How’s Business? We Have a Benchmark for That

The Myanmar Business Environment Index is a piece of statistical legerdemain that starts as a public perceptions survey and ends as a powerful tool to mobilize both government and the private sector to push for change. Read more: https://asiafoundation.org/2020/12/09/hows-business-we-have-a-benchmark-for-that/

Transcript

Ville Peltovuori (00:03):

I'm Ville Peltovuori. I'm the project manager for the Myanmar Business Environment Index

Tracy Yang (00:09):

Some development ledger domain this week on In Asia, from the Asia Foundation. I'm Tracy Yang.

John Rieger (00:15):

And I'm John Rieger. Today's program is about statistics. Hey, whoa, whoa, whoa. Come back. Tracy, why don't you tell them.

Tracy Yang (00:22):

Ha ha. Statistics can be a bit dry, admittedly. But it's also an indispensable discipline for studying human populations. And this week, we're going to talk about a statistical tool with real power to understand and to change developing economies.

John Rieger (00:38):

Joining us now is Ville Peltovuori. He's the project manager for the Asia Foundation's MBEI, the Myanmar Business Environment Index, which, as we'll see, is a very clever statistical tool. Ville, welcome to In Asia.

Ville Peltovuori (00:51):

Thank you, John. I'm very happy to be here.

John Rieger (00:53):

And where are you speaking to us from today?

Ville Peltovuori (00:55):

I'm speaking from Yangon, Myanmar.

John Rieger (00:57):

Well, thank you so much for joining us.

Tracy Yang (00:59):

So, Ville, you've just published the results of the second round of the MBEI in Myanmar. I'm a minister from another developing nation, and I've just bumped into you in the elevator. How does this tool work and what could it do for me? Give us your elevator pitch.

Ville Peltovuori (01:16):

Well, the Myanmar Business Environment Index is a tool for benchmarking the states and regions of Myanmar on how easy they are for doing business. It looks into different dimensions of the business environment, such as the entry cost for business registration, infrastructure, transparency, labor, and law and order. It tells the governments of the states and regions of Myanmar what are their strengths and weaknesses, in terms of the business environment, what are the areas that they are improving on, and what are the areas that have declined. As such, it gives information to decision-makers on how to make their states a better place to start and grow businesses.

John Rieger (01:56):

When you say 'benchmarking,' by the way, what does that mean?

Ville Peltovuori (01:59):

It means that we give a score for each state and region on different indicators. And then we compare the states and regions, according to how good places they are for doing business.

John Rieger (02:10):

The Business Environment Index, as you call it, is actually a perception survey, right? Your enumerators are out in the field asking people their opinions about things. How does that become a tool for objective change?

Ville Peltovuori (02:22):

Yeah, that's correct. Most of the information that we use to compile the MBEI comes from the survey of businesses. So it's based on business opinions. Once we have compiled the MBEI, we communicate that information to government decision-makers, to the private sector, and the general public as well. After the first survey, for example, we did workshops with government officials in every state and region of Myanmar to discuss the findings and to come up with ideas on how to improve the business environment.

John Rieger (02:54):

Do you also present the findings to members of the business community?

Ville Peltovuori (02:57):

Yes, we do. So we have done presentations to the chambers of commerce. From the perspective of the private sector, the MBEI gives them evidence to back up their views. So that means if the private sector can put more pressure on the government. It creates something concrete for the businesses to refer to. And it's also, at the same time, the government officials know about the MBEI and they listen to the results. And then we also have a business sector that keeps reminding the government about these issues.

John Rieger (03:27):

So I can march into the regulatory agency and lodge a complaint about the lack of transparency. And they can say, "I don't know what your problem is. Nobody else is complaining." And then I can slap your study down on the desk and say, "Well, take a look at this."

Ville Peltovuori (03:42):

Yes, that's exactly it.

John Rieger (03:44):

I love that.

Tracy Yang (03:47):

So, Ville, I want to hear a story. Tell us about some aspect of business dissatisfaction and how this tool can produce reform.

Ville Peltovuori (03:58):

Well, there's one example of one township where we did the workshop last year. And one of the findings was that, in that township, the businesses felt that the fees for various government services were not transparent, and they were not easily available.

John Rieger (04:12):

They weren't generally published? They weren't available in some directory?

Ville Peltovuori (04:15):

Yeah. So in this workshop, we gave the opportunity for the township-level government officials to discuss on how to improve the business environment. And one of the things they discussed was putting up the schedules outside of government offices, so that they would be visible to everyone. And then, shortly after that workshop, we did our second MBEI survey, the MBEI 2020. And in that survey, we actually found out that that township was one of the only two where 100% of businesses felt that the fee schedules are publicly available.

John Rieger (04:48):

That's a success, clearly, but it seems like a small one. Is this little matter of publishing the fee schedule somehow more important than it appears on the surface?

Ville Peltovuori (04:58):

Well, it's all about small reforms. If we can do reforms like this in every township, little by little, they start to matter.

John Rieger (05:05):

They start to add up.

Ville Peltovuori (05:06):

Yes.

John Rieger (05:07):

So What's the effect on the business environment when government fees aren't published?

Ville Peltovuori (05:11):

Well, it can cause many kinds of problems. If the fees are not publicly visible, then there is more opportunities to extract informal charges.

John Rieger (05:20):

We sometimes call them bribes in the real world.

Ville Peltovuori (05:23):

Yes. But in addition to that, it might require more visits from the businesses to the government offices, because maybe they didn't bring enough cash with them to pay the fee. For very small businesses, it may also make planning their business and the use of cash more difficult. And if the businesses have to visit the government offices several times, it also becomes more burdensome for the government officials.

John Rieger (05:47):

It's so interesting that such a small matter could have all these ramifications down the road. And it was very clever of you to pick this as an indicator in the survey. Why don't we take a look under the hood of the survey? What are the moving parts in there?

Ville Peltovuori (06:04):

So there are three levels. First of all, there is the top level, which is the overall index, which can be used to rank the states and regions. Then the second level is the 10 sub-indices that consist of things like business entry cost or transparency, labor, infrastructure, and so on. And then the third level is the indicator level of where we have 153 indicators.

John Rieger (06:27):

So at the lowest level, 153 indicators?

Ville Peltovuori (06:29):

That's right. The MBEI has been designed in a way that gives us a lot of information about government procedures. So we want the MBEI to be very specific so that it supports policymaking. So we have the overall index and 10 sub-indices that give the overall picture, how well a state or region is doing. But then we need to go down to the indicator level to find out actually why they are doing well or why they are not doing so well.

John Rieger (06:57):

Can you just break it down for us a little bit? Give us an example of one or two of the 10 sub-indexes, and then give us an example of what goes into those.

Ville Peltovuori (07:05):

For example, the sub-index on land access insecurity. It consists of 19 different indicators and those indicators are, for example, the time it takes to get a land title, what kind of risk of expropriation is perceived by the businesses? If there is an expropriation of land, do businesses feel that they get fair compensation for that? Then we have some observational indicators that look at what kind of documents are required for applying for a land title and so on.

John Rieger (07:37):

So each one of these indicators, access to land, fear of expropriation, the documentation over it, each one of these is being measured in terms of the apprehensions, fears, or perceptions of the people you're interviewing. And yet, those perceptions translate into business performance because a person who's fearful that their land will be expropriated is not going to make an investment that requires that land. Too much document overhead means too much time going to government agencies and not enough time to run a profitable business and so on.

Ville Peltovuori (08:11):

That's right. So if it's very difficult to get these procedures done, then people might not start businesses. Or they might go somewhere else to do business, or they might even close down their businesses.

John Rieger (08:21):

Very interesting. Tracy?

Tracy Yang (08:23):

So now the Asia Foundation is allowed a little right pride for inventing this methodology, which it first applied in Vietnam in 2005. But there are other tools out there now. I'm thinking of the World Bank's Doing Business Survey. How does this compare to that survey?

Ville Peltovuori (08:41):

Well, the purpose of the World Bank's Doing Business Survey is to compare countries. So in every country, they have to use the same methodology, regardless of the [inaudible 00:08:51] status of that country. What we can do with the MBI is that we design it specifically to the Myanmar context because it's only used in Myanmar. We might have an interest on some process or service that businesses need from the government. And then we could look at that service or procedure in a detailed manner.

Tracy Yang (09:10):

Why is it important to compare region to region rather than Myanmar to other countries?

Ville Peltovuori (09:15):

Well, both are important, but Myanmar is in the process of decentralization, where the states and regions have been given more power. And in that context, it's important to keep track of how the states and regions are using those powers to improve the business environment within their jurisdiction.

John Rieger (09:34):

So of course we have to ask, does it work? If scores go up from one year to the next, does it make any difference?

Ville Peltovuori (09:41):

It does make a difference. What we found out in the 2020 study is that townships that increased their scores more also had businesses growing faster.

John Rieger (09:51):

Businesses were growing.

Ville Peltovuori (09:52):

Yeah. Businesses were growing. So we measured that by the number of employees. So in these townships where they improve the MBEI score more, they also had more new employees in the businesses that we studied.

John Rieger (10:07):

Are you proud of this tool?

Ville Peltovuori (10:08):

Well, yes. I mean, we put a lot of effort into this tool to make it work and spent a lot of time in talking to government officials about it and making them aware of it. So yes, I'm proud.

Tracy Yang (10:24):

Ville Peltovuori, thank you for joining us.

Ville Peltovuori (10:27):

Thanks Tracy. It's been a pleasure.

John Rieger (10:29):

That's our show. Ville has written about the Myanmar Business Environment Index in this week's blog, where you can also find links to the 2019 and 2020 reports. John and Tracy say, "Check it out." Until next time, I'm John Rieger.

Tracy Yang (10:44):

And I'm Tracy Yang.

John Rieger (10:45):

Thanks for listening.