[LCM Articles] High Speed Business

[Loai Naamani]

 <http://www.oxfordbusinessgroup.com/weekly01.asp?id=2881> High Speed
Business


Lebanon, Volume 154, 11.05.2007
C OXFORD BUSINESS GROUP

 

The Lebanese government has vowed to cut the length of time and the expenses
involved with setting up an enterprise by half before the end of the year by
putting in place a sweeping series of reforms to business registration
process. 

On May 8, Sami Haddad, the economy and trade minister, announced that the
final touches had been put to new regulations to streamline the bureaucratic
requirements to establish a business. The reforms are due to go before the
cabinet in June. 

With the Lebanese parliament not having convened since last November due to
the ongoing political stand off, ratification by the cabinet will suffice to
bring the reforms into being, meaning they could take effect before the end
of the year. If they do, the new regulations will mark a major overhaul of
how business is done in Lebanon. 

Haddad said that while attracting investment and creating job opportunities
were a government priority, the bureaucracy was obstructing the setting up
of businesses. 

At present, an average of 46 days in required to complete all the procedures
required to set up a business in Lebanon, with associated fees totalling
around $4000, a situation which ranks Lebanon 116th out of 175 countries on
the World Bank's most recent Ease of Doing Business Survey. 

Under the reforms that make up the Business Registration Simplification
Project as outlined by Haddad, registering a business should take no more
than six days while the costs should be cut by half. 

Instead of having to do the lengthy rounds of state offices to obtain the
necessary forms, filling them out and then doing the rounds again to have
them approved, the registration process will be reduced to a four-stage
procedure. 

The new scheme will see all the required documentation available from any
post office branch. Having had the filled forms notarised and obtained proof
of having a legitimate bank account, entrepreneurs will be able to lodge all
the paperwork and pay the necessary fees at a LibanPost branch before being
forwarded for approval. 

While the six-day timeframe is not quite as short as the three-day Haddad
said he was aiming for in March when discussing the reforms, it is a major
step forward and one that could help achieve the programme's other
objectives. 

"At the end of the day, it's not just about simplifying our bureaucracy -
the ultimate goal is to create as many jobs for Lebanese as possible," he
said. 

The reforms, long called for by the private sector, are also a response to a
report released by the World Bank in late March, which stated the Lebanese
government needed to put in place far-reaching improvements to remove public
sector obstacles to investment and business growth. 

The report, prepared by the International Finance Corporation (IFC), the
bank's private-sector arm which assisted in the Business Registration
Simplification Project, said there needed to be a complete overhaul of the
business licensing system, which was described as being "inefficient,
over-regulated and time-consuming for both the public and private sector". 

Another problem faced by private enterprises in Lebanon is the slow pace of
the judicial system, which along with the high level of bureaucracy make the
business climate difficult, according to Julia Brickell, IFC country manager
for Lebanon. 

The judiciary also came under criticism from Finance Minister Jihad Azour,
who said he feared powerful professional groups such as the Bar Association
would try to push for the legislation to be overturned as it would reduce
the role of the legal profession in the registration process. 

"Lebanon lost millions of dollars and thousands of jobs because of the
opposition of the Bar Association," Azour said on May 10 in an interview
with local press. "The Bar Association is preventing the reforms from taking
place. The same for the notaries, the same for the judges." 

Further long-term reforms have also been planned, which would end the
requirement for a new business to have a high level of capital in order to
open and also eliminate more layers of legal procedures, such as the need
for a lawyer, notary and auditors. However, such measures would require a
vote of parliament and would have to avoid the sort of opposition cited by
Azour. 

Though some lobby groups may oppose the new regulations and the other
planned reforms, any liberalising of the registration regime will be
welcomed by small scale investors, the ones most affected by the current
slow process and high costs. Though the proposed steep reduction in fees may
cost the Treasury in the short-term, the revenue generated from income taxes
levied on new start ups will bridge the gap many times over.

 

http://www.oxfordbusinessgroup.com/weekly01.asp?id=2881 

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