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Belarus, Kyrgyzstan 'Among World's Top Reformers'

  • Charles Recknagel

A female vendor at a market in Bishkek, Kyrgyzstan

A female vendor at a market in Bishkek, Kyrgyzstan

Four countries in Eastern Europe and Central Asia are among the world's top economic reformers, according to a new World Bank survey.

The bank's report, "Doing Business 2009," praised Azerbaijan, Albania, Kyrgyzstan, and Belarus for streamlining procedures for opening and operating businesses.

The annual survey looked at the time and costs required for starting and maintaining a business in different parts of the world.

The progress can only be welcome news for local businesspeople across the postcommunist world, which is famous for burdensome bureaucracies, interminable licensing processes, and complicated tax codes.

Among the report's findings:

  • Belarus created a "one-stop shop" for property registration and computerized its records. As a result, the time required to register property in Minsk fell from 231 days to 21.
  • Corporate income-tax rates in Albania were cut in half this year, to just 10 percent
  • The cost to start a business in Azerbaijan is equivalent to 3.2 percent of per capita income. That compares to 27.6 percent in Tajikistan.
  • And while the number of procedures required for getting construction permits is 13 in Kyrgyzstan, the number in Russia remains 54.

The four countries are the leaders among 28 countries in Eastern Europe and Central Asia that this year trimmed regulations, boosted property rights, and widened access to credit -- all things that the World Bank sees as essential to stimulating economies.

But are such reforms enough to attract greater foreign investment, the other big stimulus for economic growth?

There, the picture is less clear. While the report congratulates the reformers, it also notes that the survey does not reflect such factors as macroeconomic policy, infrastructure, currency volatility, investor perceptions, or crime rates.

Attention-Grabbing

Nicolas Redman, an expert on Eastern Europe and Central Asia at the Economist Intelligence Unit in London, says that countries that do well in reports like these do attract the attention of investors. But he says investors consider a good ranking in such surveys to be just one of many things to be weighed before making any decisions.

"Generally it is something that would improve the atmospherics around an investment decision. It might make businesses look at the country more seriously. The World Bank is actually quite candid about the limitations of [its survey] so I don't think on the basis of a high index ranking anybody is really going to invest in a country purely on that basis," Redman says.

"But it is a useful thing for countries to have and a lot of countries have taken their ranking seriously because it is a positive signal and it might at least encourage potential investors to have more of a look at the country. So, it is a way of, I suppose, of attracting attention rather than sealing a deal, if we can use that phrase."

Redman says that what investors are really interested in is a country's whole business environment. That includes not just what laws are written to cover business dealings but, more importantly, how courts implement those laws.

Equally, he says, foreign investors are very interested in such factors as the stability of the economy overall and its levels of corruption and inflation. And, finally, there is market size.

"If you are an investor who is looking to sell into a country, as distinct say from exporting, whether a manufactured item or raw material from a country, then market size is going to be a very important thing," he says. "Some of the smaller countries such as Azerbaijan and Georgia which have been top of the rankings recently are perhaps at a disadvantage compared to someone like, say, Russia or even Ukraine or Turkey. They are just much smaller markets and the capacity to sell soap or any other commodity there is obviously going to be much more reduced."

Redman says this means that countries that make an effort to reform their business laws and streamline their procedures probably should not expect to get an immediate payoff in foreign investment. But at least they can know they are on the right track.

"Governments that care about these sort of things are perhaps more likely than the average to care about other aspects of the business environment," Redman says. "So, again, it becomes a good signal, or at least a comforting or an interesting signal for investors."

The "Doing Business 2009" survey ranks countries based on 10 indicators that measure the time and cost of government requirements in starting, operating, and closing a business, trading across borders, and paying taxes.
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