New World Bank method alters Rwanda's business status

Rwanda Development Board (RDB) chief executive Francis Gatare has described the World Bank 2015 Doing Business Report that alters the ranking of the country as "changing goal posts after the ball crossing the line."
People register businesses at Rwanda Development Board. (File)
People register businesses at Rwanda Development Board. (File)

Rwanda Development Board (RDB) chief executive Francis Gatare has described the World Bank 2015 Doing Business Report that alters the ranking of the country as “changing goal posts after the ball crossing the line.”

But Carolyn Turk, World Bank country manager, said the new ranking might appear negative (due to the new methodology used) but the reality of doing business climate in Rwanda remains positive.

Francois Kanimba, the minister for trade and industry, said, “we will continue to have a conversation with the World Bank to further understand how their new methodology works so that future reports capture the reality.”

The trio, Gatare, Kanimba and Turk, were speaking yesterday afternoon at a media briefing organised by RDB to officially unveil the findings of the World Bank’s 12th edition of Doing Business Report, released yesterday under the theme, “Beyond reforms.”

The 2015 doing business report captures reforms undertaken by 189 countries to reform their economies between June 2013 and June 2014.

According to Turk, the survey findings were computed using a new methodology that altered countries’ past rankings, including Rwanda.

Under the previous methodology used by World Bank 2014 Doing Business, surveyors ranked Rwanda 32nd easiest place to do business in the world.

But under the new methodology, Rwanda’s previous position of 32nd has since changed to 48th but which has now improved to 46th position in the new report.

Despite the effects of the new methodology, Rwanda retains its position among the top three easiest countries in Africa to do business, ranked third behind Mauritius and South Africa and ahead of Ghana and Botswana.

During the press conference, journalists asked Turk to clarify on the ‘new methodology’ but she referred them to the technical section of the report where the authors explain how they carried out the research and computed numbers.

Rwanda’s new ranking

Ten indicators were surveyed, including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

According to the report, Rwanda registered improvement in three of those indicators, including dealing with construction permits, getting electricity and getting credit.

In access to credit, Rwanda made major leaps and moved from 10th place to 4th globally.

Under construction permits, the country moved from 93rd to 34th position, while in access to electricity, it moved from 79th to 62nd position today.

Drops

However, the new methodology hurt Rwanda’s previous impressive score of being the 8th easiest place in the world to start a business a development that shocked many.

According to the report, Rwanda is now ranked in 112nd position from 72nd previously. But the 72nd position was previously 8th, but it was altered after the new methodology was applied.

Hitherto, starting a business was Rwanda’s best reformed indicator and quoted often to attract foreign investors to the country. The drastic change in ranking, some feared, might affect Rwanda’s investment attraction efforts.

However, Minister Kanimba downplayed the fears noting that serious investors can’t base on results of one year to determine their decisions.

“Our previous record on reforms is very clear and positive and this year’s changes in rankings due to a new methodology introduced cannot alter a record of the previous years,” Kanimba said.

Other indicators where Rwanda’s performance declined include registering property which dropped from 13th to 15th; protecting minority investors from 115 to 117; paying taxes from 26th to 27th; trading across borders from 157th to 164th; enforcing contracts from 50th to 62nd and resolving insolvency from 99th to 101st.

“Rwanda has been an example for emerging economies in Sub-Saharan Africa and worldwide. The country has successfully implemented a strategy to improve the business environment for local entrepreneurs that has brought tangible results,” Gatare said.

Gerald Mukubu, acting chief executive of Private Sector Federation, said the reforms Rwanda has made over the years are being enjoyed today by members of the private sector.

“We laud government for its efforts of always making it a priority to make it easy for private investors to prosper,” he said.

Govt petitions

Under the new methodology, Turk said, researchers considered more factors than was the case in the previous surveys and these findings were computed using a new model that affected the countries’ scores.

However, government officials yesterday revealed that they were not properly involved in this process and that the new findings don’t reflect the real picture and efforts of reforms inside Rwanda.

“It appears that the World Bank has changed goalposts after the ball has crossed the line and explanations for this abruptness are not justifiable,” Gatare told The New Times.

He also said government has written to the World Bank to officially express its displeasure at the new rankings which misrepresent Rwanda’s outlook.

Asked whether government will accept the findings of the 2015 Doing Business Report as they are, Minister Kanimba said, “We’ll take the report as it is as we try to understand how the new methodology works.”

Gatare, though, said the World Bank country office is a committed partner of the government and that the country office can’t be held accountable for the new report and its findings.

Details of what exactly the government wants in its appeal to the World Bank Doing Business team remained scanty, but from what was shared at the briefing, clarifications will be needed to justify the drastic changes in Rwanda’s rankings.

With the new ranking, Rwanda has to package new messages to market the nation to foreign investors who, among other reports, use the doing business surveys as a key reference to decide where to invest.

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