Doing Business: Distance to Frontier

We have been looking at the “Distance to Frontier” data for DFID partner countries as a potential logframe indicator for BERF at Impact level.  The good news is that data is available for 27 of the 28 DFID partner countries, only excluding Somalia.  Data is readily downloadable for the period 2010 – 2016, though some countries do not have a full dataset for years before 2014.

The data measures the distance between the lowest scoring countries which scores zero and the highest scoring country which scores 100.  Taking the average for the 27 DFID partner countries plus Ukraine (another country where BERF is hopefully going to engage), the average distance to frontier score was 50.2 in 2010, increasing to 53.9 in 2014, falling to 50.8 in 2015 and recovering to 51.9  in 2016.  Thus between 2010 the average (for 21 of the coutnries with data) was 1.7 less than it was for 28 countries in 2016.  If we take an average pace of improvement over the 6 years we have a figure of 0.3 percentage points.  What should we regard as a suitable target going forward?  The annual changes have fluctuated in the range of -3.1 in 2015, to plus 1.9 in 2014.  We suggest that an increase of 0.5 per year as the average would be a possible indicator of success.   Thoughts welcome?

Countries with a positive trend in distance to frontier

Overall, 16 of the sample of 28 countries had a higher score in 2016 than for the earliest data point. Looking at those which have improved, the list is topped by Ukraine (+59%), Tajikistan (+32%), DR Congo (+27%), Sierra Leone (+25%), Rwanda (+18%),  Uganda (+16%), and Zimbabwe (+16%).

These include some of the most fragile states in Africa,  and one interpretation of this data is that if you improve from a very low base you can achieve an impressive percentage improvement – for instance DRC improved from 30.15 in 2010 to 38.14 in 2016.  This was the third highest increase in the sample, but was still the second lowest score of any of the 28 countries in 2016 (above only South Sudan).

Countries with a negative trend in distance to frontier 

The countries with a negative trend in doing business are also of interest.  Most of the falls ocurred only in 2015 and 2016, and several of the countreis on the list lack data before 2014.

Yemen’s score fell from 57% in 2014 to 44.5% in 2016, the largest percentage fall in score for any country on the list.

Signficant falls took place in the scores for Bangladesh, Pakistan, and Nigeria in the same period – these countries lack data for the period 2010 – 2013. It is worrying that the business climate is apparently geetting worse in such large and important countries.  In 2016, they also have relatively low scores – Bangladesh is ranked in the bottom 5 of the 28 countreis and Nigeria in the bottom 7.

There has also been a fall since 2014 in Ghana (from 66.6% to 57.7%), and South Africa (70.8% to 64.9%) which are large percentage falls but from a high base.  It would seem plausible that the busienss environment is worsening in these countries, but their scores remain amongst the best in DFID partner countries.  In fact South Africa is ranked number 3 on the list in 2016, behind only Kyrgyz Rebpublic, and Rwanda (ranked first).  Ghana is ranked number 8 in 2016, though lower than Kenya and even Nepal.