Augusto Lopez-Claros, Director, Global Indicators Group at WB, oversees the annual Ease of Doing Business Report. He explained the key matrix in the report, Distance To the Frontier (DTF).
Distance To the Frontier (DTF) is a relatively new matrix we developed. I will tell you why we developed it. In our interactions with governments, for instance when I met with a minister from one country, he asked me, ‘last year we did A,B,C things and had an ambitious programme of reform. But our ranking did not change.’ In some cases it may also have dropped a few points. ‘How do we explain this to our PM?’ we are often asked. This was very discouraging for them but this was the reality of the ranking. In this particular instance, I explained to him, when you did all this, other countries were doing other things. With that in mind, we developed this matrix which is an absolute measure of progress in one country, independently of what is happening in other countries.
What we do is we look at the whole history of data on doing business in all the countries, all the indicators and sub-indicators. And we ask ourselves —where are the best practices located in the world. For each of the subcomponents of the indicators. For instance, where is it fastest to enforce a contract? So it turns out that it is in Singapore. It takes 150 days in Singapore. So, that was the frontier for that particular component of the index. Where is it the fastest to start a business? Turns out that it is in New Zealand. It takes half a day to start a business there.
So that is the frontier. So we developed this hybrid concept of frontier, which is not a country, but it is a level of performance based on the entire sample.
