11-11-2008 J. Chaaban The Need for Good Governance Reform Jad Chaaban Lebanese Economic Association Strengthening Private Sector Resilience under Conflict: Lessons Learned and the Way Forward 11-12 November 2008
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11-11-2008J. Chaaban The Need for Good Governance Reform Jad Chaaban Lebanese Economic Association Strengthening Private Sector Resilience under Conflict:
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Slide 1
11-11-2008J. Chaaban The Need for Good Governance Reform Jad
Chaaban Lebanese Economic Association Strengthening Private Sector
Resilience under Conflict: Lessons Learned and the Way Forward
11-12 November 2008
Slide 2
11-11-2008J. Chaaban Main messages Impediments to smooth
business operations are pervasive in the Arab countries This talk
will focus on Governance as related to corruption: Bribes to get
things done are a widespread phenomenon Bribing can be the result
of a self-enforcing mechanism, where the Government has little room
to intervene Corruption as greasing the wheel Public sector wages
and corporate taxes play an important role in limiting bribery
Institutional reform should be implemented to increase the
efficiency of the public sector and strengthen private sector
resilience
Slide 3
11-11-2008J. Chaaban Reform in business regulations is good for
job creation Source: World Bank Investment Climate Assessment, 2006
Following reforms to improve business registration: - Business
registration went up by 18.8% from 1998 to 2004 in Pakistan; -
Business entry increased by 28% in Vietnam; - Georgia reduced the
minimum capital required to start a new business from 2,000 lari to
200 ($85). Business registrations rose by 20% between 2005 and
2006.
Slide 4
11-11-2008J. Chaaban Growth and improved economic performance
reduce the risk of civil war Source: Collier and Hoeffler,
2002.
Slide 5
11-11-2008J. Chaaban Corruption is everywhere: 'hongbao' in
China 'baksheesh' in Arab countries 'matabiche' in central Africa
'propina' in Latin America, 'pots de vin' in France 'mazzetta' in
Italy or just plain bribery. On average, 35% of firms in developing
countries pay bribes to get things done As high as 50% in Lebanon
and 75% in Algeria Business regulations impose a high burden on
companies, and this exacerbates the negative impact of
conflict
Slide 6
11-11-2008J. Chaaban IraqLebanonPalestine Middle East &
North AfricaOECD Ease of Doing Business Rank 14185117.. Enforcing
Contracts Procedures (number) 51374442.531.3 Time (days)
520721700659.3443.3 Cost (% of debt) 32.530.821.223.717.7 Closing a
Business Time (years) no practice4 3.71.3 Cost (% of estate) no
practice22no practice13.97.5 Recovery rate (cents on the dollar)
019.1025.874.1 Doing business legislation in Iraq, Lebanon and
Palestine is highly inefficient with regards to investment under
uncertainty Source: World Bank Doing Business Database
Slide 7
11-11-2008J. Chaaban Source: World Bank Investment Climate
Assessment, 2006
Slide 8
11-11-2008J. Chaaban CountriesNumber of procedures Delay in
days Cost (%income) Minimum capital required (%income) Corruption
index Egypt1022105740-0.4 Iraq11773732-1.3 Jordan1118861,0120.3
Kuwait133521340.8 Lebanon64612369-0.4 Oman9345970.7 Saudi
Arabia1364691,2370.2 Sudan1039680-1.4 Syria1243355,112-0.6
Tunisia101110300.1 Palestine121062441,410-1.1 United Arab
Emirates1263444171.1 Yemen12632402,703-0.6 Arab mean114882999-0.2
World mean104769194-0.1 OECD7207411.9 Canada230.601.9 Source: World
Bank Doing Business and Governance databases, 2005
Slide 9
11-11-2008J. Chaaban
Slide 10
11-11-2008J. Chaaban It seems that firms prefer to: Evade
taxes: thus low revenues to finance public sector reforms Pay
bribes: poor entrepreneurs who cannot afford paying bribes are
excluded Sales amount reported by a typical firm for tax purposes
(%) Parallel market for business registration transactions
Solutions: Streamlining of procedures Incentive pay for public
servants Higher income taxes on firms: more accountability
Slide 11
11-11-2008J. Chaaban
Slide 12
Liquidation/ exit Establishment or incorporation Ongoing
operations Establishment of a business should be inexpensive and
the process kept at a minimum. Minimum capital requirements should
be at a minimum Compliance should be straightforward and
inexpensive. Labor law should not discourage hiring of foreign
personnel Customs formalities inexpensive and speedy Liquidation
cost at a minimum. Voluntary liquidation should be a speedy matter.
Provide financial instruments to help firms in times of crisis
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