The World Bank Group’s latest report indicates a measure of ‘absolute progress’ towards best practice goals.
Afghanistan A ‘Top Improver’ With Record Reforms: WB
The World Bank Group’s (WB) Doing Business 2019: Training for Reform report, released on Wednesday night, states Afghanistan carried out a record number of business reforms in the past year, earning the country a spot in this year’s top 10 global improvers.
With five reforms in the past year, Afghanistan advanced to 167th place in the global ease of doing business rankings.
On the measure of absolute progress towards best practice, Afghanistan significantly improved its Doing Business score by more than 10 points to 47.77, reported the WB.
The latest reforms were in the Doing Business areas of Starting a Business, Getting Credit, Protecting Minority Investors, Paying Taxes, and Resolving Insolvency.
According to Shubham Chaudhuri, World Bank Country Director for Afghanistan: “Improving the business environment is essential for Afghanistan to stimulate domestic investment and create jobs. Given the exceptional challenges of conflict and violence in the country, the government’s resolve to improve the business climate for private enterprise is doubly commendable.”
Chaudhuri also said: “We look forward to continuing to record Afghanistan’s successes in years to come.”
During the past year, Afghanistan made Starting a Business less costly by reducing the fees for business incorporation and as a result, the cost for an entrepreneur to start a business in the country has significantly been reduced from 82.3 percent of the income per capita to only 6.4 percent.
Afghanistan focused on enhancing the legal framework for businesses and minority investor protections were strengthened substantially, making Afghanistan one of the economies advancing the most in this area.
In addition, the WB reported that a new law on limited liability companies made noteworthy progress toward mitigating the risks of prejudicial conflicts of interest in companies and strengthening corporate governance structures.
Also, the Commercial Procedure Code was amended to grant greater powers to shareholders to challenge related-party transactions.
The WB said that protecting Minority Investors is an area of strength for Afghanistan and that the country scores 9 out of 10 in this indicator’s three indexes, which measure access to evidence and allocation of legal expenses in shareholder litigation, shareholders’ rights and role in major corporate decisions and governance safeguards protecting shareholders from undue board control and entrenchment.
Afghanistan has a global ranking of 26 in the area of Protecting Minority Investors.
What was also noted by the WB was that Afghanistan adopted a new insolvency framework this year and secured creditors are now given absolute priority over other claims in insolvency proceedings.
Afghanistan also made resolving insolvency easier by improving the continuation of the debtor’s business during insolvency proceedings and granting creditors greater participation in the proceedings, read the report.
Paying taxes was also made easier with the adoption of a new tax administration and law with clear rules and guidelines on tax audit, and by automating the submission of tax returns.
The time spent by businesses to pay their taxes in 2017 was reduced by five hours, to 270 hours, less than the South Asia regional average of 275 hours while the time to comply with a corporate income tax audit has been halved from 207.5 hours to 111 hours.
The report also stated that Afghanistan performs well in the area of Starting a Business with a global rank of 49.
However, it lags in areas such as Registering Property (with a global rank of 186), Dealing with Construction Permits (184) and Enforcing Contracts (181). For example, it takes 250 days to register the transfer of a property in the country, which compares poorly with the South Asia regional average of 114 days.
Over all, the main findings by the WB stated Doing Business captured a record 314 regulatory reforms between June 2, 2017, and May 1, 2018.
Worldwide, 128 economies introduced substantial regulatory improvements making it easier to do business in all areas measured by Doing Business.
The economies with the most notable improvement in Doing Business 2019 are Afghanistan, Djibouti, China, Azerbaijan, India, Togo, Kenya, Côte d’Ivoire, Turkey and Rwanda.
According to the report, one-third of all business regulatory reforms recorded by Doing Business 2019 were in the economies of Sub-Saharan Africa. With a total of 107 reforms, Sub-Saharan Africa once again has a record number this year.