It takes 70 days to start a business in Somalia while a similar exercise in Rwanda takes only four days, a World Bank report has said ranking Somalia last in the Doing Business profile for 2018.
The Doing Business 2018 just released by the World Bank ranks Somalia at number 190 based on several important dimensions of the regulatory environment as it applies to local firms.
The report which is derived from ten indicators such as starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency also puts Somalia at 187 in the starting a business rank.
The Doing Business is anchored on two aggregate measures namely distance to frontier (DFT) score and ease of doing business ranking. The former compares economies with one another while the latter benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best performance on each Doing Business indicator.
In the new report, Somalia managed a DFT score of 19.98 out of a possible 100 with the lowest being zero. Rwanda has a score of 73.40.
New Zealand has been rated the best in both the ease of doing business and DFT score with rank 1 and 86.55 respectively. It takes half a day to start a business and only one procedure. Neighboring Kenya is ranked at number 80 in overall ease of doing business with a DFT of 65.5. It takes 25 days to start a business in the East African nation.
The time it takes to start a business is based on the median duration that incorporation lawyers or notaries indicate is necessary in practice to complete a procedure with minimum follow-up with government agencies and no unofficial payments such as bribes.
The regions implementing the most reforms making it easier to trade across borders in 2016/17 were Sub-Saharan Africa (46% of reforms in this area) and East Asia and the Pacific (18%). Together, the economies in these two regions account for nearly 64% of reforms in this area as captured by Doing Business 2018.
The indicators provide actionable frameworks for governments such as setting the minimum capital requirement for new firms, investing in company and property registries to increase their efficiency, or improve the efficiency of tax administration by adopting the latest technology to facilitate the preparation, filing and payment of taxes by the business community.
Governments can also undertake court reforms to shorten delays in the enforcement of contracts.