Wednesday, May 20, 2015

IF BUSINESS WORKS, WE WILL BE FINE

Last week Kampala hosted the fifth edition of the Ease of Doing Business Initiative (EADBI), a peer-to-peer review by sub Saharan countries on their progress in facilitating private sector led growth.
The initiative comes out of the World Bank’s annual Ease of Doing Business report, which judges countries public policies and implementation on the subject.

Uganda has lagged in the lower quartile of the 190 or so countries polled coming in at rank 150 last year compared to 152 the previous year.

"The Ease of Doing Business Index which was started in 2001 came after years of development aid history pointed to the fact that for economies to grow sustainably they have to be private sector driven....

But how to facilitate the private sector to drive the economy was the question.

It is all very nice to build transport, energy and communication networks; to improve literacy and health levels; it’s even nice to engineer the breakup of state monopolies and liberalise the markets. This are all necessary, even crucial for economic growth but even more critical is to reduce the red tape that many governments have tied their businessmen up in.

And it makes sense.

According to the latest EDB report Uganda ranks 166 for starting up business – it takes 15 procedures to register a business compared to the sub-saharan average of about eight. IN addition it takes 32 days to start a business compared to the sub-Saharan average of 27 days or the even lower figure of nine days in the western economies.

Uganda does relatively well in enforcing contracts and winding up insolvent companies.

It does not take an advanced science degree to recognise that being 150 out of 189 economies in making life easy for our businessmen means we have a lot of work to do.

But their countries around us who have excelled with some of our most pressing issues. Across the border from us in Rwanda it takes eight procedures and about six days to register a business.

Think about the savings in money and time this comes with, allowing businessmen to do what they are supposed to do, not chasing and buttering up public officials.

During the conference Rwanda also announced that it was coming close to full registration of its lands and by the same time next year they will have streamlined their processes to allow for online transfers of property.

In Uganda where it takes 11 procedures and 43 days to register property would do well to learn from Rwanda, which was the reason for the conference – a sharing of challenges and experiences.

Uganda has made some significant steps in the last decade and a half that the EDB index has been coming out but more has to be done. Peer learning is a good an avenue for this as any.

"Regulating business is necessary even important but with changes in technology and the urgency of having an efficient business sector, we need to constantly re-evaluate whether our regulations are hampering or enabling business. Some regulations are obsolete while others just serve as opportunities for public servants to pad their nests...

Making things easy for business also comes from the realisation that governments are not the major drivers of job or wealth creation. It is the private sector. So government should really confine itself to creating a conducive environment for business to thrive but not at the expense of the general population.

If Uganda for instance can reduce the burdensome regulation around business they may solve another issue.

Uganda has been recognised as one of the most entrepreneurial countries in the world. The rate of opening businesses is here in phenomenal unfortunately very few of these businesses grow to be giant enterprises with a regional or even national presence.

Part of the reason for this is the high cost in time and money it takes to move from informal to formal businesses. What this means is that many of our businesses remain subsistence operations, serving only to sustain its owners lifestyles, with no ambition beyond that.

The loss to the general economy in terms of lost jobs and economic activity is obvious.

So yes, putting easing doing business top of our agenda makes not only economic but political sense as well...

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