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Kuwait lags region in ease of doing business
November 3, 2018, 6:08 pm
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Over two-third of economies around the world introduced new reforms aimed at improving regulatory frameworks surrounding doing business. A new report from the World Bank shows that 128 of the total 190 economies surveyed had introduced substantial regulatory improvements to ease doing business in the period from June 2017 to May 2018.

The 16th iteration of the annual flagship publication from the World Bank, titled ‘Doing Business 2019: Training for Reform’, which was released last week, reveals that governments worldwide set a new record in efforts to ‘bust bureaucracy’ by chalking up 314 business reforms during the review period. Based on reforms undertaken during the period, the top-ten improvers were Afghanistan, Djibouti, China, Azerbaijan, India, Togo, Kenya, Cote d'Ivoire, Turkey and Rwanda.

The annual report, which measures the regulations that enhance business activity and those that constrain it, ranked economies on their ease of doing business from 1–190. Economies were ranked on their scoring on various metrics used to measure the ease of doing business in their territories. A high ease of doing business ranking meant that the regulatory environment was more conducive to the starting and operation of a local firm.

New Zealand topped the ease of doing business rankings with a scoring of 86.6, followed by Singapore, Denmark, Hong Kong and South Korea rounding up the top five positions. At the bottom of the table were Venezuela, Eritrea and Somalia at 188, 189 and 190 positions respectively. Kuwait managed to scrape past the half-way mark by ranking a relatively respectable 97th position globally, but still trailed other countries in the six-nation Gulf Cooperation Council (GCC) bloc.

Economies in the Middle East and North Africa (MENA) region saw the implementation of 43 reforms, a new high compared to 29 the previous year. The United Arab Emirates (UAE) topped the region in ease of doing business with a score of 78.9 and ranked 11th globally. Other GCC states also fared well in terms of implementing reforms to enhance the ease of operating business activity, but lagged far behind the regional champ in ranking.

The second best in terms of ease of doing business was Bahrain with a score of 68 and a global rank of 62, followed by Oman scoring 67.2 to rank 78 and Qatar recording 65.3 to occupy 83rd place globally. Bringing up the fag-end of GCC rankings were Saudi Arabia with a score of 61.9 and a rank of 92, and Kuwait recording 61.5 to rank 97th of the 190 economies surveyed in the report. 

Kuwait did make progress in several metrics, including in ‘starting a business’ by eliminating the paid-in minimum capital requirement, and strengthening its ‘minority investor protection’ by requiring an independent review of transactions by related-parties and clarifying ownership and control structures. Nevertheless, in most metrics, Kuwait trailed even other GCC states; in particular, when compared to UAE, the top regional business destination, Kuwait fared quite dismally. For instance, among the various metrics measured, in ‘getting credit’ Kuwait scored 134, while the UAE was at 44. In ‘enforcing contract’ Kuwait scored 77, the UAE was at 9; in ‘registering property’ Kuwait scored 69, the UAE stood at 7; and in ‘getting electricity’ Kuwait scored 95, the UAE scored 1.

World Bank Group President Jim Yong Kim in a statement on the release of the report noted, "Fair, efficient, and transparent rules, which Doing Business promotes, are the bedrock of a vibrant economy and entrepreneurship environment.” He added that it was critical for governments to accelerate efforts to create the conditions for private enterprise to thrive and communities to prosper, as the “private sector is key to creating sustainable economic growth and ending poverty around the world."

The rankings were determined by sorting the aggregate scores on 10 topics, with each topic having several indicators and equal weight being given to each topic. The ten topics included in this year’s ranking on the ease of doing business were: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The ease of doing business score assesses the absolute level of regulatory performance over time by ranking countries on the basis of distance to frontier (DTF), a score that shows the gap of an economy to the global best practice. The score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance.

The reforms implemented were generally found to benefit small and medium enterprises as well as entrepreneurs, enabling job creation and private investment. The report shows that reforms were implemented in areas where they are most-needed — with low-income economies carrying out over half (172) of the reforms registered during the study period. A record 40 economies in Sub-Saharan Africa implemented nearly a third of all reforms (107) registered in Doing Business 2019, a new best in terms of the number of reforms recorded for the for a third consecutive year for the region.

The report underscores the fact that the top-ten economies in ease of doing business ranking all shared common features of regulatory efficiency and quality, including mandatory inspections during construction, automated tools used by distribution utilities to restore service during power outages, strong safeguards available to creditors in insolvency proceedings and automated specialized commercial courts.

While the World Bank report makes clear that Kuwait has a lot of catching up to do before touting its business promotion credentials and attracting foreign investments, what it does not identify is why the country continues to lag behind others. If nothing else, it is hoped that the report will provoke some deep introspection in the public sphere and among members, both in parliament and in the executive.

 

             

 

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