Developing countries dominate Doing Business 2015’s most improved list

The World Bank has been producing an annual report ranking countries according to how easy it is to set up and run a business there — a ranking that has become a handy guide for small and midsize companies worldwide. And in the latest Doing Business report, eight of the 10 countries where the ease of doing business has improved the most come from the developing world. From June 2013 to June 2014 — the period covered by the 2015 rankings — 123 countries implemented at least one reform in the different indicators measured by the Doing Business report. More than 63 percent of these reforms lowered the complexity and cost of regulatory procedures, while the rest boosted legal institutions. Eighty-five percent of countries in Europe and Central Asia implemented at least one reform during the period — the highest share among all regions. Sub-Saharan Africa, meanwhile, is home to many of the worst-ranked economies on the list. Even so, 74 percent of countries in the region implemented at least one reform to ease the process of starting a business. Five of the 10 economies with the most improved business environment come from the region as well. These countries, however, do not necessarily have the highest jumps in their distance-to-frontier scores — the World Bank’s new method of assessing the ease of doing business around the world. For instance, Albania, whose distance-to-frontier score in the 2015 rankings improved 6.27 points from 2014, is not among the top 10. Despite the reforms it implemented to make starting a business, dealing with construction permits and registering a property easier, Albania also increased the burden of getting credit and paying taxes through a weakened secured transactions system and a higher corporate income tax rate. Not all of these countries boast only improvements, either. The Democratic Republic of the Congo, for example, increased the building permit fee and made construction permits more costly. But while it has consistently been among the worst-ranked economies in the overall Doing Business lists — it placed 184th in both the 2014 and 2015 rankings — Congo implemented regulatory reforms that were significant enough to propel it to the list of most improved countries in the 2015 rankings. Below, we look at the distance-to-frontier scores of the eight developing countries where the business regulatory environments have improved the most and their most important business reforms. Tajikistan 2015 distance-to-frontier score: 48.57 2014 back-calculated distance-to-frontier score: 43.32 Improvement: 5.25 Enabling its statistics agency to issue the code for a new business at the time of registration made starting a business easier in Tajikistan. Its lowered cost of obtaining an architectural planning assignment made dealing with construction permits easier for entrepreneurs as well. In addition, Tajikistan made tax payments easier by introducing an electronic system for filing and paying corporate income tax, value-added tax and labor taxes. In June 2013, the Credit Information Bureau of Tajikistan also started to provide credit scores, making credit information more accessible. Benin 2015 distance-to-frontier score: 51.10 2014 back-calculated distance-to-frontier score: 46.61 Improvement: 4.49 The revision of the Uniform Act on Commercial Companies and Economic Interest Groups by the Council of Ministers of the Organization for the Harmonization of Business Law in Africa, or OHADA, authorized each of its member states to adopt a national legislation that will reduce the minimum paid-in capital requirement, or the capital that entrepreneurs have to deposit in a bank account or with a notary within three months of incorporation. Benin was one of the OHADA members that reduced the minimum capital requirement. The West African country also made it easier to trade across borders by reducing the number of documents needed for customs clearance of imports. For instance, the technical standard or health certificate is now only a requirement for food imports. By establishing a commercial section within its court of first instance and assigning six judges to exclusively hear commercial cases, Benin made it easier to enforce contracts as well. Togo 2015 distance-to-frontier score: 51.29 2014 back-calculated distance-to-frontier score: 47.03 Improvement: 4.26 Like Benin, Togo was among the OHADA economies that reduced its minimum paid-in capital requirement. It also lowered labor taxes and mandatory contributions by at least 1 percentage point. Further, Togo implemented reforms in strengthening its minority investor protections: increased disclosure requirements for related-party transactions and improved access to information in shareholder actions. Ivory Coast 2015 distance-to-frontier score: 52.26 2014 back-calculated distance-to-frontier score: 48.90 Improvement: 3.36 Among the 10 most improved countries this year, only the Ivory Coast featured in last year’s most improved list as well. Going beyond the reduction of the minimum capital requirement, the Ivory Coast scrapped its minimum paid-in capital altogether. With Senegal, it also adopted the Uniform Law on the Regulation of Credit Information Bureaus, which provides a legal framework for the establishment of credit information bureaus, before other OHADA states. In addition, the Ivory Coast created a unified process for tax and property registration and decreased the property registration tax. Its improved customs and port management also simplified the process of producing the inspection report for imported cargo and lowered the port and terminal handling fees at its Abidjan port. Senegal 2015 distance-to-frontier score: 49.37 2014 back-calculated distance-to-frontier score: 46.09 Improvement: 3.28 Within sub-Saharan Africa, Senegal was the most active about improving minority investor protections. It amended its code of civil procedure to give litigants more rights to obtain evidence relevant to their claims from opposing parties. Senegal simplified property transfers by removing the requirement for authorization from the tax authority. This involved allowing applicants for a property transfer to merely notify the tax authority before going ahead with the transaction at the land registry. Senegal also shortened the time required to acquire a building permit. Trinidad and Tobago 2015 distance-to-frontier score: 64.24 2014 back-calculated distance-to-frontier score: 61.87 Improvement: 2.37 A new insolvency law in Trinidad and Tobago supported creditors’ rights and strengthened the flexibility in enforcement actions through a statutory mechanism for the rehabilitation of insolvent companies. Trinidad and Tobago also introduced an online platform for registering a business, which reduced registration time from 38 days to 14.5. Entrepreneurs in Trinidad and Tobago who will be registering their business can now also check whether their preferred company names are still available online. Democratic Republic of the Congo 2015 distance-to-frontier score: 40.60 2014 back-calculated distance-to-frontier score: 38.38 Improvement: 2.22 In April 2013, Congo’s central bank put up a credit registry through the launch of YSYS-CERI, an electronic credit reporting system that allows the exchange of credit information between its credit registry and financial institutions. Congo also established a one-stop shop and made starting a business easier. Further, Kinshasa reduced the number of approvals needed for new electricity connections and lowered the security deposit required. Azerbaijan 2015 distance-to-frontier score: 64.08 2014 back-calculated distance-to-frontier score: 61.97 Improvement: 2.11 Azerbaijan reduced the time to get an electronic signature for online tax registration, making starting a business easier for entrepreneurs. It also eased property transfers by introducing an online process for obtaining nonencumbrance certificates. An electronic system for filing and paying social insurance contributions, meanwhile, made paying taxes easier for companies. Check out more practical business and development advice online, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.