Note: In September 2021, The World Bank decided to discontinue the Doing Business report, stating that they are working on a new approach to assessing the business and investment climate. We look forward to seeing their new assessment.
If the yardstick of effectiveness of any scorecard or ranking were tangible efforts, by those graded, to “improve bad ratings or maintain good ones,” few come even remotely close to the World Bank’s annual Doing Business survey. A comparison of country regulations—on starting, running, and folding an enterprise—designed to motivate country governments to improve their business environment and remain attractive to businesses and investors, Doing Business has inspired more than 3,500 reforms across 190 economies to date; in 2017-18 alone, 128 economies undertook a record 314 reforms.
While it remains by far one of the most influential measures of business regulations and enforcement, Doing Business says little about the ease or difficulty of doing digital business. We aim to close this gap with this first analysis of the Ease of Doing Digital Business (EDDB) in 42 countries around the world. We find that digital business environments require distinctive policy focuses and investments. Our evaluation is inspired by and intended as a complement to the World Bank’s influential scorecard; it is designed to provide decision-makers with a basis to go beyond mere comparison of countries on factors that determine “traditional” business-friendliness into the nuances that affect setting up and operating digital businesses across markets. While it is true that most businesses have elements of digital technology built into them, we define “digital businesses” as those with a digital platform as core to their business models. To that end, we analyze the ease of entry and operation of four essential digital platforms: e-commerce platforms (such as Amazon, Alibaba, and so on); digital media platforms (such as YouTube, Netflix, Tencent Video, and such); sharing economy platforms (such as Uber, Airbnb, Bolt, Gojek, and others); and online freelance platforms (such as Upwork, Toptal, and similar).
These four platforms capture the core ways in which digitalization is transforming our daily lives. E-commerce has already significantly impacted the way we search for and order goods, from groceries to textbooks. Digital media is continuing to change the way we access news and entertainment, with digital news subscriptions overtaking print subscriptions and video streaming sites outperforming cable television. Transportation, accommodation, delivery services, and other physical services are being reorganized through new business models in the sharing economy. Lastly, the digital gig economy (online freelance) is also shaping the future of work, as employment is shifting from full-time traditional jobs to remote, contract-based jobs arranged on online platforms. The digital economy will inevitably influence the way we work, shop, travel, and entertain ourselves, and our four chosen platforms encompass these existing and imminent changes.
In our Digital Planet 2017 report, we said that as the digital economy continues to exert an ever-larger impact on global growth, countries would do well to pay particular attention to the “digital competitiveness” of their countries, strengthening the digital and analog foundations that underpin their ability to compete in the global digital economy. We also observed that digital platforms are a ticket to inclusion into the global marketplace and that governments and policymakers keen to foster inclusive growth among their citizenry ought to work towards enabling greater access and eliminating barriers to digital platforms.
Attracting and nurturing digital business is key to inclusive economic growth both for advanced and advancing economies. Digital businesses represent the most dynamic aspect of most major economies. In the US, for example, the digital economy grew 3.7 times faster in the 11 years through 2016, compared to the economy as a whole, according to the Commerce Department’s Bureau of Economic Analysis. Digital businesses, once they are past a threshold of size and visibility, bring with them outsized expectations: they dominate lists of the most valuable companies, from those that are publicly traded to privately-held unicorns. Digital businesses are also key to economic and social leapfrogging opportunities across the developing world.
While digital businesses have to contend with many of the same challenges as all businesses, they are different in many ways.
More generally, numerous factors are idiosyncratic to digital businesses, including infrastructural considerations such as digital access and adequate bandwidth, institutional impediments for the creation of digital content such as internet censorship, and the availability of talent pools sought by freelance platforms. Despite the growing importance of the sector, these factors are not as well understood, benchmarked across countries, or systematically evaluated for action by policymakers, business leaders, and investors.
We posed the question: How easy is it for the most significant digital platforms to enter, operate, thrive or exit in markets around the world, and what are the primary facilitators and barriers?
In our quest for answers, we drew upon 236 variables across 42 countries from over 60 data sources comprising public databases such as those from the World Bank and the World Economic Forum; subscription services, such as GSMA Intelligence and Euromonitor; and proprietary sources, such as Akamai, Chartbeat, and Private Capital Research Institute. To create a composite picture of “digital business,” we considered four types of digital platforms representing distinct value propositions and the primary business models—e-commerce platforms, digital media, sharing economy platforms, and online freelance—as the leading indicators of digital business opportunities in a country.
To arrive at a country’s overall Ease of Doing Digital Business score, we combined foundational measures essential to the functioning of any digital business (the ease of starting, running, and folding an enterprise—that is, the Doing Business 2019 score as our point of departure; the state of digital and analog foundations, a derivative of our Digital Evolution Index (DEI); and the ease of data accessibility and mobility) with measures of the “levers of ease” specific to each of the four above-mentioned platforms (supply barriers and boosters; institutional barriers and boosters; and market sophistication).
The following two visuals capture the resulting analysis of how the ease of doing digital business in 2019 varies across the world and how it compares with Doing Business 2019.
There are several implications that emerge from this analysis. In the rest of this report, we delve into three broad categories of findings: patterns among notable countries, patterns across digital platforms, and a comparison of the EDDB with the Doing Business 2019 rankings. The main takeaways and conclusions from our EDDB report are summarized below.
First, unsurprisingly, digital regulations and public policy choices are key determinants of the Ease of Doing Digital Business. These can range from user privacy rules and internet freedoms to those governing sharing economy and e-commerce companies or those protecting the rights of freelance workers.
Second, infrastructural elements that are at the intersection of the digital with the physical world, from internet and mobile access to payments and fulfilment, are all key to performance on EDDB, just as they are key to traditional businesses.
Third, since digital businesses are built on platforms that match users on either side of a transaction, the factors governing all users’ capabilities are key to EDDB. Skills, user sophistication, and the willingness to engage with digital platforms are all material.
Fourth, as Exhibit 1 illustrates, greater ease for one kind of a digital platform in a country does not automatically translate into ease for every other kind of digital platform. Policymakers need a granular awareness of the factors that buoy and beset specific digital platforms. Focused actions directed towards identifying and eliminating platform-specific barriers along with eliminating barriers at the foundational level are key to digital business competitiveness.
Lastly, and perhaps most importantly, data accessibility and mobility of data across-borders is central to the sustained growth of and innovation among digital businesses. Several countries have restrictions on data flows or onerous data localization laws in place. Such laws have the effect of imposing a regressive tax on digital businesses: they raise the costs of entry and of doing digital business especially for startups and SMEs, encourage rent-seeking behavior among established domestic actors, and reduce competition. Policymakers keen to foster robust and competitive digital economies would do well to measure and monitor their Gross Data Product—or, as we call it, “The New GDP”—eliminate barriers to accessibility of data, and work towards shared norms for cross-border data flows.