Doing Business Report to Belize: Pick Up The Pace

Last week’s article focused on one of Belize’s “priority sectors”, renewable energy. The sole purpose of that piece was to highlight the immense potential for business growth that the Belizean economy has in that sector and many others. Clearly, along with renewable energy, most would probably already be aware of the growth potential of other priority sectors such as agriculture, agro processing and light manufacturing, fisheries and marine products, and services which include the ubiquitous tourism and ICT sectors.

As was the theme last week, Belize ranks fairly high on growth potentiality in the any of the sectors listed above and more. However, to be able to allow any economy to truly capitalize on and fulfill said prospects, the business climate must be conducive to growth. This conduciveness, however, is often determined by the regulatory environment within which firms must operate; and the World Bank’s flagship publication, The Doing Business Index (DBI), annually assesses how seriously governments around the world take this fact.

Particularly, the report “sheds light on how easy or difficult it is to for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, and labor market regulation indicators”.

Now, as is true for any index—especially one that tracks 190 economies—there are limitations and weaknesses. Among other things, the DBI team acknowledged the limitation of the index in that it does not directly consider factors such as an “economy’s proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders and getting electricity), …the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions”.
Nonetheless, as the DBI team has sought to improve the index over the last fourteen years, especially with the addition of the Distance to Frontier component (DTF), the DBI does provide a useful overview of the legislative and formal regulatory environment in which businesses operate. Consequently, it is concerning when both the overall ranking (relative to other countries) and the DTF scores for individual indicators show signs of deteriorating as opposed to improving.

With Belize’s general ranking falling from 112 to 121 between last year’s and this year’s DBI report, there is a strong need to scrutinize the level of ease of doing business in Belize. However, given that country rankings are also influenced by the speed of reforms in other economies, this article seeks to zero in on the changes to Belize’s Distance to Frontier (DTF) scores, as the DTF measures the “distance of each economy to the ‘frontier’, which represents the best performance observed on each of the indicators.”
The “frontier” or top-performer economy on a particular indicator would receive a score of 100. Consequently, the closer the score moves to 100 the more Belize could be said to be catching up with the best practice benchmark. Belize’s overall DTF score for the DBI report for 2018 (based on data from up to June 2017) is 57.11, up 0.03 points when compared to last year’s overall score of 57.08. The overall score is the simple average of ten individual DTF scores.

For the DBI 2018 report, the largest contributor to this increase is the “Resolving Insolvency” indicator, which moved up by 0.26 points to 45.74 from 45.48. Said differently, in terms of the time, cost and whether or not creditors are successfully able to recover their monies from defaulters, Belize has moved more rapidly than in other areas. Nevertheless, while Belize has improved (albeit marginally) in this area over the last three years, the country’s rank for “Resolving Insolvency” has dropped from 81 to 83, implying that other countries have been reforming this area comparatively faster.
The other indicators that contributed to the minor change in the overall DTF score are “Starting a Business”, “Dealing with Construction Permits”, and “Getting Electricity” that all inched up between 0.01 and 0.03.
In the case of “Starting a Business”, Belize’s DTF score moved up by 0.01 points to 73.24 from 73.23, while the economy simultaneously fell in rank from 158 to 161. If we look at the idea that the DBI is designed to encourage economies to “compete towards more efficient regulation”, then the upward change in the DTF score mixed with the downward track in the relative rank is suggesting that Belize’s reforms are being outpaced by other economies.

For example, let’s consider Jamaica. Having already been ranked highly for “Starting a Business” (in the top ten), between this and last year’s report, they have moved up in DTF score from 95.61 to 97.30 (an increase of 1.69). In The Bahamas, the DTF score for this indicator increased by 1.47 points to 84.18, improving their rank by ten points (from 118 to 108).
For Belize, the trend of small increases in the DTF scores being simultaneously matched by a decline in the indicator’s rank is not unique to “Starting a Business”. Between the DBI 2017 and 2018 reports, the ranking for “Getting Electricity” fell from 79 to 83, and for “Dealing with Construction” it fell from 100 to 114.

As stated earlier in this article, the DBI reports are not perfect; there are several factors that it does not take into consideration when dealing with developing countries in particular. Nonetheless, it would be a misleading notion to completely disregard the findings.
Fundamentally, it would be inaccurate to say that the Government of Belize (GoB) has not been making efforts to improve the regulatory environment at a national level. Among some key initiatives are the moves towards e-governance, which is undeniably a useful measure. There are also the current works at the Customs Department towards adhering to the Trade Facilitation Agreement. There has also been work to standardize the trade licensing regime, although it has only been taken through its First Reading in the National Assembly after private and public-sector actors have been engaged in the process for several years.

While these efforts and others must be noted, there is clearly a need for the speed at which these reforms are taking place to be accelerated. Other economies—many of which Belizean businesses have to compete with—are being far more aggressive and progressive in their efforts. If the Belizean economy intends to keep up, the government departments that are lagging behind, or worse, have become regressive in their processes need to develop a business-friendly outlook, especially for an economy whose growth potential is so closely linked with its export market, business competitiveness is not simply a good idea, it is a must.

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