 Finance Minister of Bulgaria, Simeon is really one of the founders of doing business. Everyone, when they associate doing business, they associate doing business with him, they sort of with Michael Klein, but Simeon is the name that will always be forever associated with the beginnings of doing business. He's going to talk a little bit about how it got, the president of the creation, how it got started, what the critiques are, what it means for reform or Simeon was a finance minister and knows what it takes to make reform happen. And I suspect he has something to share with us about what it means if you're trying to make change happen as a person in government and how helpful those sorts of metrics have been for his work as a public servant back in his home country. Simeon, the floor is yours. Thank you very much. Thank you also for the interest in this topic. I was until last month, less than a month ago, the deputy prime minister and finance minister of Bulgaria for nearly four years. So I'll actually start with that, since I think the topic is quite important, not just for Bulgaria, my own country. But for all of the European Union, which as you know for the last five years has been in the midst of quite a deep first financial crisis, then economic crisis, now financial and economic crisis, and there seems to be no end to it. So while at the very beginning of my 10 years finance minister in middle of 2009, the main topic was fiscal basically, how to deal better with budget finances. More and more in the last one or two years, we the finance ministers and also the heads of state are grappling with the question which is much more close home to the doing business topic, namely, how do we actually get business started in some of these countries that are hardest hit by the financial crisis. And I'll give you an example with Greece, but the same example I can give you with Portugal, with Cyprus, with Spain to some extent, and the example is the following. As you know, Greece is so far at least the country which is most deeply affected by this crisis just in the last three or four years. It has lost in terms of income, this is real income, not nominal income, about a third of average income. So imagine if suddenly the whole US population gets a third poorer just in the matter of about three years. Well, this is what has happened so far to the Greek population is going to continue like that for some years. You've read the press, the main discussion so far has been they spent too much, their banks over each, so now we need to reduce public finances, they need to start actually collecting taxes which didn't used to be the case for a while, they need to do pension reform and so on. But if you start reading the press just in the last about six months and when I mean the press start reading what Chancellor Merkel is saying and with a few weeks delay everybody else start saying it in Europe. The main question for Greece is the following. Do you actually want to start a business in Greece? So imagine that you're a foreign investor or actually a domestic investor and ask yourself the question, do you want to start a business in Greece? And the answer is no, because there are so many problems with starting and running businesses in Greece that there are actually very few businesses that run. So if you go to the macro picture of Greece and you ask the question, what does Greece produce? What actually does Greece produce and export? Because for small countries like Greece, this is the way to grow, you need to export. Think about it, it exports tourism, actually tourists come there, but tourists receipts about 16 to 17% of the country's GDP every year. It also exports olive oil and that accounts for about one and a half to 2%. And if any of you can tell me something else with Greece exports. No, actually they don't export anything else. If you look at their structure, it's tourism and agriculture. Agriculture is heavily subsidized by the European Union, so if the European Union stops the EU funds, which it has a number of times threatened that it would do, basically it's a single staple economy, which is tourism. So for Greece to develop, to come out of this crisis, it actually doesn't need only financial improvements, which is what we finance ministers have been focusing on. Most of all, it needs environment for businesses. Go then to Cyprus, go to Portugal, ask the same question. Yesterday in the Wall Street Journal incidentally I have an editorial on this topic. And you would see that they are basically what's called a single or a double staple economy. They have basically tourism. The second staple in Cyprus is called in a friendly way business services. It's basically a tax haven, so you can go and hide your money from your tax authorities there. And most tourists to Cyprus actually go to hide their money there, but it's basically a single staple economy. For Cyprus to grow out of this crisis, it not only needs to improve its banks, but also it needs to have an environment for business. So for the last about six months, every meeting of the finance ministers in Europe, we actually have spent time not discussing budgetary issues and monetary issues, but how to get growth going in many of these European countries, of the southern countries in general in Europe. And you get to the doing business indicators. Not because I was part of the finance ministers, actually this was the initiative of the Swedish finance minister Anders Borg, but you get to this more fundamental issue that you need business. And if business starts developing, then you can discuss monetary policy, common fiscal policy, single banking supervision in Europe and so on. But unless you have some businesses operating in these countries, you have nothing, you basically cannot really operate meaningfully. So this is my experience as a finance minister over the last few years. How doing business started, I'll just spend a couple of years on this. Unlike most indicators that start from large institutions, it actually started as an academic exercise. As you know, it has behind it a number of papers published in top economic journals that have been refereed, they themselves have become top papers in the economics profession. And from that came the simple idea which I just told you about. For any economy, not just poor economies, middle-income economies, rich economies to develop over time, they need to ask themselves a simple question. How do businesses grow and develop? And what are some, not all, but some of the constraints and namely the regulatory constraints to business. There are other constraints to business that are not part of this report. I'll give you an example from my country in the last two weeks. There is a big debate on wiretapping. It turns out that the police has been wiretapping most of the political establishment, including myself by the way, all the opposition party leaders, basically anybody you can think of. That's bad for business because if you're a business person, you start asking, are they wiretapping me? Do they know some business secrets that I've been discussing with my closest associates? So that's the type of indicator which is not part of the doing business report, but is important at least in some countries. But what I would argue is that the main regulatory indicators, the type of things that the average business person thinks about, how to start a business, how to protect their property rights, how to enforce a contract, how to pay taxes, they are already part of the doing business indicators. And as a finance minister, I've seen it myself over the last four years when somebody comes and wants to open a business with foreign investors. To Bulgaria, they first ask, what is your tax system? So they start figuring out the tax system. Then they say, what are your property rights? So basically the corporate governance type of indicators. What's your infrastructure? This is a new indicator in doing business, but for especially middle income countries, it turns out to be very important. So can I export? Can I bring in goods? Can I bring things via roads, via railroad, and so on? So the doing business indicators are the basics that you need in order to consider and perhaps to start a business. There are other things that you worry about. I mentioned police, corruption, the openness of government to innovation, and so on, which one can consider whether they can be part of these indicators or whether somebody else can collect these indicators. But my argument is that unless you have this very basic regulatory level that answers the question which I posted at the beginning, if Greece were to develop, how do you start a business? And if the answer is nobody in their right mind in this regulatory environment would start a business in Greece, well, you forget everything else. You forget the monetary policy, you forget the fiscal policy, you forget everything else. So I'll leave you with this thought. Thank you. Simeon, let's take advantage of your presence. I think I have a couple of questions for you. The first is the technical one, which is, okay, could you talk a little bit about the critiques that it's an incomplete metric? Can you talk about it doesn't we, you know, some people don't like where they end up on the ranking? Because I think the reason that there's been this panel that's been convened is, is you have various shareholders who don't like their ranking or they say, oh, I dislike the methodology. It's important. Could you just talk about a couple of the critiques and what are your responses to those critiques? Just push the button or come up here and do it either way. Why don't you do it from here? The first critique, which is often heard and is in some sense correct, is that it's an incomplete data set. So there are other things that the average business would worry about. And it is indeed the case. I just gave you an example of my own country. If today you went to Bulgaria, a new business person comes and basically starts thinking about the business, today the main topic on their mind would be, would I be wiretapped? Is this legal and if it's not legal, why is it done in Bulgaria? But it's an unusual day. So if you go on the average day, you would first ask the question, how do I pay taxes? Not how only what's the level of taxation, but the procedures. What are the ways in which I get hooked up to infrastructure? What are the ways in which my investment is protected? And what is the way in which I built warehouses and businesses and so on? So this very basic level of regulatory needs that the average business needs. Above this, there are unquestionably other topics. There is the bigger topic of public sector governance. I already mentioned that. So forget the level that the average business meets, but if you have very large projects, let's say energy projects. And if the government at very high levels, ministry levels and so on, starts asking you for bribes, what do you do? It's a more separate question. It's not a regulatory question in the sense that even if the regulation, which by the way we have says, government should not take bribes. The fact is in most governments, in most countries, actually people sometimes take bribes. But it is a set of questions that can, in my view, be answered with other methodologies better than the simply regulatory methodology. So in complete, yes, my own view has always been over time you can add some things like infrastructure was added, but there are many other topics like corruption, for example, that are better dealt with with other sets of indicators that incidentally exist. And just a word or two on the methodology. As every methodology, it can improve over time. First, conditions change, business conditions change, so you can have some indicators that over time become more important or less important over time. You learn something from other academic research that you didn't know before, and then you can change your indicators, but they need to change, either in my view, if business needs change, if the business environment changes, or if the academic discussion advances. They cannot be changed just because one lobbying group or another decides that it's not in the interest of their lobbying group to do so. If you were chairing the doing business panel, or you were a panelist on the doing business panel, what would the outcome you'd like to see happen? What would be an ideal out readout of a doing business panel report in your mind look like? It's been 10 years of the report. It has already succeeded a lot, not just in the academic contribution that it and all the follow up work has done, but it has contributed to a number of reforms in a number of countries. One can learn from these. I think more than 100 countries, right? Same in 175, except for Zimbabwe and Venezuela have made changes based on doing business because of the doing business metrics, correct? Correct. The team would know better by now. I myself as finance ministers, I mentioned Sweden, for example, has asked for help of the doing business team through me since I meet the finance ministers often, but they themselves last year, I think wanted to reform on doing business. The Israeli prime minister two years ago came to Bulgaria on bilateral visits. Zimbabwe, however, had read my biography and asked for a separate meeting. This is Netanyahu asking for changes in the doing business indicators. And again, pass them to the doing business team. Vladimir Putin, who is no great friend to Bulgaria, at least on most topics, but when he visited Bulgaria and we... Have fracking in Bulgaria, if I understand correctly. No fracking, different painful topic, but he himself asked in the bilateral meetings, can we actually have informal discussion on this? This is my own experience in the last two or three years. So it clearly has a lot of people who follow it. Can it be improved? Yes, but it can be improved only through academic debate. It cannot be that some lobbying groups say, well, we don't like this and therefore it should be changed. Okay, two more things. How about what if we said, let's outsource this. Let's give this to Harvard University. Let's give this to some other academic institution because this is too controversial. What's your answer to that? Harvard University, while a great institution, doesn't have offices and people in 180 some countries that the World Bank has. So it would be a lot more difficult for Harvard University to do such an exercise. Frankly, the World Bank itself would lose a lot from it because the question would be, so what is something that the World Bank so far has managed to do but now cannot do? Is it that somehow they got stupider? It may be that somehow the World Bank got stupider over time, so they cannot do it. I don't like where I match up and my blood enemy for the last 3,000 years across the river or in my neighbor next door is 50 ranks ahead. It's impossible because my whole national narrative or my national mythology says that we're better than those guys and how can they be better than us? So you should get rid of the ranking World Bank. What's your reaction to that about getting rid of the rankings, please? It's like everything else that you don't like. I don't like my weight, for example, as a minister I suddenly got heavier. So now I run every day to be less heavy and when I go on the scales I don't like it but I know what to do, I run through it. What this gives you is basically a scale, a metric. You can say, okay, I'm bad here, here and here and here, let's argue with the team for a while but if they're actually right, let's actually do something about it. And I have incidentally for the last three years the Polish Finance Minister, Deputy Prime Minister has been after me at every meeting of Ecofin that the rankings are not right, that we should do something and so on. Apparently last year they did something, the Polish team and suddenly he got very happy and said the rankings are actually right. Why? Well, actually we improved, we did a lot of work. Okay, so. Simeon, thank you very much. It's a privilege to have you. I'm gonna ask you to step down. We're gonna have Tom Szehe come up from the House Foreign Affairs Committee. Please thank Simeon Jankoff. It's a real pleasure because this debate is gonna be played out on several different fronts. This debate's gonna be played out at a technical level and you're gonna be hearing about that in the next panel. But there's also a separate, there's a debate at the political board level and you're seeing some of that play out in some of the discussions. But there's also something called the general capital increase of the World Bank. The United States was asked to re-up in a period of major fiscal austerity to pay for I guess, I don't know how to describe this Tom, but the last time I checked, tax-free, unaccountable bureaucrats, if I'm a Republican on the Hill, I'm being asked to give more money to the World Bank and the sales pitch that I gave when I testified as a Republican who worked in the Bush administration on behalf of the Obama administration on in favor of the general capital increase, I said the United States will maintain its voice at the World Bank and will have a seat at the table. So I would think that this would be something of great interest for the United States Congress about this, so I know you're gonna talk about doing business and the perspective from Congress on this topic. Thank you, Tom, for being here. Well, thank you, Dan, and thank you for putting together this panel on doing business. A few comments just to begin, and I'll be very brief in my remarks, I have some perspective on doing business. I was involved in the Heritage Foundation, Wall Street Journal Index of Economic Freedom, the development of that some 20 years ago, and so I'm somewhat familiar with methodology fights and the politics that can go into these decisions, but on the whole, obviously, I think this is a tremendously useful product to be able to look at the importance or the difficulty of doing business, and I remember when developing the index perennially, and it's a broader index, it's economic freedom and we believe economic growth, Hong Kong would always be pitted against Singapore as number one and two, and we'd rank 180 countries and those two countries perennially would be at the top of the list, and they would lobby us to each one desperately wanted to be number one, and obviously given the regional competition for being a financial center, and we would travel to Hong Kong and we'd travel to Singapore, and so I am a little concerned about changing methodologies. I don't think you want to be rigid, but, and I think over time, you want to look at your methodology and see if it can improve, but I think there is something to be said for consistency and having some kind of baseline, and I think the bigger obligation is really to work hard to collect the best information, the best data, and so for example, when we went to Singapore, what kept them at number two, and obviously number two was a tremendous score, was their central provident fund, and we had disputes about how housing and health were treated, so we went to the ministry and heard them out and I think that was generally satisfactory to them, and I know I picked up my index, the 18th edition I think the other day, and it's still Hong Kong number one and Singapore number two, but I would say, so again, I think some evolving, some refinement is okay, but I would be cautious about doing that, and to an earlier point that Dan had made, should the World Bank be doing this? Well, I guess my perspective would be if the World Bank can't do this, if they can't do a ranking like this, which has proved very valuable as we've heard, it does beg the question about their larger endeavors, so I would just throw that out for consideration. This is something that should be doable, I think having the World Bank moniker on it is very positive. From a congressional policy perspective, we use the rankings of countries or these types of rankings for several pieces of legislation, obviously I think you know the MCC, the Millennial Challenge Corporation, uses doing business as a way of gauging economic reform, and there is a definite sentiment in the Congress that yes, we wanna help countries, but we wanna help countries that are helping themselves, and that is a package of reforms and certainly doing business is right at the top of the list. The African Growth and Opportunity Act, which is a preferential trade program, which is 12 years old, which is bi-partisan support as is the MCC, they rely on the Heritage Index for one aspect of their assessing economies and assessing the openness of an economy and to make a decision whether we extend preferential trade preferences. I would also mention the IMF issue and Egypt for example, and we're very controversial or an attempt to construct an IMF aid package. Well, the ability for Egyptian business people to start businesses and grow and break through the crony capitalism that's existed in Egypt for 40 years, that's a very important factor and so that's something that we look at and so just the importance of being able to see how an Egyptian or a Tunisian, how difficult, how onerous it is to start a business is essentially important and again, that's I think at least our committee, it's a way we look at the IMF dealing with Egypt but also with other countries and Hernando de Soto, his work, will be having him testify in front of the committee soon and he talks to this issue about the ease of doing business. So it's a critically important issue, we're watching it, we think the project is very important and just finally, there are some real foreign policy aspects to this, to the extent that as we all know, to the extent that individuals can't start businesses and economies aren't performing well, it leads to larger unemployment and all the problems associated with that including radicalism and so we view this as an important policy standpoint. So I'll keep my remarks to that, Dan, and thank you. I don't know if you have time for questions, but let me just take the liberty of just asking you one question and then I know we have to go to the other panel. So I'm gonna ask you a leading question as you know I'm quite good at asking leading questions. So let me ask you this leading question. We have a new chairman of the House Foreign Affairs Committee, Ed Royce, he's your boss. He's very aware of metrics such as the index of economic freedom from heritage. He was quite disturbed when I raised with him the fact that there was some movement a foot to either cripple, kill or outsource the doing business index. Could you just comment a little bit about what would the reaction be of members of your committee, the House Foreign Affairs Committee? If some, how would members of Congress react to something like that? Well, with obvious concern, Dan, so we'll be looking at this and again, I don't know if the issue is evolving the methodology, if it's a tweak here or there, that's one thing, but I think at least speaking for the chairman, it's very important that it be housed within the World Bank and that unless there's some rationale that's escaped me, but we'll be having those conversations and go from there. Tom, it's a pleasure. Thank you for making the trip down from Capitol Hill to be with us. Please thank Tom Sheehy. Thank you, Dan. Okay, we're gonna have our next panel. It's a technical panel. We're gonna have Michael Klein. We're gonna have Simon Johnson's gonna be joining us. And I know that Eric Bergloff, I'm not sure if Eric Bergloff has joined us yet. He was gonna be here at 11 o'clock and so we're gonna have a discussion about the technocratic aspects of this as well. So I'm gonna ask, we're gonna go ahead and start even if Eric is not yet here because we need to keep going. And then when Eric joins us, we'll have him come up here as well. So Michael, why don't you sit here? And then we're Simon. Is he here? Okay, there he is, Simon. And then Eric Bergloff, I'm not sure he's yet arrived, but he was coming from another meeting. His meeting stops at 11, but we're gonna go ahead and start. And then I'm sure Eric can pick up and we'll have him speak third and by the time we go. But I think what we wanna do here is there is a robust debate about methodology. And I think we wanna have a discussion because I think, frankly the World Bank wanted to have a 10th anniversary review of this in December and it was canceled. And I think that was a mistake. And so we're holding the unofficial 10th anniversary of the doing business metrics today. And so I think we need to have a discussion about the technical modalities of this. So I'm gonna sit over here and put my moderator hat on and I'm gonna ask Michael Klein to start. Michael, thank you for being, you spoke earlier, but I want you to talk a little bit about the different metrics. And I want to push a little bit about the critiques because I think that's where much of the criticism of doing business comes in the methodology. Some of the critiques is perhaps robust and adequate and some of it I think is perhaps dressed up in political terms, that's my personal opinion. Talk about, there's different, there's about nine different domains if I recall correctly. Talk about them and talk about some of the major critiques from a technical standpoint and then talk about what the impact has been economically. What it means for economies to make these sorts of reforms. What does it mean for poor people? What does it mean for the economies? Michael, the floor is yours. Okay, you all have time until tonight at 10, right? So we'll talk exhaustively about a re-indicator. I've got time, I'm absolutely fascinated. I want to talk about indicator seven and then a indicator number eight. Right. Exactly. Ah, it's fast. Yeah, it really gets the juices flowing. It gets the heart pounding. I mean, this is what Paul O'Brien was talking about in terms of from a passion standpoint. The folks here are hardcore, I guess is how I would describe it. Okay, I'll start with passion. And I'll start with an anecdote and then I'll get slightly more serious. The, in 2003 the first report came out and the reaction then as now was varied. Some people find it useful, but mostly the typical reaction of the governments is anger and denial. So this is not us, it's all wrong, et cetera. And I remember one particular country event where the room was full with about 60 people representing various aspects and parts of the legal profession, jumping all over me and fairly vigorously disputing everything, being really angry. And then at the end of the day, so we had all these arguments that you have already heard to some degree. What's the general purpose of the report? How should it be named? What is in, what is out, et cetera? Is it useful, is it not useful? Is it targeting big business, small business, et cetera? All the general arguments. But at the end of the day, the real strength as has just been said in the previous presentation is the quality of the data itself. Do they reflect reality? Do they tell us something informative about the world that matters? And at the end of that meeting, two very distinguished gentlemen stood up and said, ladies and gentlemen, we are the respondents of the doing business teams. We are, in this case, law firms, represent law firms that have filled out the questionnaires that the doing business people sent us, and it is on our submission that the data are based. And we can tell you all authoritatively that the data are all wrong, and that the doing business team is a bunch of idiots who don't know what they're doing. And at that point, I said, what can I say, no? I said, okay, we've had all the debate. Now this will go back and have a look. So then we go back and have a look, and here's the first thing about the methodology. What doing business measures is what laws say. Laws, rules, decrees, statutes, et cetera, that are relevant here. So when you want to check the data, you can actually look at the piece of paper. It's not a perception survey, you're not asking businesses about what they feel, but you can look at a piece of paper and say, does the law say X, Y, and Z? And then this gets written down, this gets coded, et cetera, and the various respondents, law firms, straightforwarding firms, or whatever it is, consultants in countries send this forward on pieces of paper, and in this case, the partners had signed off on this. So we looked at this, we checked it, we sent it back and said, this is what you gave us, this is what in the report looks the same to us. You signed off on this, where are we wrong? And then after the meeting, they said, oh, it's all correct. This was an extreme case of these respondents feeling under national pressure in that particular meeting and did not feel they could be seen as breaking ranks with the establishment, but the data were correct. And that particular incident has shaped a little bit my attitude towards various types of criticisms. There's vigorous, violent, sometimes, well, not physically violent criticism of the data, and it comes from the- At least not yet, let's see what happens at two o'clock. Yeah, yeah, right, yeah, but the two of us will start exercising it. So when you walk first into the meetings of these kind of critiques, you'll have people from governments who have high ranks or who are technocrats, et cetera, and who should know, and who tell you you are wrong. And then you start debating, et cetera. And so this is initially a very uncomfortable dynamic, and it's very easy to be taken in by this argument or by that argument. And having said that, I'm not saying sometimes doing business, we have made some mistakes, we correct them, et cetera, but we have to realize that there's a lot of sentiment that clouds the debate. So the lucky part is that doing business is based on written texts, so you can actually check the data. The only element of subjectivity really that comes is when you have people estimating the time it takes, for example, to run through a particular projects to register a business. So that's, in the doing business indicator on registering business, you ask how many process steps are there, what's the time it takes, what's the amount each process step costs, and whether there's a minimum capital requirement. Most of these things are in the text of law or administrative degrees, et cetera, but then the time has to be estimated. So we use the methodology of time motion studies, break it down into little steps so that each step can be estimated more easily and so the whole estimate of time is more robust. But there is a potential element of subjectivity in there. One can then use that element of subjectivity to criticize, but the real answer is that governments should actually move towards policies that the agencies administering these steps should have norms for how long it should take and then monitor those norms. And that's the right response from a management point of view in business as early in public sector, if you have a process step, not to complain that some people might get some judgments a little bit wrong, but to move towards a system that captures it better. So these are just a few points on the very, very basics of this. And then we're in the debates about are they capturing everything? Simeon has already mentioned this. No, if the doing business ranking is great, but you have a civil war, okay, so that puts a damper on investment incentives. But doing business does not measure whether there is a civil war or not. Doing business measures the regulatory undergrowth in countries and normally regulation, agendas and reform are not of great. I may say so for lots of politicians are not of interest because a lot of little things and it's easily gets observed by special lobby groups because it's a lot of detail and hard to understand and then slipping in, distinguishing between what is slipping in a special interest group versus something sensible is hard. And doing business really summarizes stuff and makes it much more of a visible thing. So paying attention to doing business becomes almost as interesting as completing a power plant and cutting a ribbon. And so government by having the ranking, by having it all summarized, governments have actually paid attention and heads of states have paid attention. And then the question is, is this an allow, is this the right overall approach? Well, there is no other better approach yet invented to capture all this institutional underpinnings that we have heard are so important for economic growth and for the development of countries. The only other effort that exists in the world that is somewhat comparable is an assessment tool by the OECD economics department which ranks OECD countries in five year intervals on their product market regulation. It's a more involved scheme with over 800 indicators. And they also summarizing in the ranking. And the interesting thing is that the ranking that comes out of doing business for those same countries is almost the same as that that comes out amongst the OECD countries. So doing business with a slightly more reduced form is actually quite robust. And at the end of the day doing business has to be understood as a measure. If you want, from the beginning we've had this analogy. If you think about medicine and you think about the way you do diagnostics with people, you take a certain amount of measurements, you take blood and urine samples and this and that and you take measures and then you talk to them and you see in general what they are like and you put it all together. And doing business is providing one of these measurement inputs. One way of comparing it is to cholesterol measurement. If you have high cholesterol, sometimes some people with high cholesterol could still tick along quite nicely but there is a risk factor. Others have low cholesterol but they have cancer, civil war, et cetera and they have problems. But it is a risk factor, it's worth measuring and it's a useful informative tool for debate. And if you, after all the detailed debates about the validity and robustness of the methodology still think that doing business is lousy because this little problem, this little problem here is worth throwing out the baby with the bathwater then if you want it to be intellectually consistent you must throw out GDP for example as a measure of economic progress because there are a lot of conceptual problems with GDP, a lot of measurement problems with GDP, a lot of collection of data problems with GDP, revision problems with GDP, et cetera and ranking, my God, you know. And so you should really throw that out and that brings us to the fact that all measures of economic relevance are benchmarking tools that capture certain dimensions of reality. They all have, you have to understand what they measure. They are what they are, they measure what they measure and that's just what you have to get your head around and then use it together with others to see whether they're useful as diagnostic tools, use them as such and make a sensible judgment overall where they fit in the policy agenda and what to do with them. If you're at that step and use them as a benchmarking tool they actually create a very constructive tension. Some of the biggest critics in doing business have come around over the years and they've seen that, yes, there are all sorts of questions about whether the ranking is perfect, et cetera, et cetera, but it creates the right discussion and at the end of the day almost all the vigorous complainers have actually reformed afterwards. And I'm not saying that all the reforms that have been done that are captured by doing business were because of doing business, a lot of countries actually agree with the general direction. And so, and one of the other creative tensions that this creates is something that's often forgotten in debates about doing business. Doing business brings lots of government agencies from a particular country together to talk to each other, which otherwise is not the case because most of these processes that govern the life of businesses are administered by different tiers of government, different agencies, et cetera, who are not necessarily talking to each other and so it's a very great tool that creates a lot of creative tensions, et cetera. And finally, as Dan has emphasized early on in his talk, if you don't have data, it's kind of hard to evaluate anything. And so, for the first time it has been possible to do quasi-experimental impact evaluation as it's technically called for regulatory reform, using the doing business data and the papers are outside to have a look at. So, it is a real step forward. And the argument for doing business has to be on a technical level that it is a serious, informative, useful step forward. It does not answer all questions that lead us to world happiness, but it is a useful tool. And the question is, if it is a useful tool, what next? One thing has already been said, there may be tweaks here and there that might be useful and there have always been tweaks here and there over the years. There have been improvements of the labor indicators, the employing workers index, there have been improvements of the tax indicators, et cetera, in response to the various types of criticisms that we've heard. They're all outlined in the doing business support. It's the most transparent statistical system that exists in this world because all the flaws are actually written down in the report. If you read chapter two of this year's report, you have it all. And if you go to the website, you can go to endless detail if you really don't know what to do with your life. And... I'm planning to spend my Saturday night doing it. That's a great idea. So the step next is exactly the one that I would say the internal evaluation group at the World Bank, which criticized a lot about doing business, actually recommended at the end, namely to do more of it. As I said, fundamentally, this is the right direction. We need to have more approaches covering different areas. Doing business itself has made forays into new areas, capturing, for example, discrimination between gender in the legal field, et cetera. There are in Germany some attempts at the moment by civil society organizations to do an indicator on setting up philanthropic organizations, CSO organizations, et cetera. There have been indicators developed on transparency, which so far haven't been used very much, but lots of fields of rules and regulations could be covered in that way. That will give us the evidence base to make better policy in the future rather than throwing out babies with bathwaters. Thank you, Michael. Simon, you had a past life at the IMF. You're now out in the world here in Washington in the policy world. I'm gonna cede the floor to you. Thanks. So I am here to associate myself as much as possible with the views of Michael Klein and with the work of Simeon Jankov and his colleagues. I think all the really good points have been made already, so I will bore you by just reiterating a few of them and break my remarks into three pieces. I wanna reinforce the point Michael just made about risk factors. I wanna talk a little bit specifically about the methodology and why I think it's really exactly what you need in this space and why you should do more of it. And I wanna repeat the warning that Tom Sheehy just delivered to you from Capitol Hill. I think the right way to view this kind of evidence is exactly as a risk factor, exactly as something, a metric you should be concerned about, not if the, I happen to watch my cholesterol fairly closely, so I think it's that analogy works for me. Just because my cholesterol is high or low, a particular moment doesn't tell me everything I need to know about my health, but it is an informative indicator and you need to spend time with your physician thinking about that and thinking about what the implications are. It's the same thing with these measures. You should, and I think the hardest thing actually in this space is to find cross-country measures that are fair and reasonable and allow comparisons. At the same time, you can relate them to country realities. They're not something that is just too abstract or in the interests of making something comparable, we gave up the specificity. Here you have a lot of specifics and you have the World Bank engaged, so the conversations at the country level are entirely productive along the right lines. And I further wanna emphasize what Michael said earlier in the morning about the way in which these indicators push all countries to focus on rules, rules that are fair for people wanting to start business who are by and large are not the rich, powerful oligarchs in any country. So I think that you're hitting exactly the right spot there in terms of what you can measure and what you can communicate politically and in terms of economic policy and the way you can bring the World Bank to bear. Let's face it, the World Bank's record on promoting economic development and encouraging sensible policies is mixed and being polite because you mentioned the former IMF affiliation, I wanna be sensitive about that. That's very IMF speak. It is a little bit. It's what happens in the week of the spring meetings. All former officials fall back into that language. But on this one, the World Bank is pushing the right issues in the right way. And linking with civil society organizations such as with Oxfam, linking with other groups who understand this who can relate to this and can repeat it. I think that's very smart politically. But this is good economics. This is good policy. Now, specifically on the methodology, which is what you wanted us to address Daniel, I should declare very clearly that in the 1990s, I was interested in some of the same issues that Simeon was interested in. We were among a large group of people including Eric, who were looking at transition of former communist countries, who were trying to understand why the economic recovery from the end of communism was tepid relative to expectations or relative to what seemed to everyone to be the potential of those countries based on standard economic measures. And many of us were drawn towards worrying about issues of governance, institutions. You could talk about corruption broadly. You could talk about setting up businesses very specifically, and I did work on that in Poland in the former Soviet Union, for example. Simeon had the idea with his colleagues, and I did not have this idea, and frankly, I wish I had had this idea. There you go, there's my disclosure. It's a very good idea of setting up this network of experts who you could canvas on specific questions, not on all questions. You can't ask them everything that you wanna know. This is to the point about risk factors. But you can ask them a lot of specifics that where they really know, when you go visit a country and you wanna understand, you know, is this a good place to invest? Is this a good place for me to start a business or for me to, that I think will have good economic prospects? Go talk to these kinds of experts. Go talk to the people who run leading law firms. And they can take you through the details, and they can tell you how it really works as well. Now, they can give you that reality check. This is a great idea. And they started relatively small. Andres Schleifer, Rafael Laporta, Ferenzo Lapis de Salon is where we're involved. I talk to them quite a lot. I wish I'd got on that bandwagon. It's tremendously successful from an academic point of view for all the right reasons. They've got good data. They're very transparent. There's been an enormous amount of scrutiny. There's all the resistance that you get when you introduce a new idea into the academic literature, all the kind of pushback. And they went for the top journals appropriately. They went through the refereeing process. And they have an impressive set of publications that are widely used because it's good methodology. And you can pull it up. But as Michael said, I was sitting at the back checking that my colleagues at MIT are okay this morning. But in between that, I was looking at how easy it was to flip through the methodology, see what the latest methodology is and how they do it. And I'm sure if I wanted to any more specifics, it would be a piece of cake to ask them. I really agree with Michael. I don't know any other economic research that is more transparent. And I think this actually sets a level of transparency in meticulous care, documentation, and openness to which we should all aspire. But you need the resources of the World Bank to really achieve that. And on this last point, on the warning, I guess people of the World Bank worry a lot about losing the support of certain large emerging market countries that are not terribly interested in being ranked. I understand that, it's politics. And we certainly have plenty of pushback, as you can imagine, around lots of these issues at the IMF, particularly from European countries, but that's another conversation. But if you give this up, if you back away from it, the World Bank distances itself, the hit, the World Bank's credibility into its reputation will be significant. You already abandoned or walked back from the Kaufman-Cray governance indicators, which was a bad mistake, serious bad mistake to do that. If you don't care about how the World Bank is viewed in domestic American politics, move the World Bank to Beijing. If that's what you want, you want to do. You're supposed to be a brick bank set up soon. I'm not holding my breath, but I'm supposed to be. I'm on favor. I'm in favor of that, all right? Let many banks bloom. Well, okay, that doesn't sound right. With good regulation, appropriate regulation, let me be clear. And I'm talking about the public interest, absolutely. But if you don't want the World Bank to be in the United States, if you don't want the World Bank to stand for these kinds of sensible ideas, distance yourself from it by all means. But that is a very big step that will not play well in American politics. You will not, I would not count on continued support from Capitol Hill, from the Republicans or from the Democrats, frankly, if that's where you want to take the World Bank. I would absolutely reiterate, un-underline the seriousness of the warning. It was a warning that Mr. Shih just delivered to you. Thank you. Thank you very much, Simon. Eric, you're the chief economist of the EBRD, which is a regional development bank that has a private sector focus, focused historically on Eastern Europe and the former Soviet Union, and is now, I think, rightly moved into North Africa, a piece of parts of North Africa in response to the Arab Spring. And I know you've also looked at these issues. The floor is yours. Thank you for coming. Thank you very much, and thank you for inviting me. I think it's, I think actually it's an important debate. I think, you know, anything that has such power and such influence on the policy debate should be questioned once and twice. I think this is healthy. I will declare a bit of my bias in a minute. What I thought I would do is to, you know, I think a lot of the criticism against doing business, I mean, there is, I think, legitimate criticism, but a lot of the criticism is coming for the wrong reasons and I'll come back to that. So I would structure my remarks around sort of three aspects. I would call them doing research, so that's one aspect of this, doing policy, and then doing politics. So I will focus probably more on the first and the last, but I'll touch on all of them. So I should declare my bias, as Simon did. I come from an institution that has its own sort of business environment measure that we do actually together with the World Bank, which is a different approach. It's about, you know, asking managers to, hi, Marissa, it's about asking managers about, you know, the obstacles they face, and I'll come back to that, how these are, in my view, very highly complementary. But we also use doing business in constructing our composite indicators. So we have moved, we used to have sort of a judgmental transition indicators, but we move now to something that is much more transparent, much more built on sets of existing indicators, and doing business is a very important input into that. So I should disclose that as affecting my bias. As Simon said, I have been involved a bit as an academic in the past in thinking about these issues, but I'm really making my remarks mostly as someone in policymaking, thinking about how to make progress in reform. So when you assess doing business, it's a bit of a moving target, because it's actually quite a lot. I think I was quite impressed how much doing business has changed since it started, and how much work has gone in to try to, you know, interact with the research community, with the policy community, trying to get it into something that is a bit more subtle than it was, maybe when it was first launched. So that brings me to the first aspect, doing research. So I think here it's both about sort of positive research, you know, so how do we understand institutions, and then what kind of institutions do we think are sort of more desirable than others? And here probably, it's an old criticism of doing business, which I think is still somewhat relevant. There is a slight bias, I would say, in use the term cholesterol, and we look at our cholesterol, and we get a measure on our cholesterol, but actually you have both good and bad cholesterol, right? So if you have some good cholesterol, it can actually compensate for having a lot of bad cholesterol. So I think with regulation, there is a slight bias still. I think it's less now than it was when it was first launched, but it's still there, that regulation in general is probably not only a bad thing. I'm not saying that that's the view of doing business, but I'm just saying that's a slight bias. Having said that, I think in the kind of countries that I work in, the bias is almost always that there is too much regulation, that there is, and it's not that all these rules are being enforced or lived by it, because they are often widespread corruption going away, they're going around these rules and regulations. So it's not that when we're trying to argue that we simplify regulations and so on, it's not that we think that it's necessarily these rules are constraining people in every dimension. It's just that they invite opportunities to try to bribe yourself around them and they are not effectively enforced. So even though I think there is that bias, I think in the kind of countries at least that I work in, it makes some sense to maybe have that bias. And that probably there's also a little bit of a bias in sort of one size fits all, so that there is, again it's another new criticism of doing business, but it's, particularly if you go onto the sort of sub-indicators having worked on some of those areas, for example, you take things like creditor protection or shareholder protection, things that I thought a bit about. It is quite contextual, what a particular shareholder right, for example, how that plays out depending on the type of ownership structure you have in the predominant ownership structure you have in that country. Or if you have a more complex creditor structure, what does it really mean to protect, what a creditor right mean? Because a lot of this is about rules between creditors. I'm not saying that this is not something doing business is not aware of, but it's something that's hard to capture with this kind of tool that's really trying to create something that is comparable across countries and try to rank countries. And I will come back because I think this is a very important aspect of doing business that one should try to preserve. But so, the last point I want to make, and it's also again quite common, but I think it's an important one and it's sort of been touched on before. I know that doing business is trying to move from sort of de jure to de facto, to look at not what's on the books, but what is actually being implemented. I do think there it's quite some distance away from capturing what's actually going on. And the point I want to make actually that that's where the kind of instruments that we have been working mostly with these beeps, which is something that also Simeon has been involved in. And where we asked the ask managers about what the obstacles they're facing. They complement each other. I just did a couple of years ago, just one example. I looked at, was sort of a briefing on for some ministers in Southeast Europe. And I thought it could be useful to look at, what does, it was about the inter-regional trade in the Southeast Europe. And I looked at what does doing business say about trade obstacles and what does beeps say. And actually the picture is very different, but it also captured something quite important that in some respects, and particularly here the countries have been through the EU process, they had made a lot of progress on moving both the laws on the books and actually enforcement of these laws. And here I think the EU accession process is probably unbeaten as a tool to really ensure that the rules are actually enforced. So it did capture, I had a slide here, it actually captures quite nicely that idea that yes, the laws are now on the books not only in the EU members, but also in the other parts of Southeast Europe, but only in the EU members have they actually managed to enforce them. And so here I think there is a value to having several instruments and have them work together. So that's what I was gonna say about doing research, and so it's trying to understand institutions and what are good institutions. I think it's helpful, but it should be put in a broader perspective. I could be very brief on doing policy. Here I think, now we're moving to where I think do business is really powerful. And I think it's actually most powerful on politics, and I'll come back to that in a minute. But so the beauty of doing business is that it, and which is also the danger of doing business is that it takes something that is very familiar to policy makers, sort of specific rules. It's a reality that they understand and it sort of helps you at the same time define the problem. So you get a sense of how do we look compared to others, but it gives a sense of what's the problem. But it also gives very immediately sort of a sense of what to do about it. And I think it's that connection that is quite powerful, but it's also maybe sometimes deceptive, because why are these rules in place? It may not give you all the answers about what is the actual problem. And similarly, it may not give you all the answers and maybe even sometimes be misleading that by just taking away certain rules or regulations or changing certain rules or regulations, you actually have addressed the underlying problem that this observation of all these rules or regulations represent. So that's the only warning, but I think it's here where doing business really, so the rubber hits the road. This is where it really starts having an impact. And this is what brings me to my final point on doing politics, because I think this is the real strength of doing business. It's, you know, I'm working in part of the world, but we haven't seen, to be honest, a lot of progress in transition in the last, say, five, six years. It's extremely hard to change institutions. It's extremely hard to break out of these kind of transition traps. And there are many reasons for these transition traps, and I think they are quite different. You know, it's about natural sources, about capture, it's about failed transition processes. It's about a legacy of other types. And of course, now in our new region in North Africa, it's yet another form of a transition trap. So breaking out of these is not trivial at all. And I hear, this is, I think, where doing business is an extremely powerful tool. Maybe one of several, but that's where it really makes a difference. And it goes back to what I described before, this notion that you identify a problem and you have something of a solution. And again, I think one should be sort of critical and have a reflective approach when you think about these things, but and put it in the context of a broader reform program. But I think it can be an extremely powerful, and I've seen it in a number of situations where this really works. And I think here's also where the problem comes because it's so powerful, because it's used, I mean, I, you know, last year I was there when listening to President Putin Sergei, who was also there, you know, when he said, I'm gonna move from 125 to 25. And he has even went up to 20 at some point, I think he said. So, you know, this is something that we... I would wanna be on the economics team for Vladimir Putin to deliver that. And if you don't deliver it, I'm not sure what the consequences are. No, no, exactly. We have got some sense from recent recordings of what we could, at least what verbal assault you can be subjected to. But again, you know, this maybe this sort of illustrates at the same, you know, the one, on the one hand, the power of these kind of tools, but also, of course, a bit the danger of the tool. So what, so this is bringing me to my final point. So what is it that has created this situation and why maybe this meeting took place and why is it that we are sort of with some, you know, with something that is controversial, but it's controversial because I think it is trying to push in places where it hurts. And for these interests that are being mobilized to against doing business and are also the same interests, I think, as those that are generally against reform. They're not completely overlapping, but there is a strong overlap. And so what can one do from sort of the side of doing business to mitigate a bit or to get out of this impasse? And my very humble suggestion is that thinking more about how, given the very strong political power that this instrument has and the politics involved, to try to find sort of a governance structure and this, I mean, I know most of you guys who are involved in it, probably scared of that notion because it's gonna be something that is constraining you and may, you know, be lead to self-censorship and censorship and all those kinds of things. But I think to break out of this now, finding a way, a constructive way and creating a process of governance around doing business, I think that's, I think the way you have to go, is you're creating an instrument that is so powerful and that where people may run with it where you don't really have full control and you're gonna face these groups that sort of claim to represent democratic legitimacy and so on. You need to come up with something that sort of puts, gives you that same legitimacy and that's, and how to do this, I don't know and how to do it in a way so that it doesn't take away the power of the instrument, I think that's the big issue. Thank you. Okay, thank you very much, Eric. I suspect I'd like the panelists just to respond to various comments and maybe perhaps if Simon and Mike, they might respond to Eric's comment about, okay, how do we, what would be a way forward? I'm not, you know, I shudder to think about what the governance structure would look like having been within the World Bank already and how bureaucratic it is, I'm just terrified about what that might look like and but I think it's at least worth the discussion if we could speak to that and then I think also if there are other comments people wanna make on the panelists from the various folks, Michael, why don't I ask you to respond first? I think the core of it is one has to understand what it measures and how to use the tool. You cannot contain a tool on the one hand, it's supposed to be public, totally transparent, et cetera, so available to everybody and anybody can run with it the way they want. So there is a governance structure, there's a board of directors, there's all sorts of procedures in the World Bank to deal with that. The issue comes, you mentioned all these details in the beginning, this all goes back to the what does that thing measure, what does it not measure, how does one intelligently use it as one indicator amongst many good, bad cholesterol, whatever and that just pushing good analysis and sensible thinking about this. I'm not, this governance structure issue, like so many of the debates has come up over the years, there have been reviews and reviews and academic reviews, panel reviews, internal reviews, evaluation reviews. But I, sorry, I'm not familiar with all of them. No, no, no, I understand, no, no, and I appreciate it. I'm trying to be constructive. Yeah, no, no, I appreciate the suggestion. It's, and of course- I'm glad we're airing it now so that it's not- No, of course what I'm saying will be seen as defensive by those who see it on the other side, whatever. The, but at the end of the day, I think one has to just understand what it does, use it intelligently. And there's nothing, if you put a measurement out there that can constrain the use of that measure by whoever wants to use it. Somebody who puts GDP out there will use GDP numbers for whatever purpose. And make a point about government being successful or not. And other people hate that. You remember the last time GDP was challenged as a measure was by Mr. Zarcozy and his special commission chaired by Joe Stiglitz, which came up again with all the known criticisms of GDP. And then- I mean, we could all go to Bhutan, right? The gross national happiness. But Mr. Bernanke and Mr. Draghi and so on continue to look at GDP when they construct monetary policy. Simon? Well, I agree with Eric that governance is important. And I don't know much about governance at the World Bank, but I do know something about governance at the IMF. And who's on the board of the executive board of the IMF is tremendously important. And the fact that, for example, I mean, this is just as an example, the fact that the Europeans are over-represented on the board of the IMF is a very big problem for lots of things that the IMF is trying to do in the world. Operational things and even high quality analysis. So I think that it's very important that these institutions have sensible governance at the top. But I would not be in favor of introducing additional governance complicated structures lower down. If I think about the difficulties that the IMF staff has from time to time in doing, in saying things internally and externally that are clear, that are backed by the numbers, and that are speaking to policymakers in an orderly fashion, in a timely fashion, in a way that's, you know, a response to trying to push them in the right direction. None of that is gonna be helped by having additional boards and supervision and this, that, and the other. You need to have an executive board. You need to have countries represented there. And they need to have a forum which they can argue. But an additional governance structure, I think would become cumbersome. I think it would actually undermine your goal, Eric. All of which you went through, I thought was eminently sensible. You want the World Bank to be pushing these issues, measuring them carefully, pushing in the right direction, thinking about the country context, interacting with the EBRD. The EBRD, we should have said that if you go back on the intellectual history of governance measures and thinking about how to measure, how to compare across countries and use as a tool of policy, I think it was actually the EBRD that pioneered some of this back in 93 or 94, but before you were there. And then, but it's absolutely continued and become more effective during your tenure at the EBRD. So that would be my reaction on the governance idea. Eric, you'll have the last word. So I didn't have, there is, of course, a governance structure in charge of the World Bank. What I had in mind was something closer tied to doing business with people who really are forced to think through what doing business. I think a lot of what's going on now is actually also about poor information and also not understanding what it's actually trying to do. So I'm not denying that they're also, as I emphasize, they're strong special interests, but I think having something that you can sort of hold up as providing scrutiny. But again, I'm just trying to find a way out of the current impasse. Daniel, I think people understand very well what this measure does. It speaks directly to a barrisque entry. It is extremely threatening to rich, powerful people in various countries. They don't like this. And the reason the left and the right, when they think about it, for example, in our country, appreciate this is because the right sees it as lowering or speaking to barriers of entry and the left sees it as addressing these issues of entrenched interest and excessive power. So it's actually a rare convergence in our political context, but in other places, you don't necessarily have those clear voices. And mostly what you're getting is a pushback from some version of your local oligarchs. Yeah, Michael, I was fibbing. I would like Michael Klein to have the last word. Michael, you are gonna have that. No, I will not. Fair enough, fair enough. Okay, we're gonna have to end this here. Please join me in thanking the panel. We're very fortunate to have the Assistant Secretary for International Markets and Development, Marisa Lago. I wanna compliment the United States government and the Obama administration for understanding the seriousness of how high the stakes are for doing business. And I know that Marisa and Lael Brainard and Ian Solomon have taken this very, very seriously. I was proud to testify on behalf of the General Capital Increase in favor of the General Capital Increase for the administration two years ago. And so I know that the issues of the General Capital Increase and doing business are intimately interlinked. And I know you guys have been very strong advocates, so I'm gonna ask you to come up, Marisa. Thank you so much for being here. Well, thank you. And kudos to CSIS and particularly you, Dan, for realizing that during this weekend of bank fund, when all of us have so many things to do, this number of people would come out and spend this amount of time on DBR. I have to admit that it's a bit daunting to speak after the parade of distinguished speakers that you've had throughout the morning, many having come from U.S. government, including you. And it's even more intimidating as a non-economist to be speaking after this incredible panel. But here goes. To state the obvious, and as Dan has previewed, the United States government strongly believes that the DBR, including its aggregate country rankings, is invaluable. It's a knowledge product of the World Bank Group that helps incentivize changes to improve the business climate in the bank's member countries. It's not just the borrowers of the World Bank, it's the non-borrowers, including the U.S. that benefit from these annual assessments. I have to admit, as the U.S., we can look at these assessments and quibble and say, hey, it doesn't feel fully fair, but nonetheless, we're supportive of it. Now, we are supportive also of looking at ways to increase the report's usefulness and credibility, but as we do this, we're confident that the country rankings serve as an important benchmarking tool and a valuable input for reform-minded policy makers. So that is the overall frame through which the rest of my comments will come. What is the influence of the DBR? There's little dispute about the critical need for reforms to improve the business climate in developing countries, it's Development 101. Frequently, as was mentioned just now, and I'm sure earlier, these reforms directly challenge entrenched interests in both the government and in the private sector, and they require tackling these complex political economy problems. The primary challenge in a country looking to implement reforms to its business environment isn't a lack of knowledge of what the appropriate technical solutions is. It's actually been the inability of the reformers to engage with and then overcome the opposition to reforms and reforms that are so squarely in the public interest. We look to the DBR because of its simplicity, its comparability, and also the extensive media coverage. We shouldn't understate the importance of the fact that the media coverage helps reformers tackle the entrenched political economy challenges. The reformers can point to the DBR report and the fact that it's not just a domestic audience, but a global audience and also the MDBs and the donor community that are looking to the MDB. We don't think that any measure of business rankings rivals the DBR. Arguably, I'm sure economists could quibble that there might be other business environment diagnostic tools that are more comprehensive or dig deeper, but not a one of them has been able to attract and capture the public attention in a way that motivates government reforms. Now, it's really easy to quibble about any individual indicator that's included in the DBR to say this is missing one indicator, it should be weighted more heavily with another. That just totally misses the point. The goal of business environment reform initiatives isn't to perfect one particular set of diagnostic methodologies or indicators. The desired result is effective implementation of reforms in a manner that's going to vary country by country. And if you use this real world measure, the DBR is a runaway success. So we remain open to improvements to or expansion upon the indicators that could increase the impact of the DBR, but changes that would erode the communication value of the DBR and specifically the removal of the country rankings we think would undermine the fundamental reason why the DBR has been so influential. I thought I'd speak for a minute about how some US government agencies have interacted with the DBR and particularly the US Agency for International Development, the Millennium Challenge Corporation, and within Treasury, our Office of Technical Assistance. All three of these agencies have worked directly with so many of the countries that have targeted improvements in their doing business rankings as part of broader reforms of their investment climates. It's a particular point of pride for USAID that they have provided technical expertise to a majority of the countries that have been recognized as the top reformers in the DBR. In AID's experience, countries that are undertaking reform initiatives influenced by the DBR are fully cognizant of the limitations of some of the individual indicators and may well disagree that those indicators properly capture their country's investment climate, but they still have seen the value of using this well-communicated public DBR as one of the underpinnings of their reform efforts. MCC, which operates in a smaller number of countries but far more intensively, relies heavily on the annual data from the DBR as a critical component of the country's scorecards and these country's scorecards are essential to ongoing assistance from the MCC. What MCC has found in their countries is that it's not just the public entities, the government entities that see the DBR data as useful, it's also the private entities and they look at this data as objective proxies for cross-national comparisons of the investment climate. Now, there's a long list of countries that the US government has partnered with to develop and implement reform programs that are influenced by the DBR. Let me give you a sense of the diversity of countries. They range from Liberia to Kosovo, El Salvador, Jordan, Macedonia, Burkina Faso, but one shining example that I have to call out is Georgia. Here is a country that since 2004 catapulted from 112th place to 9th place on the DBR rankings. What did it do? Straightforward things but politically challenging things. It overhauled tax and customs administration, business registration, property registration and the court system. 9th on the DBR ranking is hopefully impressive. Now the other story that I wanna tell you is that earlier this year President Obama received at the White House the heads of state of four African governments, Cape Verde, Malawi, Senegal and Sierra Leone. We received an informal readout of that meeting. Unscripted, one of these heads of state mentioned the importance of DBR to his reform efforts. The other three chimed in. The notion that heads of state who are in a meeting where time is valuable where you have so many topics to cover would choose to spend time discussing the DBR to me is the highest testament to the value of this index. So turning to the methodology at Treasury we tend to be very numbers focused, finance focused and we like the DBR project because it gives truth to the maxim what gets measured is what gets done. Now there has been significant debate but we focus on the fact that it's primarily about a small subset of the overall indicators that are in the DBR. We are fully cognizant about the fact that there are limitations of the methodology that there are questions about the appropriateness of drawing larger conclusions from the results but we're heartened by the fact that the oversight, the generators of the DBR have been responsive to informed criticism. I'll use as one example that a group of international legal experts pointed out that the getting credit indicator wasn't sufficiently responsive to the fact that there were different legal systems and as a result of their criticism the getting credit indicator was updated. Now going back to where I started the US government believes that the current ranking structure is critical in motivating reform but that doesn't mean that we view the indicators as frozen in time. As part of this review we welcome the inclusion of newer measures. There's been a lot of discussion about distance to the frontier and as the DBR is a living document it can track progress both internally by revising itself and over time in the countries. So we think that there's a significant opportunity for a selective expansion of indicators to focus on other areas of the business environment but as we look at these other areas of the business environment that are susceptible to useful metrics we think that the best focus is on areas where there's broad consensus on best practice, where there is a way of measuring and making reforms actionable and also focusing on those areas that are most likely to improve the economic outcome for micro, small and medium domestic enterprises moving from a business environment that works for globally active companies and targeting it or refining it to also look at the smaller enterprises. While we think it's important to have a process for establishing and then piloting new indicators we have to recognize that no set of indicators, no report is ever going to be fully comprehensive and so the fact that there will always be criticisms is something that we take as a given and not as a weakness or something to be used as an excuse for doing away with the DBR. We have been, the US government has been very supportive of the subnational doing business projects that seek to focus on local differences in either regulations or probably even more important than regulations in implementation. By expanding the analysis beyond the largest cities it recognizes that one, you can have within country competition. We certainly see that in the US where our major cities compete for attracting businesses but it also recognizes that when it comes to implementing these reforms the legislation may be at the national level. The implementation is frequently at the local level. Think about it in the US where federal legislation gets translated into state legislation but it ultimately is the cities themselves, the municipalities that are the key actors. So we think that the use of subnational benchmarking for a subset of larger countries where one could expect wider variation may actually go a long way to addressing some of the criticisms of the DBR. So 10 years into the DBR we've seen a major increase into the research about the impact of business environment reforms. Our knowledge has increased significantly in some areas. I would say as an example, reducing barriers to a firm's registration but we do think going forward we need to heighten the focus on evaluation and research. Why? Because they're limited resources and so we need to direct them to those areas, to those indicators that are most likely to spur effective business climate reform. We do think it's right 10 years in to bring together the development community, the research community, the business community to confirm what we've learned but also to identify the remaining gaps so that the economist like the panel that was up here can continue to do their research and continue to have the type of lively debate. In the coming decades we should be looking forward to making the DBR even more useful and credible although it starts from a really high level but let me end by noting the same comment where I started, it's going to be important to retain the country rankings because that's what's the key incentive to motivate business regulatory reform. Marissa, thank you very, very much. Marissa's got a very busy schedule because of the spring meetings, she's been very generous with her time and really appreciates you being here. Let me ask you, I'm going to make a comment and I'm going to ask you two leading questions. The administration to which you don't have to, that's right, you don't have to, exactly. I think to the administration's great credit, there's been an increased emphasis on economic statecraft and it's a partnership across the government I was with a meeting of five former U.S. ambassadors in developing countries about two days ago. I said, tell me about the doing business metrics, did you use them as part of your conversations with country governments? He said, oh yes, all the time. Every minister, every prime minister knew our ranking, knew all about it. So it was one of the most important things that we did as ambassadors. So it's an important part of American economic statecraft. I also think we talk a lot in the development community about policy dialogue. This is the ultimate policy dialogue icebreaker. It's the ultimate policy dialogue icebreaker. So let me ask you two leading questions. The first is Marisa, how would the administration react if the leadership of the world banks said, well, we're going to get rid of the rankings and we're going to really mess with the methodology or maybe we'll outsource it, but we're going to retain the spirit of doing business and what's your reaction to something like that? I guess the reaction is that I'm not going to react to a hypothetical question, but to get back to the theme that I hope was evident throughout my remarks, that we value the credibility and the communications value and we place huge emphasis on the rankings and so we will look to make sure that that's preserved. Perhaps less hypothetical and a slightly different tack is, talk about, is you're having conversations with other shareholders of the world bank, what their reaction is to sort of this discussion. I'm sure there's a spectrum of responses, but I was with the executive director from New Zealand yesterday, they're very strongly supportive. South Korea, very strongly supportive. Could you talk, I don't understand the United Kingdom's very strongly supportive, could you talk a little bit about how that's going on? For example, could you talk to your sense about how African government see this? Well, I think that the example that I used, I chose specifically because this is of the president meeting with the heads of state of four African governments and it is interesting because so many of these governments are talking about progress while remaining low down on the list, so I think the heads of state are quite realistic about the challenge ahead of them, but are able to use almost as a marketing tool moving up from the 120s to the 90s, breaking from three digits to two digits. I wanna pick up on your comment in on noting that it's important that this discussion not be viewed as a US discussion. The DBR is owned by the World Bank, a truly global institution and it is important to engage all of the regions of the world, but also to your point, it's important that this not be seen as a developed versus developing country issue. Some of the strongest proponents are developing countries and again, I emphasize that are still ranking low on the rankings. There is regional competition for investment and so one can look at a group, let's use Africa as an example of African countries with the heads of state saying, hey, look, I'm doing better than my peers or setting as a target, I'm going to reform my climate to be better than my peers. I may not be able to go mano a mano against the countries that are up in the teens and the single digits, but I can show progress. Okay, one last question. I said two, I'm just going for three. They just please, the idea of having this outsourced to an academic institution or some other institution, what's the US position on that? Again, it's a hypothetical and I return to our basic principles of support for the rankings and the communication value of the rankings. Okay, Marissa, thank you very much for being here. Thank you, Dem, and thank you. Thank you.