Global Regulation Curbing Growth, World Bank Finds

October 31, 2013

Many emerging markets have dramatically improved their business climates in the last year, but a tangle of onerous regulations the world over is curbing much-needed growth from the private sector, the World Bank said in a new report published late Monday.

"We're still paying the price associated with the existence with business regulations, procedures and laws that put a heavy burden on the business community," said Augusto Lopez-Claros, head of the World Bank's global indicators and analysis division.

The bank's flagship report gauges the ease-and difficulty-of doing business in 189 countries around the world. Specifically, it assesses what it's like for small-to-medium sized firms to set up businesses, raise capital, pay taxes, enforce contracts, export their goods and a raft of other metrics.

It's not without controversy. The bank's own in-house watchdog criticized the report for what it called a "deregulation bias."  Still, "Doing Business" is lauded by many economists as a good, if imperfect, barometer of business climates and a tool that helps to drive economic restructuring, competitiveness and ultimately, growth. Seeking to attract investment, authorities want to push their countries higher in the index.

  • Mr. Lopez-Claros cited the report as a factor in driving a major contraction in the gap between worst performers, such as the Philippines, Burundi and Russia, and the top ranked, such as Singapore, New Zealand and the U.S.
  • For example, according to the 2012 report, it took an average of 113 days in the worst quartile of countries to establish a business, compared to 29 days for the rest. But in this year's review, the bank found that 84-day gap had been narrowed to 33 days.

He said similar improvements were seen across a range of measures, including for tax filing, registering properties and the amount of time it took to export products.

  • While countries such as Russia, Rwanda, Ukraine and the Ivory Coast notched some of the biggest upward moves in the ranks, one notable downgrade was China.
  • Despite being the world's second largest economy, China fell to number 96 from 91 in the previous report, putting it well behind Greece, Kazakhstan, Botswana and Tonga.

Although Beijing has been able to fuel stellar growth in the past few decades through fundamental economic reforms, Mr. Lopez-Claros said authorities still have much to do.

"If China and other economies want to sustain their growth rates over the longer term, they will have to address institutional rigidities and other problems that are still constraining the ability of the private sector," he said.

Source:  Ian Talley, "Global Regulation Curbing Growth, World Bank Finds," Wall Street Journal, October 29. 2013.

 

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