Portugal and Mozambique best Portuguese-speaking states for business: Brazil and Angola hamstrung with bureaucracy – World Bank report

26 December 2005

Lisbon, Portugal, 26 Dec – Portugal and Mozambique are the best countries in terms of doing business in the Portuguese-speaking world and although Angola and Brazil offer good credit conditions and investor protection, new ventures still face red tape and bureaucracy, according to a World Bank report.

The report, “Doing Business in 2006,” ranks Portugal 44th out of 155 economies for ease of doing business – the highest position by any of the eight-nation bloc. Guinea-Bissau was not included in the study.

Mozambique lies in 110th place, ahead of Brazil (119th) and Sao Tome and Principe (123rd), Angola (135th) and East Timor (Timor-Leste) (142nd) in an index of ease of starting up and closing down firms, dealing with licenses, hiring and firing, property registration, credit access, investment protection, cross-border trading and enforcement of contracts.

Angola lies in the top half of the World Bank’s ranking in terms of investment protection (transparency of deals and ability of shareholders to sue directors) with a score above the regional average approaching the standards of the Organization of Economic Cooperation and Development (OECD).

The report highlights favorable access to credit and regulation conditions in Angola, but identifies problems over time needed for company start-up (average of 146 days at a cost equal to 642.8 percent of gross national income (GNI) per capita) and property registration (seven separate procedures and 334 days).

Brazil’s protection of investors is a “strong point” of the Latin American nation’s economy, with the country in the top third of the World Bank table, and almost all features of credit access are above regional averages.

However, Brazil is one of the most difficult places to take on new workers or make redundancies due to excessively rigid labor laws. Closing down a business takes an average of 10 years and costs 9 percent more than the value of assets involved, according to the World Bank.

Reforms introduced in Brazil to smooth the process of bankruptcy, which allow firms to continue trading while they are restructured to give more control to creditors, are highlighted in the report.

New Brazilian legislation “should halve from 10 to five years the average timescale of bankruptcy procedures and it is hoped that this should raise the index of recovery from 0 percent to 7.5 percent of company assets,“ the report added.

Mozambique, the second-placed Portuguese-speaking state in “Doing Business in 2006”, is characterized by ease in dealing with licenses for ongoing operations (54th) and good access to credit (70th).

It takes 212 days on average to obtain these licenses in Mozambique, above the regional average and approaching OECD levels, and the 14 steps needed are less than in the majority of countries.

However, as with Angola, Mozambique lies near the bottom of the World Bank table (139th) in terms of closing a business.

Difficulties in closing and opening companies also affect Sao Tome and Principe, but the Gulf of Guinea archipelago lies in the top halve of the table (73rd) in relation to paying taxes and trading across borders.

Reforms to make African economies as business friendly as countries in Eastern Europe and Central Asia are too sluggish, said the report.

“In Africa, business people face more hurdles that in any other region. However, the reforms were slower than in any other regions. Only five countries in the region have improved their regulation. One state has become more hostile.”

East Timor is the lowest-ranked Portuguese-speaking state in the study, but manages to make the top half of the table in two areas – hiring and firing (50th) and inspection (55th), both above regional and OECD averages on some points, such as costs and numbers of payments.

The lowly position of the world’s youngest nation in the overall World Bank ranking is primarily due to its poor conditions for enforcing contracts and closing businesses. (macauhub)