PSD Blog - The World Bank Group

Twittering the launch of Doing Business 2010

As I posted on the blog last week, the Doing Business 2010 report launched on September 9th. While the report itself always contains useful information, what is often equally interesting is the response in the countries and economies concerned. As part of the launch every year, members of the Doing Business team travel around the world to discuss the results, appearing at very well attended events like Poland's Economic Forum.

Up until now, there was no convenient place to share all the interesting feedback, questions, and commentary from these events. This year, we decided to get a few of the Doing Business team members to let us know what's going on during their travels via Twitter. We're capturing all of their Tweets @WorldBankPSD, so follow us if you'd like to hear what the world is saying about the record results from DB2010.

Here's our line-up of Twitter correspondents:

• @nfgregory: Neil Gregory, Senior Adviser to the Vice President of Financial and Private Sector Development
• @SuzanneSmith7: Suzanne Smith, Lead Knowledge Management Officer
• @sbagaudinova: Svetlana Bagaudinova, Senior Private Sector Development Specialist
• @KarimBelayachi: Karim Belayachi, Operations Analyst working on the Starting a Business indicator

Experimenting with labor reforms in India

In a previous post I discussed how the current global financial crisis seems to have forced policy makers in India to take another look at existing labor laws in the country. The Economic Survey (2008-09) of India released by the Ministry of Finance in early July this year clearly noted the imperative need to facilitate the growth of labor intensive industries, "especially by reviewing labor laws and labor market regulations."

Labor market reform is a contentious and politically sensitive issue in India and its mere mention in the Economic Survey suggests that we might see some action this time around. A few weeks ago, the government exempted the IT and software establishments from the Industrial Employment (Standing Orders) Act 1946 (Central Act 20 of 1946). These laws are strict in the way they classify workers, their working hours and shifts, and the wages payable, besides other archaic rules on leave and attendance.

What is driving businesses to adopt the use of the internet?

Few would contest that the internet revolution has saved us a lot of time keeping in touch with others and conducting searches. For firms, time saved is labor saved and this is particularly attractive in countries that have stricter labor laws. What I’m suggesting here is that stricter labor laws may encourage firms to adopt modern labor-saving technologies such as the internet and computers. In theory this could magnify the adverse effect of stricter labor laws on employment and wages documented in the literature. So what does the data tell us?

China vs. India: Which is better for doing business?

Editor's Note: Peter Kusek is an Investment Policy Officer with the Investment Climate Advisory Services of the World Bank Group.

Doing Business has just published its seventh annual report for 2010.  As in the past, it includes its flagship Ease of Doing Business rank, which is once again led by high-income economies such as Singapore, New Zealand, Hong Kong (China) and the United States.  That’s not a surprise. 

What some of us might however not expect is to find countries such as Georgia, Saudi Arabia or Mauritius among the top 20.  Does this mean that these countries are amongst the world’s 20 most desirable and attractive business destinations?  Well, yes and no, depending on how you define attractiveness.  Let’s do the following quick business exercise together:

Is government bureaucracy any better in Second Life?

How do you get a small entrepreneur in northern Sicily to navigate through the maze of government bureaucracy, tap into the creative juices of an architect or a musician and submit a successful funding proposal for a government-funded development project?

With perfect timing, coinciding with the release of the latest Doing Business report, Alberto Cottica from the Italian Ministry of Economic Development (and, most importantly, a regular follower of this blog!) explains in an interview how Second Life is helping budding entrepreneurs around the country make sense of arcane government procedures (all too needed, given that Italy ranks 78th on the ease of doing business). The goal is to get these entrepreneurs to participate in development projects they would not normally get engaged with. This is all the more important since "creatives" such as musicians or designers are often intimidated by "bureaucratese."

Firms in Georgia see the benefits of reform

The Enterprise Surveys team has introduced a new product called Country Notes. This series of notes provide a customized snapshot of a country’s business environment relative to other economies surveyed in the region. While the survey fieldwork itself is a complex task, the notes themselves provide succinct analyses and policy recommendations based on the collected data.

Each note is 5-6 pages long and highlights the important differences in the investment climate between various firm subgroups such as exporters vs. non-exporters, business sectors, and different geographic locations within a country. There are currently six notes available and many more on the way. For now we are concentrating on the Eastern Europe and Central Asia (ECA) region, but over time we will cover most emerging markets.

One of the first notes to be published is on Georgia, which has been an active reformer as measured by Doing Business. This country note, based on data recently released by the Enterprise Surveys team, shows that these reforms have generated tangible benefits for firms.

The view from Mongolia on Doing Business 2010

The room was packed. About forty people, mostly journalists, came to the launch of Doing Business 2010 by video conference with Washington and several other East Asian and Pacific countries.

Mongolia is going through a lot of economic changes. It was hard-hit by the global economic crisis, which devastated commodity prices and strained the banking system. Mining could also transform the economy if negotiations between the government and Rio Tinto, a global mining corporation, are successful. Mongolia has a chance to show that it’s a good place to do business and to invest in. It would be good, then, to see signs of interest in reform by journalists and the public.

Doing Business 2010: Reforming through Difficult Times

Yup, it's that time of year again...Doing Business 2010 has just been released (at precisely 9/9/09 at 00:09 GMT, no snickers please). The widely cited rankings from the report are now publicly available, and perhaps one of the most important results this year is that Rwanda has been ranked the top reformer, the first time for a Sub-Saharan African economy.

One other headline from the report caught my attention. More governments reformed this year than in any year since 2004 (the first year of Doing Business). And much of this reform occurred in low- and lower-middle income economies. The financial crisis and its impact on the global economy clearly haven't reduced the commitment of governments in the developing world to improving their business environments. 

Here are a few more highlights from the report:

Since 2004 Doing Business has been tracking regulatory reforms aimed at improving the ease of doing business. Despite the challenges presented by the financial crisis, the number of reforms hit a record level this year. Between June 2008 and May 2009, 287 reforms were recorded in 131 economies, 20% more than the year before. Reformers focused on making it easier to start and operate a business, strengthening property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.

Access to credit and employment protection legislation

Might access to credit have anything to do with support for employment protection legislation (EPL)? Felipe Balmaceda and Ronald Fischer propose a connection. Workers in firms with easy access to credit EPL. Workers in firms with shaky access to credit oppose EPL.

Their theoretical model deserves a more detailed treatment than I can offer here, but I’ll do my best to summarize briefly. Their paper is titled “Economic Performance, Creditor Protection and Labor Inflexibility” (ungated copy available here).

Consider the following two scenarios:

A little reality check on business and the internet in developing countries

Internet usage has been increasing at a rapid rate over the last decade or so. For example, according to World Development Indicators (WDI, World Bank), internet subscribers equaled 13% of the total population in low and middle income countries in 2007. This is up from a mere 1.5% in 2000, implying on average an increase of over 109% per annum in the proportion of internet subscribers.

There is a small but growing body of work that shows that the spread of internet can have a fairly strong positive effect on economic efficiency, functioning of markets and economic development in general (see, for example, Freund and Weinhold 2002, 2004).

A good number of these studies use a general purpose measure of internet penetration such as the number of internet subscribers, portals, websites, hosts, etc. For these measures to make sense, it is important they correlate well with internet usage for business or commercial purposes. Simply exchanging, for example, personal emails with friends is unlikely to have any significant impact on economic growth.