Etim Imisim
19 August 2008
analysis
Lagos — A new book has thrown fresh light on the key dynamics of reforms. These include the facts that successful reforms often happen when new governments come into power, and when there are crises.
And reforms may depend more on timing than carefully crafted plans. In the light of more elaborate studies on linking business environment to actual macroeconomic outcomes in 178 countries, Etim Imisim writes from Abuja
Investors' Guideline
Reformers do not spend a lot of time on concepts like "getting the right sequencing" and "finding the binding constraint" while reformers are helped by active media and information campaigns, researchers say in a new book, 'Celebrating Reform 2008'.
Promoted by the Reformers Club, the book was released as a follow up to the association's annual meeting in New York in June.
The research which looks at reforms in 16 countries across the world follows a larger and an emerging pattern. Even more elaborate studies have linked the nature and characteristics of a country's business environment to actual performance and the outcomes of macroeconomic environment.
The 'Doing Business' series, a publication of the World Bank group, covers 178 countries, including Nigeria, and spans regional levels and sub-national as well as states and selected cities.
As with other studies, 'Doing Business in Nigeria 2008' measures the manner in which government regulations enhance or restrain business activities. It identifies good practices and evaluates the direct impacts that regulations have on economic growth.
The four topics covered include starting a business, dealing with licenses, registering property, and enforcing contracts. "These indicators have been selected because they cover areas of local jurisdiction or practice," the researchers said.
The conclusion is that Nigeria has made important strides in reforms and that, if she were to adopt the best regulations already in place in the country, her ranking would improve in all four areas covered in the study, and earn her the 51st place among the 178 economies being measured.
Commission of Focus
The record set by the Corporate Affairs Commission has no doubt contributed to the country's favourable rating.
Specifically, the report said, registering a business has become significantly easier across Nigeria, thanks to computerisation of the registry, establishment of zonal branches of the Corporate Affairs Commission (CAC), and new Stamp Duty offices. Company registration remains fastest in Abuja, where the headquarters of Corporate Affairs Commission are located.
The registrar general of CAC, Mr. Ahmed Almustapha, told THISDAY that his agency achieved global standard because he consciously embraced reforms, and deliberately embarked on being certified under the ISO 9001 series.
Other international authorities have singled out CAC for praise, before the May 20, 2008 report. For example, during the One-Stop-Shop Presidential Retreat at the Banquet Hall of the State House Abuja March 2006, Mr. Roy Allan of the United Nations Conference on Trade and Development (UNCTAD) said that CAC was performing at European standard.
Also, the USAID/Nigeria Development Policy Series No. 3, titled 'Letter from Nigeria' was of the same view. According to the policy paper, which USAID country office shares with its Washington DC headquarters, business registration in Nigeria compare favorably with industrialised countries such as Canada, the United States, and Australia.
"Nigeria is now meeting or exceeding word-class standards in the time it takes to register a business," the report added. "Since 2001, the Corporate Affairs Commission (CAC), the government agency charged with business start-up procedures, has totally revamped its operations, upgrading its technology, rooted our corruption, and increased morale with a renewed focus on customer service."
As the doing business report compares 10 Nigerian states and the Federal Capital Territory with each other and with 178 countries around the world, the implication is that some states are already performing up to international standard.
Report Highlights
A major highlight in the report includes the discovery that the performance of all Nigerian states is weakest in the area of registering property.
"Governor consent for property transfers is the main source of delays and high costs of property transfers throughout Nigeria. The delays in granting consent are longest in states where every consent is signed by the state governor, and shorter where the authority to grant consent has been delegated to another government official".
Currently, according to the report, all Nigerian states would rank low in the global doing business ranking. Abuja, FCT (Nigeria's top performer on this indicator) would rank only 157 out of 178 economies worldwide.
Another major highlight was the finding that compliance with building regulation is easier and cheaper in northern states.
"There is wide variance in the cost of obtaining building permits across Nigeria. A permit for the same warehouse would cost just 25 per cent of Nigeria's income per capita in Sokoto, and 826 per cent in Lagos."
It was noted also that "there are substantial differences in the time and cost to enforce a commercial contract in Nigeria. Typically, court performance is better in states that have already implemented the new High Court rules, such as Abuja, FCT, Lagos, and Kaduna. Across the country, enforcement time substantially contributing to delays in recovery of commercial debts."
Measuring Indicators
The World Bank says on its website that reform as measured by the doing business indicators typically means reducing regulations and their burden, irrespective of their potential benefits.
As a cross-country benchmarking exercise, the report cannot be expected to capture the country-specific considerations involved in prioritising, sequencing, and designing policy reforms.
However, according to the bank group, policy makers and its staff report that they draw on a range of analytical material to determine the nature, sequence, and direction of reforms.
The action plan arrived at during the meeting of G8 finance ministers in June also listed reforms of the business environment as a priority. The action plan for growth in Africa, recommended the doing business report to African reformers.
"National regulatory framework should be strengthened to attract and retain private capital," the G8 ministers said. "Complicated regulatory barriers reduce incentives for African entrepreneurs to enter the formal economy."
"While a few African countries are making progress in simplifying business regulations, much is still to be done in most others. To this end, we encourage countries to use surveys, such as the World Bank's 'Doing Business Report', as indicators of possible barriers to business and of reform efforts."
World Bank Inputs
This was the thrust of a recent interview World Bank vice president for Africa, Dr. Oby Ezekwesili, granted THISDAY in Abuja.
According to the former minister under Obasanjo administration, said that things are looking up for the African economy, and that it took reforms to get them to be that way. The result is tangible in terms of the modest but laudable rate of 5.7 per cent of the present.
"Africa needs to grow at the rate of 7 per cent and above on a sustained basis to be in a position to decisively be able to tackle poverty. Is growth a good enough condition for tackling poverty?" Ezekwesili said. "No, it is not a sufficient condition, but it is a necessary first step. You must first grow in order to have poverty decline."
As everyone recalls, this was not possible for decades when some African countries even experienced consistent negative growth rates and the whole region was better known for the deceleration of the economy.
Things got to a point when governments across the continent stepped back and decided to put together the basic building blocks for economic development.
From that point on to the present, they started to run better government balance sheets. They are making better policy choices than at any time in the past. In the process, fiscal policies and monetary policies are managed in ways that bring them to converge.
"That is the kind of situation that enables macroeconomic stability," Ezekwesili said. "During the era when many of these countries were running budget deficit, struggling with foreign exchange crises, and interest rates were in the negative, they were not growing."
In the specific case of Nigeria, the turning point came with the return to civilian rule in 1999. One of the things that Nigeria, according to Ezekwesili, did in the last years of its democracy was to put in place that important building block.
She advised Nigeria not to embark on policies that could unbundle the relatively stable macroeconomic environment of the moment.
The country should not succumb to the temptation embark on an unbridled spending of the excess crude funds of the present oil boom. The same the same advice went for other governments in the continent as a good number of African countries are benefitting from the current rise in the prices of commodities in the international market.
Specifically, she noted that when a number of countries in Africa made good of the sector reforms they pursued in the telecoms sector. Things began to work well after they deregulated environment and admitted competition into that sector at the same time that they set up a regulatory, institutional and legislation framework.
As soon as these building blocks were put in place by countries, whether it is in Nigeria, or neighbouring Benin Republic, or any other country on the continent, where we have seen the tele-communications revolution in Africa, it has been preceded by these levels of profound reform of the sector.
And the private sector instantly smelled the signals once they were set and saw the opportunities.
Models of Reform
She was unwilling to prescribe models of reforms. Because the challenges of the different sectors were not the same, one size could not fit all, she said. She was however certain that unconventional models may be what are required.
"It cannot be in the traditional model because if you try to solve the infrastructure deficit in Africa through the traditional mode, you are not going to be able to, first accomplish it; second, government is going to have difficulties keeping to the most important issues in the social sector like health and education".
It took sector reforms in information and communication technology to deliver the amazing facilities ICT now offers, as personified by the telecommunications sub-sector. It would take sector reforms to bring about significant progress in other arena of business.
The continent loses at least 1 per cent of GDP as a result of lack of or inadequate infrastructure, Ezekwesili continued. Sector reform will address infrastructure deficit in the continent, she added.
And if the infrastructural needs of the continent were to be listed they would include roads, ports, power and power would be at the heart of it, because it is at the heart of the uncompetitiveness of the manufacturing sector in the continent.
It is the cause of the joblessness, as some of the micro-level activities would be further deepened if ordinary people had access to power.
The World Bank boss said that the 'discipline and efficiency' and the capital of the private sector is what is needed fix infrastructure in the continent.
But the private sector does not come to the table until it sees that the institutions and legislation are right, that the competences are near adequate, and this means reforms and more reforms.
According to her, it also has got to be bilateral partnerships that support investment in Africa. There has to be the increasing role of the private sector. So private sector capital needs to partner with public sector resources to deliver infrastructure.
These are the common issues of how massive private sector investment can further help boost growth. I believe that when you look around the continent you can find countries that are reflecting those kinds of understanding.
"You take a country like Rwanda. Rwanda looks at itself in the face and says, You know we can be a financial services hub. And so they take the kinds of policies that will enable them get the attractiveness of a financial services or an ICT hub", Ezekwesili said.
And they say, we are such a beauty country. Tourism can be an important contributor to our GDP. What do they do? "They begin to align all of their policies in the kind of ways that will enable the tourism sector to open up", she said
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