Rita Ramalho, Senior Manager of the World Bank’s Global Indicators Group, talked to N1 on Tuesday about the group's latest report which analysed and compared the ease of doing business in 25 cities across four European countries, including five in Croatia.

What are the main findings of this report, this analysis, because its objective is to assist governments in promoting competition to reform. So what are the main indicators that you used, and what the overall and key findings, for Croatia specifically?

This report was done jointly by the World Bank Group and the European Commission, and as you stated, the main objective is to inform governments on regulatory areas where there’s room for improvement. So in this report we actually looked at four different countries – Croatia is one of them, the Czech Republic, Slovakia, and Portugal. And these are countries that have a lot of potential for growth, for convergence within the European Union. So these are great opportunities for improvement, and regulatory area, the business regulatory area, is one of the areas than can be improved further. So we are looking specifically at five areas that are measured in the Doing Business report. And those five areas tend to have more variation, more differences within a country, even within relatively small countries, these things can be actually quite different.

We are looking at the process of starting a business – so, how long, how much it costs, what is the process, to actually get a business open across the different cities that we measure. We measured 25 cities in those four countries, five specifically in Croatia. We are also looking at the regulatory process of getting a construction permit, which is probably the area that varies the most across cities within a country. We are looking at the process of getting electricity, which is, of course, also crucial for businesses, the process of enforcing contracts, when you go to court and have a commercial dispute, how do you solve that. And that also has some variation because of the different jurisdictions within a country. And we also look at the process of transferring property.

So you said five cities in Croatia compared according to the five criteria you just mentioned. How do they compare to each other, give us some example of your findings.

For instance, one of the examples, and that goes into the findings, across all five areas, Varazdin is the best one, on average, and Split is actually the worst. But that has a lot of variation within topics. So, for instance, for starting a business, Split is actually the best out of the five cities, with just six days in order to start a business, because most of the businesspeople in Split, actually, the new entrepreneurs, use an online platform to start their business, whereas in other cities they don’t. Zagreb is actually the worst in starting a business, or the one where it takes the longest, with over 22 days.

But there’s a lot of variation across the topics, even within cities. Because, for dealing with construction permits, actually, Varazdin with 112 days to get all the processes – to get a construction permit, to get a water connection, all of that, all of the different inspections, that is much faster, significantly much faster than in Split, where it takes the longest. So there is a lot of variation within cities and cities can learn from each other. We see it not as a problem but as an opportunity for them to learn from each other, because within the same country, within the same regulatory framework overall, why does one city perform much better than the other? So it shows where there is significant room for improvement.

For the European Union, cohesion policy is one of the most important ones. We basically see how the proposal of the budget for the next period 2020-27, was formed this kind of subnational comparisons within the EU. Why are there, you’ve mentioned some things, but why are they important in this sense to drive the reforms. Because we have our government, national government, that is proclaiming that they want to reform the country but the things are going really slow, especially in these kind of practical things that you analysed as the main indicators.

I think what is important for the development within a country is consistency across the different regions, the different cities. You don’t want one city to be much better than the others, you want all of them to have the same level of opportunity, the same level of services provided to their citizens. And that’s one of the interesting things we’ve seen in this report. Actually, in Croatia, we do see that small cities tend to perform better, faster. It can be an issue of workflow, so they have less demand and they can process. But then that may also indicate that maybe in the larger cities there needs to be more resources, appropriate allocation of resources, to allow larger cities to perform timely services to their citizens.

But in other countries, for instance in the Czech Republic, it’s actually the opposite. Prague is the one that is the fastest and the simplest across the different areas, in general. On average, Prague does better than the smaller cities in the Czech Republic. So it does vary a lot, it’s not just necessarily because in a smaller city you have less demands so that you actually process things faster.

What are the main obstacles that the people who are running these five cities in Croatia that you have analysed should pay more attention to, or perhaps be more brave in political decision-making, because facilitating things for doing businesses is always in their hands.

In general, there are different recommendations depending on the area, but in general, cities need to see electronic systems as their allies. Because it makes it easier for the entrepreneur to go through the processes, but it also makes it easier and cost-effective for the city to process all the red tape they need to go through. In that, we’ve seen, in the case of starting a business, where in Split it’s much faster and simpler to start a new business, because there’s an online platform that is widely used. In other cities it’s not. Even though it is available, there needs to be more communication and more dissemination on what is the value of using that system.

Also, enforcing contracts is also another area where there’s room for improvement in Croatia. Croatia could learn from other countries where they’ve used online systems for case management.

What are the best examples in that regard?

Among the countries that we measured in our report, I think Portugal would be the right example, they have a system called CITOS, that actually helps case management and makes the process much faster because a lot of it is just making sure that the process goes along and doesn’t get derailed.

There’s one interesting thing in the findings, where it says that resolving a commercial dispute in Split takes nearly 11 months longer than in Osijek. You said that the main point of policy is to make this balanced, among regions and between the cities. How can a country which is centralised in a way, like Croatia, do more to make these local inequalities disappear or reduced?

One of the findings in the report is that Croatia may be less centralised than what it thinks it is in practice. Because that type of difference of 11 months means that courts in Split have a lot of say in how they manage the process, otherwise it wouldn’t be so much slower than in Osijek. So, eben though the law may be the same at the national level, and all other processes, the adjournments, and so on, may be consistent across the whole country – but then how courts implement it, how they manage the process, the different trrials, the different hearings that happen, that is left to the court, not to the central government. And that affects a lot, the time. That difference comes from the case management process throughout. The difference in from when a plaintiff makes a complaint to the court until it actually gets executed at the end. So in that, the court has a lot of say, and that is at the local level.

So, to minimise those differences, it could be by training judges, by getting these online platforms that allow for consistency across different cities, and to simplify the process and make it faster. So that you can see this case is at stage A, this other case it at stage B, the information is transparent and available, and it makes it go faster. And probably in a more open and clear way than before, when maybe the information is only at the court, and not available.

In global Doing Business reports, and in local politics here basically, the main sickness of Croatia is called corruption. In local communities and cities it is very visible in the public eye and in actual practice. So how do you work to tackle that problem?

We don’t measure corruption directly, so we don’t have an indicator saying how much corruption is prevalent or not in the country. But all of these areas that we measure, especially the procedural aspects, how many steps you need to go through to complete something, they are highly correlated, or highly associated with corruption. In countries or cities where there’s more steps, there tends to be more opportunities for corruption. Because every step is an interaction between the businessperson and the government official, so the official can ask for a deal to sort out the problems.

What we do see the procedural complexity, the number of steps, and also how long it takes, are opportunities for requesting bribes, for corruption. So the simpler you have it, the more online interactions you have as opposed to in-person interactions, the less likely it is that there will be corruption. Because you cannot really bribe a computer. So it’s a much simpler, much more effective, and much cleaner, much more transparent, way of implementing regulations.

This report was well received. Do you think that those who govern will pick up on your findings?

I think they will. Today, for the event, we have a very good pick up from all the four countries, so policymakers from all the four countries will participate, and I think that’s already a very good sign. Of course, we cannot predict the future, but from past reports that we’ve done, for example in Poland, we’ve done six reports already in Mexico for instance, we can see that people have been using this information on how to improve. And actually in Poland is a very interesting example because different cities worked together to improve, they learned from each other and there was a lot of peer-to-peer exchange. Ultimately, that’s the goal here, to have cities learn from each other and work together to improve their regulatory system.

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