World Bank: Saudi Arabia Most Improved Economy with a Total of Eight Reforms

Published October 24th, 2019 - 10:24 GMT
The Kingdom’s “Vision 2030” plan for long-term development encompasses a variety of legal and structural reforms, the World Bank report said.
The Kingdom’s “Vision 2030” plan for long-term development encompasses a variety of legal and structural reforms, the World Bank report said. (Shutterstock)

Saudi Arabia is the most improved economy with a total of eight reforms, said the World Bank in its Doing Business 2020, adding that with a reformist mindset, the Crown Prince has implemented and promoted a policy of featuring the Kingdom as an open world-class investment destination.

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The Kingdom’s “Vision 2030” plan for long-term development encompasses a variety of legal and structural reforms, the World Bank report said.

Doing Business has acknowledged the 10 economies that improved the most on the ease of doing business after implementing regulatory reforms. In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria.

These economies implemented a total of 59 regulatory reforms in 2018/19—accounting for one-fifth of all the reforms recorded worldwide. Their efforts focused primarily on the areas of starting a business, dealing with construction permits, and trading across borders.

Jordan and Kuwait are new additions to the list of 10 most improved economies. Nigeria appears as one of the top-10 improvers for the second time. India, which has conducted a remarkable reform effort, joins the list for the third year in a row. Previously, only Burundi, Colombia, Egypt, and Georgia featured on the list of 10 top improvers for three consecutive Doing Business cycles.

Bahrain implemented the highest number of regulatory reforms (nine), improving in almost every area measured by Doing Business. China and Saudi Arabia follow Bahrain with eight reforms each. One may wonder what underlying factors drive economies to reform. The drivers can be either political or economic or both.

The economic advancement of neighbouring countries is also an important motivational factor. Research on the effects of market-liberalizing reforms in 144 economies over the period 1995–2006 finds that the most important factor in transmitting reforms between countries is their geographical and cultural proximity.

The spillover effect is magnified when more countries adopt reforms that boost economic development. Furthermore, mass media coverage affects political decisions. A recent study finds that economies with higher media coverage of Doing Business tend to carry out more business regulatory reforms, with one- and two-year lags between media coverage and reform implementation.

Business regulatory reforms across the Gulf economies have been on a steady rise. These changes are motivated in part by the urgent need for economic diversification. Successful reforms in neighbouring states, such as the United Arab Emirates, have also served as inspiration.

Doing Business 2020 acknowledges 22 reforms in the 20 top-ranking economies. Since 2003/04, the 20 best-performing economies have carried out a total of 464 regulatory changes, suggesting that even the gold standard setters have room to improve their business climates.

More than half of the economies in the top-20 cohort are from the OECD high-in-come group; however, the top-20 list also includes four economies from East Asia and the Pacific, two from Europe and Central Asia, as well as one from the Mena region and one from Sub-Saharan Africa. Conversely, most economies (12) in the bottom 20 are from the Sub-Saharan Africa region.

Encouragingly, several of the lowest-ranked economies are actively reforming in pursuit of a better business environment. Over the past year, Myanmar introduced substantial improvements in five areas measured by Doing Business—starting a business, dealing with construction permits, registering property, protecting minority investors, and enforcing con-tracts. This ambitious reform program allowed the country to rise out of the bottom 20 to a ranking of 165. In contrast to the economies ranked in the top 20, however, the bottom 20 implemented only 10 reforms in 2018/19.

Economies that score highest on the ease of doing business share several common features, including the widespread use of electronic systems. All of the 20 top-ranking economies have online business incorporation pro-cesses, have electronic tax filing platforms, and allow online procedures related to property transfers. Moreover, 11 economies have electronic procedures for construction permitting. In general, the 20 top performers have sound business regulation with a high degree of transparency.

The average scores of these economies are 12.2 (out of 15) on the building quality control index, 7.2 (out of 8) on the reliability of supply and transparency of tariffs index, 24.8 (out of 30) on the quality of land administration index, and 13.2 (out of 18) on the quality of judicial processes index. Fourteen of the 20 top performers have a unified collateral registry, and 14 allow a viable business to continue operating as a going concern during insolvency proceedings.

The difference in an entrepreneur’s experience in top- and bottom-performing economies is discernible in almost all Doing Business topics. For example, it takes nearly six times longer on average to start a business in the economies ranked in the bottom 50 than it does in the top 20. Transferring property in the 20 top economies requires less than two weeks, compared to about three months in the bottom 50.

Obtaining an electricity connection in an average bottom-50 economy takes twice the time that it takes in an average top-20 economy; the cost of such a connection is 44 times higher when expressed as a share of income per capita.

Also, commercial dispute resolution lasts about 2.1 years in economies ranking in the bottom 50 compared to 1.1 years in the top 20. Notable differences between stronger and weaker performing economies are also evident in the quality of regulation and information. In the top 20, 83 per cent of the adult population on average is covered by either a credit bureau or registry, whereas in the bottom 50 the average cover-age is only at 10 per cent.

Ease of doing business score

The ease of doing business score measures an economy’s performance with respect to a measure of regulatory best practice across the entire sample of 41 indicators for 10 Doing Business topics (the employing workers and contracting with the government indicators are excluded). For starting a business, for example, Georgia and New Zealand have the lowest number of procedures required.

New Zealand also holds the shortest time to start a business (0.5 days), whereas Rwanda and Slovenia have the lowest cost. Australia, Colombia, and 118 other economies have no paid-in minimum capital requirement. 

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