Doing Business in the Middle East and North

Doing Business in the Middle East and North Africa – with particular reference to Iraq Presentation to Iraq Private Sector Development Center 1 Baghdad 12 November 2011

What does Doing Business measure? Doing Business indicators: ü Focus on regulations relevant to the life cycle of a small to medium-sized domestic business. ü Are built on standardized case scenarios. ü Are measured for the most populous city in each country. ü Are focused on the formal sector. DO NOT measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or of regulation specific to foreign investment or financial markets. 2 22

Doing Business indicators – 11 areas of business regulation (9 included in the DB 2011 ranking; 10 in DB 2012) Start-up Starting a business Minimum capital requirement, procedures, time and cost Expansion Operations Registering property Dealing with Procedures, time and cost construction permits Procedures, time and cost Getting credit Credit information systems Paying taxes Payments, time and Total Tax Rate Movable collateral laws Protecting investors Insolvency Resolving insolvency (formerly Closing a business) Time, cost and recovery rate Trading across Disclosure and liability in related party transactions borders Documents, time and cost Enforcing contracts Procedures, time and cost to resolve a commercial dispute Getting electricity Procedures, time and cost Employing workers (annex) Entry 3 Property rights Investor protection Access to credit Administrative burden Flexibility in hiring 3 3 Recovery rate Reallocation of assets

Top 30 economies for the ease of Doing Business in 2010/11 4 1. Singapore 2. Hong Kong SAR, China 3. New Zealand 16. Georgia 17. Thailand 18. Malaysia 4. United States 19. Germany 5. Denmark 6. Norway 7. United Kingdom 8. Korea, Rep. 9. Iceland 10. Ireland 11. Finland 12. Saudi Arabia 13. Canada 14. Sweden 15. Australia 20. Japan 21. Latvia 22. Macedonia, FYR 23. Mauritius 24. Estonia 25. Taiwan, China 26. Switzerland 27. Lithuania 28. Belgium 29. France 30. Portugal 4

Economies in the Middle East & North Africa on average have relatively efficient regulatory processes but weaker legal institutions 5 5

Middle East & North Africa ranking in Doing Business 2012 (Iraq 164) Easier to do business 6 6

Middle East & North Africa economies score high in many areas of business regulation World’s top ranked Middle East and North Africa’s top ranked New Zealand Saudi Arabia (10) Egypt, Arab Rep. (21) Hong Kong SAR, China Saudi Arabia (4) Bahrain (7) Saudi Arabia (1) United Arab Emirates (6) Malaysia Saudi Arabia (48) Egypt and U. A. E. (78) New Zealand Saudi Arabia (17) Kuwait (29) Paying taxes Maldives Qatar (2) United Arab Emirates (7) Trading across borders Singapore United Arab Emirates (5) Saudi Arabia (18) Enforcing contracts Luxembourg Yemen, Rep. (38) Iran, Islamic Rep. (50) Resolving Insolvency Japan Bahrain (25) Qatar (37) Iceland United Arab Emirates (10) Qatar (18) Indicator Starting a business Dealing with construction permits Registering property Getting credit Protecting investors Getting Electricity 7 7

Economy performance across different areas of business regulations can vary considerably Average rank across DB indicators 180151 in UAE ranks Resolving Insolvency, 160 134 in Enforcing Contracts, 122 in 140 Investors Protecting 120 100 80 60 40 Average of lowest 3 topic rankings 20 Average of all topic rankings Average of highest 3 topic ranking Un ite Sau d Ar di A ab ra Em bia ira t Ba es hr ai n Qa t Tu ar ni sia Om an K Ye uw m en ait , R e Jo p. r M dan or oc Eg c L W yp eb o es t, an A t o Sy Ban rab n ria k an Rep n Ar d. Ira ab R Gaz n, ep a Isl ub am lic ic Re p. Ira Al q ge Dj ria ib ou ti 0 UAE ranks 5 in Trading Across Borders, 6 in Registering Property, 7 in

Globally, the pace of reforms making doing business easier is faster than ever before 11 of the 18 MENA economies improved their business regulations in 2010/11. 9 9

18 regulatory reforms in 11 economies improved the business environment in the region Jordan, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, United Arab Emirates Algeria, United Arab Emirates, Oman, Qatar Morocco, Oman, Yemen Djibouti, Jordan Morocco 10 Lebanon 10

Several economies from the region stand out for improving their performance over time since 2005 – no improvement for Iraq since 2001* Narrowing the Distance to the Frontier from 2005 to 2011 (percentage points) 0. 20 *Bahrain and Qatar not included due to later inclusion in the DB dataset 0. 25 0. 30 0. 35 0. 40 0. 45 0. 50 0. 55 0. 60 0. 65 n ma O 11 o n an it itseias p. uti blic p. ria aza raeqp. ia c o a e e b c d e n I R ibo pu R lg G n, R ra ro irna eba Jor uw m c u b i A d o K A T a n me Dj Re r m L E M di a a A l u b b , k t n Ye ra Sa ra p , Is a y A A n B Eg Ira st ed ian t e r i y n W S U 11

Specific results for Iraq Ease of Doing Business - Iraq ranked 164 in 2012 - Iraq ranked 159 in 2011 Doing Business indicators for Iraq in 2012: ü Starting a business - 176 ü Dealing with Construction Permits – 120 ü Getting Electricity – 46 ü Registering property – 98 ü Getting credit – 174 ü Protecting investors – 122 ü Paying taxes – 49 ü Trading across borders – 180 ü Enforcing contracts – 140 ü Resolving insolvency - 183 12 12

Specific results for Iraq Indicators where Iraq doing relatively well Getting Electricity – 46 This is a new indicator used for the first time in the Doing Business 2012 report Relatively easy and quick to connect to the electricity grid – 5 procedures, taking 47 days costing 360% of GNI (But there is a chronic shortage of electricity in Iraq – this is a key issue in Iraq) Paying taxes – 49 Iraq less reliant on business taxation than most other countries because if it reliance on oil revenues. Iraq’s business taxation system is relatively simple, 13 payments per year, taking 312 hours with tax rate of 28. 4% of profit 13 13

Specific results for Iraq Indicators where Iraq doing relatively less well Starting a business – 176 11 procedures, taking 77 days to register, costing 115% of per capita income, with minimum capital of 35 per cent of par capita income An important indicator and a major constraint for informal businesses entering the “formal economy” Trading across borders - 180 Requiring 10 documents, 80 days to get approval, cost $3550 per container An important indicator illustrating major impediments to Iraq integrating with the World economy Resolving insolvency (formerly closing a business) – 183 Businesses in Iraq cannot be closed 14 14

Specific results for Iraq Support for Doing Business reforms in Iraq USAID-Tijara (with support from other partners) leading in supporting DB reforms for: Starting a business, Registering property, Getting credit, Protecting investors, Resolving insolvency World Bank Group (with support from other partners) leading in supporting DB reforms for: Dealing with construction permits (IFC), Trading across borders and Enforcing contracts (WB) Support for Doing Business reforms in Iraq relatively recent. Progress to date has been very slow, in part, because two or more ministries are typically involved in regulating each indicator and because of institutional resistance to reforms 15 15

Thank you. For more information: www. doingbusiness. org 16 16