Engaging in Reform, and a Note from Yemen

Relations are said to go through three stages: lust, rust and dust. Engaging in reform is more complicated, requiring double that. At least this is the experience of the Doing Business team.

First comes denial. When the results of Doing Business are published (see the latest installment out as of September 2007), the media picks them up, lauding successful reformers and embarrassing laggards. Angry denials are heard: “The data are wrong. This is not us. The respondents are all opposition members. We will teach those bird-brains at the World Bank a painful lesson.”

Since this doesn’t change a country’s ranking, next comes fury. “Our reputation is ruined. Why is Doing Business using data supplied by the private sector? They don’t know anything.” (A note to new readers of Doing Business: we collect data through detailed surveys of experts – lawyers, accountants, freight-forwarders, infrastructure engineers, and business consultants. These surveys also compile all relevant laws and regulations so that the Doing Business team can verify the responses. The relevant government agencies are surveyed too—the credit registry, bankruptcy judges, the company registrar, etc.)

When fury too fails to change the country’s ranking, the government is ready for dialogue. The Doing Business team is invited to present its methodology and findings. Discussions are held on what the possible areas for reform are and what benefits would such reforms bring. Specific reforms are outlined.

Next come the details. Reformers present their reform plans and Doing Business presents the experience of other countries that have gone through similar reforms. Other experts are pulled in too – often survey respondents are best at evaluating reform options.

Finally, action: the reform takes place. By now, the reformers and the Doing Business team have met several times, have held a dozen conference calls and exchanged a hundred emails. Trust has built. The next set of reforms is considered.

A sixth, and so far often missing, stage is communicating the reform. Good reformers are often bad marketers. Once a reform is complete, they move to the next one. Instead, they should make sure that the beneficiaries and stakeholders of the reform know about it immediately. Otherwise it takes time for them to learn. And public support for the next reform is slow to come. Doing Business and the IFC office in Tbilisi have developed a public campaign in Georgia, to go live after the upcoming elections. Egypt is likely next.

A recent visit to Yemen ushered the engagement with reformers to stage 4: details. Hosted by Deputy Prime Minister and Minister of Planning and International Cooperation Abdul Karem Al-Arhaby and Minister of Industry and Trade Dr. Yahya Al-Mutawakel, Simeon Djankov and Dahlia Khalifa presented some reform ideas and case studies of reforms in taxes in Egypt and business start-up in El Salvador. Reforms in credit information and customs were discussed too. Some 200 people, from government and business, participated in the discussions.

The meeting was not without a dose of fury. A half-dozen department heads from the ministry of trade and industry disputed vociferously the data on starting a business. “It takes a day for us to register a business, not 28,” they argued. “Not so”, said several entrepreneurs attending. “It takes months and you guys take bribes to sign the papers.” One entrepreneur estimated that he gave 40,000 rials (about $200) in bribes to get the necessary signatures. With 5 or so businesses registering every day in Sana’a, being a department head is a lucrative business.

Or was. In August 2007 a new one-stop shop started operation (picture 2). It eliminates one-on-one interactions between would-be businesses and bureaucrats. All documents are submitted as a package and several rounds of signatures have been eliminated, avoiding delays and opportunities for bribing.