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Last Updated: Wednesday, 8 September, 2004, 11:27 GMT 12:27 UK
World Bank praises Slovak reforms
Bratislava, Slovakia
Slovakia - not just pretty, but a good place to do business as well
Slovakia and Colombia have improved their business climates the most during the past year, according to a report from the World Bank.

The two countries have cut the time needed to start a business, revamped labour laws, reduced red tape and made it easier for firms to collect debts.

The bank said that as a result, growth had picked up, there were more jobs for women and the black economy had shrunk.

But the study found that many African nations were lagging behind in reforms.

Helping to drive reform in Slovakia, as well in a number of other European nations, was the lure of European Union membership, the World Bank said.

One of 10 new entrants that joined in May this year, Slovakia needed to bring its domestic regulation in line with EU standards and ensure companies were prepared for the increase in competition that was likely to follow.

Higher costs

The World Bank warned that countries who delay the introduction of reforms risk being left behind.

Heavy regulation not only fails to protect women, young people and the poor - those it was intended to serve - but often harms them
Caralee McLiesh, World Bank report author

Poor countries last year undertook only a third of the investment reforms that were seen in richer nations, according to the report.

That means there are "higher costs on businesses to fire a worker, enforce contracts, or file for registration," the World Bank said.

"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 disclosures."

Time lag

An entrepreneur, for example, will need 27 days on average to start a new business in a rich country.

In a poor to lower-middle income country, the same process takes 59 days; in a dozen countries its can drag on for more than 100 days.

Once changes are made, however, the difference can be seen almost immediately, the World Bank said.

Ethiopia saw the number of new business registrations jump by almost 50% between 2003-2004 after simplifying the process. In Morocco, the number rose by 21%, while in Turkey and France it was up 18%.

Top 10 reforming countries
Slovakia
Colombia
Belgium
Finland
India
Lithuania
Norway
Poland
Portugal
Spain
Source: World Bank

And it is not just the speed with which a business can get off the ground that counts.

The simpler the process, the less it costs and the more transparent it becomes. It also becomes easier to enforce regulations, safeguarding the rights of workers and companies.

Firms can spend more on marketing their products, while governments can concentrate on social services, rather than enforcing ineffective laws.

"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, one of the authors of the World Bank report.

Problem area

Africa was singled out by the World Bank as one region that is lagging in the reform process.

According to the report, 16 of the 20 most difficult places to do business are in Africa. The Democratic Republic of Congo, Angola, Burkina Faso and Chad are all in the bottom five.

The World Bank said that to get a company registered in Chad, a businessperson needs to go through 19 different processes; in Congo it takes 155 days to get a firm up and running; in Angola it takes more than three years to enforce a contract.




SEE ALSO:
India gets $12bn World Bank deal
27 Aug 04  |  Business
Growth in Asia 'cutting poverty'
26 Aug 04  |  Business
Loan targets Brazil's environment
25 Aug 04  |  Business
Sub-Saharan Africa poverty grows
20 Jul 04  |  Africa


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