DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

0 20070Cambodia Guatemala Vanuatu ChinaSource: Doing Business database.32 Doing Business 2009AlbaniaUnitedArab Emirates UkraineUzbekistanFIGURE 6.4Collateral reform—East Asia & Pacific rapidly moving forwardNumber of reforms strengthening legal rightsby Doing Business report yearDB2006 DB2007 DB2008 DB2009Eastern Europe& Central Asia12(28 economies)East Asia& Pacific(24 economies)OECDhigh income(24 economies)Latin America& Caribbean(32 economies)South Asia(8 economies)Sub-SaharanAfrica(46 economies)Middle East &North Africa(19 economies)01Note: A reform is counted as 1 reform per reforming economy per year.Source: Doing Business database.33What are the reform trends? collateral and by allowing out-of-courtFIGURE 6.3Private credit bureaus provide more comprehensive enforcement. services to lendersIn the past 4 years 34 reforms have % of private Allowing parties % to of public agree to pursuestrengthened the legal rights of borrow-crediers and lenders in 27 economies around faults has been the most popular reformout-of-court bureaus enforcement credit if registries the debtor de-Service provided0255075100Lists the both world—while individuals and 88 firms reforms have improvedcredit both positive information systems in 61 borrowers and lenders (figure 6.5). Thefeature strengthening the legal rights ofDistributesand negative informationeconomies.ability to make such an agreement canDistributes Eastern data on Europe all loans and Central Asia persuade lenders wary of long court proceduresto make a loan in the first place.below 1% of income per capitahas had the most reforms strengtheningGuarantees that borrowerscan the inspect legal data rights of borrowers and lendersin the more past than 4 years, with a total of that have allowed such agreements in-Beyond India and Vietnam, economiesDistributes212 years (figure of historical 6.4). data Large emerging market clude Croatia, France, Ghana, Honduras,Distributes economies, data with from retailers, the exception of the the Kyrgyz Republic and Peru.trade creditors or utilitiesRussian Federation, also figure prominentlyDoing on Business the database. list of reformers. China fied collateral registry that covers sub-Establishing a geographically uni-Source:was a repeat reformer in the past 2 stantially all movable property has beenyears, broadening the range of movable another popular reform feature. Such aassets that can be used as collateral. registry allows potential lenders to findIndia reformed in 2 successive years out easily and with certainty whetherstarting in 2006, establishing an online there are competing claims on the collateral.India stands out among thosecollateral registry and expanding theavailability of out-of-court enforcement. that have taken such a step. Its huge geographicarea and large population makeUkraine improved the standing of securedcreditors in bankruptcy by giving its creation of an online, unified nationaltheir claims priority over labor and state database of security rights in movabletax claims. Vietnam made it easier for assets a notable achievement.entrepreneurs to get a loan by expanding Many economies passed new securedtransactions laws. Three of the range of assets that can be used asthis78FIGURE 6.5Top 5 reform features in legal rightsReforms including feature since DB2006 (%)Allowed out-of-court enforcement of collateralExpanded range of revolving movable assetsthat can be used as collateral35%Created a unified registry for movable property21%Gave priority to secured creditors’ claimsoutside and inside bankruptcy procedures9%Exempted secured creditors’ claimsfrom an automatic stay in reorganizationNote: A reform may include several reform features.Source: Doing Business database.FIGURE 6.247%53%year’s Rankings top on reformers—Cambodia, getting credit are based Guatemalaon 2 subindicatorsand Vanuatu—did just that. Peruintroduced Regulations a onnew bill on guarantees basednonpossessory62.5%on movable property in 33% 2006. Now 33%security interestsStrength of legal almostin movable any type of movable rights asset—tangibleindex (0–10)propertyor intangible, present or future—can37.5%secure a loan, and assets no 33%Depth longer of credithaveto be described specifically. information More than index20(0–6)different types of pledges were consolidatedScope, into quality 1. and The accessibility country’s 17 collateralregistries of credit information have been through combined public as well. 8and private credit registriesThe 88 reforms improving creditinformation Note: Private bureau in coverage the and past public 4 registry years coverage havedo not count for the rankings. See Data notes for details.shown clear results: worldwide, coverageby credit registries more than doubled, toaround 1.8 billion individuals and firms.The fastest reforming region was EasternEurope and Central Asia (figure 6.6). Itsaverage score on the depth of credit informationindex has more than doubledin the past 4 years—from 2.1 pointsto 4.4 out of a maximum of 6—and itscoverage of borrowers has increased bya factor of almost 5. That propelled theregion past Latin America and the Caribbean,and it now ranks behind only theOECD high-income economies.More than a quarter of the reformsin credit information involved setting up(c) The International Bank for Reconstruction and Development / The World Bank