Why Govt has mixed feeling over Doing Business Ranking

RDB’s Chief Strategy and Compliance Officer, Louise Kanyonga, has expressed concern over World Bank’s abrupt changes in methodology. / Sam Ngendahimana

The 2020 World Bank Doing Business Report released Thursday was received with mixed feelings by the Government.

The report saw Rwanda keep its position as the second easiest place to do business in Africa, behind Mauritius.

Reforms in three indicators, as well as improvement in the implementation of several others, were recognised as having enabled the country to remain dominant in multiple aspects.

However, despite the reforms and progress, the report ranked Rwanda 38th globally from 29th in its previous ranking.

The drop was traced to an indicator, protecting minority investors, where Rwanda was placed 114th globally from 14th in the previous report.

The drop in ranking was however not a result of performance but a change in the methodology and approach of measurement.

It is this review of the methodology and approach in the process of compilation of the report that led government officials to receive it with mixed feelings.

Among the changes made by the World Bank in the evaluation of the indicator was the late addition of assessment of the stock market performance as part of the sub-indicators in the report.

According to the latest ranking, for an economy to be seen as having an active stock market that protects minority investors, it has to show at least 10 companies listed and trading equities.

Rwanda’s grievances with the review were that it was not communicated as is the standard practice of the World Bank Doing Business Report ranking methodology.

Louise Kanyonga, the Chief Strategy and Compliance Officer at RDB, said that Rwanda is a big supporter of the report, its progress and updates to improve quality but expressed concern over abrupt changes that are not communicated.

This is not the first time that such controversies have arisen in regard to the methodology. In January this year, Paul Romer resigned from the position of World Bank Chief Economist after disagreements on the changes in methodology which he said risks painting countries in bad light. His resignation specifically highlighted Chile as a nation affected by the methodology changes.

Dr Rita Ramahlo, a World Bank Senior Manager, involved in the development of the report said that in August this year, the ranking reviewed the parameters considered under the protecting minority investors to include stock market.

Admitting that the review had not been communicated, she said that the review was aimed at improving quality measures.

Standard methodology measures involve communication to countries well in advance before collecting data with the review process taking over two years.

However, Ramalho said that considering that the consideration of firms present on the stock market did not require any surveys, no communication had been made.

The ranking took into account three reforms in three indicators, starting a business, dealing with construction permits and getting electricity indicator.

However, government agencies expressed concerned that there were more reforms than was captured.

For instance, Fred Mugisha, from One Stop Centre, said that the ranking used aspects from a building code that was no longer in use and did not take into account reforms such as elimination of geotechnical studies, topographic and Environmental Impact Assessment studies.

The report metrics and indicators did not take into account that the requirements had since been scrapped off and consequently reported that getting a construction permit takes 97 days which officials dispute.

Rwanda Housing Authority officials said that with the adjustments made over time and removal of stringent requirements, time taken is much less.

The World Bank defended its position saying that the reforms were considered based on the respondents and users feedback to mean that in some instances, despite reforms being made, stakeholders still use old practices.

Rwanda Development Board recorded four reforms through the ranking took into account only three.

In the fourth reform, enforcing contracts which involved the introduction of a new small claims procedure and reduction of court fees, the World Bank considered it as an improvement in operations approach as opposed to reform.

However, despite the disagreement, both parties noted that the country had maintained improvements in improving the business environment and the country was better for it.

Aghassi Mkrtchyan, a Senior Economist at the World Bank Rwanda office, said that Rwanda’s performance remains remarkable with multiple countries seeking to benchmark from it.

The annual WB Doing Business report is a major reference tool for investors from across the world.

editor@newtimesrwanda.com

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