Creating

16 DOING BUSINESS IN 2006
In New Zealand a builder would have to complete 7
procedures requiring 65 days and $6,800—a third of the
average annual income—to comply with all regulations.
That excludes the time and cost of building. Inspections
are contracted to private companies. The efficiency of
regulatory and inspection services makes New Zealand
the world’s easiest place to build a warehouse (table 3.1).
In Denmark it takes 7 procedures, 70 days and $31,800,
or three-quarters of the average annual income, making
Denmark the third easiest place to build a warehouse.
It is not only rich countries that achieve the right
balance between safety and costs. Mauritius is among
the easiest countries in which to build a warehouse (figure
3.1). And it has the same low rate of construction
accidents as Hong Kong (China).
Construction licenses are just one type of business
license. Here they are used as the starting point for the
discussion of licensing because construction is among
the largest sectors in every economy. In OECD countries
it accounts for nearly 10% of national income. Moreover,
the rationale for such licensing is straightforward:
well-built homes and offices save lives. Elsewhere, the
rationale for licensing is not always clear. Why do hairdressers
in Zambia need a license? Or laundromat owners
in Botswana? Couriers in Tanzania? Licensing reform
addresses these questions.
Striking the right balance between ease of doing
business and consumer safety requires continuous reform.
In Australia new licensing regulations contain
provisions that cause them to automatically expire after
a certain period unless renewed by parliament. Sweden
takes a “guillotine” approach to licensing reform, where
hundreds of obsolete licenses are canceled after the
government periodically requires regulators to register
essential ones.
Who is reforming?
Poland was the most active reformer of business licensing
in 2004, with the Freedom of Economic Activity
Act repealing more than 600 licensing and permit requirements
at the national and municipal levels (table
3.2). This reform had 2 goals: reducing the number of
licensing regulations and requiring that any new ones be
approved by parliament. For parliament to consider new
licensing legislation, a cost-benefit analysis must be submitted.
The new law also limits to 4 weeks the time that
small businesses have to spend dealing with inspections,
licensing requirements and permit renewals. This target
will be achieved by placing time limits on the services of
authorizing agencies.
Poland’s example spurred reforms in Bulgaria and
Georgia. In Bulgaria the new Law on Administrative
Regulation replaced 1,500 previous pieces of legislation.
It defines principles for introducing new licensing regimes
and requires that they be accompanied by assessments
of compliance costs. As in Poland, the law also sets
time limits on processing of licensing requests. There
is one weakness in Bulgaria’s law: it does not provide a
TABLE 3.2
Main licensing reforms in 2004
Reform
Cut the number of licensing regimes
Simplifi ed licensing and inspections
Introduced private inspections
Established time limits on issuing
licenses
Adopted new building codes
Source: Doing Business database.
Country
Bulgaria, Georgia, Poland
Argentina, Canada, Netherlands
Finland
Bulgaria, Poland, Serbia and
Montenegro
Croatia, Vietnam
“silence is consent” rule in most business licensing. This
oversight has already caused problems with addressing
delays in the issuance of licenses.
Georgia’s Law on Issuance of Licenses and Permits
reduces from 909 to 159 the types of activities subject
to licensing. For example, the Ministry of Agriculture
can issue only 2 types of licenses: for processing fish and
producing baby food. Any activity not mentioned in the
law does not need a license.
Canadian construction companies used to com-