Doing business in SA : How relevant and accurate is WB-IFC survey ?

Doing BusinessThe World Bank (WB) along with the International Finance Corporation (IFC) carried out a survey called “Doing Business Index” in 183 countries and its 2010 report is now published, covering the period June 2008 to May 2009.

In its overall world rankings from all the countries surveyed, Pakistan comes at 85, while Maldives comes 87, Sri Lanka 105, Bangladesh 119, Nepal 123, Bhutan 126, India dropping one down from the previous ranking to 133 and Afghanistan 160, the last in South Asia.


These are based on how well or how bad the countries are geared to do business with legal provisions, tax structures, credit availability, investor protection, business registrations etc.


Taking rankings in the South Asian regional basis for the ease with which business could be done, Pakistan is ranked the “best” of the 08 countries with Maldives, Sri Lanka, Bangladesh, Nepal, Bhutan, India and Afghanistan coming down the list in that order.


How much “ease” there is when contracts are not enforced is difficult to understand as on ‘contracts and enforcements’ the worst country is, India  with Bangladesh and Afghanistan getting better than India from the bottom, while the best in SA for contracts is Bhutan followed by Maldives, Nepal, Sri Lanka and Pakistan in that order of decline.

As for “cross border trade” the best in South Asia is Sri Lanka, with Pakistan, India, Bangladesh, Maldives, Bhutan, Nepal and Afghanistan following in that downward trend.


For each category used for ranking, there is a criteria used that explains the methodology of ranking. As a case in point, “enforcing contracts” had been based on how efficient or inefficient a “court of law” in a country had been in handling litigations on rent, tenant and evictions and then on bouncing of cheques.


The IFC presents its case thus. “In cooperation with Lex Mundi member law firms in 109 countries, we measure and describe the exact procedures used by litigants and courts to evict a tenant for non-payment of rent and to collect a bounced check. We use these data to construct an index of procedural formalism of dispute resolution for each country. We find that such formalism is systematically greater in civil than in common law countries, and is associated with higher expected duration of judicial proceedings, less consistency, less honesty, less fairness in judicial decisions, and more corruption. These results suggest that legal transplantation may have led to an inefficiently high level of procedural formalism, particularly in developing countries.”

In developing countries, as in Asia, more relevant issues in “enforcing contracts” are those between the Central State, provincial government and similar politically influenced agencies and the investors. This major issue being shunned away and ignored in ranking, provides a wholly distorted view of the ground situation and makes the WB-IFC ranking redundant in effective terms.


Worst is that these 02 organisations have lost track of the fact that in at least 02 of the countries in SA, there were raging wars during the period under review. In SL it resulted in a heavy country wide security, tightening and restricting mobility, heavy corruption and break down of law and order, making it very unstable for any investment. One third of the country is still out of gear in productive terms with nearly 300,000 people in the North restricted to IDP camps. There is only a very slight interest in picking the tourism market, which clearly shows that the end of the war has not raised any trust in the governing process, as yet.


In Pakistan during the same period, the SWAT valley was wholly displaced creating an exodus of 03 million people. Major cities like Karachchi and Islamabad came under regular guerilla and suicide attacks, thus making it one of the worst war affected societies.

All of it would surely have effected all other measuring rods like “employing workers”, “trading across borders” and “investor protection” in very many ways. The socio-political stability of these countries that were very much at stake, could not have allowed any “ease” in doing business.


Thus with all such boiling and burning issues left aside and very marginal criteria raised to generalise situations, it raises the issue how relevant, valid and accurate these “rankings” are and also, how serious these organisations that carry out these surveys are, in providing information to the world, and its policy and decision making organisations.


Comments

by Kusal Perera, Sri Lanka

10 September, 2009

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