Washington, D.C., September 9, 2009-In a record year for regulatory reform worldwide, most economies in East Asia and the Pacific strengthened business regulations, making them more efficient to help increase opportunities for local firms.The Pacific island economies continued to pick up the pace of reform. Timor-Leste, Papua New Guinea, Tonga, Vanuatu, and Samoa reformed in areas including paying taxes, enforcing contracts, getting credit and starting a business. Three economies from the region-in order, Singapore, New Zealand, and Hong Kong (China)-led the world in ease of doing business.
Between June 2008 and May 2009 a record 131 of 183 economies around the globe reformed business regulation, according to Doing Business 2010: Reforming through Difficult Times, the seventh in a series of annual reports published by IFC and the World Bank. In East Asia and the Pacific 17 of 24 economies made reforms against the backdrop of the global economic crisis.
"Business regulation can affect how well small and midsize firms cope with the crisis and seize opportunities when recovery begins," said Penelope Brook, Acting Vice President for Financial and Private Sector Development at the World Bank Group. "The quality of business regulation helps determine how easy it is for troubled firms to survive difficult times, how fast local entrepreneurs will start investing again and how quickly new business can get started."
Timor-Leste improved its ranking to 164 in the 2010 report from 173 in 2009 by adopting a new tax law in July 2008. The law cut the profit tax rate from 30 percent to 10 percent and abolished the alternative minimum tax and the withholding tax on interest. Meanwhile, corporate income tax is now paid in quarterly installments when turnover is less than $ 1 million.
The specialized commercial track at the National Court of Papua New Guinea-introduced in 2007-has become fully operational, improving contract enforcement.
Tonga also reformed in the area of paying taxes. The adoption of a new income tax act allows for accelerated depreciation and amortization of intangibles and preliminary expenditures, and introduced self-assessment.
Changes in the area of getting credit helped Vanuatu improve by two places to 59 in the world rankings. Vanuatu created a geographically centralized, unified registry for collateral, strengthening access to credit and secured transactions. The registry is accessible online.
Samoa made changes to starting and closing a business, moving from 68 in 2009 to place 57 this year. By passing a new company act that removed the minimum capital requirement and simplified various other procedures, Samoa eased business start-up. The act cut 26 days, 4 procedures, and three-quarters of the cost of starting a company. Samoa also enacted a new corporate law and a law introducing receivership, easing the process of closing a business.
Doing Business ranks 183 economies based on 10 indicators of business regulations that track the time and cost needed by domestic companies to meet business regulations such as start-up and operations, trading across borders, paying taxes, and closing a business. Doing Business does not measure all aspects of the business environment that matter to firms and investors. For example, it does not measure security, macroeconomic stability, corruption, skill level, or the strength of financial systems.