How easy is it to do business in the Pacific?

From the tiny atoll island of Palau to resource rich Papua New Guinea, islands economies scattered across the Pacific Ocean usually regurgitate the same story—“this country needs investment”.
The solution to that is not such a big mystery. If you want investment, you need a business-friendly environment.
Yet, it would be naïve for anyone to think that encouraging investment activities in any economy is as simple as it looks on paper. Governments everywhere face their own set of challenges ranging from their political climate, geographical location, quality of infrastructure among others and increasingly these days, Internet availability.
But discounting all factors that can turn this into a complicated debate, a government can get an idea of just what constitutes a very basic “business-friendly” environment by checking out the recently-released report from the World Bank Group, titled: Doing Business 2009.
It is the latest in the World Bank’s annual ranking of how easy-or hard-it is to do business in a certain economy, based on 10 indicators of business regulation that track the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business, standard factors in all economies despite their unique challenges.
Doing Business 2009 ranks 181 economies worldwide, three more than the number surveyed in its 2008 rankings and the result is linked to the reforms that had been put in place across these economies between June 2007 and June 2008.
These are reforms that ultimately affect the 10 indicators being looked at by the World Bank, for instance, the time it takes to register property, how much it cost to set up a business or how much in taxes a medium sized enterprise is likely to pay when doing business.
What may be of interest to governments in the region is that the pace of such reforms in the Pacific, in the context of Doing Business 2009, has been slow.
In fact, a brief glance through the latest ranking shows that the 10 Pacific islands countries surveyed—Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu—had been slipping in their “ease of doing business” standing over the last two years.
The World Bank noted that this had been the trend since the series began in 2004. The reason being, it added, that the Pacific region had not kept pace with the global reform trend.
The international financing institution was quick to add though that it was helping “several” Pacific islands countries reform their business environment.
Generally for the Pacific, Vanuatu showed the biggest improvement, with its overall ranking on the ease of doing business rising to 60 from 67 in 2008.It strengthened creditor protection by ensuring that secured creditors have priority outside and inside bankruptcy procedures. It also established a registry for secured creditors.
Tonga had the most reforms in the Pacific when it improved procedures for starting a business and dealing with construction permits.
Fiji instituted two reforms that were considered to impact negatively on the ease of doing business there; Palau chalked a positive move when it facilitated trade by automating customs declaration, while Samoa lowered the corporate income tax from 29 percent to 27 percent, a plus.
The other five PICs implemented no major reforms and all rankings, except for Vanuatu, generally dropped because the reform pace of other countries made the Pacific region appear stagnant.
But whether it is just the “Pacific Way” to go slow or whether Pacific governments are too busy with more taxing demands from their national politics, they might take comfort in the fact that out of 181 economies, most of them are still ranked in the top 100.
Still, for a country out there pitching for investment, the less riddled with bureaucracy its systems is, the more chances it might have at convincing a potential investor not to put that money somewhere else.
Besides, more governments are now using the World Business rankings to gauge and compare how their own private sector regulatory regime stack up in global and regional context.
But depending on how one looks at it, some Pacific islands countries had not done so badly. While for three years now Singapore has topped the list as the easiest place in the world in which to do business, operating in Vanuatu or Tonga was still relatively easier than in mainland China or Philippines.
It was cheapest to export goods out of Malaysia with the cost to export a container at US$450 while in the Pacific, it was costliest to export from Vanuatu, where one was likely to pay US$1497 per container.
Yet, compare that with the cost of exporting from Mongolia, where an exporter would have paid upto US$2131 per container and one is likely better off exporting from the Pacific.
Profit tax paid was 8.4 percent in Vanuatu, the cheapest than anywhere else in the world. Using a number of such sub groupings under the 10 indicators in the Doing Business report, Pacific islands countries can get an idea of how they have fared when benchmarked against other countries in the world.
—By Dionisia Tabureguci

BUSINESS INTELLIGENCE (Table)

How the Pacific Islands fared:

Pacific Island Doing Business Doing Business Change in
Country 2009 2008 Rank
Fiji 39 34 -5
Kiribati 79 75 -4
Marshall Islands 93 86 -7
Micronesia 126 121 -5
Palau 91 88 -3
Papua New Guinea 95 89 -6
Samoa 64 56 -8
Solomon Islands 89 85 -4
Tonga 43 40 -3
Vanuatu 60 67 +7

World Bank’s Note: Doing Business 2009 readjusted the 2008 ranking fot all countries as is done every year due to factors like addition of new economies, improvements in methodology and, in some cases, data has been corrected for some countries. The correction rate for Doing Business 2009 was 6 percent. Full information of this ranking can be found on
www.doingbusiness.org