Beijing, September 6, 2006 –
China has picked up the pace of its reforms and is among the world’s
top 10 reformers on the ease of doing business, according to a new
report by the International Finance Corporation and the World Bank.
Improvements in the regulatory environment mean China ranks 93 out of
175 countries on the ease of doing business. While 14 reforms in seven
economies in the region reduced the time, cost, and hassle for
businesses to comply with legal and administrative requirements, East
Asia’s overall progress in regulatory reforms lags behind all other
regions except South Asia, a fall from fourth to sixth place.
Doing Business 2007: How to Reform finds
that China implemented reforms to speed business registration and
trading, ease access to credit, and strengthen investor protection,
making it the top reformer in the region and the fourth best worldwide.
China reduced the time to register a business from 48 to 35 days and cut
the minimum capital required from 947 percent to 213 percent of income
per capita, making it easier for entrepreneurs to start new businesses.
It also established a credit information registry for consumer loans.
Now 340 million citizens have credit histories, improving their access
to credit. Amendments to the company law strengthened investor
protections against insider dealings. And new online customs procedures
reduced the time to import and export by two days, helping international
competitiveness.
The
report finds that while East Asian economies impose the fewest
regulatory obstacles on business after OECD countries, they are now
reforming more slowly than all other regions except South Asia . Less
than half of the East Asian economies introduced one or more reforms
that improved the Doing Business indicators. By comparison, every
Eastern European country reformed except Slovenia.
“More
progress is needed. East Asian countries would greatly benefit from new
enterprises and jobs, which can come with more business-friendly
regulations,” said Michael Klein, World Bank-IFC vice president for
financial and private sector development, and IFC chief economist.
Doing
Business 2007 also ranks 175 economies on the ease of doing
business—covering 20 more economies than last year’s report. Singapore
became the most business-friendly economy in the world in 2005–2006, as
measured by the Doing Business indicators, after last year’s winner, New
Zealand , made business licensing more difficult. The runner-up economy
in the region is Hong Kong ( China) (5), followed by Thailand (18),
Malaysia (25), Mongolia (45), Taiwan ( China) (47), China (93), Vietnam
(104), Philippines (126), Indonesia (135), and Cambodia (143). Lao PDR
(159) and Timor-Leste (174) are ranked lowest in the region. The top 30
economies in the world are, in order, Singapore, New Zealand, the United
States, Canada, Hong Kong (China), the United Kingdom, Denmark,
Australia, Norway, Ireland, Japan, Iceland, Sweden, Finland,
Switzerland,
Lithuania, Estonia, Thailand, Puerto Rico, Belgium, Germany, the
Netherlands, Korea, Latvia, Malaysia, Israel, St. Lucia, Chile, South
Africa , and Austria.
The
rankings track indicators of the time and cost to meet government
requirements in business start-up, operation, trade, taxation, and
closure. They do not track variables such as market size, macroeconomic
policy, quality of infrastructure, currency volatility, investor
perceptions, or crime rates.
Notable reforms in East Asian economies included:
- Vietnam cut the documents and time required to obtain building permits and allowed employers
- to use fixed-term contracts for any type of task, making hiring easier.
- Cambodia set time limits on obtaining business licenses—reducing delays by 66 days—and modernized customs, cutting time to export by seven days and time to import by 10 days.
- Hong Kong ( China) improved investor protections by increasing the availability of internal company documents for inspection, boosting transparency. The time to import and export dropped from 16 and 13 days to only five days, after three new boundary bridges opened and customs documents were simplified and put online.
- Lao PDR introduced a new collateral law that eases access to credit by allowing businesses to use their movable assets as collateral without giving up possession.
- Indonesia reduced business start-up time from 151 to 97 days by speeding approval of the incorporation documents at the Ministry of Justice.
- Thailand amended its law on credit information, making it easier for lenders to evaluate the creditworthiness of borrowers, thereby improving access to credit.
- Timor-Leste, counter to the regional trend, made it more difficult to do business, refusing to grant any new licenses for construction firms.
The
greatest remaining obstacles in the region documented in the report are
cumbersome start-up procedures and costly licensing requirements. For
example, in Cambodia, it takes 10 procedures and 86 days to start a
business. In the Philippines, it takes 23 procedures and 193 days and
costs 113 percent of income per capita to meet the regulatory
requirements to build a warehouse. Doing Business allows policymakers to
compare regulatory performance with other countries, learn from best
practices globally, and prioritize reforms.
“The
annual Doing Business updates have already had an impact. The analysis
has inspired and informed at least 48 reforms around the world. The
lesson—what gets measured gets done,” said Caralee McLiesh, an author of
the report.
Globally
the most popular reform in 2005–2006 was easing the regulations of
business start-up. Forty-three countries simplified procedures, reducing
costs and delays. The second most popular reform— implemented in 31
countries—was reducing tax rates and the administrative hassle of paying
taxes.
“Whatever
reformers do, they should always ask the question, who will benefit the
most? If reforms are seen to benefit only foreign investors, or large
investors, or bureaucrats-turned-investors, they reduce the legitimacy
of the government. “Reforms should ease the burden on all businesses:
small and large, domestic and foreign, rural and urban. This way there
is no need to guess where the next boom in jobs will come from. Any
business will have the opportunity to thrive,” said Simeon Djankov, an
author of the report.
Online Media Briefing Center:
Journalists
can access the material before the expiration of the embargo through
the World Bank Online Media Briefing Center at
http://media.worldbank.org/secure/. Accredited journalists who do not
already have a password may request one by completing the registration
form at http://media.worldbank.org/.
The
Doing Business project is based on the efforts of more than 5,000 local
experts – business consultants, lawyers, accountants, government
officials, and leading academics around the world, who provided
methodological support and review. The data, methodology, and names of
contributors are publicly available online at
http://www.doingbusiness.org.
