Business environment analysis: Testing a context-specific approach in Ethiopia

Abstract

A number of prominent business environment rankings have achieved outstanding results from their efforts to promote legal and regulatory reform around the world. Such tools help to raise awareness of general constraints, but lack the specificity and rigor to produce context-specific information to guide policy and programs supporting business and economic growth, especially in contexts with high levels of economic informality. We review four commonly referenced business environment rankings and identify their respective strengths and weaknesses. To address the identified shortcomings, we present a business environment assessment methodology that (1) provides investors and policy makers with a means of collecting rigorous evidence on local business constraints and (2) is representative of a particular population. The paper closes with a description of our experience applying the methodology to assess the business environment of Addis Ababa, Ethiopia.