1. Ease of Doing Business Reforms to Increase
Liquidity and Build Reserves through
Domestic and Foreign Direct Investments
Zimbabwe Economic Review and National Competitiveness Conference
Harare
20 October 2016
By
Amarakoon Bandara

2. Ease of Doing Business
184
0
20
40
60
80
100
120
140
160
180
200
Ease of Doing Business Rank ▲
89
0
20
40
60
80
100
120
140
160
180
200
Starting a Business
131
0
20
40
60
80
100
120
140
160
180
200
Dealing with Construction Permits
174
0
20
40
60
80
100
120
140
160
180
200
Getting Electricity

3. Ease of Doing Business
135
0
20
40
60
80
100
120
140
160
180
200
Registering Property
133
0
20
40
60
80
100
120
140
160
180
200
Getting Credit
174
0
20
40
60
80
100
120
140
160
180
200
Protecting Minority Investors
173
0
20
40
60
80
100
120
140
160
180
200
Paying Taxes

4. Ease of Doing Business
187
0
20
40
60
80
100
120
140
160
180
200
Trading Across Borders
165
0
20
40
60
80
100
120
140
160
180
200
Enforcing Contracts
189
0
20
40
60
80
100
120
140
160
180
200
Resolving Insolvency

5. Progress in Doing Business
Change in Rank
2013 2015 Change
Ease of doing business 172 184 -12
Starting a business 143 89 54
Dealing with construction
permits
170 131 39
Getting electricity 157 174 -17
Registering property 85 135 -50
Getting credit 129 133 -4
Protecting investors 128 174 -46
Paying taxes 134 173 -39
Trading across borders 167 187 -20
Enforcing contracts 111 165 -54
Resolving insolvency 169 189 -20

6. Two fundamentals for attracting
Investments
 Safety of capital
and
 Higher Return

7. Safety of capital
 Property Rights
 Rule of Law

8. Higher Returns
 Classical sources of comparative advantages
Market size; Absorptive capacity, as measured by
financial development; the level of economic
development; infrastructure; natural resource
abundance; and macroeconomic stability.
 Institutional quality and efficiency
Rule of law, quality of bureaucracy, and executive
constraints.

9. Host country’s structural reforms
 Financial sector reforms (to strengthen banking sector
supervision, to reduce credit ceilings for banks, and to
liberalize securities markets), trade reforms, and
privatization.
 Financial reform is arguably a pre-condition for the
maximization of the benefits of spillovers to foreign
investors via backward linkages as an efficient domestic
financial system greatly facilitates the establishment and
growth of domestic suppliers of the foreign firms.
 Foreign investors highly value a host country’s financial
system that is able to allocate capital efficiently, monitor
firms, ameliorate, diversify and share risk, and ultimately
mobilize savings.

10. Cost of Capital and Labor
 Limited access to and
high interest rates on
credit from formal
financial institutions
 Excessively high costs
on micro credits
 High cost of labor
relative to most
regional countries
 Low labor productivity
 Wage structures not
linked to labor
productivity

11. Liquidity Crunch
 Decline in net financial flows
(CA:-3.0bn, Capital
account:2.7bn), inability to print
money,
 Medium to long term effects of
liquidity issues on domestic and
foreign investments
 More to do with the breakdown
in confidence that leads to
hoarding, illicit financial outflows
 The role played by past mistakes
and present policy uncertainties

12. Policy Recommendations
 Restore confidence in the government and the
financial system, including through
 being transparent in policy making,
maintaining policy coherence and consistency and
establishing strong financial regulatory measures
 Undertake credible reforms (financial, labor
and public sector) to attract foreign and
domestic investments

13. Policy Recommendations
 Create a conducive investment climate including
through removal/modification of existing
restrictions on foreign investments
 Strengthen institutional efficiency. Link public
service salaries/career development to
innovation through a risk-reward system
 Fight corruption head-on

14. Thank You!