Poland takes top honors for 'most improved' in cutting red tape
It's getting easier to do business in many countries, according to a World Bank report, with Eastern Europe and Central Asia making significant strides this year.
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Indeed, Eastern Europe, along with Central Asia, surpassed East Asia and the Pacific as the second-most business-friendly region this year, according to Doing Business. OECD high-income countries are considered the most business friendly, although Singapore was ranked No. 1 for the seventh year in a row. It sustained this ranking even though it made no new regulatory changes this year.Skip to next paragraph
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Countries in Central Asia and Eastern Europe have implemented 397 institutional and regulatory reforms since 2005, including Latvia's 2009 reform which created a way for businesses to settle insolvency issues outside of court, decreasing pressure on the legal system. The consistency of these changes could, in part, be attributed to reforms expected of countries that have entered or are trying to enter the European Union.
Though the results of the World Bank’s study were largely positive, not all regions are moving forward. In past reports, the Middle East and North Africa showed consistent improvement and efforts in terms of business regulations. But that momentum slowed after the Arab uprisings that spread across the region in the spring of 2011.
And even in regions where some countries are making big leaps in easing regulation, variations can be great. Over the past eight years, Colombia, for example, implemented 25 regulatory and institutional reforms, like the “antipaperwork” law in 2005. This law eliminated close to 80 steps required for starting a business in Colombia, and inhibited government agencies from introducing new processes. Meanwhile, neighboring Venezuela’s business landscape “deteriorated as measures added to the complexity and cost of regulatory processes,” according to Doing Business.
Doing Business found that governments tend to focus on regulatory processes reforms – like the cost of starting a business or getting connected to electricity – over modifications to legal institutions, such as the framework for getting credit or protecting investors. The report notes just a little more than twice as many process reforms were implemented since 2005 than legal reforms.
Part of the reason a premium is placed on changes to regulatory processes is the impact burdensome rules can have on businesses. “If it takes 77 days and 15 permits to establish a business, or if costs are very high to become regularized,” then starting a business in the official economy is unattractive, Lessard says.
“The main issue is making sure firms thrive…. By emphasizing the ease of doing business, [governments] are saying ‘we want you to succeed’ as opposed to ‘we’ll tolerate you,’” he says.