Analysing the World Bank Report on Doing Business in PNG for year 2015-2018

Analysing the World Bank Report on Doing Business in PNG

for year 2015-2018

By Picky Airi

Introduction

According to the PNG Vision 2050 mission statement, we should be ranked in the top 50 in the United Nations Human Development Index (HDI) by 2050 and one way the country envisions to get there is through advancements in economic growth. Presently according to the 2016 HDI report produced by the United Nations Development Program (UNDP) the current ranking places PNG in 154th place out of 185 countries. A ranking which is categorized under the ‘Low Human Development’ group. (Human Development for Everyone. Briefing note for countries on the 2016 Human Development Report. 2016. pg.7). Although the HDI measures average achievements in three basic dimensions of human development different from business, the report also acknowledges the role businesses play in empowering and improving these areas of human development within a country (UNDP, 2016). Particularly advocating for women in business and social and local entrepreneurship for young people.

The UNDP report is right in acknowledging the role of business as there is an abundance of literature that supports this. It is not possible to understand divisions in the world economy today without referencing to the growth experiences of countries argues Thirlwall (2013). It is without doubt that economic growth cannot be achieved without businesses creating job opportunities, providing goods and services for consumers and for other business. The notion is further supported by Reddy & Campbell (1994), that business and market creates many benefits for people, and as a result of business and market in the economy, people will experience an increased standard of living. Business plays a vital role in the economy and is very important to a country’s economy (eNotes, 2015).

World Bank Report in Doing Business in PNG

How we will know if we are getting closer to achieving our vision at the national level is to also look at economic indicators. One particular report that sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations in PNG is the World Bank Report (WBR) on Doing Business. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulation. In a series of annual reports Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies over time. The indicators are used to analyse economic outcomes and identify what reforms have worked, where and why. The indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city (Doing Business, 2018).

This essay aims to analyse the WBR on doing business particularly in PNG. To identify and compare the country’s ranking for the current year and discuss the progress for the last three years. The goal of this analysis of the WBR is to provide an objective basis for understanding the challenges of doing business in PNG and as a result make suggestions in improving the regulatory environment for business within the country. Suggestions will be made on the worst performing key areas in the life cycle of a business as revealed by the WBR reports for the current year and a three-year period.

PNG’s ranking on the ease of doing business among its comparator economies

According to World Bank, it is helpful for policy makers to know where their economy stands in the aggregate ranking on the ease of doing business and how it ranks relative to comparator economies and relative to the regional average. Therefore, analysing the countries ranking among its comparator economies provides another perspective worth looking at. The economy’s rankings and distance to frontier scores is always highlighted in the yearly country reports as a separate table. The ease of doing business ranking ranges from 1 to 190. The ranking of 190 economies is determined by sorting the aggregate distance to frontier scores, rounded to two decimals (Doing Business, 2015). Figure 1 shows how PNG and comparator economies rank on the ease of doing business for the year 2018.

Figure 1 How PNG and comparator economies rank on the ease of doing business for the year 2018. Source: Doing Business Report for PNG, 2018

This year’s edition of the report placed PNG 109th out of 190 economies, placing it between Paraguay and Malawi but ahead of its regional neighbours Palau (130), Marshall Islands (149) and Kiribati (157). To understand PNGs ranking among its comparator economies we analyse the four-year period from 2015 to 2018 rankings. The following rank figures were extracted from the reports and tabled to help understand better the ranking of PNG among its comparator economies.

Ranking	2015	2016	2017	2018
Samoa	67	96	89	87
Tonga	69	78	85	89
Fiji	81	88	97	101
Palau	113	136	136	130
PNG	133	145	119	109
Kiribati	134	149	152	157
Marshall Islands	139	140	143	149

Table 1 How Papua New and comparator economies rank on the ease of doing business for 4-year period.

Figure 2 below shows a line chart illustrating the data shown in Table 1 above. Each country’s rank out of 189 for the 4-year period is displayed as a line. A lower rank number out of 189 (190 according to the recent report) indicates good progress in terms of the ease of doing business. If the line is sloping downwards as we move from left to right (2015-2018), it indicates lower rank or good progress on ease of doing business. Otherwise the country is not doing too well in its ranking as the years’ progress.

Figure 2 How PNG and comparator economies rank on the ease of doing business for a 4-year period
PNG’s rank (red line) has been improving since 2016 with the line sloping downward as you move towards 2018 from 2016. While for its neighbouring countries (comparator economies) the slope is moving slightly upward as we move to the right end of the chart. It is fair to say that PNG’s ranking on the ease of doing business has greatly improved since the year 2016 with our currently placing at 109 out of 190 economies compared to our comparator economies.

To read the full analysis please ask the author for a copy.

Note:This evaluation report is submitted as a requirement for the MB601 Business Environment unit in the Master of Leadership in Business Administration program at Divine Word University.

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