VIENTIANE, September 27, 2007 - Thanks to reforms in business regulation, it is now easier to start a business or trade across borders in Lao PDR, finds Doing Business 2008 Report – the fifth in an annual report series issued by the World Bank and International Finance Corporation (IFC).
Patchamuthu Illangovan, World Bank Country Manager for Lao PDR, complimented the government’s recent regulatory reforms to improve the investment climate and simplify cross-border regulations, and noted that further steps are being taken. “Improvements in business environment reduce poverty through higher growth and empowerment of the poor people. Lao PDR has shown strong economic growth and poverty reduction, and is on the right track towards improving its business environment. To face the challenge to sustain this growth Lao PDR should facilitate business operation and cross-border trade in non-resource sectors, such as manufacturing and agribusiness.” He added, “The World Bank group is supporting the Government through technical assistance and projects in trade and business-related areas, as well as through its cooperation with other development partners in this sector. We are looking forward to further increase in diversification of economy, streamlining of business processes, and poverty reduction.”
The number of days needed to fulfill procedures for starting a business dropped significantly to 103 from 163, according to the Doing Business 2008 study. The ranking of Lao PDR in dealing with licenses and enforcing contracts has also improved. This was mostly due to reforms associated with or inspired by the Enterprise Law in late 2005, including important steps to further reduce time and cost of starting a business through consistent implementation of the Investment Law and abolishment of several licensing requirements.
“Thanks to recent reforms, Lao PDR ranks better than its neighbors such as Vietnam and Cambodia in two very important indicators: starting a business and employing workers,” said Trang Nguyen, Head of Advisory Services for IFC Mekong Private Sector Development Facility (IFC MPDF). While this marks a significant improvement, to enhance competitiveness in the region, more needs to be done”,she added.
Charles Schneider, IFC MPDF Head of Office in Lao PDR emphasized that IFC MPDF will continue to work with the government to implement the Enterprise Law and further reduce the time needed to start a business. “We are also ready to provide assistance in other areas to support the government’s objective to improve the business environment.”
A second area of reform for Lao PDR concerns trading across borders where the number of documents needed to process exports or imports declined by one third,and the number of days to process export and import documents fell by almost a quarter. Lao PDR is a landlocked country and therefore lag s behind on this indicator, in comparison to its neighbors.
Although there were some positive developments, Lao PDR has some way to go in terms of further reforms. To that end, the World Bank Group is working to provide additional assistance to the government to improve key bottlenecks in the business environment.
Doing Business rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in starting-up a business, operation, trade, taxation and closure. These areas are: (1) starting a business, (2) dealing with licenses, (3) employing workers, (4) registering property, (5) getting credit, (6) protecting investors, (7) paying taxes, (8) trading across borders, (9) enforcing contracts, and (10) closing a business. These indicators arenot designed to cover issues such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, ease of access to markets or crime rates.
Doing Business 2008ranks 178 economies on the ease of doing business. East Asia and the Pacific accounts for two of the top 10, with Singapore ranking first and Hong Kong (China) fourth. Other top-ranking economies in the region are Thailand (15), Malaysia (24), Fiji (36), Tonga (47), and Taiwan (China) (50).
Only the Organization for Economic Cooperation and Development (OECD) high income countries and the countries of Eastern Europe and former Soviet Union ranked higher than the East Asia and the Pacific region in the overall ease of doing business. Worldwide, the top 25 in the rankings are, in order, Singapore, New Zealand, the United States, Hong Kong (China), Denmark, the United Kingdom, Canada, Ireland, Australia, Iceland, Norway, Japan, Finland, Sweden, Thailand, Switzerland, Estonia, Georgia, Belgium, Germany, the Netherlands, Latvia, Saudi Arabia, Malaysia, and Austria.
“The report finds that equity returns are highest in countries that are reforming the most,”said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Investors are looking for upside potential, and they find it in economies that are reforming—regardless of their starting point,” he added. Large emerging markets are reforming fast: China, Egypt, India, Indonesia, Turkey, and Vietnam all improved in the ease of doing business. And, the report finds, as more countries simplify regulation to make it easier to do business, more entrepreneurs are going into business.
