By Finau Fonua

Running a business in Tonga is getting harder, according to a new World Bank report titled “Doing Business 2015”. The annual report assesses the “ease of doing business” in countries across the world.

The report ranked Tonga at 69 out of 189 countries for ease of doing business in 2015. The new rank is a drop from last year’s ranking of 63 and a further drop from the the year 2006, when Tonga was ranked at 33 for ease of doing business. On a regional comparison for 2015, Tonga is behind Samoa (ranked 67) but ahead of Fiji (ranked 81).

Tonga’s ranking was determined from rankings of various features of running a business. Features such as “starting a business”, “dealing with construction permits”, “getting electricity”, “registering property”,  “protecting minority investors” and other aspects of running a business.

Electronic registry

For “starting a business”, Tonga was ranked at 51 out of 189 countries for ease of starting business. According to the report “Tonga made starting a business easier by implementing an electronic system at the registry, which reduced the time required for verification of the uniqueness of the company name and for registration of the company. The costs for the name search, company registration and business license increased, however.”

Tonga received some high rankings. For example, Tonga was ranked at 14 for “Dealing with construction permits”, and ranked at 35 for “getting electricity”. The report stated “Tonga made getting electricity faster by implementing a time limit for the safety inspection.”

Tong was also ranked 36 out of 189 countries for “ease of getting credit”. The report stated “Tonga strengthened its secured transactions system by passing a new law that allows a general description of the obligation in the security agreement and gives secured creditors priority outside bankruptcy - Tonga improved access to credit information by establishing a private credit bureau.”

Worst ranking

Tonga’s worst ranking however, was for “registering property”. The report ranked Tonga 174 out of 189 countries on the ease of registering property. The report stated “Tongan land law is extremely complex. Buildings do not necessarily belong to the land and there are significant conflicts and disputes involving identical material facts.”

There were also poor rankings for “protecting minority investors”. Tonga was ranked 161 out of 189 countries for protecting minority investors. The report did not clarify the reasons but rated a poor extent of shareholder rights in Tonga. The report gave Tonga 3 out of 10 for shareholder rights, a poor comparison to neighbours Samoa (6 out of 10) and Fiji (7.5 out of 10).

Tonga was ranked poorly in “resolving insolvency”, ranked at 133 out of 189 countries for resolving insolvency. The report stated “…resolving insolvency takes 2.7 years on average and costs 22.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The average recovery rate is 27.1 cents on the dollar.”