World Bank says country is ahead of EAC members in efficient business registration. By JIM ONYANGO Tuesday, May 25 2010 Rwanda has overtaken Kenya as the best destination for investment in East Africa, a new World Bank survey says. The study picks out a sluggish pace of business regulation and taxation reforms as the key factors that have helped to reduce Kenya's appeal. Kenya, the biggest economy in east Africa, has been ranked as the second best business destination in the five member East African Community and the 95th most attractive destination for capital out of 185 countries globally in a report that names Rwanda as the country that has made major strides in business registration. Uganda, Tanzania and Burundi follow Kenya in that order as the most rigid nations for starting businesses in the region. Little appeal to foreign direct investments may not necessarily cause potential investors to shun Kenya but has the ability to give new business people the reason to look to emerging markets such as Rwanda, Mauritius and Botswana, analysts have said. Kenya should push through legislative measures to create a conducive business environment for foreign capital, the experts have said. Kenya started instituting reforms in licensing but these have since slackened allowing Rwanda, Mauritius and Botswana to take over as the most reform minded nations across Africa, the report says. "Business regulatory reforms should continue throughout. It's not something you do in one year and the second year you stop" said Sylvia Solf, the World Bank's programme manager for Doing Business, Financial and Private Sector Development. The Doing Business survey indicates that starting a business in Rwanda takes just two procedures while entrepreneurs must go through 11 to 18 steps in Kenya and other EAC member states because of a decentralised process. "In Kenya, entrepreneurs interact with numerous agencies including the registrar of companies, revenue authority, and Ministry of Trade, Ministry of Labour, social security fund, health authority and town planning departments as well as commercial banks." In Rwanda, "the entire company registration is conducted at a one-stop shop established at its commercial department," says the Bank. Analysts are urging Kenya to put reform agenda back on track. "Rwanda and Mauritius are fairly small economies compared to Kenya which still has a huge potential…we should use such World Bank reports to correct where we have failed to enable us climb the ladder quickly," said Mr Sammy Onyango, the managing partner at consultancy firm Deloitte. The search for a new constitution to dismantle bureaucracy, relax taxation regimes and create political stability are key to reaching a conducive environment to attract new investors, add analysts. Countries were judged under 11 indicators including business application, tax registration, access to credit, investor protection, and procedures for closing business. The World Bank says the poor show by Kenya, Uganda, Tanzania and Burundi has worked to drag down East Africa's ranking to 116 out of 183 economies. "If each East African country were to adopt the region's best practice for each of the Doing Business indicators, east Africa would rank 12th" says the World Bank. The survey comes at a time when the EAC legislative arm is set to begin its sittings in Nairobi on Tuesday where Tanzania's President Jakaya Kikwete is expected to address. The low ranking of the EAC market goes against the region's efforts to consolidate efforts and attract foreign investment into a bloc of about 126 million people. "We take the report seriously. There is no point to be defensive. Its true that some of the EAC countries have not done well in the 11 business indicators of the Doing Business survey" said Mr Juma Mwapachu, the secretary general of the East African Community. "A number of reforms have been initiated by the EAC and within two years we hope to achieve the 12th position." Five business associations representing the member states met in Nairobi last week in a kick-off conference aimed at reviewing the challenges that have constrained the region from attracting business. Domesticate reforms The region opens up into a Common Market on July 1 to allow for the free movement of labour, capital and goods across the borders but business associations are seeing many rough edges that must be made smooth. Lack of harmonised tax regimes and goods standards, weak dispute resolution system, and slow implementation of decisions of the EAC secretariat are some of the weaknesses of and threats to the market, which they say will slow the pace of integration. Kenya's EAC Affairs permanent secretary David Nalo says reforms started in East African Community aimed at reaching micro-economic convergence among the five member states would lead to better ratings once national governments domesticate those reforms. "All the five member states have committed to reading the budget on the same day as will be witnessed on June 10; you will also witness harmonised taxes across the region. We are at a stage where we do not want to look at individual nations but at East Africa as a trading bloc" said Mr Nalo.