07 Feb 2016: Why reforms are good for Cyprus’ business rankings

In the 2016 World Bank Doing Business Rankings, Cyprus climbed 17 places to 64 from 47 previously, with its score increasing from 66.55 to 71.78.

Cyprus was ranked as one of the top 10 improvers, with five significant reforms since the previous report.

Business rankings matter, as they tend to be one of the first ports of call for international investors looking for a place to place their money. The World Bank noted improvements in getting electricity, getting credit, paying taxes, enforcing contracts and resolving insolvency.


Electricity improvement

One area in which Cyprus saw a big improvement was access to electricity. It might not occur to the average consumer as he or she queues at the Electricity Authority of Cyprus, but ease of access to electricity is an important consideration for foreign businesses.

Cyprus improved its score by reducing the time required for obtaining a new connection. The ‘Distance to Frontier’ score for obtaining to electricity rose to 75.18 from 55.28 in 2015 as a result.

The score for paying taxes also improved to 81.70 from 80.53 thanks to the introduction of electronic systems for paying corporate tax online.

For access to credit, Cyprus improved its score to 65.00 from 55.00 because of the introduction of a credit register.

As regards enforcing contracts, the World Bank noted that Cyprus (and Kazakhstan) had introduced simplified procedures to handle small claims, reducing backlog at the main trial court and contributing to procedural efficiency.

Cyprus introduced a fast-track simplified procedure for claims worth less than €3,000.

However, the score for enforcing contracts actually deteriorated overall, dropping to 48.59 from 54.17 in 2015. This seems to be because of an increase in the time taken to enforce contracts, which rose to 1,100 days from 735 previously.

Maybe this was a measuring issue. The focus on foreclosure legislation might have made people honest about quite how long it takes for creditors to get their money back.

Thankfully, the drop in the enforcing contracts core was more than offset by an improvement in resolving insolvency. This score leapt to 79.04 from 56.68 previously, thanks to the introduction of the long-delayed insolvency law, as well as measures to support the continuation of a debtor’s business during insolvency proceedings.

The fact that insolvency procedures had such a positive impact on Cyprus’ score underlines how important this difficult-to-pass law was for Cyprus’ international reputation.

In total, the World Bank lists 10 areas (with several subcategories in each) that dictate the business score.

They read like a to-do list for the government. But they are also a to-do list for the members of parliament (MPs) on which the economy relies to keep climbing up the rankings.