- Joel Odigie, Deputy General Secretary, African Organisation of the International Trade Union Confederation
Maju Varghese, Associate Director, Centre for Financial Accountability
Ashina Mtsumi, Tax and Education Alliance Coordinator, ActionAid International
Luiz Vieira, Coordinator, Bretton Woods Project
Norman Loayza, Director, Global Indicators Group, World Bank
Joel: The World Bank has been publishing the Doing Business Report (DBR) for a long period of time. DBR was not filling the purpose for what it was created. The WB decided to review DBR and an independent panel was constituted to perform such review. But to what point did this review led to a better product? This is what this session will try to address in light of concerns raised regarding Business Ready (B-ready) report, for instance around the methodology.
Since December 2022 when the Bank published the concept note on B-ready, there have been several concerns. The directors approved the report, but we did not have a chance to negotiate, it was not shared with us before they launched it. As an organised labour group, our position is that B-ready does not offer tracking methods and uses an obscure methodology.
When you look for example at issues around labour concerns from the DBR to the B-ready, one finds that is actually the same method. It’s just a label washing.
We would like to have a franc conversation and we hope to present some alternative ideas on how we think we can do better, and hope the Bank will listen.
Norman: B-ready is a new project of the WB that measures the business environment.
I should start by telling you a bit about my group: I’ve been in development economies for 30 years, most of my career in research.
Three years ago I became director of the global indicators group, part do the development economics vice-presidency of the Bank.
Our mandate is to produce data and analysis for private sector development. Why the private sector? Because it is the engine of growth, it provides 90% of employment in developing countries and contributes 80% on tax revenues. It is key to develop economy and reduce poverty.
When talking about private sector I do not talk about big corporations but a very wide set (for example, including from skilled workers to workers that have just joined the workforce)
We have 4 programmes:
- Subnational B-ready, which is the same but at the regional level, because there are many differences even within countries
- Enterprise surveys. It’s the world’s more comprehensive firm-level survey
- Women, business and the law
Let’s concentrate in B-ready: One of the corporate flagships (there’re only 3 or 4), and the only one that tries to assess the business environment.
It’s a quantitative assessment, it’s not about words, we present this with numbers.
Development purpose consists in three parts:
- Reform advocacy: Open doors and dialogue between actors, and governments, CSOs…. There’s an appetite for reform in the private sector.
- Policy advice: Inform specific policy advice, covering a wide spectrum of areas relevant to firms and markets and showing how and by how much economies lag behind good practices.
- Development research: We want to encourage research that help us understand what does and what does not work, Support social and economic research o drivers and consequences of private sector development.
In the new approach we try to improve the balance. How have we improved this balance?
- Whereas DBR was more about the ease of conducting business from the perspective of a firm or entrepreneur, now we look at the private sector as a whole. We also take into account the benefits of broader actors (i.e workers, the environment)
- DBR was very heavy on eliminating regulatory burden. But now in addition, we’re providing a guidance for regulatory quality and the public services needed to comply with the regulatory burden, giving a more positive view of what governments can offer.
- We used to have much emphasis on the laws but now is more emphasis on the de facto implementation of those norms. We are going to actually ask firms about the business environment that they face.
- DBR was based on case studies about particular small and medium size enterprises to obtain the comparability among countries, with the problem that it was not representative of different economies, but now we have expanded the ratio of firms we take into account, from the very small to the largest firms.
Three pillars under B-ready:
- Regulatory frameworks – the laws and regulations
- Public services – both directed to improve compliance and the regulatory framework.
- They both will measure efficiency.
Ten topics under the new framework, covering the full spectrum, from opening a business to closing a business (business entry, location, operating and expanding, utility services, labour, taxation….)
Under B-ready there will be 2 sources of data collection:
- Expert consultations: They will tell us about the first 2 pillars (regulatory framework and public services)
- Firm level surveys, run by expert consultations and conducting national and representative surveys of firms. The data collected will be for the efficiency pillar.
Regarding scoring: The way we will score will be by aggregating points that are assigned to each of the indicators for each of the three pillars. The we will add up the points and then get one score for each of the 10 topics.
In order to be consistent we’re going to take indicators that measure the spectrum of entrepreneurs, but also that measure broader public interests. We also give positive points for regulations and public services that benefit workers. But we also give points for those actions that benefit private.
We hope that at the end you will be more aligned to what we do, which is critical for the benefit of workers.
In terms of labour, for example:
- For business: labour is a critical factor for the production of business.
- For workers: income is the path out of poverty; protection: Labour regulation provide social protection and a reasonable level of stability; inclusivity: Formal sector provide inclusivity
We want to collect data with the highest level of standards and transparency. We will be making publicly available all the data we collect.
Luiz: I’m going to step back and take a more structural approach to the discussion.
We acknowledge there’re some positive changes in the B-ready relative to DBR, ie discussions on social protection.
The central concern is that a B-ready project is a modified extension of the DBR, with the same premise that private sector is the solution for development.
We are not anti-private sector, we are not naïve. We are not against de-risking industrial policy, but the key question is how this is done and addressing the balance of power between the actors that are involved.
B-ready project is related to the wider criticism we have of the WBG’s evolution. B-ready is an essential flagship of the result of the evolution roadmap (as you mention). The evolution documents explain very clearly that the Bank recognises we’re in a crisis of development. And if you read through the documents, at various stages eluding to a request for further capital increase down the road, it says the Bank has been pivotal pillar of the economic development landscape and that it should be trusted going forward to continue to lead.
I find it striking that the two issues are never connected: WBG as a key development actor, and recognise there’s a crisis, but the evolution does not make the connection of to what extend has the WB programmes, such as B-ready, contributed to this crisis of development? How does it not talk about how it has contributed to the climate crisis, inequality, commodity dependency…? We do not see these issues addressed in the roadmap.
The 2021 independent review report of the DBR notes among the evidence base that in most cases research related to the DBR makes not casual claims that DBR will lead to better development outcomes, which is supported by the findings in the 2013 independent review of the DBR. To us this is a key question: Your premise that increased private sector development necessarily results in development outcomes. We have to question that.
There is no mention on the evolution or B-ready of the social benefits. The WBG lacks a human rights policy – how are you measuring social benefits and, is that measurements complaint with international human rights laws?
Another thing I would like to hear your opinion upon is about DBR look at country level – fine, but countries do not work in isolation. This is related to the continuous commodity dependence – how is B-ready going to support states through regulatory framework to provide a business enabling environment for a green economic transition? I do not see that in the document.
There are also many references in the document about best practices but, going back to my central point, I would like to see the substantiation in evidence that the best practices guidance used by the document has shown itself to have good development outcomes.
Many of the refences in the documents keep referring back to WBG studies and documents as the sources.
We need to think about what are the foundations of positive development outcomes that are rooted under international human rights legislation.
Maju: I would like to bring some country context of what the earlier versions of the DB have done, specifically from India.
India’s ranking in the DBR report came at a huge cost, for instance in regulations. The ease of doing business is not only about the indicators. Development indicators do get ranked, but this is a push for less government and a strong agenda for privatisation of economy.
What we have witnessed is corporate taxes being reduced, introduction of simple tax systems for financial market reforms, reducing production and the rights of the trade unions. All this was witnessed under the earlier version of the DBR. This is how deregulation has been pushed under the earlier report.
It’s not only about the national level, but it is also about when a country work with the Bank to bring reduced regulations at the subnational level, with regions competing among them to bring investment via lowered regulations. This all leads to huge inequality within the country in terms of bare investment floors: Those states that succeed in lowering regulations and reduced labour compliance get more opportunities.
If we look into certain concrete examples instead of the macro picture, in India half of the changes made have been in the form of relaxation, which have negatively impacted the laws designed to protect them.
The business regulations are a bottle neck under the DBR.
If you look for example at forest clearance, there has been huge relaxation happened related to the easy of doing business. In this case it’s not only about DBR but about the echo system created. There is a study in India that shows that only one request for forest clearance was rejected. 99% were given because they did not want this to be seen as a bottle neck for businesses. This is the kind of impact the Bank should understand when they advise on policy reforms on forests, for example.
What is the report doing to bring legitimacy to the government? The report legitimises watering down the regulations existing in the country. Implementing business friendly policies, it’s clear their best interest is not in the social end development interests.
The Bank needs to understand these are not academic exercises. The tools are in the hands of people, capitalists, that what they want is to extract more from nature, and pushing for business has a broad impact in maintaining a liveable planet and bringing share prosperity.
This only works for a few and bring large inequality impacts.
We need to step back and see the essence of this destruction and look at the B-ready, which will give legitimacy to the governments. Its role is not to measure the development indicators, but changing the economic system.
Ashina Mtsumi: I would also like to look at the structural considerations.
Would like to remind everyone that the B-ready is not implemented in a vacuum but in a context of batting austerity that has been imposed by the WB and the IMF, crippling public systems in Africa and Indonesia.
In a new AA report, it has been shown that 80% of 15 countries studies were advised to cut or freeze spending on public sector wages as percentage of their GDP. In Kenya for example, the government was advised to reduce spending on wage bills from 4% to 3.6% of GDP. Even though it was not much to begin with, they’ve been advised to shrink it even further. Even when there’s advice in these reports to protect public sector, workers, etc., this rarely works in practice. Education and health are the vast of public sector workers and are inevitably affected whenever governments attempt to implement this advice. And this is happening in a context in which we have a desperate shortage in education and health workers.
Within the context enters the B-ready approach.
There’re already concerns about significant differences between DBR and B-ready, for example on the key impacts, especially on the systems and structures that people in the planet need to survive and for the enjoyment of human rights.
One of the key issues, for example, is taxation: The impact of pushing governments to really reduce the amount of taxes they collect from business and deregulation, as well as weakening of social protection and services for the work force.
In education, 97% of education budgets are financed by domestic resources. It’s critical to strengthen domestic services, which we know can be done through taxes, as the most sustainable way, and has the highest potential to increase the fiscal space to fund education, healthcare and a number of other public services.
If we want to encourage an approach that leads governments to prioritise easing the tax burden of corporations, rather than increasing the fiscal space to set up the public system that we need, then there’s a fundamental flaw in that approach. It makes us think about the systemic impact of the project intervention.
Advocating for deregulation of private specially in social services. These are connected to education, health, these are fundamental needs, things that we cannot avoid. No one should be denied access to education, healthcare. But when we deregulate, when we take a position where there’s an assumption that regulation is an undesirable burden on businesses and trust the market to self-regulate and people to choose whatever works for them, there’re a couple of flaws in that logic. The assumption that a choice can be made if a person is given an option. Many people unable to reach public hospitals and education, they-re forced to rely on private services. They’re not making a choice. We’re not against private sector but it’s important to recognise there’re certain spaces where we need to be conscious of the effect of private sector and be mindful of the systemic impact of the overreliance on the private sector.
I would like to emphasise that there’s been significant evidence from civil society, human rights experts, even from some governments, acknowledging that it’s impossible to ensure that everyone is able to enjoy their human rights and flourish without a significant investment and provision of public services.
I would really like to hear from Norman on the nuance measures that they have introduced in B-ready to make sure public services are protected.
Questions and answers
Alex Campbell (ITUC): I wanted to appreciate the Bank’s intervention about this being quantitative research, not about words. There’s tension I see between B-ready as analytical tool (asking the particular question about the ease of doing business) while DBR proclaimed itself as a development tool. Given the narrower scope of consultations, how can that not be used to generate positive development reforms?
From Morocco customs administration representative: DBR was abandoned under credibility issues. How are these issues supported in B-ready report?
Roos Saalbrick (Action Aid): coming from a panel with Kristalina Georgieva, Ajay Banga and Zambia prime minister. Kriatalina mentioned she was in Zambia where visited a school. She mentioned countries need more finance. No mentions of regulation whatsoever. How would be this project different in regulating business/finances and help countries to have more public finance? How would this be different? What would be the impact this analytical tool will bring?
Katelyn Gallagher (BIC): do you consult with labour leaders and trade unios as part of these consultations mentioned? One of the main criticisms against WB knowledge provider role is that it’s not as connected to the Bank’s operational side as it should be. In B-ready, is there an aim to shift to how the Bank takes the knowledge and use it in its operations? (And learning from its successes and fails)
CSO representative from Islamabad: there have been no issues discussed about Southeast Asia. There has been unprecedented flooding, hundreds of children left school during Covid… No big research or outputs during these sessions on how to improve our learning about disasters. AS CSPF we need to think how we can engage and get better in this direction.
CSO representative from environmental organisation in Morocco: I have a worry: in the B-ready report, there’s the question of labour. It talks about minimum protection, regulation, minimum wages, social protection… I guess the rights of workers, freedom are not respected – with the reduced regulation, workers are not respected. What is the new report doing to address that? What is that the report is going to do to protect workers’ rights?
Norman: I would like to make a few points.
This is a business ready, it’s not about everything ready. We need to be humble with respect of the scope of the project. What we’re saying is that we think that the private sector can contribute to the solution.
Second point is that we’re not driven by any ideology. We’re very pragmatic and we believe we’re based on evidence. It’s easy to say that we’re not based in good practices, but if we go case by case and discuss indicator by indicator, we can show how this is all based in good practice, in the evidence that we’ve seen.
Third point is in terms of workers. Looking at the regulatory framework sheet you will see that there’re points in terms of regulations that favours workers. It takes into account also workers that are outside the formal economy. I do not see that level of imbalance. It is the first time you can combine workers with business interests. The discrepancy you mentioned is not really reflected in the indicators or in this cause.
Fourth: on social protection I would say we’re more ambitious than you are as you only raise social protection for formal workers and this being paid for by the firms. We want social protection for everyone that works, formal and informal. We are not making business responsible for social protection, but states.
We insisted a lot in the private sector-led economy. Looking at the risks, like low growth, climate change, demographic pressures, the state is not going to produce the solutions for everything, because now they’re in a burden. Growth and employment must come from somewhere else, and that’s the innovation and value provided by the private sector.
Regarding environment: this project recognises that the environment is vital for long-term sustainability of the private sector. We include many regulations on the environment, in fact it goes along the 10 topics I told you about before.
We are also worried about biodiversity and we think the solution is to provide more jobs in places, cities, factories that are not in places where this biodiversity can be put at risk. If you look at the data, you’ll see the informal factories and informal workers are the ones that really put biodiversity in danger. For instance, informal mining.
On credibility of what we do: We have a very robust governance, which does not mean is perfect, but it’s designed to avoid manipulation of data, based on robust protocols.
Final comments by panelists:
Luiz (to Norman): This is not us against you. We did appreciate your presentation and the details. Going back to my first point: When you say the indicators are for good practice, I would like to sum up a little bit. The WB discussion about its focus on the scorecard to measure development outcomes and saying they now are in a position to show development outcomes. But then, what was the Bank doing prior this? Why has the Bank then not been able to show success? Human rights are not to be discussed here, but they’re fundamental to this institution. The Bank does not take human rights – when you talk about good practises, what are the development outcomes of those good practices? B-ready is very country-specific, but there’re other issues, how does the b-ready take into account other relevant issues that are country-specific, such as trade balance, agreements? Countries are now competing for scarce FDIs. We appreciate the things you’re saying are good for the economy (better social protection, etc) but these are fundamental human rights that should not be instrumentalised.
Maju: How is the set of indicators a tool for all the countries from North to South? We need to move beyond these global indicators to measure everything from how economies are good for private.
When we talk about informal labour, I do not agree with this statement that they’re the ones that have been contributing to destruction.
When we talk about informal, we’re not talking about mafias, we’re talking about communities.
I’m still sceptical that this report will bring any good to the economy. This should not be called B-ready but “be economics ready for the private sector.”
Ashina: I understand B-ready is not everything ready. We understand it’s not trying to solve every single problem. We understand this and we emphasise with the task you have ahead of you. I need to add that the project aggravates the problem. It should not operate in a way that makes other existing issues worse. We are happy to hear you want social protection for all, but for us to make this possible we need to support the state to deliver on that. And this all goes back to the question of systemic impacts of B-ready.
BIC mentioned the lessons learned from the IFC investments in private education. The IEG review of the IFC investments in education flagged that there’s potential for investments in private school to exacerbate inequality and have unintended undesirable spill overs. There’s an opportunity for the Bank to learn from itself and have a look at the issues and problems that have already been flagged. An overreliance of private sector has negative effects for communities and marginalised groups. They do not take the extra investments to ensure services are accessible for people in need. Research shows there’s a deepening in inequality and discrimination when there’s overreliance on the private sector.
I hear you saying you are to focus on women empowerment, but again, this, in a flawed framework is problematic. The deregulation, reduced security and public services that come with private sector, have a direct impact in women and girls. And when the system fails (meaning there’s not investment for example) they are the ones taking the largest share of unpaid work. We need to focus on systemic impacts and move to learn from the evidence that civil society has to share and be willing to take a step back and B-ready to adjust if there’s a need for that.
Joel: just a small reminder to the very interesting comments from your boss, Norman, on how this would add to the issue of inequality. His response was: How do you help countries that are going to pay development fees to think very careful about the economy they want to have in 5 or 10 years time.
What we’ve seen is that B-ready is not ready to help do that. Criticism are legitimate for everyone. But it’s more about the people in the ground. When you talk about the evidence, I was stroke by that. Maybe that’s just because you talk about your own data, your own references. From where I sit in Togo the evidence does not support that. The evidence shows that for one worker there’re 6 dependants with no jobs. When you talk about what’s ambitious for social protection, we really do want that, that everyone has access. It’s not enough when you talk about creating jobs. Then you only have many business and factories, but these workers that are working, when they take their pay check home, they are still poor. They are working but they are poor. They cannot afford to take care of themselves. Finally, can really the Bank be genuine and do real consultation? And really disclose information?
Norman: I know you have your views and comments and I respect them. But I need to say that even though this is not a human rights project, the focus on job is about human rights (jobs with respect, where you’re not discriminated, right to have a job in a liveable planet, etc). We are also in an agreement of who we want to benefit. We do not want to benefit the private sector. We want to benefit the workers, the informal sector, the common workers….
Luiz: It would be amazing for you group to take the B-project to advocate for human rights. I’m not expecting that you tell me you’re going to do it now in public, but it would be great to know we could have your support internally.