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Doingbusiness in 2006A snapshot of Business Indicators

Richard Stern, FIASJames Emery, PEP AFR

May 22-23 , 2006Addis Ababa, Ethiopia

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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

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•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 ‘05

2004 2005 2006

Doingbusiness indicators

Products: Report, academic papers, country summaries, website databasewww.doingbusiness.org

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Use DoingBusiness to drive reforms

Develop targets to rank relative to reference groups. Competitors – at least as good as competitors Neighbors – best in the region Economic models – goal to approach models which

help shape strategy and policy Phased strategy of achieving objectives Use Doing Business as an outcome indicator

Useful for engaging private sector in process Objective and updated annually

Measure results – DB is a tool to attract invesment, growth and jobs

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Where DB Finds Results: Most reforms in East Europe

100%

82%

50% 50%

40%31%

22%

EastEurope

OECD LatinAmerica

SouthAsia

EastAsia

MiddleEast

Africa

Percentage of countries with at least one reform

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Who is reforming in Africa?

Rwanda - a top reformer - abolished mandatory pre-shipment inspections and created specialized court chambers for business and tax matters, reducing court delays.

Mozambique cut the property transfer tax from 10 to 2.4% of the property value, the largest cost reduction in the world.

Kenya and Mauritius improved credit information sharing by amending their banking acts. This makes it easier for lenders to evaluate creditworthiness.

In Mauritania, the Nouakchott port now operates around the clock, compared with only 60 hours a week previously.

Burundi introduced a new summary procedure for debt recovery and allowed private bailiffs to operate, reducing delays in the courts.

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1. New Zealand2. Singapore3. United States4. Canada5. Norway6. Australia7. Hong Kong, China8. Denmark9. United Kingdom10. Japan11. Ireland12. Iceland13. Finland14. Sweden15. Lithuania16. Estonia

Top economies on the ease of doing business

16. Switzerland17. Belgium18. Germany19. Thailand20. Malaysia21. Puerto Rico22. Mauritius23. Netherlands24. Chile25. Latvia26. Korea27. South Africa28. Israel29. Spain99. Vietnam101.Ethiopia

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Who’s in your DB neighborhood?

1

68

137

90

151

101

140

38

141

0

35

70

105

140

175

NewZealand

SaudiArabia

Kenya Yemen Ethiopia Eritrea Tanzania Egypt Sudan

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26 Ease of paying taxes47 Hiring and firing workers48 Closing a business57 Dealing with licenses 71 Ease of contract enforcement94 Ease of starting a business114 Getting credit129 Trading across borders137 Protecting investors140 Ease of registering property

Ethiopia’s rank on the ease of doing business: 101

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A Snapshot of Doing Business inEthiopia

Starting a business

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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

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Starting a Business: Methodology

The Company

Is a limited liability company

Operates in the country’s most populous city

Is 100% domestically owned and has 5 owners, none of whom is a legal entity.

Has up to 50 employees 1 month after the commencement of operations, all of them nationals

Has a company deed 10 pages long

Performs general industrial or commercial activities

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Starting a Business: Methodology

Procedure

any interaction of the company founder with external parties:

government agencies, lawyers, auditors, notaries, etc

Both pre- and post-incorporation procedures that are officially required for an entrepreneur to legally operate a business are recorded.

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Number of procedures to start a business

2

10 10

12

13 13 13

7

13

0

3

6

9

12

15

Australia* Ethiopia Egypt Sudan Yemen Eritrea Saudi Arabia Kenya Tanzania

Fewest Procedures - Global

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Time it takes to start a business (days)

2

32

63 64

91

38

54

35

34

0

20

40

60

80

100

Australia Ethiopia Egypt Tanzania Sudan Kenya Yemen Saudi Arabia Eritrea

Least Time - Global

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

0.0

48.2

65.1

104.9

128.6

161.3

68.1 68.5

240.2

0

52

104

156

208

260

Denmark Kenya Ethiopia Sudan Saudi Arabia Egypt Eritrea Tanzania Yemen

Least Cost - Global

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• 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

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A Snapshot of Doing Business inEthiopia

Contract enforcement

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Contact enforcement: Number of Procedures

21

30

37

44

67

55

27

25

11

0

15

30

45

60

75

Australia Tanzania Kenya Eritrea Ethiopia Yemen Saudi Arabia Egypt Sudan

Fewest Procedures - Global

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Contract enforcement: number of days

27

242

410 420

915

385360360360

0

200

400

600

800

1000

Tunisia Tanzania Kenya SaudiArabia

Yemen Eritrea Egypt Ethiopia Sudan

Least Time- Global

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Contract enforcement: Financial cost(percent of debt value)

4.2

10.5

14.8

19.9 20.0

30.0

35.3

41.3

18.4

0

10

20

30

40

50

Norway Yemen Ethiopia Egypt Eritrea Saudi Arabia Sudan Tanzania Kenya

Least Cost - Global

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In addition. . .

Property registrationCross-boarder tradeTaxes

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Procedures to register property

1

4

6 6

8

12

7

15

No Data0

4

8

12

16

20

Norway* SaudiArabia

Yemen Eritrea Egypt Kenya Tanzania Ethiopia Sudan

Fewest Procedures - Global

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Time to register property (in days)

1 4

21

56 61

91

73

193

No Data0

45

90

135

180

225

Norway* Saudi Arabia Yemen Ethiopia Tanzania Kenya Eritrea Egypt Sudan

Least time - Global

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Cost of registering property(in percent of property value)

0.0

3.9 4.1

6.1

9.19.6

10.4

12.2

No Data0

3

6

9

12

15

Saudi Arabia Yemen Kenya Egypt Eritrea Rwanda Ethiopia Tanzania Sudan

Least Cost - Global

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Time to export (in days)

5

2730

33

45 46

69

82

36

0

20

40

60

80

100

Denmark Egypt Tanzania Yemen Saudi Arabia Kenya Ethiopia Eritrea Sudan

Least Time - Global

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Number of signatures to export

1

1011

12

20

3335

8

15

0

8

16

24

32

40

Germany* Yemen Tanzania Egypt Saudi Arabia Kenya Eritrea Ethiopia Sudan

Fewest Signatures - Global

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Time to Import(in days)

5

29 31

5157

62

69

44

111

0

24

48

72

96

120

Denmark Egypt Yemen Saudi Arabia Tanzania Ethiopia Kenya Eritrea Sudan

Least Time - Global

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Number of signatures to import

1

1618

20 20

8

45

33

50

0

12

24

36

48

60

Denmark* Egypt Tanzania Saudi Arabia Yemen Kenya Eritrea Ethiopia Sudan

Fewest Signatures - Global

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Paying taxes: time cost in hours/year

12

52

216248 248

372

504

70

No Data0

110

220

330

440

550

UAE Ethiopia Saudi Arabia Eritrea Tanzania Yemen Kenya Egypt Sudan

Least Time - Global

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Paying taxes: financial cost (% gross profits)

1.4

32.1

53.9

128.8

68.2

43.6 51.3

66.3

No Data0

25

50

75

100

125

150

Saudi Arabia Egypt Ethiopia Tanzania Rwanda Eritrea Kenya Yemen Sudan

Least Tax Payable - Global

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Paying taxes: number of payments/year

1

13

39

48

32

20

1817

No Data0

11

22

33

44

55

Hong Kong,China

SaudiArabia

Kenya Eritrea Ethiopia Yemen Egypt Tanzania Sudan

Fewest Payments- Global

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Target areas to work on

Doing Business and ICA results can prioritize areas for reform:

Property registration Business start-up Licensing Contract enforcement Import/Export procedures

And within those highlight specific procedural constraints which are binding