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World Bank Report 'Doing Business 2005'

10 September, 2004

World Bank Report 'Doing Business 2005'

"There are several messages to take from the World Bank report that ranks New Zealand high in terms of the ease of doing business", Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

First, New Zealand scores well in general in the seven areas studied by the Bank on this occasion, namely starting a business, hiring and firing workers, registering property, getting credit, protecting investors, enforcing contracts and closing a business, Mr Kerr said.

This confirms the benefits of the economic reforms undertaken in the 1980s and early 1990s. It is foolish for the government to brand them as failed policies. For it to take credit for New Zealand 's ranking is like the rooster taking credit for the sunrise.

Secondly, New Zealand does not stand out on two indicators.

With respect to difficulty of hiring, New Zealand is behind Australia in the Bank's index and for difficulty of firing we are on a par with that country (and several others). Few observers would regard Australia as having a genuinely flexible labour market, which is what the World Bank advocates. New Zealand needs to stand out from the crowd with superior policies if we are to outperform competing economies.

With respect to protection of investors, New Zealand ranks behind Australia , Canada , Japan , Korea , the United Kingdom and the United States . This may reflect the government's patchy record of respecting property rights in areas such as ACC renationalisation, Timberlands, the electricity and telecommunications industries and the foreshore and seabed.

Thirdly, the World Bank is yet to examine many areas that also have a major and possibly greater impact on the ease of doing business. Examples are taxation, environmental regulation such as the Resource Management Act, and infrastructure such as roading, electricity and water supply. New Zealand is unlikely to score well in these areas.

Finally, the thrust of the World Bank report is to urge governments to continue with the kind of market-oriented reforms that New Zealand undertook a decade and more ago. It finds that the payoffs from such reforms are large, and that heavy regulation and weak property rights are harmful, especially for lower income groups. It particularly commends increasing the flexibility of labour laws. New Zealand is not listed among the active reformers.

"Nowhere does the report endorse hands-on, interventionist policies as the government claims", Mr Kerr said. "Like the OECD and New Zealand business organisations, the World Bank is implicitly saying that New Zealand is going in the wrong direction in returning to more complex and inflexible employment laws and adding to regulatory burdens on business.

"Far from providing grounds for self-congratulation, this report should be a wake-up call for New Zealand", Mr Kerr concluded.



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