Ease of Doing Business Index Information

The Ease of Doing Business Index is an index created by the World Bank.^[1] Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights. Empirical research funded by the World Bank to justify their work show that the effect of improving these regulations on economic growth is strong.^[2]

"Empirical research is needed to establish the optimal level of business regulation—for example, what the duration of court procedures should be and what the optimal degree of social protection is. The indicators compiled in the Doing Business project allow such research to take place. Since the start of the project in November 2001, more than 800 academic papers have used one or more indicators constructed in Doing Business and the related background papers by its authors."^[3]

Methodology

The index is based on the study of laws and regulations, with the input and verification by more than 8,000 government officials, lawyers, business consultants, accountants and other professionals in 183 economies who routinely advise on or administer legal and regulatory requirements.

The Ease of Doing Business index is meant to measure regulations directly affecting businesses and does not directly measure more general conditions such as a nation's proximity to large markets, quality of infrastructure, inflation, or crime. A nation's ranking on the index is based on the average of 10 subindices:

• Starting a Business - Procedures, time, cost and minimum capital to open a new business
• Dealing with construction permits - Procedures, time and cost to build a warehouse
• Employing workers - Difficulty of hiring index, rigidity of hours of index, difficulty of redundancy index, rigidity of employment index, redundancy costs
• Registering property - Procedures, time and cost to register commercial real estate
• Getting credit - Strength of legal rights index, depth of credit information index
• Protecting investors - Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
• Paying taxes - Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit
• Trading across borders - Number of documents, cost and time necessary to export and import
• Enforcing contracts - Procedures, time and cost to enforce a debt contract
• Closing a business - Index of recovery rate which is a function of time, cost and other factors such as lending rate and the likelihood of the company continuing to operate ^[4]

For example, according to the Doing Business 2010 report, Australia ranked third on the first subindex "Starting a business" behind only New Zealand and Canada. In Australia there are 2 procedures required to start a business which take on average 2 days to complete. The official cost is 0.8% of the Gross National Income per capita. There is no minimum capital requirement. By contrast, in Guinea-Bissau which ranked among the worst (183rd out of 183) on this same subindex, there are 16 procedures required to start a business taking 213 days to complete. The official cost is 323.0% of the gross national income per capita. A minimum capital investment of 1006.6% of the gross national income per capita is required.

While fewer and simpler regulations often imply higher rankings, this is not always the case. Protecting the rights of creditors and investors, as well as establishing or upgrading property and credit registries, may mean that more regulation is needed.

Research and influence

More than 800 academic papers have used data from the index. The effect of improving regulations on economic growth is claimed to be very strong. Moving from the worst one-fourth of nations to the best one-fourth implies a 2.3 percentage point increase in annual growth.^[5]

The various subcomponents of the index in themselves provide concrete suggestions for improvement. Many of them may be relatively easy to implement and uncontroversial (except perhaps among corrupt officials who may gain from onerous regulations requiring bribes to bypass). As such, the index has influenced many nations to improve their regulations. Several have explicitly targeted to reach a minimum position on the index, for example the top 25 list. Between June 2008 and May 2009, Doing Business recorded 287 reforms in 131 economies, 20% more than in the year before. The 10 top reformers were Rwanda, Kyrgyz Republic, Macedonia, Belarus, United Arab Emirates, Moldova, Colombia, Tajikistan, Egypt and Liberia.^[6]

The correlations between the subindices are low, which suggest that countries rarely score universally well or universally badly on the indicators. In other words, there is usually much room for partial reform even in the best ranking nations.^[4]

The annual Reformers' Club event brings together individuals from top reformer countries who have been instrumental in initiating and implementing business environment reform. These reformers are acknowledged for their success in improving the ease of doing business in their country.^[7] Presentations and case studies are available online.^[8]

Somewhat similar annual reports are the Indices of Economic Freedom and the Global Competitiveness Report. They, especially the later, look at many more factors that affect economic growth, like inflation and infrastructure. These factors may however be more subjective and diffuse since many are measured using surveys and they may be more difficult to change quickly compared to regulations.

According to some critics, however, some of the research lacks the rigor of a coherent economic theory, contains unstated ideological biases, and too much of it is undertaken by individuals closely associated with the index and reforms, so it is not sufficiently independent to be fully credible.^[9] This blanket criticism is often offered by those with their own ideological bias.

Criticism

The Doing Business methodology regarding labor regulations has been criticized because of the support for flexible employment regulations.^[10] For instance, the easier it is to dismiss a worker for economic reasons in a country, the more one goes up in the rankings. The Employing Workers index was revised in Doing Business 2008 to be in full compliance with the 188 International Labour Organization conventions. A country can have all ILO conventions ratified and still rank #1 on the Ease of Employing Workers. As a further step, according to the Report 2010, Doing business plans to develop a new worker protection indicator, a process that will benefit from the advice of a working group with broad stakeholder representation. The ILO, which has leadership on the core labor standards, will serve as an essential source of guidance in this process.

In 2008 the World Bank Group's Independent Evaluation Group, a semi-independent watchdog within the World Bank Group, published an evaluation of the Doing Business index.^[11] The report, titled Doing Business: An Independent Evaluation, contained both praise and criticism of Doing Business. The report recommended that Doing Business be clearer about what is and is not measured, disclose changes to published data, recruit more informants, and simplify the Paying Taxes indicator.

In April 2009 the World Bank issued a note with revisions to the Employing Workers index.^[12] The note explained that scoring for the Employing Workers indicator would be updated in Doing Business 2010 to give favorable scores for complying with relevant ILO conventions. The Employing Workers indicator was also removed as a guidepost for Country Policy and Institutional Assessments, which help determine resources provided to IDA countries.

A study commissioned by the Norwegian government alleges methodological weaknesses, an uncertainty in the ability of the indicators to capture the underlying business climate, and a general worry that many countries may find it easier to change their ranking in Doing Business than to change the underlying business environment.^[9]

Ranking

The most recent rankings come from the "Doing Business 2012" report.^[13]

Singapore topped the ranking on Ease of Doing Business for the sixth year.^[14] Based on Singapore's experience, IDA International is collaborating with public agencies in several countries in the areas such as ICT strategy, national infocomm planning and solutions implementation that can help increase the ease of doing business.

North Korea, Turkmenistan, Somalia, Libya, Cuba, Burma, and the disputed territory Western Sahara are not ranked.

References

1. ^ Home - Doing Business - The World Bank Group
2. ^ "Doing Business report series - World Bank Group". Doingbusiness.org. http://www.doingbusiness.org/documents/growthpaper_03_17.pdf. Retrieved 2012-02-14.
3. ^ Ease of doing business: An appendix, Page 93.
4. ^ ^{a b} [1]
5. ^ "Doing Business report series - World Bank Group". Doingbusiness.org. http://doingbusiness.org/documents/growthpaper_03_17.pdf. Retrieved 2012-02-14.
6. ^ "Doing Business 2010 - World Bank Group". Doingbusiness.org. http://www.doingbusiness.org/documents/fullreport/2010/DB10-full-report.pdf. Retrieved 2012-02-14.
7. ^ Reformers Club Home
8. ^ Reformers Club Case Studies
9. ^ ^{a b} http://ifiwatchnet.org/sites/ifiwatchnet.org/files/Doing%20Business_ESOPanalysis.pdf
10. ^ ITUC-CSI-IGB - International Trade Union Confederation
11. ^ "Doing Business - Doing Business: An Independent Evaluation". Web.worldbank.org. 2008-06-26. http://web.worldbank.org/WBSITE/EXTERNAL/EXTOED/EXTDOIBUS/0,,contentMDK:21645387~pagePK:64829573~piPK:64829550~theSitePK:4663967,00.html. Retrieved 2012-02-14.
12. ^ EWI Revisions
13. ^ "doingbusiness.org economy rankings". http://www.doingbusiness.org/rankings.
14. ^ "Singapore Tops World Bank Survey". Bloomberg. http://www.bloomberg.com/news/2010-11-04/singapore-tops-world-bank-survey-on-ease-of-doing-business-for-fifth-year.html. Retrieved 23 August 2011.

External links

• doingbusiness.org – Doing business map

Categories:

• World Bank
• Business law
• Administrative law
• Economic policy
• International rankings

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See Also:

• Big Beast
• British Overseas Territory
• Central Business District
• Eastern Rumelia
• Eastern Studies
• Fazio-londe Disease
• Haff Disease
• List of Protected Areas of Alberta
• Middle Eastern Studies
• Nuclease