AS THE government continues its efforts to encourage a ‘pro-business’ environment in the country, the results of the efforts since last year will likely to be revealed within the month.
The Ease of Doing Business report by the World Bank is scheduled for release every October. The Washington-based lender’s flagship report attempts to rank countries across the world in terms of how easy it is for a small and medium enterprise to start and run a business.
In the previous Ease of Doing Business 2016 report published in October last year, Brunei was ranked at 84th place, up from 105th place from the 2015 report two years ago. Ongoing reforms had pushed the country up by 20 places, and an aspirational target of being in the top 20 had been set.
As best practices for business processes across the world are used as benchmarks for the ranking purposes, the ranking itself holds a particular allure.
While it is important for local SMEs to have a business environment that is conducive to grow and sustain, it is also important in the eyes of foreign investors.
In context, in the Doing Business 2016 report, Brunei’s ranking in the East-Asia Pacific region is eight out of 25 economies that had participated in the survey, lagging behind Singapore, Hong Kong and Taiwan at the very top.
Brunei leads in some criteria, such as Paying Taxes, where Brunei ranked 3rd among regional counterparts, and is drastically behind in others, such as Trading Across Borders (19th out of 25) and Enforcing Contracts (14th out of 25th).
These two areas are where Foreign Direct Investors may be most concerned about, given that Brunei is leveraging on its position as a BIMP-EAGA logistics hub for products, either through trans-shipment or manufactured locally. Equally important is the country’s Rule of Law, the ability to enforce terms and conditions in contracts, is basis for investor confidence and good governance.
Trading Across Borders (TAB)
Brunei’s TAB ranking as of last year’s report in this area on a global ranking is 121st. According to the World Bank Data, where it lags behind in the East-Asia pacific region comes down to processing time of documents at the border and during import and export procedure.
For border compliance, it takes 72 hours as opposed to 51 hours in the East Asia Pacific (EAP) region and a whopping 168 hours for documentation compliance in comparison to an average time of 75 hours among EAP counterparts.
Import time takes somewhat less at 48 hours for border compliance compared to an average time of 59 hours in the EAP region. However it takes 144 hours for documentary compliance, compared to the EAP average of 70 hours.
The government aims to reduce much of the time needed to process documentation through the Brunei Darussalam National Single Window, which was implemented around 2014.
According to Dk Najibah Pg Hj Abdul Aziz, a customs official, a majority of government agencies involved in import and export (15 out of 20+ of them) have signed on to the system, with another five coming on board this year.
As the system becomes fully integrated, a single click to send applications to all relevant authorities for import or export deals may help cut down documentation processing time significantly.
The officer also shared that they are aiming for automation of processes on certain items.
Automation of approval is also important to reduce documentation processing time, especially when it comes to Auto-parts, as the World Bank uses how easy it is to get auto-parts in and out of the country as the basis for its criteria on Importing Goods.
The government had also reduced port charges by some 36 per cent on containers, along with other fees when it comes to port services. This may help to lower the cost of import and export, another factor governing TAB rankings.
To climb in this ranking from where the country is at now will be no easy task.
According to the World Bank’s Distance to Frontier Calculator, which gives an idea on where the rankings would be given different results, Brunei’s TAB ranking can only break above 50th (assuming no other economies improve) if the time taken to meet compliance across the board were reduced below 14 hours, alongside reduction in the cost of import/export.
On enforcing contracts, Brunei ranks 113th among the 189 economies measured by the World Bank, and the low rank comes primarily to the Judicial ‘quality’ in terms of its processes when it comes to handling business matters.
It scored ‘7’ out of 18 in Doing Business 2016, in comparison to the average of 7.6 across EAP economies.
The government and the judiciary had made much effort to improve issues revolving around the processes.
One initiative is the rollout of the Judicial Case Management System which occurred earlier in March this year.
The system is intended to cover civil and criminal litigation, bankruptcy, probate and marriage processes in both the Supreme Court and Subordinate Court.
It is expected to be an electronic network connecting all civil courts nationwide. JCMS consist of an e-Filing System, Case Management System, and Queue Management System.
The e-Filing system is an online portal designed for public users and legal practitioners specifically for the electronic filing of court documents.
It will also act as a system for the Courts and its users to search, store and retrieve documents online while providing users with their case schedules and alert them of the status of their cases and times of hearings.
Meanwhile, the Case Management System is a centralised system through which the courts can manage cases and proactively track and monitor each case through its life span.
It would allow for the assignment of cases and management of hearing schedules for judges and judicial officers.
Having Electronic case management is important in the sense that Brunei scored poorly by not having one that is widely used and recognised, in the eyes of the Doing Business report.
The introduction of the Commercial Court which was made earlier this year is also a step forward, as a recognition of a best practice of having a specialised court to deal with the nuances of business cases and contracts.
In September, Dr Colin Ong, President of the Arbitration Association Brunei Darussalam noted that the creation of the Commercial Court provides the potential for Brunei to develop into a commercial hub with a reliable and efficient way to resolve disputes. “It sends a very positive message out to the world that Brunei is a safe jurisdiction that abides by the rule of law.”
Just raising the score to be on par with the EAP region average will put Brunei to rank 106th globally.
In order to break top 50 (assuming no other economies improve and average costs of claims remain the same), Brunei’s judicial quality score needs to be above 13. In context, Judicial quality of high income OECD countries is about 11 on average, and Singapore scores 15.5 out of 18.
Reforms must be felt
There are many other reforms the government have made when it comes to ease of doing business in the country; including issues evolving around business permits, land, getting electricity and construction approval.
Some initiatives for a ‘pro-business’ environment were not even part of the assessment, such as easier Halal License application, something which had earned praised by visiting officials from the World Bank.
During a roadshow in Tutong, Yung Mei Hui, acting senior special duties officer in the EODB Secretariat under the Ministry of Finance said that Brunei’s EODB ranking must be “realised and felt” by the business community and not just on paper.
“This year, the government is aiming to improve its ranking further. With collaboration among government ministries, public sector and the private sector, various components (in the EODB) had been improved in terms of service and competitiveness,” she said.
Yung said this means the government is listening and ready to make changes needed “to create an ecosystem that is dynamic to the business community”.
At the end of the day, these business reforms are important to help give the entrepreneur confidence needed to start or expand business, important for national goals of diversification from oil and gas.
Economies around the world however, are also constantly improving.
122 economies in the Doing Business 2016 ranking had saw improvement, according to the World Bank. In that context, Brunei’s ranking in this year’s report might not see marked or significant improvement despite the number of reforms and changes made.
However, those changes represent best practices and general improvement, and as such, striving for them and achieving them will continue to overall benefit the Brunei economy and its businesses.
Source: Ministry of Finance Brunei Darussalam