The World Bank Doing Business Reports - Regulation and Change in China and Australia

Abstract

Under the auspices of the World Bank, "Doing Business" reports have been issued in relation to business activity in economies around the world in 2004, 2005, 2006 and 2007. The Reports focus on business regulation by looking at regulations that enhance and constrain business activity. In order to do so, the authors of the Reports have created quantitative indicators to measure business regulation and various types of regulated activities in a number of identified sub-indices (now 10) and to rank economies (primarily countries) on the basis of the indicators. An overall "Ease of Doing Business" ranking is accorded to each country in the study (175 in the 2007 Report) on the basis of the rankings in the various sub-indices. The data is then used in an attempt to identify successful reforms and the reasons for their success. While the reports provide a far-reaching comparative study of the regulation of various carefully defined aspects of business activities across the world, the indicators and rankings themselves and the sometimes sweeping conclusions which the authors draw from them, are, however, problematic in a number of respects, in particular, the use of the data and rankings to promote a definite program of regulatory reform.

This paper queries the validity of using this quantitative data to make an overall comparative assessment of the "ease of doing business" in a particular jurisdiction by reference to Australia (ranked 8th overall) and China (ranked 93rd), at a time when Australian business groups complain of excessive red tape and bureaucratic regulation and foreign investment funds continue to pour into China and private participation in the business sector in China grows at an exponential rate. The paper concentrates on the Starting Business sub-index, in relation to Australia and the People's Republic of China and considers the general question of regulatory reform, the subject of the 2007 Report, in those two jurisdictions and its relationship with business activities.

The research for this paper was supported by the GIP "Mission Law and Justice" for the research program on Economic Attractiveness of Law.

Keywords: China, Australia, World Bank, World Bank Doing Business Reports, administrative law, regulation, red tape, quantitative data, measuring efficiency, regulatory reform, bureaucracy, starting a business

JEL Classification: K10, K30, K33, K23