Economies in Europe and Central Asia Accelerate Pace of Reforms to Improve Business Climate, says Doing Business Report
WASHINGTON – Economies in the Europe and Central Asia region stepped up the pace of reforms to improve the ease of doing business for domestic small and medium-sized enterprises, says the World Bank Group’s Doing Business 2019: Training for Reform report, released today.
A total of 54 business reforms were carried out in the region during the past year, compared with 43 reforms the year before. Nearly all of the region’s 23 economies carried out reforms that help create jobs and stimulate private enterprise.
The region hosts two of this year’s top 10 ranked economies, measured by the Doing Business report, with Georgia moving up to 6th place, and FYR Macedonia edging up one spot to 10th place. The region also hosts two of this year’s top improvers, Azerbaijan and Turkey.
“Once again, the economies of Europe and Central Asia have demonstrated a very strong commitment to the reform agenda, which is aimed at fostering the development of the private sector and boosting organic economic growth and prosperity,” said Santiago Croci Downes, Program Manager of the Doing Business Unit.
Turkey, which is a top improver for the first time, carried out a record seven reforms, moving the country to 43rd spot in the global rankings. Starting a Business in Turkey became easier with the elimination of the minimum paid-in capital requirement. Other improvements involved electronic processing of documents and provision of more information related to payment of taxes and improved access to credit. However, an increase in the cost of transferring property in Turkey made property registration more difficult.
Azerbaijan, which advanced to 25th place, carried out a record eight reforms, the highest number of reforms by an individual country this year. Getting electricity in Azerbaijan became faster and cheaper, with a reduction in the time it takes for a business to get connected to the grid from 56 to 41 days. The country also improved the reliability of power supply by investing in grid infrastructure and establishing a national regulator to monitor power outages. Dealing with construction permits was made easier, while minority investor protections were strengthened by increasing shareholders’ rights and roles in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency.
With four reforms, Russia advanced to 31st place. Reforms in Russia included a reduction in the cost of paying taxes in both Moscow and St. Petersburg. Russia made trading across borders easier by prioritizing online customs clearance and introducing shortened time limits for automated completion, which almost halved the time needed for border compliance to export and import goods. Russia also made it faster to get construction permits, reducing by 13 days the time it takes for a business to obtain all permits to build a warehouse. Getting electricity was also made faster and cheaper.
In Georgia, three reforms were carried out. Starting a new business and contract enforcement were made easier. Paying taxes was made easier by reducing taxable income. However, the process of paying value added tax (VAT) has become more cumbersome.
In FYR Macedonia, one reform was carried out. A reduction in land development fees made the process to get a construction permit less costly.
Collectively, the region’s economies focused their reform efforts in the past year on improvements in trading across borders and paying taxes, with nine and eight reforms, respectively.
The region’s economies perform best with regard to registering property and protecting minority investors. On average, it takes 20 days to complete all procedures required for transferring property, at a cost of 2.6 percent of the property value, compared to 4.2 percent in high-income OECD economies for the same amount of time.
However, the region continues to underperform in the area of getting electricity. On average, it costs 325 percent of income per capita for a business to obtain an electricity connection, compared with 64 percent in high-income OECD economies.
Since Doing Business first began in 2003, starting a business and paying taxes are the areas that have seen the most reforms in Europe and Central Asia. As a result, the average time to start a business in the region has been slashed to 14 days, from 44 days in 2003, and the cost has been significantly reduced from 21 percent of the income per capita in 2003 to 3.6 percent today. The time needed for a company to prepare, file and pay taxes has been halved to 227 hours, from 473 hours in 2005 (when Doing Business began tracking the collection of taxes).
This year, Doing Business collected data on training provided to both public officials and users of business and land registries. A case study in the report, which analyzes this data, finds that mandatory and annual training for relevant officials is associated with higher business and land registry efficiency. In Europe and Central Asia, 55 percent of business registries and 41 percent of land registries use pilot testing. By using pilot testing to convey regulatory changes, business and land registries can identify and address potential challenges before the full implementation of new processes.
A second study, on enforcing contracts and resolving insolvency, examines the education and training that judges receive worldwide. It features initiatives from the European Union and the International Organization for Judicial Training. Two other case studies focus on the benefits of accrediting electricians and training customs clearance officials.
The full report and its datasets are available at www.doingbusiness.org