1 Governance World Business Council for Sustainable Development Geneva, September 2007 Doing Business with the World - The new role of corporate leadership in global development

2  The global view: Economic freedom  Assessing governance  Measuring rule of law Overview

3 The global view: Economic freedom Economic Freedom vs. Per Capita GDP “There is a clear relationship between economic freedom and numerous other cross-country variables, the most prominent being the strong relationship between the level of freedom and the level of prosperity in a given country.” Index of Economic Freedom The Heritage Foundation/Wall Street Journal In the 2007 Index of Economic Freedom, 157 countries are measured across 10 specific factors of economic freedom. Source: 2007 Index of Economic Freedom, at: (accessed 2 August 2007) There is a strong relationship between economic freedom and per capita GDP.

4 Assessing governance The World Bank identified six criteria for assessing governance World Bank. “Governance Matters 2007” (27July 2007) (Top bar) (Bottom bar) (Top bar) (Bottom bar) (Top bar) (Bottom bar) (Top bar) (Bottom bar) (Top bar) (Bottom bar)

5 Measuring rule of law today Source: World Bank. “Governance Matters 2007” Lack of respect for the rule of law deters local entrepreneurship and foreign investment.

6  Running a business – from beginning to end  Tax compliance  Correlation between corruption and doing business  Where are the challenges? Needs & Challenges

7 Running a business – from beginning to end Every country needs effective procedures for closing a failed business or saving a viable one that is experiencing temporary problems. -World Bank Doing Business in “ ” Number of days to start a business Source: World Bank. Doing Business in 2006: Creating Jobs

8 Tax compliance Tax evasion is a national sport in Bolivia.. -José, businessman in La Paz (Quote from Doing Business 2007) “ ” Taxes in Bolivia = 80% of company profits = 189 days = 41 payments/year Source: World Bank. Doing Business in 2007: How to Reform. Source: World Bank. Doing Business in 2007: How to Reform.

9 Correlation between corruption and doing business As the number of business procedures increases, so does the hassle and corruption. Each additional procedure represents another possible bribe. The cost is the forgone jobs that new firms would have created. 1 Source: World Bank. Data were taken from the World Bank’s 2006 “Doing Business” database and Transparency International’s Corruption Perception Index for (24 August 2007)

10 What are the challenges?  Lack of political will  Governance goes hand-in-hand with providing basic services  Both legislative and procedural challenges  Socio-cultural issues

11  How can business contribute?  Reforming business start-up: what are the implications?  Key messages Opportunities

12 How can business contribute? Engage with developing country governments, local companies and communities to actively participate in shaping framework conditions Provide information technology to automate many administrative procedures performed by government Train and assist small and medium enterprises in developing countries Establish and participate in business-led forums to provide a voice in local affairs

13 Reforming business start-up: focus on El Salvador Source: World Bank. Doing Business in 2007: How to Reform. With no changes to the law, El Salvador cut the number of days required to register a business from 115 days to 26 days in two years.

14 Key messages For business, investing time and resources in good governance can: Lead to improved framework conditions Create greater transparency Facilitate opportunities to engage with developing country governments Enable business to root out corrupt practices, thereby making conduct of business easier Give rise to more stable operating environments For governments, an effective policy framework to improve governance can: Create optimum enabling conditions for improved economic and human development and growth Facilitate improved conditions for the development of a market-based economy Lead to increased respect for rule of law and help root out corruption Reduce the prevalence of informal economic activity

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