Washington, D.C. — A new World Bank report identifies what it calls "four main lessons...to ensure effective [economic] institutions" in Africa and throughout the world of developing nations: designs that complement what exists in terms of human capabilities and available technologies, innovation, open information flows, open trade and greater competition. "The challenge for policymakers," the report argues, "is to shape institutional development in ways that enhance economic development."
"Overly complex regulations are especially problematic in poor countries," says Roumeen Islam, Director of the World Development report 2002. This is a particular problem in Africa, he says. "Despite some successful reforms, many countries are left out of market opportunities because of overly complex rules and regulations."
In Mozambique, registering a new business requires 19 steps and five months; the cost is more than the average annual income. Efficiency is possible without sacrificing fairness, the report stresses. In Senegal, it takes 450 days to enforce a judgement on debt collection; in Ghana, by contrast, just 18 days. South Africa, Zimbabwe, Zambia, Nigeria and Uganda have small claims courts that rely on simplified, sometimes only spoken procedures that result in faster resolution of disputes at a lower cost.
The report is based on a survey of legal systems, business regulations and media ownership in around 100 countries. Of particular relevance to Africa are costly and complex land-titling procedures that "discourage" poor farmers from using their land as collateral for money to invest in improvments. Legal systems work against poor people, and regulations keep capital from small entrepreneurs, who are likely to offer lower cost services for the poor.
Examples of alternative approaches are scattered across Africa. Simplified steps in a specialized commercial court in Tanzania cut the average time of disposition of an issue from 22 months to three months. In Senegal, small private enterprises rent telephone lines and run telecenters for local households. But, "when it comes to institutions, one size doesn't fit all," says Islam.
