A new study says efforts by governments in the Middle East and North Africa to improve the business climate have been hampered by the Arab Spring, reports Nesma Nowar
Despite significant reforms achieved by Middle East and North Africa (MENA) countries regarding their business environment during the past 10 years, the reform momentum has slowed down since the beginning of the Arab Spring in January 2011, says the IFC-World Bank Doing Business Report 2013.
The report is an annual study that measures the ease of doing business worldwide. The report's rankings are based on 10 indicators covering 185 economies. Egypt moved up only one step in its ranking, going from 110 last year to 109 out of 185 countries this year.
"Most indicators had the same underlying data of last year. There has been a very small shift in sub-components of indicators, which adds to the aggregate ranking of Egypt," said Augusto Lopez-Carlos, director of global indicators and analysis at the World Bank Group, in a video conference addressing the Egyptian press this week.
Lopez-Carlos added that Egypt did not achieve any significant progress this year whereas other countries have improved.
The report states that while Egypt was a top improver in the MENA region since 2005, its improvement was concentrated in the years before 2009. In the past four years there was no visible improvement in the areas measured by the report.
According to the report, Egypt and other MENA countries have seen slower reform momentum since the Arab Spring last year. The report attributed this to the fact that countries became engrossed with changes in government and the challenges of complex processes of transition to more democratic forms of governance.
Still, despite these challenges, the report showed that 47 per cent of economies in the region implemented regulatory reforms from June 2011 to June 2012 that made it easier to do business.
Meanwhile, the report notes that changes in the region provide a unique opportunity for governments to invest in governance structures and increase transparency in parallel with efforts to improve the business environment.
"Moving to a system of more transparent, sensible and business-friendly rules will go a long way towards creating the conditions for more equitable economic growth and a faster pace of job creation," said Lopez-Carlos.
Magdi Amin, manager of the Investment Climate Department at the International Finance Corporation (IFC), said that the economic situation in MENA countries has gotten worse since the uprisings. He underlined the important role the private sector can play in creating jobs, increasing investment and generating tax revenues for governments. "The private sector could play a big role if it has a proper investment climate," Amin said at the press conference.
However, the region faces structural challenges that can impede private sector activity. Amin pointed out that new governments and ministers in the region have an opportunity to restart the reform process.
The report says that although economies in the MENA region have made some forward strides in reducing the complexity and cost of the regulatory process, entrepreneurs across the region still contend with weak investor and property right protections. "The region has still much room for making the life of local businesses easier through clearer and more transparent rules applied more consistently," the report says.
Overall, the last 10 years have seen significant progress in terms of easing the business environment. Lopez-Carlos stated that in 2005, starting a business in less than 20 days was only available in 40 countries, mostly industrial and developed countries. However, in 2012, the number of countries became 105, including developing countries. This is in addition to other improvements in many areas of business regulation.
Singapore topped the global ranking on the ease of doing business for the seventh consecutive year. Joining it on the list of the top economies with the most business-friendly regulations were Hong Kong, New Zealand, the United States, Denmark, Norway, the United Kingdom, the Republic of Korea, Georgia and Australia.