Doing Business: Easier in Ethiopia than Kenya, except for start-ups

.

Posted on Friday, November 14, 2014

By Fetsum Berhane

.

Highlights:

- Ethiopia’s is 132nd of the 189 economies, 4 points above the 136th Kenya, in the overall global ranking of ease of doing business.

- Ethiopia also ranks 14th of the 47 Sub-Saharan Africa economies while Kenya is right next her at 15th.

- Ethiopia has slipped 3 points from the 2014 ranking while Kenya improved its ranking by 1 point.

- Ethiopia has got a better ranking than Kenya in five indicators: Dealing with Construction Permits, Getting Electricity, Registering Property, Enforcing Contracts and Resolving Insolvency.

- Kenya ranks better in five indicators: Starting a Business, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across Borders.

The time of reports has now arrived. “Doing Business 2015”, the flagship report of The World Bank, compares business regulations for domestic small to medium sized firms in 189 economies. Economies are ranked from 1 to 189 by the ease of doing business and are evaluated based on how business regulations are to the best global practices.

The “Doing Business” report aims to illustrate the ease or difficulty of opening and running a small to medium-size business with respect to relevant regulations. The report provides an aggregate ranking on the ease of doing business based on indicator sets that measure and benchmark regulations relevant to domestic small to medium-size businesses.

The ten indicators used in this ranking are: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The report emphasizes that the ranking and the indicators “do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business”.

The report also presents the indicators and rankings of Ethiopia in comparison with the indicators of a good practice economy, or those of comparator economies in the region.

Six economies were selected by the report as comparator economies. These are (with global and regional ranks, respectively): Eritrea (189, 47), Kenya (136, 15), Rwanda (46, 3), Uganda (150, 22), South Africa (43, 2) and Egypt (112).

In light of their comparable GDP and ranking level, HornAffairs opted to provide you a comparison table of these two nations of the Horn. The full list of the ranking and the report can be found here and here.

Indicators measure the ease of:

*Starting a Business – all procedures (officially required or commonly done in practice) to start up and operate —as well as the time and cost required to complete these procedures.

*Dealing with Construction Permits – the procedures, time and cost for a business in the construction industry to build a warehouse in the largest business city, connect it to basic utilities and register it so that it can be used as collateral or transferred to another entity.

*Getting Electricity – All procedures to obtain a permanent electricity connection and supply for a standardized warehouse, as well as the time and cost to complete them.

*Registering Property – procedures necessary for a business to purchase property from another business and transfer the property title to the buyer’s name.

*Getting Credit – assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions

Protecting Minority Investors – measures the protection of minority investors from conflicts of interest through one set of indicators and shareholders’ rights in corporate governance through another.

*Paying Taxes – measures the taxes and mandatory contributions that a medium-size company must pay in a given year as well as the administrative burden of paying taxes and contributions.

*Trading Across Borders – the time and cost (excluding tariffs and the time and cost for sea transport) associated with exporting and importing a standard shipment of goods by sea transport, and the number of documents necessary to complete the transaction.

*Enforcing Contracts – the efficiency of the judicial system in resolving a commercial dispute before local courts.

* Resolving Insolvency – the time, cost and outcome of insolvency (bankruptcy) proceedings involving domestic legal entities.

********