Two days ago the “Doing Business 2012” report of the World Bank was released, which related to the environment of doing business.
As it’s known the Doing Business is one of the favorite reports of our authorities because unlike for instance the Forbes we normally occupy ranks higher than the average. In the current report Armenia progressed by 6 ranks and Armenia is 55th in the latest rankings, having risen by six places in accordance with changed methodology and a new indicator added by the authors of the survey. Quite frankly, we wouldn’t have adverted to this theme because almost all the media outlets wrote about that. But on the other hand this fact made us advert to this with two days of delay. Many of the media agencies and print media mostly wrote about the Doing Business with positive trends and mostly focused on the fact that Armenia progressed by six positions. The first deputy of the minister of economy Karine Minasyan also adverted to this report. She mentioned that some innovation was added to the Doing Business 2012 report and that a new index is being counted – receipt of electricity. The unit shows how much time it takes for the businessmen to join the electrical network after registering the business. Karine Minasyan said that the motto of the report is Doing Business in a More Transparent World – how transparent are the government functions for businessmen. According to Minasyan, Armenia has implemented serious reforms in its business environment. The reforms are implemented as part of Armenian President Serzh Sargsyan’s election program, under Armenian Prime Minister Tigran Sargsyan’s immediate supervision. Armenia has recorded a progress in 11 ranks and regress in seven. Particularly, it has climbed up 10 points in Starting a Business rank, 38 points in Dealing with Construction Permits, six points in Paying Taxes, and five points in Getting a Credit (40th). Regress was observed in Getting Electricity rank (2 points), Registering Property (1 point, and 5th place), Trading Across Borders (1 point, 104th), Enforcing Contracts (27 points, from the 27th place down to the 91st), Protected investments (4 points) and Registering Insolvency (6 points). Nonetheless, the impression is that the Doing Business has only fixed the successes of Armenia. And that the only setback is the receipt of electricity, which can hardly be called a flaw. It is merely a technical malfunction and if we had started the reform a month sooner we would have splendid index.
Unfortunately the reality is slightly different. We have similarly reason to be sad and happy about. This table that was taken from the official website of the Doing Business demonstrates the flaws that Armenia had in its economy. Thus, besides the electricity issue, Armenia has a worse index in terms of tax administration. Despite the fact that Armenia progressed by 6 ranks in the report of the Doing Business 2012, we still remain in the 153rd position in terms of taxes. The report also reads that Armenia eased the tax legislation by cutting the social security payments and also the electronic application process. However, this wasn’t enough even to occupy middle ranks. The index of foreign trade is not positive. Compared to the previous report Armenia dropped down by one rank and currently occupies 104th place. Let us mention that the cost of the exportation of one container exceeds 1,8 times (1800 USD instead of 1032 USD), importation cost exceeds 2 times (2195 instead of 1085 USD). Importation in Armenia requires 18 days instead of the 11 days defines by European criteria.
Of course there are rates that are better in Armenia than in other countries. For example, in terms of starting business we are sharing the 10th place with Saudi Arabia (only Georgia in the region is advanced with this rate – Georgia is in the seventh place). This is mainly connected with the innovation enabling to register businesses online without visiting different state institutions. Generally in terms of six indicators out of the ten indicators used by Doing Business, Armenia has stagnated. These indicators concern receiving electricity, registration of ownership, international trade, provision of agreement fulfillment, etc. The largest stagnation was in terms of fulfillment of agreements (with 27 points). Even though the name does not make it clear, it concerns resolution of disputes through court proceedings. It estimates not the fairness of court proceedings but other measurable indicators such as the average duration of court proceedings, the number of procedures parties should undergo, etc. With this indicator Armenia is in the 91st place.
In fact Armenia’s positions are very weak in terms of protection of investors’ rights. According to the previous report, Armenia has drawn back by four places and occupies the 97th place.
In conclusion, we would like to note that we did not want to find shortcomings in this report. However, we should not make reforms only in consideration of the estimations published by Doing Business and for the purpose of improving the positions in it. The most important thing is the changes and reforms that first of all businessmen should feel. If businessmen feel the real changes, they will not care about the Doing Business anymore.