World Bank praises pro-business reforms in many African countries

Africa is making strides in cutting red tape and improving business regulation, according to a report published today by the International Finance Corporation, the private sector arm of the World Bank.

Two-thirds of African countries implemented at least one pro-business reform over the past year, with Tanzania and Ghana among the top 10 reforming nations, the study finds.

Other active African reformers include Benin, Burkina Faso, Cameroon, Gambia, Madagascar, Malawi, Mali, Mozambique, Niger, Nigeria and Zambia.

These countries have simplified business regulation, and some have improved property rights and made it easier to start companies.

The Doing Business Report, published annually by the IFC, shows that in spite of these advances, Africa ranks as the world's worst regulated region.

But it says "more improvements are under way and these will be reflected in the Doing Business indicators next year".

Worldwide, the report dubs Georgia the "top reformer" for a comprehensive package of reforms spanning business registration, customs, commercial law and corporate social security contributions.

Romania comes in a surprise second, with Mexico third, in large measure due to its landmark overhaul of investor protection laws.

China ranks fourth, with improvements in business entry, investor protection and customs red tape.

Meanwhile, France - which has long scored poorly on the Doing Business indicators - also ranks among the top 10 most active reforming nations.

Singapore, New Zealand and the US continue to rank as the most business-friendly locations overall.

Michael Klein, chief economist at the IFC, told the Financial Times "there is an overwhelming sense that governments continue to move along this agenda towards improvement".

He said the push for better regulation was increasingly a matter of "consensus between left and right" with leftwing governments, for instance, keen to give poor people formal property rights. Only a handful of countries were swimming against the pro-business tide, with Bolivia, Venezuela, Eritrea, East Timor, Uzbekistan, Zimbabwe and Hungary going backward.

However, Mr Klein said reform of working practices continues to be "very difficult" worldwide, with little progress made on liberalising employment regimes.

The study underscores the importance of newly elected governments enacting reforms swiftly so there is time for them to bear fruit before politicians have to return to the polls.

It finds that in the most active reforming countries over the past three years, 85 per cent of reforms are implemented within the first 15 months of a new government coming to power.

Mr Klein said the debate remained open as to whether it was best for a country to enact a "big bang" set of reforms in one go, or to advance along a continuous process of improvement.

He said what mattered most was to signal a "regime shift" towards a more pro-business, better regulated economy.

"This sense of unstoppable progress released a lot of dynamism in China, India and Vietnam," he said.

But he said there were no "silver bullets" for reform. Formal property rights for the poor, for instance, would not unleash widespread bank lending unless there were viable mechanisms by which lenders could repossess collateral when a borrower defaults on a loan.