30 Euros and 30 minutes

Juan José Güemes. President. International Center for Entrepreneurial Management. IE Business School

13 December 2010

Spain is one of the worst countries in the OCDE for setting up a business due to a lack of facilities and too much red tape. This is bad news for the entrepreneurial spirit.

It would seem logical for the country with the highest unemployment rate in the developed world (Spain) to try as hard as possible to foster the entrepreneurial spirit and enable the creation and growth of enterprise. But the actual situation is very different. According to the World Bank´s Doing Business report (www.doingbusiness.org), which publishes an annual ranking of countries according to the facilities (and obstacles) in place for starting and developing a business, Spain is in 62nd position out of 183 and one of the five worst-classified countries of the OECD.

There are even more worrying results if we look at the criteria used by the authors of the report to draw up the general ranking: Spain is in 147th position in terms of facilities for "opening a business"; and 157th in "hiring workers". The only aspect in which Spain is among the top 20 is "closing a business". While it is true that making it difficult to close a business also discourages the start-up of new initiatives, it is somewhat of a paradox that Spain is one of the countries in the world in which it is most difficult to open a company and also one in which it is most difficult to close it. According to the aforementioned report, opening a business in Spain requires an average of 10 bureaucratic procedures (twice the average of the OECD), 47 days (more than three times the figure for the OECD) and a cost equivalent to 15% of our per capita income (more than three times the average cost in the OECD).

Meanwhile, there is a proliferation of all kinds of "one-stop shops" opened by every level of public administration to the confusion of the citizens they attend. Could we not simply propose that constituting a company should not take more than 30 minutes or cost more than 30 Euros and make all the legislative and administrative changes that are necessary for such an idea to be put in place? Even more worrying is the trend: in 2010, Spain fell 11 positions in the general ranking (from 51st to its current 62nd) and is now between Kuwait and Kazakhstan. Of the 10 criteria examined by the authors of the report, we have worsened in eight, not moved in one and improved in "payment of taxes" despite the fact that the tax burden on small and medium-sized enterprises and the bureaucratic cost of their the tax bill are much higher than the OECD average. Spain´s dreadful performance in facilitating business, as revealed by the World Bank (and our downward trend), coincides with the assessment made by the experts consulted for the Global Entrepreneurship Monitor (GEM, www.ie.edu/gem), for which IE Business School serves as the Spanish arm.

The average assessment made by the panel of experts for the 14 "entrepreneurial framework conditions" has worsened significantly between 2004 and 2009 in all the criteria assessed except one. One of the aspects that have deteriorated most during said period is "government policy: bureaucracy and procedures". The weight of public administrations, the existence of several levels of government with authorities that overlap and the desire to regulate and control everything have become a heavy burden for citizens/taxpayers, who are becoming more and more aware of the fact that instead of having an administration at their service, they live to serve the administration.

Whatever the case, I do not think it is enough to simplify administrative procedures: there must be a detailed review of the size of public administrations and the way in which they relate to citizens. We need more agile governments whose administrative and legislative activities are guided by a trust in the society they serve; and the presumption of guilt levelled at citizens, which underpins the exaggerated rules and procedures we have to put up with, has to go.

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