metadata: authors: 0: author: BRUNETTI, AYMO AART OLIVER
1: author: Kisunko,Gregory
2: author: Weder,Beatrice Silvia
count: World
docna: 0: docna: Institutional obstacles to doing business :
            region-by-region results from a worldwide survey of the
            private sector
docty: Policy Research Working Paper
subtopic: International Terrorism & Counterterrorism,Competition Policy,Inflation,Competitiveness and Competition Policy,Global Environment,Crime and Society,Armed Conflict
teratopic: Governance,Health, Nutrition and Population,Environment,Infrastructure Economics and Finance,Private Sector Development,Public Sector Development,Industry
abstracts: cdata!: Case studies and anecdotal evidence have
            suggested that uncertainty about policies, laws, and
            regulations has hampered development of the private sector
            in many developing countries. The authors present results
            from a new cross-country survey that provides comparable
            data on local investors' problem in dealing with the
            state. The survey was conducted in 69 countries and covers
            more than 3,600 entrepreneurs. The questionnaire asked 25
            questions about investors' perceptions about such
            issues as the predictability of laws and policies, the
            reliability of the judiciary, corruption in bureaucracies,
            and security of property rights. It also asked about general
            obstacles to doing business and the quality of
            state-delivered services. The authors discuss their
            methodology and present many findings. Among them: a) In
            less developed countries the majority of entrepreneurs
            constantly fear policy surprises and unexpected changes in
            rules that can seriously affect their business.
            Entrepreneurs in Asia have the most trust in government
            announcements of policy changes and changes in rules;
            entrepreneurs in the Commonwealth of Independent States are
            the most cynical about new announcements; and half of
            businessmen surveyed in Latin America and Central and
            Eastern Europe do not believe government announcements. b)
            Entrepreneurs worldwide feel that the cost of doing business
            is substantially increased by theft and crime and in many
            developing countries the business community feels that
            authorities do not adequately guarantee their personal
            safety and do not reliably enforce their property rights. c)
            Unreliable judiciaries are perceived as major problems in
            many developing countries. This applies in particular to the
            Commonwealth of Independent States and to Latin American
            countries. d) Entrepreneurs in industrial countries
            perceived the greatest obstacles to doing business to be tax
            regulations and high taxes, labor regulations, safety or
            environmental regulations, financing, regulations for
            starting new business and operations, and general
            uncertainty about the costs of regulation. e) Entrepreneurs
            in South Asia and Southeast Asia ranked the top obstacles to
            doing business as high taxes and tax regulations, inadequate
            infrastructure, inflation, labor regulations, and
            regulations for starting new businesses and operations. f)
            In the Middle East and North Africa, entrepreneurs
            considered lack of infrastructure the chief obstacle to
            doing business, followed by corruption, high taxes and tax
            regulations, and financing. g) In Central and Eastern
            Europe, high taxes and tax regulations were the only
            regulation-related obstacle ranked high, followed by
            financing, corruption, and inflation. h) The worst obstacles
            in Latin America were considered to be corruption and
            inadequate infrastructure, followed by crime and theft,
            problems with finance, and high taxes and tax regulation. i)
            In Sub-Saharan Africa the biggest problems were corruption,
            tax regulations and high taxes, inadequate infrastructure,
            inflation, crime and theft, and financing.
repnme: repnme: Institutional obstacles to doing business :
            region-by-region results from a worldwide survey of the
            private sector
display_title: Institutional obstacles to doing
            business : region-by-region results from a worldwide survey
            of the private sector
listing_relative_url: /research/1997/04/438823/institutional-obstacles-doing-business-region-by-region-results-worldwide-survey-private-sector
topicv3: Price Controls m1326085 2107,Inflation m1326709 0870F4727ACED1CF8525815C00471347,Environment, Natural Resources and Blue
            Economy m1327391 566,Terrorism m1327775 2467,Crime m1439217 3041
publishtoextweb_dt: 2015-09-14T00:00:00Z
historic_topic: Governance,Health, Nutrition and Population,Environment,Infrastructure Economics and Finance,Private Sector Development,Public Sector Development,Industry
origu: Off of Sr VP Dev Econ/Chief Econ (DECVP)
no_of_pages: 84
author_keys: 0: author_key: 87463
1: author_key: 97231
2: author_key: 439824
model_extractions: I POLICY RESEARCH WORKING PAPER 1759

# Summary findings

Case studies and anecdotal evidence have suggested that uncertainty about policies, laws, and regulations has hampered development of the private sector in many developing countries. Brunetti, Kisunko, and Weder present results from a new cross-country survey that provides comparable data on local investcors' problem in dealing with the state. The survey was conducted in 69 countries and covers more than 3,600 entrepreneurs.

The questionnaire asked 25 questions about investors' perceptions about such issues as the predictability of laws and policies, the reliability of the judiciary, corruption in bureaucracies, and security of property rights. It also asked about general obstacles to doing business and the quality of state-delivered services.

Brunetti, Kisunko, and Weder discuss their methodology and present many findings. Among them: - In less developed countries the majority of entrepreneurs constantly fear policy surprises and unexpected changes in rules that can seriously affect their business. Entrepreneurs in Asia have the most trust in government announcements of policy changes and changes in rules; entrepreneurs in the Commonwealth of Independent States are the most cynicai about new announcements; and half of businessmen surveyed in Latin America and Central and Eastern Europe do not believe government announcements.

* Entrepreneurs worldwide feel that the cost of doing business is substantially increased by theft and crime and in many developing countries the business community feels that authorities do not adequately guarantee their personal safety and do not reliably enforce their property rights.

* Unreliable judiciaries are perceived as major problems in many developing countries. This applies in particular to the Commonwealth of Independent States and to Latin American countries.

* Entrepreneurs in industrial countries perceived the greatest obstacles to doing business to be tax regulations and high taxes, labor regulations, safety or environmental regulations, financing, regulations for starting new businesses and operations, and general uncertainty about the costs of regulation.

Entrepreneurs in South Asia and Southeast Asia ranked the top obstacles to doing business as high taxes and tax regulations, inadequate infrastructure, inflation, labor regulations, and regulations for starting new businesses and operations.

* In the Middle East and North Africa, entrepreneurs considered lack of infrastructure the chief obstacle to doing business, followed by corruption, high taxes and tax regulations, and financing.

* In Central and Eastern Europe, high taxes and tax regulations were the only regulation-related obstacle ranked high, followed by financing, corruption, and inflation.

* The worst obstacles in Latin America were considered to be corruption and inadequate infrastructure, followed by crime and theft, problems with finance, and high taxes and tax regulation.

* In Sub-Saharan Africa the biggest problems were corruption, tax regulations and high taxes, inadequate infrastructure, inflation, crime and theft, and financing.

- This paper a product of the Office of the Chief Economist and Senior Vice President, Development Economics- was produced as a background paper for _World DevelopmentReport 1997_ on the role of the state in a changingworld. The study was funded in part by the Research Support Budget under the research projects "Cross-Country Indicators of Institutional Uncertainty" (RPO 680-51), and "Indicators of Government Quality as Perceived by the Private Sector" (RPO 681-52). Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Michael Geller, room N7-078, telephone 202-473-1393, fax 202-522-0056, Internet address wdr@worldbank.org. April 1997. (75 pages)

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings_ **_out_** _quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World_ **_Bank,_** _its Executive Directors, or the countries they represent._ Produced by the Policy Research Dissemination Center
# **Institutional Obstacles to Doing Business** Region-by-Region Results from a Worldwide Survey of the Private Sector'

Aymo Brunetti, Gregory Kisunko and Beatrice Weder

- This survey was conducted for the WDR 1997. We thank Ajay Chhibber for his support. We also want to thank Dan Atchison and Michael Geller for outstanding editorial assistance.

A companion background paper to this one explores the links between indicators of institutional uncertainty derived from this data set and cross-country differences in economic performance. See Brunetti, Kisunko and Weder (1997).
# Table of Contents

|**1. Why this survey? ..............................................................................**<br>**1**|
|---|
|**2. The questionnaire ..............................................................................**<br>**2**|
|**3. The implementation of the survey ..............................................................................**<br>**4**|
|**4. Characteristics of responding firms ..............................................................................**<br>**6**|
|5.**Summary results for individual questions .............................................................................**<br>**10**|
|_Question 1. Policy surprises ..........................................................................._<br>_10_|
|_Question 2. Credibility of announcements .........................................................................._<br>_11_<br> <br>|
|_Question 3. Information ..........................................................................._<br>_1]_<br> <br>|
|_Question 4: Participation ............................................................................_<br>_12_|
|_Question 5: Retroactive changes .........................................................................._<br>_13_|
|_Question 6: Change of predictability over time .........................................................................._<br>_13_|
|_Question 7: Changes in rules due to regular government changes ....................................................................... 15_|
|_Question 8: Policy surprises due to irregular government changes ..................................................................... 15_|
|_Question 9. Theft and Crime .........................................................................._<br>_16_|
|_Question 10. Security of property and personal safety ..........................................................................._<br>_17_|
|_Question 11. Reliability of the judiciary ..........................................................................._<br>_18_|
|_Question 12: Ranking of obstacles for doing business .........................................................................._<br>_19_|
|_Question 13: Interface State-Government .........................................................................._<br>_30_|
|_Question 14: Frequency of Corruption .........................................................................._<br>_30_|
|_Question 15: Predictability of amount of bribe .........................................................................._<br>_31_|
|_Question 16: Corruption and Blackmailing .........................................................................._<br>_32_|
|_Question 17: Uncertainty about receiving the service after paying a bribe ........................................................... 33_|
|_Question 18: Limits on discretionary power of bureaucrats ..........................................................................._<br>_34_|
|_Question 19: Changes in discretionary power over time ........................................................._<br>_.................. 34_|
|_Question 20a: Difficulties in complying with government regulations .................................................................. 36_|
|_Question 20b: Transaction costs versus uncertainty in complying with government regulations .......................... 37_|
|_Question 21: Senior management time spent on negotiations with officials .......................................................... 38_|
|_Question 22: Efficiency of government in providing major services ..................................................................... 38_|
|_Question 23: Frequency of power outages? .........................................................................._<br>_41_|
|_Question 24: Time for getting public telephone line connected .......................................................................... 42_|
|_Question 25: Government efficiency in delivering services ._<br>_.......................................................................... 43_|
|**References .......**<br>**......................................................................**<br>**44**|
|**Appendix .......**<br>**......................................................................**<br>**_45_**|
|_List of surveyed countries .........................................................................._<br>_45_|
|_Questionnaire for Private Sector Survey .........................................................................._<br>_46_|
|_Guidelines for private sector survey .........................................................................._<br>_52_|
|_Appendix Table_**_1._**_Regional patterns of numbers of received questionnaires and method of survey ......... ...... 53_|
|_Appendix Table 2. Regional patterns of company size ..........................................................................._<br>_54_|
|_Appendix Table 3. Regional patterns of sectors of economy .........................................................................._<br>_55_|
|_Appendix Table 4. Regional patterns of location of management ...................................................................... 56_|
|_Appendix Table_**_5._**_Regional patterns offoreign participation ....................................................................... ... 57_|
|_Appendix Table 6. Regional patterns of access to foreign markets ................_<br>_..............................._<br>_58_|
|_Appendix_**_Table_**_7. Index of obstacles for doing business - regional averages ................................................... 59_|
|_Appendix Table 8. Regional rankings of obstacles for doing business ........................................................._<br>_60_|
|_Appendix Table 9. Regional averages for individual questions (in percentage) ....................................... ......... 61_|
# 1. **Why this survey?**

There exists a huge number of anecdotal evidence that uncertainty on laws, policies and regulations hurts private sector development in many LDCs. Typical examples are the study by De Soto (1989) on the problems of infornal firms in Peru, the description by Klitgaard (1990) of the uncertainties for doing business in Equatorial Guinea, or the analysis of institutional uncertainty in Nicaragua by Borner, Brunetti and Weder (1995). Such case studies show that unpredictable state action can have large costs in terms of economic development. If the private firms cannot be sure which regulations apply in the near future, whether private contracts are unarbitrarily enforced, or whether their property will be protected against violence private firms typically react by cutting back on long-term investment. The considerable sunk costs of most investment projects create large disincentives against binding any resources to long-term investment projects if the firm operates in uncertain environments. The theory of irreversible investment (e.g. Dixit and Pindyck 1994) has reinforced the argument that such uncertainties are particularly costly in terms of aggregate investment.

Given the case study evidence and the theoretical arguments on investment irreversibility, the reliability of government activity should be at the forefront of an analysis of the sources of differences in economic development. Due to lack of adequate data, this is not the case. Research and data on the sources of development is mainly based on broad cross-country data sets that allow direct comparisons of government policies and other country characteristics. Such comparable cross-country data on the degree of reliability of government activity has, however, not been available.<sup>3</sup> This survey's aim is to fill that gap by creating a comparable, quantitative data set on different aspects of the degree of institutional uncertainty as perceived by private entrepreneurs. In contrast to case study work, this data is created for a broad cross-section of countries making it possible to calculate individual indicators that can be used in standard cross-country analysis.

> **3** Researchers have worked with some measures of political instability or policy volatility derived from political handbooks. The problem is, however, that such objective indicators measure crude aspects of policy instability but they do not grasp uncertainty. What matters for the private investment decision is not objective instability but subjectively perceived _uncertainty._ For a more detailed discussion of alternative proxies for policy uncertainty and their potential problems see Brunetti, Kisunko and Weder (1997).

1 1
# 2. **The questionnaire**

This section gives an overview of the main focus of the questionnaire. The first subsection describes how the questionnaire was developed, and the second subsection discusses 4 the structure of the questionnaire .

# Development of the questionnaire

The survey instrument was developed in several steps during the last four years. It started with a large number of interviews of private entrepreneurs in different Latin American countries that resulted in a short multiple choice questionnaire. This questionnaire asked whether entrepreneurs feared large and unpredictable swings in lawmaking. This questionnaire was then sent out to a very small number of finns in 28 LDCs. No stratification was done in this survey. Given the small number of responses per country, no strong conclusions could be drawn. Nevertheless, these results coupled with growth and investment data proved promising as the political credibility indicator was significantly related to economic performance of the 28 countries (see Brunetti and Weder 1995). Based on the results of this pretest the survey instrument was refined and expanded. In preparation for the WDR 1997 survey the expanded questionnaire was discussed with a number of country experts at the World Bank and at IFC. After these discussions the questionnaire was revised and finalized and resulted in the survey presented in this paper.

# Structure of the questionnaire

The questionnaire first asks for general characteristics of the firm. These questions aim to capture a brief but detailed picture of the firm that is answering in the questionnaire. Five different dimensions are considered. First the firm is asked to define its size-less than 50 employees, between 50 and 200 employees and more than 200 employees. Second the nature of the firm's business is asked (manufacturing, services and agriculture). Third the location of management is inquired (capital city, large city or small city/countryside). The last two questions of this section ask for the internationalization of the firm in the two dimensions foreign participation (yes-no) and exports (yes-no). Section 4 will provide an overview of the actual distribution of all responding firms according to these five criteria.

The main part of the questionnaire consists of 25 mainly multiple choice questions. These questions are divided into five sections each with its own focus . All the questions aim to identify the degree of (un)certainty created by state action. In preparatory interviews for this questionnaire, firms that were confronted unpredictable state action usually came up with very different examples of policy and regulatory uncertainties. These answers ranged from surprising executive decrees to unpredictable court decisions, from uncertainty on the severity of tax audits to unpredictable custom procedures, and from policy reversals whenever a new minister is appointed to uncertainty whether a bribe would lead to blackmailing by government officials.

4 The questionnaire can be found in the appendix.

2
The questionnaire concentrates on obtaining a picture that does differentiate between such forms of institutional uncertainties. The aim was to force the respondent to express a general "gut" feeling on the degree of institutional uncertainty and to distinguish different forms of such uncertainties. This discrimination in the questionnaire not only aims at enabling more detailed empirical analysis of the data set, but it is indispensable for deriving any reasonably focused conclusions on how to improve the predictability of government actions in a particular country.

The questionnaire is divided into the following five sections:

- _Predictability of laws and policies._ These questions seek to evaluate the uncertainties created by the lawmaking process. By asking questions from different angles, the firm must evaluate whether it fears constant surprises in legislation and whether it can reduce its exposure to such surprises by obtaining information early or by consulting either directly or through its business association.

- _Political instability and security of property._ The first questions ask about uncertainties involved in regular government transfers and in unconstitutional government transfers (coups). As is the case for the questions in section 1, these two questions mainly aim at evaluating possible uncertainties stemming from lawmaking. The remaining three questions in this section focus on the uncertainties in law enforcement. They ask whether the firm has confidence in the ability of state authorities to protect property rights and to guarantee a predictable judiciary process.

- _Government-business interface._ Question 12 provides a list of 15 areas where the firm is confronted with government action and asks it to evaluate the degree to which these different areas create obstacles for doing business. The perceived quality of government action in different fields is this question's main thrust. Lastly, an overall question on the perception of government as either a "helping hand" or an "opponent" is asked to round out this section.

- _Law enforcement_ and _bureaucratic red tape._ These questions focus on the degree of corruption and whether corruption is a predictable transaction cost or a source of uncertainty. The problem of such questions is, of course, a firm's reluctance to openly admit that it pays bribes. To circumvent this obstacle of directly asking about bribes and to get as clear a picture as possible, several questions broach this topic but indirectly. The sensitivity of corruption-questions led to the decision not to present these questions together with the other questions on law enforcement earlier in the questionnaire. In addition, this section directly questions whether uncertainties in dealing with the state have stifled planned investment projects and what percentage of senior management's time is spent on dealing with legal requirements.

- _Uncertainty created by state action and the efficiency of government in providing services._ These questions concentrate on whether and how efficiently the government delivers some basic infrastructure as e.g. mail, health care, telephones, or roads.

3
The questionnaire ends with an open section that invites respondents to give additional remarks on the relationship between the private sector and government or comments on the questionnaire in general.

# **3. The implementation of the survey**

The original version of the questionnaire was written in English, however, the worldwide distribution necessitated that it be translated into some major languages namely-French, German, Russian, and Spanish. Wherever possible the questionnaires were administered in these languages or in English. In specific cases, however, it was vital to provide translations for one single country. This was done in the cases of Albania, Bulgaria, Czech Republic, Hungary, Italy, Poland, Portugal, Slovak Republic, and Turkey.

The process of implementing the survey began in August 1996 and ended in January 1997. At the survey's conclusion 69 countries had participated. In most of the countries the questionnaires were distributed through World Bank missions and/or local consulting companies. In all 9 European (developed) countries the survey was undertaken as a separate exercise under the direction of the University of Basel. Those surveyed by the University of Basel used exactly the same methodology.

In selecting companies to be surveyed, a set of guidelines was prepared. These guidelines sought to guarantee a wide range of respondents. The respondents crossed the gamut of firm size, geographic location within their country, sector of the economy and of the proportion of purely local companies, i.e. companies which do not have any foreign participation.<sup>5</sup> The questionnaire attempted to use direct mailing where possible; in some countries where mail delivery systems were unreliable, hand delivery was used. Table 1 in the appendix provides details on regional patterns in modes of delivery as well as on rates of returns. Considering other experiences with mailed surveys the high rate of return on mailed survey in LDC countries (30%) is remarkable. Two factors can be attributed to this: the survey raised questions of a high concern for the local businessmen, and in a number of countries reminder calls were placed to companies that delayed responses.

Due to budget and time constraints, not all the surveyed countries represent a random sample of companies for questionnaire-distribution. In other cases, political and economic conditions allowed only limited geographical coverage. On average, however, the survey achieved its goal of 50 responses per country. Table 1 shows regional averages and some descriptive statistics of response patterns.

- 5 The appendix 2 gives the detailed set of instructions.

4
**Table 1: Private sector survey: Returned questionnaires per region**

||Number of<br>surveyed countries|Number of<br>surveyed firms|Average|Median|Minimum|Maximum|
|---|---|---|---|---|---|---|
|All countries|69|<br>3,685|<br>53|50|13|<br>124|
|LDC|58|<br>3,431|<br>59|51|<br>13|<br>124|
|DC|11|<br>254|<br>23|20|14|<br>56|
|SSEA|3|<br>139|<br>46|45|41|<br>53|
|MNA|3|<br>109|<br>36|42|15|<br>52|
|CEE|11|<br>771|<br>70|70|46|<br>114|
|LAC|9|<br>474|<br>53|47|17|<br>87|
|SSA|22|<br>1,288|<br>59|48|13|<br>124|
|CIS|10|<br>650|<br>65|62|31|<br>91|

Figure 1 gives an overall summary of the number of questionnaires returned and the 7 regional distribution of countries covered in the survey.

The first part of Figure 1 gives an overview of the number of returned questionnaires in 69 countries and shows the numbers for individual regions. Of the 3,685 returned questionnaires, 3,431 came from developing countries. Figure 1 shows the percentage regional distribution of the countries in the data set. Sub-Saharan Africa countries constitute the largest percentage (33%) of participating regions. Equal shares of the countries are in the following four regions: Developed countries (16%), Central and Eastern Europe (16%), Commonwealth of Independent States (14%) and Latin-American countries (13%). The regions of South Asia, Southeast Asia, and Middle East and Northern Africa are underrepresented with only 4% of total countries each.

- 7 A list of countries in each category is in the appendix.

_5_
# **Figure 1. Distribution of the responses by region**

<!-- Start of picture text --> . ~~~ReturnerT<br>All countries Alecunris_ 3,68:5 Countries in the sample<br>Developed<br>countries 254<br>SSA<br>Developing DC<br>countries 3,431 16%<br>Sub-Saharan<br>Africa 1,28,<br>SSEA<br>Conmonwealth of 4%<br>Independent States 6511<br>Central and Eastern<br>Europe 771ci<br>Latin America and LA 14%<br>Caribbean 474 13% CEE<br>Middle East and 16%<br>North Africa 1093<br>South and<br>Southeast Asia 1393<br><!-- End of picture text -->

## 4. **Characteristics of responding firms**

This section deals with the type of firm covered in the survey. The following figures<sup>7</sup> demonstrate the range of sampled firms according to company size, industry, location of management, foreign participation and internationalization of business.

Figure 2 presents the distribution of company size. Almost one half of the firms were small (less than 50 employees). The other two categories of larger firms have more or less an equal share. The sample, therefore, is reasonably diversified according to this criterium.

More detailed results for all criteria, decomposed by region can be found in the appendix.

6
# **Figure 2: Distribution of responses by company size**

## **Company Size:**

<!-- Start of picture text --> more than<br>less than 50 employees [ 200<br>employees<br>28%<br>more than 50 and less than 50<br>less than 200 employees O employees<br>more than 200 employees D<br>more than 50<br>and less than<br>200<br>employees<br>32%<br><!-- End of picture text --> The regional decomposition presented in the appendix shows considerable regional variation in the percentage of firm size. This reflects differences in economic development and in the development of the private sector itself. For example, the countries of the former Soviet Union are dominated by small (less than 50 employees) firms-55% of the responding companies. This clearly reflects the FSU's "transitional" status and less developed private sector in comparison to the developed countries where the respective share is 26% in this category.

Another important characteristic was the location of company management. The survey intended that the companies represent a variety of geographical locations within each country. Figure 3 shows that this aim was at least partially achieved.

7
**Figure 3: Location of management of the surveyed firms**

Location of management: <!-- Start of picture text --> Small city or<br>Capital city F countryside Capital city<br>Large city D 22% 49%<br>Small city or countryside D<br>Large city<br><!-- End of picture text --> Capital city firms constitute about one half of the surveyed firms. It is remarkable for a survey such as this one that was organized in capital cities, that one half of the respondents are not located there. In particular, it is encouraging that almost one quarter of the firms had their management located in a small city or on the countryside. The aggregate results of Figure 3, however, hide strong variations within individual countries. The share of firms located in the capital city varies between 100% and 0% for individual countries. Such a bias and variation can be explained by the distribution of private businesses over country territory. In some former republics of the Soviet Union, more than 50% of registered businesses are situated in the capital city. Still in other surveyed countries the socio-economic and political situation limited access to the remote parts. Or in some countries the mail system was simply unreliable, making it infeasible to distribute questionnaires in such remote places and have them returned in a timely manner.

Figure 4 shows the break down of surveyed firms according to their line of businessmanufacturing, services or agriculture.

8
# **Figure 4: Breakdown of responses by branch of economy**

## **Industry:**

Manufacturing O Services O1 Agriculture O <!-- Start of picture text --> Agreculture_ Manufacturing<br>Services -<br>41%<br><!-- End of picture text --> While services and manufacturing are represented equally, there appears to be a strong bias against agriculture. This bias can be explained by geographic distribution. As more than three quarters of the surveyed firms have their headquarters in the capital city or a large city, chances of surveying an agricultural firms are greatly reduced.

The last two categories balanced the sample of companies with regard to their origin of capital (local versus foreign) and their access to foreign markets. Figures _5_ and 6 show the aggregate results.

**Figure** **_5:_ Capital origin of the surveyed companies**

<!-- Start of picture text --> Foreign participation:<br>yes<br>no<br>Foreign<br>_ participation<br>35% ONOMMINIh,<br>No foreign -<br>participation<br>65%<br><!-- End of picture text -->

**Figure** 6: **Access to foreign markets of the surveyed companies**

<!-- Start of picture text --> Exports.<br>yes<br>no<br>no OZ<br><!-- End of picture text --> <!-- Start of picture text --> Companies Companies<br>not Involved Involved in<br>in export export<br>activities activities<br>~~~51% 49%<br>.Al<br>r<br><!-- End of picture text --> 9
Firms were evenly distributed in these categories. In particular two thirds of the surveyed companies do not have any foreign participation-they are purely local. This contrasts with other earlier attempts of subjective measurement of investment climate that concentrate entirely on the perceptions of multinational firms.<sup>8</sup>

# 5. **Summary results for individual questions**

Every question of the survey along with the results are summarized in this section. A graph showing the regional distribution of the percent of entrepreneurs who ticked the 3 worst (meaning high degree of uncertainty) answers accompanies each question. The full distribution of answers for every single subcategory is given in the appendix.

# _Question 1. Policy surprises_

The first question addresses the problem of predictability on the most general level. Policy surprises can originate in many places of the government in a legislative process, which is not transparent, because the executive uses executive decrees to change laws, or in a bureaucracy who makes the specific regulations to implement policies. This question sought to capture all such uncertainties, regardless of their origin.

<!-- Start of picture text -->
1.  Do you regularly have to cope<br>with unexpected changes in rules, laws or  @<br>policies which materially affect your<br>business?<br>7J<br>Changes in laws and policies are<br>8,<br>(1) completely predictable  H<br>(2) highly predictable  H<br>(3) fairly predictable  H*<br>(4) fairly unpredictable  *<br>(5)  highly unpredictable  40<br>(6) completely unpredictable  H<br>VThd  Ir  OC  MA  CEE  LC  S4  as<br><!-- End of picture text -->

**Percentage of firms who ticked** (4), (5), **or (6) for question 1**

The results show that in some areas of the world entrepreneurs fear policy surprises and unexpected changes in rules which can seriously affect their business. In the CIS, almost 80

- 8 For a discussion of the differences between the approach of this survey and such "business indicators" based on expert opinion see Brunetti, Kisunko and Weder (1997).

10
percent of entrepreneurs report that unpredictable changes in rules and policies seriously affected their business. In the CEE, Latin America and Africa around 60 percent of entrepreneurs complained about this problem. In developed countries, South Asia, and Southeast Asia, only about 30 percent of respondents identified this as a problem for their business.

# _Question 2. Credibility of announcements_

This question tackles uncertainty about rulemaking from the angle of whether entrepreneurs believe that government will implement the changes that it announces. This question is most closely linked to the concept of credibility as it is used in the macroeconomic literature.

<!-- Start of picture text --> 70<br>2. Do you expect the<br>government to stick to 60<br>announced major policies?<br>(1) always C*<br>(2) mostly O<br>(3) frequently [i 40<br>(4) sometimes O<br>(5) seldom C0<br>(6) never B 1<br>10<br>World LDC DC SSEA MNA CEE LAO SSA CIS<br><!-- End of picture text --> <!-- Start of picture text --> Percentage of firms who ticked (4), (5), or (6) for question 2<br><!-- End of picture text --> Entrepreneurs in the Asian region have the most trust in government announcementseven more so than in developed countries-only 10 percent of entrepreneurs do _not_ think that government will stick to major announced policies. On the other extreme in the CIS, entrepreneurs are most cynical about new announcements; 70 percent of entrepreneurs do not believe them. Half of all surveyed businessmen in Latin America and the CEE give their governments much credibility.

# _Question 3. Infonnation_

A major factor for entrepreneurs taken by the surprise of new regulation or policy is that they were not informed in advance. This question addresses the informational aspect of predictability.

11
<!-- Start of picture text --> 80<br>3. "The process of<br>developing new rules or policies<br>is usually such that affected 70<br>businesses are informed."<br>65<br>This is true<br>60<br>(1) always 71<br>(2) mostly E] s<br>(3) frequently L<br>(4) sometimes 50<br>(5) seldom E<br>(6) never Ej 45<br>40<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text --> 3. "The process of developing new rules or policies is usually such that affected businesses are informed."

**Percentage of firms who ticked (4),** (5), **or (6) for question 3**

Marked differences between regions are revealed by this question. 75 percent of all entrepreneurs in Africa, the CEE and the CIS believe that affected businessmen are not informed about upcoming changes in rules and policies. By comparison only around 40 percent of businessmen in Asia and the developing countries feel ill informed.

# _Question 4: Participation_

This question on the predictably of rules and policies is closely linked to question 3. Negative reaction to surprises in new rules and policies are less likely if entrepreneurs can participate in the process of developing new rules and can voice their concerns either directly or through their business association.

<!-- Start of picture text --> 4. "In case of go<br>important changes in laws<br>or policies affecting my B5<br>business operation the 80<br>government takes into<br>account concerns voiced 7<br>either by me or by my 70<br>business association."<br>65<br>This is true 60<br>(1) always 55 |l<br>(2) mostly<br>(3) frequently<br>(4) sometimes j 45<br>(5) seldom I 40 F<br>(6) never World LDC DC SSEA MNA CEE LAC SSA CIS<br>Percentage of firms who ticked (4), (5), or (6) for question 4<br><!-- End of picture text -->

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A majority of entrepreneurs, the world over, thinks that the government does not take into account their concerns when developing new rules. However, the same differences that were revealed in question 4 are also apparent here. In Asia and the developing countries fewer businessmen feel that they cannot participate, whereas in the CEE, CIS, and in Africa more than 80 percent of entrepreneurs think that their concerns are not being taken into account.<sup>10</sup>

# _Question 5: Retroactive changes_

One source of unpredictability is that regulations may be changed retroactively. This question addresses this issue.

<!-- Start of picture text --> 70<br>65<br>5. Do you fear<br>retroactive changes of 60<br>regulations that are important<br>for your business operations? 55<br>(1) always E<br>(2) mostly Z1 4<br>(3) frequently 3<br>(4) sometimes n 40 I<br>(5) seldom D *<br>(6) never 35<br>30<br>25<br>20<br>Wo.M mC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 5**

Results show that retroactive changes are perceived as a problem by more than half of all surveyed businessmen in MNA and in the CIS. In developed countries and in Latin America relatively few entrepreneurs thought that retroactive regulatory changes presented a problem for their business operations.

# _Question 6: Change of predictability over time_

Question 6 asked if predictability had changed in the entrepreneurs view over the past 10 years (over the last 5 years in the case of the transition economies). This is a summary question for the preceding five questions that addresses the change in overall predictability.

> 10 Also, small companies on average, are found to be less informed about and involved in the drafting of new regulations and are therefore more subject to policy surprises.

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6. In the last ten years predictability of laws and policies has increased D remained about the same D decreased [1 don'tknow O <!-- Start of picture text --> 2 0.3.<br>S 0.2<br>ID<br>0 °<br>x o.01<br>* 0.2<br>-0.3-<br>~'-0.4-<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text --> The responses show that only one region-South and Southeast Asia enjoyed an overall increase in the predictability of rules and policies. The index was measured as an average deviation from the second response to the question, which stated that the predictability of laws and policies remained about the same. According to the responding businessmen, the worst decrease occurred in the transitional economies; the Sub-Saharan Africa region and developed countries followed. In these regions the decrease was about the same in absolute terms. Small decreases in predictability were experienced by the firms in Latin America and the Middle East and North Africa. The attached chart presents another view of the change in predictability of laws and policies.

Overall only 22 of 69 surveyed countries reported an improvement of predictability in laws and policies. A country was considered having an improvement if a majority of surveyed businessmen reported that predictability increased. As it was expected from the previous graph businessmen in all surveyed Asian countries consider that over the last decade their government's policies became more predictable. This is a remarkable achievement in comparison to the poor government performance of CIS countries, where businessmen in only one out <!-- Start of picture text --> 70.<br>60]-<br>so<br>40<br>30<br>2<br>l I i<br>'4° 3 2<br>_<br>World LDC DC SSEA MNA CEE LAC SSA as<br>unter of countries wtiere predictability inremsed orrearnired the sane Enumrr of surveyed<br><!-- End of picture text --> of the ten surveyed countries think that predictability of government policies has increased. Businessmen in only four of eleven developed countries think that predictability of government laws and policies has increased.

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# _Question 7: Changes in rules due to regular government changes_

This question considers the problem of unpredictable changes in rules and policies from the angle of one of it's frequent causes: changes in governments. Respondent's answers depended on their particular institutional setting whether a regular change in government leads to large administrative changes in policies. For example, in some countries, the bureaucracy is quite autonomous and changes in government hardly affect the predictability of rules.

<!-- Start of picture text --> 7. "Constitutional changes of<br>government (as a result of elections) 70<br>are usually accompanied by large<br>changes in rules and regulations that 65<br>have an impact on my business."<br>60<br>To what degree do you agree with<br>this statement? -<br>(1) fully agree so<br>(2) agree in most cases K<br>(3) tend to agree 4<br>(4) tend to disagree El<br>(5) disagree in most cases 14<br>(6) strongly disagree C.<br>does not apply 35 X +<br>Wakl WC DC SSEA MA CEE LAC SSA as<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 7**

The uncertainty resulting from government changes is lowest in the developing countries. In all other regions of the world more than half of all entrepreneurs feel that this particular form of uncertainty greatly affects their business. The highest uncertainty rests in the CIS

# _Question 8: Policy surprises due to irregular government changes_

The aim of this question is similar to the preceding one-to tackle the problem of unpredictable changes in rules and policies caused by changes in governments, but in this case by irregular changes. Again, this form of political instability does not automatically imply that there is also large uncertainty for entrepreneurs, as for example, the bureaucracy could be so autonomous that even a coup does not seriously affect the predictability of rules.

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<!-- Start of picture text --> 70<br>8. "I constantly fear<br>unconstitutional government 60<br>changes (i.e. coups) that are<br>accompanied by far-reaching 50<br>policy surprises with significant<br>impact on my business."<br>40<br>To what degree do you agree<br>with this statement?<br>30<br>(1) fully agree [L*<br>(2) agree in most cases 0 20<br>(3) tend to agree<br>(4) tend to disagree n<br>(5) disagree in most cases D 10<br>(6) strongly disagree _<br>does not apply<br>World LDC DC SSEA MNA CEE LAC SSA cis<br><!-- End of picture text -->

## **Percentage of firms who ticked (1), (2), or (3) for question 8**

The fear of business disruption due to irregular government changes is highest in Africa, the CIS and MNA where over 60 percent of entrepreneurs say their businesses would significantly be impacted. In Latin America, though it has a history of coups, this problem is perceived as relatively small.

# _Question 9. Theft and Crime_

Theft and crime indicate that property rights are not properly enforced. However, businessmen can sometimes find ways to protect themselves from this particular uncertainty by hiring private protection agencies. Therefore this question directly asks whether theft and crime substantially increase the cost of doing business.

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9. "Theft and crime are serious problems that can substantially increase the costs of doing business." <!-- Start of picture text --> so<br>To what degree do you agree with this 70<br>statement? Nl<br>Now 10<br>years 50<br>ago<br>(1) fully agree C l E 40<br>(2) agree in most C0<br>cases LI LI<br>(3) tend to agree I LI 20<br>(4) tend to disagree [1 -Li<br>(5) disagree in most 'E<br>cases LI L<br>(6) strongly disagree o L v*I WC DC[n SSEA MA CEE LC SSA Cis<br>UN<br>U10(5)yma&ag<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question** 9

The world over businessmen consistently believe that the cost of doing business is substantially increased by theft and crime. In Latin America this problem is most pronounced as almost 90 percent of entrepreneurs who responded think that these are serious problems. In a similar vein around 80 percent of entrepreneurs in the CIS, CEE, Africa, and Asia perceive crime and theft as serious problems.

Moreover, in all regions (except Asia) businessmen think that the problems of crime and theft have increased over the last decade. In the case of the transition economies this trend was witnessed over the last five years rather than the last ten.

# _Question 10. Security of property and personal safety_

This question addresses not only the security of property but also personal safety. As opposed to the preceding question, this question does not relate crime and theft to the cost of doing business but asks whether businessmen trust the authorities to protect them and their property.

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10. "I am not confident that the state authorities protect my person and my property from criminal actions" To what degree do you agree with this statement?

Now 10 years ago (1) fully agree E C (2) agree in most cases 7 [7 (3) tend to agree bi X (4) tend to disagree 5 [J _(5)_ disagree in most cases [ 0 (6) strongly disagree [7 L <!-- Start of picture text --> 90<br>80<br>70<br>|l<br>50<br>4<br>30<br>20*<br>20<br>10<br>-<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br>Now<br><!-- End of picture text -->

## **Percentage of firms who ticked (1), (2), or (3) for question 10**

In most countries the business community feels that authorities do not adequately guarantee their personal safety and enforce their property rights. In Latin America, Africa, the CIS, and the CEE almost 80 percent of entrepreneurs reported that they did not feel confident that the state authorities would protect their person and property from criminal actions. Even in the developed countries half of the respondents (on average) did not trust government in this dimension. Furthermore in all regions, except for Asia, entrepreneurs reported that the security of property and personal safety had decreased over the last decade (over the last 5 years in the case of the transition economies).

# _Question 11. Reliability of the judiciary_

Unreliable judiciaries can cause two forms of uncertainty: unreliable judiciaries offer no fair recourse against unlawful behavior between citizens and similarly unfair treatment of citizens by state officials is unclearly prosecuted by the judiciary. This undenmines property and contract rights.

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11. "Unpredictability of the judiciary s. presents a major problem for my business operations." 70 To what degree do you agree with this **60** statement? **50** Now 1 0 years **40** (1) fully agree **3** El **3** (2) agree inmost cases **3j** El (3) tend to agree O - (4) tend to disagree 3 3 (5) disagree in most cases O Q li (6) strongly disagree E O* World _lDC_ DC SSEA MNA CEE **IAC** SSA **Cis** I **10(5)years ago**

**Percentage of firms who ticked (1), (2), or (3) for question 11**

Unreliable judiciaries are perceived as a major problem all over the world. In the less developed countries over 70 percent of entrepreneurs feel that judicial unpredictability presents a major problem for their business operations. Moreover, in most regions of the world entrepreneurs think that their problems with the judiciary have increased over the last 10 years On average in all regions entrepreneurs thought, that the reliability of judiciary systems today presents a larger problem for their business than 10 years ago (5 years in the case of the transition economies.

# _Question 12: Ranking of obstacles for doing business_

This question does not relate primarily to problems of uncertainty but asks businessmen to rank all kinds of obstacles comparatively. Some parts of this question have been used before in private sector assessments for individual countries by the World Bank and the question was introduced this survey to gain a comparative picture across countries.

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12. Please judge on a six point scale how problematic these different policy areas are for doing business (Please do not select more than 5 obstacles as the very strong (6)):

||||Obs|tacles|Ve|ry|
|---|---|---|---|---|---|---|
||No||Mode|rate|stro|ng|
|a. Regulations for starting<br>business/new operations|1|2|3|4|_5_|6|
|b. Pricecontrols|1|2|3|4|_5_|6|
|c. Regulations on foreign<br>trade (exports, imports)|1|2|3|4|5|6|
|d. Financing|1|2|3|4|_5_|6|
|e. Labor regulations|1|2|3|4|_5_|6|
|f. Foreign currency<br>regulations|1|2|3|4|5|6|
|g. Tax regulations and/or<br>high taxes|1|2|3|4|_5_|6|
|h. Inadequate supply of<br>infrastructure|1|2|3|4|_5_|6|
|i. Policy instability|1|2|3|4|_5_|6|
|j. Safety or environmental<br>regulations|1|2|3|4|_5_|6|
|k. Inflation|1|2|3|4|_5_|6|
|1. General uncertainty on<br>costs of regulations|1|2|3|4|_5_|6|
|m. Crime andtheft|1|2|3|4|_5_|6|
|n. Corruption|1|2|3|4|_5_|6|
|o. Terrorism|1|2|3|4|_5_|6|
|p. Other_|||||||
||1|2|3|4|5|6|

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The main results for this question will discussed separately by region. The bar charts always display the calculated average ranking for each obstacle-ranging from 1 (no obstacle) to 6 (very strong obstacle).

# **Developed countries**

Entrepreneurs in developed countries found five out of six major obstacles for doing business related to regulations. They are the following: <!-- Start of picture text --> g. Tax regulations and/or<br>high taxes<br>e. Labor regulations<br>j. Safety or<br>environmental regulations<br>~ : d. Financing<br>a. Regulations for<br>starting business/new<br>1. General uncertainty on<br>costs of regulations<br>h. Inadequate supply of<br>inftastructure<br>n. Corruption<br>m.Crime and theft<br>OECD<br>c. Regulations on foreign<br>(exports, imports)<br>i. Policy instability<br>M > ~~~~~~~~~~~~~~~~~~~k. Inrtation<br>f. Foreign currency<br>-<br>b. Price controls<br>o. Terrorism<br>1.5 2.0 2.5 3.0 3.5 4.0 4.5<br><!-- End of picture text -->

1. Tax regulations and/or high taxes (question 12.g)

2. Labor regulations (question 1 2.e)-the highest ranking among regions.

3. Safety or environmental regulations (question 12j)-also the highest ranking among regions. ranking among regions. None of the other regions ranked environmental regulations higher than 11 on a 15 point scale (rank 1 means the worst obstacle, rank 15- the least).

5. Regulations for starting business/new operations (question 12.a) 6. General uncertainty on costs of regulations (question 12.1) Financing was ranked the forth major obstacle by surveyed businessmen in developed countries.

At the same time, corruption (question 12.n) was ranked number eight out of 15 obstacles considered-the lowest rank in any region. Foreign currency regulations (question 12.f) and price control (question 12.b) were found to be the third and second lowest obstacles and terrorism (question 1 2.o) was ranked the least important obstacle.

The quantitative value of the top obstacle (tax regulations and/or high taxes) was almost twice higher than the value of the second lowest obstacle (price control).

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# **South and Southeast Asia**

These Asian businessmen found tax regulations and/or high taxes (question 12.g) and inadequate supply of infrastructure (question 12.h) the top two obstacles for doing business in their countries. Closely following these two obstacles was inflation (question 12.k). Asian businessmen ranked - businessmen.rankd g. Tax regulations and/or inflation as an higher high taxes obstacle for obstacle~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~hg doing h. Inadequate supply oftaxesin business than infrastructure entrepreneurs in any other region. k. Inflation Forth and fifth ranks were e. Labor regulations given to labor regulations _____ __ _ _a. Regulations for (question 12.e) and starting business/niew regulations for starting n. Corruption business/new operations (question 12.a), L. General uncertainty on respectively. Corruption costa of regulatons followed next (question - d. Financing 12.n).

|business<br>inflationas anhigher<br>obstacle~~~<br>obstacle<br>for<br>doing<br>business<br>than<br>entrepreneurs in any other<br>region.|men.rankd<br>~~~~~~~~~~~~~~~~~~~~~~~~~~~hg|g.Tax regulations and/or<br>high taxes<br>taxesin<br>h. Inadequate supply of<br>infrastructure<br>k. Inflation|
|---|---|---|
|Forth and fifth ranks were||e. Labor regulations|
|given to labor regulations|_____<br>__<br>_<br>_a.|Regulations<br>for|
|(question<br>12.e)<br>and<br>||starting business/niew|
|regulations for starting<br>business/new operations||n. Corruption|
|(question<br>12.a),||L.General uncertainty on|
|respectively.<br>Corruption<br>||costa of regulatons|
|followed next (question<br>12.n).|-|d. Financing<br>f. Foreign cufency<br>li|
|Overall only three out of|t|~~~~~~~reguatons<br>|
|six top obstacles in this<br> <br>||c. Regulations on foreign<br>trade (exports, imports)|
|region<br>are<br>regulation<br>related compared to five<br>out of six in developed|Asia|m.Crime and theft|
|countries.||i.Policy instability|
|At the bottom of the list of||j. Safety or|
|obstacles are safety or||environmental regulations|
|environmental regulations||b. Price controls|
|(question<br>12j),<br>price<br>control (question 12.b),<br>followed by<br>terrorism|_<br>I<br>l|o. Terrorism|
|which Asian businessmen<br>consider less important (in<br>absolute values) than their co|1.5<br>2.0<br>2.5<br>3.0<br>3.5<br>4.0<br>4<br>lleagues in developed countries.|.5|

The quantitative value of the top obstacle (tax regulations and/or high taxes) was only 30 percent higher than the value of the second lowest obstacle (price control).

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# **Middle East and North Africa**

The worst obstacle for business in this region is inadequate supply of infrastructure (question 12.h) Corruption (question 12.n), tax regulations and/or high taxes (question 12.g) and financing (question 12.d) closely follow.

<!-- Start of picture text --> h. Inadequate supply of<br>infrstcture<br>-<br>n. Corruption<br>g Tax regulations and/or<br>high taxes<br>d. Financing<br>; _- ; ___:_1_c. Regulations on foreign<br>* ; -- E --- -* -;; 4 --, ~~~ t exports, ivmpot)rade<br>1. General uncertainty on<br>costs of regulations<br>i. Policy instability<br>tk Iflation<br>a Reglahon<br>a. Regulations for<br>starting business/new<br>e. Labor regulatiorns<br>MNA<br>b. Price controls<br>and the least I~~~~~~~~~~~~~~~~~~~~~~~~. Safety or<br>environnental regulations<br>f. Foreign currency<br>reguatons<br>_ mCrmand theft<br>o. Terrorism<br>1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0<br><!-- End of picture text --> Three out of six major obstacles in the Middle East and Northern Africa region are regulation related.

Price control (question 12.b) is a low ranked obstacle (eleventh), but this ranking is the highest among regions. In every other region except CIS where this obstacle was ranked number 12, price control was ranked number fourteen or number fifteen.

The least important obstacles are foreign currency regulations (question 12.), crime and theft (question 12m) 12.m), and the least important is terrorism.

The quantitative value of top obstacle (inadequate supply of infrastructure) was two times higher than the value of the second lowest obstacle (crime and theft).

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# **Central and Eastern Europe**

In Central and Eastern Europe business considers only one regulation related obstacle as major-this is tax regulations and/or high taxes (question 12.g),. Financing (question 12.d) and corruption (question 12.n) are the second and the third most important obstacles. They are of equal importance.

In CEE inflation (question 12.k) was found to be the fourth most important obstacle for doing business. This is the second highest ranking among all regions. The only other region where inflation was as highly ranked was in Africa.

> The least important obstacles for doing business in CEE were foreign currency regulations (question 12.f), terrorism (question 12.o) and price controls (question 12.b).

<!-- Start of picture text --> _ g. Tax regulations and/or<br>high taxes<br>dFnancing<br>n Couption<br>_k aflion<br>It h._____________________________ hndequte spply of<br>i. Policy instability<br>1. aneral uncertainty on<br>costs of reguatons<br>c. Regulations on fcreign<br>t rde(expaots, irports)<br>e. Labor regulations<br>CFE<br>enviromJne regt)aions<br>-<br>taReguing iss/nfrw<br>f. Foreign currency<br>regulations<br>o. Terrism<br>b. Price controls<br>1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0<br><!-- End of picture text --> The quantitative value of the top obstacle (inadequate supply of infrastructure) is two times higher than the value of the lowest obstacle (price control).

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**Latin America and the Caribbean**

The worst two obstacles according to the businesspeople of Latin America are corruption (question 12.n) and inadequate supply of infrastructure (question 12.h). Crime and theft are considered to be the third most important obstacle. This is the highest ranking of crime and theft among all regions.

The only regulation related obstacle which made the top six list is tax regulation and/or high taxes. This obstacle was ranked fifth by entrepreneurs in Latin America, the lowest ranking among regions. All other regulations are ranked at the bottom of the list starting with labor regulations (ranked number eight).

The list of obstacles concludes with terrorism (question 112.o) and price2.0 controls (question 12.b).

<!-- Start of picture text --> n Corruption<br>t<br>h. Inadequate supply of<br>infrastructure<br>m.Cxime and theft<br>d. Financing<br>g. Tax regulations and/or<br>high taxes<br>i. Policy instability<br>k. Inflation<br>e. Labor regula______ons<br>e.Laborregulations<br>L General uncertainty on<br>costs of regulations<br>-.... LAC c. Regulations on foreign<br>trade (exprts, imports)<br>_ j. Safety or<br>environmental regulations<br>a- Regulations for starting<br>busine/new operaions<br>f. Foreign currency<br>regulations<br>o. Terrorism<br>b. Price controls<br>(question 12.o) and price2.5 3.0 3.5 4.0 4.5 5.0<br><!-- End of picture text --> The quantitative value of the top obstacle (corruption) is 1.67 times higher than the value of the lowest obstacle (price controls).

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# **Sub-Saharan Africa**

The most important problems according to African entrepreneurs are corruption (question 12.n), tax regulations and/or high taxes (question 12.g) and inadequate supply of infrastructure (question 12.h), followed by inflation (question 12.k), crime and theft (question 12.m) and financing (question 12.d).

<!-- Start of picture text --> __ _Corruption<br>g. Tax regulations and/or<br>high taxes<br>h. Inadequate supply of<br>infrastructure<br>k. Inflation<br>Pj8i m.Crime and theft<br>t<br>d. Financing<br>t 1. General uncertainty on<br>costs of regulations<br>i. Policy instability<br>c. Regulations on<br>foreign trade (exports,<br>_ Africa f. Foreign currency<br>regulations<br>e. Labor regulations<br>j: Ssfety or<br>environmental regulations<br>these~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a Regulations for<br>___________________E_ a. Regulationsfor<br>starring business/new<br>b. Price controls<br>o. Terrorism<br>1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0<br><!-- End of picture text --> As in the Latin America region, few regulatory questions made it to the top of the obstacle list (tax regulation was the only exception). The least important of these regulations for African businessmen are labor regulations (question 12.e), safety or environmental regulations (question 12j), and regulations for starting new business (question 12.a).

The least important overall obstacles<sup>are price control (question 12.b) and terrorism (question</sup> 12.o).

The quantitative value of the top obstacle<sup>(corruption) is 1.78 times higher than the value of the</sup> second lowest obstacle (price controls).

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**Commonwealth of Independent States**

Tax regulations and/or high taxes (question 12.g) was the single most important obstacle for doing business in CIS countries according to responses of surveyed businessmen. The quantitative value of this obstacle was 1.41 times higher then for the second obstacle - policy instability (question 12.i). This is the 12.i).Thisra is the **t** highest ratio for all regions.

|and/or high taxes<br>(question 12.g) was<br>thesingle most<br>important obstacle<br>|||g.Tax regulations<br>and/or high taxes<br>**i.**Policy instability<br>|
|---|---|---|---|
|for doing business<br>in CIS countries<br>|||n.Corruption|
|according to<br>responses of|||m.Crime and theft|
|surveyed|||IGeneral uncertainty|
|businessmen. The<br>quantitative value of<br>this obstacle was|||on costs of regulations|
|1.41 times higher|||c. Regulations<br>on|
|then for the second<br>obstacle - policy|||foreign trade (exports,|
|instability (question|1?||**k.**Inflation|
|12.i). This is the<br>12i)This**t**<br>ra is the|||**h Inadequate**<br>**supply of**|
|..<br> <br>highest ratio for all|||**.**<br> <br>infrastructure|
|regions.|||f. Foreign currency|
|||CIS|<br>regulations|
|As previously stated<br>|+|||
|policy instability|**la**<br>policy instability||**euain**<br>**o**<br>starting business/new|
|was the second||||
|majorobstacle for|||b. Price controls|
|doing business in||||
|the countries of CIS.|||e. Labor regulations|
|This is the highest||||
|ranking this obstacle|||o.Terrorism|
|received among all||||
|regions. The second|||j.Safety or|
|highest ranking for|l<br>l<br>l<br>l|I|environmental|
|policy instability|1.5<br>2.0<br>2.5<br>3.0<br>3.5<br>4.0<br>4.5|5.0|5.5|
|was 6 in Latin<br>America.||||

Corruption received rank 3 followed by crime and theft (question 12.m).

The lowest on the list of obstacles is safety or environmental regulations (question 12j). This ranking is also the lowest among the regions.

The quantitative value of the top obstacle (tax regulations and/or high taxes) is almost two times higher than the value of the lowest obstacle (safety or environmental regulations).

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**Developed countries vs. developing countries**

<!-- Start of picture text --> a. Regulaions for starting business/new operations<br>o. Terrorism$ 4.5 ilb. Price controls<br>n. Corruption 3C c. Regulations on foreign trade (exports, imports)<br>m.Crime and theft d. Financing<br>1. General uncertainty on costs of regulations e. Labor regulations<br>k. Inflation f. Foreign currency regulations<br>j. Safety or environmental reguations g. Tax regulations and/or high taxes<br>i. Policy instability h. Inadequate supply of infrastructure<br>LDC<br>| OECD<br><!-- End of picture text -->

As can be seen from the above figure, index values for 12 out of 15 obstacles are higher in developing countries. The only three obstacles receiving higher quantitative values in developed countries can be easily classified as they are related to different types of regulations: question 12.a: regulations for starting new business question 12.e: labor regulations, and question 12.j: safety or environmental regulations.

# **Degree of troublesomeness**

The following graph shows the number of countries together and in each region where 50 or more percent of surveyed firms gave scores of 4 or higher to each of the considered obstacles. The leader was question 12.g - tax regulations and/or high taxes. For example, in all ten surveyed CIS countries at least 50 percent of surveyed businessmen think that tax regulation and/or high taxes are an obstacle. Overall in 49 out of 69 surveyed countries, taxes and tax policies were considered an obstacle by more than 50 percent of surveyed businessmen.

The second highest obstacle is corruption (question 12.n). A majority of businessmen in 35 countries considered it a hurdle for doing business. Of these 35 countries, 15 are in Africa. In none of the developed countries surveyed was corruption found to be an obstacle by a majority of respondents .

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Crime and theft (question 12.m) were considered an obstacle by the majority of businessmen in 22 countries. Again none of the developed countries are included in this list. Crime and theft is followed by financing (question 12.d) which 21 countries rated highly. Following them is an inadequate supply of infrastructure (question 12.h)-20 countries.

On the other end of the spectrum are regulations for starting new business (question 12.a) and price controls (question 12.b). Neither of them was considered an obstacle by a majority of survey respondents in any of the countries.

Safety and environmental regulations (question 12.j) were ranked third in the developed countries, but only in one developed country this was considered an obstacle by a majority of surveyed entrepreneurs.

Terrorism (question 12.o) received a majority in two countries-one in Latin America and one in Africa.

<!-- Start of picture text --> 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50<br>question 12,a T --<br>question 12, b<br>question 12, c 3 3 4<br>question 12, d 6 - UE<br>question 12, e 3 2<br>question 12, f 2<br>question 12,g | 68 E - 1<br>question 12,h 2 3[ - M -<br>question 12, i 4 5 | M Other<br>U cis<br>question 12, j E AFR<br>question 12, 4 - L1 D CEE<br>question 12,1 3I<br>question 12. m 2 5 '<br>question 12,n 7 L65IIjIj 15 ,<br>question 12. o X<br><!-- End of picture text -->

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# _Question 13: Interface State-Government_

This general question asks entrepreneurs on their overall perception of the state and the bureaucracy. Is the state an opponent, a neutral agent, or a helping hand for the private sector? Though this question has 6 possible answers, these were clearly divided into 3 parts: opponent, neutral agent, and helping hand. The graph shows the polar case of the percentage of entrepreneurs who ticked 5 and 6 (opponent).

13. Please rate your overall perception of the relation between government and/or bureaucracy and private firms on the following scale.

"All in all, for doing business I perceive the state as": Helping Neutral Opponent hand agent Now 1 2 3 4 _56_ 10 years ago 1 2 3 4 _5_ 6 <!-- Start of picture text --> 45<br>40<br>35<br>80<br>25 - -<br>20-<br>15<br>10<br>5<br>iI DC S9A MNA CEE IAC SSA CiS<br>ONowl<br>I:10 (5) vaso<br><!-- End of picture text -->

## **Percentage of firms who ticked (5), or (6) for question 13**

The percentage of entrepreneurs who thought that the state was an _opponent_ is highest in Latin America (40 percent). At the other extreme, only 5 percent of entrepreneurs in SSEA feel in this way about their relation with the state. When asked to rate this relationship 10 years ago, 20 percent of businessmen thought of the state as an opponent in this region. In MNA, the developed countries, and the CIS the relation between the state and the business community seems to have worsened in the past 10 years ago (5 years in the case of the transition economies).

# _Question 14: Frequency of Corruption_

This question probes the overall frequency of corruption without distinguishing between different types of corruption. To obtain a less biased answer, the question asks respondents to rate the frequency of irregular payments in their line of business, without asking whether he or she has ever paid bribes personally.

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14. "It is common for **finrs** in my line of business to have to pay some irregular "additional payments" to get things done." This is true

**(1)** always (2) mostly [] **(3) frequently** 0 (4) sometimes _ElD01 (5)_ seldom El (6) never **El10**

<!-- Start of picture text --> 70<br>60<br>50<br>40<br>I X<br>30<br>20<br>i<br>Wodd LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 14**

The frequency of corruption varies clearly across regions: it is the lowest in the developing countries (15 percent), followed by Asia and MNA (about 35 percent), then CEE, Latin America and Africa (between 40 to 50 percent) and finally the CIS where more than 60 percent of entrepreneurs, considered this to be a major phenomenon.

# _Question 15: Predictability of amount of bribe_

This question distinguishes between "greasing" corruption and "blocking" corruption. "Greasing" corruption is predictable and acts like a transaction cost, whereas, "blocking" corruption is highly unpredictable causing large uncertainties. The following chart shows regional averages for those firms which answered positively to question 14. In other words only firms which made "additional payments" at least sometimes (meaning they ticked frequently, mostly, or always in question 14) are represented in this chart.

Caution should be used when interpreting these results because the sample of the firms was largely truncated to avoid misleading answers. For example in many cases (especially in developed countries), respondents who marked "never" (paid "additional payments") for question 14 also answered "never" (knew in advance about how much this "additional payment" is) for question 15. Question 15 then translates to an extremely high average score for unpredictability of corruption. Thus, truncation is necessary, even if the sample is heavily reduced in size.

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<!-- Start of picture text --> 15. "Firms in my line of 70 .<br>business usually know in advance<br>about how much this "additional 60<br>payment" is."<br>so<br>This is true<br>40<br>(1) always<br>(2) mostly 3<br>(3) frequently<br>(4) sometimes<br>(5) seldom El2<br>(6) never El<br>World [DC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 15**

Results show that more than 40 percent of corruption in developing countries is of the "greasing" type. In the CIS about 70 percent of entrepreneurs usually know beforehand what the additional payment will be. In developed countries only 10 percent of entrepreneurs possessed this knowledge.

# _Question 16: Corruption and Blackmailing_

<!-- Start of picture text --> 16. "Even if a firm has to<br>make an "additional payment" 5<br>it always has to fear that it will<br>be asked for more, e.g. by<br>another official." 40<br>This is true<br>30<br>(1) always I<br>(2) mostly E<br>(3) frequently I<br>(4) sometimes i I<br>(5) seldom I<br>(6) never I1 1<br>Wc_ d LDX DC SSFA NM CEE LAC SSA cis<br>Percentage of firms who ticked (1), (2), or (3) for question 16<br><!-- End of picture text --> This is true 32
This question tackles the issue of predictability of corruption within bureaucracy. For instance a bureaucracy in which the income from corruption is shared among all the members, acts like a monopolist that jointly maximizes bribe income. Thus, the briber is subject to less uncertainty (although possibly to higher amounts of bribes). Conversely, if the level of organization of corruption within the bureaucracy is low, the bribee is subject to more uncertainty and blackmailing from many different officials who participate in the delivery of the service.

The sample was truncated in the same way as question 15.

The results of this question show that uncertainty resulting from this source is highest in the Latin America and CIS, (about 55 percent), followed by Africa, and than by MNA and CEE. This kind of problem seems to be almost absent in developed countries.

_Question 177: Uncertainty about receiving the service after paying a bribe_ Question 17 attempts to determine predictable versus unpredictable corruption from still another angle. It asks if paying a bribe usually means that the service is delivered as agreed.

The sample was truncated the same way it was explained in question 15.

<!-- Start of picture text --> 17. "If a firm pays the 90 - .- . . .. .<br>required "additional payment" 8<br>the service is usually also<br>delivered as agreed." 70<br>This is true 60<br>(1) always D 5<br>(2) mostly 40<br>(3) frequently 2<br>(4) sometimes 2 30-<br>(5) seldom D<br>(6) never 2 20<br>10 i<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br>Percentage of firms who ticked (1), (2), or (3) for question 17<br><!-- End of picture text --> In Asia and the CEE and CIS more than 80 percent of businessmen thought that there was little uncertainty about the delivery of the service after paying a bribe. Overall in all regions at least about 70 percent of surveyed businessmen thought that there was little uncertainty about service delivery after "the wheel was greased." This percentage is the lowest in Africa (but still well above 60 percent).

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# _Question 18: Limits on discretionary power of bureaucrats_

18. "If a government agent acts against the rules I can usually go to another official or to his superior and get the correct treatment." <!-- Start of picture text --> 80<br>against the rules I can usually go to l<br>another official or to his superior and get<br>the correct treatment."<br>600<br>This is true<br>(1) always 40<br>(2) mostly 40<br>(3) fequently 30<br>(4) sometimes Li<br>(5) seldom 02<br>(6) never LI<br>10<br>World LDC DC SSEA MNA CEE LAC SSA Cis<br><!-- End of picture text -->

## **Percentage of firms who ticked (4), (5), or (6) for question 18**

This question asks about the extent of discretionary power in bureaucracies and gives a measure of how well "checks and balances" work within the public service. In a well functioning bureaucracy the discretionary powers of an individual official are limited by the ability of customers to complain to his superior or simply to go to another official and receive the correct treatment. In a discretionary setting this check does not work. For instance the other officials as well as the superior may be cooperating together.

Discretionary power within bureaucracies is perceived as lowest in developed countries followed by MNA. CEE and LAC are in the middle and highest is the CIS, Africa and Asia.

# _Question 19: Changes in discretionary power over time_

Question 19 asked if bureaucracies have become more or less discretionary over the past 10 years (over the last 5 years in the case of the transition economies). This is a summary question for the preceding 5 questions that addresses the change in overall bureaucratic discretion and corruption.

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<!-- Start of picture text --> 19. In the last ten years,<br>difficulties in dealing with - 0.5<br>government officials have<br>g 0.4<br>increased Os<br>remained O<br>about the same C1<br>decreased<br>don'tknow DX 0.2 -<br>g 0.1<br>0.0<br>t -0.1<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text --> The results shows that in all regions (with exception of transition economies) businessmen consider their relations with government officials less difficult than 10 years ago. The highest decrease in those difficulties was noted in Asia and in developed countries. The situation was the worse in the CIS.

<!-- Start of picture text --> In 60 percent of the surveyed 70 -<br>countries the majority of<br>entrepreneurs thought that it 60-<br>is now easier to deal with<br>their governments than it 50 l<br>was 10 (5 years for<br>transitional economies) years 40<br>ago. The percentage of 3<br>countries where businessmen 30<br>think that the difficulties<br>decreased is highest in Asia 20-<br>(100 percent) followed by 1 i<br>developed countries (73 10<br>percent), and MNA (two out 2 IlJ A<br>of tree countries surveyed). o<br>In CEE only two out of World LDC DC SSEA MNA CEE LAC SSA CIS<br>eleven surveyed countries | numiber ofcountries where difficulties decreased orrernaied the same number of surveyed countries<br>found that difficulties in<br>dealing with their<br>government decreased over the last 5 years.<br><!-- End of picture text -->

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_Question 20a: Dificulties in complying with government regulations_ This question was introduced as a different way to address problems of governmentprivate sector relations from the point of view of outcomes: It asks investors whether they had ever decided not to make an major investment because of problems in compliance with government regulations.

In developed countries about one third of respondents indicated that problems with government regulations had prevented them from investing. In Asia about 25 percent of entrepreneurs thought so. On the other extreme, almost half of all entrepreneurs in the CIS reported that they had refrained from investing because of government regulations.

<!-- Start of picture text --> 20. Have you ever 50<br>decided not to make a 45<br>major investment<br>because of problems 40<br>relating to complying 35<br>with government<br>regulations? 30<br>25<br>yes<br>no u2<br>15<br>10<br>WorlO LDC DC SSEA MNA CEE LAC SSA C15<br><!-- End of picture text --> 20. Have you ever decided not to make a major investment because of problems relating to complying with government regulations?

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_Question 20b: Transaction costs versus uncertainty in complying with government regulations_ This question was linked to the preceding one. Entrepreneurs who did not invest because of government regulations were queried whether their decision was based on regulations that were too expensive (but clearly known) or on regulations that were too unclear and uncertain to prevent reasonable investment planning.

If your answer was "yes", **could you** please specify which of the following two options better describes the nature of these problems: Costs of compliance are _too high,_ but clearly known L Costs of compliance are _too uncertain_ for investment planning **I** Other **I**

**Known**

**Unknown**

<!-- Start of picture text --> 82~~~~~~~~~~~~~~~~~~~~~~~~~~~2<br>82<br>15<br>MUB L DC ccl 9A "A CE C S Gs Va L cc SEX M E LAC S as<br>Percent of firms which said that costs of compliance Percent of firms which said that costs of compliance<br>are too high, but clearly known are too uncertain for investment planning<br><!-- End of picture text -->

**Percent of firms which said that costs of compliance are** **_too uncertain_ for investment planning**

In the developed countries costly regulations and red tape hinder investment. 40 percent of entrepreneurs responded that they had not invested because cost of compliance where too high, albeit clearly known. In developing countries the problem of high but certain cost is less important; on average less than 20 percent of businessmen responded in this way. On the other hand, almost 70 percent of entrepreneurs in developing countries said that they had not invested because the costs of compliance with government regulations where too uncertain to make for investment planning.

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# _Question 21: Senior management time spent on negotiations with officials_

This question was asked to evaluate an amount of the productive time managers were forced to spend negotiating with the government bureaucracy. The answers show that only about 2 percent of managers in developed countries spent more than 25 percent of their time in negotiating with government officials. Developed countries are followed by CEE region, South and South-East Asia and LAC. The situation is worst in MNA, Sub-Saharan Africa and in CIS. In CIS countries more than a quarter of senior managers' time in the surveyed firms is spent on negotiation with officials about changes and interpretations of laws and regulations.

<!-- Start of picture text --> 21. What percentage of 30<br>senior management's time<br>is spent on negotiation with 25<br>officials about changes and<br>interpretations of laws and<br>regulations? 20<br>is<br>(1) less than5% El<br>(2) 5%-15% '° **<br>(3) 15%-25% El<br>(4) 25% - 50% D 5<br>(5) 50% - 75% *<br>(6) more than 75% 0<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (4), (5), or (6) for question 21**

Questions 22 - 25 were added to the questionnaire with a different goal in mind. The following four questions aimed a gaining indicators of the quality of government services such as roads, health care, etc. They were added to the questionnaire in order to take advantage of the cross country survey and to gain additional information about service delivery. The quality of these services may only indirectly be related to the uncertainty of doing business.

# _Question 22: Efficiency of government in providing major services_

Question 22 asked businessmen to rate their overall perception of: efficiency of customs, roads, mail delivery, and public health provision. This question aims at an implicit evaluation of several major components of government services in the surveyed countries.

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# 22. Please rate your overall perception of:

<!-- Start of picture text --> 22. Please rate your overall perception of: .'<br>45<br>very very 40<br>g-Ood poor "<br>a. The efficiency p3<br>of customs 1 2 3 4 5 6 25 il3 ---I a.<br>b. The general condition 20<br>of roads you use 1 2 3 4 5 6 _5<br>c. The efficiency of mail<br>10<br>delivery 1 2 3 4 5 6<br>d. The quality of public<br>health care provision 1 2 3 4 5 6 Customs Condition Mail Quality<br>are of roads delivery of public<br>efficient are bi health is<br>sufficiot officion sufficient<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or** (3) **for question** 22

The overall picture shows that in none of the four polled services did governments satisfy even 50 percent of the surveyed businessmen. The highest "satisfaction ratio" rested in mail delivery that was considered efficient by 48 percent of respondents worldwide (country average based estimate) and by 44 percent of respondents in developing countries. The lowest satisfaction rate with any government service was with public health. This service was evaluated as efficient by less than 30 percent of businessmen worldwide and by 21 percent of businessmen in developing countries.

# a. The efficiency of customs

In developed countries almost 70 percent of businessmen found customs to be efficient. In all other regions this indicator was at least 25 percentage points lower (41 percent in SSEA). Only 19 percent of surveyed businessmen in CIS evaluated their customs as efficient.

<!-- Start of picture text --> 70<br>60<br>50<br>40<br>3t<br>20<br>0+<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 22.a**

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b. The general condition of roads you use About 70 percent of respondents from developed countries found road conditions sufficient. The second highest percentage satisfaction with road conditions was surprisingly given by businessmen in MNA region (about 40 percent), this despite ranking supply of infrastructure as the number one obstacle for doing business. The lowest satisfaction with road conditions was expressed by respondents from the CIS (less than 15WodLD percent).

<!-- Start of picture text --> 80<br>70 fg<br>60 -<br>40<br>30<br>20<br>10<br>C SA MN CE LC<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 22.b**

# **c.** The efficiency of mail delivery

Businessmen in MNA are more satisfied with mail delivery than their colleagues anywhere in the world.

There are at least 20 percentage points between the "better" respondents of MNA, DC, SSE and SEE and the other three regions. In other words, 59 percent of respondents from CEE countries thought that mail delivery is efficient and only 39 percent businessmen from SSA thought so for their countries. The lowest score for mail delivery resides in the CIS, where less than 30 percent of surveyed companies evaluated mail delivery system as efficient.

<!-- Start of picture text --> 80<br>X0<br>40<br>30<br>DCC SSA A CEE LAC SSA as<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 22.c**

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d. The quality of public health care provision The quality of health care provision was found to be poor in all regions, except developed countries. Only about 35 percent of surveyed businessmen in MNA and CEE thought that quality of public health care provision is efficient. The numbers for CIS and LAC are the lowest (14 and 13 percent respectively).

<!-- Start of picture text --> 60<br>50<br>40<br>30<br>20<br>* *<br>10<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

**Percentage of firms who ticked (1), (2), or (3) for question 22.d**

_Question 23: Frequency of power outages?_ Question 23 asked about another aspect of service provision - uninterrupted supply of electrical power over time.

23. How frequent are power outages?

<!-- Start of picture text --> Power outags happen oncenaweekor m often<br>outages?<br>(1) once in more 40<br>than 3 months O<br>(2) once a month 0i 35<br>(3) once in two weeks O 3<br>(4) once a week 0 30<br>(5) once a day °i 25<br>(6) no power for<br>long period El 20<br>15<br>As expected developed 10<br>countries have the lowest 5<br>percentage share of<br>Wodd LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text --> As expected developed countries have the lowest percentage share of businessmen who experience power outages at least once a week (about 1 percent of respondents). Sub-Saharan Africa has the highest share of businessmen having problems with power outages (almost 45 percent).

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# _Question 24: Time for getting public telephone line connected._

<!-- Start of picture text --> Question 24 asked about<br>sufficiency of telecommunications It takes less than I month to get a public telephone line connected<br>and accessibility for businesses. 90<br>80<br>24. How long does it take to get a public<br>telephone line connected? 70 -<br>(1) less than 1 month .<br>(2) 1 to3 months C 50<br>(3) 3 to 6months<br>(4) 6months to 1 year 40<br>(5) more than 1 year D 30<br>(6) difficult to say |<br>20<br>More than 80 percent of<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br><!-- End of picture text -->

More than 80 percent of respondents from developed countries answered that it takes less than a month to get a public telephone line connected. Only about 50 percent of business people in Asia have this same fortune. 25 percent of surveyed CEE and CIS entrepreneurs can obtain a telephone line in less than a month.

The situation is the worst in Sub-Saharan Africa, where less than 10 percent respondents can be connected to public telephone network in less than a month.

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# _Question 25: Government efficiency in delivering services._

Question 25 asked how efficient in general the government is in delivering services now and how efficient it was 10 years ago (5 years ago in the case of the transition economies). This is a summary question for the preceding 3 questions.

<!-- Start of picture text --> 25. How would you generally rate 90<br>the efficiency of government in<br>delivering services? 80<br>70<br>10 years<br>Now a-go 6<br>(1) very efficient [ [*<br>(2) efficient 0<br>(3) mostly efficient L1 LI 40t<br>(4) mostly inefficient O C*<br>(5) inefficient 0 0 30<br>(6) very inefficient E02 11<br>20<br>10<br>World LDC DC SSEA MNA CEE LAC SSA CIS<br>| 10 (5) yars ago<br><!-- End of picture text -->

Businessmen in all regions, except CIS and SSA thought that government became more efficient compared to 10 years (5 years for transitional economies) ago. The greatest progress was reported by Asian businessmen. 10 years ago the share of businesses who thought that government was inefficient in service provision was about 60 percent. It was even higher in Africa and in MNA region than at present. The situation is worst in LAC, both now and 10 years ago. Despite improvements more than 70 percent of surveyed businessmen in LAC said that government service provision is inefficient (compared to more than 80 percent a decade ago).

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