Ease of doing business is a recent and evolving index used by many corporate and quantitative analysts to help making investment decisions. The main components are: Starting a business, Dealing with Construction Permits, Getting electricity, Registering a property, Getting Credit, Protecting Investors, Paying Taxes, Trading Across borders, Enforcing Contracts, Resolving Insolvency. In this note we shed some light on this index, present where Tunisia is globally, and investigate some improvement ideas.
Currently, Tunisia ranked 51 in 2012 and 56 in 2013 out of the 186 economies under study. The world bank reports several reform attempts to improve the index. However Tunisia ranking keeps on getting higher and worse, the political situation is probably the main reason for the decline.
In chart 1 below we illustrate and compared the Ease of Doing Business in Tunisia in red to the oil-rich Arab countries in green, other Arab countries shown in yellow, and other select countries. Overall Tunisia is more competitive than its counterpart Arab countries with the exception of oil-rich countries. Since we strive for better performance we investigated the index for potential improvement.
Chart1
Looking at the makeup of the index we identified two components where Tunisia significantly lags other nations and score below average namely 1) Dealing with Construction Permits and 2) Access to credit. It would make sense if some of the reform priorities focus on those components to give the index and Tunisia ranking a boost. By inspection, the top 5 best ranked countries in Ease of Doing Business share an excellent low score in "Getting credit".
A normal distribution of access to credit worldwide is present below chart 2. With a mean of 87, Tunisia index stood at 109 and to the right hand side of the curve (i.e. worse than average). The need to reform the banking sector and access to credit has been discussed in prior TUNESS publications [1].
Chart 2
“Dealing with construction permit” is a measure of the procedure efficiency for starting construction with all legal documents and requirements. It involves the cost, time, and complexities required to obtain generate drawings, submit documentation, and obtain licensees, permissions, clearances, inspections including but not limited to water, sewage, and communication. Many assumptions are included in the construction of this components which are discussed in the methods of best countries for doing business[2].
Tunisia score in dealing with construction permit is 122 while the global average is 94 as shown in the graph 3 below. Again Tunisia does not have a competitive advantage in this metric and an improvement must be achieved. An improvement of this metric could be achieved by the deployment of Lean principles. The adoption of lean and its success have been measured and well documented in many private, public and government agencies globally [3,4,5,6,7]. The correct integration of Lean is not capital intensive. The method rather focuses on eliminating waste, and the implementation of pull system. The success and sustainability of such implementation will depend largely on communication, training, and continuous rapid improvement programs.
Note Prepared By: Zied Driss TUNESS Research Team
Refrences:
- Measuring Banking Performance in Tunisia, Bechir Bouzid, TUNESS
- http://www.gfmag.com/global-data/economic-data/best-countries-for-doing-business-2013
- Transforming government performance through lean management, McKensey Center for Government.
- Lean Production in the Public Service Sector, Jason Crawford, Uppal University
- Lean Thinking in government: The state of IOWA, David Brickhamer, Lean.org
- Implementation of Lean Concepts for Public Sector Engineering Design and Construction: A Case Study, John A Kuprenas, Proccedings IGLC
- http://www.epa.gov/lean/government/pdf/leangovt-factsheet.pdf
Source: Worldbank