September 27, 2007
International Finance Corporation Report Identifies MCC Partner Countries as Leaders in Policy Reform
Washington, D.C.— The International Finance Corporation (IFC), a subsidiary of the World Bank, yesterday released its annual Doing Business 2008 report, which identifies three of MCC’s partner countries – Ghana, Georgia and Kenya – among the world’s top ten reformers. These countries are making great strides in adopting policies that stimulate private investment, promote trade, and create jobs. Doing Business 2008 measures government regulations in 178 countries that effect ten key areas of entrepreneurial activity: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.
“I am delighted to see that many of MCC’s Compact and Threshold partners are leading the list of policy reformers as highlighted by this year’s Doing Business report. We are proud to be working closely with the leadership of countries that have demonstrated a strong commitment to creating an environment of economic freedom,” said Ambassador John Danilovich, MCC’s CEO.
According to the report, MCC partner countries like Ghana, Burkina Faso, Mozambique, and Paraguay have aggressively implemented reforms that make it easier for people to start a business and own legal title to property. These reforms help reduce poverty by creating greater economic opportunities for women, boosting property values and investment, and drawing firms out of the informal economy where they can access credit and grow to their full potential. In a survey of 60,000 people in more than 50 countries, the World Bank found that men and women believe that the single most effective way to escape poverty is to start a business.
MCC requires that all of its partner countries maintain and improve policy performance to create an environment conducive to economic growth and poverty reduction. Using third-party policy indicators, eligibility for MCC Compact assistance is based on a country’s demonstrated commitment to policies that promote political and economic freedom, investments in education and health, control of corruption, and respect for civil liberties and the rule of law.
For the second year in a row, the IFC has identified Ghana as one of the top ten reformers in the world. This year, Ghana slashed the number of days it takes to register property from 169 to 34. It also reduced the time it takes to start a business from 81 to 42 days.
Georgia, the leading reformer in the world in 2006, set an ambitious goal for itself. After improving its rank on the overall ease of doing business from 112th in 2004 to 37th in 2006, the country decided to target the top 25 list in 2007. This year, it catapulted to 18th place worldwide, outperforming Belgium, Germany, the Netherlands, and Austria.
Mozambique decreased both the time and the cost of starting a business by 75%. It also introduced a series of additional investment climate reforms by replacing a commercial code that dated back to 1888.
Burkina Faso cut the cost of property registration and business registration by a third. It also introduced a “one-stop shop” for company registration and reduced the number of days it takes to start a business from 34 to 18.
Honduras slashed the number of days it takes to register property from 36 to 24. It also reduced the amount to time it takes to start a business by more than 50%.
In Madagascar, it now takes just one week to start a business, and the government has cut the cost of business registration by almost 60% in two years. The impact of such reforms has been dramatic: in 2006, the country saw a 26% rise in the rate of new business registrations.
MCC’s Threshold partners are also showing progress on policy reforms. The Threshold Program is designed to assist countries that have not yet qualified for MCC Compact assistance to improve their performance on the MCC selection criteria. The Threshold Program provides an added incentive to governments committed to reform and assists them in moving toward future eligibility for Compact assistance. The IFC report highlights several MCC Threshold countries that have made significant reforms that will accelerate economic growth and reduce poverty.
For example, in Paraguay, the government resolved as part of its Threshold Program to make the business registration process faster and more efficient. This year, it cut the cost of business registration by more than $600 and reduced the number of days it takes to register a business from 74 to 35. It now plans to lower the average wait to fewer than 10 days – well beyond its original objective.
Kenya, one of the top ten reformers of 2007, eliminated 10 days worth of red tape at the company registry by simply streamlining administrative processes. It also introduced competition among land valuers, which reduced the amount of time it takes to register property by 9 days.
In Albania, the government, which already has reduced the cost of starting a business by 30% in two years, plans to use its Threshold Program to lower costs by an additional 40%. To implement its 2007 law on business registration, the first National Registration Center opened in September 2007, initiating “one-stop” business registration.
Niger, which is currently developing a Threshold Program, has made huge strides in a very short period of time. In late 2006, MCC and the Government of Niger discussed the indicators which currently prevent it from becoming eligible for MCC Compact funding including the cost of starting a business and the time and cost of property registration. The government took swift action, reducing the cost of starting a business by almost 60% and the time and cost of property registration by more than a third.
Millennium Challenge Corporation (MCC), a United States government corporation designed to work with some of the poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people that promote economic growth and elimination of extreme poverty.