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Arab World2011

  2. 2. © 2010 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington, DC 20433Telephone 202-473-1000Internet www.worldbank.orgE-mail feedback@worldbank.orgAll rights reserved.1 2 3 4 08 07 06 05A copublication of the World Bank and the International Finance Corporation.This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressedin this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governmentsthey represent. The World Bank does not guarantee the accuracy of the data included in this work.Rights and PermissionsThe material in this publication is copyrighted. Copying and/or transmitting portions or all of this work withoutpermission may be a violation of applicable law. The World Bank encourages dissemination of its work and willnormally grant permission to reproduce portions of the work promptly.For permission to photocopy or reprint any part of this work, please send a request with complete information to theCopyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax 202-522-2422; e-mail copies of the Doing Business global reports, Doing Business 2011: Making a Difference for Entrepreneurs,Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growthand Doing Business in 2004: Understanding Regulations may be purchased at
  3. 3. ContentsDoing Business in the Arab World 2011 is Regulations affecting 11 areas of the life Preface va regional report drawing on the global of a business are measured: starting a Executive summary 1Doing Business project and its database business, dealing with construction per- About Doing Business 9as well as the findings of Doing Business mits, registering property, getting credit, Doing Business topics2011, the eighth in a series of annual protecting investors, paying taxes, trad- Starting a business 16reports investigating regulations that en- ing across borders, enforcing contracts,hance business activity and those that closing a business, getting electricity and Dealing with construction permits 20constrain it. employing workers. The getting electric- Registering property 23 ity and employing workers data are not Getting credit 27Doing Business presents quantitative in- included in the ranking on the ease of Protecting investors 30dicators on business regulations and the doing business in Doing Business 2011. Paying taxes 34protection of property rights that can be Data in Doing Business 2011 are cur-compared across 183 economies—from rent as of June 1, 2010. The indicators Trading across borders 38Afghanistan to Zimbabwe—and over are used to analyze economic outcomes Enforcing contracts 42time. This report presents a summary of and identify what reforms have worked, Closing a business 45the Doing Business indicators for 20 Arab where and why. Ease of doing businesseconomies: Algeria, Bahrain, Comoros, Data notes 50Djibouti, the Arab Republic of Egypt, The methodology for the employingIraq, Jordan, Kuwait, Lebanon, Mau- workers indicators changed for Doing Doing Business indicatorsritania, Morocco, Oman, Qatar, Saudi Business 2011. See Data notes for details. Country tablesArabia, Sudan, the Syrian Arab Repub- Acknowledgmentslic, Tunisia, the United Arab Emirates,West Bank and Gaza and the Republicof Yemen.THE DOING BUSINESS WEBSITE Download reports Access to Doing Business reports as well asCurrent features subnational and regional reports, reform caseNews on the Doing Business project studies and customized country and regional profilesRankings economies rank—from 1 to 183 Subnational and regional projects Differences in business regulations at theDoing Business reforms subnational and regional levelShort summaries of DB2011 reforms, lists of since DB2004 Subnational-Reports Law libraryHistorical data Online collection of laws and regulationsCustomized data sets since DB2004 relating to business and gender issues http://wbl.worldbank.orgMethodology and researchThe methodology and research papers Local partnersunderlying Doing Business More than 8,200 specialists in 183 economies who participate in Doing Business Doing-Business Business Planet Interactive map on the ease of doing business
  4. 4. PREFACE vPreface A vibrant, competitive private sector—with firms making investments, creating jobs and improving productivity—promotes growth and expands opportunities for the poor. In the words of an 18-year-old Ecuadoran in Voices of the Poor, a World Bank survey capturing the perspectives of poor people around the world, “First, I would like to have work of any kind.” Enabling the growth of a competitive, transparent private sector —and ensuring that poor people can participate in its benefits—requires a regulatory environment where new entrants with drive and good ideas, regardless of their position in society, can get started in business and where firms can invest and grow without government interference, generating more jobs. Beginning in early 2011, the Arab world and the broader Middle East and North Af- rica region has witnessed a series of sweeping political changes. Although driven by a variety of factors, one key driver of these changes has been a sense of frustration, par- ticularly by young people, that they have not been able to find jobs. Hence, renewed at- tention is focused on the need to create more competitive private sectors wherein more innovative industries can grow and thrive – generating more employment opportuni- ties for all, especially young people. Their quest for more transparency, accountability and participation in the political and economic sphere also reflects their desire for a level playing field, which underpins a truly competitive business environment. Doing Business in the Arab World 2011 is the third in a series of annual reports bench- marking the regulations that enhance business activity and those that constrain it in 20 economies in the Arab world. The report presents quantitative indicators on business regulation and the protection of property rights in those 20 economies, and it is based wholly on the data and analysis of the Doing Business 2011 report that was published in November 2010. The data are current as of June 2010. A fundamental premise of Doing Business is that economic activity requires good rules—rules that establish and clarify property rights and reduce the cost of resolving disputes; rules that increase the predictability of economic interactions and provide contractual partners with certainty and protection against abuse. The objective is regulations designed to be efficient, accessible to all and simple in their implementa- tion. Doing Business gives higher scores in some areas for stronger property rights and investor protections, such as stricter disclosure requirements in related-party transactions. Doing Business is limited in scope. It takes the perspective of domestic, primarily smaller companies and measures the regulations applying to them through their life cycle. Economies are ranked on the basis of 9 areas of regulation—for starting a busi- ness, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a busi- ness. In addition, data are presented for regulations on employing workers and for a set of pilot indicators on getting electricity. It does not consider the costs and benefits of regulation from the perspective of society as a whole. Nor does it measure all aspects of the business environment that matter to firms and investors or affect the competitiveness of an economy. For example, it does not measure security, political risk, or macroeconomic variables. Its aim is simply to supply business leaders and policy makers with a fact base for informing policy mak- ing and to provide open data for research on how business regulations and institutions affect such economic outcomes as productivity, investment, informality, corruption, unemployment and poverty.
  5. 5. vi DOING BUSINESS IN THE ARAB WORLD 2011Through its indicators, the global Doing Business report has tracked changes to busi-ness regulation around the world, recording more than 1,500 important improvementssince 2004. Since its launch in 2003, the global Doing Business report has stimulateddebate about policy through its data and benchmarks, both by exposing potential chal-lenges and by identifying where policy makers might look for lessons and good prac-tices. Governments have reported more than 280 business regulation reforms inspiredor informed by Doing Business since 2005, including 40 among the 20 economies ofthe Arab world. Most were nested in broader programs of investment climate reformaimed at enhancing economic competitiveness, as in Colombia, Kenya and Liberia.Well designed and streamlined business regulations will have a stronger impact ongrowth and employment in an environment where rules of the game are the same foreveryone. This is best achieved with reforms that extend beyond the regulatory issuesmeasured by the Doing Business indicators. In structuring their reform programs forthe private sector, governments should recognize the need to use multiple informationsources, and reach out to many stakeholders and interest groups, all of whom bringimportant issues and concerns to the debate. World Bank Group dialogue with gov-ernments on the investment climate is designed to encourage critical use of the data,sharpening judgment, avoiding a narrow focus on improving Doing Business rankingswithin a framework which encourages broad-based reforms that enhance the invest-ment climate.This volume is a product of the staff of the World Bank Group. The team would like tothank all World Bank Group colleagues from the regional departments and networksfor their contributions to this effort.Augusto Lopez-Claros Simon C. BellDirector Sector ManagerGlobal Indicators & Analysis Financial and Private Sector DevelopmentFinancial and Private Sector Development Network Middle East and North AfricaWorld Bank Group World Bank Group
  6. 6. STARTING A BUSINESS 1Executive FIGURE 1.1 Strengthening credit information systems and easing cross-border trade,summary most popular reforms in the Arab world last year Share of Arab economies with at least 1 Doing Business reform making it easier to do business, by topic (%) 0 10 20 30 40 Starting a business Dealing with Doing Business reform by report year construction permits Registering DB2011 only property DB2005–DB2011 Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a businessEconomies in the Arab world continue Note: Not all indicators are covered for the full period. Paying taxes, trading across borders, dealing with construction permits andin 2009/10 to make it easier for small- to protecting investors were introduced in Doing Business 2006.medium-size enterprises to do business. Source: Doing Business database. In the past year, firms around theworld felt the repercussions of what spections. Similarly, Tunisia upgraded other custom posts around the country.began as a financial crisis in mostly its electronic data interchange system The United Arab Emirates streamlinedhigh-income economies and then spread for imports and exports, speeding up document preparation and reduced theas an economic crisis to many more. the assembly of import documents. In time to trade with the launch of DubaiWhile some economies were hit harder Egypt, modern customs centers are being Customs’ comprehensive new customsthan others, policy makers around the established at major ports and new in- system, “Mirsal 2.” Saudi Arabia reducedworld took steps in the past year to make formation technology systems are being the time to import by launching a newit easier for firms to start up and operate. implemented. In particular, electronic container terminal at the Jeddah IslamicThis is important. How easy or difficult it submission of export and import docu- Port. In West Bank and Gaza, more ef-is to start and run a business—and how ments was introduced at Alexandria Port. ficient processes at Palestinian customsefficient courts and insolvency proceed- These new systems are being rolled out to made trading easier.ings are—can influence how firms copewith crises. Business conditions also af- BOX 1.1fect how quickly new opportunities can Measuring regulation throughout the life cycle of a businessbe seized against the backdrop of finan- This year’s aggregate ranking on the ease of doing business is based on indicator sets thatcial and economic crises. measure and benchmark regulations affecting 9 areas in the life cycle of a business: starting Between June 2009 and May 2010, a business, dealing with construction permits, registering property, getting credit, protectinggovernments in 117 economies—includ- investors, paying taxes, trading across borders, enforcing contracts and closing a business. Doing Business also looks at regulations on employing workers and, as a new initiative, getting electric-ing 10 economies from the Arab world— ity (neither of which is included in this year’s aggregate ranking).1implemented 216 business regulation Doing Business encompasses 2 types of data and indicators. “Legal scoring indicators,” such asreforms. These reforms made it easier to those on investor protections and legal rights for borrowers and lenders, provide a measure ofstart and operate a business, improved legal provisions in the laws and regulations on the books. Doing Business gives higher scorestransparency, strengthened property for stronger investor and property rights protections in some areas, such as stricter disclosurerights, and helped streamline commer- requirements in related-party transactions. “Time and motion indicators,” such as those oncial dispute resolution and bankruptcy starting a business, registering property and dealing with construction permits, measure the efficiency and complexity in achieving a regulatory goal by recording the procedures, time andprocedures. In the Arab world, last year’s cost to complete a transaction in accordance with all relevant regulations from the point of viewmost popular reforms—strengthening of the entrepreneur. Any interaction of the company with external parties such as governmentcredit information systems and easing agencies counts as one procedure. Cost estimates are recorded from official fee schedules wherecross-border trade—together, accounted these apply. For a detailed explanation of the Doing Business methodology, see Data notes.for half the region’s total (figure 1.1). 1. The methodology underlying the employing workers indicators is being refined in consultation with relevant experts and stakehold- ers. The getting electricity indicators are a pilot data set. (For more detail, see the annexes on these indicator sets.) Aggregate rankings Bahrain built a modern new port, published in Doing Business 2010 were based on 10 indicator sets and are therefore not comparable. Comparable rankings based on 9improved its electronic data interchange topics for last year along with this year are presented in table 1.1 and on the Doing Business website (, and introduced risk-based in-
  7. 7. 2 DOING BUSINESS IN THE ARAB WORLD 2011TABLE 1.1Rankings on the ease of doing business AW DB2011 DB2010 DB2011 AW DB2011 DB2010 DB2011 AW DB2011 DB2010 DB2011RANK RANK RANK ECONOMY REFORMS RANK RANK RANK ECONOMY REFORMS RANK RANK RANK ECONOMY REFORMS 1 1 Singapore 0 62 61 Fiji 1 123 116 Russian Federation 2 2 2 Hong Kong SAR, China 2 63 82 Czech Republic 2 124 122 Uruguay 1 3 3 New Zealand 1 64 56 Antigua and Barbuda 0 125 121 Costa Rica 0 4 4 United Kingdom 2 65 60 Turkey 0 126 130 Mozambique 1 5 5 United States 0 66 65 Montenegro 3 127 124 Brazil 1 6 6 Denmark 2 67 77 Ghana 2 128 125 Tanzania 0 7 9 Canada 2 68 64 Belarus 4 129 131 Iran, Islamic Rep. 3 8 7 Norway 0 69 68 Namibia 0 130 127 Ecuador 1 9 8 Ireland 0 70 73 Poland 1 131 128 Honduras 0 10 10 Australia 0 71 66 Tonga 1 132 142 Cape Verde 3 1 11 12 Saudi Arabia 4 72 62 Panama 2 133 132 Malawi 2 12 13 Georgia 4 73 63 Mongolia 0 134 135 India 2 13 11 Finland 0 7 74 69 Kuwait 0 13 135 133 West Bank and Gaza 1 14 18 Sweden 3 75 72 St. Vincent and the Grenadines 0 14 136 136 Algeria 0 15 14 Iceland 0 76 84 Zambia 3 137 134 Nigeria 0 16 15 Korea, Rep. 1 77 71 Bahamas, The 0 138 137 Lesotho 0 17 17 Estonia 3 78 88 Vietnam 3 139 149 Tajikistan 3 18 19 Japan 1 79 78 China 1 140 138 Madagascar 2 19 16 Thailand 1 80 76 Italy 1 141 139 Micronesia, Fed. Sts. 0 20 20 Mauritius 1 81 79 Jamaica 1 142 140 Bhutan 1 21 23 Malaysia 3 82 81 Albania 1 143 143 Sierra Leone 3 22 21 Germany 1 83 75 Pakistan 1 15 144 144 Syrian Arab Republic 3 23 26 Lithuania 5 84 89 Croatia 2 145 147 Ukraine 3 24 27 Latvia 2 85 96 Maldives 1 146 141 Gambia, The 0 25 22 Belgium 1 86 80 El Salvador 0 147 145 Cambodia 1 26 28 France 0 87 83 St. Kitts and Nevis 0 148 146 Philippines 2 27 24 Switzerland 0 88 85 Dominica 0 149 148 Bolivia 0 2 28 25 Bahrain 1 89 90 Serbia 1 150 150 Uzbekistan 0 29 30 Israel 1 90 87 Moldova 1 151 154 Burkina Faso 4 30 29 Netherlands 1 91 86 Dominican Republic 0 152 151 Senegal 0 31 33 Portugal 2 92 98 Grenada 3 153 155 Mali 3 32 31 Austria 1 93 91 Kiribati 0 16 154 153 Sudan 0 33 34 Taiwan, China 2 8 94 99 Egypt, Arab Rep. 2 155 152 Liberia 0 34 32 South Africa 0 95 92 Seychelles 1 156 158 Gabon 0 35 41 Mexico 2 96 106 Solomon Islands 1 157 156 Zimbabwe 3 36 46 Peru 4 97 95 Trinidad and Tobago 0 17 158 157 Djibouti 0 37 35 Cyprus 0 98 94 Kenya 2 18 159 159 Comoros 0 38 36 Macedonia, FYR 2 99 93 Belize 0 160 162 Togo 0 39 38 Colombia 1 100 101 Guyana 3 161 160 Suriname 0 3 40 37 United Arab Emirates 2 101 100 Guatemala 0 162 163 Haiti 1 41 40 Slovak Republic 0 102 102 Sri Lanka 0 163 164 Angola 1 42 43 Slovenia 3 103 108 Papua New Guinea 1 164 161 Equatorial Guinea 0 43 53 Chile 2 104 103 Ethiopia 1 19 165 167 Mauritania 0 44 47 Kyrgyz Republic 1 9 105 104 Yemen, Rep. 0 20 166 166 Iraq 0 45 42 Luxembourg 1 106 105 Paraguay 1 167 165 Afghanistan 0 46 52 Hungary 4 107 111 Bangladesh 2 168 173 Cameroon 1 47 49 Puerto Rico 0 108 123 Marshall Islands 1 169 168 Côte d’Ivoire 1 48 44 Armenia 1 109 97 Greece 0 170 172 Benin 1 49 48 Spain 3 110 110 Bosnia and Herzegovina 2 171 169 Lao PDR 1 4 50 39 Qatar 0 10 111 107 Jordan 2 172 170 Venezuela, RB 1 51 51 Bulgaria 2 112 117 Brunei Darussalam 3 173 171 Niger 1 52 50 Botswana 0 11 113 109 Lebanon 1 174 174 Timor-Leste 1 53 45 St. Lucia 0 12 114 114 Morocco 1 175 179 Congo, Dem. Rep. 3 54 55 Azerbaijan 2 115 113 Argentina 0 176 175 Guinea-Bissau 1 5 55 58 Tunisia 2 116 112 Nepal 0 177 177 Congo, Rep. 1 56 54 Romania 2 117 119 Nicaragua 1 178 176 São Tomé and Principe 1 6 57 57 Oman 0 118 126 Swaziland 2 179 178 Guinea 0 58 70 Rwanda 3 119 118 Kosovo 0 180 180 Eritrea 0 59 74 Kazakhstan 4 120 120 Palau 0 181 181 Burundi 1 60 59 Vanuatu 0 121 115 Indonesia 3 182 182 Central African Republic 0 61 67 Samoa 1 122 129 Uganda 2 183 183 Chad 0Source: Doing Business database
  8. 8. EXECUTIVE SUMMARY 3FIGURE 1.2 understanding some of the underlyingFifty percent of economies in the Arab world reformed business regulation in 2009/10 causes of the financial crisis. But whereShare of economies with at least 1 Doing Business reform making it easier to do business (%) business regulation is transparent and ef-Eastern Europe ficient, opportunities are less likely to be & Central Asia 84 East Asia based on personal connections or special & Pacific 75 privileges. Moreover, when more eco- OECD high income 67 nomic activity takes place in the formal South economy, it can be subject to beneficial Asia 63 regulations and taxation. Since 2003, Middle East & North Africa 61 when the Doing Business project started, Sub-Saharan 59 policy makers in more than 75% of the Africa world’s economies have made it easier Arab world 4750 to start a business in the formal sector. Latin America & Caribbean 47 A recent study using data collected fromNote: Sub-Saharan Africa includes 3 Arab economies: Comoros, Mauritania and Sudan. company registries in 100 economiesSource: Doing Business database. over 8 years found that economies with efficient business registration systems have a higher firm entry rate and greater In 2005, only 2 economies in the eliminated the minimum threshold for business density on average.2region—Kuwait and Saudi Arabia—had loans included in the credit bureau data- Ultimately this is about people. Theprivate credit bureaus; today 6 do. Arab base. This move expanded the database’s economic crisis has made it more im-economies continue to improve their coverage of individuals and firms to 2.8% portant than ever to create new jobs andcredit information systems in 2009/10. of the adult population. The United Arab preserve existing ones. As the number ofJordan has set up a regulatory framework Emirates enhanced access to credit by unemployed people reached 212 millionfor establishing a private credit bureau as setting up a legal framework for the in 2009—34 million more than at thewell as lowering the threshold for loans to operation of a private credit bureau and onset of the crisis in 20073—job creationbe reported to the public credit registry. requiring that financial institutions share became a top priority for policy makersLebanon allowed banks online access to credit information. around the world. With public budgetsthe public credit registry’s reports. Syria Through indicators benchmarking tighter as a result of stimulus packages 183 economies, Doing Business sheds and contracting fiscal revenues, govern-FIGURE 1.3 light on how easy or difficult it is for ments must now do more with less. Un-Where do Arab economies rank on a local entrepreneur to open and run leashing the job creation potential of smallbusiness-friendly regulations?DB2011 ranking on ease of doing business (1–183) a small to medium-size business while private enterprises is therefore vital. #1 complying with relevant regulations. Small and medium-size businesses economy It measures and tracks changes in the indeed have great potential to create OECD high income regulations applying to these compa- jobs. They account for an estimated 95% 30 nies throughout their life cycle—from of firms and 60–70% of employment start-up to closing (box 1.1). The results in OECD high-income economies and have stimulated policy debates in more 60–80% of employment in such econ- Eastern Europe & Central Asia 72 than 80 economies and enabled a grow- omies as Chile, China, South Africa, East Asia & Pacific 87 ing body of research on how firm-level and Thailand.4 It makes sense for policyLatin America & Caribbean 96 regulation relates to economic outcomes makers to help such businesses grow.Middle East & North Africa 103 Arab world South Asia 117 across economies.1 A fundamental prem- Improving their regulatory environment ise of Doing Business is that economic ac- is one way to support them. Sub-Saharan Africa 137 tivity requires good rules that are trans- parent and accessible to all. WHAT WERE THE TRENDS IN Doing Business does not cover all 2009/10? factors relevant for business. For exam- 183 Average ranking on ple, it does not evaluate macroeconomic For policy makers seeking to improve the ease of doing business conditions, infrastructure, workforce the regulatory environment for business, (1–183) skills, or security. Nor does it assess priorities varied across regions this pastNote: Sub-Saharan Africa includes 3 Arab economies: Comoros,Mauritania and Sudan. market regulation or the strength of fi- year.Source: Doing Business database. nancial systems—both key factors in
  9. 9. 4 DOING BUSINESS IN THE ARAB WORLD 2011 FIGURE 1.4 DB change score In the past 5 years about 85% of economies made it easier to do business 0.5 Five-year measure of cumulative change in Doing Business indicators between DB2006 and DB2011 0.4 0.3 Doing business became easier 0.2 0.1 GEORGIA RWANDA BELARUS BURKINA FASO ZAMBIA SAUDI ARABIA MALI KYRGYZ REPUBLIC GHANA CROATIA KAZAKHSTAN MACEDONIA, FYR MOZAMBIQUE EGYPT, ARAB REP. UKRAINE CHINA ALBANIA TAJIKISTAN NIGERIA CZECH REPUBLIC SYRIAN ARAB REPUBLIC SIERRA LEONE UZBEKISTAN COLOMBIA AZERBAIJAN SENEGAL MADAGASCAR ARMENIA PERU MAURITIUS MALAWI VIETNAM TIMOR-LESTEBOSNIA AND HERZEGOVINA FRANCE POLAND GUATEMALA MEXICO HAITI INDIA DOMINICAN REPUBLIC YEMEN, REP. RUSSIAN FEDERATION CONGO, DEM. REP. TOGO TUNISIA DENMARK CAMBODIA INDONESIA CÔTE DIVOIRE MAURITANIA IRAN, ISLAMIC REP. NIGER ANGOLA MOROCCO SLOVENIA THAILAND LAO PDR SLOVAK REPUBLIC HONG KONG, CHINA ETHIOPIA CAMEROON TANZANIA TURKEY UNITED ARAB EMIRATES PORTUGAL UNITED KINGDOM SERBIA BENIN GUINEA-BISSAU GAMBIA, THE SWAZILAND ROMANIA SUDAN PARAGUAY BULGARIA BANGLADESH MALDIVES UGANDA SWEDEN ALGERIA BOTSWANA VANUATU AUSTRALIA JORDAN BRAZIL PAPUA NEW GUINEANote: The DB change score illustrates the level of change in the regulatory environment for local entrepreneurs as measured by 9 Doing Business indicator sets over a period of 5 years.This year’s DB change score ranges from –0.1 to 0.54. More details on how the DB change score is constructed can be found in the Data notes.Source: Doing Business database.QUICK RESPONSE TO CRISIS revised nor modernized for decades, and integration efforts. Some of these effortsThe global crisis triggered major legal these outdated laws fall far short of inter- built on existing initiatives—such as theand institutional reforms in 2009/10. Fac- national best practice standards. There Southern African Customs Union. Ining rising numbers of insolvencies and is, therefore, a need to revise the laws, to East Africa, single border controls ex-debt disputes, 16 economies—mostly in focus on the reorganization of debtors in pedited crossings between Rwanda andEastern Europe and Central Asia and the financial distress, and to decriminalize Uganda. Although customs authoritiesOECD high-income group—reformed bankruptcy6. In 2008/09, Kuwait imple- in Kenya, Tanzania, and Uganda still usetheir insolvency regimes—including mented rescue statutes enabling compa- different electronic data systems, effortsBelgium, the Czech Republic, Hungary, nies in financial difficulties on the verge are under way to create a single interfaceJapan, the Republic of Korea, Romania, of insolvency to reorganize themselves, between these systems. Overall, 27 of 46Spain, the United Kingdom, and the restructure their debt, and apply other Sub-Saharan African economies imple-Baltic states.5 Particularly in times of measures to regain financial health and mented Doing Business reforms—49 re-economic distress, efficient court and restore profitability. The plan aims to forms in all.bankruptcy procedures are needed to protect companies from creditors if theyensure that assets can be reallocated file a viable business plan. ELECTRONIC SYSTEMS ON THE RISE AROUND THE GLOBEquickly and do not get stuck in court.Most of the reforms in this area focused TRADE FACILITATION POPULAR IN In economies around the world, regard- THE ARAB WORLDon improving or introducing reorganiza- less of location and income level, policytion procedures to ensure that viable About half of all trade facilitation re- makers are adopting technology to makefirms can continue operating. forms in 2009/10 took place in the Arab it easier to do business, lower transac- There are few reorganizations pro- world (with 6) and Sub-Saharan Africa tions costs, and increase transparency. Incedures in the Arab world despite the (with 9). Bahrain, the Arab Republic of Latin America and the Caribbean, wherefact that many of the countries have Egypt, the United Arab Emirates, and 3 47% of economies implemented businessreorganization provisions in their laws. other Arab economies modernized cus- regulation reforms in the past year, 23 ofSuch reorganization provisions tend to toms procedures and port infrastructure the 25 reforms simplified administrativebe heavily creditor-driven, providing to facilitate trade and align with inter- processes. Many did so by introducinglittle flexibility for debtors to negotiate. national standards. In Sub-Saharan Af- online procedures or synchronizing theMany of the region’s laws have not been rica, several were motivated by regional operations of different agencies through
  10. 10. DB change score 0.5 0.4 0.3 0.2 0.1 VENEZUELA, R.B. CONGO, REP. ARGENTINA SINGAPORE ZIMBABWE LITHUANIA SURINAME COMOROS PAKISTAN FINLAND NORWAY NAMIBIA ICELAND ESTONIA GUINEA GABON PALAU CHAD ITALY FIJI SOLOMON ISLANDS UNITED STATES KOREA, REP. COSTA RICA AFGHANISTAN BHUTAN HONDURAS WEST BANK AND GAZA CAPE VERDE MONGOLIA GUYANA MICRONESIA, FED. STS. LESOTHO TAIWAN, CHINA ISRAEL EL SALVADOR MOLDOVA IRELAND HUNGARY MARSHALL ISLANDS SAMOA MALAYSIA URUGUAY IRAQ BELGIUM BURUNDI OMAN NICARAGUA SPAIN DJIBOUTI TONGA PUERTO RICO LEBANON ECUADOR GREECE LATVIA KENYA PHILIPPINES KUWAIT SOUTH AFRICA ERITREA CANADA SWITZERLAND ST. VINCENT AND THE GRENADINES ANTIGUA AND BARBUDA GRENADA TRINIDAD AND TOBAGO SRI LANKA KIRIBATI BELIZE JAMAICA EQUATORIAL GUINEA AUSTRIA CENTRAL AFRICAN REPUBLIC DOMINICA SEYCHELLES BOLIVIA NEW ZEALAND PANAMA ST. KITTS AND NEVIS ST. LUCIA NEPAL SÃO TOMÉ AND PRINCIPE NETHERLANDS JAPAN CHILE GERMANY –0.1 Doing business became more difficultelectronic systems. Through technology, WHERE IS IT EASIEST TO DO prove them. Hong Kong SAR (China) andBrazil, Chile, Ecuador, and Mexico sim- BUSINESS? Singapore turned their one-stop shopsplified start-up, Colombia eased con- for building permits into online systemsstruction permitting, and Nicaragua Globally, doing business remains easi- in 2008. Denmark just introduced a newmade it easier to trade across borders. est in OECD high-income economies. computerized land registration system. In South Asia, where 5 of 8 econo- In Sub-Saharan Africa and South Asia, The United Kingdom recently introducedmies introduced changes (7 in all), India entrepreneurs have it hardest and prop- online filing at commercial courts.continued improvements to its electronic erty protections are weakest across the 9 Top-ranking economies also oftenregistration system for new firms by areas of business regulation included in use risk-based systems to focus theirallowing online payment of stamp fees. this year’s ranking on the ease of doing resources where they matter most, suchAcross Eastern Europe, the implemen- business (figure 1.3). as the supervision of complex buildingtation of European Union regulations Singapore retains the top ranking projects. Germany and Singapore areencouraging electronic systems triggered on the ease of doing business this year, among the 85 economies that have fast-the implementation of electronic cus- followed by Hong Kong SAR (China), track permit application processes fortoms systems in Latvia and Lithuania, New Zealand, the United Kingdom, the small commercial buildings.among other changes. In the Arab world, United States, Denmark, Canada, Nor- Finally, these economies holdSaudi Arabia allows registration with the way, Ireland, and Australia. Change con- public servants accountable throughGeneral Organization of Social Insur- tinued at the top. Among the top 25 performance-based systems. Australia,ance (GOSI) to be done online. Egypt economies, 18 made it even easier to do Singapore, and the United States haverecently launched a new system to estab- business this past year. The top ranked used performance measures in the ju-lish companies electronically. The first Arab economy, Saudi Arabia, climbed diciary since the late 1990s. Malaysiaphase of the system, allowing online one position to 11 after initiated 4 re- introduced a performance index forsubmission of the registration applica- forms last year. judges in 2009. Case disposal rates aretion, is in place. Economies where it is easy to do already improving. business often have advanced e-govern- ment initiatives. E-government kicked off in the 1980s, and economies with well-developed systems continue to im-
  11. 11. 6 DOING BUSINESS IN THE ARAB WORLD 2011MORE WAYS OF TRACKING CHANGE IN time, this year’s report introduces a new just 7.0% of income per capita. In 2007,BUSINESS REGULATION measure. The DB change score provides Saudi Arabia was among the top 10Every year Doing Business recognizes the a 5-year measure of how business regula- economies that improved the most. It10 economies that improved the most in tions have changed in 174 economies.7 streamlined the document requirementsthe ease of doing business in the previous It reflects all changes in an economy’s for importing. It carried this out by abol-year and introduced policy changes in 3 business regulation as measured by the ishing a consular certificate requirementor more areas. This past year Kazakhstan Doing Business indicators—such as a and allowing the electronic transfer oftook the lead. Kazakhstan amended its reduction in the time to start a business data instead of requiring hard copies ofcompany law and introduced regulations thanks to a one-stop shop or an increase documents to be submitted. Saudi Ara-to streamline business start-up and re- in the strength of investor protection bia also improved the capacity of its portduce the minimum capital requirement index thanks to new stock exchange rules facilities, thus allowing the port of Jeddahto 100 tenge ($0.70). It made dealing that tighten disclosure requirements for to clear more containers per day. It alsowith construction permits less cumber- related-party transactions. The findings eliminated its paid-in minimum capitalsome by introducing several new build- are encouraging: in about 85% of the 174 requirement, which used to amount toing regulations in 2009, a new one-stop economies, doing business is now easier 1,057% of income per capita—previouslyshop for construction-related formalities for local firms (figure 1.4). one of the highest in the region. Reformsand a risk-based approach for permit The 10 economies that made the continued. In 2007/08, Saudi Arabia re-approvals. Traders benefit from improve- largest strides in making their regulatory formed in 4 areas covered by Doingments to the automated customs infor- environment more favorable to business Business. In 2008/09, it further enhancedmation system and risk-based systems. are Georgia, Rwanda, Belarus, Burkina its business start-up process and madeSeveral trade-related documents, such as Faso, Saudi Arabia, Mali, the Kyrgyz Re- dealing with construction permits easier.the bill of lading, can now be submitted public, Croatia, Kazakhstan, and Ghana. In 2009/10, it implemented changes in 4online, and customs declarations can be All implemented more than a dozen regulatory areas: Getting Credit - Legalsent in before the cargo arrives. Mod- Doing Business reforms over the 5 years. Rights, Trading across Borders, Dealingernization efforts, already under way Several—including Georgia, Rwanda, with Construction Permits, and Closingfor several years, also include a risk Belarus, Burkina Faso, the Kyrgyz Re- a system to control goods public, Croatia, and Kazakhstan—have According to Doing Business 2005,crossing the national border and a mod- also been recognized as top 10 Doing starting a limited liability company inern inspection system (TC-SCAN) at the Business reformers in previous years. Egypt wasn’t easy: It took 13 procedures,border crossing point shared with China. Between 2005 and 2010, almost all more than a month, and required paid-inAs a result, the time to export fell by 8 economies in the Arab world have made minimum capital of 8 times the averagedays, the time to import by 9 days and it easier to do business by implementing income per capita. Today it takes just athe number of documents required for reforms that have had a positive impact week, with no minimum capital require-trade by 1. Kazakhstan also increased on Doing Business indicators. Out of the ment. Egypt implemented measures inthe requirements for legal disclosure in 174 economies, Saudi Arabia is among 8 areas. For example, it created its firstrelated-party transactions. Thanks to the the top 5 reformers, according to the private credit bureau, established a one-amendments to its company law, compa- new measure. Egypt and the Syrian Arab stop shop for company registration, andnies must describe transactions involv- Republic are 2 more of the 20 economies introduced low, fixed transfer fees foring conflicts of interest in their annual that made the largest efforts to improve property registration—costing EGP 2000report. their business regulatory environment, (USD 331), rather than 3% of the value of Yearly movements in rankings can according to the 5-year measure of cu- the property. As a result, property regis-provide some indication of changes in mulative change. tration costs were reduced from an aver-an economy’s regulatory environment Saudi Arabia’s DB change score age of 5.9% of the property value to justfor firms, but they are always relative. shows that its regulatory reforms have 1% in 2006. New property registrationsAn economy’s ranking might change be- been cumulative and substantial. Since jumped by 39% in the following year.cause of developments in other econo- 2006, Saudi Arabia has implemented 17 Syria was one of the first economiesmies. Moreover, year-to-year changes in business regulation reforms in the areas in the Arab world to revamp its businessrankings do not reflect how the business measured by Doing Business. The impact regulatory environment, as recorded byregulatory environment in an economy has been positive. In 2005, starting a the DB change score. Key achievementshas changed over time. business in Saudi Arabia took 13 pro- include gradually reducing minimum To illustrate how the regulatory en- cedures and cost 68.5% of income per capital requirement from SYP 10 millionvironment as measured by Doing Busi- capita. Today, entrepreneurs can register to just 1 million and including all loanness has changed within economies over a new business in 4 procedures and pay information in the public credit registry,
  12. 12. EXECUTIVE SUMMARY 7 BOX 1.2 within a country over time, as when Encouraging women in business Colombia implemented a bankruptcy Women make up more than 50% of the world’s population but less than 30% of the labor force reform that streamlined reorganization in some economies. This represents untapped potential. For policy makers seeking to increase procedures. Following the reform, viable women’s participation in the economy, a good place to start is to ensure that institutions and firms were more likely to be reorganized laws are accessible to the types of businesses and jobs women currently hold. than liquidated, and firms’ recoveries Take credit bureaus. With the advent of microfinance institutions in the 1970s, poor improved.9 Other studies investigated women in some parts of the world were able to access credit for the first time. By 2006 more policy changes that affected only certain than 3,330 microfinance institutions had reached 133 million clients. Among these clients, 93 million had been in the poorest groups when they took their first loans, and 85% of the firms or groups. Using the unaffected poorest were women. But only 42 of 128 credit bureaus in the world cover microfinance in- group as a control, they found that re- stitutions, limiting the ability of their borrowers to build a credit history. A new World Bank forms easing formal business entry in Group project, Women, Business and the Law, looks into discrepancies such as these as well as Colombia, India, and Mexico led to an regulations that explicitly differentiate on the basis of gender.1 increase in new firm entry and compe- A recent analysis of existing literature concludes that aspects of the business regulatory tition.10 Thanks to simplified municipal environment are estimated to disproportionately affect women in their decision to become an registration formalities for firms in Mex- entrepreneur and their performance in running a formal business. Barriers to women’s access to finance might drive their concentration in low-capital-intensive industries, which require ico, the number of registered businesses less funding but also have less potential for growth and development. One possible barrier is increased by 5%, and employment by that women may have less physical and “reputational” collateral than men.2 2.8%, in affected industries. Women can benefit from laws facilitating the use of movable assets such as equipment or Other promising results are emerg- accounts receivable as security for loans. While women often lack legal title to land or build- ing. Using panel data from enterprise ings that could serve as collateral, they are more likely to have movable assets. In Sri Lanka surveys, new research associates busi- women commonly hold wealth in the form of gold jewelry. Thankfully, this is accepted by ness regulation reforms in Eastern Eu- banks as security for loans.3 Women often resort to informal credit, which involves high transactions costs. A recent rope and Central Asia with improved study in Ghana reports that women, to ensure access to credit, invest considerable time in firm performance.11 While such factors maintaining complex networks of informal credit providers.4 as macroeconomic reforms, technologi- Improving firms’ access to formal finance has been shown to pay off, by promoting entre- cal improvements and firm character- preneurship, innovation, better asset allocation and firm growth.5 Everyone should be able to istics may also influence productivity, benefit, regardless of gender. the results are promising. The region’s 1. 2. Klapper and Parker (2010). economies have been the most active in 3. Pal (1997). improving business regulation over the 4. Schindler (2010). 5. World Bank (2008). past 7 years, often in response to new circumstances such as the prospect of joining the European Union or, morewithout a minimum loan threshold. larly for small and medium-size busi- recently, the financial crisis. Some 93% In absolute terms, change depends nesses. But how do business regulation of its economies eased business start-up,not only on the pace of reform but also reforms affect the performance of firms and 20 economies established one-stopon the starting point. For example, Sin- and contribute to jobs and growth? A shops. Starting a business in the region isgapore, with efficient e-government sys- growing body of empirical research has now almost as easy as it is in OECD high-tems in place and strong property rights established a link between the regula- income economies. Immediate benefitsprotections by law, now has less room tory environment for firms and such for firms are often cost and time savings.for improvement. Others, such as Italy, outcomes as the level of informality, em- In Georgia a 2009 survey found thatimplemented several regulatory reforms ployment and growth across economies.8 the new start-up service center helpedin areas where results might be seen only The broader economic impact of lower- businesses save an average of 3.25% ofin the longer term, such as judiciary or ing barriers to entry has been especially profits—and this is just for registrationinsolvency reforms. well researched. But correlation does not services. For all businesses served, the mean causality. Other country-specific direct and indirect savings amounted toWHAT IS THE EFFECT ON FIRMS, factors or other changes taking place si- $7.2 million.12JOBS, AND GROWTH? multaneously—such as macroeconomic reforms—may also have played a part.Rankings and the 5-year measure of How do we know whether thingscumulative change are still only indica- would have been any different withouttive. Few would doubt the benefit of the reform? Some studies have been ablereducing red tape for business, particu- to test this by investigating variations
  13. 13. 8 DOING BUSINESS IN THE ARAB WORLD 2011 China, State Administration for Industry BOX 1.3 Other World Bank indicator sets on business regulations and Commerce, english/; and Ayyagari, Beck and Demir- güç-Kunt (2007). Women, Business and the Law ( Data on legal differentiations on the basis of gender in 128 economies, covering 6 areas 5 In the United Kingdom, for example, 19,077 companies were liquidated in Investing Across Borders ( 2009, 22.8% more than in the previous Data on laws and regulations affecting foreign direct investment in 87 economies, covering 4 areas year. Subnational Doing Business ( 6 See Uttamchandani (2010). Doing Business data comparing states and cities within economies (41 studies covering 299 cities) 7 Doing Business has tracked business regulation reforms affecting businesses World Bank Enterprise Surveys ( throughout their life cycle—from start-up Business data on more than 100,000 firms in 125 economies, covering a broad range of business to closing—in 174 or more economies environment topics since 2005. Between 2003 and 2005 Doing Business added 5 topics and increased the number of economies covered fromWHERE ARE THE OPPORTUNITIES While overly complicated proce- 133 to 174. For more information onIN DEVELOPING ECONOMIES? dures can hinder business activity, so the motivation for the 5-year measure can the lack of institutions or regulations of cumulative change, see About DoingMore than 1,500 improvements to busi- that protect property rights, increase Business. For more on how the measure is constructed, see Data notes.ness regulations have been recorded by transparency and enable entrepreneursDoing Business in 183 economies since to make effective use of their assets. 8 For a comprehensive literature review on business start-up regulation as it relates2004. Increasingly, firms in developing When institutions such as courts, col- to such economic outcomes as productiv-economies are benefiting. In the past lateral registries and credit information ity and employment, see Djankov (2009)year about 66% of these economies made bureaus are inefficient or missing, the and Motta, Oviedo and Santini (2010).it easier to do business, up from only 34% talented poor and entrepreneurs who See also Djankov, McLiesh and Ramalho (2006). More research can be found onof this group 6 years before. Compelling lack connections, collateral and credit the Doing Business website (http://www.results are starting to show, as illustrated histories are most at risk of losing out.14 Rwanda and Ghana, and these results So are women, because institutions and 9 Giné and Love (2006).have inspired others. regulations such as credit bureaus and 10 Aghion and others (2008), Bruhn (2008), This is good news, because oppor- laws on movable collateral support the Kaplan, Piedra and Seira (2007) andtunities for regulatory reform remain. types of businesses that women typically Cardenas and Rozo (2009).Entrepreneurs and investors in low- and run—small firms in low-capital-inten- 11 Amin and Ramalho (forthcoming). Using data on a panel of about 2,100 firms in 28lower-middle-income economies con- sive industries in both the formal and the economies in Eastern Europe and Centraltinue to face more bureaucratic formali- informal sector (box 1.2).15 Asia, the authors compare changes inties and weaker protections of prop- labor productivity over time in reformingerty rights than their counterparts in and nonreforming economies. The differ- ence in the change in labor productivityhigh-income economies. Exporting, for between the 2 groups of economies isexample, requires 11 documents in the 1 Some 656 articles have been published statistically significant at less than the 5% in peer-reviewed academic journals, andRepublic of Congo but only 2 in France. level. Differences in time-invariant fac- about 2,060 working papers are availableStarting a business still costs 18 times as tors such as firm composition or GDP per through Google Scholar (http://scholar. capita do not affect the results.much in Sub-Saharan Africa as in OECD 12 International Finance Corporation, “IFChigh-income economies (relative to in- 2 Klapper, Lewin and Quesada Delgado Helps Simplify Procedures for Georgiancome per capita). Many businesses in (2009). Entry rate refers to newly regis- Businesses to Save Time and Resources,” tered firms as a percentage of total regis-developing economies might simply opt accessed September 20, 2010, http://www. tered firms. Business density is defined asout and remain in the informal sector. the number of businesses as a percentageThere they lack access to formal business of the working-age population (ages 13 ILO and markets, and their employees 18–65). 14 World Bank (2008a).receive fewer benefits and no protec- 3 International Labour Organization (ILO) 15 Chhabra (2003) and Amin (2010).tions. Globally, 1.8 billion people are data.estimated to be employed in the informal 4 OECD (2004b); ILO and SERCOTEC (2010, p. 12); South Africa, Departmentsector, more than the 1.2 billion in the of Trade and Industry (2004, p. 18);formal economy.13
  14. 14. 9About DoingBusiness:measuringfor impactGovernments committed to the economic applying to them through their life cycle. establish and clarify property rights andhealth of their country and opportuni- Doing Business and the standard cost reduce the cost of resolving disputes,ties for its citizens focus on more than model initially developed and applied in rules that increase the predictability ofmacroeconomic conditions. They also the Netherlands are, for the present, the economic interactions and rules thatpay attention to the laws, regulations and only standard tools used across a broad provide contractual partners with coreinstitutional arrangements that shape range of jurisdictions to measure the protections against abuse. The objective:daily economic activity. impact of government rule-making on regulations designed to be efficient in The global financial crisis has business activity.1 their implementation, to be accessiblerenewed interest in good rules and regu- The first Doing Business report, pub- to all who need to use them and to belation. In times of recession, effective lished in 2003, covered 5 indicator sets simple in their implementation. Accord-business regulation and institutions can and 133 economies. This year’s report ingly, some Doing Business indicatorssupport economic adjustment. Easy covers 11 indicator sets and 183 econo- give a higher score for more regulation,entry and exit of firms, and flexibility mies. Nine topics are included in the such as stricter disclosure requirementsin redeploying resources, make it easier aggregate ranking on the ease of doing in related-party transactions. Some giveto stop doing things for which demand business. The project has benefited from a higher score for a simplified way ofhas weakened and to start doing new feedback from governments, academics, implementing existing regulation, suchthings. Clarification of property rights practitioners and reviewers.2 The initial as completing business start-up formali-and strengthening of market infrastruc- goal remains: to provide an objective ties in a one-stop shop.ture (such as credit information and basis for understanding and improving The Doing Business project encom-collateral systems) can contribute to con- the regulatory environment for business. passes 2 types of data. The first come fromfidence as investors and entrepreneurs readings of laws and regulations. The sec-look to rebuild. WHAT DOING BUSINESS COVERS ond are time and motion indicators that Until recently, however, there were measure the efficiency and complexityno globally available indicator sets for Doing Business provides a quantitative in achieving a regulatory goal (such asmonitoring such microeconomic factors measure of regulations for starting a granting the legal identity of a business).and analyzing their relevance. The first business, dealing with construction per- Within the time and motion indicators,efforts, in the 1980s, drew on percep- mits, registering property, getting credit, cost estimates are recorded from officialtions data from expert or business sur- protecting investors, paying taxes, trad- fee schedules where applicable.3 Here,veys. Such surveys are useful gauges ing across borders, enforcing contracts Doing Business builds on Hernando deof economic and policy conditions. But and closing a business—as they apply to Soto’s pioneering work in applying thetheir reliance on perceptions and their domestic small and medium-size enter- time and motion approach first used byincomplete coverage of poor countries prises. It also looks at regulations on em- Frederick Taylor to revolutionize the pro-constrain their usefulness for analysis. ploying workers as well as a new measure duction of the Model T Ford. De Soto The Doing Business project, initi- on getting electricity. used the approach in the 1980s to showated 9 years ago, goes one step further. It A fundamental premise of Doing the obstacles to setting up a garment fac-looks at domestic small and medium-size Business is that economic activity requires tory on the outskirts of Lima.4companies and measures the regulations good rules. These include rules that
  15. 15. 10 DOING BUSINESS IN THE ARAB WORLD 2011WHAT DOING BUSINESS DOES BASED ON STANDARDIZED entrepreneurs may spend considerable CASE SCENARIOSNOT COVER time finding out where to go and what Doing Business indicators are built on the documents to submit. Or they may avoidJust as important as knowing what Doing basis of standardized case scenarios with legally required procedures altogeth-Business does is to know what it does specific assumptions, such as the busi- er—by not registering for social security,not do—to understand what limitations ness being located in the largest business for example.must be kept in mind in interpreting city of the economy. Economic indicators Where regulation is particularly onerous,the data. commonly make limiting assumptions levels of informality are higher. Informal- of this kind. Inflation statistics, for ex- ity comes at a cost: firms in the informalLIMITED IN SCOPE ample, are often based on prices of con- sector typically grow more slowly, haveDoing Business focuses on 11 topics, with sumer goods in a few urban areas. poorer access to credit and employ fewerthe specific aim of measuring the regula- Such assumptions allow global workers—and their workers remain out-tion and red tape relevant to the life cycle coverage and enhance comparability. But side the protections of labor law.7 Doingof a domestic small to medium-size firm. they come at the expense of generality. Business measures one set of factors thatAccordingly: Doing Business recognizes the limitations help explain the occurrence of infor- Doing Business does not measure all of including data on only the largest busi- mality and give policy makers insights aspects of the business environment ness city. Business regulation and its en- into potential areas of reform. Gaining a that matter to firms or investors—or all forcement, particularly in federal states fuller understanding of the broader busi- factors that affect competitiveness. It and large economies, differ across the ness environment, and a broader per- does not, for example, measure security, country. And of course the challenges spective on policy challenges, requires macroeconomic stability, corruption, and opportunities of the largest business combining insights from Doing Business the labor skills of the population, the city—whether Mumbai or São Paulo, with data from other sources, such as underlying strength of institutions Nuku’alofa or Nassau—vary greatly across the World Bank Enterprise Surveys.8 or the quality of infrastructure.5 Nor countries. Recognizing governments’ in- does it focus on regulations specific to terest in such variation, Doing Business WHY THIS FOCUS foreign investment. has complemented its global indicators Doing Business does not assess the with subnational studies in such countries Doing Business functions as a kind of strength of the financial system or market as Brazil, China, Colombia, the Arab Re- cholesterol test for the regulatory envi- regulations, both important factors in public of Egypt, India, Indonesia, Kenya, ronment for domestic businesses. A cho- understanding some of the underlying Mexico, Morocco, Nigeria, Pakistan and lesterol test does not tell us everything causes of the global financial crisis. the Philippines.6 about the state of our health. But it does Doing Business does not cover all In areas where regulation is complex measure something important for our regulations, or all regulatory goals, and highly differentiated, the standard- health. And it puts us on watch to change in any economy. As economies and ized case used to construct the Doing behaviors in ways that will improve not technology advance, more areas of Business indicator needs to be carefully only our cholesterol rating but also our economic activity are being regulated. defined. Where relevant, the standard- overall health. For example, the European Union’s ized case assumes a limited liability One way to test whether Doing Busi- body of laws (acquis) has now grown to company. This choice is in part empiri- ness serves as a proxy for the broader no fewer than 14,500 rule sets. Doing cal: private, limited liability companies business environment and for com- Business covers 11 areas of a company’s are the most prevalent business form in petitiveness is to look at correlations life cycle, through 11 specific sets of most economies around the world. The between the Doing Business rankings and indicators. These indicator sets do choice also reflects one focus of Doing other major economic benchmarks. The not cover all aspects of regulation in Business: expanding opportunities for indicator set closest to Doing Business in the area of focus. For example, the entrepreneurship. Investors are encour- what it measures is the OECD indicators indicators on starting a business or aged to venture into business when po- of product market regulation;9 the corre- protecting investors do not cover all tential losses are limited to their capital lation here is 0.72. The World Economic aspects of commercial legislation. The participation. Forum’s Global Competitiveness Index employing workers indicators do not and IMD’s World Competitiveness Year- cover all areas of labor regulation. The FOCUSED ON THE FORMAL SECTOR book are broader in scope, but these too current indicator set does not include, In constructing the indicators, Doing are strongly correlated with Doing Busi- for example, measures of regulations Business assumes that entrepreneurs are ness (0.79 and 0.64, respectively).10 addressing safety at work or the knowledgeable about all regulations in A bigger question is whether the right of collective bargaining. place and comply with them. In practice, issues on which Doing Business focuses