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Ease of Doing Business Varies in Cities Across Croatia, the Czech Republic, Portugal and Slovakia

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The ease of doing business varies substantially among cities within Croatia and the Czech Republic, while the implementation of business regulations is more consistent across cities in Portugal and Slovakia, finds a new World Bank report.

Released today, Doing Business in the European Union 2018: Croatia, the Czech Republic, Portugal and Slovakia covers 25 cities in the four countries.

It finds that Prague is the only capital city which out-performs other cities in the Czech Republic. Bratislava, Lisbon and Zagreb, on the other hand, lag behind most of the smaller cities within their own country.

The report analyzes business regulations affecting domestic small and medium sized firms in five Doing Business areas: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, and Enforcing Contracts.

The 25 cities covered are: Osijek, Rijeka, Split, Varazdin, and Zagreb in Croatia; Brno, Liberec, Olomouc, Ostrava, Plzen, Prague, and Usti nad Labem in the Czech Republic; Braga, Coimbra, Evora, Faro, Funchal, Lisbon, Ponta Delgada, and Porto in Portugal; and Bratislava, Kosice, Presov, Trnava, and Zilina in Slovakia.

“The unevenness in performance among cities in each country shows that the regulatory reform agenda remains incomplete and suggests opportunity for improvement,” saidRita Ramalho, Senior Manager of the Global Indicators Group at the World Bank. “We hope this report will draw the attention of policy makers in the four countries and serve as a roadmap for reform at the subnational level.”

Key findings include:

In Croatia, entrepreneurs in the smaller cities of Varazdin and Osijek face less hurdles than their counterparts in the three larger cities covered by the report. And, regulatory reforms to improve the ease of doing business over the years have led to inconsistencies in how regulation is implemented at the local level. As a result, Starting a Business is easier in Split; Dealing with Construction Permits and Getting Electricity in Varazdin; while Osijek stands out for its performance in the areas of Registering Property and Enforcing Contracts.

Among the seven cities benchmarked in the Czech Republic, it is the country’s three largest—Prague, Brno and Ostrava—where doing business is easier across the five areas measured. Prague ranks first in two areas (Getting Electricity and Enforcing Contracts), while Brno ranks first in Dealing with Construction Permits and Ostrava in Registering Property—demonstrating the potential for large cities to achieve regulatory efficiency and quality by capitalizing on economies of scale and investing in administrative modernization.

In Portugal, the eight cities benchmarked show the most homogeneous performance, suggesting relatively consistent implementation of regulations across the country. Nevertheless, Porto ranks first in Dealing with Construction Permits but close to the bottom in Registering Property and Enforcing Contracts. Coimbra leads in Getting Electricity and Enforcing Contracts, but lags behind in Dealing with Construction Permits. Faro, along with Funchal and Ponta Delgada, tops the ranking in Registering Property, but ranks last in Getting Electricity.

Smaller cities in Slovakia are more business-friendly as they vie to compete with the capital. Except for Bratislava, each of the five cities benchmarked in Slovakia ranks at the top in at least one area: Starting a Business is easier in Presov and Zilina, construction permitting is more efficient in Presov and Getting Electricity in Zilina. Trnava stands out for its performance in Registering Property and Kosice outperforms its peers in Enforcing Contracts.

Overall, the report finds that the most marked differences in performance within each country are in areas where local authorities have the most autonomy in developing and implementing regulations, such as construction permitting, getting electricity and contract enforcement.

In the areas of Starting a Business and Dealing with Construction Permits, most cities benchmarked have processes that are more complex than the average amongst European Union member states.

Reform-minded officials can make tangible improvements by replicating good practices in other cities in their country. If the capital cities adopted all the good practices found at the subnational level, all four countries would move substantially closer to the global frontier of regulatory best practices. For Croatia, this could mean an improvement of 11 places in the Doing Business global ranking, while Slovakia could improve its rank by nine places.

“The European Commission has been working closely with national and regional authorities, in the context of Cohesion Policy, to set the right conditions for growth and job creation. This report shows how to make the life of businesses and entrepreneurs easier. The future Cohesion Policy for 2021-2027 will continue supporting those reforms that make our regions attractive places to work and invest in,” said Corina Crețu, European Union Commissioner for Regional Policy.

Doing Business in the European Union is a series of subnational reports being produced by the World Bank Group at the request of and funded by the European Commission. A first edition, covering 22 cities in Bulgaria, Hungary and Romania, was released in 2017.

The work on Croatia, the Czech Republic, Portugal and Slovakia is based on the same methodology as the global Doing Business report published annually by the World Bank Group.

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Portugal’s post-crisis policies boosted growth and employment

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A mix of sound economic and social policies and constructive social dialogue between the government, workers’ and employers’ organizations have helped Portugal recover from the 2008 economic and financial crisis and have driven economic and employment growth, says a new ILO report.

The study, entitled Decent work in Portugal 2008-18: From crisis to recovery , finds that Portugal way out of the crisis lied on a mix of economic and social policies which helped improve the business environment, public sector efficiency, education and training, and integration in global production chains. These factors – some of which pre-dated the crisis – paved the ground for the country’s current trajectory towards solid recovery.

According to the report, the Portuguese experience does not support the conventional notion that economic recovery can be accelerated and international competitiveness rapidly regained simply by means of reducing labour costs and making the labour market more flexible.

Reaching 4.8 million by the end of 2017, employment in Portugal has partially recovered from the more than 600,000 jobs lost following the 2008 economic and financial crisis.

With an estimated 351,800 jobseekers (6.7 per cent) in the second quarter 2018, unemployment has reached pre-crisis levels. In 2013, unemployment had peaked at 927,700 compared to only 455,200 job seekers in 2008.

ILO Director-General Guy Ryder commended the study as a solid basis to inform Portugal’s future policy decisions which could “also become a point of reference for other countries”. He cited Portugal “as an important example of overcoming austerity policies, while continuing to pursue a realistic commitment to needed fiscal consolidation.”

Social dialogue between the country’s government and social partners before, during and after the crisis, though not always resulting in consensus, was key to the country’s achievements over the last decade, the report states. However, “where decisions were made unilaterally, or against the interests of unions and/or employers, conflict and pushback resulted.”

Nevertheless, in spite of economic and employment recovery, concerns remain about the quality of jobs and the need to further strengthen the production base to enhance resilience to external shocks, underscoring that these two objectives are not incompatible.

In addition, labour market segmentation “has led to a high rate of involuntary temporary contracts, raising both equity and efficiency concerns. There is a need for policies to address this issue, particularly the low number of workers moving from temporary to permanent employment and unequal working conditions across contract types,” the report says.

In this context, the report authors welcome the commitment of the Portuguese government to further tackle labour market segmentation as a step in the right direction. The will of the government and the social partners to work together on this issue was reflected in a tripartite agreement in June of this year.

The study also highlights recent changes in the country’s collective bargaining system, noting that the goal of the agreement and subsequent legislation “to decentralize collective bargaining from the sectoral to the enterprise level was not achieved.” It also says that the extension of collective agreements was key to promoting collective bargaining, reducing inequality and fostering inclusiveness. The study therefore recommends maintaining this system of extensions.

While wages picked up before the 2008 crisis, they sharply fell during 2010 – 2013 and levelled off just slightly above pre-crisis levels. The report notes, however, that the wages of low-paid workers increased due to Portugal’s minimum wage policy, which was pursued in recent years. This contributed to a decline in wage inequality.

Following consultations with Portugal’s Ministry of Labour, Solidarity and Security, these findings update a 2013 ILO report, Tackling the Jobs Crisis in Portugal .

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Further reforms will promote a more inclusive and resilient Indonesian economy

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A steady economic expansion in Indonesia is boosting living standards, curbing poverty and offering millions of people greater access to public services. Reforms that boost growth, improve the business environment for small and medium-sized enterprises and increase government revenues will allow investment in infrastructure and increased spending on health and social services, which would ensure a brighter future for all Indonesians, according to two new reports from the OECD.

The latest OECD Economic Survey of Indonesia looks at the current expansion, as well as the challenges facing the country moving forward. The Survey projects growth of 5.2% this year and 5.3% in 2019, and lays out an agenda for making the economy more resilient and more inclusive.

The Survey, presented in Bali by OECD Secretary-General Angel Gurría and Indonesian Finance Minister Sri Mulyani Indrawati, highlights the importance of policies to increase resilience as global risks rise. It also underlines the potential for tax reforms that increase government revenues to meet financing needs in a growth and equity-friendly manner, as well as how tourism can contribute to sustainable regional development.

“As the OECD launches the latest Economic Survey of Indonesia today in Bali, our heartfelt sympathies go out to the Government and the people of Indonesia over the tragic loss of life from the earthquake and tsunami in Central Sulawesi. This Economic Survey promotes policies designed to improve Indonesia’s resilience to global risks. Efforts already underway to recover from this natural disaster and rebuild for the future offer a powerful illustration of resilience in action,” Mr Gurría said.

“The Indonesian economy is growing at healthy rates, and a demographic dividend will further boost growth in the coming years,” Mr Gurría said. “The challenge going forward will be to create the conditions to ensure that future generations have the opportunities for a better life. Infrastructure, education, health and job quality still pose important challenges that must be addressed to ensure that Indonesia achieves sustainable and inclusive growth.”

To make the economy more resilient and inclusive, the Survey calls for improved targeting of social assistance, deepening domestic financial markets, better transparency and governance of state-owned enterprises, reforms to employment regulations to bring more workers into formal employment and further simplification of business regulations.

To raise greater revenues to meet spending needs, the Survey proposes Indonesia increase investment in tax administration, make greater use of information technology to strengthen monitoring and facilitate compliance, broaden the tax base for both income tax and value-added taxes, and work with local governments to increase revenues from recurrent property taxes.

To develop a stronger and more sustainable tourism sector, the Survey points out the need to include infrastructure in new development plans, expand tourism skills training and consider opening new areas for appropriate tourism use.

Improving conditions for SMEs and entrepreneurs will also be key for future economic development, according to the first-ever OECD SME and Entrepreneurship Policy Review of Indonesia 2018. Mr Gurría presented the Review in Bali with Minister of Cooperatives and SMEs Anak Agung Gede Ngurah Puspayoga and Minister of National Development Planning Bambang Brodjonegoro.

The Review examines the performance of SMEs and entrepreneurship and provides tailored recommendations for improving the business environment and framework conditions, the strategic policy context, national programmes and the coherence between national and provincial policies.

“In Indonesia, small companies employing less than 20 people account for more than three-quarters of national employment, more than in any OECD country,” said Mr. Gurría. “This is why policies to boost SME development should remain a priority for the Indonesian Government.”

To strengthen productivity growth in SMEs, the OECD suggests increasing government spending on skills upgrading and innovation in SMEs. The Review finds that Indonesia spends less than 0.1% of GDP on R&D, compared with the OECD average of 2.3%, and that standard innovation policies such as R&D tax credits are relatively underdeveloped.

To reduce the budgetary impact of this policy, the OECD also suggests reducing the cost of some large-scale programmes, such as KUR (Kredit Usaha Rakyat, People’s Business Credit) – a loan guarantee with an interest rate subsidy – by increasing focus on targeted groups, such as first-time borrowers and SMEs from lagging regions.

To improve the overall coherence of Indonesian SME policy, the Review recommends the integration and merger of programmes that offer very similar services but are operated by different ministries, for example in the field of business development services and business incubators.

Mr Gurría and Minister Indrawati also launched a new OECD – Indonesia Joint Work Programme (2019-21) that will cover a range of national studies, policy advice and capacity building, while placing greater emphasis on bringing Indonesia closer to OECD bodies and instruments. “Aligning Indonesia to OECD standards can lead to a more dynamic economy and a more inclusive and sustainable growth model,” Gurría said.

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Shared mobility and automation will reshape the auto industry by 2030

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Shared mobility and automation are expected to drive a revolution in the automotive industry workforce and production by 2030, according to a new study by PwC’s Strategy& consultancy.

Transforming vehicle production: How shared mobility and automation will revolutionize the auto industry by 2030 predicts substantial changes for manufacturers and consumers. Vehicle production will have split between mass-market, largely no-frills “cars on demand” that will be rented journey-by-journey and more customized vehicles for those who still want to drive, or be driven in, their own vehicle.

PwC’s Strategy& expects that this will require original equipment manufacturers (OEMs) to rapidly develop two distinct types of factory. The first will be focused on standardised, networked ‘plug and play’ vehicles aimed at young, urban drivers. The second ‘flex champion’ model will produce customised vehicles for a range of consumers, akin to today’s luxury prestige market.

The study expects this change to radically alter the current workforce as robots take on a greater share of the work, on both assembly lines and in the R&D function. It is estimated that between 40-60% of today’s workers with contemporary skills will be needed on the shop floor, although the required number of data engineers and software engineers may rise by 90%.

“The auto industry has not substantially altered its model since Ford’s assembly lines were introduced over a century ago,” says Heiko Weber, partner in PwC Strategy& Germany, “yet we expect to see many of these changes to gather pace by 2021.

“OEMs must start now to build the workforce they will need over the next decade, both by hiring people with the right skills and by retaining and retraining their existing employees. By 2030 the number of data engineers will almost double in the flexible plant and increase by 80 percent in the plug-and- play plant, while the number of software engineers needed will rise by 90 percent, and 75 percent, respectively,” Weber says.

The study also notes that the pace of change will accelerate in other areas, with the time between R&D and production to shrink to two years, compared to 3-5 years today. There will also be growing competition to OEMs from technology companies who will be able to provide mobility-as-service solutions directly to consumers.

At the same time, there will be growing pressure on manufacturers to create far more cost-efficient production processes to accommodate an increasingly diverse range of vehicles and designs.

“The auto industry is on the brink of a revolution where data management and the ability to adapt will be essential to survival,’ says Weber.

“OEMs should act now, making the right choices for their production models and future workforce,” he adds.

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