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26 DOING BUSINESS IN 2006 Why reform? The International Labour Organization has established a set of fundamental principles and rights at work, including the freedom of association, the right to collective bargaining, the elimination of forced labor, the abolition of child labor and the elimination of discrimination in hiring and work practices. 6 Beyond adopting and enforcing these regulations, governments struggle to strike the right balance between labor market flexibility and job stability. Most developing countries err on the side of excessive rigidity, to the detriment of businesses and workers alike. Flexible employment regulation increases productivity. Analysis suggests that if Paraguay adopted the employment regulations of Chile—moving from the 20th to the 80th percentile on the rigidity of employment index—it might increase its annual productivity growth by up to 1 percentage point. That would represent a doubling of the rate. 7 But if employment regulation is rigid, businesses seek other means of staying competitive. They hire informal workers, pay them under the table and avoid providing social benefits, as Doing Business in 2005 reported. And when parents fail to find decent employment, children often end up working too. Reforms of employment regulation reduce business costs by increasing firms’ ability to adjust to new technologies, macroeconomic shocks and inflows of immigrant labor. 8 The result is a higher employment rate. In OECD countries with flexible laws, it is 2–2.5 percentage points higher. 9 Flexible employment regulation also increases the benefits of trade liberalization. 10 As the economy opens, competition from now-cheaper imports drives jobs away from less productive sectors and into more productive ones, expanding the economy. But this happens only if workers can move. Where barriers to hiring and firing are high, labor stays in unproductive sectors. The result is less job creation and a loss of competitiveness, as in much of Latin America in the past decade. These are not the kinds of effects legislators had in mind. Notes 1. In particular, there is no correlation between social security taxes and the rigidity of employment index. 2. World Bank (2005b). 3. Meadows (2003). 4. European Council (1997). 5. A number of countries have conducted studies on the effectiveness of such reform in attracting young employees and providing them on-the-job training. All have found positive results. See, for example, Neumark and Wascher (2004). 6. ILO (various years). Economic studies show that the presence of such fundamental rights improves productivity. 7. Caballero and others (2005). 8. Angrist and Kugler (2003). 9. Blanchard and Philippon (2004) and Pierre and Scarpetta (forthcoming). 10. Bolaky and Freund (2004).
27 Registering property Who is reforming? What to reform? Why reform? “It is slow and bureaucratic to the point of being dysfunctional. The procedures are unclear, can only be learned with experience and can only be guessed at by reading the law. They are not uniform but rather vary from municipality to municipality. The cost is beyond 95% of the citizens.” So says João about registering property in Mozambique. No surprise then, that only 10% of properties in Maputo are formally registered. And 20% of those are in dispute. Things may improve. Last year the government cut the cost to register property in half. No such luck in most other poor countries. It takes 363 days to register property in Bangladesh, but only 1 in Norway and 2 in Sweden. The procedure costs around 21% of the property value in Chad, the Republic of Congo and Zimbabwe, but only 0.1% in Slovakia and New Zealand, the top performer on the ease of registering property (table 5.1). In the Netherlands an entrepreneur can register property online, where she can also check ownership records back to 1832. But in Nigeria an entrepreneur has to complete 21 pen-and-paper procedures, including obtaining the state governor’s consent. The process lasts 274 days and requires official fees amounting to more than 27% of the property value. There are few takers. Making property registration simple, fast and cheap lets entrepreneurs focus on their business. And it strengthens property rights by encouraging formal title. 1 Without that title entrepreneurs invest less and find it harder to get credit. 2 If registering property is cumbersome, ownership quickly slips back to informal. Take the example of Armenia. A $10 million land reform program was at risk of failure because few chose to register property and subsequent transactions. The government streamlined procedures, cutting fees by 50% and the time required to 6 days. Registrations jumped. 3 TABLE 5.1 Where is registering property easy—and where not? Easiest New Zealand Lithuania Saudi Arabia Slovakia Norway Sweden Armenia United Arab Emirates Iceland United States Most difficult Tanzania France Angola Madagascar Côte d’Ivoire Burkina Faso Uzbekistan Afghanistan Bangladesh Nigeria Note: Rankings on the ease of registering property are the average of the country rankings on the procedures, time and cost to register property. See the Data notes for details. Source: Doing Business database.
Page 1: Creating Jobs
Page 5: Contents Doing Business in 2006: Cr
Page 8 and 9: 2 DOING BUSINESS IN 2006 to registe
Page 10 and 11: 4 DOING BUSINESS IN 2006 Less costl
Page 12 and 13: 6 DOING BUSINESS IN 2006
Page 15 and 16: 9 Starting a business Who is reform
Page 17 and 18: STARTING A BUSINESS 11 duced the mi
Page 19 and 20: STARTING A BUSINESS 13 Introduce st
Page 21 and 22: 15 Dealing with licenses Who is ref
Page 23 and 24: DEALING WITH LICENSES 17 plain that
Page 25 and 26: DEALING WITH LICENSES 19 Not in Sie
Page 27 and 28: 21 Hiring and firing workers Who is
Page 29 and 30: HIRING AND FIRING WORKERS 23 TABLE
Page 31: HIRING AND FIRING WORKERS 25 raised
Page 35 and 36: REGISTERING PROPERTY 29 In Latin Am
Page 37 and 38: REGISTERING PROPERTY 31
Page 39 and 40: 33 Getting credit Who is reforming?
Page 41 and 42: GETTING CREDIT 35
Page 43 and 44: GETTING CREDIT 37 But public regist
Page 45 and 46: 39 Protecting investors Who is refo
Page 47 and 48: PROTECTING INVESTORS 41 TABLE 7.2 I
Page 49 and 50: PROTECTING INVESTORS 43 TABLE 7.6 W
Page 51 and 52: 45 Paying taxes Who is reforming? W
Page 53 and 54: PAYING TAXES 47
Page 55 and 56: PAYING TAXES 49 What to reform? Tax
Page 57 and 58: PAYING TAXES 51 2004, despite the n
Page 59 and 60: 53 Trading across borders Who is re
Page 61 and 62: TRADING ACROSS BORDERS 55 Who is re
Page 63 and 64: TRADING ACROSS BORDERS 57 documents
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Page 68 and 69: 62 DOING BUSINESS IN 2006 Who is re
Page 70 and 71: 64 DOING BUSINESS IN 2006 loans at
Page 73 and 74: 67 Closing a business Who is reform
Page 75 and 76: CLOSING A BUSINESS 69 What to refor
Page 77: CLOSING A BUSINESS 71 Such measures
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76 DOING BUSINESS IN 2006 Slovak St
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78 DOING BUSINESS IN 2006 Economy c
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80 DOING BUSINESS IN 2006 a procedu
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82 DOING BUSINESS IN 2006 • Is 10
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84 DOING BUSINESS IN 2006 Protectin
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86 DOING BUSINESS IN 2006 Assumptio
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88 DOING BUSINESS IN 2006 Assumptio
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91 Ease of doing business: an appen
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APPENDIX 93 countries all rank in t
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96 DOING BUSINESS IN 2006 Starting
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98 DOING BUSINESS IN 2006 Hiring an
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100 DOING BUSINESS IN 2006 Hiring a
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102 DOING BUSINESS IN 2006 Getting
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104 DOING BUSINESS IN 2006 Paying T
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106 DOING BUSINESS IN 2006 Paying T
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108 DOING BUSINESS IN 2006 Enforcin
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110 DOING BUSINESS IN 2006 AFGHANIS
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112 DOING BUSINESS IN 2006 AUSTRALI
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114 DOING BUSINESS IN 2006 BENIN Su
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116 DOING BUSINESS IN 2006 BULGARIA
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118 DOING BUSINESS IN 2006 CENTRAL
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120 DOING BUSINESS IN 2006 CONGO, R
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122 DOING BUSINESS IN 2006 DOMINICA
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124 DOING BUSINESS IN 2006 ETHIOPIA
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126 DOING BUSINESS IN 2006 GHANA Su
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128 DOING BUSINESS IN 2006 HONDURAS
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130 DOING BUSINESS IN 2006 IRAN Mid
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132 DOING BUSINESS IN 2006 JAPAN OE
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134 DOING BUSINESS IN 2006 KUWAIT M
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136 DOING BUSINESS IN 2006 LITHUANI
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138 DOING BUSINESS IN 2006 MALI Sub
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140 DOING BUSINESS IN 2006 MOLDOVA
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142 DOING BUSINESS IN 2006 NETHERLA
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144 DOING BUSINESS IN 2006 OMAN Mid
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146 DOING BUSINESS IN 2006 PERU Lat
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148 DOING BUSINESS IN 2006 RUSSIA E
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150 DOING BUSINESS IN 2006 SERBIA A
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152 DOING BUSINESS IN 2006 SOUTH AF
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154 DOING BUSINESS IN 2006 SYRIA Mi
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156 DOING BUSINESS IN 2006 TONGA Ea
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158 DOING BUSINESS IN 2006 UNITED K
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160 DOING BUSINESS IN 2006 VIETNAM
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163 Acknowledgments Contact details
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ACKNOWLEDGMENTS 165 Tibor Fabian BI
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ACKNOWLEDGMENTS 167 Barthélémy Ke
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ACKNOWLEDGMENTS 169 Ghislane Moise
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ACKNOWLEDGMENTS 171 Bernt Juthstrom
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ACKNOWLEDGMENTS 173 Kari Hrafn Kjar
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ACKNOWLEDGMENTS 175 Ivan A. Zaitsev
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ACKNOWLEDGMENTS 177 Samuel Tembenu
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ACKNOWLEDGMENTS 179 Russell Lawn BU
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ACKNOWLEDGMENTS 181 Jazmin Banal RO
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ACKNOWLEDGMENTS 183 Ivan Petrovic L
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ACKNOWLEDGMENTS 185 Wen-Horng Kao P
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ACKNOWLEDGMENTS 187 Katherine Stone
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Doing Business in 2006: Creating Jo
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