JEDDAH – Saudi Arabia is the best country in the Middle East for doing business, the World Bank/International Finance Corporation said in its “Doing Business 2013” report released Wednesday. The kingdom, the world's largest oil producer, was ranked 22nd globally in the latest annual report, ahead of the UAE which placed 26th. Elsewhere in the GCC, Qatar came 40th, Bahrain 42nd, Oman 47th and Kuwait 82nd. The report noted that despite the challenges faced by governments in the Middle East and North Africa, 47 percent of countries in the region implemented regulatory reforms from June 2011 to June 2012 that made it easier to do business. Saudi Arabia scored highly in terms of taxation (3rd in the world), investor protection (19th), property registration and access to electricity (both 12th). The Kingdom, however, performed poorly when it comes to starting a business (78th globally), enforcing contracts (124th) and resolving insolvency (107th). Globally, the report was topped by Singapore, followed by Hong Kong and New Zealand in second and third places, respectively. The International Monetary Fund forecast earlier that the Saudi economy would grow by 6 percent this year. The WB/IFC report also noted that the reform momentum in the region has slowed since the beginning of the Arab Spring in January 2011 as key countries grapple with changes in government and the challenges of transitioning to more democratic forms of governance. Despite the challenges, the report noticed some positive moves in the region. It added that Oman guaranteed the rights of borrowers to inspect their personal credit data. “The United Arab Emirates further streamlined startup requirements, implemented an online system for filing and paying taxes, and reduced the time to obtain an electricity connection,” the report added. Nonetheless, the report said although countries in the region have made some strides in reducing the complexity and cost of regulatory processes, entrepreneurs across the region still contend with weak investor and property rights protections. With an average of 98 (out of 185) in the global ease of doing business ranking, the region still has much room to grow. “The changes in the region suggest a renewed opportunity for governments to invest in governance structures and increase transparency in parallel with efforts to improve the business regulatory environment,” said Augusto Lopez-Claros, director of Global Indicators and Analysis, World Bank Group. “Moving to a system of more transparent, sensible and business-friendly rules will go a long way toward creating the conditions for more equitable economic growth and a faster pace of job creation.” The region faces structural challenges that can impede private sector activity, the report noted. A history of government intervention has created more opportunities for rent seeking than for entrepreneurship. Firm surveys show that manufacturing firms as well as their managers are older on average than those in other regions, indicating weaker entry and exit mechanisms. Firm entry density in the Middle East and North Africa is among the lowest in the world. Moreover, the region suffers from a crisis of governance and trust: businesses do not trust officials, and officials do not trust businesses. Business managers in the region rank corruption, anticompetitive practices and regulatory policy uncertainty high on their list of concerns. At the same time 60 percent of public officials interviewed across the region perceive the private sector as rent seeking and corrupt. And banks cite lack of corporate transparency as among the main obstacles to extending more finance to small and medium-size enterprises. Some governments in the region have tried to aggressively reform the business environment in the past, but have seen the impact of their efforts lessened by a lack of sustained commitment to in-depth changes and the related risk of upsetting the established order. A common view is that only connected entrepreneurs are successful, suggesting a dual set of rules with preferential treatment for those close to the ruling elites. This suggests a need for governments to invest in governance structures and increase transparency in parallel with efforts to improve the business regulatory environment. Worldwide, the Central African Republic was ranked the worst country in the world for doing business. Worldwide, economies at all income levels are narrowing the gap with the frontier on average — but low-income economies more so than high-income ones. This is an important achievement. Indeed, while business regulatory practices in all lower income groups are converging toward those in high-income economies on average, low-income economies have reduced the gap the most, by 4 percentage points since 2005. Lower-middle-income economies have closed the gap with high-income economies by 3 percentage points, and upper-middle-income economies by 2 percentage points. – SG/QJM
