses to fire a worker,
enforce contracts, or file for registration; they impose more delays in going
through insolvency procedures, registering property, and starting a business;
and they afford fewer protections in terms of legal rights for borrowers and
lenders, contract enforcement, and disclosure requirements. In administrative
costs alone, there is a threefold difference between poor and rich nations.
The number of administrative procedures and the delays associated with them
are twice as high in poor countries.
The payoffs from reform appear to be large. The report estimates that an improvement
from the bottom to the top quartile of countries in the ease of doing business
is associated with an additional 2.2 percentage points in annual economic growth.
An indication of the payoff comes from Turkey and France, each of which saw
new business registration increase by 18 percent after the governments reduced
the time and cost of starting a business last year.
Slovakia's reform of collateral regulation helped increase the flow of bank
loans to the private sector by 10 percent. The payoff comes because businesses
waste less time and money on unnecessary regulation and devote more resources
to producing and marketing their goods and because governments spend less on
ineffective regulation and more on social services.
Heavy regulation and weak property rights exclude the poor – especially
women and younger people - from doing business. The report finds that weak property
rights and heavy business regulation conspire to exclude the poor from joining
the formal economy. "Heavy regulation not only fails to protect women,
young people, and the poor - those it was intended to serve - but often harms
them," said Caralee McLiesh, an author of the report. Doing Business shows
that countries with simpler regulations can provide better social protections
and a better economic climate for business people, investors, and the general
public.
The report builds on noted economist Hernando de Soto's work, showing that while
it is critical to encourage registration of assets, it is as important - and
harder - to stop them from slipping back into the informal sector.
The top 20 economies in terms of ease of doing business are New Zealand, United
States, Singapore, Hong Kong/China, Australia, Norway, United Kingdom, Canada,
Sweden, Japan, Switzerland, Denmark, Netherlands, Finland, Ireland, Belgium,
Lithuania, Slovakia, Botswana, and Thailand.
The Doing Business project is the product of more than 3,000 local experts -
business consultants, lawyers, accountants, and government officials –
and leading academics, who provide methodological support and review. The data,
methodology, and names of contributors are publicly available online.To view
the Doing Business Latin American and Caribbean Regional Profile, please visit:
http://wbln0018.worldbank.org/LAC/lacinfoclient.nsf/8d6661f6799ea8a48525673900537f95/51cd5443e17f03b685256f080077f1c6/$FILE/LAC%20%20Report%202005.pdfThe
full report is available online to journalists at the World Bank's Online Media
Briefing Center http://media.worldbank.org/
Investment climate indicators and analysis, along with information on ordering
the report, are available on the Doing Business website:
http://rru.worldbank.org/doingbusiness
Regional Contact:
Adriana Gomez
Phone:+(202) 458 5204
Cell: +(202) 294 4698
Email: agomez@ifc.org