Common Misconceptions About Doing Business
Doing Business indicators, in capturing some key dimensions of regulatory environments for domestic businesses, provide useful data for benchmarking and research. Like with any other data it is important to familiarize oneself with the specificities and limitations of the indicators before using them for analysis. The About Doing Business and the Data Notes chapter of Doing Business 2017, and other information on the website, go into detail explaining these limitations and specificities. This page clarifies the most frequently heard misinterpretations of the Doing Business data.
Misconception #1: Doing Business ranking is a comprehensive measure of business environment
Doing Business does not measure all aspects of the business environment that matter to firms or investors—or all factors that affect competitiveness. It does not, for example, measure security, macroeconomic stability, corruption, labor skills of the population, underlying quality of institutions and infrastructure or the strength of the financial system. Doing Business focuses on 11 topics, with the specific aim of measuring the regulation and red tape relevant to the life cycle of a domestic small to medium-size firm.
Misconception #2: Narrow focus on increasing Doing Business ranking results in improvement of the overall business environment
While Doing Business is a powerful tool for catalyzing reforms in business regulation the indicators are not used by policy makers as the only source in structuring reform programs. Over the past ten years, most reforms relating to Doing Business topics were nested in broader programs of business regulatory reform aimed at enhancing economic competitiveness, as is the case, for example, in Colombia, Latvia, Rwanda and APEC.
Misconception #3: Doing Business indicators promote deregulation
Several of Doing Business indicator sets measure the strength of regulations; others focus on their efficient application. Accordingly, some Doing Business indicators give a higher score for more regulation, such as stricter disclosure requirements in related-party transactions. Some give a higher score for a simplified way of applying regulation with lower compliance cost for firms, for example, if firms can comply with business start-up formalities in a one-stop shop or through a single online filing portal.
Misconception #4: Doing Business indicators focus only on laws and do not take into account practice
Doing Business encompasses two types of data and indicators. “Legal indicators,” such as those on investor protections and legal rights for borrowers and lenders, provide a measure of legal provisions in the laws and regulations on the books. “Time and motion indicators,” such as those on starting a business, registering property and dealing with construction permits, measure the efficiency and complexity in achieving a regulatory goal by recording the procedures, time and cost to complete a transaction in accordance with all relevant regulations from the point of view of the entrepreneur. For some indicators—for example, the indicators on dealing with construction permits, enforcing contracts and resolving insolvency—part of the cost component (where fee schedules are lacking) and the time component are based on actual practice rather than the law on the books.
Misconception #5: Doing Business methodology and historical data have not been revised over the years
Doing Business publishes 24,120 indicators (120 indicators per economy) each year. To create these indicators, the team measures more than 115,000 data points, each of which is made available on the Doing Business website. Data time series for each indicator and economy are available on the website, beginning with the first year the indicator or economy was included in the report. To provide a comparable time series for research, the data set is back-calculated to adjust for changes in methodology and any revisions in data due to corrections. The website also makes available all original data sets used for background papers. The correction rate between Doing Business 2016 and Doing Business 2017 is 7.1%*. It is hard to compare this with other international data sets because they do not publish corrections rates. In this respect Doing Business is the most transparent data set of its kind. Nevertheless, it is possible to dispute data by sending a detailed email to the Doing Business team at email@example.com.
Misconception #6: Doing Business data is based on firm surveys
The Doing Business approach to data collection contrasts with that of enterprise or firm surveys, which capture perceptions and experiences of businesses. The Doing Business data are based on domestic laws, regulations as well as administrative requirements. For several indicators cost, time and procedures components are based on actual practice rather than the law on the books. To collect data for these indicators the Doing Business project works with legal practitioners or professionals who regularly undertake the transactions involved. A corporate lawyer registering 100–150 businesses a year will be more familiar with the process than an entrepreneur, who will register a business only once or maybe twice. Utilizing the knowledge of professionals in 190 economies Doing Business puts together a unique dataset of business regulations. For data based on firm surveys please visit the World Bank's Enterprise Surveys website.
* This correction rate reflects changes that exceed 5% up or down.