Methodology

Overview

B-READY assesses an economy’s business environment by focusing on the regulatory framework and the provision of related public services directed at firms and markets, as well as the efficiency with which regulatory framework and public services are combined in practice. B-READY seeks a balanced approach when assessing the business environment: between ease of conducting a business and broader private sector benefits, between regulatory framework and public services, between de jure laws and regulations and de facto practical implementation, and between data representativeness and data comparability. B-READY covers the areas where it can provide the most value added in the context of existing indicators: namely, the regulatory framework and related public services at the microeconomic level.

What does B-Ready measure?

B-READY focuses on ten topics that are organized following the life cycle of the firm and its participation in the market while opening, operating (or expanding), and closing (or reorganizing) a business. The main topics include Business Entry, Business Location, Utility Services, Labor, Financial Services, International Trade, Taxation, Dispute Resolution, Market Competition, and Business Insolvency. Within each topic, considerations relevant to the business environment regarding aspects of the adoption of digital technology, environmental sustainability, and gender are captured. Based on the data collected, B-READY generates scores for each topic area and potentially a set of aggregate scores. B-READY collects both de jure information and de facto measures. While de jure data are collected from expert consultations, de facto data are collected from both expert consultations and firm surveys. The latter is a major innovation and represents a significant increase in the data available to WBG teams, development practitioners, and researchers around the world. Data collection and reporting processes are governed by the highest possible standards of integrity, including sound data gathering processes, robust data safeguards, clear approval protocols, transparency and public availability of granular data, and replicability of results.

How are data collected?

Quantifying business environment conditions into corresponding measurable indicators is critical for the B-READY benchmarking exercise. All data obtained from either experts or firms are collected in raw form and then converted to a score that can be combined with other scores. The objective of the scoring methodology of raw data is to allow for score aggregation that preserves absolute cardinal differences, which can be used to compare across economies and over time (rather than purely ordinal or relative scoring). The granular data produced by the B-READY project are combined to produce a score for each of the ten B-READY topics. Every topic score will be generated by averaging the scores assigned to each of the three pillars (regulatory framework, public services, and efficiency) for that topic. For nearly all indicators, the regulatory framework pillar captures de jure information, and the public services and efficiency pillars capture de facto information. The scoring approach therefore provides complementarity between de jure laws and regulations and de facto practical implementation.

B-READY combines primary data collected from thousands of specialists— each an expert in the private sector of a specific economy—with data collected directly from businesses operating in that economy. To accomplish this, B-READY uses expert questionnaires tailored to the B-READY project and World Bank Enterprise Surveys featuring questions designed to feed into the B-READY assessment. Through expert questionnaires, the project obtains detailed information from specialists in each topic for indicators in the Regulatory Framework and Public Services pillars. Using the World Bank Enterprise Surveys, the project gathers data directly from businesses for indicators in the Operational Efficiency pillar. 

Overview

Registered companies benefit from a variety of advantages, including the legal and financial services provided by courts and banks. Their employees enjoy social security protection. Additionally, the economy takes advantage of positive spillovers: where formal entrepreneurship is high, job creation and economic growth also tend to be high. As more businesses formalize, the tax base also expands, enabling the government to spend on productivity-enhancing areas and pursue other social and economic policy goals. However, entrepreneurs often encounter barriers to entry into the formal economy.

There is evidence that higher costs for business start-ups are associated with lower business entry and lower levels of employment and productivity. Cumbersome regulations for business start-ups are associated with high levels of corruption and informality. A simple business start-up process is a positive factor for fostering formal entrepreneurship. Moreover, digital technology and transparency of information can encourage businesses to register and promote private sector growth.

What does Business Entry Measure?

The Business Entry topic measures the process of registration and start of operations of new limited liability companies (LLCs) across three different dimensions, here referred to as pillars. The first pillar assesses the quality of regulations for business entry, covering de jure features of a regulatory framework that are necessary for the adoption of good practices for business start-ups. The second pillar measures the availability of digital public services and transparency of information for business entry. The third pillar measures the time and cost required to register new domestic and foreign firms. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory has several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

Acquiring the physical space where a business will operate is a crucial ingredient of success for many firms, even in the digital age. Getting the right location can influence business access to customers, transportation, labor, and materials, as well as determine taxes, regulations, and environmental commitments they must comply with.

Whether an entrepreneur is leasing or purchasing a commercial property, the regulatory framework and the public services related to acquiring a location can have an impact on how conducive the business environment is for individual firms and the private sector development of an economy.

Firms are more likely to invest in economies with strong property rights in which they are confident that their immovable property investments will be safe. A reliable land administration system, which provides clear information on property ownership, facilitates the development of real estate markets, and supports tenure security. These factors not only provide confidence to the private sector but also indicate the economy’s prospects for economic growth. Transparency in land administration also reduces information asymmetries, which increases market efficiency, further supporting economic development.  

When investors and entrepreneurs acquire a new location for their business, the process often involves licensing requirements for altering a property or changing tenancy. Building-related permits are essential for public safety, strengthening property rights, and contributing to capital formation. Last but not least, transparent and accessible environmental regulations related to building control reduce the regulatory burden on firms by offering clarity on rules and regulations.

What does Business Location Measure?

The Business Location topic measures three different options—purchase, lease, or build—that are available to entrepreneurs to choose the adequate location to set up their company, across three different dimensions, here referred to as pillars. The first pillar assesses the quality of regulations pertaining to property transfer, building, and environmental permitting, covering de jure features of a regulatory framework that are necessary for immovable property lease, property ownership, urban planning, and environmental licenses. The second pillar assesses the quality of public services and transparency of information in the provision of property transfer, building, and environmental permitting. The third pillar measures the operational efficiency of establishing a business location in practice.

The interaction between these three pillars ensures a comprehensive evaluation of business location, balancing regulatory quality, service transparency, and operational efficiency to create an optimal environment for business establishment.

The three indicators consider both the firm’s flexibility and the broader social benefits. They ensure a more balanced approach accounting for private sector needs while safeguarding public interests, such as environmental sustainability and public safety.  Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory consists of several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

By providing essential services—electricity, water, and digital connectivity—utilities play an important role in supporting economic and social development. Without these services, businesses cannot function, and households cannot lead quality lives. Yet, more than 30 percent of businesses globally identify electricity supply as a major constraint to their operations, according to the World Bank Enterprise Surveys. Disruptions in electricity supply impair firm productivity, revenues, and economic growth. Similarly, inadequate water supply can lead to decreased firm productivity, deterioration of machinery, and reduced profits.  Access to reliable internet is another critical element in today’s digitalized world, where the use of digital technologies improve productivity. However, as of 2021, just over 15 percent of people globally had fixed broadband subscriptions, and only 1.4 percent in the least developed countries. The provision of basic utility services should be effective and reliable. Facilitating timely access to such services in an environmentally sustainable manner is instrumental for economic growth.

The effectiveness of regulatory frameworks, good governance, transparency, and efficiency of utility services are pivotal elements of a good business environment. An effective regulatory framework, for example, is a fundamental steppingstone for the provision of high-quality utility services. Furthermore, the reliability and sustainability of utility services should be maintained through monitoring the quality of service supply and connection safety, fostering public accountability and safety. Interoperability through agency coordination and digitalization of utilities can also help improve the quality of public services and the customer experience.

What does Utility Services Measure?

 The Utility Services topic measures the effectiveness of regulatory frameworks, and the quality of governance and transparency of service delivery mechanisms, as well as the operational efficiency of providing electricity, water, and internet services. Under the first pillar the Utility Services topic assesses the effectiveness of regulation pertaining to electricity, water, and internet services, covering de jure features of a regulatory framework that are necessary for the efficient deployment of connections, reliable service, safety, and environmental sustainability of provision and use of utility services. The second pillar of the topic measures the quality of governance and transparency in the provision of utility services, thus assessing the de facto provision of utility services. The third pillar measures the time required to obtain electricity, water, and internet connections, as well as the reliability of utility service supply. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory consists of several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

Labor is arguably the most important factor of production in most businesses and the primary source of income for most people. Regulations and public services related to labor are fundamental drivers of private sector development from the perspective of both enterprises and workers. These regulations and public services affect firms’ decisions on whether to expand by hiring labor, and whether to do so formally or informally. In addition, they impact the well-being of potential workers by providing them with good jobs and opportunities for growth.

For formally employed workers, labor regulations matter—they protect their rights, reduce the risk of job loss, and promote equity and welfare. For workers employed in the informal sector, labor regulations can affect their ability to enter the formal workforce. If labor regulations make hiring costs too high or the rules too cumbersome, firms may opt to use more capital than labor or to hire informally. Sound and balanced labor regulations are essential for ensuring that both firms and workers benefit from a dynamic and innovative labor market without compromising income security or basic workers' rights. In addition, public services may address market imperfections and have important implications for the functioning of the labor market and firm choices.

What does Labor Measure?

The Labor topic measures good practices in employment regulations and public services from the perspective of both enterprises and employees across three different dimensions, here referred to as pillars. The first pillar assesses the quality of labor regulations pertaining to workers' conditions and employment restrictions and costs, covering de jure features of the regulatory framework that are necessary for the functioning of the labor market and to provide employers and employees with their obligations and relevant safeguards. The second pillar measures the adequacy of public services for labor, assessing the de facto provision of social protection and the institutional framework on which the labor market and the enforcement of labor regulations depend.  The third pillar measures the operational efficiency of labor regulations and public services in practice, assessing employment restrictions and cost, as well as public services. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory has several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

Access to finance remains a major constraint for firms worldwide, despite being essential for their operations and expansion and positively associated with innovation. Additionally, access to finance affects firms’ ability to manage a volatile cash flow and directly contributes to their resilience, which was underscored during the global pandemic. Research has also shown that private sector financing in developing economies has positive macroeconomic effects as firm-level employment often benefits from improved access to finance.

Access to finance also plays an important role in maintaining a company’s financial stability. Removing bottlenecks associated with making and receiving payments further strengthens firms’ financial security. In recent years, cashless transactions (including e-payments) have continued growing. However, economies’ ever-increasing digitalization requires modern regulations that enable electronic solutions to reap the benefits of technological progress. This would unlock the extensive use of electronic payments (e-payments), which is associated with reduced tax evasion and lower informality in the private sector.

What does Financial Services Measure?

The Financial Services topic measures four areas—Commercial Lending; Secured Transactions; e-Payments; and Credit Information—across three different dimensions, here referred to as pillars. The first pillar assesses the effectiveness of regulation pertaining to commercial lending, secured transactions, and e-payments, covering the de jure features of  regulatory frameworks. The second pillar measures the accessibility of information in credit infrastructure by evaluating the operation of credit bureaus and registries and the operation of collateral registries. Thus, the second pillar assesses de facto and some de jure aspects of financial services. The third pillar measures the operational efficiency of (i) obtaining a loan; (ii) registering a security interest as well as the timeliness of credit information sharing; and (iii)  e-payments usage and their efficiency. Each pillar is divided into categories, which are defined by common features that inform the grouping. Each category is further divided into subcategories, which contain several indicators. These indicators may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to determine the number of points for each subcategory, category, and pillar.

Overview

International trade is a key driver of economic growth and private sector development. Through competition among domestic and foreign firms, it promotes specialization and resource reallocation to the most productive firms. While there are winners and losers among firms, workers, and consumers, international trade can generate overall benefits for the private sector and society. To remain competitive, firms must continuously adapt, innovate, and improve their efficiency, resulting in aggregate productivity growth and welfare. Trade openness may generate further productivity gains by creating economies of scale and providing access to cheaper intermediate inputs of higher quality and variety, as well as facilitating knowledge and technology transfers. Increased access to foreign inputs may enhance productivity and export performance, and it may provide opportunities to diversify the economy and reduce its dependence on a single product or market. This shows the complementarities between exports and imports and emphasizes the importance of trade openness to reap the benefits of international trade.

To fully realize the benefits of international trade, it is necessary to have a conducive business environment that reduces trade barriers and lowers compliance and transaction costs for the private sector. A regulatory framework that establishes a nondiscriminatory, transparent, predictable, and safe trading environment generates incentives to engage in international trade and provides a level playing field. Furthermore, it is crucial to have regulations that strike a balance between public policy objectives, including protecting public health and the environment, and the requirements they impose, which can create market distortions that impede trade. Finally, policies that improve the quality of physical and digital infrastructure, as well as border management, reduce the time and cost borne by the private sector, which represents a substantial barrier to trade, and increase participation in international trade for small, medium, and large firms.

What does International Trade Measure?

The International Trade topic measures different aspects of international trade—trade in goods, trade in services, and digital trade—across three different dimensions, here referred to as pillars. The first pillar assesses the quality of regulations pertaining to international trade, covering de jure features of a regulatory framework that are necessary to establish a nondiscriminatory, transparent, predictable, and safe environment to harness the potential of international trade. The second pillar assesses digital and physical infrastructure concerning international trade and the quality of border management, thus assessing de facto provision of public services for international trade facilitation. The third pillar measures the time and cost to comply with export and import requirements, participation in cross-border digital trade, as well as the perceived major obstacles for international trade. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory consists of several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

Taxation is a powerful policy tool that governments use to generate revenue to finance their operations and provide public goods and services. Taxation affects the private sector development through a variety of interrelated channels. On the one hand, it creates enabling conditions for the growth and development of the private sector by financing critical infrastructure, investing in human capital, ensuring law enforcement, and supporting other vital services. On the other hand, excessive taxation can distort markets, impair investment decisions, and foster tax evasion. Likewise, cumbersome regulations, complex tax reporting requirements, and inefficient and inconsistent tax procedures increase compliance costs on firms, thereby discouraging formalization. Identifying the key challenges faced by taxpayers is essential for guiding reforms that support private sector development while pursuing domestic resource mobilization objectives.

What does Taxation Measure?

The Taxation topic measures the quality of regulation, administration, and practical implementation of tax systems across the three different dimensions, referred to as pillars. The first pillar assesses the quality of regulation related to taxation, encompassing both the legal framework (de jure) and the implementation (de facto) of the legal requirements. The second pillar measures the quality of tax administration by assessing the public services related to tax matters. The third pillar evaluates the practical effectiveness of the implemented tax regulations and public services. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory consists of one or several indicators, each of which may, in turn, have one or several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

Inability to resolve commercial disputes promptly and fairly can lead to adverse economic outcomes in the private sector, ranging from reduced entrepreneurship and lower investment to macroeconomic volatility. This makes efficient and quality dispute resolution essential for a healthy business environment. Having time- and cost-effective mechanisms for resolving disputes is critical because excessively long and expensive proceedings may defeat the very purpose of bringing a case to formal institutions, making them unattractive and unaffordable. In fact, correlations have been established between judicial efficiency and facilitated entrepreneurial activity. Evidence also suggests that under a more effective court system businesses are likely to have greater access to finance and borrow more. The quality of the dispute resolution process also matters. Claims should be considered with due care by credible institutions capable of issuing sound judgments. It was found that in economies with low confidence in court systems, firms are less willing to expand their businesses and look for alternative trade partners. To attract more investors, economies therefore should ensure not only judiciaries’ effectiveness but also their strength and reliability.

What Does Dispute Resolution Measure?

The Dispute Resolution topic measures efficiency and quality of the resolution of commercial disputes—those arising in the business context between firms—across three different dimensions, referred to as pillars. The first pillar assesses the adequacy of legislation pertaining to both court processes and alternative dispute resolution (ADR), covering de jure features that are necessary for the efficient processing of cases, facilitated resolution of cross-border claims, creating alternative venues for settling disputes, and ensuring trust in relevant institutions. The second pillar focuses on judicial organizational structure, courts’ digitization and transparency, as well as ADR-related services, thus capturing the de facto provision of public services. The third pillar measures the reliability of dispute resolution, the time and cost required to resolve a dispute, as well as the time and cost associated with the recognition and enforcement of decisions. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. All subcategories are composed of specific indicators, which, in turn, consist of one or several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

There is substantial economic evidence that a fair level of market competition spurs economic growth by increasing industry and firm innovation and productivity, leading to better products, more and better jobs, and higher incomes.  By affecting market entry and exit, competition stimulates product innovation and service quality, protects consumers, and forces market operators to provide their products and services at cost. But competition is rarely perfect. Markets fail either due to firms’ behaviors or government interventions. Market power—a firm’s ability to raise prices well above cost, offer a low-quality good or service, and drive out competition—must be kept in check.

What does Market Competition Measure?

The Market Competition topic measures good practices related to the enforcement of competition policy, intellectual property rights and innovation policy, and regulations that focus on improving competition and innovation in markets where the government is a purchaser of services or goods across the three different pillars. The first pillar assesses the quality of regulations that promote market competition, covering de jure features of a regulatory framework that enable firms to participate in fair market conditions and innovate, and where firms can participate in open and competitive government markets. The second pillar measures the adequacy of public services that promote market competition, thus assessing the de facto provision of services that create an equal level of playing field in markets, and that foster and promote innovation. The third pillar measures the operational efficiency in the implementation of key services promoting market competition (reflecting both the ease of compliance with the regulatory framework and the effective provision of public services directly relevant to firms that contribute in practice to the promotion of market competition). Each pillar is divided into three categories defined by common features that inform the grouping: (1) good practices related to competition regulations and institutions; (2) good practices in the area of intellectual property rights and innovation; (3) and good practices in public procurement from a competition perspective. Each category is further divided into subcategories. Each subcategory consists of several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.

Overview

The efficient and rapid exit of nonviable firms plays an important cyclical role in renewing the economy by removing firms that are not productive and making way for more productive ones. The purpose of an efficient insolvency framework is to ensure that nonviable firms are swiftly liquidated, and viable firms are effectively restructured in a sustainable way. When insolvency regimes do not have the adequate tools to handle the restructuring and liquidation of companies in a timely and effective manner these companies’ economic distress is amplified, jeopardizing the stability of the financial system. In economies where creditor recovery rates are high and resolution times are quicker, restructuring within the formal bankruptcy process fulfills its cyclical role during economic downturns by keeping companies afloat.

What does Business Insolvency Measure?

The Business Insolvency topic measures key features of insolvency systems on a regulatory level. It also assesses the institutional and operational infrastructure associated with insolvency proceedings (judicial services), as well as the operational efficiency of insolvency proceedings across three different dimensions, here referred to as pillars. The first pillar assesses the quality of regulation pertaining to judicial insolvency proceedings—liquidation and reorganization, covering de jure features of a regulatory framework that are necessary for structured debt resolution processes and effective creditor and debtor regimes. The second pillar measures the quality of institutional and operational infrastructure for judicial insolvency proceedings, thus assessing the de facto aspects of insolvency resolution mechanisms and the infrastructure required to implement the legal framework on insolvency. The third pillar measures the time and cost required to resolve in-court liquidation and reorganization proceedings. Each pillar is divided into categories—defined by common features that inform the grouping into a particular category—and each category is further divided into subcategories. Each subcategory consists of several indicators, each of which may, in turn, have several components. Relevant points are assigned to each indicator and subsequently aggregated to obtain the number of points for each subcategory, category, and pillar.