A friend told me that it took him over three months to start up a new business. He was even tempted to quit the process. But it has come to reality due to the continued encouragements of people in his circle. Doing business and starting new business remain tough with layers of challenges and begs comprehensive intervention as Ethiopia finds itself at the bottom list of global easing of doing business list.
Ethiopia stood 159th among 190 economies by the 2018 World Bank’s flagship report, easing of doing business. Low ease of doing business means the regulatory environment is not conducive for startup business and operation of private firms. It takes 32 days to start new business, 93 days to get electricity service, and 300 hours to comply with tax regulations, these prove the rocky road that business persons may face along their way.
Recently, National Steering Committee established to evaluate the implementation of the actions identified for improvement of doing business. The committee comprises members from the Ministry of Trade and Industry, Ethiopian Electric Corporation, Ministry of Revenue, Addis Ababa City Administration, Supreme Court and National Bank of Ethiopia.
Dr. Abdiyuya Ahmad is an economist. He says from the business point of view, the rank indicates that local private entrepreneurs and international businesses do not have adequate incentives to start and run a business in the country adding that this is especially serious for countries like Ethiopia whose local manufacturing capabilities are very low and the focus is to attract foreign investment in priority sectors.
Foreign firms will find it easier to locate their business to countries with good ranking. Protecting minority businesses, credit access, dealing with construction, starting a business, and trading across border are the top five factors that could contribute to the low ranking. Other remaining factors also need to be improved. “As the ranking is based on a composite index of mainly ten factors, we need to have a look at the ten components.”
The low ranking will be having negative impacts on the competitiveness of the private sector which in turn has direct implication on the performance and the prospect of economic diversification. Economic growth will depend on the competitiveness and development of private business, according to him. “The main problem for start-up business is access to credit, lack of demand and shortage of skills to run a business.”
In order to improve the doing business environment, the government has to work on addressing the major factors indicated above, he adds. Above all, there should be a system that can help implement policies, reduce cost of transaction, enhance commitment among the public bureaucrats, improve access to business information and develop technical skills, not to mention the creation of sectorial linkages.
However, the problem has not been about absence of good policy, it is a problem with implementing the policy itself, he says. “The country’s plan to moving about 80 points down to improve its rankings within two years sounds ambitious and not realistic. I have two main reasons for this.” The first is, it is less likely for the government to change the work culture and the complexities in the bureaucracy due to which no such significance has been seen in the doing business ranking over the last 2-3 years. Secondly, this is the right time for the government to establish sustainable political environment which is a crucial to ease of doing business.
“This last step does not seem to be that easy from want we have been observing.” The policy and legal environment as well as poor attitude of people who are in the front line of service delivery seem to have contributed a lot to the piling up of the problem, he argues. To put it boldly, those who lead the business are far from being competent.
Business activities are managed and run poorly and traditionally. “Entangled with ill-conceived public awareness, doing business appears to be tougher than what we imagine,” states Kibret Fufa, a social entrepreneur and owner of Tebita Ambulance. “The challenge begins at startup stage. New business faces bureaucratic labyrinth throughout the process. Business is nurtured and incubated with encouraging policy and sufficient supports”. The current system favors some business and undermines some others. The country has to come up with a system that works for all. Public officials in charge of leading the business sector must be ethically and professionally competent as well, he says.
Of late, in his meeting with his cabinet members, Prime Minister Dr. Abiy Ahmed accepted as doing business in Ethiopia is tougher to domestic and foreign investors, and expressed commitment to bring about short, medium and long-term solutions to ease the business climate. The premier rightly said: “Government’s plan is to increase domestic revenue but the practice shows that new businesses have not proliferated owing to straitjacket.”
People who have business plans usually find it hard to translate their plans to practice due to restrictive legal environment, backward service delivery and bureaucratic hassling, he said, adding that the objective of the national initiative is to devise innovative mechanisms that enable both domestic and foreign investors easily get into businesses and ensure profitability.
He also indicated, as the initiative is part of mitigating fiscal policy gap focusing on revenue, expenditure and budget deficit. Explaining these, he said the government has prioritized to broaden the tax base in addition to automating the service provision while shifting interest to concessional loan and abolishing straitjacket.
“Our plan is to keep the national budget deficit to the minimum by broadening the revenue base and cutting government expenditure.” To him, by increasing private participation, it is possible to award citizens with a new lease of life. Minor problems emanating from inefficient system and bureaucracy should not set barricade along their journey, he said.
“Easing the business and trade climate can attract more anchor investors to the country that can involve in agro-processing, manufacturing, mining and other areas.” The government has identified around 80 actions to deal with them in the short term. And around ten indicators have already been set up. Starting business, construction permits, registering property, getting electricity, getting credit, paying taxes, trading across borders, resolving insolvency, protecting minority rights and enforcing contracts are among the indicators. If goes to plan, the current move of easing doing business helps many businesses to proliferate and individuals like that of my friend would not see too much hassling.
The Ethiopian herald April26/2019
BY STAFF REPORTER
