B.E. Assessment

Competing Approaches to Measuring Business Regulation. Reducing Red Tape in Rwanda, Cologne Business Discussion Papers (Kölner Diskussionspapiere zur Wirtschaftswissenschaft) #11/1(2) (Version 2, Update from 20 March 2011), 2011

    The degree of Red Tape existing in a country's business environment is measured by a variety of measures and rankings. This study by Wolfgang Veit compares the World Bank Doing Business Indicators and perception-based surveys in terms of methodology and their ability to adequately measure the supply and demand for reforms. It also examines whether the reforms undertaken by the Rwandan government between 2008 and 2010 addressed the demands of the business sector, and evaluates whether they have been effective.

    Summary of results
    The study finds that for Rwanda, perception based and fact based (DB) approaches do not yield the same results regarding the demand for regulatory reform. While reforms undertaken by the government addressed areas of concern of Rwandan businesses, the supply of reforms appears to be geared towards covering areas that are listed in the DB indicators, and did not fully reflect the priorities of the business community.

    The study therefore concludes that the perception based method more clearly spells out the problems businesses have with existing regulation than the (fact based) method of DB does. This is particularly true when a cost based assessment of the regulator environment is considered.

    Moreover, DB seems to overstate the actual improvement in the regulation of local businesses: Based on interviews in late 2010, of the eight areas defined by the DB indicators, reforms on average were rather not effective in five areas, rather effective in two areas, and neutral in one. This rather neutral perception of the Rwandan business environment quality after two years of intensive reforms contrasts with the strong improvement of Rwanda in the DB international country rankings.