Doing Business 2013
Bad rules breed corruption. Cutting them costs nothing
SINCE 2003 the International Finance Corporation (IFC) and the World Bank have been tracking the business-friendliness of government rules around the world. Things are looking up. Nearly all regions are catching up with the best practices seen in the richest countries.
This matters for many reasons. One is that onerous rules breed corruption. For as many countries as it can, the IFC plots its own measures of the regulatory burden against perceived levels of corruption, as ranked by Transparency International, a pressure group. As the chart shows, the more rules impede business, the more incentive businessfolk have to bribe them away. Lighter rules mean less baksheesh. They also mean a larger formal economy and a wider tax base.
In “Doing Business 2013”, published this week, the countries that score well are not those with no regulation at all—Somalia is a fearsome place to do business—but places where rules are simple and designed to make markets work better. The top 20 list includes the usual suspects: Singapore, Hong Kong, the Nordic countries, America. But less obvious entrants are there, too: Georgia, Malaysia and Thailand.
The most dramatic progress has come in making it simpler to jump through the regulatory hoops necessary to start a business. Since 2005 the average time it takes has fallen from 50 days to 30. Among the worst performers (the bottom quartile, which are mostly poor countries) the improvement has been slightly greater: from 112 days to 63. But they still have far to go: in New Zealand the process takes only one day.
Augusto Lopez-Claros of the World Bank sees growing evidence that better business conditions are boosting economic growth, job creation and trade. Reducing the time it takes to fill in the forms for shipping goods can lead to a one percent rise in exports, he notes.
The Doing Business rankings seem to have spurred reform. In 2005 only a third of countries in sub-Saharan Africa were reforming; now over two-thirds are. Poland, Ukraine and Uzbekistan have made big gains. Even the sick men of Europe—Greece and Italy—are showing signs of progress. Unlike bail-outs, cutting rules comes cheap.