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.

1. Taking the measure of the
Doing Business Indicators:
An Independent Evaluation
www.worldbank.org/ieg/doingbusiness

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
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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
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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
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5. DB informants are mostly lawyers
Government
Official, 18%
Accountant -
PWC, 7%
Accountant -
Private Sector
Non PWC, 1%
Lawyer, 70%
Other, 4%
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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
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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
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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
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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
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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
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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
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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
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13. Usefulness of the DB Indicators
High
►sparking dialogue on regulatory issues
Low
►designing and sequencing reform programs
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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.
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15. Learn more at….
www.worldbank.org/ieg/doingbusiness
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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%
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17. Not all reforms are rewarded equally
Countries at the more dispersed sections of the distribution must
work harder to change their overall rankings
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Latvia
Number of Countries
8 Latvia reduced tax rate 10% up 17 ranks
Belarus reduced tax rate 42% no change in rank
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Belarus
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0
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17 Total Tax Rate as a Share of Profits

18. Why do they participate?
Prestige Requested by
46% colleague 5%
Intellectual Share
exercise 10% experience
Free time 33%
available, 5%
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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%
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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
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