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

MD Staff

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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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People Can Prosper and Thrive If Pakistan Reforms Faster

MD Staff

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Pakistan urgently needs to invest more and better in its people if they are to be richer, better educated, and healthier when the country turns 100 years old in 2047, says a new report by the World Bank.

Launched today at the Human Capital Summit, the report, Pakistan@100: Shaping the Future, urges Pakistan to overcome its boom-bust cycles through a deep-rooted economic transformation. It recommends the essential reforms Pakistan needs now to accelerate and sustain growth. This means increasing and improving human capital investment, boosting productivity, promoting social and environmental sustainability, ensuring good governance, and leveraging its location to connect more with neighbors and the world beyond says the report. 

“There are steps Pakistan can take today to boost its economic performance and thereby ensure a better future for its people,” says Hartwig Schafer, World Bank Vice President for South Asia. “These steps are ones that other countries have taken to open up their business sectors to competition and innovation and laying the foundations for growth, investment, and good jobs.”

The forward-looking report argues that Pakistan’s greatest asset is its people – a young population of 208 million. This large population can transform into a demographic dividend that drives economic growth. To achieve that, Pakistan must act fast and strategically to: i) manage population growth and improve maternal health, ii) improve early childhood development, focusing on nutrition and health, and iii) boost spending on education and skills for all, according to the report.

“Because the next generation is meeting only 40 percent of its potential it means that Pakistan is foregoing much of its economic growth, but this can change if women’s potential is unlocked,” says Annette Dixon, World Bank Vice President for Human Development. “When women and girls are empowered to make their own decisions, they stay in school longer, they start families a little later, have fewer children, contribute more to the economy, and invest more in their children. It’s a virtuous circle that’s good for families and good for the whole country.”

In addition to human capital, Pakistan@100: Shaping the Future calls for reforms in other key areas.

To increase investment levels, the report recommends ways to make it easier to do business in Pakistan, as well as reforms to tax policy and administration to increase fiscal space and public investment in the country’s top priorities. Strong governance will be crucial to implement a difficult set of reforms. The report discusses the key elements of a strong governance environment, including the need for a stronger civil service.

“Accelerating and sustaining Pakistan’s growth over a 30-year period is ambitious, but possible,” says Illango Patchamuthu, World Bank Country Director for Pakistan. “Many other countries have achieved economic transformations within a generation with the right set of policies. The World Bank is committed to working with the government of Pakistan and other stakeholders in the country to advance the necessary reforms, so that Pakistan can significantly increase growth and sustain it, so it is an upper middle-income country by the time it celebrates its centenary.”

Pakistan@100: Shaping the Future has also benefited from funding by the UK Department for International Development and Australian Department for Foreign Affairs and Trade.

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Trade in fake goods is now 3.3% of world trade and rising

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Trade in counterfeit and pirated goods has risen steadily in the last few years – even as overall trade volumes stagnated – and now stands at 3.3% of global trade, according to a new report by the OECD and the EU’s Intellectual Property Office.

Trends in Trade in Counterfeit and Pirated Goods puts the value of imported fake goods worldwide based on 2016 customs seizure data at USD 509 billion, up from USD 461 billion in 2013 (2.5% of world trade). For the European Union, counterfeit trade represented 6.8% of imports from non-EU countries, up from 5% in 2013. These figures do not include domestically produced and consumed fake goods, or pirated products being distributed via the Internet.

Trade in fake goods, which infringe on trademarks and copyright, creates profits for organised crime gangs at the expense of companies and governments. Fakes of items like medical supplies, car parts, toys, food and cosmetics brands and electrical goods carry a range of health and safety risks. Examples include ineffective prescription drugs, unsafe dental filling materials, fire hazards from poorly wired electronic goods and sub-standard chemicals in lipsticks and baby formula.

“Counterfeit trade takes away revenues from firms and governments and feed other criminal activities. It can also jeopardise consumers’ health and safety,” said OECD Public Governance Director Marcos Bonturi, launching the report with the Director of the EU Observatory on IPR infringements at the EUIPO, Paul Maier, and the EU Ambassador to the OECD Rupert Schlegelmilch. “Counterfeiters thrive where there is poor governance. It is vital that we do more to protect intellectual property and address corruption.”

The goods making up the biggest share of 2016 seizures in dollar terms were footwear, clothing, leather goods, electrical equipment, watches, medical equipment, perfumes, toys, jewellery and pharmaceuticals. Customs officials also noted an increase in counterfeits of goods less commonly seen in the past such as branded guitars and construction materials.  

The majority of fake goods picked up in customs checks originate in mainland China and Hong Kong. Other major points of origin include the United Arab Emirates, Turkey, Singapore, Thailand and India.

The countries most affected by counterfeiting in 2016 were the United States, whose brands or patents were concerned by 24% of the fake products seized, followed by France at 17%, Italy (15%), Switzerland (11%) and Germany (9%). A growing number of businesses in Singapore, Hong Kong and emerging economies like Brazil and China are also becoming targets.

Small parcels sent by post or express courier are a prime and growing conduit for counterfeit goods. Small parcels accounted for 69% of total customs seizures by volume over 2014-2016 (57% via post and 12% via courier), up from 63% over the 2011-2013 period.

Along with insufficient screening of small parcels, other areas where policy gaps are facilitating counterfeit trade are inconsistent penalties on traffickers and the special rules governing free trade zones. Past OECD-EUIPO analysis has shown that free trade zones – where economic activity is driven by reduced taxes, customs controls and lighter regulation – can unintentionally facilitate counterfeit trade. The OECD is working with its member countries on formal guidelines to help authorities stem the problem.

Trends in Trade in Counterfeit and Pirated Goods covers all physical fake goods which infringe trademarks, design rights or patents, and tangible pirated products, which breach copyright. It does not include online piracy, which is a further drain on economies.

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Oil Market Report: Supply cushion insures against losses

MD Staff

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The electricity crisis in Venezuela has paralysed most of the country for significant periods of time. Although there are signs that the situation is improving, the degradation of the power system is such that we cannot be sure if the fixes are durable. Until recently, Venezuela’s oil production had stabilised at around 1.2 mb/d. During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market. As it happens, 1.2 mb/d is also the size of the output cuts agreed by OPEC countries and some non-OPEC producers. The cuts were implemented in January and compliance by OPEC reached 94% in February, with Saudi Arabia cutting back by about 170 kb/d more than required. The non-OPEC countries are complying more slowly at a rate of 51%, with Russia reducing its output very gradually. Due to the cuts, OPEC members are sitting on about 2.8 mb/d of effective spare production capacity (Iran and Venezuela are excluded from the calculation), with Saudi Arabia holding two-thirds of it. Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports. Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand.

Before the seriousness of the situation in Venezuela became apparent, our oil balances for the first half of 2019, which have not changed significantly since our last Report, suggested that the market is tightening. On the basis of solid oil demand growth, modest declines in OPEC production due to Iran and Venezuela, and rising US output, the market could show a modest surplus in 1Q19, before flipping into deficit in 2Q19 by about 0.5 mb/d. This does not take into account Saudi Arabia’s announced plans to reduce its exports further in April.

Although we must await developments in Venezuela, if there were to be a collapse in production, it could provide an opportunity for other producers who can supply comparable barrels. Venezuela currently ships about 400 kb/d to both China and India. Elsewhere, other producers have already taken advantage of Venezuela’s problems: as exports to the US have slumped following the imposition of sanctions, Russia has taken the opportunity to increase its shipments to the US from relatively modest levels to around 150 kb/d.

Geopolitics has added another complication to the global oil market. At the same time, production cuts have increased the spare capacity cushion. This is especially important now as economic sentiment is becoming more pessimistic and the global economy could be entering a vulnerable period. Another way in which the world is better placed to weather geopolitical storms is shown in the IEA’s five-year oil market outlook Oil 2019 – Analysis and Forecasts to 2024, which we published on 11 March. A key theme is the growing importance of the US in global markets. Rising production there is not a new story; what is game changing is that the US in 2021 will become a net oil exporter on an annual average basis. With Canadian production also increasing, and most of its exports moving to US refineries, this frees up US crude for export. This year US seaborne oil trade will move into surplus with net exports rising to nearly 4 mb/d of by 2024. The rising profile of the US not only brings greater choice to consumers, but, crucially, it enhances security of supply, especially when, as now, there are heightened geopolitical concerns.

IEA

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