Presentation on Doing Business Indicators

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This is a presentation about IEG's evaluation of the Doing Business Indicators. The Doing Business Indicators are the Bank Group's well-known tool for comparing the business regulatory environments of 178 countries.

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Presentation on Doing Business Indicators

  1. 1. Taking the measure of the Doing Business Indicators: An Independent Evaluation www.worldbank.org/ieg/doingbusiness
  2. 2. ‘Ease of Doing Business’ averages rankings on 10 indicators • Starting and closing a business • Enforcing contracts • Trading across borders • Closing a business • Registering property • Protecting investors • Dealing with licenses • Paying taxes • Employing workers • Getting credit 2 2
  3. 3. DB covers less than half of businesses’ top constraints 1. Access and/or cost of financing 7. Anticompetitive or informal practices 2. Corruption 8. Restrictive labor regulations 3. Inefficient government 9. Political instability bureaucracy 4. Infrastructure 10. Macroeconomic instability (e.g. electricity, transportation) 5. Tax rates 11. Skills and education of workers 6. Tax administration 12. Economic and regulatory policy uncertainty Shaded items are covered by DB 3 3
  4. 4. RECOMMENDATION: Be clearer about what DB does and does not measure Since DBI measures…. • Only a few of the constraints on business • Written rules, not actual practice • Regulations‟ burdens, not benefits ….it should avoid overstating the indicators‟ scope and explanatory power 4 4
  5. 5. DB informants are mostly lawyers Government Official, 18% Accountant - PWC, 7% Accountant - Private Sector Non PWC, 1% Lawyer, 70% Other, 4% 5 5
  6. 6. Few informants per indicator Getting Credit Public/ Employing Enforcing Paying Starting a Legal Private Workers Contracts Taxes Business Rights Credit Bureau Average number of informants per country 1.7 1.8 1.5 1.5 1.0 3.5 6 6
  7. 7. RECOMMENDATION: Get more informants ►Disclose how many informants per indicator per country ►Establish selection criteria ►Recruit more informants… especially for indicators with fewest informants and the countries with least reliable information 7 7
  8. 8. DB changes its published data… ►Of the 5600 data points used for the 2007 country rankings, DB changed 40% after publication ►Changes not mentioned on website ►Previous data no longer available 8 8
  9. 9. …and the changes would alter the country rankings FIVE BIGGEST FIVE BIGGEST WINNERS LOSERS Guyana +40 Nicaragua -18 Italy +33 Samoa -18 Turkey +27 Tajikistan -18 St. Kitts and Nevis +24 Papua New Guinea -22 Bhutan +18 Uruguay -23 9 9
  10. 10. RECOMMENDATION: Disclose the data changes ►disclose data changes as they are made ►explain their effect on the rankings ► make available the removed data for research 10 10
  11. 11. Anomalies in Paying Taxes ►One firm provides data on 142 countries ►“Total tax rate” reflects fiscal policy -- not „red tape‟ ►Top-rated countries on tax rate include tax havens and oil states 11 11
  12. 12. RECOMMENDATION: Simplify Paying Taxes ►Collect information on tax rates but exclude it from the rankings ►Simplify the calculations and get more informants to reduce dependency on PwC 12 12
  13. 13. Usefulness of the DB Indicators High ►sparking dialogue on regulatory issues Low ►designing and sequencing reform programs 13 13
  14. 14. Considerations for the World Bank Group ►Does the World Bank Group inadvertently signal that reducing regulation is its most important development goal? How can it celebrate other development achievements ? ►Can the DB approach be applied to other development issues? Only where actionable indicators can proxy the target outcomes and where the direction of improvement is uniform for all countries. 14 14
  15. 15. Learn more at…. www.worldbank.org/ieg/doingbusiness 15 15
  16. 16. Where do civil law countries do poorly? ►Civil law countries score significantly lower than common law countries on 12 subindicators DBI Subindicator Employing Workers Difficulty of Hiring index, Difficulty of Firing index, Rigidity of Hours index Getting Credit Legal Rights index Protecting Investors Extent of director liability index, Ease of shareholder suits index Starting a Business Procedures, Cost, Minimum Capital Requirement, Time* Paying Taxes Time, Payments* Dealing with Licenses Time* * All differences are significant at the 99% level unless noted with an asterisk (*) indicating significance level at 95% 16 16
  17. 17. Not all reforms are rewarded equally Countries at the more dispersed sections of the distribution must work harder to change their overall rankings 12 10 Latvia Number of Countries 8 Latvia reduced tax rate 10% up 17 ranks Belarus reduced tax rate 42% no change in rank 6 4 Belarus 2 0 17 17 Total Tax Rate as a Share of Profits
  18. 18. Why do they participate? Prestige Requested by 46% colleague 5% Intellectual Share exercise 10% experience Free time 33% available, 5% 18 18
  19. 19. Where do civil law countries do poorly? ►Civil law countries score significantly lower than common law countries on 12 subindicators DBI Subindicator Employing Workers Difficulty of Hiring index, Difficulty of Firing index, Rigidity of Hours index Getting Credit Legal Rights index Protecting Investors Extent of director liability index, Ease of shareholder suits index Starting a Business Procedures, Cost, Minimum Capital Requirement, Time* Paying Taxes Time, Payments* Dealing with Licenses Time* * All differences are significant at the 99% level unless noted with an asterisk (*) indicating significance level at 95% 19 19
  20. 20. Employing workers is consistent with letter of ILO provisions but not the spirit ► Ease of hiring index and Rigidity of hours index – Consistent ► Firing cost and Ease of firing index – 6 questions are consistent, 4 questions are consistent with the letter but not the spirit Reassignment or retraining ILO does not require but asks for such consideration activities before layoffs? DB ranks countries higher who have no such requirement Clearly established criteria ILO does not require but recommends criteria applying to redundancies? DB ranks countries higher who have no such requirement How much severance pay ILO does not set a specific severance scale but stipulates pay must a redundant worker should be based on seniority, wage level, etc. get? DB ranks countries higher if less than 8 weeks pay given Notification of a third party ILO does not specify a cut-off number or percentage of for terminating a group of workers to qualify as a group workers? DB specifies cut-off as a group fewer than 25 workers 20 20

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