German Business Gets Good Marks

Germany's high scores on a recent report by the World Bank on the business environment of different countries is a sign of hope that the European Union's strongest economy is on the path of growth.

The World Bank report called Doing Business in 2006 describes the often pejorative effects of government regulations across various countries. By measuring the time and cost associated with government requirements, it ranks 155 countries in terms of their business-friendliness. New Zealand was in the top position, followed by Singapore and the United States.

Germany came in at number 19 on the easy-to-do-business index. It also ranked as the fifth most reform-friendly country in the world.

A step on the right path?

This could be interpreted as good news for the current government, which has pushed through a series of controversial welfare and labor reforms designed to spur the economy by making employment laws more flexible.

The report's lead author, Simon Djankov, said the report puts a positive spin on Germany's growth prospects because of successful attempts to put reforms into place in the past year. "As a result we record Germany as one of the top reformers in the business environment in the world -- especially in areas like the labor market, business, courts and contract enforcement," he said.

Such far-reaching reforms have been shown to work wonders elsewhere after a year or so. "So Germany's certainly on the right track," Djankov added.

Other top scorers

Also on the right track are other top scorers, including the Eastern European countries Slovakia and Georgia, as well as fast growing Asian countries such as Vietnam. Serbia-Montenegro was also ranked a top reformer, having made improvements in almost all areas -- from making it easier to start a business to improving labor-market flexibility and simplifying commercial dispute resolution.

Ranked lower in the report were many countries in Africa, South America and the Middle East which continue to discourage business activity with heavy legal burdens and miles of red tape. For example, in Mozambique it takes 153 days to start a very basic company (versus two in Canada). In Syria it takes over $60,000 (more than 10 times the average annual income) to start a small company.

Such bureaucratic slow-downs ultimately stem from excessive regulation, which has accumulated over time. If these cumbersome processes are not improved, the offshoot is an increase in unemployment and less economic growth.