Sierra Leone has become one of the most improved economies in the Doing Business 2012 report—an amazing step toward sustainable economic growth for a country that has overcome a devastating civil war less than ten years ago. The country is now ranked 141st on the ease of doing business—an improvement of 9 places from the previous year. This achievement was made possible to a large extent by the IFC-World Bank Removing Administrative Barriers to Investment (RABI) program.
Sierra Leone in 2006
I first visited Sierra Leone in 2006. Back then, one had to take either a rickety helicopter that could drop into the ocean at any time or an overcrowded ferry to get to Freetown. The civil war had destroyed the entire infrastructure of the country.
Every pavement in downtown Freetown was crammed with people trying to make some money. Most of them were improvising, using broken down wheel chairs and prams, filling them with anything they could sell—bottles, water, trinkets and toothpaste. All payments had to be made in cash and dollars were exchanged with local currency by foreign exchangers.
There was no internet, the land lines did not work and darkness befell the streets every night due to the lack of electricity. It was depressing to see an entire city without light in the 21st century.
This September, I returned to Sierra Leone and was amazed about the visible changes the country had undergone. During my travel, I met a telecommunication engineer. The conversation with him struck me—he explained to me that he was helping connect the country to Europe via a submarine cable. The work of him and his colleagues will help bring high speed internet to the former war ravaged country soon—a very big step within just a few years!
The RABI program
How does one help a country stand on its feet after years of conflict? This was the question facing those designing the IFC-World Bank RABI program to support the country back in 2004.
The challenges were numerous, but the opportunities were even more.
The World Bank was already helping the government of Sierra Leone rebuild infrastructure and schools. Establishing a conducive environment for businesses to start up and grow seemed “natural” choices for investment climate teams of the World Bank Group. Thus, advisory work first focused on removing administrative barriers and helping businesses formalize by improving legislation and procedures for business registration and taxation.
But Sierra Leone also needed institutions that could sustain private sector development. Therefore, the Sierra Leone Business Forum (SLBF)—a Public Private Dialogue platform—and the Sierra Leone Investment and Export Promotion Agency (SLIEPA) that reached out to investors, were established.
The first task of these institutions was to encourage businesses to formalize and grow since legally registered businesses were able to access the banking system. Formal entities also faced less challenges dealing with local authorities and could hire employees.
RABI also worked with the Office of the Administrator and Registrar General of Sierra Leone (OARG) to ease the process of registering a business. The program helped improve the OARG infrastructure. Two of the biggest barriers were:
- the requirement to have all the documentation required for registration to be signed off by a lawyer and
- the requirement to get clearance from the Tax Administration, the National Revenue Authority (NRA)
The first requirement was very burdensome for any business that was interested in registering with little value added to the process but the requirement to get clearance from the NRA was even more burdensome. The NRA required the non-registered business to estimate its income for the year and pay taxes in advance based on expected profits.
The program successfully supported the government with removing these two requirements.
As a result of RABI, the time and cost to register a business has been reduced drastically and the number of registered businesses doubled. A recent independent evaluation estimated that the program helped create nearly 6,000 new businesses and 15,000 jobs. A public credit registry has been created resulting in 13 banks providing credit information for over 9000 firms and individuals.
The video Rebuilding Business and Investment in Post-Conflict Sierra Leone illustrates the achievements of the RABI program. It is a fascinating glimpse of a country on the rebound.
In the 1960s the per-capita income of Sierra Leone was the same as Singapore and it was one of the most prosperous countries in West Africa. Sierra Leone is on the road to recovery. In my next blog I will talk about the challenges of getting Sierra Leone stand on its feet by helping it collect taxes and pay for rebuilding of the country.