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20.02.2006 Business & Finance

Ghana - Friendliest Country For Investors

By Graphic

... in West Africa The World Bank has rated Ghana as the most friendly country in West Africa to do business in.

Ghana is also ranked ninth out of the 41 African countries surveyed and 82nd among the 155 countries surveyed across the world.

On the list of 10 indicators considered, Ghana placed 131st in starting a business, 71st in dealing with licences, 48th in hiring and firing, 120th in registering property, 116th in getting credit and 28th in protecting investors.

Other indicators are paying taxes, 90th, trading across borders, 108th, enforcing contracts, 28th, and closing business, 79th.

The data for the indicators are benchmarked to a January 2005 World Bank study and in most cases refer to each country's most populous city.

The World Bank explained in the research report that indicators measured government regulations and their effect on businesses, especially on small and medium-size domestic firms.

It said the data were based on research of laws and regulations, with input and verification from more than 3,000 local government officials, lawyers, business consultants and other professionals who routinely administered or advised on legal and regulatory requirements.

“This approach uses factual information and allows for multiple interactions with local respondents to clarify potential misinterpretations of questions,” the bank said in the report posted on its website. It said standard templates and questionnaires were also developed for all topics.

The bank further explained that it based the findings on aggregate rankings because they were easily understood by politicians, journalists and development experts and therefore created pressures to reform.

Giving details, the report said the 'starting a business' indicator identified the bureaucratic and legal hurdles an entrepreneur must overcome to incorporate and register a new firm.

They included the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per capita gross national income (GNI).

The 'dealing with licences' indicator also tracked the procedures, time and costs to build a warehouse, including obtaining necessary licences and permits, completing required notifications and inspections and obtaining utility connections.

Another important indicator for investors, hiring and firing of workers, was introduced into the research because it measured the flexibility of labour regulations.

“It examines the difficulty of hiring a new worker, rigidity of rules on expanding or contracting working hours, the non-salary costs of hiring a worker, and the difficulties and costs involved in dismissing a redundant worker,” the report stated.

The 'registering property' indicator examined the steps, time and cost involved in registering property, assuming a standardised case of an entrepreneur who wanted to purchase land and a building in the largest business city — already registered and free of title dispute.

The main indicators included the number of procedures legally required to register property, time spent in completing the procedures and the costs, such as fees, transfer taxes, stamp duties and any other payment to the property registry, notaries, public agencies or lawyers.

The 'getting credit' indicator is the bane of most enterprises in developing countries, such as those sampled. The topic explored two sets of issues, credit information registries and the effectiveness of collateral and bankruptcy laws in facilitating lending.

The 'protecting investors' indicator measured the strength of minority shareholder protections against the misuse of corporate assets by directors for their personal gain.

The main ingredients of that indicator included transparency of transactions (extent of disclosure index), liability for self-dealing (extent of director liability index), shareholders' ability to sue officers and directors for misconduct (ease of shareholder suit index) and the strength of investor protection index (the average of the three indices).

The research also examined the paying of taxes, addressing the taxes that a medium-size company must pay or withhold in a given year, as well as measures of administrative burden in paying taxes. Also included in the indicators was trading across borders to deal with the procedural requirements for exporting and importing a standardised cargo of goods.

The report stated that every official procedure was counted, from the contractual agreement between the two parties to the delivery of goods, along with the time necessary for completion.

Another factor of importance to entrepreneurs is the issue of contract enforcement, which was also dealt with in the research.

It looked at the efficiency of contract enforcement by following the evolution of a payment dispute and tracking the time, cost and number of procedures involved from the moment the plaintiff filed the lawsuit until actual payment.

The 'closing a business' indicator was to identify the weaknesses in existing bankruptcy laws and the main procedural and administrative bottlenecks in the bankruptcy process.