BISSAU, November 1, 2011 -- The newly established Center for the Formalization of Enterprises (CFE) is rapidly changing the way business is done in Guinea-Bissau.
In May 2011, the CFE one-stop shop for business registration was created, with technical assistance from the World Bank (South-South Experience Exchange Facility Trust Fund), International Finance Corporation (IFC), United Nations Development Program (UNDP), European Union (EU) and the African Development Bank (AfDB). Already it is showing signs of remarkable progress.
Just few months into its inception, the CFE has played a key role in giving Guinea-Bissau a much-needed and long-awaited boost in its Doing Business (DB) ranking. For the past five years, Guinea-Bissau has ranked near the bottom, 181 out of 183 countries.
But thanks to the CFE, the recently-released Doing Business 2012 report shows the country is now ranked at 176, a remarkable accomplishment that places Guinea-Bissau among the 10 most improved economies in Africa this year.
According to the report, the number of procedures to start a business in Bissau has dropped from 17 to 9, and the time from 216 days to 9 days. Doing Business’ methodology assumes that the minimum time for each procedure is one day; however, in practice most companies complete the process at the CFE in just one to two days.
The cost to start a business has fallen from 183.3 percent of GNI per capita to 49.8 percent. As a result of these improvements, Guinea-Bissau has advanced 44 places in the ease of starting a business ranking, from last in the world at 183, to 149.
The CFE one-stop shop combines all essential services needed to create a business under one roof, including notarizing the company statutes, registering at the Commercial Registry, obtaining the tax identification number, obtaining work permits for foreign investors and receiving commercial, industrial and tourism licenses and urban inspections.
Licensing requirements were eased by eliminating the requirement for prior authorization for low-risk commercial activities. In addition, the implementation of the revised General Commercial Law of the Organization for the Harmonization of Business Law in Africa (OHADA), of which Guinea-Bissau is a member, replaces the requirement to submit the criminal records of the company founders at the time of registration with a sworn declaration.
“The Center for Business Formalization we are inaugurating today is part of the new generation of policies to attract investment and simplify the formalities in setting up businesses," Minister of Economy H.E. Helena N. Embaló said at the center’s inauguration. “[The CFE Center] will remove obstacles to the development of economic activities, thus facilitating trade, investment, competitiveness and the consequent creation of wealth.”
The government also intends to use the CFE aid in the conversion of informal economic activities into formal businesses within the structured sector of the economy – which represents about 80 percent of the economy.
"Indeed, the wealth produced by this sector is not recorded in the official accounts and is not even taxed, which explains our low tax revenue," Embaló said.
President of Guinea-Bissau Malam Bacai Sanhá said the center is a “necessary condition” to attract investment, but it is not sufficient by itself to stimulate and attract private capital. Success involves several fronts, he said, including “the legal security of investments, speed and smooth operation of the courts, macroeconomic stability, good governance, the soundness of the financial system, the flexibility of labor regulations are all necessary and determinant factors to build confidence and appetite among investors, who are concerned about guarantees and stability for their investments.”
Sanhá said there is also a “need to change the mindsets of economic actors and foster a culture of promotion of quality, expertise and innovation that at the same time enhances transparent management, responsibility and best practices."
While Guinea-Bissau has an agenda of significant reforms to strengthen the business environment in the country, the CFE is a major first step, and serves as an example of donor coordination led by the government, political championing by a reform-oriented Ministry of Economy, just-in-time technical assistance and responses from the World Bank Group (IFC, IDA), and learning from other countries (Cape Verde) through the South-South Experience Exchange.