WASHINGTON, USA —Governments of 115 economies around the world launched 294 reforms over the past year to make doing business easier for their domestic private sector, paving the way for more jobs, expanded commercial activity, and higher incomes for many, according to the World Bank Group’s Doing Business 2020 study.
This latest edition of the study documents reforms implemented in ten areas of business activity in 190 economies over 12 months ending May 1, 2019. Business-friendly environments are associated with lower levels of poverty, and improved regulatory efficiency can stimulate entrepreneurship, startups, innovation, access to credit, and investment. The study is the 17th in an annual series that evaluates regulations enhancing or constraining business activity for small and medium-sized enterprises.
“Governments can foster market-oriented development and broad-based growth by creating rules that help businesses launch, hire, and expand,” World Bank Group President David Malpass said. “Removing barriers facing entrepreneurs generates better jobs, more tax revenues, and higher incomes, all of which are necessary to reduce poverty and raise living standards.”
It is important to note that Doing Business is not meant to be an investment guide, but rather a measurement of indicators of ease of doing business.
The ten economies where business climates improved the most were Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria, the study found. China and Togo appear among the top ten for the second consecutive year, while India makes the list for the third consecutive year, indicating that business regulatory reform is a multi-year process. Bahrain implemented the highest number of reforms, improving in nine out of ten areas measured by the report. China and Saudi Arabia followed with eight reforms each.
The ten economies scoring the highest on the ease of doing business rankings were New Zealand, Singapore, Hong Kong SAR China, Denmark, Republic of Korea, United States, Georgia, United Kingdom, Norway, and Sweden. Top performers typically had online business incorporation processes, electronic tax filing platforms, and online procedures for property transfers.
At the same time, 26 economies took steps that posed new obstacles to business activity. Many of these increased the costs of doing business.
An entrepreneur’s experience differs wildly in high- and low- performing economies. For example, it takes nearly six times as long, on average, to start a business in the economies ranked in the bottom 50 than in economies ranked in the top 20. Transferring property in the 20 top economies requires less than two weeks, compared to three months in the bottom 50. Obtaining an electricity connection in an average bottom-50 economy takes twice as long as in an average top-20 economy; the cost of such a connection is 44 times higher when expressed as a percent of income per capita.
The ten areas measured in the report are: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. One additional area, employing workers, is also measured but is not included in the rankings.
Starting a business, dealing with construction permits, getting electricity, and paying taxes were areas with the most active reform over this period. Reforms in dealing with construction permits and getting electricity have jumped in recent years. Many of the 37 economies that made construction permitting simpler streamlined interactions with agencies for pre-approval and inspection. To connect businesses with the power grid more efficiently, 16 economies invested substantially in modernizing electrical infrastructure. One outcome: average global duration of power cuts fell more than eight percent between 2017 and 2018.
Since its inception in 2003, more than 3,500 business reforms have been carried out in 186 of the 190 economies Doing Business monitors.
East Asia and Pacific: Economies in this region carried out 33 business-climate-enhancing reforms during the past year. While many made doing business easy for small and medium-sized entrepreneurs by global standards, the overall pace of reforms slowed. The number of reforms in the region fell by ten over the 12 months and reforms were implemented in fewer than half of its economies (12 out of 25). Even so, five are among the top 25 global performers, including Singapore (2nd), Hong Kong SAR, China (3rd); Malaysia (12th); Taiwan, China (15th); and Thailand (21st). China is among the top 10 improvers for a second consecutive year.
Europe and Central Asia: Economies in this region accelerated an already strong momentum to improve their business climates, enacting 56 reforms and leading globally in reforms on paying taxes and enforcing contracts. Europe and Central Asia is home to two of the world’s top 20 best places to do business – Georgia (7th) and North Macedonia (17th). Tajikistan ranks among the top ten most improved economies globally. Azerbaijan, the Kyrgyz Republic, Kosovo, and Uzbekistan were among the top 20 most improved economies worldwide.
Latin America and the Caribbean: Economies in the Caribbean carried out a record 19 reforms over the past year to make it easier for domestic enterprises to do business, but the region has more work to do to reach global standards. Puerto Rico and Jamaica were the region’s top-ranked economies, ranking 65th and 71st globally. Latin America continues to lag other regions of the world, but there are some bright spots. Colombia has implemented a total of 37 reforms since 2005 and continues to lead reform efforts in the region. Mexico remains the region’s top-ranked country, 60th, but for the second year in a row, Mexico did not introduce any major business climate improvements.
The Middle East and North Africa: Reforms across the Gulf economies have been on a steady rise, driven in part by the urgent need for economic diversification. Economies in the region implemented the most reforms on record to ease doing business for domestic enterprises – 57 business regulatory reforms, up from 43 during the previous 12-month period covered by the study. The region hosted four of the most improved countries world-wide: Saudi Arabia, Jordan, Bahrain, and Kuwait. These countries account for almost half of the region’s reforms. Saudi Arabia implemented reforms including establishing a one-stop-shop for business registration procedures, introducing a secured transactions law and an insolvency law, improving protections for minority investors, and measures to empower women economically. The United Arab Emirates remained the strongest performer overall in the region, placing 16th on the ease of doing business rankings.
South Asia: Many South Asian economies kept up a solid pace of business regulatory reforms as India and Pakistan both earned spots among the world’s top ten most improved economies and improved their global ease of doing business scores. Economies of the region carried out 17 reforms to improve the business climate for domestic enterprises. India continues to be the region’s top-ranked economy, placing 63rd in global ease of doing business rankings thanks to four reforms. In Pakistan, the time it took to obtain an electrical connection was cut by 49 days.
Sub-Saharan Africa: While economies in this region continued to improve their business climates, the pace of reforms has slowed, and the region lags other parts of the world in terms of reform impact and implementation. Economies of the region enacted 73 reforms, down from a record high of 108, and the number of countries implementing at least one reform fell to 31 from 40. While reform efforts continued in many countries, much needs to be done on performance and ensuring the impact of the reforms. Only two Sub-Saharan African economies rank in the top 50 on the ease of doing business rankings while most of the bottom 20 economies in the rankings are from the region.