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| Sunday, 4 December 2005 |
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Business |  |
| News Business Features Editorial
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Ranked 75 out of 155 countries : Doing business in Lanka not that easy by Gamini Warushamana The Doing Business (DB) 2006 report of the World Bank ranked Sri Lanka at 75 out of 155 countries and implied that doing a business in Sri Lanka is not so easy compared with the rest of the world. The report focuses on economic reforms needed to make the start up of a business in any country easy. The report also compares economic reforms of the countries adopted to enable the private sector to start a business. The Maldives is the easiest place in the South Asian region to do business according to the DB ranking. In the DB ranking the Maldives stood at 31, Nepal 55, Pakistan 60 Bangladesh 65, Sri Lanka 75, Bhutan 104 and India 116. The report says that in 2004, 99 countries or two-thirds of the doing business sample introduced 185 reforms to make it easier to do business. Under the reforms they have simplified some aspects of business regulations, strengthening property rights, reducing export and import costs, easing tax burdens and increased access to credit. The rationale behind the DB ranking is that the reforms make way for prosperity for all countries. The reforms enable firms to grow faster and create more jobs. Especially the reforms expand the formal sector of the economy. In view of the benefits of being formal such as easier access to credit, better utility services, the number of formal jobs will increase. More formal jobs mean more workers are protected by pensions, safety regulations and health benefits. Today women employees represent three quarters of workers in the informal sector and they will be benefited by the reforms, the report said. However, this argument contradicts the general view of protecting workers' rights and enhancing the working conditions, because one of the essential reforms proposed in the doing business report is labour market reform and makes it easy to hire and fire workers. Two indicators added The World Bank Doing Business report evolved over time. In 2004, it covered five topics such as starting business, hiring and firing workers, enforcing contracts, getting credit and closing business. The 2005 survey added another two indicators registering property and protecting investors. The 2006 report was updated again and added three more topics licences, paying taxes and trading across borders and therefore today there are ten indicators. The figures in the table compare key indicators of Sri Lanka in the DB ranking with New Zealand which is at the top of the ranking and the Congo Democratic Republic which is at the bottom and China, the fast growing economy in the world. The easy to start a business (cheaper and faster) is vital to higher economic growth and one of the most important aspects in attracting FDI. Despite the poor infrastructure Afghanistan became one of the easiest places to start a business in 2004. In 2004 the country reduced the required procedures from 28 to 1 and the time to complete the process from 90 days to seven. Eastern European countries are among the top reformers who are making business start easy. Their achievements are encouraging, the report said. After reforms in the first half of 2005 nearly 1,500 new firms registered in Serbia and Montenegro. It increased to 42% compared to the first half of 2004. Similarly the reforms increased new business registration in Vietnam by 28%, Romania by 22% and in Belgium by 16%. The report also highlights the positive development in the creation of new jobs and expanding the formal sector of the economies after labour market reforms. In a rigid labour market which is common in most developing countries, employers choose conservatively. In such an economy mostly men with years of experience benefit. Young, female and low skilled workers often lose job opportunities. Women's share The report proved that the women's share of private sector employment is increasing with the reducing rigidity of employment index. The women's share of private sector employment is higher in the least rigid labour markets. The figures also show that youth unemployment is rising with the increase in the rigidity of the hiring index. In the least rigid labour markets youth unemployment is lower. Ironically the former socialist countries in Eastern Europe and Central Asia are at the top of the labour market reforms. These countries liberalise employment regulations and adopt new labour laws. These laws make work hours more flexible by allowing longer overtime. It also permitted cyclical industries to shift work hours between slow and peak seasons. They also reduce the administrative burden on dismissal of redundant workers. Rigid regulations These rigid employment regulations have been designed to protect workers from arbitrary, unfair or discriminatory actions by their employers. They cover issues from mandatory minimum wage to premiums for overtime work, to grounds for dismissal, to severance pay. However, the report says that rigid employment regulations often protect some existing jobs at the expense of workers in general. High severance payments adopted in the name of reducing the risk of unemployment benefited only people who already have jobs. The high cost forces employers to cut down on new recruits and this results in creating fewer jobs. The report pointed out four reforms to employment and social security regulations that can reduce the burden on business and expand opportunities for workers. They are; raise the retirement age in countries with an aging population, make the retirement age for men and women equal, move from severance pay to unemployment insurance and introduce apprentice contracts. However, the ultimate objective of the ranking is to remove all roadblocks for capital to flow all over the world from New Zealand which is on the top of the DB report to Congo Democratic Republic which is at the bottom. These are the same economic reforms enforced on poor countries as
conditions with donor assistance a few years ago. Following several failures
and the increasing number of protests from all over the world others of
neoliberal policies changed the tune and adopted new ways and means for the
same purpose. |
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