Doing Business at the crossroads: ten years
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Event hosted by thinktank Washington-based Center for Strategic and International Studies on 19 April 2013. Video of this event is available on the CSIS website.
Presentations
Dan Rande, CSIS
- This is the World Bank’s most successful program. It is evidence based and data driven. Without it its reputation as the Knoweldge Bank is under threat.
- DB has sparked major free market reforms. It encourages formality. Having it at the WB gives it influence and leverage.
- Countries that dislike because rank badly call for review.
- Broadly american and widely accepted view of developmet strong US support to set up from USAID.
- Forces in WB dislike for ideological reasons and professional jealousy.
- US had huge influence with WB management and should use it to Defend DB.
Juan Jose Daboub, former Managing Director of World Bank
- Use DB to promote reforms, are other tools available, but source as WB gives DB additional value.
- Use DB to encourage governments by showing other countries are beating us. Touch their nationalistic nerve.
- Countries esp. Europe given socialist system they have and cannot compete, dislike DB, but Africa and Latin American happy to use to help them come out of their situation, following example of US.
- Tool to convince president, parliament and work with civil society to work and attract investment in those countries.
- Global adaptation index for CC vulnerability and readiness uses information from Doing Business. strong correlation with Doing Business report.
- How manage non-consensus at the Board? This is a test of president of WB he must show leadership on ideas and defend DB.
Paul Wolfowitz, former World Bank President
- Advice to Kim. Tool does no harm, only good.
- Certain European countries and Asian economies dont like where they are ranked.
- Not use to allocate Bank resources even though in CPIA no one understands how CPIA works.
- For countries struggling to free selves from excessive regulation it is tragic that DB is being challenged.
- Creates problems of informality.
- President has enormous discretion on this. Only President can make motions even if majority of board are against it.
- Andrew Natsios USAID at time of DB inception
- In reaction against Washington Consensus lost focus on growth. Social services
- DB in line with Paul Harvard books on competitiveness.
- Djankov (DB founder) lectured to USAID every year.
- Purge of economists at USAID in 1990s. Djankov macroeconomists rejected microeconomics as essential to growth.
- Constant attack of Board because of national pride stupid to make policy on basis of national pride. French opposition based on truth that common law more conducive to economy than Napoleonic Code.
- USAID funded DB report. Send in teams from USAID to help with DB reforms. Had to put ad in newspaper in Ethiopia to start business because of brother owning newspaper. This is about challenging elites and loosening their controls. What’s downside of quick legal systems and setting up business cheaply? Challenging this is deplorable. Supposed to be all about poor people.
Randal Quarles, US executive director at the IMF, formerly at US Treasury at Doing Business’ inception
- US Treasury supported DB private sector growth is essential for developing countries. Making it easier to start new business is good for growth. Inefficient regulation victimises most vulnerable cronyism impossible without system of heavy regulation.
- Really like that report involves everybody contrary to FSAP processes which US refused to participate in.
- Successful policy efforts have 2 characteristics start with detailed, nuanced analysis, DB has this because of Djankov work.
- Second, nuaced discussion gets condensed into set of principles allows change to happen. Easily assimilated and can be hammered home again and again. Actionable tool.
- Investors want to know what is investment climate? Regulatory obstacles to business are fundamental. Factors matter for investment.
- Same level as WDR but different style which makes them uncomfortable. But this gives their role in policy process as action tool.
Paul O’Brien, Oxfam America:
- The danger is that CSOs don’t get interested enough in DB.
- Nobody debates pathway is equitable growth debate is how equitable. Not enough energy on improving quality fo growth. Small businesses will be the ones that drive development.
- Comparisons are useful sophisticated ways to hold governments accountable. DB is an index that is transparent and has legitimacy of WB helps them to engage and encourage countries to move up the rankings.
- Is there a more sophisticated way of taking sides on discussion around development? Way of challenging elites in countries should avoid taking sides and alienate from civil society.
- Taxation needs to be discussion about role of taxation. Statement that paying less taxes is a sign of progress you are taking sides. Do you mean to do this? I think you have it wrong.. Need to think harder about them , but need to review tax indicator. Give us the tools to help you in the larger cause to create opportunity for everyone.
Discussion
Chair: Is it problematic that DB promotes a western, US model -not culturally sensitive?
Natsios: conservative republican. Idea that developing countries can grow without tax is wrong. Problem is cost of entitlement programmes. BUt too many taxes people leave or find ways around them. Urge nuanced view on optimum level of taxation. Collection of taxes.
Quarles Poverty is the point of DB. Elements measured are not irrelevant to large international investors but fundamentally affect local small businesses.
Oxfam:. The model is about transparency and citizen-state accountability and create a enabling environment. If we don’t tax business looking for regressive taxes, and making choice about kind of growth.
Wolfowitz: Doing Business not for MNCs its for small business. Can we call it the small business report?
Micheal Klein, Former WB Director: On Tax, Indicator is about how complicated tax system is. Making payment easier get more aggregate tax revenue. Marginal tax rates in Africa are the highest because of tax evasion. If you raise corporate taxes too high, it is problematic.
Oxfam like idea of calling it a small business report. Why are small businesses paying more than MNCs? All share desire to side with small business owners.
Michael Klein: Director at inception of report. About success on basis of rules. About opening up opportunities, not helping incumbents. Mexico used DB in parliament to show that their proposal would make them move up rankings and opposition proposal would move them down re investor protection.
Simeon Djankov, former Minister of Finance, Bulgaria: DB is important in eurozone crisis problems starting and running a business in Greece.Cyprus needs to develop business environment. Discussion is how to reboot growth in these countrie. Swedish Finance minister turn to DB indicators. Other constaints to business that are not in report, but main things businesses think about are already part of DB.
Rande: How do you respond to DB critiques?
Klein: Incomplete data set this is true. But covers the basics of an average day. Can expand and imrove methodology over time eg infrastucture. Should change when business needs change or academic thinking suggests it should change.
Rande: Most countries have made changes because of doign business. All countries except Zimbabwe and Venezuela. Can be improved only through academic debate, not because of lobbying. Should not outsource because of value of Bank presence in countries. WB would lose its reputation.
Tom Sheeny, House of FA Committee: Used debate on WB general capital increase to stress important that US to keep seat at table. Interest of US Congress to keep DB. De Soto to address Congress on DB. Can evolve methodology but need to keep it. AGOA and MCC use heritage index (similar to DB) to determine access to trade preferences.
Technical panel on methodological crtiques:
Michael Klein:
- most governments react from anger and denial.
- Data is reliable and meaningful. Measures what laws say. Not perception survey.
- DB critiques generally political.
- One input cholesterol test. Risk factor and worth measuring.
- Dont throw out baby with bath water. To be intellectually consistent also throw out GDP as inadequate for ranking governments.
- They are what they are, use with other tools. Creates right discussion. Brings lots of government agencies together.
- Provides data to evaluation. can do impact evaluation for regulatory reform.
- what next? tweaks, do more of it need more approaches covering different areas eg gender. DB team is v open about flaws and limitations of DB
Simon Johnson:
- metric should be concerned about, but not everything you need to know.
- cross country measures that allow comparisons.
- pushes countries to focus on rules.
- WB record on promoting economic rules is mixed, being diplomatic.
- impact on how WB is viewed in USA, if you dont want WB in USA and associated with American ideas, then do away with DB
EBRD:
- DB has such power and influence on policy that it needs to be debated
- Lot of criticism, DB changed a lot since start. Need interaction with academic and policy community.
- relevant criticism bias against regulation, also one size fits all bias for example, shareholder protection,
- credit providers shouble be v. contextual reforms.
- DB trying to move from de jure to de facto but still quite some distance away need to complement with other instruments such as those of EBRD.
- DB power mostly political its beauty but also danger. Gives sense of problem, but problem is also gives you immediately idea of answer. Many not give you all problem or all answers, may mislead to believe that by addressing regulation you are also addressing underlying problems.
- strength of DB to promote debate on reform. But can close down debate by also providing answers. because so powerful with politicians also danger, need to thnk more about governance structure for DB
Klein:
- need to understand what it measures and how to use it.
- EDs are governance structure
- how do use intelligently as one tool amongst many?
Johnson:
- Governance is important Real governance problem is that Europeans over-represented at Bank
- additional governance structure would become unmanageable
- do need country context and interact with EBRD
