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B-Ready 2024 instead of Doing Business
Is there a future in the new tool of the World Bank, in which several of the most economically powerful countries were "forgotten" to be included?
29 October, 2024
World Indexes & Rankings
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The B-Ready 2024 Premier Index is a test of a new assessment tool that has attracted the attention of tens of thousands of economists, lawyers and consultants around the world. This is a new tool for assessing the quality of the business climate from the World Bank (WB).
Once popular Doing Business Index (the latest version was released in 2019) was replaced by B-Ready Index (Business-Ready). Its first experimental version was released in early October 2024 and covered only 50 countries. It is planned to include 100 countries in the index next year, and 180 countries in 2026.
Apparently, the World Bank wants to avoid repeating the "fate" of the Doing Business index, which became the most popular economic index in the world in 17 years, but was "killed" due to the corruption and dishonesty of certain WB officials, as well as some countries that tried to agree on improving their indicators. Now we can observe the revival of the glorious tradition of once again having a kind of hit parade of countries according to the business climate quality.
The demand for such a tool in the world is huge. It is of interest to investors who compare different jurisdictions in terms of investment attractiveness.
- It is important for politicians competing to attract investments, as well as having a dialogue with business and society.
- It is of interest to scientists, forming a basis for research into various aspects of economic development and growth.
Any index is a simplification and acceptance of certain assumptions, as well as a complex theoretical and practical challenge. Firstly, because in one indicator it is necessary to summarize all the key components of the so-called "business climate". Secondly, it is very difficult to objectively and adequately conduct such measurements according to a uniform methodology in all countries of the world. Assessing the quality of the business climate is not the same as measuring air temperatures or a person's blood pressure. There is no device for this, and demand creates supply.
After a five-year break, the creator of the B-Ready index, the World Bank, defines its purpose as follows: "...For too long, attention has been paid to what governments can do for the benefit of business, and not enough to what business can do for the benefit of everyone. This report marks an important first step towards eliminating this imbalance. The Business Ready (B-READY) project aims to create a comprehensive toolbox that, by 2026, will have enabled approximately 180 countries to create the precise parameters necessary for dynamic private sector development—a combination of conditions that will reduce poverty, promote overall prosperity, and accelerate the transition to low-carbon economy".
This formulation of the task gives the "newborn" index an excessively expressed ideological and political color. The interpretation may be different. "General prosperity", "green" parameters, "poverty reduction" - all these are rather party slogans, rather than scientific theory and practice.
The following explanation raises even more questions: "The purpose of the index is to accelerate smart development by encouraging healthy competition between companies and countries. It is designed specifically to prevent the 'race to the bottom' or simplistic decision-making that has become an unintended by-product of the Doing Business Index, our previous efforts to help countries create the right conditions for private sector development."
The interpretation of the concept of "smart, healthy, competitively responsible regulatory field, monetary and fiscal policy" in the hands of technocrats, policymakers and their ideologues turns the index into an ideologically colored tool in advance.
Business, by default, is created precisely for profit. An entrepreneur speculatively predicts an uncertain future, experiments with different forms of capital, combines them so that the goods/services produced by them bring a net profit and pay off their investment.
The standard indicators for assessing the quality of business work include:
- gross/net profit;
- labor productivity;
- revenue.
For larger companies, you can use such indicators as the price/earnings ratio (P/E ratio):
- market capitalization;
- market share;
- dynamics of EBITDA (earnings before interest, taxes, depreciation and amortization) - "the amount of profit before deducting expenditures including the payment of interest, taxes, wear and tear and accrued amortization."
Imposing other goals on a commercial organization, an extended package of KPI (key performance indicators) - "key performance indicators" - is already an ideological agenda of certain political forces.
It distances an index based on such assumptions from the basic canons of entrepreneurial activity. Imagine a council of economists-technocrats, consultants, accountants, econometricians, lawyers, representatives of regulatory bodies, who have to agree on quantitative parameters and evaluations of such adjectives as "smart" for development, "healthy" for competition, "balanced" for regulatory policy.
Analysis of indicators of B-READY Index from the World Bank
B-READY index evaluates the business climate by 10 topic blocks:
- entry to the market;
- business location;
- communal services;
- work;
- financial services;
- international trade;
- taxes;
- settlement of disputes;
- market competition;
- business insolvency.
Each block has three bases/pillars:
- regulatory environment/regulatory framework;
- state services;
- operational efficiency.
Three conceptual ideas run through all ten components: digital adaptation, climate resilience and gender.
About 1,200 indicators are analyzed for all topics and subcategories.
Each country receives one score on a scale from "0" to "100" for each theme and pillar. Each survey questionnaire is processed by 3 - 5 experts in each country. Then there are used data from the World Bank Enterprise Survey .
There is a system of verification and control.
B-READY-2024 consists of 50 countries (Ukraine is not included in the list).
We see a very unique set of countries in these charts. Most of the developed democratic countries (the United States of America, Great Britain, Germany, France), which are traditionally on top international rankings, were not included in the 50 countries where surveys were conducted. Undoubtedly, the leading countries of the world economy should appear in the next editions of the rating, and only then will it be possible to draw conclusions about the rating of countries by the main components of the business climate.
There are still a lot of questions related to the polling conduct mode. In countries with defective democracy, especially in authoritarian, oligarchic regimes, international organizations work closely with lawyers, economists, and consultants who have access to powerful offices.
If the opinion about the quality of the business climate in the country is formed through the "B-READY Index" tool, and this directly or indirectly affects investment flows, credit rating or the decision to enter global/regional value chains, then there will undoubtedly be a danger of influence on those who interview and on those who are interviewed. The tendency to push (nudge) representatives or authorized representatives of the World Bank to choose the "right" respondents also does not go anywhere.
However, the World Bank itself has repeatedly been noticed in a wide variety of the schemes being not objective enough, both statistical and evaluative in nature (Doing Business, recalculation of purchasing power parity with unexpected results for the BRICS countries), as well as investment, project, about which the whole books have been written by former employees of the World Bank. This organization definitely does not have the resources to ensure the objectivity, impartiality of surveys and, what is critically important, unified interpretations of answers and evaluations. One thing is "Sustainability", "healthy competition", "smart regulation", and another thing is "responsible competition".
The launch of the new tool of the World Bank to assess the quality of the business climate has come out as "The first pancake for nothing". The B-Ready index not only has not corrected the defects of Doing Business, but also increased the number of controversial points in the interpretation of the results and the evaluation process.
Instead of integrating the experience of scientific research and conclusions formed over the past 30 years by scientists and analysts who annually make indices of economic freedom, human freedom, and protection of property rights, the experts of the World Bank decided to follow the path of the UN, taking into account the agenda of public organizations that actively promote DEI. In this form, the life of the B-Ready index will expire much faster than the one of its predecessor. Until the World Bank is de-ideologicalized and depoliticized, this institution is unlikely to create a scientifically based, universal tool for assessing economic growth, well-being and the development of the private sector. On the other hand, in 2023, references to economic freedom began to appear in the reports of the Security Council. The issue of supporting the private sector and entrepreneurship is open.
If there is an honest search for answers to pressing questions of the current economic development agenda, you need to offer your solutions. Fortunately, the Austrian School of Economics (AESH) has a lot of them for more than 100 years of active scientific work.
Is it difficult to assess the ease of doing business?
According to the experts of the World Bank, "ease of doing business" is far from being enough to define a healthy business environment. They believe that reducing the "cost of doing business" may inadvertently lead to increased costs for society as a whole. Therefore, the Business Ready index assesses not only the regulatory burden, but also the quality of regulation, for example, "does labor legislation protect employees from arbitrary dismissal? Does it indeliberately make female workers less competitive than male workers and disincentivize them from looking for work?”
We see another example of subjectivization of the business environment quality assessment. Who, how, according to what methodology will evaluate the concept of "society’s expenditures in general"?
In this approach, there stick out the ears of the ideology of DEI (diversity, equity, inclusion) (diversity, equality/justice, inclusiveness), the UN strategy for sustainable development with 17 goals, as well as gender and "green" aspects.
The neo-Marxism and state interventionism embedded in the methodology of the B-Ready index, by definition, make it unsuitable for the application in 180 countries of the world, as it is planned by the World Bank.Share
It is one thing to evaluate, for example, such parameters as "time/cost of company registration", "cost of credit", "tax burden", "time/cost of conducting a foreign trade agreement or defending one's property rights through court"; and it is completely different to try to justify the coefficients that increase/decrease the quality of the business climate depending on the interpretation of gender, the common good, climate dynamics, etc.
The authors of the new B-Ready index suggest evaluating not only business rules and regulations, but also public services:
- "Do public utilities provide reliable water and electricity supplies to enterprises?
- Do governments make it easier for enterprises to fulfill their tax obligations, comply with environmental and social guarantees?
- Do they create systems that enable government agencies to share information about the commercial activity of enterprises with each other?
- Do they provide public databases that support the transparency and free flow of information necessary for a healthy business climate?"
With such an approach, questions will always arise as to who interviewed whom and in what mode. Knowing how creatively such sociology can be done in countries without clear canons of democracy and the rule of law, the authors of the Index plant a "bomb" under its reputation.
In the new Index, the World Bank intends to combine almost 2,000 data for each country. Such a database does not exist anywhere in the world.
The World Bank believes that its presence will enable businesses to make more accurate, better decisions regarding the choice of direction for investment and production activities. It also naively believes that the availability of such a source of information "encourages governments to form better policies by learning from each other, which will enable researchers around the world to join efforts for proper development of the global private sector."
Striving for uniqueness is, among other things, a standard marketing ploy designed, in particular, for donors. However, the issue of what prevents politicians and public figures from learning from the achievements and failures of others remains open. For more than 30 years, the reports of the Fraser Institute, Cato Institute, Heritage Foundation on the unconditional benefit of the intangible asset «economic freedom» and its impact on growth, development, quality of life and economic competitiveness have been publicly available. And what? The number of completely economically free countries can be counted on the fingers of one hand.
The Legatum Prosperity Index has been published annually for almost 20 years. It has 12 groups with 300 indicators. It is also an excellent source of information on how to ensure the prosperity of the country. Unfortunately, politicians ignore the recommendations and wishes of business and academic economists, if they are aimed at reducing the size and functionality of the State. Finally, there are reports on the state of property rights in the world from Hernando de Soto and his Property Rights Alliance. They have been published annually since 2007. His reports make a compelling case for the critical importance of private property.
Neither these, nor other regular reports, nor the scientific theories of the Austrian School of Economics, which year after year calls attention to the defects of economics, has prompted governments to revise their policies, and the scientific, university mainstream, reveling in its status as a priest at the throne of Leviathan, stubbornly block the AES, using the tools of the "cancel culture" against it.
The World Bank itself only in 2024, for some reason, began to use the phrase "economic freedom" in its reports, and even then, not instead of, but together, in one "plate" with DEI, sustainable development, public-private partnership, gender equality, global social benefits and the fight against climate change. Attempts to combine the incompatible in the field of economic theory and political economy of reforms, to create another third way, are doomed to failure. Judging by those assumptions and the format of the B-Ready index-2024, the World Bank itself is not ready to learn from the theoretical mistakes of the past. Therefore, the claim that this index will become an "important public good" is more of an advertising ploy at this stage.
The World Bank says its B-Ready index is more rigorous and transparent than its predecessor, Doing Business. It combines the opinions of more than 2,500 business climate experts and the answers of more than 29,000 business representatives. The survey data are published in the public domain. You can check them. Based on the received data, World Bank experts have formulated two general observations.
The first one: "Countries are generally better at enacting regulations aimed at improving the national business climate than they are at providing the public services needed to ensure actual progress." That is, there is a significant gap between the law and its implementation.
The second one: "Richer economies tend to be more ready to do business, but a country does not have to be rich to create a good business environment."
For example, Rwanda has ranked in the Top 10 out of 50 countries for the quality of public services and operational efficiency. Colombia is in the Top 10 for the quality of the regulatory framework and public services, Georgia for the regulatory framework and operational efficiency.
It is obvious that a poor, developing country with a post-totalitarian, Soviet heritage must reduce the functions and powers of the state in order to concentrate resources and efforts on the main thing - the protection of life and property of citizens.Share
Demand for stimulation of private business
Creating conditions for the development of the private sector is on the agenda of the World Bank for a reason. After the financial crisis of the second half of the 2000s, the State significantly increased in size, resources and functionality. There happened a crowding out of private investment and consumption by the state ones.
For more than 15 years, VIP-disposers and consumers of other people's property pretended that everything was going according to plan, that the State was handling everything, but the numbers and facts persistently said the opposite. Neither the World Bank, nor the IMF, nor the international economic mainstream have yet recognized the obvious failure of the State, but they are more and more insistently proposing measures to support the private sector.
In the Report, the World Bank claims that the private sector creates ~90% of jobs, carries out 75% of investments, and more than 70% of sales. The private sector in developing countries forms 80% of state revenues. However, in the last 15 years, the rate of private investment has decreased substantially.
In 2023-2024, the average growth rate of investment per capita will be only 3.7%, which is half the annual average rate for the previous two decades. The World Bank believes that the private sector must be "more dynamic and resilient to meet the enormous challenges of development." That is, the logic of the authors of the B-Ready index is as follows. The private sector needs to be supported so that it pays more taxes or fulfills the goals of sustainable development, DEI (diversity, equity, and inclusion) with its own funds, works in the mode of woke culture and at the same time pays high taxes.
In the coming decade, the world needs to create 44 million jobs for young people every year. 30% of them are in Africa. In order to eliminate extreme poverty in 10 years, low-income countries must ensure GDP per capita growth of 9%. In order to get out of the middle income trap, developing countries need to maintain growth rates above 5% of GDP for a long time. By 2030, in order to implement the climate agenda and achieve other development goals, they must attract $2.4 trillion annually. Governments will not be able to fulfill such a task on their own. It is necessary to develop the private sector with the mobilization of investments and "maximization of benefits for business, entrepreneurs, workers and society in general."
In order to activate the private sector, it is necessary to answer the following critically important questions:
- What elements of the business climate can bring such benefits?
- Which countries have been the best at creating such a climate and how can others learn from them?
- What policy measures need to be implemented or intensified? What should be given up?
Business Ready (B-READY) is intended to answer these questions as part of the World Bank's new strategy to promote private investment, job creation and productivity for "inclusive and sustainable" development.
Unfortunately, the authors of the reports, as well as the main stakeholders of the World Bank, fail to question the very objectives of the UN, the WEF, and the international socialist international.
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Topics
World Indexes & Rankings
Yaroslav Romanchuk
A well-known Ukrainian and Belarusian economist, popularizer of the Austrian economic school in the post-Soviet space. He specializes in reforms in transitional economies in the post-socialist space.
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