Comparison Of Mauritius And Madagascar

Published Date: 02 Nov 2017

Introduction

The doing business index ranks economies according to the ease businessmen have in carrying out their businesses in the different economies. It takes into account different topics which affect business activities. These are starting a business; dealing with construction permit; getting electricity; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts; closing a business and employing workers. The report also analyses reforms undertaken by governments in order to make their economies conducive for carrying out business. It encourages reforms in the sense that governments have to continually improve their business environment in order to achieve a good positioning in the Doing Business rankings. Since its first publication in 2003, Doing Business has become an international benchmark for investors wishing to carry out business in different economies. It has also established itself as the yardstick with which banks and governments measure the business environment in developing countries. According to the Wall Street Journal, Doing Business is "a way to encourage countries to reduce obstacles to entrepreneurship. Developing countries compete to land a spot on the top 10 list of most-improving countries because it is seen as a way to get attention and investment." The index covers 185 economies and this year Singapore is ranked first followed by Hong Kong and New Zealand which take the second and third position respectively. Mauritius is at the 19th position globally but ranks first in the Sub-Saharan African region. This report will compare Doing Business rankings for the different topics between Mauritius and Madagascar for the year 2010 and 2011. But first, we will carry out a PEST (Political Economic Social Technological) analysis of the two countries.

From a political point of view, Mauritius is a democratic state as proclaimed by the Constitution which is the supreme law of the island. The Constitution provides basic human rights and freedoms and any statement inconsistent with the Constitution is held to be null. Elections are held every five years and the elected members constitute the National Assembly, the country’s law making institution. In addition, the best loser system ensures that all ethnic groups are adequately represented in parliament. Mauritius has an independent judiciary and is a member of various organizations such as the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC), Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC) and the World Trade Organization (WTO).

The political situation in Madagascar however is being portrayed by violent unrest and continuing scuffles for power since 1960. Like Mauritius, Madagascar has a constitution and holds elections every five years though this has not been respected lately due to political instability. Madagascar also has a Senate with 33 members and forms part of various organizations like the COMESA, IOR-ARC, Indian Ocean Commission (IOC), and the Francophone Organization (OIF). The island has strong ties with France as well as economic and cultural links with French-speaking West Africa (BBC News).

Economically, Mauritius is ranked as a middle income country and is 67th globally out of 173 countries for the Human Development Index. The island enjoys a stable and modern environment with good infrastructure. The main pillars of the economy are sugar, textile, tourism, financial services and information and telecommunication technology (ICT). The Seafood Hub is on the way of becoming another pillar of the economy. Inflation has been lower than 10% since 1993 and was at 3.9% in December 2012 (Trading Economics). On the contrary, Madagascar is one of the poorest countries in the world. The World Bank has estimated that 70% of Malagasy live on less than $1 per day. But it has very fertile land, for which there is strong competition and which is causing the decline of its forests. These forests are home to a unique diversity of wildlife and could be an emerging tourist industry. Madagascar is rich in natural resources and mining is one of the major industries of the economy along with fishing, coffee, cotton and spices like clove and pepper. With an inflation rate of 9.5% in 2011(Trading Economics), for over three decades Madagascar recorded the fifth-lowest rate of GDP growth in the world -0.5% per annum (World Bank)

From a social viewpoint, Mauritius is a highly overpopulated island with people of diverse religious groupings. Education is compulsory and free up to the age of 16. The citizens also benefit from free health care available round the clock, which caters specially to the ageing population. Festivals are celebrated on a national level such that there are 13 public holidays in a year. In Madagascar, the Malagasy ethnic group forms over 90 percent of the island’s population and is typically divided into eighteen ethnic sub-groups. Malagasy pay a lot of attention to their dead and spend much effort on ancestral tombs, which are opened from time to time so the remains can be carried in procession, before being rewrapped in fresh shrouds (BBC News). Education is currently free and compulsory up to the age of 16. However the quality of education provided is considered weak with average pupil to teacher ratios of 47:1 in 2008 (Trading Economics)

Technologically, the ICT sector has been promoted as the fifth pillar of the economy. Home to numerous BPOs (Business Process Outsourcing), broadband internet services is also easily available at a reasonable price. ICT literacy courses are offered to the public with the aim to make Mauritius a cyber island. As for Madagascar, technology is not a priority due to the many problems it is currently facing. Because of poverty, the locals do not have access to computers or internet. The few that do have access are mostly companies.

Comparison of Mauritius and Madagascar in cost of doing business

Below are the ranks of the ability to own and operate a business in Mauritius and Madagascar for the year 2010 and 2011, as per the study of the World Bank. A strong ranking on the ease of doing business index means the regulatory environment is more open to starting and operating a firm.

Year

2010

2011

Country

Mauritius

Madagascar

Mauritius

Madagascar

Starting a business

10

12

12

70

Dealing with construction permits

42

107

54

130

Getting Electricity

-

-

45

181

Registering business

66

152

65

141

Getting credit

87

167

75

177

Protecting investors

12

57

12

60

Paying Taxes

12

74

11

74

Trading Across Barriers

19

111

21

110

Enforcing Contracts

66

155

60

156

Resolving Insolvency

-

-

76

147

Note: Getting Electricity was a new category that was introduced by Doing Business in 2011. In our further analysis of the different topics, Getting Electricity could not be included as we were not able to access Doing Business reports for Mauritius and Madagascar for the year 2011.

Starting a business

Doing Business measures the ease of starting a business in an country by recording all procedures that are required by a businessman to put in place and run a business. It also records the time, cost and the paid-in minimum capital that companies must deposit before registration. The ease of starting a business is based on the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement.

To make the data comparable across economies, Doing Business assumes that all information is readily available to the entrepreneur and that there has been no prior contact with officials. It also assumes that all government and nongovernment entities involved in the process function without corruption.

In 2010 Mauritius was ranked 10th while Madagascar was 12th on the list for ease of starting a business. In 2011, Mauritius was 12th while Madagascar faced a serious decline to the 70th position.

In order to start a business in Mauritius, one must follow these procedures:

Incorporate and register the business and search for company name online

Receive inspection by local authorities

Pay license fees

Register with the Social Security Office

Make a company seal

In Madagascar it requires 2 procedures and takes 7 days to start a business. The procedures are as follows:

Obtain a new fiscal identification number

Deposit registered status, apply for license, statistical identifications and file a notice of constitution to be published in a French newspaper.

The table below compares Mauritius and Madagascar on their ease of starting a business for 2010 and 2011.

Madagascar

Mauritius

2010

2011

2010

2011

Rank

12

70

10

12

Procedures

2

2

5

5

Time

7 days

7 days

6 days

6 days

Cost (% of income per capita)

12.9

6.2

3.8

4.1

Paid-in Min.Capital (% income per capita)

248.1

207.4

0.00

0.00

Source: Doing Business database

Reform

Starting a Business

In 2010/11, 42 economies made starting a business easier, with streamlining registration formalities the most popular feature of reforms that have been undertaken. These include Ghana, Hungary, Montenegro, Samoa and Singapore. Peru improved the ease of starting a business the most, establishing a one-stop shop and simplifying post registration formalities at the district council level. This reduced the number of procedures for starting a business by 33%, the time by 34% and the cost by 18%. Reforms that were undertaken were to simplify the registration formalities, to introduce online application procedures, to create a one stop shop and to reduce or eliminate minimum capital requirement.

Mauritius made name verification go online in 2009 and experience a slight decrease in cost from 2010 to 2011. Madagascar simplified business start-up through the streamlining of procedures at the one stop shop, elimination of stamp duty and elimination of the minimum capital requirement in 2010. No reforms were undertaken by either country in 2011.

The last reform done in Mauritius was in 2009 where name verification for a new company was done online making the start up easier. Although no reform was undertaken from 2010 to 2011, Mauritius climbed from the 10th position to the 12th. This may be due to the slight increase in cost from 3.8% to 4.1% of income per capita.

In 2010, Madagascar simplified business start-up through the streamlining of procedures at one stop shop together with the elimination of stamp duty and minimum capital requirement. There were no reforms in 2011.

The reason behind the decline of Madagascar to the 70th position may partly be attributed to the rise in paid in minimum capital, but it is also due to the fact that in 2011 many other countries undertook reforms to make business start up easier. For example, Peru improved the ease of starting a business the most establishing a one stop shop and simplifying post registration formalities at the district council level. This reduced the number of procedures to start a business by 33%, the time by 34% and the cost by 18%. (DB report 2011). The table below shows some good practices that have been adopted around the world making it easy to start a business.

Practice

Economies( out of 183)

Examples

Putting procedures online

105

Cape Verde, Maldives, New Zealand, Saudi Arabia, Singapore

Having no minimum capital

Requirement

80

Bangladesh, Belarus, Canada, Colombia, Tunisia,

Vietnam

Having a one-stop shop

72

Afghanistan, Azerbaijan, Italy, Jordan, Peru, Philippines

Source: Doing Business database

This explains why Madagascar was ranked 70th although it had done nothing to make business start ups more difficult. In fact, other economies have surpassed Madagascar by putting in place reforms as described above.

Dealing with construction permits

Regulation of construction is vital for public protection. But it requires to be efficient, to avoid undue restrictions on an important sector of the economy. Where complying with building regulations is excessively costly in time and money, many builders opt out. Bribery may become the preferred way of passing inspections or builders may simply build illegally, making compromises on public safety. For this sake, compliance ought to be simple, straightforward and inexpensive. Doing Business measures the procedures, time and cost for a small to medium-size business to obtain all the necessary approvals to build a simple commercial warehouse and connect it to basic utility services.

In 2010 Mauritius was ranked 42nd in the ease of dealing with construction permits and moved to the 54th position in 2011. Madagascar moved from 107 in 2010 to 130 in 2011.

The ranking on the ease of dealing with construction permits is based on three component indicators: procedures, time and cost.

Madagascar

Mauritius

2010

2011

2010

2011

Rank

107

130

42

54

Procedures

16

16

16

16

Time(days)

172

172

136

136

Cost (% of income per capita)

1250.6

1298.7

35.5

32.3

Source: Doing Business database

Reform

Eastern Europe and Central Asia was the region with the most reforms of construction permitting in the past 6 years. Twenty economies implemented 33 new regulations, mainly to revamp outdated construction formalities from the communist era. Georgia, after 6 years of steady improvements, has the most efficient permitting system. Among the reforms that were put in place in 2011 were to adopt new building regulations, to introduce risk-based approvals, to have an approved building code and to reduce time for processing permit applications.

In 2010/11, neither Mauritius nor Madagascar undertook reforms in the case of dealing with construction permits and no reform has been put in place in both countries since 2009. This explains why both countries are lagging behind.

Since 2008 neither Mauritius nor Madagascar has undertaken any reform in the ease of dealing with construction permits. But they have not done anything to make the process more difficult either. The reason why these two countries have moved down the ladder still lies in the fact that other economies have been reforming their procedures so that dealing with constructions permits become easier. According to Doing Business, the Democratic Republic of Congo improved the ease of dealing with construction permits the most in 2011 by reducing the time to deal with constructions permits from 248 days to 128 and the average cost from $6,908 to $4,307. The table below shows what economies around the world have done in 2011 to make dealing with construction permits easier.

Features

Economies

Some Highlights

Reduced time for processing permit applications

Benin, Burkina Faso, Democratic Republic of Congo,Croatia, Hungary, Kazakhstan, Mexico

In Benin a new commission to process building permit applications reduced the average time for dealing with construction permits from 410 days to 320.

Streamlined procedures

Côte d’Ivoire, Croatia, Kazakhstan, Mali, Mexico, Saudi

Arabia, Ukraine

Ukraine cut 9 of 31 procedures, reducing time by a third and cost by 6%.

Adopted new building regulations

Croatia, Hungary, Kazakhstan, Romania

Amendments to Romania’s construction law and building regulations cut time by 15 days and cost by 12.9%.

Reduced fees

Burkina Faso, Democratic Republic of Congo, Rwanda

Vietnam’s new registration fee for completed

buildings cut total cost by 43%.

Introduced or improved one-stop shop

Kazakhstan, Paraguay, Russian Federation, Saudi Arabia

In Paraguay a new single-window approach in

the municipality cut time from 291 days to 179

Introduced risk-based approvals

Kazakhstan, Mali

Mali’s new simplified environmental impact assessment for noncomplex commercial buildings cut time by 9% and cost by 32.7%.

Improved electronic platforms or online services

Colombia

Colombia improved its electronic verification of prebuilding certificates, which cut 1 procedure.

Source: Doing Business database

Registering property

One important task is to ensure formal property rights. Administrating land effectively is part of that. If transferring property formally is too expensive or complex, then formal titles might go informal again. It is important to note that if property has not been formally or well administered, then the chance of being accepted as collateral for loans is little- access to finance is limited. Registering property involves several steps, time and cost.

The table below shows a comparison between Mauritius and Madagascar for registering property in Cost of Doing Business.

Mauritius

Madagascar

2010

2011

2010

2011

rank

66

65

152

141

Procedures (number)

4

4

6

6

Time (days)

26

26

74

74

Cost (% of property value)

10.7

10.6

9.4

9.8

Source: Doing Business database

In 2010, Mauritius was ranked 66th for registering property while Madagascar was ranked 152nd in the same year. The huge gap between these two countries` ranking is because Mauritius adopted reforms such as in 2010, registering was made easier, by putting a statutory time limit of 15 days for obtaining the final property title from the Land Registry. Madagascar has been left behind mainly because of the political instability prevailing there.

In 2011, there have been slight change in the ranking of Mauritius and Madagascar, that is, they ranked 65th and 14th respectively. The number of steps taken for the procedure of checking encumbrances, obtaining clearance certificate and preparing deed and transfer title, did not change, that is, it was 4 for Mauritius and 6 for Madagascar in both 2010 and 2011. There has been no change.

Furthermore, even the time taken which is in terms of days to transfer property did not alter. It means that Mauritius took 26 days and Madagascar took 74 days in both 2010 and 2011 to transfer property.

However, there has been a slight change in the cost which is a percentage of property value, with no bribes included. The cost for Mauritius decreased from 10.7 in 2010 to 10.6 in 2011. On the other hand, the cost for Madagascar increased from 9.4 in 2010 to 9.8 in 2011.Entrepreneurs are finding it easier to register and transfer property owing to facilities like computerized land registries, introduction of limits for the time taken for the procedures and setting an affordable fixed fees. The time required has been cut by many and this may facilitate buyers to use or mortgage their property earlier.

Reform

Registering property

A number of countries, such as Bangladesh, Hungary, Malawi, Denmark, Malaysia, Jamaica and many other countries, adopted reforms for making registering property become easier and faster. Reforms such as fixing registration fee, or reduction of taxes on registering property, increasing efficiency of administration, for example cutting down of 150 days by Sierra Leone to remove restrictions on land transfers, were done in 2011. Furthermore, Slovenia, Samoa and Malaysia adopted computerized procedures to save time. In addition, registration was less time consuming. The introduction of fast-track procedures and combined and streamlined procedures, are even more beneficial as reform for investors.

Moreover, Mauritius was not left behind in improving its procedures. Reforms such as reducing registration fees, abolishing two of its procedures and setting of time limit of 15 days for the procedure of obtaining the final property were introduced. On the other hand, Madagascar did not reform as such.

Getting Credit

Credit information systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws, are facilitating the access to credit and is making improvement to its allocation. Credit information systems will permit borrowers to have a good credit history which will enable them to have access to credit easier. A good and sound collateral law will enable businesses to make use of their assets, especially movable property, as part of security to generate capital. This indicator examines two fundamentals issues- the effectiveness of collateral and bankruptcy laws in making lending and credit information registries become easier.

The table below shows the ranking of Mauritius and Madagascar for getting credit in Cost of Doing Business.

countries

Mauritius

Madagascar

year

2010

2011

2010

2011

rank

87

75

167

177

Strength of legal rights index (0-10)

6

6

2

2

Depth of credit information index (0-6)

3

3

1

0

Public registry coverage (% of adults)

36.8

49.8

0.1

0

Private bureau coverage (% of adults)

0

0

0

0

Source: Doing Business database

To start with, private bureau coverage and public registry coverage are measured but they do not count for the rankings. Mauritius has got the 7th place in 2010 for ease of getting credit and it has ameliorated quite a lot, since in 2011, it was ranked 75th. This shows a real reform for Mauritius. This can further be shown by the reform made in 2010 where access to credit information was strengthened by allowing the licensing of private credit information bureaus, and by facilitating expansion of the bureau coverage to all credit facilities. However, in 2011, no reform was measured by Doing Business in Mauritius.

Globally, Mauritius stands at 87th and 75th for the ease of getting credit in 2010 and 2011 respectively.

On the other hand, instead of ameliorating its ease of getting credit, Madagascar was declining and this is so because in 2010, it was ranked 167th and in 2011, 177th. This is because the strength of legal rights index which means regulations on non-possessory security interests in movable property did not change. It remained 2 for both 2010 and 2011. However, the depth of credit information index which measures the scope, quality and accessibility of credit information through public and private credit registries, deteriorated a lot. From a score of 1 in 2010, it was dragged down to 0 in 2011. This is the reason for which, there has not been any reform in the case of Madagascar.

Strong legal rights of lenders and borrowers under collateral and bankruptcy laws, and increased scope, coverage and accessibility of credit information, can increase the access of entrepreneurs to credit.

Reform

Getting Credit

Countries like Georgia, Estonia, Saudi Arabia, Marshall Islands, Solomon Islands, Jordan and many others, introduced reforms for ease of getting credit. Reforms done are amendments of out-of-court enforcement, creation of a unified registry, giving priority to secure claims of creditors outside procedures of bankruptcy and many other reforms.

Moreover, Mauritius did not lack behind in making reforms. The minimum loan requirement was eliminated, the licensing of private credit information bureaus were allowed and amongst others.

Protecting investors

Protecting investors is important because it determines the company`s ability to raise the capital which is needed for the growth, innovation, diversification and completion. It is important to note that investors may not want to invest, if protections are not provided by laws or unless they are given the controlling power. Strengthened regulations give a clear view of related-party transactions, promotion of clear and efficient requirements of disclosure, the requirements for the shareholders to participate in important and big decisions of the firm and setting of clear accounting standards for the company insiders.

Protecting investors ranks the power of minority shareholder protections against misuse of corporate assets by directors for their personal gain.

The table below shows the ranking of Mauritius and Madagascar for protecting investors’ indicator for Cost of Doing Business.

Countries

Mauritius

Madagascar

Year

2010

2011

2010

2011

Rank

12

12

57

60

Extent of disclosure index (0-10)

6

6

5

5

Extent of director liability index (0-10)

8

8

6

6

Ease of shareholder suits index (0-10)

9

9

6

6

Strength of investor protection index (0-10)

7.7

7.7

5.7

5.7

Source: Doing Business database

Mauritius scored 7.7 on the strength of investor protection index and higher score shows stronger protection. Globally, Mauritius stands at 12th in both 2010 and 2011 for ease of getting credit.

The scores recorded over time for Mauritius on the strength of investor protection index may also be revealing. The strength of investor protection index`s ranking indicates whether the economy is lacking behind other countries in investor protections—or surpassing them.

Mauritius being ranked 12th in both 2010 and 2011 is a good thing and is better in all aspects against Madagascar. The latter did not improve at all. The measurement of transparency of transactions, the measurement of liability for independent-dealing by directors and the measurement of the ability of shareholders to file a case on officers and directors for misconduct did not change at all; they remained 5, 6 and 6 respectively for Madagascar.

Countries with the strongest protections of minority investors, from independent-dealing have requirement for disclosure and a clear definition of directors` duties. Minority investors are given a way, to prove their case and to get a judgment within a reasonable time; by providing them with good-functioning courts and updated procedures rules. So reforms in this case may be on different fronts—such as through introduction and amendment of the company laws or rules of the civil procedure.

Reform

Protecting investors

Reforms are adopted by countries such as Brazil, France, New Zealand, Japan and so on. Requirement of detailed disclosure were given as reform for protection of investors. Allowing the access to corporate documents, before and during trials is also a measure of reforming. Giving a clear definition of the duties of directors is also part of that. On the other hand, Mauritius and Madagascar did not administer such reforms.

Paying Taxes

Tax is a means by which the government finances their expenditure by imposing charges on citizens and corporate bodies. They are considered as important because they are used to fund infrastructure, services and public amenities in order for the economy to function effectively. Nevertheless the government needs to be careful when setting up tax rates and avoid any kind of complexities.

The Doing Business statistics for Mauritius and Madagascar shows whether it is easy or difficult to comply with tax regulations in those countries. The data collected over the years shows clearly which part of the process has changed.

Globally, Mauritius had the following ranking 12th and 11th in the year 2010 and 2011 respectively, in the ranking of 183 countries on the ease of paying taxes. However for both 2010 and 2011 Madagascar had the same ranking which was 74th out of 183. These data clearly shows that the possibility for easing tax agreement is greatest in Mauritius.

The indicators reported here for Mauritius and Madagascar are based on a set of taxes and contributions that are paid by companies used by Doing Business for its study. Data are collected from these companies. Financial statements are reviewed as well as all the transactions of the company during the year are considered. The taxes and contributions paid as well as the related number of payments, time and tax rate are listed below:

Year

2010

2011

Indicator

Mauritius

Madagascar

Mauritius

Madagascar

Payments(number per year)

7

23

7

23

Time(hours per year)

161

201

161

201

Total tax rate (% profit)

22.9

39.2

25.0

37.7

In the year 2010, Mauritian firms make 7 tax payment on average in a year, 161 hours spent a year on filing, preparing and paying taxes and the total taxes paid amount to 22.9% of profit while for the year 2011, the data remained practically the same nonetheless the total tax paid out of profit increased to 25%.

However Madagascar was less competitive as compared to Mauritius, for both years 2010 and 2011 firms made on average 23 tax payments each year, 201 hours spent on filing each year, preparing and paying taxes. However the total taxes paid decrease from 39.2% to 37.7%.

The above table indicates that Mauritius has made paying taxes faster and easier for businesses. These are in terms of reducing the frequency of payments or performing electronic filing and payment. Thus it is more competitive than Madagascar when considering those indicators.

Reforms undertaken for paying taxes

In 2010/2011, there were 33 countries in all which made paying taxes easier and lowered tax burden. They were namely India, Canada, New Zealand, and Seychelles among others. They adopted some or all of these reforms; Easing Tax Compliance, Reducing tax rates and Introducing new systems.

In 2010, neither Mauritius nor Madagascar undertook any reform. While in 2011, Mauritius introduced a new corporate social responsibility and Madagascar continued to reduce corporate tax rates. These reforms clearly explain why Madagascar has lack behind on the ease of paying tax. It continued to concentrate on minimising the tax rates while Mauritius introduced new system.

Trading across borders

It has become important to make trade between countries easier in today’s globalized world. Several procedures such as customs, document requirements, efficiency of port operations and poor infrastructure may cause additional costs and delays for exporters and importers hence stifling trade potential.

Globally, Mauritius stood at 19th in 2010 and at the 21st position in 2011 among 183 economies on the ease of trading between countries. It shows that the position of ease of doing business for Mauritius has dropped by 3 positions. However, Madagascar had a ranking of 111th in 2010 and 110th in 2011. This clearly shows that there was a positive change in the ranking by a change of one.

The procedural requirements, the required documents, associated time and cost to complete each procedure, in order to export and import a standard shipment of goods are illustrated below:

Year

2010

2011

Indicator

Mauritius

Madagascar

Mauritius

Madagascar

Documents to export (number)

5

4

5

4

Time to export(days)

14

21

13

21

Cost to export(US$ per container)

737

1279

737

1197

Document to import (number)

6

9

6

9

Time to import (days)

14

26

13

24

Cost to import (US$ per container)

689

1660

689

1555

According to data collected by Doing Business for Mauritius in the year 2010, 5 documents were required to export a standard container of goods which took 13 days and cost $737. While 6 documents were required to import the same container of goods, took 13 days and cost $689 and for the year 2011 they remained practically the same apart that there was a slight change in the number of days for export and import.

However for Madagascar, in year 2010 4 documents were required in order to export a standard container of goods which cost $1279 and took 21 days. If the same container of goods was imported, it required 9 documents, took 26 days and cost $1660 and for the year 2011 they remained practically the same apart that there was a slight change in the cost to import number of days for export and import.

As measured by Doing Business over the years Trading across borders has become faster and easier. New tools have been adopted by the government to make trade easier. These particular changes help enhance the trading environment and increase firms’ competitiveness internationally.

Reforms Trading across barriers

There were 18 countries which adopted new measures in order to make trade across borders easier. Among them there was Poland, Belgium, Seychelles and 15 others. The reforms which they adopted was introducing or improving electronic data interchange system, customs administration, procedures at port, risk-based inspections, single window, implementing border cooperation agreements and reducing the number of trade documents.

In order to make trading across border easier, in 2010 Mauritius opted to introduce electronic submissions of customs declarations and bills of lading which has expedited trade however no reforms were undertook in 2011. However, no reforms were introduced in Madagascar in 2010 while in 2011; there was an improvement in communication and coordination. This was done through the single-window system (GASYNET), thus the time and cost to export and import is reduced. Despite reforming the system in Madagascar, Mauritius was proven to be more competitive because it adopted a more robust measure.

Enforcing contracts

Contract enforcing laws are necessary for businesses expand their network and markets. People might choose to do business only with those whom they trust if there is no effective contract enforcement. Firms are more likely to do business with new customers or borrowers where the contract enforcement is efficient.

Globally, Mauritius stood at 66th in 2010 and at the 60th position in 2011 on the ease of enforcing contracts. However for Madagascar in the year 2010, it stood at the 155th position while in 2011 at 156th. The ranking clearly shows that Mauritius has better functioning courts than Madagascar and contracts can be enforced easily.

The procedures, the time and cost of completing a commercial lawsuit, are listed in the summary below.

Year

2010

2011

Indicator

Mauritius

Madagascar

Mauritius

Madagascar

Time (days)

720

871

645

871

Cost (% of claim)

17.4

42.4

17.4

42.4

Procedures (number)

36

38

36

38

According to data collected by Doing Business for Mauritius in the year 2010, it required 36 procedures took 645 days and cost 17.4% of the value of the claim to enforce a contract and for the year 2011 they remained practically however there was a decrease in the number of days it took to enforce contract. However contract enforcement deteriorated for Madagascar in both years.

Contracts enforcement has been significantly improved in practically all regions over the past years. Developed economies are trying to find new ways to improve their efficiency by introducing new technologies while developing economies are trying to reduce backlogs in their system.

Reforms Enforcing contract

Over the last few years, economies in all regions have implemented reforms easing contract enforcement, In 2010/2011, there were a total of 11 countries, Kenya, Malaysia Nepal and Russian Federation was among these economies. The judiciary can be improved in different ways. This can be by increasing the procedural efficiency at the main trial court, introducing computerized case management system, expanding specialized commercial court, making enforcement of judgement more efficient and by reviewing rules on the modes of service and notification.

In both years 2010 and 2011, Mauritius had introduced new reforms in its system while no changes were made in that of Madagascar. In 2010, Mauritius created a specialized commercial division of the Supreme Court thus improving contract enforcement and in 2011 the resolution of commercial disputes was speeded up by recruiting more judges and increasing the number of courtrooms. These reforms clearly explain the ranking of Madagascar and Mauritius which is 156th and 60h respectively in 2011.

Resolving insolvency

Well-functioning insolvency systems can enable access to finance, save efficient and competent businesses and thus improving potential growth of the economy overall thus the expectation of debtors and creditors will be improved about the outcome of insolvency proceedings.

Globally, Mauritius had the ranking of 76th in the year 2011 while that of Madagascar was 147th in the ranking of 183 countries for resolving insolvency. These data clearly shows that the potential for resolving insolvency is greatest in Mauritius. Data Collected by Doing business studies shows where efficiency of insolvency proceedings has changed and where it has not, thus there is a potential to identify where improvement was greatest.

The indicators reported here for Mauritius and Madagascar involve the time, cost and insolvency proceedings outcome for domestic entities. Data are collected through surveys which are responded by local insolvency practitioners. This information is verified on bankruptcy systems by laws, regulations and public information. The time, cost and recovery rate are listed below:

Year

2010

2011

Indicator

Mauritius

Madagascar

Mauritius

Madagascar

Time (years)

-

-

1.7

2.0

Cost (% of estate)

-

-

15

30

Recovery rate (cents on the dollar)

-

-

35.1

14.3

In the year 2010, resolving insolvency in Mauritius took 1.7 years on average and cost 15% of the estate of the debtor and the recovery rate is 33.6 cents on average on the dollar. While for the year 2011 the data remained the same but there was a slight change for the average recovery rate, it increased to 35.1 cents on the dollar.

However Madagascar was less competitive as compared to Mauritius, for both years 2010 and 2011. Resolving insolvency for both 2010 and 2011 took 2.0 years on average and cost 30% of the debtor’s estate. The recovery rate on the dollar was 14.3 cents on average.

Reforms Resolving insolvency

Reforms were adopted by several countries in order to make closing a business easier. There were 29 countries among which were Australia, France. Malaysia, Switzerland among others. Establishing reorganization procedures or pre-packaged reorganizations, eliminating formalities or tightening time limits, regulating the profession of insolvency administrators, modifying obligation for management to file for insolvency and promoting specialized courts were measures adopted by the economies.

In year 2010 Mauritius adopted new insolvency law. This was a rehabilitation procedure for companies as an alternative to winding up and defines the rights and obligations of creditors and debtors as well as sanctions for those who abuse the system. However no reforms were introduced in 2011. No new measures were adopted by Madagascar during these two years.