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 jointly released 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.
(China.org.cn September 6, 2006)