Making It Easier to Do Business in the Pacific

Article | 30 June 2014

It is now easier to register a business in many Pacific island countries following a successful pilot program in the Solomon Islands.

Approved: November 2006
Closed: April 2013
The average number of new businesses started per year has more than doubled
Business incorporation takes less than 2 days, down from 45 days
Loan approval takes 1 day, down from 28 days
Incorporating a business now costs $175, compared with $336 before the reforms
Loans secured with assets other than land allow women who lack access to and control of land to borrow money for business

Not long ago, registering a new company in Solomon Islands was a torturous bureaucratic process that often took months. Aloysio Ma'ahanao, an accountant who has helped his clients register new companies, remembers those times well.

"Under the old Companies Act, it took from 2 weeks to 2 or 3 months, and under the new act the longest it takes me is 2 days. The registration itself takes about 5 minutes."

The quick business registration that Aloysio's clients now enjoy is a result of the reforms made through the Pacific Private Sector Development Initiative. Solomon Islands is one of the 14 Pacific countries benefiting from the regional technical assistance project.

Improving the business climate

The initiative is making it easier to do business in the Pacific by reducing barriers to starting and operating a business. It is supported by grants from ADB ($6.1 million) and the governments of Australia ($41.7 million) and New Zealand ($4.5 million).

The project has helped simplify and modernize business laws.

The initiative addressed the poor business climate in many of the countries in the Pacific. Natural impediments, including small market size, remoteness, and susceptibility to natural disasters, have constrained business activities.

Throughout the Pacific, business operators have faced high start-up costs and expensive and time-consuming processes and regulations, as well as laws that restrict investments - particularly foreign investments.

The Pacific Private Sector Development Initiative introduced reforms that reduced the time required to start a new company, and increased opportunities for people to access credit to operate a business. Outdated laws and regulations that hindered business were amended. Through the initiative, the governments of Pacific island countries have eliminated the need for lawyers when incorporating a new company and removed cumbersome identification requirements.

Strong government commitment

Reforms are underway throughout the Pacific and Solomon Islands has been a leader in improving its business climate. Undertaking much-needed reforms requires strong government commitment. Despite understandable concerns about loss of revenue, the government abolished the fee to reserve a company name and the obligation to create a company seal. This has significantly reduced the cost of incorporation.

"These reforms have helped the business community because companies are spending less time on bureaucracy and more time on their core business."

- Hayden Everett, a senior country specialist at ADB

The country's company registry is now fully online, with fast company name searches, simple forms, and automated checking of completed documents. An improved registry has reduced the time it takes to approve a loan from 28 days to 1 day.

"These reforms have helped the business community because companies are spending less time on bureaucracy and more time on their core business," says Hayden Everett, a senior country specialist at ADB. "Women entrepreneurs who run informal businesses and want to enter the formal business sector have also benefited."

Since the company law reforms took effect in 2010, the number of business owners in Solomon Islands has grown significantly. In the 5 years before the reforms, from 2005 to 2009, there were on average 124 new companies formed per year. Since 2010, the average has more than doubled.

Before the reforms, it cost $336 to incorporate a business. It now costs $175.

Business incorporation time has been reduced to less than 2 days from 45 days before the system was streamlined.

With more companies operating in the country's formal sector, new job opportunities have been created.

This article is an excerpt from a longer piece originally published in Together We Deliver, a publication highlighting successful ADB projects across Asia and the Pacific that demonstrated development impacts, best practice, and innovation.