Ten Years of Doing Business:

Lessons and Challenges

May 23, 2013

Stockholm, Sweden

Augusto Lopez-Claros

Director, Global Indicators and Analysis alopezclaros@ifc.org

What does Doing Business measure?

Doing Business indicators:

Focus on regulations relevant to the life

cycle of a small to medium-sized domestic

business.

Are built on standardized case scenarios.

Are measured for the most populous city in

each country.

Are focused on the formal sector.

DO NOT measure all aspects of the business environment such as

macroeconomic stability, corruption, level of labor skills, proximity to

markets, or of regulation specific to foreign investment or financial

markets.

2 2

2

How does Doing Business define SMART

business regulations?

S

• STREAMLINED—regulations that accomplish the desired outcome in the most efficient way

M

• MEANINGFUL—regulations that have a measurable positive impact in facilitating interactions in the marketplace

A

• ADAPTABLE—regulations that adapt to changes in the environment

R

• RELEVANT—regulations that are proportionate to the problem they are designed to solve

T

• TRANSPARENT—regulations that are clear and accessible to anyone who needs to use them

3

Doing Business indicators – 11 areas of business

regulation

4

88%

47%

38%

46%

61%

68%

OECD high Income

Eastern Europe and Central Asia

Sub-Saharan Africa

Middle East and North Africa

Latin America & the

Caribbean

South Asia

East Asia and Pacific

Pace of reforms remains strong in 2011/12: share of

economies with at least one reform making it easier to

do business

5

45%

About two-thirds of European union economies carried out reforms improving their business regulations for small and medium sized business in 2011/12

Worldwide, 108 economies implemented 201 reforms in 2011/2012.

5

67%

EU-27

It was possible to start a business in less than 20 days in only 40 economies, mostly in North America and Northern and Central Europe Only 10 EU economies made it possible for entrepreneurs to start a business in less than 20 days

Now, the time to start a business is less than 20 days for entrepreneurs in 105 economies Now it is possible to start a business in less than 20 days in 19 EU economies

2005

2012*

*Based on samples of 174 economies in 2005 and 185 economies in 2012

Development impact: Countries that regulate entry more heavily have greater corruption and larger unofficial economies, but not better quality of public or private goods. (Quarterly Journal of Economics, February 2002, Djankov, La Porta, Lopez de Silanes, Shleifer.)

Reforms making it easier to start a business were

once again most common in 2011/12 – and show

results over time in reduced delays…

6

… and big reductions in the cost to start a business

around the world

7

4.6

4.6

6.0

21.6

22.9

34.4

35.3

67.6

8.1

9.0

17.5

41.1

51.0

66.7

58.1

233.4

OECD high income

European Union

Eastern Europe & Central Asia

South Asia

East Asia & Pacific

Middle East & North Africa

Latin America & Caribbean

Sub-Saharan Africa

DB2013DB2006

As of 2012, 91 economies have no minimum capital requirement.

Global Average

32.5

Cost of Starting a Business (% of income per capita)

More new firms are registered after reforms making

it easier to start a business

8

Developing economies around the world have

reduced delays for exporting and importing through

seaport

9

11

11

17

20

21

28

31

32

12

14

22

26

24

36

38

36

OECD high income

European Union

Latin America & Caribbean

Middle East & North Africa

East Asia & Pacific

Eastern Europe & Central Asia

Sub-Saharan Africa

South Asia

DB2013 DB2006

Sub-Saharan African economies have reformed 63 times in trading across borders, reducing time to import and export Development impact: Empirical evidence shows that each additional day that a product is delayed prior to being shipped reduces trade by more than one percent. (Review of Economics and Statistics, November 2008, Djankov, Freund and Pham)

Global Average

22

Reforms have reduced the time to prepare, file and

pay taxes worldwide to 27 payments and 268 hours

per year

10

12

12

21

25

28

30

31

39

16

20

25

29

52

30

40

40

OECD high income

European Union

Middle East & NorthAfrica

East Asia & Pacific

Eastern Europe & CentralAsia

South Asia

Latin America &Caribbean

Sub-Saharan Africa

Payments (number per year)

Global Average

180

203

205

214

267

311

381

322

235

270

224

291

448

305

415

343

Time (hours per year) DB2013

DB2006 Global Average

27 276

All regions have reduced the time it takes to

transfer property between local firms

11

26

28

28

36

60

62

66

100

59

71

112

49

87

85

104

121

OECD high income

European Union

Eastern Europe & Central Asia

Middle East & North Africa

East Asia & Pacific

Latin America & Caribbean

Sub-Saharan Africa

South Asia

DB2013

DB2006

Global Average

Average time to register property (days)

52

Strong convergence across economies since 2005

12

112

63

29 18

26 13

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012

Time to start a business (days)

Worst quartile

Best 3 quartiles

EU*

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 2009 2010 2011

Time to pay taxes (hours per year)

Worst quartile

Best 3 quartiles

EU*

0

50

100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009 2010 2011 2012

Time to deal with construction permits (days)

Worst quartile

Best 3 quartiles

EU*

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012

Time to register property (days)

Worst quartile

Best 3 quartiles

EU*

How did EU economies perform between 2005 and

2012?

*Not including Cyprus, Luxembourg, and Malta

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11 European Union economies are among the top

30 on the ease of doing business index

1. Singapore

2. Hong Kong SAR, China

3. New Zealand

4. United States

5. Denmark

6. Norway

7. United Kingdom

8. Korea, Rep.

9. Georgia

10. Australia

11. Finland

12. Malaysia

13. Sweden

14. Iceland

15. Ireland

16. Taiwan, China

17. Canada

18. Thailand

19. Mauritius

20. Germany

21. Estonia

22. Saudi Arabia

23. Macedonia, FYR

24. Japan

25. Latvia

26. United Arab Emirates

27. Lithuania

28. Switzerland

29. Austria

30. Portugal

14

Almost all economies are closer to the frontier in

regulatory practice today than they were in 2005

0

25

50

75

100

Sin

gap

ore

Un

ited

Sta

tes

Irel

and

Un

ited

Kin

gdo

m

Den

mar

k

Au

stra

lia

Ger

man

y

Jap

an

Ko

rea,

Rep

.

Esto

nia

Lith

uan

ia

Mal

aysi

a

Sou

th A

fric

a

Latv

ia

Taiw

an, C

hin

a

Po

rtu

gal

Slo

vak

Rep

ub

lic Fiji

Fran

ce

Hu

nga

ry

An

tigu

a an

d B

arb

uda

Bo

tsw

ana

St. L

ucia

Per

u

Jam

aica

Ro

man

ia

Ton

ga

Seyc

hel

les

Do

min

ica

Sau

di A

rab

ia

St. V

ince

nt

and

the

Gre

nad

ines

Arm

enia

Gre

nad

a

Mac

edo

nia

, FYR

St. K

itts

an

d N

evis

Vie

tnam

Mal

div

es

Gre

ece

Leb

ano

n

Trin

idad

an

d T

ob

ago

Nep

al

Cap

e V

erd

e

Mo

rocc

o

Gh

ana

El S

alva

do

r

Pap

ua

New

Gu

inea

Pal

au

Solo

mo

n Is

lan

ds

Ru

ssia

n Fe

der

atio

n

Phi

lipp

ines

Iran

, Isl

amic

Rep

.

Ecu

ado

r

Geo

rgia

Uru

guay

Eth

iop

ia

Jord

an

Cro

atia

Uga

nd

a

Bo

snia

an

d H

erze

govi

na

Alg

eria

Tan

zani

a

Bra

zil

Ind

on

esia

Ch

ina

Bh

utan

Mal

awi

Mo

zam

biq

ue

Zim

bab

we

Mic

ron

esia

, Fed

. Sts

.

Ven

ezu

ela,

RB

Cam

bo

dia

Egyp

t, A

rab

Rep

.

Uzb

ekis

tan

Equ

ato

rial

Gu

inea

Syri

an A

rab

Rep

ub

lic

Ben

in

Rw

and

a

Sen

egal

Hai

ti

Gu

inea

Mau

rita

nia

An

gola

Co

ngo

, Rep

.

Afg

han

ista

n

Co

ngo

, Dem

. Rep

.

Tajik

ista

n

Erit

rea

Georgia

Rwanda

Venezuela

Zimbabwe

2005

2012

15

5 economies from the EU are among the 50 economies

narrowing the distance to frontier the most since 2005

16

17

Economies that rank high on the ease of doing

business tend to combine efficient regulatory

processes with strong legal institutions

OECD high-income economies have the most business-friendly regulatory

environment on both dimensions

Different economies have followed a variety of

regulatory reform paths

18

Globally, reforms have focused more on reducing the complexity and cost of regulatory practices than on strengthening legal institutions

19

Doing business is easier today than in 2005, particularly in

Eastern Europe and Central Asia and Sub-Saharan Africa

20

Two EU economies are among the 10 economies

improving the most across 3 or more areas

measured by Doing Business in 2011/12

Ease of Doing

Business rank

Starting

a

Business

Dealing with

construction

permits

Getting

electricity

Registering

property

Getting

credit

Protecting

investors

Paying

taxes

Trading

across

borders

Enforcing

contracts

Resolving

insolvency

1 Poland 55 √ √ √ √

2 Sri Lanka 81 √ √ √ √

3 Ukraine 137 √ √ √

4 Uzbekistan 154 √ √ √ √

5 Burundi 159 √ √ √ √

6 Costa Rica 110 √ √ √ √

7 Mongolia 76 √ √ √

8 Greece 78 √ √ √

9 Serbia 86 √ √ √

10 Kazakhstan 49 √ √ √

21

APEC : sharing goals and experience

using Doing Business indicators

Identifies champion economies to lead capacity

building activities

For example, U.S. assisting Thailand in starting a

business; Korea assisting Indonesia and Peru in

enforcing contracts.

In 2009-2012, improved their performance on the

5 indicator sets by 11.5% on average.

But wide variation within APEC in the ease of

doing business and in the rate of progress

by enhancing cooperation, moving closer to

APEC-wide goal.

22

Research associates Doing Business

with Foreign Direct Investment (FDI) flows

Improvements in Doing Business are often associated with an increase in FDI flows by policymakers and in the press

Research conducted for DB 2013 finds statistical evidence supporting the association (see subsequent graph)

On average, a 1 percentage point difference in regulatory quality is associated with a difference in annual FDI flows of $250 - $500 million

Doing Business indicators also have a correlation of 57% with measures of FDI-specific regulations

These findings suggest that countries with friendly regulation for domestic firms tend to also have friendly regulation for foreign firms – supporting the association between Doing Business and FDI

23

Better regulation is correlated with more FDI

24

How transparent is Business Regulation?

• In Sub-Saharan and the Middle East and North African important regulatory information can often only be obtained by meeting with an official

• OECD high-income economies most consistent in providing easy access to regulatory information through websites or printed brochures

• Accessibility of regulatory information varies with income level and internet penetration but resources are not the only explanation

• Access to information is easier in economies with greater political rights and greater political accountability

• Economies providing greater access to information also tend to have more efficient regulatory processes and lower regulatory compliance costs

Easy Access to information empowers citizens to monitor the quality of government services and the use of public resources:

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Doing Business: a dynamic project in

constant evolution

A growing indicator set: from 5 initial data sets (Starting a Business, Employing

Workers, Enforcing Contracts, Getting Credit, Resolving Insolvency) to 11 indicators

Number of economies covered increasing from 133 to 185: Barbados and Malta

added in DB13

Inclusion of a new measure to illustrate change over time of the regulatory

environment for local businesses in each economy - the distance to frontier

Continuous improvements to Doing Business indicator methodology

– Ongoing methodology review of the Employing Workers Index (EWI)

– Establishment of a threshold for minimum tax rate in the Paying Taxes indicator

Expansion of Subnational Doing Business studies: 54 economies, 335 cities,

covered since 2005

– Recent examples include Mexico, Russia, Indonesia, Southeast Europe, Italy,

Kenya

A growing body of research on how specific areas of business regulation – and

regulatory reforms in those areas – relate to social and economic outcomes

– Over 1,245 articles in peer-reviewed academic journals refer to the DB data

Focus on specific economies and themes through case studies (Mexico, Macedonia,

United Kingdom, Colombia, Latvia, Rwanda, FDI, Transparency)

26

Possible future innovations

Expand coverage of indicators beyond largest business city,

particularly in large federal countries

Broaden definition of particular indicators (e.g., protecting

investors, getting electricity)

Broaden coverage of indicators to other areas not currently

covered

Think of alternative ways of presenting the data, over and

above aggregate rankings

Expand the scope of engagement with users on

methodology issues.

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Thank you. For more information:

www.doingbusiness.org

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