Save the World Bank’s *Doing Business* report

Yesterday I received an email from Michael Klein:

We are writing to you about the World Bank’s Doing Business report.  Published since 2003 the report benchmarks 185 countries annually on key dimensions of the legal and regulatory environment for small businesses.  It has supported numerous reforms all over the world helping small businesses and employment.

There is currently a serious risk that the report may be abolished or severely curtailed as part of an ongoing review that will be finished in the next few weeks.  The report has always been subject to controversy as it highlights shortcomings that countries may not appreciate.  The World Bank’s President and its Board of Executive Directors will consider the future of the report in the next few months.

We would like to ask you to support an open letter to the World Bank’s President and its Executive Directors supporting the Doing Business project and recommending general directions for the future.  The letter (see below) is informed by our review of the arguments about Doing Business (attached).

This is our private initiative and without any institutional affiliation.

Please, reply by return email, if you agree to support the open letter. If you wish, indicate in which capacity you want to be mentioned.  If you want to forward this email to ask others also to support the letter, please, ask them to reply to this email address (helpdoingbusinessreport@gmail.com) so that we can keep an accurate record of support.

I support the report very much and I have found it useful in my own work.  It is one of the best things the World Bank does, and you can read more about the report here.  Please do email at the above address if you think your support can be useful.  Here is some back story on how China is seeking to push around the Bank on the ratings.  Here is FT coverage of the same.

Comments

Thanks for forwarding this email via your blog. It's incredibly important. There's been some comment, but not nearly enough yet. Here also is a link to John Taylor discussing the subject on his blog, including input from Bill Gates: http://johnbtaylorsblog.blogspot.co.uk/2013/05/10-years-doing-business-measuring.html

As an aside, how does bench-marking business-friendliness come under any of the core goals of the World Bank? Also, doesn't the Cato already publish a similar report?

Development. Going from poor to middle to wealthy. Is there any way other than business?

The World Bank's official goal is the reduction of poverty. And, though not perfect, they've consistently been the best and primary research hub confronting that issue ever since I can remember. I always preferred their lessons to the lessons of my teachers at the UK Institute of Development Studies.

Re the 'not perfect' bit, I was once sent all-expenses-paid for an interview at the World Bank in Washington. There were only two on the shortlist. I've always believed I did not get the job for two reasons: 1) I discovered on returning to the hotel that I was missing a button on my suit, and 2) I told the WB's chief economist that I had worked in Nicaragua in the mid-80s. I have no idea what the real reason was of course, but I remember the unpleasant feeling as I watched his jaw drop.

Let me help you figure it out. http://www.amazon.com/Game-Old-Empire-Unabridged-Value-Priced/dp/1609980026

Cato does publish the Economic Freedom of the World report (with Fraser and others), but it actually uses a LOT of data from the Doing Business report. Losing this project would be devastating to the EFW project.

'Losing this project would be devastating to the EFW project.'

Or make them pay for data. And really, Cato is not in the business of paying - its main shareholders are undoubtedly far too financially stretched as it is, especially after not getting the immediate interest in Cato that they had desired -

'According to an agreement signed in 1977, there were to be four shareholders of the Cato Institute. They were Charles and David H. Koch, Edward H. Crane,[106] and William A. Niskanen. Niskanen died in October 2011[107] In March 2012, a dispute broke out over the ownership of Niskanen's shares.[106][107] Charles and David Koch filed suit in Kansas, seeking to void his shareholder seat. The Kochs argued that Niskanen’s shares should first be offered to the board of the Institute, and then to the remaining shareholders.[108] Crane contended that Niskanen's share belonged to his widow, Kathryn Washburn, and that the move by the Kochs was an attempt to turn Cato into "some sort of auxiliary for the G.O.P.... It's detrimental to Cato, it's detrimental to Koch Industries, it's detrimental to the libertarian movement."[76]

In June 2012, Cato announced an agreement in principle to settle the dispute by changing the institute's governing structure. Under the agreement, a board will replace the shareholders and Crane will retire to be replaced as Chief Executive Officer by former BB&T bank CEO John A. Allison IV.[109][110] The Koch brothers agreed to drop two lawsuits.' http://en.wikipedia.org/wiki/Cato_Institute#Shareholder_dispute

After all, if Cato is apparently too poor to support a founder's widow in the eyes of two of the three surviving owners, it is undoubtedly too poor to pay for data.

I'm sure there's an innocent explanation, but why is this site blocking me from posting when I am in the Philippines? , but not when I'm logged into a US based proxy server? Could it be censorship, Dr. Tyler Kronsteen Cowen? Oh the irony! Do as I say, not as I do, Herr Teacher? ;-) I guess I'll find out if this post gets mysteriously deleted... to be continued. Not the first time it's happened at this site either.

When accessing this blog from the Philippines, but not elsewhere:
Network Error (tcp_error)
A communication error occurred: "Operation timed out"
The Web Server may be down, too busy, or experiencing other problems preventing it from responding to requests. You may wish to try again at a later time.

Just to clarify: it's blocking me period, not just from posting. And no other site I'm familiar with does the same thing, when I'm accessing the internet from the Philippines, where I live.

Never attribute to malice for explaining which mere incompetence might suffice: Probably some bad bits of web programming.

Ray, the most recent Doing Business report ranks the Philippines 138th out of 185 countries. Yet it does quite well in the category ‘Trading Across Frontiers”, where it is 53rd. It does worst in the category of ‘Resolving Insolvency’ (165th). Have you ranked your consumption units and paid your marginal utility bills this month? At what rate are you currently substituting your uses of Marginal Revolution? I remember when I was in Manila I also had trouble commenting at MR. Maybe MR's emotion Sensors pick up the Manila vibes.

Proof?

I checked a remote ping tool below and was able to reach marginalrevolution.com from 100% of the dozens of international locations. Including India, China, South Africa, Malaysia, Argentina, Egypt, Turkey, Ukraine and Brazil. I highly doubt that marginalrevolution.com would be conspiratorially blocked only in the Philippines, one of the most pro-Western countries of the "global south."

http://www.just-ping.com/index.php?vh=marginalrevolution.com&c=&s=ping%21&vtt=1368518297&vhost=_&c=

Not sure if this is related but in the past few days Philippines government has been blocking a lot of internet traffic in and out of the country due to Taiwanese hackers attacking their official websites. Last week Philippines coast guard fired at an Taiwanese fishing boat and killed a fisherman. As usual, the president and the whole Philippines bureaucracy handled the incident so badly that it generated an outrage in Taiwan and is now on its way to become an international incident.

Sometimes I wonder why Southeast Asian countries (Philippines, Indonesia, Thailand etc.) have such awful governmental efficacy as compare to their Northern Asian neighbors. I suspect it is caused by the same forces that made Italy's government to be far less competent and more corrupt than say Germany or France, although I am not certain what those forces are.

Who do you have in mind for the good government neighbors?

Japan, South Korea and even China. Their governments are not necessarily "better" in any moral sense but are definitely more efficient than the Southeast Asians in doing the clean up, cover up, making press announcement or whatever damage control that is needed after a major disaster or some unplanned event.

And doing business. But the SEAs will catch up. They are on their way.

Changes in latitude...?

Again, as of 4:01 AM 5/15/2013 (Manila time) I cannot reach this website...and the only reason you are reading this is because of a proxy server based in Pennsylvania USA that I have logged into. I have paid my local ISP fees and it might be, like Mike H says, some sort of country wide block...but no other site is being blocked except MR it seems to me, not even porn sites. I personally think somebody at GMU's IT department has blocked the Philippines by mistake or maybe because it is showing up as a country for spam origination.

Have you become a disloyal reader? We can detect this you know.

And even delete any undesirable information when it appears. Andrtew' is good for the proof, he being a most loyal reader - though who knows, a loyalty test might just be what commenters here need..

Email of support sent.

And it's not just because I feel it'd be nice in theory. I've read some of these reports before and did find them useful...

DB had already lost a bit of it's usefulness when they dropped the Labor indicator, but as Tyler says, it remains among the MOST useful things the Bank does, typical production of a public good.

Does anyone know who is opposition and who supports it?

Tyler, do not support these things. I am not sure what you mean by saying that you have found them useful in your own work - have you actually tried to compare the information in the DBIs with the realities in any of the countries that you have been looking at?

Just because the DBIs provide data, does not mean that the data are close to being accurate or meaningful. Even among many World Bank staff, mention of the DBIs brings a sniff of contempt, and rightly so. Much of what is contained in them is simply wrong. Several years ago, an internal World Bank review damned them with faint praise, but an examination of the work behind the review revealed suspect methodology and inaccurate information. I personally have tried to have incorrect information changed for years, without any success.

I do agree that trying to have them suppressed for political reasons is iniquitous - far better to dismiss them on methodological and accuracy grounds.

Bennito Arunada in The Institutional Foundations of Impersonal Exchange identifies in these indicators and the rankings what he describes as fraud . I would not go that far but certainly none of the data can be relied upon and the rankings are sheer nonsense. They are not worth preserving in their present form.

I haven’t got a copy yet but it seems a serious book - quite balanced and careful. Saying, for example, that formalism can be very helpful but that simplicity can be taken too far. At least he’s hitting the notes and deploying important concepts like *impersonality*.

Are you 100% positive Arrunada uses the word “fraud” to describe the WB Doing Business rankings? I don’t see it. The word fraud appears 37 times, but about notaries in Latin America and such like.

He seems to have reasonable (though predictable) methodological and applied-policy disagreements with Doing Business. Or quibbles. But in a sentence where he talks about the “partiality” of Doing Business he immediately points out that the alternative perspectives of e.g. “users” “suffer serious biases”.

Of course there are going to be coding errors, a-la-Reinhart/Rogoff. Such as when you say he is called Bennito Arunada when in fact the name is Benito Arrunada with a squiggle over the ‘n’.

And of course broad brushes will have been used when fine brushes would have served better. There may well be too much “management by numbers” and and a predilection for “public vertically integrated single windows” rather than Hayekian decentralisation or some other ideal in the policy applications that have initially stemmed from these reports .

But compared with the alternative 'theories' of contra-market statism which prevailed in developing country governments and development economics prior to the bright new era of Doing Business, the message is basically right … isn’t it? My impression is that these reports scared the pants off self-important meddling and corrupt bureaucrats all over the developing world, and helped usurp the West's atavistic [under]development practitioners of 20 years ago.

Not sure how reliable these surveys are, especially in developing countries. I had the dubious honor of personally witnessing a 'survey' done once. I was sitting in a public library for youth when a woman came in and started handing out questionnaire forms for everybody in the study hall and in an authoritative manner demanded everyone present to fill them out. I remember being confused as the forms had multiple choice questions about the biggest obstacles facing small business owners in the country while the majority of kids in the hall were barely into high school. I'm sure a great illuminating report was generated by overpaid consultants somewhere on the business environment in the country. Not sure why the woman would ask kids questions about the regulatory difficulties in obtaining business licenses, but my best guess is she was saving herself actual legwork to go and survey actual small business owners.

If you saw a survey being done it was not Doing Business which is based on observable behavior resulting from following rules. Of course they are only indicators and it is debatable whether the cost of starting a new business is an important obstacle to development of Ruratania, but at least they point to specific things that can't hurt. And I have seen a government actually use them to measure its administrative simplification efforts. And they are broadly valid: compare Mexico/Chile/Peru/Colombia with Argentina/Venezuela/Ecuador. And they correlate to other measurements of governance such as the Perceptions of Corruption index and the Global Competitiveness index.

I think anyone interested in this debate ought to read Mary Driemeir and Lant Pritchett on the issue: http://www.hks.harvard.edu/fs/lpritch/NEW%20docs,%20ppts,%20etc/how%20business%20is%20done.pdf

Driemeir and Pritchet point to an important point, that failing to follow the too onerous rules -- corruption -- can mean the actual policies are better than they appear on paper in come Countries. This could lie behind the paradox of rapidly growing countries like China with poor indicators -- China's score on Global Competitiveness is much better than on Doing Business and Corruption. On the other hand China's indicators have been improving and are actually better than might be expected for a country as poor as it is, but maybe they do not like being compared to their peers, but to the West.

As an effort to make public useful statistics, Doing Business is worth applauding and supported. But it is far from the whole story, as its survey indicates. Just look at what it does not cover. Most economists, I think, would suggest these conditions -- ranging from transport facilities to corruption -- are much more important in figuring out the real cost of doing business and competitiveness. As for it influence, the report cites France and Mauritius as models other governments have used! Hardly the best recommendation, though Doing Business cannot be blamed for that -- only for boasting of these examples without qualification. I remember recommending it to a U.N. trade official working on improving developing country exports. Look at its imdicators, he replied. They are just too superficial to be useful. What we need is a revised set of indicators that development specialists can confidently use. Otherwise it becomes yet another example of the World Bank telling the Third World how to be more First World in the worst way.

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