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Bhutan is on the right track to improve business climate

World Bank resident representative for Bhutan and senior country economist, Yoichiro Ishihara talks to Business Bhutan reporter Lucky Wangmo about the country’s ranking in the ease of doing business, hindrances to investment climate and how far Bhutan has come.

 

1.What is Doing Business?

Answer: The World Bank launched the Doing Business (DB) project in 2002. DB looks at domestic small and medium-size companies and measures the regulations and their enforcement across through their life cycle in 190 countries. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies towards more efficient regulation and offers measurable benchmarks for reform.

2.In Doing Business 2018, Bhutan’s global rank slipped to 75 from 71 in DB2016 and 73 in DB2017. What are key findings for Bhutan in Doing Business 2018?

Answer: Although Bhutan’s global ranking slightly declined, Doing Business 2018 shows that Bhutan is on the right track to improve business climate for three reasons: Firstly, Bhutan maintained the top position in South Asia. Secondly, Bhutan’s score on the distance to frontier improved from 65.2 in DB2017 to 66.3 in DB2018. The distance to frontier score (0-100) captures the gap between an economy’s performance and a measure of best practice across the entire sample of 41 indicators for 10 Doing Business topics to frontier score. Thirdly, the improvement in the distance to frontier score reflects four reforms since last year. These reforms are (a) starting a business, (b) access to credit information, (c) minority investor protection, and (d) enforcing contracts. Four reforms are the largest number of reforms in Bhutan in the past 10 years.

3.The main bottlenecks to investment climate in Bhutan have been identified as lack of funding, lack of access to skilled labor and market. How has Bhutan done with regard to this in the last three years? Are these the reasons that it has slipped in the ease of doing business ranking?

Answer: The World Bank launched the Investment Climate Assessment (ICA) in September 2017 based on the 2015 Enterprise Survey. The ICA found that access to finance, skilled labor and markets are the three most binding constraints to private sector development. Bhutan has made  progress to address these constraints. For example, on access to finance, Doing Business 2018 recognizes that Bhutan improved access to credit information by beginning to distribute customer payment data from two of the utility companies. The World Bank supported this effort through the Second Fiscal Sustainability and Investment Climate Development Policy Credit.

4.What can Bhutan do to promote a conducive environment for investments and entrepreneurs?

Answer: Once again, Bhutan is on the right track to improve business climate. Going back to DB and focusing on a big picture, Bhutan ranked 126th and the distance to frontier score was 56.4 in DB2010. In DB2018, Bhutan ranked 75th and the distance to frontier score increased to 66.3. It is critical to maintain this momentum. More specifically, I would strongly suggest accelerating implementations of reforms in the 2017 Economic Development Policy. Increasing private sector growth and competitiveness is one of three key results areas of the 2014 Country Partnership Strategy between the World Bank Group and the Royal Government of Bhutan. The World Bank Group remains committed to supporting this area through policy reforms and their implementation, technical assistance and analytical work.