Knowledge

Background

Civil Society Strategy Meeting on the Doing Business rankings

26 September 2011 | Minutes

Notes from the Civil Society Strategy Meeting on the Doing Business rankings
21 September 2011
Washington

Presentations

Christian von Drachenfels, VDI/VDE Innovation and Technik
3 positives:

  • DB was successful in raising awareness of red tape and that this is a burden for many businesses all over the world
  • Benchmarking approach can stimulate public dialogue on issues that are of concern to the private sector
  • Focus on domestic small and medium sized enterprises rather than Foreign Direct Investment

However:

  • it implicitly advocates for deregulation, very often the problem is not too much regulation but not sufficient regulation
  • You need to consider many other factors such as skillset of workforce, access to finance, infrastructure
  • It has overstated the pro-poor character of many business regulatory reforms whereas improving other policies eg education policy would do more to benefit poor people
  • They are not suited for informing governments nor private sector representatives about reform priorities

David McNair, Christian Aid

  • How do the DB indicators help with improving the tax system of developing countries?
  • Much more appealing to do business, according to businesses, in a place which is stable economically and politically, access to markets etc, tax rates are not identified as a problem.
  • How do DBIs contribute to effective tax systems?
  • Good at encouraging simplicity and removal of red tape
  • But, even the IMF has said that a one size fits all approach to tax doesn’t work, yet the DBIs still take this approach.
  • Countries which are tax havens or that have very low corporate tax rates are ranked high in DBIs

Tina Weller, CAFOD

  • Came to issue because of recognition of how important these indicators are in influencing reform priorities
  • Many developing countries want to move up the ranking – 85% of policy makers said the DBR were important in influencing their reform priorities.
  • We work a lot on small businesses and these rankings don’t seem to be that relevant to them.
  • These firms face very significant barriers to growing their own business. Women in particular. Issues that they have identified by female entrepreneurs are ignored by the DBR. So whilst important they are largely irrelevant.
  • Agriculture is not recognised as an important sector to be supported by the DBR.
  • This skews priorities of developing country governments
  • But DBR can in fact negatively affect the poorest eg the approach to land registration
  • Whilst the DBR can kickstart useful discussions about the right environment for supporting small businesses micro-entrepreneurs can often not take part in those discussions.

Jeroen Kwakkenbos, Eurodad

  • This is conditionality through the back door. One size fits all.
  • Entirely misconceived and pushes the wrong policies.
  • IEG wants reform
  • Question is what is the right approach?

Peter Bakvis, ITUC

  • The ITUC has  been working on the labour aspects of DB since the first edition of DB in 2003
  • ILO also working on this since about 2007
  • Our focus has been on the ‘hiring and firing’ indicator, now termed the ‘employing workers’ indicator (EWI) and the paying taxes indicator.
  • It is a fundamentally flawed way of looking at labour markets.
  • World Bank took Heritage Foundation’s concept of labour regulation being nothing but a restriction on ‘economic freedom’ and gave low scores to countries with high level soft social and workers’ protection, including many developed countries. The absence of all labour regulations was the model.
  • Paying taxes indicator – the best performers are countries that do not tax companies. Particularly in a situation of fiscal crisis, it is ludicrous that the Bank is promoting no taxes on business. Even the IMF agreed with our position on paying taxes indicators.
  • The work has had some impact.
  • Several government and their EDs have supported our criticism and recommendations concerning the labour aspects of DB, including the US and several countries in Europe and Latin America.
  • IMF had discussions with us in 2008 about the use of the DB labour indicator and the IMF issued a directive telling staff not to use the EWI.
  • Then we were contacted by the World Bank, which accepted to suspend the EWI, remove it from the CPIA and tell Bank staff to stop using it in policy recommendations or for loan conditions, although the basic data on EWI are in still available in an annex.
  • The Bank also asked us to join an advisory group to recommend further modification to the labour and paying taxes aspects of DB; unions and the ILO accepted to take part in this work
  • There are now discussions about having a worker protection indicator which are still ongoing, as are discussions about modifications to the paying taxes indicator

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