Thursday, April 18, 2013

The World Bank Considers Scrapping/Crippling "Doing Business"

It's the one thing that they clearly do right. And therefore there are those who want to destroy it (CSIS):

For ten years the World Bank’s Doing Business report has shone a spotlight on the complications of official regulation for small and medium enterprises (SMEs) and records the written rules that governments make for SMEs. The facts are summarized in indicators that are comparable across countries and allow them to learn from each other. The focus on the complex area of regulation has supported reform all over the world—stronger protection of property & contracts and less complicated procedures. Importantly, this is reform spurred without large aid payments.

At the same time, indicators that can be compared across jurisdictions have made it possible systematically to study the effects of rulemaking. For the first time, impact evaluation can be considered for some regulatory reforms to isolate the effect of reform. Mexico was the first case, where different states at different times improved the ease of setting up businesses. States that reformed saw business registration increase as well as formal job creation. Competition spurred businesses to improve. Prices fell, creating benefits for consumers and employees. People are now more likely to succeed on the basis of rules rather than connections. The reforms give the Mohamed Bouazizis of this world a stab at success.

The very punch that Doing Business packs has prompted opposition. From the beginning several governments were unhappy. A typical initial reaction is anger and denial but the very unease stirred by Doing Business has led to reviews of problems and ultimately reform efforts. It has been a productive tension for citizens; every year over 200 reforms are recorded by Doing Business with over 2,000 logged in ten years. Apart from Venezuela and Zimbabwe, no country has made life harder for business under the measures captured by Doing Business. As an Indian newspaper put it, the politically optimal way to deal with the report is to “trash it in public and implement it in secret.”

Yet criticism persists. The new World Bank president, Jim Kim, has established a commission to review Doing Business and make recommendations for its future. All options are on the table. Critics claim the data are not robust, the relevance of the data for reform is questionable, and the rankings direct reform efforts to the wrong priorities.
There are few words that appropriately express how absurd I feel this is.

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