Doing Business as a Tool for Economic Reform

The World Bank Doing Business report

The World Bank’s Doing Business report is an objective and comparative assessment that measures how easy it is to start, run, and grow a business. For example, the report measures the time and cost it takes to register a business, get electricity, and enforce contracts. For over a decade, it has generated significant attention from national governments and has become a trusted tool for countries to use to improve their economic governance.

Due to its legitimacy among national governments, the Doing Business report is a useful resource for implementing regulatory reform and has been used in a variety of countries, including Kosovo.

Regulatory reform is highly complex

As a relatively new country, Kosovo has been making efforts to institutionalize free market ideas and establish the foundations of a functioning democracy (the necessary preconditions for sustainable economic growth). However in recent years, the nation has faced the monumental task of refining its laws and regulations to be more effective and efficient. Doing so will enable it to improve internal government coordination, reduce systemic bottlenecks and corruption, streamline key functions, enhance transparency, and strengthen its ability to self-assess. Further, as international experience has shown, economic growth is maximized in countries with simple, transparent, accountable, and responsive governance. Improved governance will reduce disincentives and barriers to business registration, increase job creation in the formal market, reduce opportunities for corruption, and stabilize government revenue by introducing processes to ensure that taxes and service fees are administered consistently and transparently.

Doing Business offers a ready-made road map

To assist Kosovo with developing a functioning and dynamic market economy, USAID’s current Partnerships for Development project and previous Business Enabling Environment Program (2010-2013), both implemented by Chemonics, support government initiatives for private sector-led economic growth and business environment improvement. The Doing Business methodology serves an important programmatic role in both projects. As a first-tier assessment, Doing Business is based on first-hand analysis of domestic legislation, regulation, and practice with information drawn directly from respondents in each country. While there are certainly many other international assessments — such as the World Economic Forum Global Competitiveness Index, the Heritage Foundation Index of Economic Freedom, and more — Doing Business is often used as an input into those and other analyses. It also has the distinction and value for economic impact of being directly connected to outcomes within each country, as the report is published close to the time of research observations.

With support from both projects, the Kosovo government uses Doing Business to focus economic policy reform; increase efficiency; align Kosovo’s practices with comparative practices (such as those needed for EU accession); reduce barriers to formality; and work towards building simple, transparent, accountable and responsive (STAR) governance to combat corruption.

Doing Business fulfills a structurally informative role in Kosovo by pushing for intra-governmental coordination, encouraging a disciplined approach for evaluating and advancing policy, and guiding the design and implementation of reforms. Additionally, it fulfills an ongoing role by enabling the government to monitor improvements in key outcomes such as reductions in the number of procedures required to register a firm and reductions in costs associated with obtaining property certificates.

Kosovo’s strides in improving the ease of doing business

Kosovo is already starting to reap the benefits of Doing Business-informed reforms. In recent years, Doing Business objectives influenced decisions to eliminate unnecessary requirements associated with starting a business, protecting minority investors, trading, and obtaining construction permits, as well as supported the development of an online tax filing system. These actions subsequently reduced costs (in the form of both time and money) associated with economic activity for the benefit of small- and medium-sized enterprises looking to penetrate the market.

Progress in governmental coordination and public engagement in Kosovo is linked to the National Council for Economic Development (NCED), established in 2012. Through this body, the prime minister (who serves as the chair), ministers, technical departments, and private sector groups discuss and recommend policy reforms. Building on previous reforms (credited for Kosovo’s placement among Doing Business’ top reformers in 2014), NCED recently launched a new round of reforms. Under NCED, a dedicated Doing Business task force and indicator-specific working groups operate to identify, adopt, implement, and monitor reforms.

Key takeaways

Overall, decisions influenced by the Doing Business resource have supported the Kosovo government in assuming increased accountability, reducing unnecessary transaction costs, removing barriers to formality, and reducing corruption. This has contributed to increases in business registration, employment, government revenues, and overall economic activity in the market.

More specifically, Kosovo’s underlying lessons speak firstly to the importance of host country-grounded approaches and secondly, to the potential in leveraging resources already in existence. The significance of country ownership cannot be overstated in the use of Doing Business in Kosovo. The tool is greatly valued by the Ministries of Trade and Industry, Environment and Spatial Planning, and Finance, among others, and is widely promoted within the government. Further, in light of the tool’s contribution to policy reform in Kosovo, we must remember that Doing Business is just one of several extant tools for guiding governance reform. Innovation therefore means not only developing new measures, but finding ways to better utilize the quality resources already available to advance pro-growth reforms.