Doing Business’ Dutiful Insolvency Drive

With the developed world again in debt crisis mobilization mode, the World Bank’s annual Doing Business publication tabulated record insolvency law revisions in thirty countries from the OECD and Eastern Europe/Central Asia, double the number from last year. By region Sub-Sahara Africa showed a breakthrough with 80 percent of members improving their regulatory environment in ten categories. Overall 120 nations instituted twice that amount of reforms for a 15 percent increase, concentrating on commercial startup registration. A new measure on electricity connection access was added. E-government and consolidated small business approaches are now common in both advanced and developing economies with emerging markets Morocco, Latvia, Korea and Colombia among the leaders in broad progress. In Africa the OHADA treaty was modernized for harmonized legal treatment, while at the opposite extreme Caribbean states embraced few changes. In the decade since the ranking began 80 percent of the 180 destinations tracked in on-the-ground micro-surveys have facilitated business launch with one-stop-shops as in Egypt a frequent platform. Malaysia has been a top performer in investor protection, getting credit, and cross-border trading but lags in other areas. In Mexico and elsewhere results can vary at the municipal level, but a 10-day reduction in licensing time can be associated universally with a 0.3 percent GDP growth boost. Ecuador and Venezuela were exceptions in moving toward a more unfriendly climate. Rwanda and Georgia were cited for commitments to reaching a critical “frontier” mass encouraging formal entrepreneurship with outside technical assistance and multilateral support. In the latter, administrative and tax burdens have eased but physical security and infrastructure remain impediments. On the bankruptcy front over 100 countries recognize creditor committees, while 50 feature out-of-court workouts and require expert credentials. Future research will focus on women’s participation and foreign companies’ role in domestic regimes.

The updated review came as the IIF released its Q3 reading on emerging market bank lending conditions modeled on the Fed, ECB and Bank of Japan equivalents. Its index dipped below 50 for the first time on “significant deterioration,” particularly in external fund availability. Europe fell to 45, while credit standards tightened in all regions despite higher consumer and industrial loan demand. Half of banks reported stiffer wholesale terms, with previously unaffected trade finance experiencing pressure. Non-performing assets are due to rise in the final quarter with commercial and residential real estate displaying softness along with other core borrower segments illustrating a range of doing business difficulties.