Fast may not be fast enough if not faster than others

Bangladesh has earned a place among the "Top-20 improvers in Doing Business 2020", according to a World Bank web feature published on September 27, 2019.  This is great news.  It recognizes some specific reforms implemented by the authorities during last one year to make doing business easier. As explained in the web feature, economies in this list are selected based on the implemented regulatory reforms making doing business easier minus regulatory changes making it more difficult to do business. The choice of the most improved economies is determined by the largest improvements in the ease of doing business score among those with at least three (net) reforms. "This top 20 improver list does not reflect fully an economy's attractiveness for businesses and is purely based on the improvements across 10 different regulatory areas", says the WB web feature. 

Selecting the economies that implemented regulatory reforms with the biggest improvements in their ease of doing business scores highlights their ongoing, broad-based reform programs. Identifying the top improvers allows a focus on the absolute progress in contrast with the relative improvement shown by a change in rankings.  Bangladesh featured in this list because of reforms in the areas of starting a business, getting electricity and getting credit. 

In a world where countries are competing intensely with each other for capturing FDI flows and export orders, what matters at the end of the day is it's ranking.  The problem of ranking is similar to assigning letter grades to students in a class based on test scores.  The absolute scores in each test is important as a measure of how well you have answered the questions in those tests, but the letter grade you get at the end of the semester is often determined by your composite score relative to the rest of the students in the class.  You can get an A scoring 70 out of 100 if no one else has scored more than 70 while the same score can get you a C or D if most others have scored more than 70.

The Doing Business assessment presents results for the ease of doing business score as well as ranking.  The score is called the Distance To Frontier (DTF), which is analogous to the test scores.  The ease of doing business ranking is analogous to the letter grade in that the ranking compares economies with one another to show how much the regulatory environment has changed relative to that in other economies.  

A key question inquisitive minds are asking after reading the WB web feature is what impact Bangladesh's appearance in the list of top-20 reformers will have on Bangladesh's ranking in DB 2020? Recall that Bangladesh ranked 176 out of 190 countries in DB 2019.  In theory, it is not possible to predict the ranking without knowing the exact DTF scores on each of the ten indicators for all the 190 countries. But based on what we know from last year's ranks and the top-20 improvers list it is possible to make some conjectures.  

Bangladesh is most likely to improve its ranking relative to last year.  How confident can we be about this? A little certainly, if not more. 

None of the countries that were below Bangladesh last year – Guinea-equatorial, Timor-Leste, Syria, Congo Republic, Chad, Haiti, Central African Republic, Congo Democratic Republic, South Sudan, Libya, Yemen Republic, Venezuela, Eritrea and Somalia – are in the list of top-20 improvers. Even if they have implemented some reforms, there is no chance any of them will surpass Bangladesh, like Afghanistan did last year.  

Also, except Myanmar, none of the countries that were within 20 places above Bangladesh's rank last year are in the list of top-20 improvers. Reforms in these countries may have covered less than three DB areas, but the change in their DTF score is most unlikely to exceed the change in Bangladesh's DTF score.  Bangladesh should therefore be able to overtake countries just above its rank last year such as Guinea-Bisau (175), Liberia (174), Angola (173) and Iraq (171) since Bangladesh is among the 20 countries with the largest improvements in the 2020 doing business scores.

It may be unrealistic to expect a big jump in ranking.  India moved up last year from 100 in DB 2018 to 77 in DB 2019 by increasing its DTF score by 6.63 points with reforms covering eight DB areas and was among the top-10.  Bangladesh is among the top-20 with reform covering the minimum of three areas while countries such as Bahrain and Saudi Arabia are in the same group covering 9; China 8; Kenya and Pakistan 6; Myanmar, Nigeria, Kuwait, Zimbabwe and Togo 5; and Azerbaijan, Kosovo and Uzbekistan 4.  Other than Bangladesh, Jordan, Djibouti, Tajikistan, and the Kyrgyz Republic have covered 3 areas.        

The government committed to implement regulatory reforms a couple of years ago to get Bangladesh to double digits in DB ranking by 2021. Good to see that the journey has begun and the first significant milestone very much in sight. But there is absolutely no room for even an iota of complacence because this is an uphill sprint with a fuzzy finish line to reach which running fast is not enough.  What would matter is to run faster than those who are behind as well as those who are ahead.   

The author is an economist.