A review of the Doing Business 2013 report, published by the World Bank, and the extent to which select government regulations and processes support ICT/tech businesses in the Caribbean.
Although ICT/tech businesses might have some unique needs depending on the products and services being offered, or the nature of the operations, to a considerable extent, they are not very different from businesses in other sectors. Typically, the private sector benefits from government regulations and processes that reduce the burden on businesses, and support their continued viability and growth.
In that regard, the World Bank’s Doing Business 2013 report, which was released earlier this week, highlights the ease of doing business by analysing
… regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and protecting investors (Source: World Bank)
This post examines the results of Doing Business 2013, and highlights the performance of the Caribbean with regard to four indicators that tend to be pertinent to ICT/tech businesses.
Methodology
The Doing Business 2013 study assesses local business regulations that affect small-to-medium sized businesses across the following 10 indicators:
- starting a business
- dealing with construction permits
- getting electricity
- registering property
- getting credit
- protecting investors
- paying taxes
- trading across borders
- enforcing contracts
- resolving insolvency.
The data used for this study was collected from a variety of in-country sources, through the World Bank Enterprise Survey, and covers the period June 2011 to June 2012. In this its 10thyear, the review includes 185 countries, 16 of which are in the Caribbean and/or are members of the Caribbean Community (CARICOM), and will be highlighted in this post.
Overall results
As expected, developed economies topped the Doing Business 2013 global ranking. Among the top 10 countries no single region dominated – countries from Asia (Singapore, Hong Kong, Korea), Europe (Denmark, Norway, United Kingdom) and Australasia (Australia, New Zealand) all made the list, as reflected in Table 1.
Table 1: Top 10 economies for doing business as per the Doing Business 2013 report (Source: World Bank)
Among Caribbean countries, the countries that performed well in other assessments, such as Barbados and St. Kitts and Nevis, were not as highly ranked in this study. The results indicate that Puerto Rico, ranked 41 globally, followed by Saint Lucia, at 53, and Antigua and Barbuda, at 63, offer the most enabling environments for doing business. Table 2 presents the ranking of all Caribbean/CARICOM countries included in the study.
Table 2: Doing Business 2013 report global ranking for select Caribbean countries (Source: World Bank)
Within the period June 2011 to June 2012, approximately four of the 16 Caribbean countries included in the report made some improvements to business processes that ought to make it easier for local entrepreneurs and business owners to do business. Reforms included reducing processing time for imports and/or exports (Dominica, Grenada, Jamaica, Trinidad & Tobago), and implementing systems to make paying taxes easier (Jamaica, Puerto Rico). However, globally those improvements were not enough for Caribbean countries to maintain their ranking from the previous year (2010/2011), as shown in Figure 1. (Note: The lower the number, the better the ranking.)
Figure 1: Comparison of global Doing Business ranking for select Caribbean countries in 2010/2011 and 2011/2012 (Source: World Bank)
Indicators relevant to ICT/tech businesses
With regard to our particular focus on ICT/tech businesses in the Caribbean, we will discuss the results of the following indicators:
- starting a business
- getting credit
- paying taxes
- resolving insolvency
Starting a business. This indicator measures the number of procedures; the time in days; the cost, as a percentage of per capita income; and paid-in minimum capital, as a percentage of per capita income, required to establish a limited liability company. In the Caribbean, as shown in Table 3 and across all sub-measures, Puerto Rico, followed by Jamaica and Dominica are considered by the World Bank, the easiest places to start a business.
Table 3: Performance of select Caribbean countries on the ease of starting a business in 2011—2012 (Source: World Bank)
For the majority of countries in the sample group, less than 10 procedures are required to start a business. However, wider disparity exists with regard to processing time, and incorporation costs, which may be more significant contributors to the overall performance, as they speak directly to the delay and expense to a prospective entrepreneur or small business owner, who wishes to establish a company.
Getting credit. At some point during the development of a business, there may be need for external funds, which may be required in circumstances such as, to directly support operations; to cover a shortfall in revenue; or to facilitate expansion of the businesses. This indicator does not measure directly how easy it is to get credit. Instead, it examines the extent to which the requisite systems to facilitate the giving credit have been established. The two main measures for this indicator are the strength of legal rights index, which examines ‘how well collateral and bankruptcy laws facilitate lending’, and ‘the coverage, scope and quality of credit information available through credit registries and credit bureaus’ (Source: World Bank).
With regard to the Caribbean, Puerto Rico again leads the region in the ease of getting credit, at 22, and is followed by Trinidad and Tobago at 23 (Table 4). From the results, it is highlighted that the top five ranked countries in the region all have the same “strength of legal rights index”, but three out of the five, scored zero for “depth of credit information”, and as such were ranked 83 for this indicator.
Table 4: Performance of select Caribbean countries on the ease of securing credit in 2011—2012 (Source: World Bank)
Paying taxes. Although the paying of taxes is necessary in most jurisdictions, the ease of payment and the burden on the business can have a significant impact on micro, small and medium-sized enterprises. In Table 4, Saint Lucia is the top-ranked Caribbean country, at 43 globally, with regard to the paying of taxes and other mandatory deductions and contributions. It is followed by Belize at 45 and Suriname at 49. The worst performers are Saint Kitts and Nevis at 135, Antigua and Barbuda, at 142, and Jamaica, at 163, out of 185 countries.
Table 5: Performance of select Caribbean countries on the ease of paying taxes and the burden of those taxes on businesses in 2011—2012 (Source: World Bank)
Resolving insolvency. Although unfortunate, businesses can become insolvent and may have to file for bankruptcy. This indicator assesses the time, costs and outcome of insolvency proceedings involving local businesses. The assessment places an emphasis on the extent to which business recovery is supported and facilitated, which would in turn influences the associated processes and costs
In the Caribbean, the best performing countries with regard to resolving insolvency are Puerto Rico, which is ranked 46th globally, and is followed by Barbados, at 28, and Belize, at 30 (Table 6). Grenada, Saint Kitts and Nevis, and Saint Vincent and the Grenadines are listed at the bottom of the table.
Table 6: Performance of select Caribbean countries on the ease of resolving insolvency in 2011—2012 (Source: World Bank)
It should be noted that the “no practice” status means that a country has had zero insolvency cases a year over the past 5 years. The World Bank has construed this as meaning
that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for “no practice” economies is zero… (Source: World Bank)
Image credits: Sura Nualpradid (FreeDigitalPhotos.net)
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