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How’s Business? We Have a Benchmark for That

December 9, 2020

By Ville Peltovuori

In the second half of the 20th century, Myanmar’s economy was impaired by mismanagement and isolation. Changes in governance have moved the country towards more openness and growth. Between 2005 and 2017, according to the Myanmar Living Conditions Survey 2017 Poverty Report, Myanmar’s poverty rate fell from 48 to 25 percent, and the World Bank reported that economic growth since the country’s democratic transition in 2011 has exceeded 6 percent of GDP in most years. In 2018, the government launched the Myanmar Sustainable Development Plan, laying out its economic vision for Myanmar. High on the government’s priority list is the promotion of “equitable and inclusive private-sector development,” which it calls “the true and most reliable engine of growth.”

 

In 2018, The Asia Foundation launched the first-ever Myanmar Business Environment Index (MBEI), with support from UK Aid via the DaNa Facility, to provide an objective measure of Myanmar’s progress. At its heart, the MBEI is a survey, primarily among businesspeople, that measures perceptions of the ease of doing business in a number of different dimensions: How long does it take to get a business license? How good is the public infrastructure? How often is it necessary to pay bribes, and how much? The survey results are then analyzed statistically to produce an index for each of the 14 states and regions of Myanmar, creating a public benchmark of business-friendliness that both government agencies and private-sector constituencies can use to push for needed change.

The MBEI measures the ease of doing business in Myanmar for service and manufacturing businesses.

The Asia Foundation was the first to apply this methodology, which it developed for the 2005 Provincial Competitiveness Index (PCI) in Vietnam, the first survey of this kind. The PCI has been repeated every year since and has become an important tool for Vietnam’s provincial governments.

The 2020 MBEI is Myanmar’s second since its inaugural edition. The index provides information on key aspects of the business landscape that can be influenced and improved by policymakers. It is organized into 10 subindices, each of which measures a specific dimension of the business environment such as the cost of entry, government transparency, access to land, and the availability of suitably skilled labor. Each subindex consists of several statistically rigorous indicators—153 indicators in total. Each MBEI indicator tracks a specific issue. For example, the MBEI dataset answers questions ranging from how many businesses have had difficulties with official registration to how frequently they have power outages. Most of the indicators are collected through a nationwide survey of businesses, but the original methodology has evolved to include observational visits to government offices and to use secondary data to complement the perceptions survey.

Each state or region is ranked in ten categories, called subindices. Cumulatively, these subindices comprise 153 different indicators, which represent a combination of perception-survey data and “hard” data such as direct observation in government offices.

How can the indicators be used to improve the business environment? Consider, for example, the common complaint that there is no published schedule of fees for government services. This apparently minor fault in government transparency can increase the cost of doing business in a number of ways, from extra trips to a licensing office, to opportunities for officials to exact “informal charges.” The MBEI indicators provide an objective measure of the pervasiveness of problems like this, creating an inducement for government officials to rectify them—in this case by posting an official schedule of fees.

Improving public awareness of government rules and regulations in this way not only makes things more transparent; it also makes it easier for businesses to comply. It streamlines government procedures, saving everyone’s time and cutting costs for both business and government. And the MBEI, through repeated iterations, can be used to measure these improvements over time. The MBEI has identified a link, for example, between MBEI scores and formal-sector employment in Myanmar. The more a state/region or township’s score improves, the more businesses are able to hire.

Workers in Yangon. MBEI scores have been shown to predict formal-sector employment in Myanmar: hiring increases as MBEI scores improve. (Photo: Chan Myaye Kyaw / The Asia Foundation)

The MBEI has some important differences and advantages compared to other international indices. The World Bank’s Doing Business study, for example, indexes Myanmar against other countries, while the MBEI indexes Myanmar’s states and regions against one another, nationwide. Since the MBEI methodology does not need to extend to other countries, it can be tailor-made for the Myanmar context—for example, by linking questions to specific rules or regulations in Myanmar.

The ten subindices of the core MBEI, showing changes from 2018 to 2020.

The recently released MBEI findings also show that Myanmar has made progress since the first survey. Scores improved on six of the 10 subindices. Among these six, infrastructure showed the biggest improvement. The availability of suitably qualified labor improved as well. Transparency showed some improvement but remains low in all parts of the country. The only subindex to decline was law and order.

As might be expected, Yangon Region, the country’s economic center, came out on top in the overall ranking of states and regions, followed by Sagaing and Bago Regions and Nay Pyi Taw. No state or region showed a decline in its overall index, but some improved considerably more than others.

The 2020 MBEI report also includes indices for over 70 townships. MBEI scores were found to differ more significantly among townships within the same state or region than among the states and regions as a whole. And using the ability of the MBEI to track changes over time, The Asia Foundation has conducted two additional surveys, in 2020, to study the effects of Covid-19 on the private sector. Thus far, the impact on businesses has been severe, leading to significant losses of sales and profitability.

Read the full MBEI 2020 report here.

Read the 2020 Covid-19 surveys here.

Ville Peltovuori is project manager for The Asia Foundation’s Myanmar Business Environment Index. He can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation.

Related locations: Myanmar
Related programs: Good Governance

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