1 Doingbusiness in 2006 A snapshot of Business Indicators Richard Stern, FIAS James Emery, PEP AFR May 22-23, 2006 Addis Ababa, Ethiopia

2 What this presentation is about 1. DoingBusiness—a snapshot of the investment climate, benchmarked with other countries 2. A DB assessment of the business climate in Ethiopia and how the indicators work: example: analysis of starting a business 3. A snapshot of other DB indicators to present a general assessment of the economy 4. How the World Bank Group (PSD, FIAS/PEP Africa) work together to remediate the problems raised by DB

3 Regulation of Entry Labor Regulations Contract Enforcement Credit Markets Credit information Collateral Bankruptcy Corporate Governance Property Registration Updates of ‘04 topics Business Licensing Taxation Trade Infrastructure Transport Customs Standards Updates of ‘04 and ‘ Doingbusiness indicators Products: Report, academic papers, country summaries, website database

4 Use DoingBusiness to drive reforms l Develop targets to rank relative to reference groups. l Competitors – at least as good as competitors l Neighbors – best in the region l Economic models – goal to approach models which help shape strategy and policy l Phased strategy of achieving objectives l Use Doing Business as an outcome indicator l Useful for engaging private sector in process l Objective and updated annually l Measure results – DB is a tool to attract invesment, growth and jobs

5 Where DB Finds Results: Most reforms in East Europe Percentage of countries with at least one reform

6 Who is reforming in Africa? l Rwanda - a top reformer - abolished mandatory pre- shipment inspections and created specialized court chambers for business and tax matters, reducing court delays. l Mozambique cut the property transfer tax from 10 to 2.4% of the property value, the largest cost reduction in the world. l Kenya and Mauritius improved credit information sharing by amending their banking acts. This makes it easier for lenders to evaluate creditworthiness. l In Mauritania, the Nouakchott port now operates around the clock, compared with only 60 hours a week previously. l Burundi introduced a new summary procedure for debt recovery and allowed private bailiffs to operate, reducing delays in the courts.

7 1. New Zealand 2. Singapore 3. United States 4. Canada 5. Norway 6. Australia 7. Hong Kong, China 8. Denmark 9. United Kingdom 10. Japan 11. Ireland 12. Iceland 13. Finland 14. Sweden 15. Lithuania 16. Estonia Top economies on the ease of doing business 16. Switzerland 17. Belgium 18. Germany 19. Thailand 20. Malaysia 21. Puerto Rico 22. Mauritius 23. Netherlands 24. Chile 25. Latvia 26. Korea 27. South Africa 28. Israel 29. Spain 99. Vietnam 101. Ethiopia

8 Who’s in your DB neighborhood?

9 26Ease of paying taxes 47Hiring and firing workers 48Closing a business 57Dealing with licenses 71Ease of contract enforcement 94Ease of starting a business 114Getting credit 129Trading across borders 137Protecting investors 140Ease of registering property Ethiopia’s rank on the ease of doing business: 101

10 A Snapshot of Doing Business in Ethiopia Starting a business

11 Methodology: a time and motion study 1. Follow the entrepreneur from the beginning to the end of a basic transaction 2. Record every step of the process, and the associated time and cost 3. Gather all the relevant laws, regulations, decrees, fee schedules

12 Starting a Business: Methodology The Company l Is a limited liability company l Operates in the country’s most populous city l Is 100% domestically owned and has 5 owners, none of whom is a legal entity. l Has up to 50 employees 1 month after the commencement of operations, all of them nationals l Has a company deed 10 pages long l Performs general industrial or commercial activities

13 Starting a Business: Methodology Procedure l any interaction of the company founder with external parties: l government agencies, l lawyers, l auditors, l notaries, etc l Both pre- and post-incorporation procedures that are officially required for an entrepreneur to legally operate a business are recorded.

14 Number of procedures to start a business

15 Time it takes to start a business (days)

16 Cost of starting a business (% of per cap income)

17 Single access point for businesses Makes start-up on twice as fast Standardized articles of incorporation Facilitates document processing at registry and prevents errors Simplify license requirements Eliminate the mandatory publication in the Official Gazette Colombia, Nicaragua, Turkey, Belgium Slovakia, Singapore, Sweden, Norway Honduras (temporary license), Mexico (SARE), Peru Ethiopia, Germany, Serbia and Montenegro, Starting a business: some best practices and reforms

18 A Snapshot of Doing Business in Ethiopia Contract enforcement

19 Contact enforcement: Number of Procedures

20 Contract enforcement: number of days

21 Contract enforcement: Financial cost (percent of debt value)

22 In addition...  Property registration  Cross-boarder trade  Taxes

23 Procedures to register property

24 Time to register property (in days)

25 Cost of registering property (in percent of property value)

26 Time to export (in days)

27 Number of signatures to export

28 Time to Import (in days)

29 Number of signatures to import

30 Paying taxes: time cost in hours/year

31 Paying taxes: financial cost (% gross profits)

32 Paying taxes: number of payments/year

33 Target areas to work on l Doing Business and ICA results can prioritize areas for reform: l Property registration l Business start-up l Licensing l Contract enforcement l Import/Export procedures l And within those highlight specific procedural constraints which are binding