CPIA business regulatory environment rating (1=low to 6=high) - Country Ranking

Definition: Business regulatory environment assesses the extent to which the legal, regulatory, and policy environments help or hinder private businesses in investing, creating jobs, and becoming more productive.

Source: World Bank Group, CPIA database (http://www.worldbank.org/ida).

See also: Thematic map, Time series comparison

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Development Relevance: The International Development Association (IDA) is the part of the World Bank Group that helps the poorest countries reduce poverty by providing concessional loans and grants for programs aimed at boosting economic growth and improving living conditions. IDA funding helps these countries deal with the complex challenges they face in meeting the Millennium Development Goals. The World Bank's IDA Resource Allocation Index (IRAI) is based on the results of the annual Country Policy and Institutional Assessment (CPIA) exercise, which covers the IDA-eligible countries. Country assessments have been carried out annually since the mid-1970s by World Bank staff. Over time the criteria have been revised from a largely macroeconomic focus to include governance aspects and a broader coverage of social and structural dimensions. Country performance is assessed against a set of 16 criteria grouped into four clusters: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions. IDA resources are allocated to a country on per capita terms based on its IDA country performance rating and, to a limited extent, based on its per capita gross national income. This ensures that good performers receive a higher IDA allocation in per capita terms. The IRAI is a key element in the country performance rating.

Limitations and Exceptions: The CPIA exercise is intended to capture the quality of a country's policies and institutional arrangements, focusing on key elements that are within the country's control, rather than on outcomes (such as economic growth rates) that are influenced by events beyond the country's control. More specifically, the CPIA measures the extent to which a country's policy and institutional framework supports sustainable growth and poverty reduction and, consequently, the effective use of development assistance.

Statistical Concept and Methodology: All criteria within each cluster receive equal weight, and each cluster has a 25 percent weight in the overall score, which is obtained by averaging the average scores of the four clusters. For each of the 16 criteria countries are rated on a scale of 1 (low) to 6 (high). The scores depend on the level of performance in a given year assessed against the criteria, rather than on changes in performance compared with the previous year. All 16 CPIA criteria contain a detailed description of each rating level. In assessing country performance, World Bank staff evaluate the country's performance on each of the criteria and assign a rating. The ratings reflect a variety of indicators, observations, and judgments based on country knowledge and on relevant publicly available indicators. In interpreting the assessment scores, it should be noted that the criteria are designed in a developmentally neutral manner. Accordingly, higher scores can be attained by a country that, given its stage of development, has a policy and institutional framework that more strongly fosters growth and poverty reduction. The country teams that prepare the ratings are very familiar with the country, and their assessments are based on country diagnostic studies prepared by the World Bank or other development organizations and on their own professional judgment. An early consultation is conducted with country authorities to make sure that the assessments are informed by up-to-date information. To ensure that scores are consistent across countries, the process involves two key phases. In the benchmarking phase a small representative sample of countries drawn from all regions is rated. Country teams prepare proposals that are reviewed first at the regional level and then in a Bankwide review process. A similar process is followed to assess the performance of the remaining countries, using the benchmark countries' scores as guideposts. The final ratings are determined following a Bankwide review. The overall numerical IRAI score and the separate criteria scores were first publicly disclosed in June 2006.

Aggregation method: Unweighted average

Periodicity: Annual