Wednesday 30 October 2013

Myanmar among hardest places to do business: World Bank

Myanmar is among the ten most difficult countries in the world to conduct business, the World Bank has concluded in an annual report released today.

According to the World Bank’s 'Doing Business 2014' report, which ranks 189 countries in 10 categories that measure the ease of doing business, Myanmar ranked 182nd overall behind Zimbabwe (170th) and Venezuela (181st) and just ahead of the war-torn Democratic Republic of Congo (183rd).

The poor ranking comes as the country begins to modernise regulations to match growing interest from foreign investors. It is the first time Myanmar has been included in the report.

“The data show that there is considerable scope for reform, and efforts are under way to improve the country’s business regulations,” World Bank country manager, Kanthan Shankar was quoted in a press release issued to coincide with the report.

“By removing bottlenecks to firm creation and growth, governments can signal the emergence of a more business-friendly environment, as has already been done in a large number of economies in the region.” 

According to the Bank, Myanmar ranks last in the world for ease in starting a business, citing a lengthy registration process of 72 days that is spent navigating outdated laws and bureaucratic practices that force entrepreneurs into an average of 11 different registration processes.

Minimum capital costs meanwhile remain high, averaging 7016 percent of income per capita, while total expenditures equate to 176.7pc of income per capita.

“Economies still require entrepreneurs to deposit capital before registering a business. This amount varies greatly–from 1 euro in Germany to more than US$58,000 in Myanmar,” the report states.

The government hopes to make it easier to start a business, pledging in August to overhaul the 100-year-old Myanmar Companies Act, which would eliminate some redundancies , while plans are in the works to allow for online registrations.

According to the report, the country also performed poorly for its ability to enforce contracts, ranking 188th in the world, or second to last, as it takes an average 1160 days, or more than three years, to settle, while the process is expensive – averaging 51.5 percent of claims.

“The problem for Myanmar is how to materialize the provisions in contracts and how to implement and understand them,” said U Than Maung, senior associate and advocate at law firm Kelvin Chia Yangon Ltd.

He also said that while the legal process is hindered by outdated legislation – the Contract Act of 1872 – the laws themselves are only part of the problem.

“Most of Myanmar’s businesses go without written contracts – gentleman’s contracts – so now that we encounter foreign businesses increasingly, we are not in a position to understand or enforce those existing laws,” he said.

Myanmar did not break into the top 100 for any of the ten categories, but the World Bank credited it for its reduction of the corporate income tax rate last year from 30 to 25pc, ranking Myanmar 107th in the world when it comes to paying taxes.

Nevertheless, Myanmar’s total tax rates remain high at 48.9pc of profit, despite making little revenue from taxes compared to its regional neighbors, the report shows.

U Than Lwin, an economist and former deputy governor of the Central Bank of Myanmar, said that the ranking systems issued by international finance institutions do not offer an accurate depiction of one country’s development or potential future progress.

“We [Myanmar] are just starting up and this is the time for learning for us. One cannot say what we are as everything will change here in just a few years time, so I am not concerned with the ranking system,” he told The Myanmar Times.

According to the World Bank report, Singapore tops the list of easiest countries for business, followed by Malaysia in 6th, Thailand at 18th and Cambodia at 137th.

source: The Myanmar Times

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