110308 The World Bank Metanomics Transcript

METANOMICS: WORLD BANK DOING BUSINESS 2009

NOVEMBER 3, 2008

ROBERT BLOOMFIELD: Good afternoon. I’m Rob Bloomfield, and welcome to Sage Hall

and the 54th edition of Metanomics. While everyone in my household and my office building

seems obsessed with domestic politics today, we have a distinctly international show. Our

spotlight guest is Dahlia Khalifa, senior economist of the World Bank, who will be telling us

about the challenges of doing business around the world and how countries are alleviating

poverty by making it easier to start and run small- to medium-size businesses. Before that,

we will hear from Dorette Steenkamp, executive director of Uthango Social Investments, a

nongovernmental organization in Cape Town, South Africa.

As always, we start our show by thanking our generous sponsors InterSection Unlimited,

Kelly Services, Learning Tree International, Language Lab and, of course, Cornell

University’s Johnson Graduate School of Management. I’d like to say hello to our viewers at

are our event partners Orange Island, Colonia Nova Amphitheater, Meta Partners

Conference Area, Rockliffe University, New Media Consortium and JenzZa Misfit’s historic

Muse Isle. We are using InterSection Unlimited’s ChatBridge system to transmit local chat to

our website and website chat into our event partners. This great technology brings you in

touch with people around Second Life and on the web, wherever you are. So speak up, and

let everyone know your thoughts.

And while I’m asking you to speak up, I’d actually like to start out right now with a quick

question. Roland Legrand, who is in Belgium, asked the Metanomics group, “Where can I

go in Second Life to keep touch with the results from the U.S. election?” So if you are aware

of live events and crowds that will be gathering to discuss returns as they come in, please

type that into your local chat window, and all the people on whatever event partner island or

watching on the web, everyone will be able to get that information. So if you know the good

places to go tomorrow, let everyone know.

Okay, before we talk with Ms. Khalifa from the World Bank, we take a moment to take a look

at Uthango Social Investments, and hear from its executive director, Dorette Steenkamp,

who hails from Cape Town, South Africa. Dorette, welcome to Metanomics.

DORETTE STEENKAMP: Thank you very much, Robert. It’s wonderful to be here and

especially with the company of World Bank and yourself and the sponsors.

ROBERT BLOOMFIELD: I appreciate you taking the time. And what you’re doing in the

Real World is fascinating. Can you just tell us a little bit about Uthango’s projects in Africa?

What are your goals?

DORETTE STEENKAMP: Well, basically, we are a poverty eradication company, and that

sounds quite big, but we do it at a micro level, where we operate between the macro

economy and the micro economy. As a company, we’re situated at a [missa?] level. And we

really look at communicating with the intelligence in a community. Our goal is to find the

solutions in a community, work with that community intelligence and solve the problems

locally. So we focus on infrastructure development, social security, food security. We have

very strong micro-economic programs and then, of course, digital device to the Virtual

Worlds’ access. But really, as we set our goals, as we get funding and ask communities

define what they want to do, we seek those goals and find the resources to achieve them.

ROBERT BLOOMFIELD: Now you’ve been in Second Life since March of 2007, and you

have a number of activities going on in Second Life, one of which is Virtual Africa. Can you

tell us a little bit about Virtual Africa?

DORETTE STEENKAMP: Yes, well, basically when we came in-world, or when I came

in-world, one of the first things I noticed was that Africa wasn’t well represented here. And

for good reason because, as you would all know, probably bandwidth is very expensive, and

it’s not very easy for nonprofit companies to enter into Virtual Worlds because it’s so [cutting

edge?], and it is a luxury to some extent. So we were really very excited to see in what way

we could assist a community and add some value and develop some content. So we really

decided to focus on building a Virtual Africa immersive environment and to work from there.

And our vision is really to focus on African culture collaboration, to look at how we can use

the platform to fast-track more collaboration between academics and the nonprofit sector

and look at bottom of the pyramid solutions and communicating that across the grid.

ROBERT BLOOMFIELD: I’d like to just point out to our viewers that there’s a video by

LifeFactory Writer, part of a larger piece called Life on Life, but there’s a middle section in

that, that does a great job of conveying the Virtual Africa build so, hopefully, my producer,

Bjorlyn Loon, can paste in some information on where people can see that video.

Let’s see. I have a question already, which I’ll just pass along from Joia Sands, from our

backchat, “Do people in the Uthango communities have access to Second Life, and are they

using it for other than fundraising at this point?”

DORETTE STEENKAMP: That’s a very good question. As far as we can tell, we were, for a

long time, one of the only nonprofit companies that were here. Recently, in the past three or

four months, I’ve noticed that there were about two other companies coming onto Second

Life platform. Our own staff come on from time to time, and they live in some of these

communities, but we find that it’s not at the moment a platform that is used by people living

in the townships. It’s very expensive. There are other technologies, like mobile technology,

that makes much more sense to use for digital divide issues and communication in

townships. Having said that, it is definitely part of our vision into the not-so-far future to look

at how Virtual Worlds can embrace bottom of the pyramid social enterprises and to what

extent we can utilize the Virtual World's platform, to bring benefit at a very, very micro level

in townships.

So the quick answer to that is no. There’s not enough people from townships coming into

Virtual Worlds. It is not even used for fundraising extensively. It is mostly used for advocacy,

even in our own case. We have not been extremely successful in fundraising because it

hasn’t been a focus for us, so we haven’t come in with the idea of raising funds here. We

have come in with the idea of using it as a platform for advocacy, where we could bring in

some of the solutions that we’ve discovered in Africa as best practices and that’s been

recognized internationally. And we wanted to share that on an international platform. So I

think that would be possibly the best use at this stage for companies coming in-world. It’s to

bring what they have done in Africa, to bring that onto this platform when they can afford it.

ROBERT BLOOMFIELD: Okay. So I’d like to ask you about a couple specific activities

Uthango has been involved with. And I guess actually, first, let me just back up and give

people some sense of the scope and magnitude of the economic problems in the

communities you’re addressing. I was looking through information on your site. You’re

working with communities with 50, 60, maybe 70 percent unemployment and very little in the

way of resources for any sort of education. So you have your work totally cut out for you.

Now as one example of the way you work with communities and organizations, you helped

to build a Jungle Jim, a play structure for an underserved school. Can you tell us a little bit

about how that came to be and how you work with the community and the organization to

make that happen?

DORETTE STEENKAMP: Yes, just in a nutshell really, just a quick correction. We didn’t

build the Jungle Jim. It was a locally Rotary Club that actually donated the Jungle Jim, but

we came across it in our search, to look at resources at local schools. It was really the

Second Life project that led us there because we started a few months ago with a bicycle

project in-world. And the idea was to take the entire concept of social enterprise that is used

extensively in the international community of nonprofit companies and to build that into our

methodology here where we actually do make a profit and the profit gets reapplied within

the context of the nonprofit’s work. We started with the African bicycle project, and that led

us to seek the beneficiaries for this project. To date, we have close to 460 bicycles that we

sold virtually, and we have about nine bicycles that are Real Life bicycles so we also wanted

to investigate the possibility of bringing in a Real Life link for actual benefit on the ground

into Second Life and see how those two could connect with each other. Which led us to the

Education Department, and the Education Department really in South Africa, in turn led us

to a very poor school outside of Cape Town-Atlantis area. Hundred and seventy-four

[learner’s fee?], and all of the family members are under the poverty line about 600 Rand, at

least a hundred dollars a month income. And the children have a dire need to go through a

good curriculum, which, in this case, was focused on recreation and sports. And we found

the Jungle Jim there really, and the grass wasn’t cut so the children don’t use it because

there’s lots of snakes in the area. Although it was donated by a Rotary Club, the

maintenance of the Jungle Jim wasn’t kept up. So it’s one of the typical examples, I believe,

where it’s often small resources that will make all the difference and when you also focus on

curriculum and not only on the infrastructure. So you have to look cohesively at how you

build a project, that it’s not only giving the asset but is actually building a cohesive project

and program around the asset.

ROBERT BLOOMFIELD: I would like to point out that our viewers can see one of the virtual

bicycles right behind you here in Sage Hall, on Metanomics, and there’s a vendor. So can

you just go into a little more detail on what happens when people buy a bicycle in Second

Life? Right? They click on the vendor, they can buy a bicycle. How does that pass through

to having a Real World effect?

DORETTE STEENKAMP: Well, it works in two ways. First of all, let me just quickly do a

plug for RDV Animations who animated the bicycle for us and also for Shukran Fahid who

built this, and we commissioned the bicycle really because we wanted a true African bicycle.

Bicycles are used extensively in Africa and increases of productivity of communities, to a

large extent as well. We had different experiences with the bicycle, in terms of selling it and

it adding up to a Real Life bicycle. And we ended up saying, “Let us rather give people the

opportunity who want to buy a Real Life bicycle to actually buy one directly from the vendor.

So there is a bicycle available in the vendor. You will see we have calculated it to about 90

U.S. dollars to buy it here from a local reputable shop that can also have a guaranty on it,

and it will fit into the safety roads program of this particular school.

I can see a question coming up here in the chat, “What percentage of the proceeds of the

bicycle sales goes to Uthango?” In this particular project, there’s no percentage that goes to

Uthango. The entire percentage is a hundred percent of the bicycle sales go directly

towards the bike, and we’ve had a request recently that the vendor--if people set up a

vendor, we should build in five percent for the vendor owner to also stimulate the economy

in Second Life. And we’ve considered that, and will most probably do that as well. So I

believe that some of these vendors are already set up like that. So that would be 95 percent

from today onwards that goes directly towards the bicycle purchase.

If you buy a virtual bicycle, some of the funds go towards our tier and our operations

in-world, which is not a substantial amount, but we use it for [CROSSTALK]

ROBERT BLOOMFIELD: Every little bit helps, huh?

DORETTE STEENKAMP: Definitely. Especially with new increases.

ROBERT BLOOMFIELD: Yes. That will be a topic for another show perhaps.

DORETTE STEENKAMP: Absolutely.

ROBERT BLOOMFIELD: We have a question from Tara5 Oh, Tish Shute in Real Life,

about whether Uthango is discussing with Linden Lab any of Philip Rosedale’s ideas about

using Second Life at the base of the pyramid. I actually had a chance to interview

Philip Rosedale in September, and I just want to read a short quote when he was talking

about his thoughts on using Second Life to alleviate poverty in developing nations. So he

says, “I’m just struck by the vast inequity between that imagined future and the fact that

today there’s so many people around the world who have the ability to deliver intellectual

production, but do not have the access to do it or are restricted by their local community or

conditions in such a way that they can’t participate in the information economy.” This is

Philip continuing, “And I think that Second Life is a really compelling way to bridge that gap

because all you’ve got to do, what we’ve already seen is the value of Second Life to an

individual, who’s educating themselves, getting a job, the value is thousands and thousands

of dollars, which greatly is in excess of the cost of a computer. So what that means is, if you

can come up with the right bootstrap model, you should be able to get computers to people

in developing environments where they didn’t have access to them, and there should be a

good profitable model where they’re easily able to earn back and provide for themselves.”

So do you see promise in that approach, and is that something you expect to be pursuing

actively?

DORETTE STEENKAMP: Thank you very much for the question from your site that

Tara5 Oh, or Tish Shute, and also for the work that you do in this area of digital divide for

Ugo Trade. Yes, yes and yes. We are definitely pursuing it. It is like a dream come true for

us for Philip to be saying things. We have met with Philip even before we opened Virtual

Africa officially, just before the Second Life Community Conference or convention 2007. We

met with him the first time and actually walked around. I, in my ignorance, thought that it

was the first time that I was seeing a virtual hippo, which was, of course, not the case. So

we did show Virtual Africa to him. At the time we were very honest with him and saying that

the broadband is a big issue, that we believe that there’s a time for everything and that it will

probably take time for Virtual Worlds to be ripe for using the platform to benefit bottom of the

pyramidal base of the pyramid as it’s known. And we believe the time is right now.

Of course, for us, strategically, we’re putting together a very firm proposal to Linden Lab and

are also open to other platforms looking at similar ventures. Because we do believe that

Africans have enormous contributions to the world intellectually, in terms of poverty and in

terms of the way that they run social networks because social networks is ingrained in the

way that Africans do their business in the townships that we experienced it in and even in

the way that politics are being run here. So it’s not so foreign. It’s the technology that’s often

lacking. And if we have courageous people like the Philip Rosedales out there that will come

forward and say, “Here’s a platform. Let’s use it. Let’s do something big,” then I do believe

that we can make something credible happen.

We have about five different scenarios that we would like to pitch also at your Linden Lab. I

don’t want to use this platform to launch those kind of self-interest talks, not really.

[CROSSTALK]

ROBERT BLOOMFIELD: Actually, we’d love to hear it, but I think we’ll wait ‘til you pull that

together and when you’re ready to go public on that, well, we’d love to have you back.

DORETTE STEENKAMP: Because I say too quickly. This is true.

ROBERT BLOOMFIELD: I’d like to end by just trying to help fit Uthango into the larger

picture of organizations that are addressing poverty in developing nations in particular. So

we have NGOs, nongovernmental organizations like yours. We have the communities, small

micro entrepreneurs, small businesses, larger corporations and governments. And I’m

wondering if you can talk a little bit about how you see all those organizations fitting

together.

DORETTE STEENKAMP: Look. I think the one thing that the nonprofit community got right

here, under the guidance of TechSoup, and I really want to congratulate them for that, is

that they have managed and with angel investors coming forward they have managed to

pull together the nonprofit community. We have really been very, very focused on our own

agenda, to be honest, in terms of getting this access issue for Africans sorted, so we look

forward to participate more in the activities of the Nonprofit Commons as well. But that’s

really the missing gap is that we’re sitting with local NGOs that operate at a micro level,

local community-based organizations that are busy with civil engagement, very close to

communities in Africa. And they really have the voices with them of people that sit with

solutions, but there’s a disconnect between them and government often or a disconnect

between themselves and corporations or development agencies. And the World Bank is

getting a lot of that right by working with local agencies and working with government. But

there’s a level below that even where I think the NGO that is often overlooked and they have

played a huge part in the politics of Africa, of engaging with civil society, of driving human

rights issues, it is after all the 60th anniversary, and I think this would be a wonderful

initiative around that. But the NGO community and the non-government community in Africa

has enormous contribution, and we would love to play a part in bringing that community

forward. And that’s what we do in Africa as well.

We connect the bigger business macro with the smaller business, look at supply chain

creation, develop models that are micro enterprise business ventures, micro tech best

practice in terms of business incubation that we know is a concept internationally and also

build micro enterprise business incubation models, which is really what we’ve been awarded

for from MIT and the Harvard University side. And also Rotary International. So I think there

are best practice out there, but we need the platform to start sharing that, and that makes

me very, very excited.

ROBERT BLOOMFIELD: Well, thank you so much for coming on to the show. Our guest in

On The Spot has been Dorette Steenkamp, Alanagh Recreat in Second Life, speaking to us

from Cape Town, South Africa, on behalf of Uthango Social Investments. So, Dorette,

thanks so much for joining us.

DORETTE STEENKAMP: And thank you very much for having me here. It was really an

honor. I’ve been an avid follower of Metanomics from the first time that I came in-world. It

was a discovery for me that something like this could be possible. And Metanomics played a

huge role in my professional virtual career as well. So thank you very much for having me.

ROBERT BLOOMFIELD: Well, that’s heartening to hear. Please tell all your friends.

DORETTE STEENKAMP: Will do.

ROBERT BLOOMFIELD: Okay. Now let's meet our guest for the main event. Dahlia Khalifa

is a World Bank senior economist, who joined the Doing Business Team of the World Bank

in June 2007, after years of experience in economic and policy analysis, investment banking

and strategic communications. Ms. Khalifa has established and managed financial services

companies offering services in corporate finance, brokerage, private equity investing,

management consulting and other advisory services, with a focus on Africa and the Middle

East. She’s worked extensively with nonprofit organizations, founded Egypt’s International

Economic Forum, and served as vice president of the American Chamber of Commerce in

Egypt. She has a Bachelors and Masters degree in economics and a Masters in

international law. She’s currently finishing up a doctoral degree in international relations at

Georgetown University in Washington, D.C. So, Dahlia, welcome to Metanomics.

DAHLIA KHALIFA: Hi there. I thank you for having me here.

ROBERT BLOOMFIELD: Well, I’m really interested in hearing about the World Bank’s

Doing Business Report, but before we get there, your background is fascinating, and you

must be one of a very small number of female investment bankers who have worked in the

Mideast. Can you tell us a little about that experience?

DAHLIA KHALIFA: Well, it was a very enriching experience, but, for me, it was a very

natural one. I started my businesses in the Middle East at a time when financial markets and

equity markets in general were taking off in the region. And you’d be surprised to know that

there are quite a number of women in that field actually in the region. But I guess there’s a

much smaller number who actually started their own businesses. I can just say that it was

an exciting time of my life, and I learned quite a lot.

ROBERT BLOOMFIELD: Okay. Fantastic. Let’s see. This is the second Doing Business

Report that has been presented in Second Life. You did one last year, and then you

presented this year’s just a few days ago, late last week. So as I understand it, this is really

just a supplement to your usual task of presenting the report to Real Life audiences. Is that

right?

DAHLIA KHALIFA: Indeed. This is our sixth annual report, and our reports are usually

followed by three to four months of heavy travel all around the world, what we call our road

show, taking our report to countries, explaining what it is that we do, why we do it, what are

results of the reports. And last year was our first foray into Second Life, and I must say it’s

been very rewarding. In fact, usually during our launch events, we have audiences

anywhere between 50 to 150 people. We far exceeded that in Second Life in a single event,

so it’s been a good experience. It’s a new area to be in, and we’re finding that we want to

stay here.

ROBERT BLOOMFIELD: What’s your target audience when you do the road show? Who

are the people that you are trying to reach?

DAHLIA KHALIFA: Well, when we go out traveling and elsewhere, we’re looking to speak to

people who care about what it is that we’re talking about, which is basically regulatory

reform and the impact that the regulatory environment has on small- to medium-size

business growth and developments. So we’re looking to speak to government officials, to

academia, to the media, to the private sector, really anyone who cares about sparking that

engine of growth, which is a small- to medium-size business in any economy.

ROBERT BLOOMFIELD: Okay. And that, I guess, brings us to the question of: What is the

goal of the Doing Business group more generally? And, in particular, I guess a question I

have is why are you focusing on the startups and operations of small- to medium-size

businesses?

DAHLIA KHALIFA: The basic truth to economic growth in the economies of the world is,

they are dependent in large part on small- to medium-size businesses, even in more

developed economies, such as the United States or in Europe. The small- to medium-size

entrepreneur is the lion’s share of the economy. It’s where most jobs are created. It’s where

most growth and expansion resides. And so it makes sense then if the World Bank, whose

mission is the alleviation of poverty and economic growth, to focus on that element of the

economy that actually is that engine of growth. And in order for that engine of growth to find

its way and to achieve its objective, there must be an environment in which it operates,

which is conducive. And that, of course, means the regulatory environment.

Business is going to happen in developing economies. They can either happen in the

informal sector or in the formal sector. And what we mean by the informal sector, basically,

is that it’s that part of the economy that’s outside of the law. It is not regulated. Laborers in

those markets don’t have the protection of labor law. Entrepreneurs don’t have access to

traditional forms of finance, etcetera. So if you want more of that part of the economy to

come into the formal sector and if you want more and more entrepreneurs in general to be

encouraged to start businesses, then it’s important to have the conducive environment for

them to do so.

So we focus on what are the regulations that an entrepreneur is going to come up against in

order to start and operate a business. And that means we have to go to the very beginning:

How conducive is the regulatory environment to starting a business? To accessing credits?

To registering property? And all the other areas that we look at in the Doing Business

Report, which I’m sure we’ll touch upon.

ROBERT BLOOMFIELD: Yeah. And, in fact, I know we have a graphic of the ten indicators

that you use that SLCN will probably pop up on the screen right now. But, before talking

about those specifically, I would like to follow up a bit on this notion of the informal economy.

One of the sort of ongoing debates in economic policy is on regulation. On the one hand, we

have the Libertarians who are saying regulation is bad; it’s a drag on business and makes it

difficult for entrepreneurs. But it sounds like your goal is really to bring these underground

informal businesses into a more formal structure where they are regulated and where they

are part of the formal legal economy. You see regulation then as being helpful, it sounds

like.

DAHLIA KHALIFA: Yeah. Most definitely. In our view, it’s not a question of more regulation

versus less regulation. It’s more important to have smart regulation. It’s to have regulation

that finds that balance between securing the operation of certain economic activity and, at

the same time, not being such a high barrier to entry with such high transaction costs that

people prefer to operate in the informal sector or, even worse, not operate at all. And that’s

really what we mean by smart regulation.

So, for example, how smart is it to have to present ten pieces of paper to ten different

windows in ten different government offices in order to prove who you are before you could

start your business. If the object behind the regulation is to secure the ID of the individual or

to make sure that this person actually does own this piece of property that they’re trying to

have registered, then there must be a smarter way of fulfilling that regulatory requirement

but by lowering the transaction costs to the entrepreneur. Perhaps that means creating one

window where all the documents are presented and let the government offices then,

amongst themselves, sort things out so that the entrepreneur only has to face one hurdle

rather than ten. It’s that kind of smart solutions that we’re looking at.

How, to what degree, can you find e-governments to be a smarter solution? To what degree

are there enough protections in your regulatory environment so that minority shareholders’

rights are protected? Those are the kinds of questions that we look at. So we’re not really

looking at the question of more versus less, but we’re looking at a smart versus not so

smart.

ROBERT BLOOMFIELD: Okay. So you have this list of the ten indicators. You mentioned a

few of them, like starting a business, getting construction permits, which, frankly, in the state

of New York and the county of Tompkins where I am, I know is a real nightmare. Employing

workers, registering property, getting credit, protecting investors, paying taxes, trading

across borders, enforcing contracts and closing a business.

What I’d like to do just for a minute is to give people a better sense of how you go about

creating this report. What I’d like to do is talk in just a little more detail about one of those

indicators: enforcing contracts. So first of all, as I understand it you create a standardized

case that refers to the event. One of the things that seems so challenging to me is how

you’re going to compare two completely different countries on a dimension like how good

are they at enforcing contracts. So again, as I understand it, the first thing that you do is that

you break this down into procedures, time and cost and then you take this standardized

case and you try to assess how difficult it is for the small business person to go through

those. So can you just sort of sketch out for us how this is going to work in your analysis?

DAHLIA KHALIFA: Sure. Basically, as you briefly mentioned, what we do--and this is really

new to the whole idea of measuring regulatory environments--is that we've created a

systematic scientific way of breaking down time and motion into a measurable metric, if you

will. A metric that allows you to say, “Okay, in order to start a business, I need to go through

X number of procedures across Y number of days at a cost of Z.” And this had never been

done before the Doing Business project tackled it. And, in order to do that, we need not only

to break this activity down into something that’s measurable, but we also need to make sure

that it’s comparable between countries so that we can actually compare how it is in

country A versus country B. And, therefore, in order to do so, we create a standardized case

study.

We ask, for example, in starting a business, if you assume--and this is the assum--every

one of the ten indicators has an assumption--if you assume a limited liability company, and

you have five domestic partners who want to form a limited liability company. These five

domestic partners have done their own analysis and they’re assuming that the capital that

they need in order to start this company is equal to 20 times the gross national income per

capita for that country. That this company is going to be operating at an annual revenue

level equal to a hundred times gross national income per capita. Those are the set of

assumptions that we ask. And then what we have are a set of local partners in each country.

In fact, we have almost seven thousand partners that we send this assumption or what we

call the survey to, and we ask them: What are the underlying laws and regulations? Cite the

laws to us that control this kind of activity. Tell us what are the official government’s fee

schedules and we're only interested in official fee schedules that are associated with this

activity. And then we ask, “Okay, what, in your opinion, is the length of time that is required

to achieve this?”

And we have this for each of the ten indicators, and that’s how we make sure that we’re able

to compare apples to apples, and we have something that is comparable not only across

countries but across time.

ROBERT BLOOMFIELD: I mean this isn’t exactly a survey because--I mean you’re asking

people to answer questions, but it’s not all, “How do you feel about your regulations?” It’s

really, “Go into the legal code and tell me what the law is or what the regulations are.”

DAHLIA KHALIFA: Yes.

ROBERT BLOOMFIELD: It’s really not until you get to the end where you’re having people

estimate time and so on that there’s some judgment. Is that right?

DAHLIA KHALIFA: That’s very true. This is not a perception-based survey.

Perception-based surveys, of course, are valuable in other contexts. But, in this context,

what we want is as much as possible a fast-based survey. We want to get to the laws. We

want to get to the official fee schedules. And not only do we want to get to them, but we

want to make them accessible to others, so we’ve created our own law database available

on our website for people to actually go and see the laws that we’re coding, these indicators

and this data against. And then, as you said, the only elements of opinion--and it’s a very

calculated element--is when we ask our local partners to estimate the time. And the way we

make sure that we’re even getting at that correctly is, we have more than one respondent.

And we even go and do our own data checks on the ground because we travel to countries.

We have a team of 45 professionals. We travel around the world. In a two-year period, we

cover all the countries in our survey, so each year we go, on average, to about 80 countries.

So this is very much a hands-on database, very much a fact-based database.

ROBERT BLOOMFIELD: I’ve got a couple questions on method for you, and one goes

back to the issue of how difficult it can be to get comparability across countries that are so

different. When you create a standardized case, like for example the size of the contract

dispute is a certain multiple of per capita income, isn’t there a concern that, for very poor

countries, then you’re really dealing with--I mean even though it’s the same size relative to

per capita income, it’s still, in absolute terms, a very small amount, which may just be more

difficult to deal with or easier to deal with systematically than an amount that’s, in absolute

terms, larger. So I’m just wondering are you sure that your standardized cases really do

provide a level playing field for all the very different countries you’re looking at? And how do

you assess that?

DAHLIA KHALIFA: That’s a good question. In the case of enforcing contracts, what we’re

looking at, for example, is the claim that equals 200 percent of the country’s income per

capita. And in enforcing contracts in particular, what we’re looking at is a commercial

dispute between two parties, a seller and a buyer, where there’s a dispute after the seller

has sold goods, the buyer has taken delivery of the goods, but refuses to pay for the goods

for whatever reason. What then is the recourse that the seller has? How is this issue then

satisfied?

And, going to your question, how do we know that 200 percent is really anything that we can

stand on? Well, first of all, all of our indicators have an academic paper underpinning them.

So this has gone through rigorous academic review. You can go to the academic study on

which underpins each of our ten indicators from our website so you can see what is the

rationale exactly for why it is that we feel this is an adequate measure. And it has gone

through some rigorous testing; why is it that we feel that 200 is better than 300 is better than

100, for example.

And we’ve also taken into account that, yes, as you’ve already noted, we’re basing this so

that it’s relative comparison based on the income level of a country so that a case 200 times

income per capita in the United States is going to be very much different than the case in

Bangladesh for example. And we feel confident that the level we have chosen is relevant.

Now having said that, of course, doing business as an exercise has only been operating for

six years. It’s still relatively, as far as academics go, young project. And, every year,

invariably, we’re perfecting our methodology more and more. In terms of enforcing

contracts, we went through a methodology change just a couple years ago. We’re pretty

secure that this is a strong measure of what it is that we’re trying to look at.

ROBERT BLOOMFIELD: Okay. Great. I’d like to move on a little bit, and actually I want to

warn SLCN this is a little out of order. We have this really fascinating graphic from the

Report on Credit. So Texas, this is graphic 16 called Credit, and what it shows is that higher

economic recovery rates are closely tied to the ability of businesses to get access to credit.

And I’m wondering if you can just talk about the type of analysis, Dahlia, that was underlying

this and what you see as being the implications.

DAHLIA KHALIFA: Okay. You have me at a disadvantage. I’m trying to the exact slide that

you’re talking about.

ROBERT BLOOMFIELD: Well, I can just tell you that the one I’m looking at ranks

economies by quintile of recovery rate--

DAHLIA KHALIFA: Got it. Yeah, yeah. I’ve got it.

ROBERT BLOOMFIELD: --and then looks at the extent of credit by GDP and also the

percentage of firms perceiving access to credit as an obstacle.

DAHLIA KHALIFA: Right. Yeah, I see that. What we’re saying here is that there’s a

correlation. There’s no causality here because we haven’t tested for that, but there is a

correlation between the amount of available credit and how that economy ranks. So where

economies, on average, rank the lowest, there tends to be lower levels of available credit.

And this also correlates very strongly with perceptions, on the other hand, of entrepreneurs

who perceive access to credit as an obstacle. Where there are higher rankings, there tend

to be lower perceptions of credit as an obstacle.

And I should just note here that the Doing Business Team has a unit also within our overall

directorship here that’s called the Enterprise Surveys. I would also invite you to check that

website out. It’s called enterprisesurveys.org, and what that is, in fact, is a perception-based

survey. What they do is, they go out and ask firms about their perceptions of the business

environment on many dimensions, and one of them is credits. And what we’ve done here is,

we’ve correlated those perceptions of firms to what we are actually seeing in terms of

correlations between rankings and access to credits.

ROBERT BLOOMFIELD: Okay. Actually we have a question from IntLibber BnT on credit.

He is asking whether you think Islamic restrictions on banking are a factor limiting

development in the Muslim world.

DAHLIA KHALIFA: That’s an interesting question. It’s not something that we look at, at

doing business. I’m not sure that I actually have enough facts to respond to it. I did see a

number of very interesting reports lately in media, which showed that, especially in light of

the financial crisis, Islamic banking because it is a risk-sharing kind of banking that this may

be an interesting model for countries to look at going forward, in light of the recent financial

crisis. But, in terms of doing business, I don’t have any direct facts to give you on that.

ROBERT BLOOMFIELD: I guess just thinking about the way your report is structured to the

extent that Islamic law affects the number of steps you need to go through to get credit and

your ability to get it, the end result would show in the ranking.

Let’s actually talk about the rankings. We have this great map that ranks the 181 economies

that you look at, from number one to 181, and this is considering all ten of the indicators that

you cover. I also want to mention that you have this great link on your website, Business

Planet, where you can actually work with the map. We can show a single graphic, but you

can actually work with this map dynamically, so my producer, Bjorlyn, will pop that link into

the chat so that people can check that out.

We have this map, and just sort of at a glance what I’m seeing is that Northern Europe,

Eastern Europe look pretty good. Africa does not look quite so good. Before we talk about

specific countries and where they stand, I want to clarify that doing business--your goal is

primarily to assess, right, not to influence what they do? But there’s another group within the

World Bank that actually works with governments to help them improve their ranking. Do I

have that right?

DAHLIA KHALIFA: Yes, indeed. We have two units. The unit that I work with is doing

business projects where we do the measuring and the data collection. And there’s another

unit called the Doing Business Reform Advisory Unit, and it’s job is to respond to

government requests to advise on what kind of regulatory reform would be useful and would

have a positive impact not only on doing business but on entrepreneurs in general.

ROBERT BLOOMFIELD: We have a comment in the chat on local corruption, from

Bevan Whitfield, who’s talking about the severity of the problem with local corruption. So I’m

wondering if you can talk about how you capture corruption in your measures of the

indicators in the rankings?

DAHLIA KHALIFA: We don’t measure corruption directly, but we do measure corruption in

an indirect manner. It’s implied in actually measuring steps and time. When we say that

smart regulation is important, that’s partially what we’re attempting to capture in that

statement. So for example, if you need to meet several people in order to accomplish

something, to run your business, that’s several opportunities for a bribe basically. However,

if you limit the number of interfaces between an entrepreneur and the bureaucracy, if it’s

limited to a single window, for example, or, even better, if it’s an online service, then you’re

limiting the opportunities for corruption. And so that’s what we mean by some of the

transaction costs that are built into a very complicated regulatory environment. It’s not just

the time that people have to go through in order to accomplish something, but it’s also this

kind of a hassle and transaction costs that they often face. Which can be an impediment.

We’ve done a lot of research, for example, in Africa, to show that women often are not

interested in going through the processes of starting a formal business because of the fact

they’re harassed and hit up for bribes. They would rather not come up with that, so either

they operate in the informal market, where they have less access to finance and less ability

to grow, or they don’t even consider going into private business.

ROBERT BLOOMFIELD: Okay. Great! Let’s start talking about specific countries and

specific reforms. Let’s start with reforms rather than the countries. You’ve been tracking this

now for a number of years, and one of the figures you have is basically on which regions of

the world have the most countries with at least one positive reform. I’m wondering if you can

just talk a little bit about the different regions and the reforms that they are making.

DAHLIA KHALIFA: Yes. In fact, since we started doing this report, Eastern Europe and

Central Asia has been the fastest reforming region in the world. This year 93 percent of the

countries from that region actually implemented at least one reform, and they’re continuing

this fast pace. Many of our top ten reformers, in fact, four of them are from that region, and

all four of them happen to be on the top ten reformers list for the first time. In addition to

Eastern Europe and Central Asia, two other regions are also keeping a very steady and

quick pace of reform and that’s the Middle East and North Africa. And, surprisingly, this year

East Asia and Pacific, which picked up from last year, had dropped off a little bit, but it had

been a faster reformer in previous years, and this year it picked up again.

And the most pleasant surprise has been Sub-Saharan Africa, in which 61 percent of the

countries of that region have implemented positive reforms this year. In fact, this is the

fastest reforming year for that region. Other regions, Latin America and the Caribbean and

the OECD economies in South Asia continue to reform at a rate of 50 percent of their

economies. So that’s an overview in general of which regions have been reforming the

quickest.

ROBERT BLOOMFIELD: And just a few moments ago, we had a list of the particular

reforms that are most popular and, by a pretty significant amount, starting a business is the

area of the most popular reform. Why is that?

DAHLIA KHALIFA: Well, it’s the low hanging fruit, and it’s what makes sense. If you’re

talking about making things easier for entrepreneurs to do business, then where is it not

easier to start than starting a business. And that often starting a business is a very

procedural and a very bureaucratic process. Usually there is a company law or one form of

a law that dictates what needs to be done in general terms, but the rest tends to be

administrative or ministerial directives, and, therefore, it’s easiest to reform. It’s easier to

say, “Let’s put ten desks behind the window,” or, “Let’s reduce the number of stamps,” or,

“Let’s put some service online.” And it has the highest impact. We’ve seen in our analysis

that countries that make it easier for entrepreneurs to start a business tend to, in fact, have

a higher number of businesses per capita. And associated with that, of course, is greater job

creation.

ROBERT BLOOMFIELD: Okay. Oh, go ahead.

DAHLIA KHALIFA: No. I was just going to say starting a business is the predominant area

of reform this year and in previous years, not only on a global level, but also on a regional

level. And this is followed by two other areas of mostly paying taxes and trading across

borders, which tend to be popular areas of reform as well.

ROBERT BLOOMFIELD: Okay. You referred to simplifying tasks for businesses by putting

processes online, not surprisingly, since this is a Virtual World show. We have an audience

that’s very interested in the use of online technologies in business. We have discussed

before on Metanomics some advances, like for example, the state of Vermont allowing firms

to incorporate entirely virtually. They never have to file anything in hard copy. It can be all

online and PDFs, and they don’t need to have brick and mortar anywhere. I know I’m

probably pulling you a little outside the bounds of the report itself, but I’m wondering if you

could just speak to any thoughts you have on the role of virtual business, virtual commerce

and whether you see that playing an important role in making business easier to do.

DAHLIA KHALIFA: By all means. It plays a very important role. It’s the next level of

business simplification, rationalization and getting regulation to do what it needs to do. And,

of course, countries are limited by their capacities and their penetration levels and their

capacity to roll out more e-governments and so on. To the extent that this is a fast-changing

limitation in many countries, we definitely see that there is a future and that this is where

most processes are going. So we are already seeing it in many countries, in the areas of

paying taxes, for example. More and more countries are allowing their companies--not only

allowing, but requiring their companies to file online, keeping in mind that there are many

forms of taxations. There are many forms of mandatory payments that we’re looking at in

this indicator. For example, Social Security payments and allowing companies to put that

online. And, to the degree that this is happening more and more, of course, it’s making the

life of entrepreneurs easier.

Being able to start a business just by checking out trademarks, for example, online, rather

than having to go to a city hall and going through piles and piles of books or waiting for a

government official to go through these books for you, to see if there’s somebody else with

the same name that you want to use, for example. So there’s many, many uses obviously

for online and internet-based services. And we’re building this into our methodology. And

we’re looking for it when we do our data collection. And we’re seeing that it’s a general

global trend.

ROBERT BLOOMFIELD: Okay. Well, we are basically out of time, Dahlia, but before we

end, I have to ask. You are getting your Ph.D. from Georgetown. Can you tell us about your

dissertation topic?

DAHLIA KHALIFA: I can, but it’s going to bore you into tears because it has nothing to do

with doing business. I tend to have very eclectic interests and background, so it has nothing

to do with being an investment banker or doing business. What I’m looking at, at

Georgetown, is--well, maybe it’s slightly related. I’m looking at what are the conditions under

which a country can be formed, a new state can be formed. What are the international legal

requirements? What are the political requirements? What are the economic requirements,

etcetera, in order for a successful state formation? So that’s it. Very boring.

ROBERT BLOOMFIELD: Well, actually, I doubt that is boring to people in the Balkans.

DAHLIA KHALIFA: Yes, indeed!

ROBERT BLOOMFIELD: So actually it sounds like a very fascinating topic, and I wish you

the best of luck in that. Thank you so much for joining us and telling us about the World

Bank’s Doing Business Report. Maybe we can have you on in a year, and you can tell us

who the new number one reformer is.

DAHLIA KHALIFA: Indeed. Thank you very much for your interest in Doing Business, and

next year, I look forward to you telling me that you’re interested in having us with you again.

Thank you again. Thank you, everybody, for joining.

ROBERT BLOOMFIELD: Okay. Dahlia Khalifa, senior economist of the World Bank. So

thank you. This has been the second Metanomics event this fall that has focused on Real

World business and policy issues. A couple weeks ago, we had Cornell professor

Maureen O’Hara discuss with us the Real World credit crisis.

In today’s Connecting The Dots, I’d really just like to talk about two things, and the first is

really just a request from you. I would like to ask for some feedback from the Metanomics

audience what do you think of having Metanomics events focus on Real World issues, as

our main event, rather than Virtual World issues? Is that something that you would like us to

do more often? Less often? Well, just take a moment, right now if you would just type your

thoughts into the local chat channel so that we can pick that up by ChatBridge. Or, if you

would prefer, send me a private instant message. This is just sort of a spontaneous poll, but

just give us your thoughts right now. As we plan the future of Metanomics, this will be very

useful for us.

Second, I would like to just briefly tie the discussion we had with Dahlia about the indicators

of the ease of doing business into Second Life. How easy is it to do business in Second

Life? Well, when I run through these indicators and perhaps SLCN can pop these up on the

screen, let’s think about the regulatory or Linden Lab imposed requirements on things like

starting a business. First, you have to get into Second Life, don’t you? And having brought a

number of people into Second Life just recently, that is not an easy thing to do. Construction

permits, well, we don’t really have anything like that. Employing and firing workers: This is a

case where I was very interested to hear what Dahlia had to say about the helpful role of

regulations because there really is absolutely no regulation right now on hiring and firing

workers, and that also creates problems because it is very difficult to identify workers who

are dedicated, capable, have certification for their ability to take on certain tasks. Getting

credit, protecting investors: Actually I would just suggest that viewers go back to panel

discussions that we’ve had on Metanomics about the financial sector, about the stock

markets, the banks, our interview with IntLibber Brautigan, very, very lightly regulated, if at

all. And probably the markets, in my assessment, are not doing a great job in making it easy

for people to get credit or in protecting investors. So as you walk through it, I think I’m

sympathetic to Dahlia’s view that smart regulation is a lot better than no regulation, and I will

leave it at that.

So thank you very much for watching our show today and participating in the backchat. Next

week we will be taking a close look at Rezzable, a company that is doing some very

interesting and active business in Second Life, providing entertainment for a very large

group of Second Life residents. We will be hearing from Jon Himoff, the founder and CEO of

Rezzable, and he will also have some thoughts on recent pricing changes on Linden Lab

OpenSim land. So thank you again for joining us. See you next week. This is

Rob Bloomfield, from Sage Hall in Second Life and Real Life, saying bye bye.

[END OF AUDIO]

Document: cor1039.doc Transcribed by: http://www.hiredhand.com

Second Life Avatar: Transcriptionist Writer