Thursday, 10 September 2009

Doing Business 2010

The International Finance Corporation (IFC), a World Bank institution, released its annual “Doing Business 2010” report yesterday. The audit looks at how countries around the world have improved the environment for small to medium businesses (including sole traders and entrepreneurs) to set up and do business.

Singapore remains at the top for overall “ease of doing business” but some interesting results for Africa – and opportunities for sharing best practices.

287 reforms were recorded in 131 economies (June 2008 to May 2009) – a record – but more significant was the fact that low- and lower-middle-income economies accounted for two-thirds of reforms in 2008/09. Is the economic crisis hitting developing nations harder than we thought, kick-starting reformers into action to attract more inward investment?

Rwanda – the top reformer - introduced reforms in 7 out of the 10 categories (such as registering property, enforcing contracts, getting credit, protecting investors), rising from 143rd to 67th place on the ease of doing business rankings – and the first time a Sub-Saharan African country has led the world in reforms. Liberia entered the top ten, while Mauritius and Sierra Leone were also recognised for leading in certain areas.

So post-conflict countries have a reason to reform as well it seems – again with the driver of attracting Foreign Direct Investment. While business reforms are only one part of economic development / recovery, it is one area that the government can manage, monitor and measure. The question is how much the private sector can influence the government – but big business has to realise the advantages of a thriving SME sector in that case.

Rankings are one thing – the World Economic Forum also released its 2009 / 10 global competitiveness index yesterday, to give countries even more numbers to compete on, but surely what counts is the experience in each country. As Penelope Brook, Acting Vice President for Financial and Private Sector Development for the World Bank Group said – absolute scores are what matter. A women trying to set up a retail business in South Africa is not going to care what others are going through in Ghana or Guinea; what matters is the speed and ease of processes for her. All the top rankings in the world count for nothing if people on the ground don’t experience change.

So where to from here? Is it the case, as Thierry Tanoh, IFC Vice President for Sub Saharan Africa, states, that we are seeing a sea change in the way Africa views investment, or is it a short-term shift in rankings due to circumstance? There are remarkable signs of progress in Africa, with the likes of Rwanda providing a roadmap for others, but the ability to maintain that momentum, and weather the storms of political, economic or social changes is crucial – for domestic and international audiences and investors.

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