DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

viii Doing Business 2009references to the relevant laws, regulationsand fee schedules, aiding datachecking and quality assurance.For some indicators part of thecost component (where fee schedulesare lacking) and the time componentare based on actual practice rather thanthe law on the books. This introduces adegree of subjectivity. The Doing Businessapproach has therefore been to workwith legal practitioners or professionalswho regularly undertake the transactionsinvolved. Following the standardmethodological approach for time andmotion studies, Doing Business breaksdown each process or transaction, suchas starting and legally operating a business,into separate steps to ensure a betterestimate of time. The time estimatefor each step is given by practitionerswith significant and routine experiencein the transaction.Over the past 6 years more than10,000 professionals in 181 economieshave assisted in providing the data thatinform the Doing Business indicators.This year’s report draws on the inputs ofmore than 6,700 professionals. The DoingBusiness website indicates the numberof respondents per economy and perindicator (see table 12.1 in Data notes forthe number of respondents per indicatorset). Because of the focus on legal andregulatory arrangements, most of therespondents are lawyers. The credit informationsurvey is answered by officialsof the credit registry or bureau. Freightforwarders, accountants, architects andother professionals answer the surveysrelated to trading across borders, taxesand construction permits.The Doing Business approach todata collection contrasts with that ofperception surveys, which capture oftenone-time perceptions and experiences ofbusinesses. A corporate lawyer registering100–150 businesses a year will bemore familiar with the process than anentrepreneur, who will register a businessonly once or maybe twice. A bankruptcyjudge deciding dozens of cases a year willhave more insight into bankruptcy than acompany that may undergo the process.Development of themethodologyThe methodology for calculating eachindicator is transparent, objective andeasily replicable. Leading academics collaboratein the development of the indicators,ensuring academic rigor. Six ofthe background papers underlying theindicators have been published in leadingeconomic journals. Another 2 are atan advanced stage of publication in suchjournals.Doing Business uses a simple averagingapproach for weighting subindicatorsand calculating rankings. Other approacheswere explored, including usingprincipal components and unobservedcomponents. 15 The principal componentsand unobserved components approachesturn out to yield results nearly identical tothose of simple averaging. The tests showthat each set of indicators provides newinformation. The simple averaging approachis therefore robust to such tests.Improvements to themethodology and data revisionsThe methodology has undergone continualimprovement over the years. Changeshave been made mainly in responseto suggestions from economies in theDoing Business sample. For enforcingcontracts, for example, the amount ofthe disputed claim in the case scenariowas increased from 50% to 200% ofincome per capita after the first year, asit became clear that smaller claims wereunlikely to go to court.Another change relates to starting abusiness. The minimum capital requirementcan be an obstacle for potentialentrepreneurs. Initially, Doing Businessmeasured the required minimum capitalregardless of whether it had to be paidup front or not. In many economies onlypart of the minimum capital has to bepaid up front. To reflect the actual potentialbarrier to entry, the paid-in minimumcapital has been used since 2004.This year’s report includes onechange in the core methodology, to thestrength of legal rights index, which ispart of the getting credit indicator set.All changes in methodology areexplained in the report as well as onthe Doing Business website. In addition,data time series for each indicator andeconomy are available on the website,beginning with the first year the indicatoror economy was included in thereport. To provide a comparable timeseries for research, the data set is backcalculatedto adjust for changes in methodologyand any revisions in data dueto corrections. The website also makesavailable all original data sets used forbackground papers.Information on data corrections isprovided on the website (also see Datanotes). A transparent complaint procedureallows anyone to challenge thedata. If errors are confirmed after a dataverification process, they are expeditiouslycorrected.notes1. The standard cost model is a quantitativemethodology for determining theadministrative burdens that regulationimposes on businesses. The method canbe used to measure the effect of a singlelaw or of selected areas of legislation orto perform a baseline measurement ofall legislation in a country.2. In the past year this has included a reviewby the World Bank Group IndependentEvaluation Group (2008).3. De Soto (2000).4. The indicators related to trading acrossborders and dealing with constructionpermits take into account limitedaspects of an economy’s infrastructure,including the inland transport of goodsand utility connections for businesses.5. http://www.doingbusiness.org/subnational.6. http://www.doingbusiness.org.7. Schneider (2005).8. http://www.enterprisesurveys.org.9. Narayan and others (2000).10. World Bank (2003).11. http://scholar.google.com.12. For example, Masatlioglu and Rigolini(2008), Kaplan, Piedra and Seira (2008)and Djankov, Ganser, McLiesh, Ramalhoand Shleifer (2008).(c) The International Bank for Reconstruction and Development / The World Bank