Doing business in Ghana is a lot easier - study

In Africa, a More Business-Friendly Approach
Africa moved up from last place to the middle of the pack among world regions in carrying out changes that make it easier to start and run a business, according to a World Bank report released Tuesday.

Tanzania and Ghana catapulted this year into the ranks of the top 10 reformers. Rwanda and Nigeria made it into the top 20.

And 26 other African countries took modest steps to ease business regulations “by the stroke of a minister’s pen,” the report noted.

Africa, the world’s poorest region, currently has the highest tax rates and some of its most convoluted and antiquated business regulations. In every African country, most businesses operate underground, beyond the reach of regulators and tax collectors.

Authors of the report, “Doing Business,” by the World Bank and the International Finance Corporation, the bank’s private sector arm, say they hope simplifying and easing the rules of the capitalist game will entice more businesses above ground.

A team of 30 researchers found that African countries had made many incremental changes.

“The most surprising thing for me was to see the pickup of reform in Africa,” said Simeon Djankov, a World Bank economist who four years ago developed the rankings on the ease of doing business. “Something has happened this year. At least two-thirds of Africa’s countries have at least one positive reform.”

Tanzania computerized its business and tax registries and reduced delays in customs inspections and the courts.

Ghana has cut the corporate tax rate to 25 percent, from 32.5 percent, and made it easier to export goods.

Rwanda scrapped a law adopted during Belgian colonial rule that had given one official a monopoly on notarizing documents for the entire country.

Ivory Coast slashed the time to register property to a month from more than a year by eliminating a requirement that the urban minister give his consent.

Wealthy donors like the World Bank, the United States and Britain, which focus on spurring economic growth and job creation, are putting heavier emphasis on such changes in deciding where to provide aid.

The Millennium Challenge Account, President Bush’s aid program, explicitly uses the bank report’s measure of days to start a business as one criterion for deciding who qualifies for large grants.

Economists outside the bank say the wealth of statistical information and rankings are useful to countries seeking to improve their investment climates.

But they also caution that scoring well in the rankings is no guarantee of economic growth and no substitute for a broader economic strategy.

“It’s just one piece of the puzzle,” said William Easterly, a former bank economist who is now an economist at New York University.

Dani Rodrik, a Harvard economist, said the report focused on steps that got government out of the way — like cutting taxes and regulations — but he said that countries often needed governments that encouraged industries through subsidies, preferential tax policies or special economic zones.

“What’s assumed is that if government provides the right environment for property rights, contract enforcement and low taxes these economies will take off, but in actual fact, economic development requires a government more actively involved with the private sector,” he said.

Mr. Djankov, an author of the report, agreed that there were things a government could do that might be more important to economic development than the factors in the report. For example, he said, building a port might make be significant but it could also cost billions of dollars and take years to complete, unlike the changes in the report. “These reforms are very cheap and easy to do for a government,” he said.

The bank’s “Doing Business” report ranked 175 countries by the number of days it takes to start a business and on other indicators that measure contract enforcement, investor protections, corporate taxation levels and the flexibility businesses have to hire and fire workers.

The nations the bank named as the top 10 reformers were, from the best, Georgia, Romania, Mexico, China, Peru, France, Croatia, Guatemala, Ghana and Tanzania. Eastern Europe, Central Asia and wealthy Western nations were the leading regions, followed by Africa. This year, South Asia brought up the rear.