Insight

Doing Business 2015: going beyond efficiency

March 2015


Through indicators benchmarking 189 economies, Doing Business measures and tracks changes in the regulations applied to domestic small and medium-size companies in eleven areas in their life cycle. This year's aggregate ranking on the ease of doing business is based on indicator sets that measure and benchmark regulations affecting ten of those areas:

  • starting a business
  • dealing with construction permits
  • getting electricity
  • registering property
  • getting credit
  • protecting minority investors
  • paying taxes
  • trading across borders
  • enforcing contracts
  • resolving insolvency.

Regulation is a reality from the beginning of a firm's life to the end. Navigating it can be complex and costly. On average around the world, starting a business takes 7 procedures and 22 days and costs 28% of income per capita in fees. However, in many parts of the world in recent years, Doing Business data show that there has been remarkable progress in removing some of the biggest bureaucratic obstacles to private sector activity. Economies with the weakest regulatory institutions and the most complex and costly regulatory processes are slowly but steadily beginning to adopt some of the better practices seen among the best performers. For example, in 2005 the time to transfer property averaged 235 days among the economies ranking in the worst quartile on this indicator versus 42 days among the best 3 quartiles. Today that gap is substantially narrower - at 62 days. Yet room for improvement still remains, as small and medium-size enterprises are subject to burdensome regulations and vague rules that are unevenly applied and that impose inefficiencies on the enterprise sector.

In 2013/14, 123 economies implemented 230 regulatory reforms making it easier to do business. Europe and Central Asia, continuing its steady pace of regulatory reform, had the largest share of economies registering improvements - 85% of economies in that region implemented at least one institutional or regulatory reform making it easier to do business. Sub-Saharan Africa, the region with the largest number of economies, accounted for the largest number of regulatory reforms in 2013/14, with 39 reducing the complexity and cost of regulatory processes and 36 strengthening legal institutions.

Sub-Saharan Africa was also the region that accounted for 5 of the 10 economies improving the most in 2013/14 in areas tracked by Doing Business, including Benin, Togo, Côte d'Ivoire, Senegal and the Democratic Republic of Congo. The other economies in this category included Tajikistan, Trinidad and Tobago, Azerbaijan, Ireland and the United Arab Emirates. Of the 10 most improved economies, 8 reformed in the area of starting a business. Tajikistan implemented a new software at the one-stop shop and eliminated one of the business registration procedures, while Trinidad and Tobago introduced online systems for employer registration and tax registration. Several others reduced their minimum capital requirement.

Getting credit was another common focus, with 7 of the top improvers implementing changes in this area. In the United Arab Emirates the credit bureau Emcredit and the Dubai Electricity and Water Authority (DEWA) began exchanging credit information in October 2013. Ireland adopted a new act providing for the establishment and operation of a credit registry. And in Trinidad and Tobago a new insolvency law strengthened protection of secured creditors' rights in insolvency proceedings, giving greater flexibility in enforcement actions.

Other top improvers eased the property transfer process, strengthened the rights of minority shareholders and made paying taxes easier. Azerbaijan introduced an online procedure for obtaining non-encumbrance certificates for property transfers. Côte d'Ivoire, Senegal, Togo and the United Arab Emirates all made it possible for shareholders to inspect documents pertaining to related-party transactions as well as to appoint auditors to conduct inspections. And Tajikistan introduced an electronic system for filing and paying various taxes.

In addition to assessing the efficiency of regulation, this year's report introduced a new measure of quality in the resolving insolvency indicator set and expanded the measures of quality in the getting credit and protecting minority investors indicator sets. Next year's report will add measures of regulatory quality for 5 other indicator sets. The data show that efficiency and quality go hand in hand. Insolvency cases are resolved more quickly, and with better outcomes, where insolvency laws are well designed. Property transfers are faster and less costly in economies with good land administration systems. And commercial disputes are resolved more efficiently by courts using internationally recognized good practices.

Collecting the more than 100,000 unique Doing Business data points each year and placing them in a broader context of economic policy and development is a major undertaking. The team is in direct communication with a network of 10,700 lawyers and other professionals who deal with business regulation every day. They have generously donated their time to provide the legal assessments that underpin the data.

Russell Bedford International acted as one of the report's global contributors.

For more information on the Doing Business project, please visit www.doingbusiness.org.

Author: Joyce Antone Ibrahim