Framework for Analysis and Reform of the Business and Investment Climate

Transcription

1 Framework for Analysis and Reform of the Business and Investment Climate Definition Concept - Result Chain Data - Tools Dr. Sonja Kurz Economist Economic Development and Employment 26 July 2005

2 Content 1. Understanding Business and Investment Climate 2. Result chain of the Business and Investment Climate 3. How to analyse Business and Investment Climate? 4. Case Studies to analyse Business and Investment Climate?

3 Understanding Business and Investment Climate Business and Investment Climate (BIC) comprises all factors influencing the investment decisions of enterprises BIC for enterprises is determined at the micro-,, meso- and macro level The factors influencing the BIC and their importance differ across various regions, sectors and types of enterprises A distinction is drawn between the BIC in a narrower sense (regulation of factor-,, capital- and labour markets, bureaucracy, corruption, etc.) and the BIC in a wider sense (access to real and human capital, access to intermediate inputs and BDS, access to markets, social and productive infrastructure)

4 Elements of BIC in a Narrower Sense Elements Governance issues Policy, legal and regulatory framework Organisational framework Core Topics Rent seeking mechanisms, corruption etc. Property Rights, Resolution of Commercial Disputes, Employment, Business Registration, Taxation etc. Capacity of advocacy institutions, capacity of public administration, mechanisms for public- private dialogue Possible Areas of Intervention Measures to increase transparency and accountability in public administration Facilitate analysis, design, implementation and monitoring of policy, legal and regulatory reforms Strengthening institutions, organisational development for public and private sector

5 Elements of BIC in a Wider Sense Elements Macroeconomic strategies Labour Force and Human Capital Finance Support services Markets, social and productive infrastructure etc. Core Topics Key macroeconomic figures such as exchange rate, interest rates etc. Access to qualified labour Access to finance Access to Business Development Services access to markets, market information, quality of infrastructure etc. Possible Areas of Intervention Macroeconomic policy and strategy advice Skills Development Financial System Development BDS Market Development Improving market access, market research and information, export promotion, investments in infrastructure etc.

6 What is different to the former approach? Stronger concentration on state and institutional failure than on market failure Stronger emphasis on the political economy Decrease of direct support on the enterprise level Private sector plays an active role in problem solving Better representation of the private sector in the political process

7 Content 1. Understanding Business and Investment Climate 2. Result chain of the Business and Investment Climate 3. How to analyse Business and Investment Climate? 4. Case Studies to analyse Business and Investment Climate?

8 Result chain (1) Output - Political decision makers, staff of line ministries and representatives of business associations are sensitized and capacitated in key issues and methodologies for improving the framework conditions for PSD and the institutional set-up for public private dialogue is improved Core Problem Activities - Development and dissemination of feasible approaches and instruments for improving the framework conditions, capacity building of key actors (training courses, study tours, elaboration of handbooks etc.), process facilitation and provision of backstopping services, organisational support to public-private dialogue mechanisms. - The current legal, political, and institutional framework conditions are bottlenecks to PSD

9 Result chain (2) Attribution Gap Direct Benefit - The costs of doing business are reduced, the business and investment climate is constantly monitored improved and new economic opportunities are opened up Use of Output - Private and public sector engage in a continuous dialogue to analyse bottlenecks to PSD, improve existing laws and regulations, implement the changes at national and local level, and develop capacity for monitoring the impact of the reforms as well as for assessing the impact of potential new laws and regulations

10 Result Chain (3) Highly Aggregated Impact Indirect Benefit Attribution Gap - The program contributes to pro-poor growth (a) by reducing constraints and barriers to economic growth and (b) by improving the participation of the poor in the growth process - The number of newly created companies rises and existing companies expand their production. As a result, new productive employment opportunities are created. Furthermore, the investment in physical and human capital grows facilitating the companies to participate in technical progress

11 Content 1. Understanding Business and Investment Climate 2. Result chain of the Business and Investment Climate 3. How to analyse Business and Investment Climate? 4. Case Studies to analyse Business and Investment Climate?

12 Importance of Analysis in the Reform Process (Model) Analysis Design Monitoring & Evaluation Implementation

13 What to assess? Key Questions: 1. What are the key constraints which hinder private sector development? 2. Which legal, political and institutional framework conditions are responsible?

14 Key constraints could be:

15 Methods of analysis Use of existing assessments (standardised assessments) Reduce risk of subjectivity Promote comparisons across locations Promote comparisons over time Can be used by partners to build capabilities Promote a consistent focus of investigation Cost-efficient means of assessment Use of self-collected data Emphasis on the unique nature of assessments Used to supplement the information from standardised assessments produced by other agencies Tool for public private dialogue Tool for capacity building of the partners Regular Impact Assessments (RIA) Benchmarking,, Look for a champion

16 Firms Perception - Philippines Percentage of firms identifiying indicator as a major or very severe obstacle to business Philippines Small (1-49 e) Medium ( e) Large (250+ e) 0 Economic and regulatory policy uncertainty Corruption Tax rates Macroeconomic instability Anti-competitive or informal practices Business licensing and operating permits source: : Investment Climate Snapshot,, Worldbank

17 Starting a Business - Philippines Starting a Business Indicator Philippines Regional OECD Average Average Number of procedures Time (days) Cost (% of income per capita) 19,5 48,3 8,0 source: Doing Business 2005, Worldbank

18 Standardised approaches: Investment Climate World Business Environment Survey Doing Business Business Environment and Enterprise Performance Survey (BEEPS) Investment Climate Assessments (ICA) Investment Compass Country Competitiveness Global Competitiveness Index (GCI) Global Competitiveness Yearbook Economic Freedom Economic Freedom of the World Index (EFW) Index of Economic Freedom Investment risks International Country Risk Guide Country Risk Service Business Risk Service (BRS) Global Risk Service World Market Research Center Country Reports Others Transparency International Corruption Perceptions Index (CPI) FDI Confidence Index

19 World Business Environment Survey (WBES) Publisher: World Bank Type: Index Method: Interview managing directors/company company owners Countries: 80 worldwide Use: free interactive webtool*, analysed in publication* Release: Once 1999 Categories: corruption,, legal system, lobbying, Business Environment, regulation, financial system, governance, infrastructure, enterprise behaviour * *Investment Climate around the world, Batra, G., Kaufmann, D., Stone, A.

20 Doing Business Report Benchmarking Businesss Regulations Publisher: World Bank, IFC, Oxford University Press Type: Index Method: Research of laws and regulations,, Interview local government officials, lawyers,, business consultants Countries: 145 worldwide Use: free interactive webtool*, analysed in publication* Release: anual update, first in 2004 Categories: starting a business, hiring and firing workers, enforcing contracts, getting credit, closing a business, registering property, protecting investors * rru.worldbank.org/doingbusiness/

21 Business Environment and Enterprise Performance (BEEPS) Publisher: EBRD and World Bank Type: Index Method: : Interview managing directors/company company owners (see WBES) Countries: : 25 transition countries (Southeast Europe and Central Asia) Use: free interactive webtool*, report* Categories: corruption,, legal system, lobbying, Business Environment, regulation, financial system, governance, infrastructure, enterprise behaviour (WBES) * *The 2002 Business Environment and Enterprise Performance Survey:

22 Investment Climate Assessments (ICA) Publisher: IFC/World Bank Type: Index/report Method: Interviews with Business Executives/ accountants Countries: 18 developing, transition and industrialising countries Use: free report to download*, free webtool* with country comparisons Categories: sales and sourcing, barriers to enterprise development, infrastructure and services,, finance, public-private private dialogue,, legal framework, crime, innovation, productivity * *

23 Investment Compass Publisher: UNCTAD Type: Index Method: questionnaires in cooperation with investment promotion agencies Countries: 52 developing and industrialising countries Use: Webtool; development of indicators over time, country and regional comparisons Release: annual update Categories: taxation, regulation, ressources, infrastructure, costs of operation, economic performance,, governance

24 Global Competitiveness Index (GCI) Publisher: World Economic Forum Type: Index/report Method: Interviews with Business Executives, statistical data Countries: 104 worldwide Use: free report to download* Release: annual, since 2001 Categories: technology index, index of public institutions, macroeconomic index * Global+Competitiveness+Programme%5CGlobal+Competitiveness+Report

25 World Competitiveness Yearbook Publisher: Institute for Management Development Type: Yearbook Method: Data of International Organisations, Interviews with Business Executives (GCI) Countries: 60 industrial and industrialising countries Use: webtool*, annual report* Release: annual,, (since1989) Categories: economic performance,, international trade and investment, public finances, education, productivity, infrastructure,, plus GCI data *

26 Index of Economic Freedom (EFW) Publisher: Heritage Foundation Type: Index/report Method: assessment of in-house experts (public and private sources) Countries: 161 worldwide Use: free webtool*, annual report* Release: annual,, (since( 1995) Categories: trade policy, taxation,, governance, fiscal policy, foreign investment, financial system, salaries and prices,, property rights, regulations, black market *

27 Economic Freedom of the World Publisher: Fraser Institute Type: Index/report Method: Data of the Global Competitiveness Report (World Economic Forum) and the International Country Risk Guide (PRS Group) Countries: 123 worldwide Use: search on the free website*, annual report* Release: annual,, (until( 2000 every 5 years ) Categories: governance, legal system, access to finance, free trade, regulations * *

28 International Country Risk Guide Publisher: PRS Group Type: Report Method: objective criteria to evaluate economy and financial system, political risk subjective assessment Countries: 140 worldwide Use: Report and CD-Rom* (fees( fees) Release: annual Categories: political risk, financial system, economic risk *

29 Country Risk Service Publisher: Economist Intelligence Unit (EIU) Type: Report Method: assessment of in-house experts (public and private sources) Countries: 100 worldwide Use: Country reports (fees)* Release: every second year with monthly updates Categories: economic policy, political framework, economic structure, liquidity risk, currency, public debt, financial sector * country_id=&ref=product_detail_list_by_category_title

30 Business Risk Service (BRS) Publisher: Business Environment Risk Intelligence Type: Report Method: assessment of selected experts (managers, government officials) Countries: 50 industrialised and industrialising countries Use: subscription (fees)* Release: three times a year Categories: political risk, foreign direct investment, remittances *

31 Global Risk Service Publisher: Global Insight Type: Report Method: assessment of in-house experts Countries: 117 worldwide Use: subscription (fees)* Release: quarterly Categories: 51 categories in the three fields- political risk, foreign direct investment, structural problems *

32 World Market Research Center Country Reports Publisher: World Market Research Center Type: Report Method: assessment of in-house experts (public and private sources) Countries: 186 worldwide Use: Country reports (fees)* Release: ongoing Categories: economic, political and legal framework, taxation, foreign investments, security and crime rate *

33 Transparency International Corruption Perceptions Index (CPI) Publisher: Transparency International Type: : Index Method: based on 18 surveys of independent organisations Countries: 146 worldwide Use: results table on the internet* *

34 FDI Confidence Index Publisher: AT Kearney Type: Report Method: interviews with managers of the 1000 biggest companies in the world, information of international organisations Countries: 60 industrialised and industrialising countries Use: free download* Release: annually,, last issue 2003 Categories: political and economic stability, market size,, growth potential, operating costs, access to export markets, competition, quality of life, transparency, infrastructure, taxation

35 Content 1. Understanding Business and Investment Climate 2. Result chain of the Business and Investment Climate 3. How to analyse Business and Investment Climate? 4. BCS (Business( Climate Survey) and RIA (Regulatory Impact Assessment) to analyse Business and Investment Climate?

36 The SADC Regional Business Climate Survey (RBCS) The Aim: Monitoring Business Climate across the SADC Region Strengthen the Contents of Public-Private Private Sector Dialogue Serve as an Index to Measure Regional Integration Assist in Advocacy Issues at Regional Level Strengthening the relationship of private sector organisations with their members; Developing a sustainable BCS model for the SADC region for measuring regional integration; Empowering National Business Umbrella Organisations to develop BCS for domestic advocacy purposes.

37 The SADC Regional Business Climate Survey (RBCS) Survey Methodology: Focus on the manufacturing sector in the SADC region. List of respondents drawn mainly from membership list of Private Sector Organisations conducting the RBCS. Complemented by non-members from lists from official sources Survey protocol was left to the participating Private Sector Organisations. Possible options included: mail face to to face interviews and telephone interviews

38 The SADC Regional Business Climate Survey (RBCS) A Unique Questionnaire Nine questions regarding the business climate were asked: 1. How do you rate your current business performance? 2. How do you rate your expected business performance for the next 12 months? 3. Over the next 12 month will you employ more ore less people? 4. Over the next 12 month will the capital expenditure of your company in your country increase or decrease? 5. Over the next 12 month will the capital expenditure of your company in the SADC region increase or decrease?

39 The SADC Regional Business Climate Survey (RBCS) 6. How do you expect your export revenue from other SADC countries to change over the next 12 months? 7. How do you expect your export revenue from outside of the SADC countries to change over the next 12 months? 8. How do you expect your expenditure for imports from other SADC countries to change over the next 12 months? 9. How do you expect your expenditure for imports from countries to change over the next 12 months?

40 The SADC Regional Business Climate Survey (RBCS) Checklist for conducting RBCS: 1. Create awareness 2. Look for visibility (press conference, marketing strategy inhouse) 3. Asure sustainabilty (institutional wise; once is not enough) 4. Asure financial sustainability 5. Look for competent partners doing the evaluation (economic research institutes) 6. The results will also aid your members in identifying with your current activities. 7. By making use of national results you can strengthen the contents of Public Private Sector Dialogue

41 Regulatory Impact Assessment (RIA) A RIA is a framework for analysis of the likely impacts of a policy change and the range of options for implementing it. It is a comprehensive and flexible tool which considers: Any form of regulation formal legislation, codes of practice, information campaigns etc. The full range of potential impacts economic, social and environmental Where the impact may be business, the public sector, the voluntary sector or other groups

42 Regulatory Impact Assessment (RIA) Method Systematically and consistently examination of potential impacts arising from government action or non-action Steps: Clearly define the ojectives of proposed policy change Consider and assess the full impact of the proposed policy change Identify and assess alternative options to achieve clearly defined policy objectives Assess whether the benefits of the proposed change are greater than the costs of the proposed change Ensure a transparent and efficient consultation process Determine whether particular groups may be disproportionately affected Help ensure compliance with international agreements and treaties

43 Thank You