Dodwell in SOM1 Moscow - Post 6

February 13, 2012

Competitiveness, how we are progressing on liberalization, and the “dashboard” measuring APEC member economy progress towards achieving the Bogor Goals of free and open trade and investment were the focus of the APEC Committee on Trade and Industry (CTI) and the Economic Committee (EC) which both began their long sequences of meetings in Moscow on Sunday.

While the Economic Committee focused on the “Ease of Doing Business” indicators devoted to the metrics measuring how our member economies are progressing in their liberalization efforts, the CTI was host to long, technical presentations from the World Bank, the IFC, the World Economic Forum and APEC’s own Policy Support Unit, on how they build their global country rankings on competitiveness. There was even a presentation from the Turku School of Economics in Finland on competitiveness in the Logistics Sector, based on an assumption that competitiveness in this sector is a good proxy for broader trade competitiveness.

Predictably, the presentations were dry, technical, long and worthy. But they were also controversial. Members from China and Russia – ranked low by many of these organizations – bristled over methodology – and in some contexts they were not wrong. How – for example – can the World Economic Forum rest a number of its competitiveness conclusions on questionnaire responses from a hundred or so Chinese company executives. In so vast an economy, it is difficult to be comfortable that such a limited group could reliably reflect any statistical truth about China.

But maybe these ranklings miss the most important point of such indicators. First, if they are all saying pretty much the same thing about an economy, then they must be getting something right. Second, they are probably valuable over time for measuring progress in various areas. And finally – perhaps most important – they must surely be useful in flagging for leaders those areas of their economy and business performance that can valuably attract some policy attention.

Of all the presentations, perhaps the most fascinating and entertaining was from Olin McGill, a US consultant who has worked for the past four years or so with Georgia – not in the US, but the recently independent former Soviet satellite. The ferociously liberalizing government of Georgia is the darling of the World Bank and others compiling “Ease of Doing Business” rankings. Georgia has soared up the rankings over the past 4 years – from 112th to 11th worldwide – on the back of some breathtakingly courageous and controversial measures. Aware that the police force was profoundly corrupt, the government literally sacked the entire police force. It then reorganized it, and several weeks later invited interviews for reappointment. From being one of the country’s most despised agencies, the police force is now among the most admired. Aid officials arrived several years ago to discover that the country’s entire tax records (don’t ask what proportion of the population paid their taxes!) on the hard drive of a perilously aging computer.

One of their first moves was simply to buy a new computer and new hard drive, and copy the tax files. Finding that it took an average of 54 days to get an export out of the country, the Government took an axe to the customs service. Today, it takes an average of 10 days, with customs documentation cut by half.  Clearly, from such chaotic beginnings, it is easy for a Government to rise up the rankings. But Georgia’s story was an uplifting one, with some insights we all could learn from, like: “eliminating corrupt agencies can’t make things worse”; “every interaction between Government and business is an opportunity for corruption”.  McGill left us with four key conclusions that must surely be useful to us all:

  1. No government department should ask business for information that the Government already has.

  2. Savings for business do not mean a loss for government: everyone gains from efficiency.

  3. Governments should be facilitators of growth, not enforcers of rules.

  4. Government decision-making should not be top-down: it should be based on consultation, and should be bottom-up as well.

Carlos Kuriyama from APEC Policy Support Unit, presenting update on Ease of Doing Business in APEC.
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