BANGKOK, July 8, 2010 — Overly restrictive and obsolete laws are an impediment to foreign direct investment and their poor implementation creates additional costs to investment, finds Investing Across Borders 2010, a new report by the World Bank Group.
This is the first World Bank Group report to offer objective data on laws and regulations affecting foreign direct investment that can be compared across 87 countries. Clear and effective laws and regulations are vital for ensuring best results for host economies, their citizens, and investors.
In this report, the World Bank provides specific indicators that facilitate comparison of the climate for foreign investment between countries and with regional and world averages. The report assesses restrictions on foreign investment in eleven economic sectors as well as the ease of starting a foreign business, the prospects of accessing industrial land and the ability to resolve commercial disputes through arbitration.
Thailand's Scores are Mixed
For each of the analyzed economic sectors, the report shows Thailand is more restrictive on foreign ownership than the average nation in Asia Pacific with the sole exception of light manufacturing. In every sector, Thailand is more restrictive than the average world nation.
On the other hand, Thailand generally requires fewer procedures and it takes less time to establish a foreign business than average for nations in the region and in the world. The report rates the overall ease of establishing a business in Thailand as slightly less than for other nations in the region, but slightly better than world average.
Thailand’s rules governing foreign business land leasing/ownership are mixed compared with other nations. While it takes less time on average to lease private land in Thailand, ownership rights available to foreign businesses are weaker and it is somewhat more difficult to access land information.
Finally, the report assesses that entering arbitration of commercial disputes is somewhat easier in Thailand than in the average nation in the region and in the world. Overall, the strength of Thailand’s laws governing arbitration is roughly equal to that in other countries in the region and in the world.
Investing Across Borders 2010 aims to help countries develop more competitive business environments by identifying good practices in investment policy design and implementation. It provides indicators examining sector-specific restrictions on foreign equity ownership, the process of starting a foreign business, access to industrial land, and commercial arbitration regimes in 87 countries.
In Angola and Haiti excessive red tape means it can take half a year to establish a subsidiary of a foreign company. In Canada, Georgia, and Rwanda, this can be done in less than a week. Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, Republic of Korea, and Sudan. In Pakistan, Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award.
The report finds that countries that do well on the Investing Across Borders indicators also tend to attract more foreign direct investment relative to the size of their economies and population. Conversely, countries that score poorly tend to have higher incidence of corruption, higher levels of political risk, and weaker governance structures.
Investing Across Borders does not measure all aspects of the business environment that matter to investors. For example, it does not measure security, macroeconomic stability, market size and potential, corruption, skill level, or the quality of infrastructure. However, the indicators provide a starting point for governments wanting to improve their global investment competitiveness.
The report does not rank countries by overall openness to foreign investment. Rather, it allows detailed comparisons among countries in each of these factors.