1. Doing Business 2007 How to reform Private Sector Development in Small States Michael Klein Vice President, Financial and Private Sector Development and IFC Chief Economist September 18, 2006

2. Doing Business indicators Starting a business Dealing with licenses Employing workers Registering property Enforcing contracts Getting credit Trading across borders Protecting investors Paying taxes Closing a business 2006 2007 2008 www.doingbusiness.org Update of 2006 Add 20 countries - 19 Small States How to reform - 50 case studies Update of 2007 Add Paying bribes Add Using infrastructure

3. Starting a business in Gambia in January 2006 1. Check the uniqueness of the company name 2. Notarize the company statutes 3. Payment of stamp duty and deposit of corporate tax with commissioner 4. Register with commercial registry 5. Obtain operational licenses 6. Register with Labor department 7. Register employees for Social security 8. Make a company seal Procedures Time (Number of days) Cost (% of GNI per capita) Cost (right axis) Time (left Axis)

4. Top 30 on the ease of doing business, 2007 16.Lithuania 17.Estonia 18.Thailand 19.Puerto Rico 20.Belgium 21.Germany 22.Netherlands 23.Korea 24.Latvia 25.Malaysia 26.Israel 27.St. Lucia 28.Chile 29.South Africa 30.Austria 1.Singapore 2.New Zealand 3.United States 4.Canada 5.Hong Kong, China 6.United Kingdom 7.Denmark 8.Australia 9.Norway 10.Ireland 11.Japan 12.Iceland 13.Sweden 14.Finland 15.Switzerland

5. Top reformers in 2005/06

6. As a group, small states near global average Average ease of Doing Business

7. …But there is large variation Doing Business 2007 ranking

8. Small states average ranking by indicator Average ranking for small states

9. Small states did not reform much this year Percentage of countries with at least one reform, 2005/06

10. Small states reformers in 2005/06

11. Decreases in time and cost to comply with regulations CountryDoing Business topicNature of reformImprovement in indicators Antigua and Barbuda Starting a businessSeparated company registry from high court Time decreased from 31 to 21 days GambiaEnforcing contractsIntroduced specialized commercial court Time decreased from 766 to 247 days MicronesiaStarting a businessNew Companies Law eliminated minimum capital requirement Minimum capital requirement from 50% of income per capita to 0. SeychellesRegistering propertyStamp duty decreasedCost reduced from 11.89% to 7% of property value

12. Large improvements are possible―SmallStateStan would be #3 overall The hypothetical country “SmallStateStan” has the ease of: Starting a business in Marshall Islands (#13) Licensing (construction) in St. Vincent (#1) Employing workers in Tonga (#4) Registering property in Palau (#13) Getting credit in Fiji (#21) Protecting investors in Mauritius (#11) Paying taxes in Maldives (#1) Trade in Cape Verde (#20) Enforcing contracts in Estonia (#20) Closing a business in Belize (#24)

13. Heavy regulations exclude the vulnerable Countries ranked by procedures to register property, quintiles Least procedures Most procedures Greater Informal Sector to GDP Countries ranked by rigidity of employment index, quintiles Least rigid Most rigid Greater Share Lesser Share Lesser Women’s Share of Private Employment

14. Reform payoff: creating jobs Countries ranked by ease of doing business, quintiles HigherLower Unemployment (%) Note: Relationship is statistically significant at the 1% level and remains significant when controlling for income per capita