Doing Business 2012

The World Bank Group’s Doing Business team have just released the annual report for this year: Doing Business 2012: Doing Business in a More Transparent World. 

This is the ninth in a series of annual reports comparing business regulations in 183 economies. It measures regulations affecting 11 areas of everyday business activity. “During this time of persistent unemployment, when job creation is high on policy makers’ agendas, more economies are implementing changes to make regulations for domestic—primarily smaller—firms more business-friendly”.

This year’s report shows how governments in 125 economies (out of the 183 economies measured) implemented a total of 245 business regulatory reforms. This is 13 percent more reforms than in the previous year. Singapore leads on the overall ease of doing business, followed by Hong Kong SAR, China; New Zealand; the United States; and Denmark. Topping the list of most improved economies across several areas of regulation are Morocco, Moldova, and the former Yugoslav Republic of Macedonia.

The subtitles of these annual reports always interest me. This year it is Doing Business in a More Transparent World:

A fundamental premise of Doing Business is that economic activity requires good rules that are transparent and accessible to all. Such regulations should be efficient, striking a balance between safeguarding some important aspects of the business environment and avoiding distortions that impose unreasonable costs on businesses. Where business regulation is burdensome and competition limited, success depends more on whom you know than on what you can do. But where regulations are relatively easy to comply with and accessible to all who need to use them, anyone with talent and a good idea should be able to start and grow a business in the formal sector (p.1).

In 2011, the report was subtitled, Making a Difference for Entrepreneurs:

Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in the regulations applying to domestic, primarily smaller companies through their life cycle, from start-up to closing (p.1).

Clearly, entrepreneurship is seen as synonymous with business ownership. Which is a shame because the promotion of entrepreneurship, including the creation of entrepreneurial business environments, goes well beyond making it easier and cheaper to start-up and grow a business. The World Bank Group are quick to admit this, of course:

Doing Business does not measure all aspects of the business environment that matter to firms or investors—or all factors that affect competitiveness. It does not, for example, measure security, macroeconomic stability, corruption, the labor skills of the population, the underlying strength of institutions or the quality of infrastructure. Nor does it focus on regulations specific to foreign investment (DB2011, p. 13).

We need more and better measures for entrepreneurship and innovation. There are others, of course, and these contribute to a better overall understanding of what a more entrepreneurial society looks like and, in some cases, begins to provide policy makers with some guidance on where to start the process of reform, but the results as still inadequate. A first step would be to look beyond business ownership as a proxy for entrepreneurship and to begin to better understand and measure the features that define entrepreneurship and innovation.