The last release of the “Doing Business” report from Asiya Investments, a subsidiary of Asiya Capital Investments Company, showed a moderate improvement in the GCC.

However, the newly released results do not hide the poor performance of the region in the last five years, with the only exception of the UAE, says Jordi Rof, economist at Asiya Investments Company.

But what does that mean? “The overall index published in the report measures quality of regulation in a manner that makes it possible to compare it across countries. Ten different categories are considered in the gauge, such as starting a business, getting credit, paying taxes or resolving insolvency,” explains Riof.

Then, these topics are tested by performing the same action in the different legal systems. For instance, it takes six procedures, eight days and about $600 to start a business in the UAE (Dubai). In Kuwait, it takes 12 procedures, 31 days and $1,050 to do so. This translates in a score of 90.0 for the UAE and 75.4 for Kuwait in the category of creating a business.

The UAE is not only the best GCC performer, with an overall score of 75 (31st in the world), but also the only Gulf state improving consistently since 2010. The Emirates have advanced markedly in contract enforcement, protecting minority investors and in resolving insolvency procedures.

An important driver behind the positive evolution of the three categories has been higher quality and more agility of the legal system, which reduced the necessary average days needed to complete the procedures.

The UAE also registered significant deterioration in the categories of cross-border trade and credit regulation, but mainly due to a methodological change in the compilation of information to elaborate the index.

Overall, it seems that the intense reform activity and its quality is behind the notable evolution of the country, as the country performed 20 different reforms directly related to one the sub-categories of the index since 2010.
In the rest of the Gulf, the evolution is not positive. Saudi Arabia and Qatar registered a significant decline in the overall index. Saudi, for instance, improved substantially in taxation and contract enforcement.

Still, the evolution was clearly negative in most other categories, and its lack of effective insolvency procedures led to the worst score in the world in this category. Kuwait, Bahrain and Oman witnessed no significant change.

Government inaction, at least compared to the UAE, explains the poor performance in the rest of the GCC. Saudi Arabia and Kuwait passed only twelve and seven reforms in the last five-year period respectively, a lot less than the UAE, and two of them with a negative impact on regulation quality in each country. Qatar and Oman, carried out six and eight positive reforms respectively, while no reforms where reported for Bahrain.

There are lessons to be learnt from the case of the UAE. Nowadays, the scores of most GCC countries are mediocre, particularly compared to other high-income economies. However, regulation quality can be improved in relatively short periods of time provided the right reforms are passed and properly implemented, as in the case of the Emirates.

Higher institutional quality is a necessary condition for the emergence a pro-business environment in which the non-oil sector is able to thrive. Ending with the dependence on oil depends heavily on removing the unnecessary regulatory burden that the private sector is still facing.

DISCLAIMER: The information contained in this report is prepared by the Research Department of the Asiya Investments is believed to be reliable, but its accuracy and completeness are not warranted. Research recommendations do not constitute financial advice nor extend offers to participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions. – TradeArabia News Service