African countries emerge as regulation reformers

In the previous two years’ rankings, the region lagged behind all others in the pace of reforming unwieldy regulations.

Yet the bank’s Doing Business 2007 report released recently says Africa now ranks third among regions, behind only Eastern Europe-Central Asia and the wealthy Organisation for Economic Cooperation and Development (OECD) countries.

Two-thirds of African countries made at least one important regulatory reform to spur economic growth, according to the report.

Tanzania, which introduced electronic-data interchange and risk-based inspections at customs, reduced the time it takes to clear imports by nearly two weeks.

Cote d’Ivoire reduced the time it takes to transfer property to 32 days from more than a year. Burkina Faso cut the number of procedures for starting a business by one-third. Madagascar reduced the minimum capital for start-ups from 10 million francs to 2 million francs.

“I don’t fully understand it,” said Simeon Djankov, the report’s main author, referring to advances made by those and other African countries.

But he attributed the phenomenon, at least in part, to a push by major donors in the United States and United Kingdom to get African countries to create jobs and generate economic growth on their own.

For example, the US Millennium Challenge Account requires recipients to meet certain standards, including engagement of the private sector in projects, to qualify for this category of foreign aid.

The US Agency for International Development increasingly works with aid recipients on improving business climate.

Front cover of “Doing Business 2007: How to Reform.” There was little change among those countries that had the highest rankings in Doing Business 2006.

The top three positions in terms of the ease of doing business continued to be held by Singapore, New Zealand and the United States.

There was much more movement in the lower tiers of the list. Within a year, Georgia climbed from the 112th to the 37th position.

Mexico jumped from the 62nd to the 43rd and is credited with one of the boldest reforms ‘ increasing investor protections in its new securities law.

China, Number 93 a year ago, moved up 15 places. Like Georgia, Mexico, Tanzania and Ghana, China is among the World Bank’s “top 10 reformers.”

Its government has sped up the business-starting process, increased investor protections, reduced red tape in trade, and established a credit-information registry for consumer loans that provides credit histories of 340 million citizens, according to the report.

A separate report on foreign direct investment, released by Columbia University and The Economist publishing group, predicts that until 2010 China will be the top emerging market for business investment inflows, but Africa will not receive much investment any time soon.

Karl Sauvant, director of the Columbia Program on International Investment, which released the investment report, said China will attract $87 billion from US businesses alone in 2006, while sub-Saharan Africa, with 10 percent of the world’s population, gets less than 1 percent of total foreign direct investment flows.

According to Sauvant, to achieve economic growth a country must do more than reform business regulations.

It also must compete to attract investment and provide quality infrastructure and a skilled work force, he said.

The World Bank’s Djankov said the Doing Business 2007 report focuses only on what governments can do in a few years at a cost of millions of dollars, not hundreds of millions.

The most popular reform this year has been easing regulations on starting a business ‘ something accomplished by 43 countries. “Any government can do this, and any government can do it now,” Djankov said. ‘ World Bank.

September 2006
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