The “Doing Business in 2006: Creating Jobs” report, sponsored by the World Bank, ranked 155 nations on key business regulations and reforms, putting New Zealand in the number one spot, followed by Singapore, the US, Canada and Norway.It was the second year in row that New Zealand topped the list.
Hailing the results in a press statement, New Zealand Finance Minister Michael Cullen said, “That New Zealand should compare so well internationally is a credit to the quality of our regulatory regime and to the government’s economic management.”
The list is not an empty-headed beauty contest, mere magazine fodder. The World Bank feels strongly that the types of business regulations and reforms that it measures can lead to the creation of new jobs all around the world.
“Jobs are a priority for every country, and especially the poorest countries. Doing more to improve regulation and help entrepreneurs is key to creating more jobs – and more growth. It is also a key to fighting poverty,” said Paul Wolfowitz, President of the World Bank. “Women, who make up three quarters of the work force in some developing economies, will be big beneficiaries. So will young people looking for their first job. The past year’s diverse range of successful reformers – from Serbia to Rwanda – are showing the way forward. We can all learn from their experience.”
The report found that African nations impose the most regulatory obstacles on entrepreneurs and have been the slowest reformers over the past year. For example, an entrepreneur in Mozambique must undergo 14 separate procedures taking 153 days to register a new business. In Sierra Leone , if all business taxes were paid they would eat up 164% of a company’s gross profits.
“Many African countries that desperately need new enterprises and jobs risk falling even further behind other countries that are simplifying regulation and making their investment climates more business friendly,” said Michael Klein, World Bank Vice President.
New indicators in this year’s report further reinforce the overwhelming need for reform, especially in poor countries.
The report found that poor countries levy the highest business taxes in the world. These high taxes create incentives to evade payment, driving many firms into the underground economy, and do not translate to higher revenues. Similarly, analysis shows that reforming the administrative costs of trading can remove significant obstacles to exporting and importing. Contrary to popular belief, customs paperwork and other red tape (often called “soft infrastructure”) cause the most delays for exporting and importing firms. Less than a quarter of the delays are caused by problems with “hard infrastructure” such as poor ports or roads. For manufacturers in developing countries, the administrative burdens of trading can pose larger costs than tariffs and quotas.
On the plus side, every country in Eastern Europe improved at least one aspect of the business environment. Overall, European nations were the most active in enacting reforms. The top 12 reformers in the past year, in order, were Serbia and Montenegro , Georgia , Vietnam , Slovakia , Germany , Egypt , Finland , Romania , Latvia , Pakistan , Rwanda and the Netherlands.