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| World Bank Headquarters in Washington DC [PHOTO: Shiny Things] |
Washington: Most economies are recovering from the sharp drops in new
firm registration triggered by the 2008 global financial crisis—an improvement
that may have been bolstered by government reforms, according to new World Bank
data released today.
In 2011, more than 60 percent of the world’s economies saw a
faster pace of new firm registration than in the year before. That is almost
double the 2009 rate of 34 percent, although it still lags behind the 2007 rate
of 75 percent, according to the World Bank Group Entrepreneurship Database,
which is updated every two years.
Reforms that significantly reduce the time, cost, days and
number of steps required to start a business—generally over a 50 percent
reduction in any given measure recorded by the World Bank Group’s Doing
Business series—have a real and sustainable impact on new firm registration,
according to an analysis by economists in the World Bank’s Development Research
Group.
For example, Rwanda registered 4,500 new firms in 2011, up from
1,136 in 2008. This was in the wake of 2009 reforms that, among other things,
eliminated six steps to register a business and shortened the process time from
14 to three days.
“The new data offer policymakers and researchers new
insights into global trends in formal entrepreneurship, which will lead to more
evidence-based decisions,” said Kaushik Basu, the World Bank’s chief economist
and senior vice president.
The Entrepreneurship Database is based on the only global
survey of formal entrepreneurship that can be compared across countries and
over time. Data on new firm registration are collected directly from business
registries in 130 economies. The database is funded by the Ewing Marion
Kauffman Foundation and the World Bank Group.
Rates of new firm registration differ significantly from
country to country, reflecting variations in their performance of Doing
Business indicators. For every 1,000 working-age adults, four new
limited-liability companies are registered in high-income economies. That compares
with just one in developing countries.
Countries improve the most when the reforms are large and
broad. That is especially true in economies with a relatively weaker business
environment, said Leora Klapper, a lead economist at the World Bank’s Development
Research Group.
“If policymakers are willing to make significant reforms and
make it easier for entrepreneurs to formally register their business, then
there is real potential to significantly increase new firm registration,” said
Klapper, who co-authored the research paper with Inessa Love, an associate
professor at the University of Hawaii.