amarakoon-zimbabwe economic review
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Ease of Doing Business Reforms to Increase Liquidity and Build Reserves through Domestic and Foreign Direct Investments
Zimbabwe Economic Review and National Competitiveness ConferenceHarare
20 October 2016
By Amarakoon Bandara
Ease of Doing Business
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200 184
Ease of Doing Business Rank ▲
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
89
Starting a Business
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
131
Dealing with Construction Permits
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
174
Getting Electricity
Ease of Doing Business
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
135
Registering Property
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
133
Getting Credit
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
174
Protecting Minority Investors
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
173
Paying Taxes
Ease of Doing Business
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200 187
Trading Across Borders
Mauritius
Botswana
Morocco
Seychelle
s
NamibiaKenya
Ghana
Uganda
Egypt, A
rab Rep.
Mozambique
Malawi
Burkina Faso
EthiopiaTogo
Burundi
ComorosBenin
Niger0
20406080
100120140160180200
165
Enforcing Contracts
Mauritius
Rwanda
Botswana
South Africa
Tunisia
Morocco
Seychelle
s
Zambia
Namibia
Swaziland
KenyaGhana
Lesotho
Uganda
Cabo Verde
Egypt, A
rab Rep.
Mozambique
Tanzania
Malawi
Côte d'Ivoire
Burkina Faso Mali
Ethiopia
Sierra Le
oneTogo
Gambia, The
Burundi
Senegal
Comoros
Zimbabwe
BeninSudan
Niger0
20406080
100120140160180200 189
Resolving Insolvency
Progress in Doing BusinessChange in Rank
2013 2015 ChangeEase of doing business 172 184 -12Starting a business 143 89 54Dealing with construction permits
170 131 39
Getting electricity 157 174 -17Registering property 85 135 -50Getting credit 129 133 -4Protecting investors 128 174 -46Paying taxes 134 173 -39Trading across borders 167 187 -20Enforcing contracts 111 165 -54Resolving insolvency 169 189 -20
Two fundamentals for attracting Investments
Safety of capital
and
Higher Return
Safety of capital
Property Rights
Rule of Law
Higher Returns
Classical sources of comparative advantages Market size; Absorptive capacity, as measured by
financial development; the level of economic development; infrastructure; natural resource abundance; and macroeconomic stability.
Institutional quality and efficiencyRule of law, quality of bureaucracy, and executive
constraints.
Host country’s structural reforms
Financial sector reforms (to strengthen banking sector supervision, to reduce credit ceilings for banks, and to liberalize securities markets), trade reforms, and privatization.
Financial reform is arguably a pre-condition for the maximization of the benefits of spillovers to foreign investors via backward linkages as an efficient domestic financial system greatly facilitates the establishment and growth of domestic suppliers of the foreign firms.
Foreign investors highly value a host country’s financial system that is able to allocate capital efficiently, monitor firms, ameliorate, diversify and share risk, and ultimately mobilize savings.
Cost of Capital and Labor Limited access to and
high interest rates on credit from formal financial institutions
Excessively high costs on micro credits
High cost of labor relative to most regional countries
Low labor productivity
Wage structures not linked to labor productivity
Liquidity Crunch
Decline in net financial flows (CA:-3.0bn, Capital account:2.7bn), inability to print money,
Medium to long term effects of liquidity issues on domestic and foreign investments
More to do with the breakdown in confidence that leads to hoarding, illicit financial outflows
The role played by past mistakes and present policy uncertainties
Policy Recommendations
Restore confidence in the government and the financial system, including through being transparent in policy making, maintaining policy coherence and consistency and establishing strong financial regulatory measures
Undertake credible reforms (financial, labor and public sector) to attract foreign and domestic investments
Policy Recommendations Create a conducive investment climate including
through removal/modification of existing restrictions on foreign investments
Strengthen institutional efficiency. Link public service salaries/career development to innovation through a risk-reward system
Fight corruption head-on
Thank You!
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