JEDDAH – Entrepreneurs across the Arab world continue to face often complex and costly regulatory processes to start and run a business - and contend with weaker investor and property rights protections than their counterparts in other regions, the "Doing Business in the Arab World 2012" by IFC/World Bank said. Governments in 13 of 20 Arab economies implemented regulatory reforms in the past year aimed at improving the business environment for local entrepreneurs. Overall, these governments implemented 20 such reforms between June 2010 and May 2011. The regulatory environment varies across economies in the region. While Arab economies have an average ranking on the ease of doing business of 99 (among 183 economies globally), there is a great range within the region - from Saudi Arabia (12) to Djibouti (170). Morocco was the most active in implementing regulatory reforms in 2010/11. It launched a fully operational one-stop shop for obtaining construction permits. It eased the administrative burden of paying taxes for firms by enhancing electronic filing and payment of the corporate income tax and value added tax. And it adopted a new law modifying the rules of procedure governing commercial proceedings. New data show the importance of access to regulatory information. Fee schedules, documentation requirements and information relating to commercial cases and insolvency proceedings are not readily accessible in some Arab economies. But the rise in e-government initiatives in the region and around the world provides an opportunity to increase access to information and transparency. A new measure shows that over the past 6 years, 94 percent of 174 economies covered by Doing Business - and 94 percent of the 18 Arab economies in the sample - made their regulatory environment more business-friendly. These economies moved closer to the "frontier," a synthetic measure based on the most business-friendly regulatory practices across 9 areas of business regulation - from starting a business to resolving insolvency. Among Arab economies, Egypt made the greatest progress in narrowing the distance to the frontier between 2005 and 2011, followed by Saudi Arabia. In the Arab world, Egypt, Saudi Arabia and Morocco are among those that made the most progress in closing the gap to the frontier over the past 6 years. These economies started off with relatively high levels of bureaucracy and weak protections of property rights as measured by Doing Business. Since 2005, however, Egypt has implemented 23 reforms making it easier to do business, Saudi Arabia 18 and Morocco 14. Yet economies such as Egypt and Morocco still have some way to go compared with most other economies, particularly in their legal institutions, many of which remain underdeveloped. By contrast, Saudi Arabia not only focused on easing regulatory burdens over the past 4 years, it also passed legislation to strengthen the protections of minority shareholders, speed up the bankruptcy process and improve access to credit. Jordan is another Arab economy that has made substantial progress toward the frontier. Since 2005 it has implemented 14 regulatory reforms in areas covered by Doing Business, almost a third of them focused on making it easier and less expensive to start a business. In the past year, Jordan reduced its paid-in minimum capital requirement from 1,000 Jordanian dinars to half a dinar (less than $1) - far below the Arab world average of 107 percent of income per capita. Moreover, Jordan lowered the overall cost to start a business from 102 percent of income per capita in 2004 to 14 percent today. This is less than a third of the average in the Arab world, though still 3 times the average in OECD high-income economies. In Saudi Arabia business regulation reforms in the areas covered by Doing Business have been a high priority for the government. In the past 7 years Saudi Arabia made 20 improvements in 7 of these areas. These reforms included adopting a real property registration law in 2006, establishing a commercial credit bureau in 2007 and eliminating the paid-in minimum capital requirement - which, at 1,057 percent of income per capita, had been among the highest in the region. In 2006 Saudi Arabia also streamlined business registration and the documentation requirements for importing goods, and in 2008 it amended its company law to address approval and disclosure requirements for related-party transactions. In 2009 it launched a new container terminal at the Jeddah Islamic Port. And in 2010 it expedited the bankruptcy process by providing for earlier access to amicable settlements and set time limits for the process to encourage creditors to participate. In recent years regulatory reforms in the Arab world have focused on simplifying regulatory processes such as starting a business or trading across borders. In 2010/11, 6 Arab economies made it easier to start a business. Since 2005 the number of Arab economies where starting a business takes 20 days or less has more than doubled, from 4 to 11. And trading across borders has become faster. The average time required to export goods has fallen from 30 days in 2005 to 21 today, while the average time to import has fallen from 36 days to 25. Yet economies in the Arab world have lagged behind in implementing institutional reforms to improve insolvency regimes, judicial systems, collateral laws and credit information systems. No Arab economy implemented reforms in registering property, enforcing contracts or resolving insolvency in 2010/11, and only Morocco amended legislation to strengthen shareholder protections. Resolving a commercial dispute through the courts in Arab economies takes 651 days on average - longer than in any other region except Latin America and the Caribbean and South Asia. Creditors in Arab economies can expect to recover on average only 32.7 cents on the dollar from insolvent firms - a recovery rate that, along with that in Latin America and the Caribbean, ranks second lowest in the world after Sub-Saharan Africa's. In a positive trend, reforms to improve credit information systems have been high on the agenda of the region's policy makers in recent years. Seventeen Arab economies have a public credit registry or private credit bureau. But coverage by these institutions, at only 15 percent of the region's adult population, remains low - lower than in any other region except Sub-Saharan Africa (12 percent) and South Asia (10 percent). Eastern Europe and Central Asia, the region with the next highest ranking, has coverage of 40 percent of its adult population. Institutions play a major role in private sector development. Courts, registries, tax agencies and credit information bureaus are essential to make markets work. – SG
