Expand the coverage of current diagnostic tools and integrate them to produce comparable indicators so that these can capture the areas of the business environment not yet covered by existing tools.
Over the years a number of diagnostic tools have been used to design investment climate interventions. Recently new tools have been developed for specific areas of the regulatory environment. Although these tools cover in detail individual areas of the regulatory environment, there is no comprehensive tool that allows an assessment of all regulatory aspects in client countries. Such a tool would help determine which area is the most problematic in client countries.
IEG presented evidence that the Doing Business indicators and Enterprise Survey data the most commonly used diagnostic tools are incomplete that is, they do not cover all areas of regulation as identified in the best practice list (Table 1.3). Doing Business and Enterprise Surveys cover only some aspects such as business registration, taxation, and trade where most of the World Bank Group activities take place.
WB: Agree. Management agrees that diagnostic tools and indicators should evolve over time in the light of operational experience, evolving priorities, and advances in the academic literature. Management is undertaking multiple initiatives to develop new, and refine existing, diagnostic tools.
Management plans to review how indicators and other benchmarking tools are being utilized by the World Bank Group to inform investment climate activities, with a view to expand the utilization of indicators as an engagement tool. Management also notes the move of Global Indicators and Analysis Group, responsible for the Enterprise Surveys and Doing Business indicators, to the Development Economics Vice Presidency in October 2013 as part of the efforts to further revamp and expand the menu of investment climate indicators available to World Bank Group staff.
Action 1.A: Jointly with DEC, identify gaps in the current set of indicators and opportunities to fill these gaps through an expansion or refinement of existing indicators.
Indicator: Development of a strategy towards filling gaps in the current set of indicators jointly with DEC, including related technical engagement and fundraising.
Baseline: Gaps to be identified in first half of FY16.
Target: Improved coverage of the investment climate space through appropriate indicators.
Timeline: Strategy developed by end of FY16 implementation of expansion or refinement completed by end of FY18
The actions listed by Management reflect mostly the spirit of the recommendation and action by identifying gaps and collecting more indicators. The Management made substantial progress in fulfilling this action. However, the point of the recommendation is to collect or compile comparable data on all different areas of the investment climate as to allow the WBG to determine which area(s) of the business environment require attention or support. This collection of comparable data could be done ideally across countries or at least within one country.
Throughout FY17, the Investment Climate team has continued to fill gaps in the current set of investment climate indicators and measurement approaches. The leading initiatives include:
- Consolidation of internal and external investment climate data across more than 190 countries, published on an online portal T&Cdata360. This portal was awarded FY17 EFI Vice-Presidential Award.
- Collaboration with DECIG on new indicators of business regulation and business governance. For example, the Global Indicators in Regulatory Governance are informing various investment climate project under the "Good Regulatory Practice" program. (http://rulemaking.worldbank.org/)
- Systematic integration of new DECIG measures on quality of regulation in evidence-based technical assistance under Indicator-Based Reform product of Investment Climate.
- Collection and leveraging of new data on predictability, implementation gaps, and reform implementation on a project level through the Good Regulatory Practice Program.
- Collaboration with IFC to develop the methodology for the Country Private Sector Diagnostic (CPSD), including identification of the leading indicators for each of the diagnostic pillars, and development of new indicators where gaps exist.
- Completion of the Global Investment Competitiveness survey of business executives of multinational companies, providing indicators of drivers of FDI decisions.
- Development of a global database of corporate tax incentives.
- Development of new measures of FDI retention, generation, concentration, complexity, and potential.
- Development of a modular Investment Climate Diagnostic with standard indicators.
In FY18, these efforts will be deepened and broadened through the development of new impact measures of investment climate reforms, rollout of standardized investment climate surveys, development of an approach to measure high-frequency data of private sector performance, and introduction of new measures of FDI regulations.
The first recommendation aims at developing a set of comparable indicators of the business environment, complete and integrated, so that the WBG can identify the most important constraint in client countries. Although some actions have been taken towards achieving such recommendation, these new initiatives are mostly directed to M&E activities or to facilitate access to indicators from existing sources - e.g. indicators from the Global Competitiveness Report (World Economic Forum) and the World Investment and Political Risk (MIGA). Consequently these indicators are not comparable to the main sources of data - e.g. Doing Business and Enterprise Surveys. In other words, using these new indicators will not allow the WBG to identify priority areas because the new indicators do not use the same metric. It is not clear from the update whether a strategy has been developed to improve the WBG support to investment climate through appropriate indicators, as previously planned.
The Investment Climate team has been working on multiple fronts in FY16 to continue to identify and fill data and diagnostic gaps. FY16 achievements include:
- Launch of a new Investment Climate Snapshot portal providing curated cross-country investment climate indicators to facilitate broader use of such data for diagnostics and operations. (http://wbmsfpd08:50829/)
- Development of new indicators for investment climate results measurement and evaluation, e.g. investment generated.(http://globalpractices.worldbank.org/trade/Pages/SitePages/ME_IC.aspx)
- Undertaking of a systematic review of gaps in the coverage of investment climate data and indicators. (http://globalpractices.worldbank.org/trade/Knowledge Base/Forms/AllItems.aspx?RootFolder=%2Ftrade%2FKnowledge%20Base%2FIC%2FIndicator%5FBased%5FReform%2FIC%20Diagnostics&FolderCTID=0x01200088244B94A062384FBA76C44F79ABE71C&View=%7BB0E5A2B2%2DD8CA%2D41B0%2DA276%2DA8F1190D598C%7D)
- Continuation of a close collaboration with DECIG in leveraging new data in research, analytical work, and operations. For example, the new DECIG dataset on Global Indicators in Regulatory Governance is underpinning new investment climate work in several workstreams of the Good Regulatory Practice program. (http://rulemaking.worldbank.org/)
In FY17, these efforts will be deepened and broadened through the launch of a new Global Investment Competitiveness survey, development of an integrated Investment Climate Diagnostic tool, and targeted policy research and analysis on various investment climate topics.