Read this and wince. Adam Smith blog
Regulation and poverty
By Dr Madsen Pirie Globalization
A new report from the World Bank, Doing Business in 2005, shows that poor countries impose on average three times the administrative costs and twice the number of bureaucratic procedures as rich countries. The current issue of The Economist picks out some of the striking contrasts.
"For example, registering property requires one step in Norway, but 16 in Algeria. Incorporating a business takes two days in Canada, but 153 in Mozambique. Sacking a worker in Guatemala costs a firm three years’ worth of wages, compared with almost nothing in New Zealand…
In Haiti, for example, it takes 203 days to register a company, which is 201 days longer than in Australia. In Sierra Leone it costs 1,268% of average income, compared with nothing in Denmark. To register in Ethiopia, a would-be entrepreneur must deposit the equivalent of 18 years’ average income in a bank account, which is then frozen.
In Lagos, Nigeria’s commercial capital, recording a property sale involves 21 procedures and takes 274 days. Official fees amount to 27% of the value of the transaction. In Norway the task takes less than a day and costs only 2.5% of the price of the property."
Relief from poverty does not come from a few crumbs tossed from rich tables; it arises from domestic economic growth. It is difficult to force people to be entrepreneurial, but they can be encouraged to be so if it is both easy and rewarding. The burdens and the fees should be lower, not higher, in the poorer countries because they need the growth more.
It would be helpful if a model schedule could be drawn up setting out 'best practice' to be followed in encouraging small firms to become established and business deals to be transacted. Countries which signed up to that schedule would gain the benefits in both investment and growth, and their citizens would climb out of poverty.
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