Tag Archives: World Bank

Thinking About Doing Business

By Simon Johnson

In class #1 of Entrepreneurship without Borders (at MIT Sloan) we discussed attitudes towards starting a new business.  In many countries, people want to become entrepreneurs, but they can access only limited types of opportunities.  Relatively small established elites, often with strong political connections, are able to mobilize the resources needed to build a company that can do well.  Class #2 focused on the details of the current situation in Portugal – the macroeconomy will presumably begin to improve and the basic enforceability of legal contracts seems fine, but we do yet see a breakthrough in companies being created by new entrepreneurs.  Below is a summary of the discussion in class #3.

The World Bank’s Doing Business indicators offer a rich set of data with many insights into the various barriers facing small and medium-sized business – as well as potential entrepreneurs.  These numbers provide a first-pass comparison across countries focused on (a) regulation, and (b) contract enforcement.

Singapore and Hong Kong are the impressive leaders of the pack (see Table 1.1 on page 3 of the executive summary of this report).  Countries can grow with an unfavorable environment, measured in this way, but this is more likely with a great deal of natural resources (e.g., offshore oil in Angola, ranked #172).  For most countries, it would be wise to look for a set of reforms that make it easier to do business.

Experience in Georgia since the mid-2000s is encouraging.  The government used the Doing Business indicators and related work to target their priorities – and made a great deal of progress, for example in terms of reducing the number of licenses required (for all kinds of activities) and creating a legal fast-track for applications (i.e., pay a premium and get your passport faster). Continue reading

Jim Yong Kim For The World Bank

By Simon Johnson, co-author of White House Burning

A decision on choosing the next president of the World Bank is expected this week – perhaps as early as Monday.  The Obama administration nominated Jim Yong Kim, president of Dartmouth College and a noted public health expert.  The reaction to this nomination from development economists and people experienced in the business of lending to poor countries has been overwhelmingly negative.

They are making a big mistake.  Mr. Kim would make an excellent World Bank president. Continue reading

The World Bank And The Stress Test For U.S. Banks

Forecasters at international organizations often find themselves in a delicate position.  On the one hand, they have unparalleled access to hard data and intelligence about what is happening in every corner of the world economy.  On the other hand, their main shareholders – the US and larger European countries – do not want to hear predictions that are inconsistent with their own preferred baseline.

And, in the case of the US today, nothing could be more sensitive: it’s a relatively optimistic baseline, with a quick bounceback next year, that underpins the mild “stress scenario” being used for banks.  So if the World Bank or the IMF said that the world economy is going down and not coming back any time soon, that would raise major issues.

The World Bank clearly wants to speak truth to authority on this occasion, but can’t quite get the job done. Continue reading

Forecasting the Official Forecasts

The IMF is signalling that it will further revise down its global growth forecast.  This is after cutting the forecast sharply in October and again in November.  Their latest published view is growth in 2009 will be 2.2% year-on-year, and 2.4% fourth quarter on fourth quarter.  This view is dated November 6, 2008, so you should think of it as reflecting what the IMF knew at the end of October.

I obviously can’t predict exactly what the next forecast will look like, as there is a lot of economic ground to cover between now and mid-January.  But here are some considerations to keep in mind. Continue reading