Looking for Inspiration
The Doing Business project of the World Bank Group, which measures the ease of administrative procedures that matter to businesses such as starting a business, registering a property, enforcing a contract or carrying international trade can be a strong means of holding governments accountable for their work.
Chambers of Commerce, Architects' associations or Law societies may be interested in what a Doing Business-based methodology has to offer. For example, Doing Business data raise simple questions:
- Why does it take 4 days in Armenia but it takes 40 days in Germany and 334 days in Angola to transfer a land title?
- How come building a warehouse, critical for an efficient distribution system of products, takes 13 procedures in South Korea, France, Vietnam and Sao Tome and Principe, yet the time required to go through the various required procedures ranges from 34 days to 255 days in these countries?
The Doing Business project shines light on these differences and suggests where one can look for solutions.... basically to those economies that tend to score better and those that are reforming. Private sector-led initiatives can apply in diverse economies from Saudi Arabia to Azerbaijan to China.
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Sorry, but as a constant critic of DB I have again to comment on this one:
Why does it take...? How come...?
Well, for instance because of differing social preferences of societies or because of differing levels of economic development and therefore complexity of business transactions. What matters here is that there might be good reasons for the observed differences in regulation, whereas DB suggests that this is all pure red-tape and rent seeking of bureaucracies.
Looking for solutions in DB?
Fair enough, it is never a bad idea to look at how someone else does things and compare this to your own ways,...But (!):
DB cannot tell governments if they are regulating to much or too less as the optimal degree of regulation is country specific, depending on the preferences of stakeholders, the evolution of regulations and so on.
According to North "(…) economies that adopt the formal rules of another economy will have very different performance characteristics than the first economy because of different informal norms and enforcement. The implication is that transferring the formal political and economic rules of successful Western market economies to third-world and Eastern European economies is not a sufficient condition for good economic performance" (AER 84 (3) 1994 p. 366).
Therefore DB is a bad guide to advise governments on priorities for reform. DB suggests a standard set of business regulations to be reformed, although for a given country, other factors that constrain businesses may be much more relevant.
The current edition of DB started to reflect to a certain extent on these limitations, however, I hope the 2010 edition will do this more thoroughly.
Christian von Drachenfels
Posted by: Christian von Drachenfels | Feb 12, 2009 7:22:22 AM
This is an issue not only country to country but also region to region. Though businesses may see it from the standpoint of efficiency local residents may also see it from the perspective of maintaining quality of life. Residents in the United States, for example, may wish industry here could be more competitive but don't want to see wage, environmental and working condition standards errode to make that competition possible. It will be interesting to see whether standardization will bring places in the world with low standards up or bring other nations with higher standards down in order to compete.
Posted by: Shawn | Feb 14, 2009 2:32:52 PM