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What does the world need to do to become “Business Ready”? A healthy business environment and strong private sector are foundations of economic growth: generating jobs, boosting investment and increasing output. So what do economies need to do to enable businesses to thrive, for the benefit of society as a whole?
Norman Loayza, Director of the World Bank’s Global Indicators Group, who leads a new flagship report – Business Ready, or B-Ready, joins Expert Answers. He explains how the report looks at over 1200 indicators, to assess the regulatory framework and public services directed at firms.
Timestamps
00:00 Introducing the topic and expert
01:35 The importance of private sector
03:34 Main findings from the report
05:10 The case of developing countries
07:09 Public policies to to improve business environment
Transcript
[00:00] - Although it is true that advanced economies or wealthier economies are more business ready, we find a ray of hope for poor economies, for low-income economies.
- Hello, and welcome to "Expert Answers." I'm Camilla Liu. In this episode, we'll be looking at the foundation to economic growth: the private sector. When functioning well, it generates jobs, boosts investments, and increases output. But what happens when that foundation starts to crack? Since the Great Financial Crisis of 2008, the private sector's been struggling to regain its footing. And with the recent economic downturns, private investment in developing economies has slowed substantially. Per capita investment growth between 2023 and 2024 is barely half of the rate of the previous two decades. This slowdown isn't just an economic issue. It hampers countries' ability to fight poverty and tackle climate change. And these challenges are far beyond what governments can tackle alone. Having a dynamic private sector is key to solving a wide range of global challenges over the next decade. So what does the private sector need to truly thrive? Let's find out. I'm joined here by Norman Loayza, director of the World Bank's Global Indicators Group, who leads a new flagship report, Business Ready, that assesses the global business environment. Welcome to "Expert Answers," Norman.
- My pleasure.
[01:35] - But this report, Business Ready, is about private sector development. So I want to start by asking you, why is it so important that we pay attention to the private sector?
- The short answer is that the private sector can be the engine of economic growth. There is great need for economic growth around the world. It is estimated that low-income economies need about 9% of GDP growth per capita to eliminate extreme poverty within the next decade. And it's also estimated that the middle-income economies need about 5% of GDP growth to overcome the middle-income trap and become advanced economies. So how is this going to happen? It can happen only if the private sector becomes re-energized, if it provides enough jobs and enough opportunities for people. Now, we may want to understand what the private sector really means. It's not just businesses. Private sector is an ecosystem that comprises businesses, workers, the environment, consumers, and even the market as a whole. When this private sector is dynamic and resilient, it can provide economic growth and job creation. Let me tell you that Business Ready is a detailed set of data that can guide policy reforms to improve the private sector as a whole. That is to make it more efficient, to make it living by higher-quality standards, and by delivering on providing jobs and investment for the economies that are involved.
[03:34] - Can you please share with us the biggest findings of this year's Business Ready report?
- The most important finding of our report, Business Ready, or B-READY for short, is that the world is not business ready despite the large importance that the world has for economic growth, for job creation, and for investment. Let me unpack a bit this result. We measure in Business Ready the quality of regulations as well as the efficiency of public services that are directed at firms. And what we find is that, on average, in the 50 economies that we assess in the first report, only about three quarters of the regulate, the high-quality regulations are in place, and about only 50% of effective public services are well designed. So this implies that there is significant improvement that can be made both in terms of enacting better regulations and also improving better public services. But there is also a corollary here that I want to underscore, that it seems to be easier to enact regulations than to provide public services. There is a public service gap that must be addressed to improve the business environment.
[05:10] - So you just mentioned that the world is not business ready, and in the report, it indicates that some countries perform better than others. Could you unpack a little bit? What about developing economies? How do they perform?
- Although it is true that advanced economies or wealthier economies are more business ready, we find a ray of hope for poor economies, for low-income economies. In fact, there are very interesting, notable exceptions. And they lead us to believe that countries do not need to be rich to have a strong business environment. And I can give you a few examples. The first is Rwanda. Rwanda performs well in 6 out of the 10 topics that span the lifecycle of the firm that we measure. And it may be because of this good performance in the business environment that the country has been able to double the size of its economy in the last decade. The second example is Georgia, a country that in the last decade has grown by a rate of about 5% of GDP per capita. Now, this country performs well, as I said, being in the top 20% of 7 of the 10 topics that we measure. And the last example comes actually from Cambodia, who tops the assessment on the topic of financial services. It may be for that reason that in the last decade in Cambodia, the number of bank accounts has increased by tenfold in the country.
[07:09] - That is an interesting point. Now, using assessment from this report, what can policymakers do to improve the business environment in their countries?
- The Business Ready report is very rich in terms of data. In fact, let me tell you that it includes about 1,200 indicators per economy. So this can serve as a compass and guide for policy reform, identifying the issues where economies need to work and improve, and also the areas of strength, where they can rely upon. To be more specific, as I said before, we cover 10 topics that span the lifecycle of the firm. For the economies that we measure, the 50 economies, it's business entry where economies perform the best, and business insolvency and market competition where economies perform the least well. But overall, there is plenty of room for improvement.
- Norman, thank you very much for being on "Expert Answers" and for sharing some insights from the Business Ready report.
- Thank you very much.
- Thanks again to Norman for joining me on "Expert Answers." Don't forget to check out the Business Ready section of the World Bank website to learn more about this innovative report. Bye for now.
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