How Ghana Business Enabling Environment Programme (BEEP) Is Using the Methodology to Assess Results and Drive Implementation
BERF recently reviewed early lessons from applying of the Compliance Cost Methodology to the regulatory environment in Ghana. The findings of the Evidence and Learning Note are being used by DFID Ghana as it implements the Business Enabling Environment Programme (BEEP), a £10 million four-year programme (2016 -2019) which aims to improve the business environment by supporting Government institutions to implement reforms, build an evidence base, and support public private dialogue to advocate reforms. BEEP is working to reform three regulatory areas – commercial justice and contract enforcement, improving taxpayer services, and reducing the cost of business licensing fees and construction permits.
The Evidence and Learning Note provides an update on the programme’s progress, explains how the Compliance Cost Methodology works, assesses how it compares to other Business Environment reform measurement tools such as the Doing Business Indicators, and gives guidance on how the methodology can be used for implementing Ghana BEEP and other DFID programmes.
- The Government of Ghana is beginning to understand the value of the Compliance Costs Methodology to showcase results and guide policy decisions. The methodology needs to be accepted by partner governments if it is to be used beyond the life of the programme, and one of Ghana BEEP’s programme outputs measures the extent to which the Government adopts approaches used by the programme. The methodology was well received by officials in all reform areas. Qualitatively it is similar to the consultative user committees that officials already use, although these user committees are more used to solicit feedback and air grievances than to identify whether new or amended regulations will likely have a small, medium, or large impact on companies. Officials see quantitative data as useful and in some cases contributing to their own departmental agendas, i.e. as evidence of results, increased organisational efficiency, or justifications for setting fees or other departmental costs. The methodology is also starting to be used in guiding component level work-plans and designing regulatory reforms.
- Compliance Cost Methodology provides a way to compare value for money and results of Business Environment Reform programmes. It provides comparative data across similar Business Environment Reform programmes. Many DFID programmes, guided by the World Bank Doing Business indicators, are working in the same reform areas, including tax, export and customs, and e-portals for permit applications, often using the same indicators and seeking the same results. This methodology provides a means to compare the efficiency, effectiveness, and value for money of these programmes.
What doesn’t work
- The approaches in the Evidence and Learning Note are not appropriate for measuring compliance cost in the informal sector. The methodology is applied to formalised companies which abide by government regulations and are willing to discuss these issues with researchers. Research methods outlined in the report use businesses as the unit of analysis, and derive sampling frames based on lists of eligible businesses. However, up to 85% of Ghanaians work in the informal sector, are not registered as businesses or with the tax authority, and require another sampling approach. Compliance cost methods may need to be administered at the household level for programmes to measure benefits at the individual level. The purpose of the research must be explained well to participants to get a good response.
- Governments and industry groups in partner countries may not yet have the in-house technical capacity to undertake compliance cost methodology themselves. This means donors may need to provide technical assistance to generate initial compliance cost data. This approach is not sustainable unless government and/or industry groups see the value of the data and have both the desire and the know-how to repeat the exercise with future regulations.
- Data gathered may not be fully representative of all businesses effected by regulatory reforms. Sampling of businesses in developing countries is challenging due to a lack of information. Ministries in Ghana had limited ability to produce lists of businesses with which they had interacted. Moreover, some lists were decentralised, held at local offices, and were paper-based, with incomplete and inconsistent information. Piecing these lists together took time and some businesses were not captured. The overall sampling frame is limited and perhaps not representative.
- Businesses may be reluctant to respond to surveys. It can be challenging to get businesses to talk about sensitive reform areas. Businesses in Ghana are not used to this kind of research and viewed contact with suspicion.
- Compliance cost methodology does not directly lead to all relevant outcomes, and may not be appropriate for all Business Environment Reform programmes. The methodology looks at efficiency and cost savings, and is part of a results chain which has evidence linking it to increased growth and GDP. More evidence is needed to link compliance cost savings with outcome and impact level results such as job creation, business satisfaction, and private sector investment including Foreign Direct Investment. It has limited relevance for programmes that take the perspective of the government rather than taxpayers, for instance DFID tax reform programmes that aim to maximise tax revenues collected without direct consideration of the costs involved to businesses.
- Survey instruments are designed for specific regulatory areas and require additional work to adapt to others. The Ghana BEEP programme is flexible in its ability to add other reform areas and vary existing components. Although compliance cost methodology provides a useful means of standardising measurement of results across different reform areas, adding a new reform area during the programme requires re-developing survey instruments specific to that area and collecting baseline data. This may mean that rolling baselines and additional survey work are needed if a BER programme adds more reform areas.