Doing Business Report

Doing Business Report

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The Doing Business Report (DBR or DB) is a study elaborated by the World Bank Group
World Bank Group
The World Bank Group is a family of five international organizations that makes leveraged loans, generally to poor countries.The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary...

 since 2004 every year that is aimed to measure the costs to firms of business regulations in 183 countries in 2010. The study has become one of the flagship knowledge products of the World Bank Group in the field of private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...

 development, and is claimed to have motivated the design of several regulatory reforms in developing countries
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...

. The study presents every year a detailed analysis of costs, requirements and procedures a specific type of private firm is subject in all countries, and then, creates ranking
Ranking
A ranking is a relationship between a set of items such that, for any two items, the first is either 'ranked higher than', 'ranked lower than' or 'ranked equal to' the second....

s for every country. The study is also backed up by broad communication
Communication
Communication is the activity of conveying meaningful information. Communication requires a sender, a message, and an intended recipient, although the receiver need not be present or aware of the sender's intent to communicate at the time of communication; thus communication can occur across vast...

 efforts, and by creating rankings, the study spotlights countries and leaders that are promoting reforms.

The DBR has been widely known and used by academics, policy-makers, politician
Politician
A politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...

s, development experts, journalist
Journalist
A journalist collects and distributes news and other information. A journalist's work is referred to as journalism.A reporter is a type of journalist who researchs, writes, and reports on information to be presented in mass media, including print media , electronic media , and digital media A...

s and the business community to highlight red tape
Red tape
Red tape is excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making...

 and promote reforms. As stated by the IEG
Independent Evaluation Group
The World Bank's Independent Evaluation Group is an independent unit within the World Bank Group. It evaluates the relevance and impact of the Bank Group's support to developing countries for reducing poverty...

 study from the World Bank: “For country authorities, it sheds a bright, sometimes unflattering, light on regulatory aspects of their business climate. For business interests, it has helped to catalyze debates and dialogue about reform. For the World Bank Group, it demonstrates an ability to provide global knowledge, independent of resource transfer and conditionality
Conditionality
Conditionality is a concept in international development, political economy and international relations and describes the use of conditions attached to a loan, debt relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional...

. The annual exercise generates information that is relevant and useful.”.

Contents


In 2011, the study contains quantitative measures of regulations for starting a business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

, dealing with construction permit
Construction permit
A construction permit or building permit is a permit required in most jurisdictions for new construction, or adding on to pre-existing structures, and in some cases for major renovations. Generally, the new construction must be inspected during construction and after completion to ensure compliance...

s, employing workers, registering property, getting credit, protecting investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...

s, tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

es, trading across borders, enforcing contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

s, getting an electricity connection and closing a business. As stated in the introduction of the study, “A fundamental premise of DBRs is that economic activity requires good rules. These include rules that establish and clarify property rights and reduce the costs of resolving disputes, rules that increase the predictability of economic interactions and rules that provide contractual partners with core protections against abuse”.

Origins


The Doing Business Report has its origins in a paper first published in the Quarterly Journal of Economics
Quarterly Journal of Economics
The Quarterly Journal of Economics, or QJE, is a peer-reviewed academic journal published by the Oxford University Press and edited at Harvard University's Department of Economics. Its current editors are Robert J. Barro, Elhanan Helpman and Lawrence F. Katz...

 by Simeon Djankov
Simeon Djankov
Simeon Djankov is a Bulgarian economist and Deputy Prime Minister and Minister of Finance of Bulgaria in the government of Boyko Borisov. Prior to his cabinet appointment, Simeon Djankov was a Chief economist of the finance and private sector vice-presidency of the World Bank...

, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer
Andrei Shleifer
Andrei Shleifer is a Russian American economist. From its inauguration in 1992 until it was shut down in 1997, Shleifer served as project director of the Harvard Institute for International Developments Russian aid project...

 called “The Regulation of Entry” in 2002. The paper presented data on the regulation of entry of start-up firms in 85 countries covering the number of procedures, official time and official cost that a start-up must bear before it could operate legally. The main findings of the paper were that: “Countries with heavier regulation of entry have higher corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...

 and larger unofficial economies, but no better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry.” The paper became widely known because it provided quantitative evidence that entry regulation benefits politicians and bureaucrat
Bureaucrat
A bureaucrat is a member of a bureaucracy and can comprise the administration of any organization of any size, though the term usually connotes someone within an institution of a government or corporation...

s without adding value to the private sector, or granting any additional protection.

Methodology


DB is above all, a benchmark
Benchmark
-Geology:*Benchmark , a point of reference for a measurement**Benchmarking , an activity involving finding benchmarks*Benchmark , used in pricing crude oil-Technology:...

 study or regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...

. The process of gathering data, is first based on a survey of over 8,000 expert contributors (lawyers, accountants etc) in 183 countries who deal with business regulations in their day to day work. The surveys are not a statistical sample, and the results are interpreted and cross-checked for consistency before being included in the report. Results are also validated with the relevant government before publication. DBR respondents fill out written surveys and provide references to the relevant laws, regulations and fees, based on standarized case scenarios with specific assumptions, such as the business being located in the largest business city of the economy
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...

. In most indicators, the case study refers to a small domestically-owned manufacturing company - hence the direct relevance of the indicators to foreign investors and large companies is limited.

DB uses a simple averaging approach for weighting sub-indicators and calculating rankings. A detailed explanation of every indicator can be found through the DB website, and a .xls archive that simulates reforms.

As stated in the main body of the DBR 2010, some caveat
Caveat
Caveat , the third-person singular present subjunctive of the Latin cavere, means "warning" ; it can be shorthand for Latin phrases such as:...

s regarding the rankings and main information presented have to be considered by every user of the report. Mainly:
  • DBR does not measure all aspects of the business environment that matter to firm or investors, such as the macroeconomic conditions, or the level of employment, corruption, stability or poverty
    Poverty
    Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

    , in every country.
  • DBR does not consider the strengths and weakness neither of the global financial system
    Global financial system
    The global financial system is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level...

    , nor the financial system
    Financial system
    In finance, the financial system is the system that allows the transfer of money between savers and borrowers. A financial system can operate on a global, regional or firm specific level...

     of every country. It also doesn’t consider the state of the finances of the government of every country.
  • DBR does not cover all the regulation, or all the regulatory requirements. Other types of regulation such as financial market, environment, or intellectual property
    Intellectual property
    Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...

     regulations that are relevant for the private sector are not considered.

This is why, the DBR is not a complete assessment of competitiveness or of the business environment of a country, and in any case, it should only be considered as a proxy of the regulatory framework faced by the private sector in a specific country.

Main Findings

According to the DBR, regulation does matter for the development of the private sectors, and several reforms are suggested across the report in order to promote the development of the private sector and enable the business environment. Some highlighted findings of the DBR are:
  • Lower barriers to start-up are associated with a smaller informal sector.
  • Lower costs of entry encourage entrepreneurship
    Entrepreneurship
    Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

    , enhance firm productivity
    Productivity
    Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

     and reduce corruption.
  • Simple start-up translates into greater employment
    Employment
    Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

     opportunities.

Evaluation


Doing Business is a controversial study, with passionate critics and devoted fans. As recognized by the Independent Evaluation Group
Independent Evaluation Group
The World Bank's Independent Evaluation Group is an independent unit within the World Bank Group. It evaluates the relevance and impact of the Bank Group's support to developing countries for reducing poverty...

 of the World Bank, “ Some have questioned the reliability and objectivity
Objectivity (science)
Objectivity in science is a value that informs how science is practiced and how scientific truths are created. It is the idea that scientists, in attempting to uncover truths about the natural world, must aspire to eliminate personal biases, a priori commitments, emotional involvement, etc...

 of its measurements. Others doubt the relevance of the issues it addresses or fear it may unduly dominate countries reform agendas at the expense of more crucial development objectives. And the attention given to the indicators may inadvertently signal that the World Bank Group values less burdensome business regulations more highly than its other strategies for poverty reduction
Poverty reduction
Poverty is the state of human beings who are poor. That is, they have little or no material means of surviving—little or no food, shelter, clothes, healthcare, education, and other physical means of living and improving one's life....

 and sustainable development
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...

.

According to Snodgrass, several limitations are present in the DB studies and have to be kept in mind when using the study:
  • The indicators and measures are referred to the costs, requirements and fees of doing business in the country’s largest business city; thus conditions elsewhere within the country may differ.
  • To achieve cross-country standardization
    Standardization
    Standardization is the process of developing and implementing technical standards.The goals of standardization can be to help with independence of single suppliers , compatibility, interoperability, safety, repeatability, or quality....

     respondents are asked to give estimates for a limited liability company
    Limited liability company
    A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...

     of a specific size. Costs for other forms and scales of businesses may differ.
  • Transactions and fees to be cost out are very specifically defined. The costs of other types of transactions may differ.
  • The cost estimates come from individuals identified as expert respondents. Sometimes the estimates give by such individual may differ with other experts and with public officials. If so, the responses are cross-checked for consistency.
  • The estimates assume that a business knows what is required and does not waste time. Satisfying regulatory requirements will obviously take longer if the business lacks information or is unable to follow up promptly. A related point here is that DBR may not understand “work-arounds”, “facilitating fees”, and “learning time” that speed or delay approvals and causes variation costs.

Related studies


Published now for nine years, the DBR has originated a growing body of research
Research
Research can be defined as the scientific search for knowledge, or as any systematic investigation, to establish novel facts, solve new or existing problems, prove new ideas, or develop new theories, usually using a scientific method...

 on how performance on DBR indicators, and reforms generated by the reports, related to specific development desirable outcomes. As stated by the DBR 2010, about “405 articles have been published in peer-reviewed academic journal
Academic journal
An academic journal is a peer-reviewed periodical in which scholarship relating to a particular academic discipline is published. Academic journals serve as forums for the introduction and presentation for scrutiny of new research, and the critique of existing research...

s and about 1143 working papers are available through Google Scholar”.

The DBR has acknowledged the limitation of getting data from one city to give information and a ranking valid for all the country. Several regional and sub-national studies have been carried out using the Doing Business methodology to assess variations within countries and regions across different cities, including sub-national studies for countries like Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

 and Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...

 and regional studies for the Caribbean
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...

, the Arab World and the Balkans
Balkans
The Balkans is a geopolitical and cultural region of southeastern Europe...

. All studies are available from the DBR website.

DBR sometimes unintentionally has been widely used as a study to measure competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...

. However, regulation rather than competitiveness is the main objective in the DBR. Other studies that are also used to measure competitiveness and recognized as business enabling environment ranking systems are the Global Competitiveness Index
Global Competitiveness Report
The Global Competitiveness Report is a yearly report published by the World Economic Forum. The first report was released in 1979. The 2011–2012 report covers 142 major and emerging economies....

, the Index of Economic Freedom
Index of Economic Freedom
The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world's nations....

, and the Global Entrepreneurship Monitor, among others.

Motivating reforms


Several countries have launched reforms to improve their rankings in the DBR. These efforts are motivated to a great scope by the fact that the World Bank Group publishes the data, and hence huge coverage by the media
Mass media
Mass media refers collectively to all media technologies which are intended to reach a large audience via mass communication. Broadcast media transmit their information electronically and comprise of television, film and radio, movies, CDs, DVDs and some other gadgets like cameras or video consoles...

 and the private sector is usually granted every year. Also DBR highlights every year the successful reforms carried out by every country.

The World Bank Group has advised over 80 countries on reforms to regulations measured in the DBR, providing technical assistance and guidance. Reform advice and DBR report production are organizationally separate to avoid conflicts of interest.

External links