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BRIEF August 10, 2017

Business Environment

Context

Improvement of regulatory environments remain at the core of efforts to unlock private sector investment and jobs, and hence crucial achieving the World Bank Group’s twin goals of ending extreme poverty and promoting shared prosperity. For the past three decades, the private sector has been at the forefront of leading economic growth and poverty reduction around the world. Enhanced private sector competitiveness has, along with integration with global markets, contributed to the unprecedented growth of many economies, such as China, Costa Rica and Vietnam. Nevertheless, a large number of developing countries – particularly poor and conflict-affected states – have yet to fully harness their economic potential. Regulatory hurdles – such as low regulatory quality, lack of transparency, and predictability – remain a key deterrent to private investments, and result in market failures, corruption, and excessive compliance costs.

Strategy

By leveraging a comprehensive approach that addresses the legal, regulatory, procedural and institutional barriers affecting all phases of the investment and business lifecycle, the Bank Group’s Global Business Regulation Team helps countries establish a competitive investment climate that can attract, retain and leverage investments for business-led growth. Working through a wide range of Bank Group instruments – including advisory services and analytics (ASAs), reimbursable advisory services (RASs), and diverse lending products – to help developing countries. The offering is centered around four different focus areas:

1.    Business Entry, Operation, and Regulatory Technology: The quality and enforcement of regulations make up an important cornerstone of an efficient, transparent, and predictable regulatory framework. Based on analytics, the team advises on the design of regulation governing business entry and growth, including to i) Ensure that regulation is efficient, low-risk, and fit-for-purpose to pursue policy objectives without unnecessary costs and externalities; ii) Advise on regulatory simplification, transparency, and predictability; and iii) Help to enhance transparency, accountability, accessibility, and predictability of the regulatory system ICT and other disruptive technologies across the full spectrum of the offerings.

2.    Indicator-Based Reforms: Global benchmarks have put business regulation reforms on the forefront of policy-makers’ agendas and created strong demand for World Bank Group support in this area. Responding to this demand, the team provides assistance in reforming i) regulatory frameworks impacting business entry, operations and exit fueled by the Doing Business project; ii) barriers to women's economic participation, and supporting the reform of discriminatory laws and regulations as measured by the Women, Business and the Law dataset; and iii) strengthening public procurement systems to foster competition and lower costs for the government.

3.    Quality Infrastructure: The team helps governments develop modern and efficient quality systems that help producers increase the quality of their products and services to compete domestically and globally. Clients are helped to identify key gaps in their quality infrastructure through a market assessment, which analyzes the existing supply and potential demand for quality assurance services, and suggests reform recommendations based on good international practices to meet such demand. This work also includes implementation support for these reforms, tailoring them to specific country conditions.

4.    Regulatory Governance: The Global Business Regulation team supports client governments in improving the way regulation is created, managed and enforced. This is notably achieved by i) identification of gaps in the way rules are drawn up, enacted and enforced through diagnostics, and ii) supporting the design and implementation of Good Regulatory Practices to ensure regulations are issued, enforced and implemented in a transparent and consistent way to facilitate investment decisions. Commonly used tools are Regulatory Impact Assessment systems, public consultation mechanisms (such as Notice and Comment), and institutional oversight to ensure that new and existing rules are developed and updated consistently.

Recognizing that governments often have a small window of opportunity for reform, the World Bank Group offers a unique platform which allows the multi-facetted Global Business Regulation team to respond swiftly to client demands, and also to leveraging expertise from across the Bank Group to deliver integrated, multi-instrument solutions. The team and client governments jointly design reform programs in the context of broader competitiveness agendas; determine priority areas for reform in the short, medium and long term; set clear targets with measurable results; and strengthen the institutional capacity of public-private dialogue mechanisms and inter-ministerial reform committees.


In Practice

Afghanistan: With significant security challenges and more than half of the Afghan population living below the national poverty line, Afghanistan aims to catalyze private investment and help entrepreneurs advance their business to grow and create jobs. With the support of the WBG Business Regulation unit, Afghanistan has made significant gains to improve the ease of doing business in the country and was recognized as global top improver in Doing Business 2019. The country improved its Doing Business score by more than 10 points to 47.77/100. These gains reflected the record five reforms which were successfully implemented in 2018 to reduce constraints faced by small and medium entrepreneurs. The Government cut the business licensing fee from 32,000 afghanis to 100 afghanis for a three-year license and it reduced the time, burden, and unpredictability involved with paying taxes for companies by automating the submission of tax returns. On the legal front, Afghanistan carried out a comprehensive overhaul of its legal framework for companies: the new Limited Liability Company Law strengthens corporate governance rules as well as protection for minority investors; and the new Insolvency Law makes it easier for businesses to get access to credit as it establishes that secured creditors are repaid first during business liquidation, and hence have priority over other claims. This legislation also improves the continuation of the debtor’s business during insolvency proceedings, introducing  the reorganization procedure, and granting creditors greater participation.

Serbia: The World Bank helped establish a one-stop shop for business registration, insolvency, collateral registry and financial accounts. The time to start a business was decreased from 51 to 7 days, and the minimum capital requirement of US$5000 for LLCs was eliminated. More than 450,000 business records were made available on-line. Moreover, the registry recorded a 70% increase of newly registered companies in the first year and is now an up-to-date, transparent and accessible repository of data on businesses.


Related Sites

Regulatory Governance

Indicator Based Reform

Quality Infrastructure

Experts

Catherine Masinde, Practice Manager, Global Business Regulation (IC)

Peter Ladegaard, Global Lead, Regulatory Governance

Sylvia Solf, Global Lead, Indicator Based Reform Advisory

Blogs

Keeping pace with digital disruption: Regulating the sharing economy

The silent ‘change agents’ in government

IC Publications

Regulatory Governance in Developing Countries

Introducing a risk-based approach to regulate businesses How to build a risk matrix to classify enterprises or activities

Good Practices for Construction Regulation and Enforcement Reform : Guidelines for Reformers

How to Reform Business Licenses

How to Reform Business Inspections: Design, Implementation, Challenges

Videos /Multimedia

Investment Competitiveness for Business-Led Growth

Improving the Investment Climate in Bosnia & Herzegovina

Business Environment Learning Series: Business Entry

Business Environment Learning Series: Licensing & Inspections

Business Environment Learning Series: Risk-Based Approaches

News

G20 Leaders Welcome Launch of Inclusive Business Platform, September 7, 2016

Côte d’Ivoire Launches New Platform to Improve Business Regulation, August 2, 2016

FIAS Embarks on Renewed Effort to Boost Business Environment in Struggling Economies, July 19, 2016

World Bank Group, African Development Bank, and Guinea Launch One-Stop Shop to Boost Mining Sector, July 11, 2016

Partner Publications

Good Practices for Construction Regulation and Enforcement Reform: Guidelines for Reformers

Risk and Regulatory Policy, OECD

Last Updated: Oct 08, 2019