April 23, 2024

Governments Clearing the Way for Small Business Creation, Report Says

PARIS — Governments have responded to the financial crisis by making it easier for entrepreneurs to start new businesses, paving the way for employment growth amid an uncertain economic outlook, according to a World Bank report released late Wednesday.

The study, Doing Business 2011, found that governments in 117 of the 183 economies it surveyed had carried out 216 regulatory overhauls “making it easier to start and operate a business, strengthening transparency and property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.”

“It’s been a strong year of reform around the world,” Neil Gregory, director of indicators and analysis at the World Bank and one of the authors of the report, said, adding: “Over all, we’re seeing a move toward making regulation more efficient.”

With public finances under pressure, and the number of unemployed people reaching 212 million around the world last year — 34 million more than at the onset of the financial crisis in 2007 — the report said it was “vital” to unleash “the job creation potential of small private enterprises.”

Singapore remains the world’s easiest place to start and run a company, followed by Hong Kong, New Zealand, Britain and the United States, but developing countries are working to catch up, the report found.

Kazakhstan improved the most of any country on the list, rising to No.78 from the No.88 spot in 2009. The Central Asian country has set the minimum capital requirement for establishing a new business at about 70 cents and smoothed construction and trade regulations.

Rwanda, Peru and Vietnam also improved markedly, as did the island republic of Cape Verde. Over five years, the greatest improvement has been in Rwanda, Belarus, Burkina Faso, Saudi Arabia and the former Soviet republic of Georgia, the report found.

Amr bin Abdullah al-Dabbagh, governor of the Saudi Arabian General Investment Authority, attributed his country’s rise in the rankings to “major reforms, including the elimination of the minimum capital requirement for starting a business, streamlining processes for starting a business and creating the foundations of a competitive internal credit market.”

Saudi Arabia rose to No.11 in the latest rankings from No.67 in 2005, he said in a statement.

Sub-Saharan Africa and South Asian countries continued to score the lowest in the study.

While harder economic times led governments in Eastern Europe and elsewhere to quickly improve rules dealing with business insolvency, Mr. Gregory said, a range of reforms in East Asia — where many economies have held out better than elsewhere — suggest that “these aren’t just crisis measures.”

The World Bank report, which analyzes data collected from June 2009 to May 2010, ranks countries based on nine areas: the ease of starting a business, paying taxes, trading across borders, registering property, dealing with construction permits, getting credit, closing a business, enforcing contracts and protecting investors. It focuses on companies of about 50 employees.

Mr. Gregory said that one of the most striking trends was governments’ increasing use of the Internet to reduce paperwork, a development that makes life easier for start-ups and helps governments to capture taxes more efficiently.

In Singapore, for example, “almost everything is online,” he said, while Mexico has made great strides in helping small businesses use software to file taxes with minimum hassle.

China, the largest developing economy, ranked 79 on the list, little changed from 78 last year. But Mr. Gregory said Beijing’s concern about employment was leading it, too, to take overhauls aimed at small businesses seriously.

“They’re trying to develop the domestic interior,” he said, “and these are the types of business they’re targeting.”

Mr. Gregory pointed to the area of credit history, noting that in 2006 there were essentially no credit history data on Chinese adults, while today 64 percent of the population was covered.

The authors of the study do not claim that such reforms lead to a measurable improvement in gross domestic product, but Mr. Gregory said small-business creation did correlate positively with employment growth.

“Making changes in these areas really does make a difference,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=7190641b7fc8ca2ee382e7fe9d3e49ee

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