investing across borders 2010

Investing Across Borders 2010 Indicators of foreign direct investment regulation in 87 economies

Investment Climate Advisory Services

World Bank Group

Embargoed: Not for news wire transmission, posting on Web sites, or any other media use until Wednesday, July 7, 2010, 09.00 Vienna time (Wednesday, July 7, 07.00 GMT)

THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

■ Overview■ Findings

■ Implications

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Overview

Investing Across Borders (IAB) is a new World Bank Group initiative comparing regulation of foreign direct investment (FDI) around the world.

It presents indicators on countries’ laws, regulations, and practices affecting how foreign companies invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes.

IAB’s objectives are to: Respond to information requests for benchmarks on FDI regulations by client

governments, development partners and academics Facilitate policy dialogue by identifying good practices (building on the

experience of existing diagnostics such as Doing Business, Enterprise Surveys, etc.)

Facilitate sharing of reform experiences Inform reform advisory work Enable research and analysis on links between reforms in measured areas and

desired outcomes


Country coverage: 87 economies across 7 regions

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Regions and economies Selection criteria

Countries included in the 2007-08 pilot test

Population size

Countries in current and expected future portfolio of the Investment Climate department

Countries with strong reform potential

Post-conflict economies (corporate priority)

Key comparator economies

Sub-Saharan Africa (SSA – 21 economies): Angola, Burkina Faso, Cameroon, Côte d'Ivoire, Ethiopia, Ghana, Kenya, Liberia, Madagascar, Mali, Mauritius, Mozambique, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, Sudan, Tanzania, Uganda, Zambia

East Asia and the Pacific (EAP – 10 economies): Cambodia, China, Indonesia, Malaysia, Philippines, Papua New Guinea, Singapore, Solomon Islands, Thailand, Vietnam

Eastern Europe and Central Asia (ECA – 20 economies): Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Kazakhstan, Kosovo, Kyrgyzstan, Macedonia, FYR, Moldova, Montenegro, Poland, Romania, Russian Federation, Serbia, Turkey, Ukraine

Latin America and the Caribbean (LAC – 14 economies): Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Peru, Venezuela R.B.

Middle East and North Africa (MNA – 5 economies): Egypt Arab Rep., Morocco, Saudi Arabia, Tunisia, Yemen Rep.

South Asia (SAR - 5 economies): Afghanistan, Bangladesh, India, Pakistan, Sri Lanka

High-income OECD (12 economies): Austria, Canada, Czech Rep., France, Greece, Ireland, Japan, Korea Rep., Slovak Rep., Spain, United Kingdom, United States


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Methodology

IAB data measures laws (de jure indicators) and their implementation (de facto indicators)

IAB 2010 data based on a survey of over 2,350 expert respondents in the 87 economies between April and December 2009 (ie, 27 respondents per country)

Typical respondents included lawyers, other professional service providers (mainly accounting and consulting firms), investment promotion institutions, chambers of commerce, and law professors


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IAB indicators focus on four areas of FDI regulation

Investing Across Sectors indicators assess the degree to which economies’ laws allow foreign companies to establish or acquire local enterprises. They capture restrictions on foreign equity ownership in 33 sectors.

Starting a Foreign Business indicators measure the step-by-step process that foreign companies go through to establish a subsidiary in a new market.

Accessing Industrial Land indicators evaluate the legal options for foreign companies to lease or own land in a host economy, the availability of information about land plots, and the step-by-step process of leasing land.

Arbitrating Commercial Disputes indicators analyze legal frameworks governing alternative dispute resolution, rules for the arbitration process, and the extent to which the judiciary supports and facilitates arbitration.

IAB 2010 report does not include rankings or aggregation of indicators at topic level.


Resources

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Report Online database www.investingacrossborders.org

One-page profile of each economy Detailed results for each topic, region, and economy

User-friendly access to thousands of data points, sortable by economy or topic International benchmarks References to FDI-related laws Directory of thousands of leading experts on business and FDI laws and regulations


■ Overview

■ Findings■ Implications

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Global Result HighlightsInvesting Across Sectors indicators

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Countries in Eastern Europe and Central Asia and Latin America and the Caribbean have on average fewer sector restrictions to FDI entry than economies in the other regions.

East Asia and the Pacific region is, on average, most restrictive, with many economies limiting or completely prohibiting foreign investment in media, transport, energy, telecommunications, and financial services.

There are hardly any restrictions on FDI entry in light manufacturing, construction, tourism and retail.

In contrast, many economies still restrict FDI in other services industries.


In all regions, starting a foreign company takes longer and requires more steps than starting a domestic company. It takes longest in LAC -- 75 days.

In Sub-Saharan Africa, on average, starting a foreign business takes nearly twice as long (40 days) as starting a domestic business (21 days).

Global Result HighlightsStarting a Foreign Business indicators

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Of the additional procedures required of foreign companies, the most common one is the investment approval.

In Europe and Central Asia and Latin America and the Caribbean, none of the economies covered in the IAB survey require an investment approval.


Average time to lease industrial land from the government is more than double the time required to lease land from a private holder.

Middle East and North Africa and OECD high income economies have the most efficient systems for leasing industrial land. In contrast, it can take over a half a year to lease government-owned land in the South Asian economies.

Global Result HighlightsAccessing Industrial Land indicators

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All 87 economies surveys allow foreign owned companies to lease land.

However, most economies in East Asia and the Pacific and Sub-Saharan Africa regions do not allow land ownership by foreign-owned companies. Economies in these regions instead commonly offer long term leases from the government.


Global Result HighlightsArbitrating Commercial Disputes indicators

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Only seven economies, mainly in Europe and Central Asia and Sub-Saharan Africa, do not have a law on commercial arbitration.

The majority of economies have not yet enacted a law on mediation.

Countries with well developed or modern arbitration laws give parties in dispute greater freedom to choose a flexible and effective arbitration process.

Some middle income economies restrict party autonomy by requiring that arbitrators speak the local language (e.g. LAC), or that arbitrators are domestically licensed lawyers (e.g. ECA).


■ Overview

■ Findings

■ Implications

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ImplicationsRestrictive and obsolete laws and regulations impede FDI

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Most of the 87 economies measured by IAB have FDI-specific restrictions that hinder foreign investment

A fifth of the countries surveyed require foreign companies to go through a foreign investment approval process. This adds, on average, nearly 1 month to the establishment process and in some countries up to 6 months.

Almost 90% of countries limit foreign companies’ ability to participate in some sectors of their economies. Service sectors - such as media, transportation, and electricity - have stricter limits on foreign participation than other sectors.

In international commercial arbitration, 1 in 4 measured countries has not ratified the New York Convention, the ICSID Convention, or both. Adherence to and implementation of international and regional conventions signal a government’s commitment to the rule of law and its investment treaty obligations.


Administrative processes and interactions with public institutions matter

ImplicationsRed tape and poor implementation of laws create further barriers to FDI

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In Angola and Haiti establishing a subsidiary of a foreign company can take more than 6 months. In Canada, Georgia, and Rwanda it can be done in less than a week.

Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, Republic of Korea, and Sudan.

In Pakistan, Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award. In high-income OECD countries such as France and the United Kingdom enforcement can be completed in less than 2 months.


Countries with poor regulations and inefficient processes for foreign companies receive less FDI and have smaller accumulated stocks of FDI

ImplicationsGood regulations and efficient processes matter for FDI

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Countries tend to attract more FDI if they allow foreign ownership of companies in a variety of sectors, make start-up, land acquisition, and commercial arbitration procedures efficient and transparent, and have strong laws protecting investor interests. But this correlation does not imply existence or direction of a causal relationship. Many other variables such as market size, political stability, infrastructure quality, or level of economic development are likely to better explain the relationship.

IAB also finds that countries with smaller populations and markets tend to have fewer restrictions on FDI. And countries that have done particularly well in attracting FDI (before the recent economic crisis) such as Ireland, Singapore, the United Kingdom, and the United States also score well on the IAB indicators.


Easily accessible and reliable information, and efficient and predictable actions by public institutions help create a business

environment conducive to investment

ImplicationsEffective institutions help foster FDI

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IAB shows that effective institutions that provide easily accessible and reliable information matter for creating an enabling investment climate. Furthermore, countries that provide their citizens with good public services, have good institutions, enjoy political stability, and do not suffer from corruption tend to score well on the IAB indicators.


IAB indicators are designed to identify good practices that offer governments specific tools for improving their investment climates in

the 4 measured indicator areas

ImplicationsCountries can improve their FDI competitiveness

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Investing Across SectorsAllowing foreign ownership in the primary, manufacturing, and service sectors.

Accessing Industrial Land- Clear laws which provide fair and

equal treatment for foreign and domestic companies.

- Accessible land information. - Efficient land acquisition procedures.

Arbitrating Commercial Disputes- Strong arbitration laws in line with

arbitration practice.- Autonomy to tailor arbitration

proceedings.- Supportive local courts.- Adherence to international

conventions.

Starting a Foreign Business- Equal treatment of foreign and

domestic investors.- Simple and transparent establishment

process.


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More information is available at

www.investingacrossborders.org

Global launchJuly 7, 2010

09.00 Vienna time (07.00 GMT)Vienna , Austria

investing across borders 2010

Documents

indicators iab

countries laws

borders iab

south africa

jure indicators

zambiaeast asia

south asia sar

fdi regulations