Economies of Middle East & North Africa Accelerate Pace of Business Climate Reforms
Economies in the Middle East and North Africa region implemented the most reforms on record to ease doing business for domestic small and medium-sized enterprises and hosted four of the countries that improved the most world-wide, according to the World Bank Group’s Doing Business 2020 study.
Economies of the region put in place 57 business regulatory reforms in the 12 months to May 1, up from 43 during the previous 12-month period covered by the study. Thirteen of the region’s 20 economies carried out reforms and the region’s average ease of doing business score improved by 1.8.
Economies of the Gulf region have been particularly active, implementing 35 business-climate-improving measures in the past year.
This year, the region hosts four of the world’s top 10 improvers: Saudi Arabia, Jordan, Bahrain, and Kuwait. These countries account for almost half of the region’s reforms. The United Arab Emirates remained the strongest performer overall in the region, placing 16th (out of 190) on the ease of doing business rankings.
“It is a year of records for economies in the Middle East and North Africa, and we are committed to continuing our support to all countries in the region ” said Ferid Belhaj, World Bank Regional Vice President for the Middle East and North Africa. “The next generation of reforms should focus on transparency, fair competition and good governance to make MENA open for business and attract investments needed to create jobs for youth and women.”
Jordan joins the top reformers for the first time – with three reforms. The economy strengthened access to credit by introducing a new secured transactions law, amending the insolvency law and launching a unified, modern and notice-based collateral registry, among other measures.
Bahrain, with nine reforms, led both the region and the world in number of reforms implemented. The country recently introduced a new bankruptcy law, strengthened the rights of minority shareholders and revamped the process of obtaining building permits through a new online platform. Enforcing contracts was also made easier by creating a specialized commercial court, establishing time standards for key court events and allowing electronic service of the summons.
Saudi Arabia, this year’s top improver (based on the increase in its overall ease of doing business score), carried out a record of eight reforms in the past year. It established a one-stop shop for company incorporation and eliminated the requirement for married women to provide additional documentation when applying for a national identity card. It also made importing and exporting faster by enhancing the electronic trade single window, enabling risk-based inspections, launching an online platform for certification of imported goods, and upgrading infrastructure at Jeddah Port. Other reforms led to improving access to credit, strengthening minority investor protections and facilitating the resolution of insolvency.
Kuwait also earned a spot in the top 10 improvers for the first time with seven reforms. Building permitting was streamlined by integrating additional authorities into the electronic permitting platform and enhancing inter-agency communication. The country also made trading across borders easier by enhancing the customs risk management system and implementing a new electronic clearance system.
Morocco carried out six reforms: strengthening minority investor protections; reducing the corporate income tax rate; and introducing e-payment of port fees. The United Arab Emirates, Egypt, and Oman implemented four reforms each. All three strengthened the rights of minority investors, streamlined business registration processes and made it easier for businesses to import and export goods.
Collectively, the region’s economies focused their reforms on getting electricity and protecting minority investors, with 40% of the countries in the region reforming in these areas (eight reforms in each).
Overall, the region performs the best in the areas of paying taxes, getting electricity, and dealing with construction permits. Obtaining a building permit takes on average 124 days, 28 days less than among OECD high-income economies. Similarly, entrepreneurs in the region need to complete 16.5 payments on average to comply with their fiscal requirement compared to 23 globally. Bahrain is the best performer globally in tax compliance time, requiring just 22.5 hours per year to file and pay taxes.
However, some economies in the region still fall short. Libya has not implemented any reforms since the inception of Doing Business, while Iraq has improved on only four indicators. Lebanon has made one reform to improve its business climate in the last five years and seven reforms since the first launch of the Doing Business study in 2003. It ranks 143rd globally, and especially underperforms in the areas of starting a business and dealing with construction permits.
Getting credit in the Middle East and North Africa remains harder than anywhere else in the world, partly due to insufficient protections for lenders and borrowers in collateral and bankruptcy laws. The region also underperforms in the areas of trading across borders and resolving insolvency. The cost of complying with border requirements for exporting averages $442 and takes 53 hours, three and four times more than the averages among OECD high-income economies. In bankruptcy, the average recovery rate in the region is 27 cents on the dollar, compared with 70 cents in OECD high-income ones.
Doing Business finds that barriers against women are still widespread in the Middle East and North Africa, with 13 of the region’s economies imposing additional procedures for female entrepreneurs to start a business.