5.2.8. Competitiveness Impacts of Business Environment Reform (CIBER)
Competitiveness Impacts of Business Environment Reform (CIBER)
Recently, USAID developed and pilot tested the Competitiveness Impacts of Business Environment Reform (CIBER) tool in order to 1) engage value chain participants in identifying the aspects of the regulatory environment that most negatively affect value chain competitiveness; 2) quantify the costs and benefits of implementing required reforms; and 3) develop practical and effective advocacy plans for achieving reform.
The CIBER process takes a targeted approach toward assessing regulatory reform requirements (see Figure 1). Rather than examine all regulations, administrative procedures and judicial enforcement issues affecting a value chain, it uses input from enterprises and industry experts to determine the scope of analysis. It was pilot-tested on the Brazilian cashew nut value chain.
Figure 1: Competitiveness Impacts of Business Environment Reform (CIBER) Process Map
The CIBER approach follows the end market and chain analysis phase of the value chain project cycle. The first step is to work closely with value chain stakeholders to identify key regulatory and administrative constraints to competitiveness. These constraints may be imposed by overly burdensome, outdated, inappropriate or insufficient regulation. This analysis may draw from a variety of regulatory categories including:
- Regulations governing business activity/factors of production (labor regulations, land use regulations, financial sector regulations, etc.)
- Required interaction with authorities (business registration, tax collection, licensing, property registration, etc.)
- Transactions in downstream markets (access to markets, compliance with health, quality and safety standards, foreign exchange restrictions, etc.)
- Transactions in upstream markets (access to inputs, imports, etc.)
Next, stakeholders are consulted to identify and ground-truth priority issues related to the business environment. This information may be gained through surveys, one-on-one interviews or focus groups. Consultation with industry experts and international buyers is also helpful for identifying issues that may not be visible to local participants, such as gaps in intellectual property protection that impede opportunities for upgrading.
Once a short list of issues has been identified, the method guides researchers, project staff and industry stakeholders through the process of identifying the costs imposed by specific laws, regulations, implementation issues or lack of necessary regulations. In some cases it is possible to track the added cost per unit of the product under consideration, as well as added value at each stage of production, using a cost modeling approach. In other instances, such as for issues of quality certification, a qualitative approach or general estimate of the magnitude of impact will be sufficient.
At the next stage of the CIBER exercise, facilitators engage stakeholders in a process of weighing the costs and benefits of business environment reforms that target the constraints identified or reinforce positive impacts.
Next, the research team assesses the political and administrative feasibility of each specific reform. This assessment is based on a variety of factors that reflect the degree to which reforms will be possible and over what timeframe. The feasibility assessment supports the final prioritization of reform activities and helps programs to determine short-, medium- and long-term priorities, informing the development of an advocacy approach. These may be designed around public-private dialogue initiatives and/or use locally appropriate media outlets to build a broader base for reform support. Advocacy approaches for policy, regulatory and/or administrative reform will ideally be led and owned by local stakeholders in order to ensure sustainability of these efforts over time.
Implementation of CIBER
The CIBER approach was piloted in the cashew value chain in Brazil. World cashew nut supply almost tripled between 1994 and 2005. As competition intensified for the 195,000 Brazilian producers, located mainly in Brazil’s poorest region, the government sought to support cashew exporters with a tax credit. However, poor design and worse implementation of the tax credit refund process have imposed costs that reduce the competitiveness of Brazil’s cashew exports. CIBER analysis determined that the cost of production per box of raw cashew nuts for an average processor increased by more than 10 percent because of delays in tax credit refunds and lost credits. These increased costs have halved processors’ profit margins. The reform of national and state level tax refunds appears to have political currency in the context of a national movement towards tax reform. Due to the highly concentrated nature of cashew industry processing—located in the Northeast state of Ceará—industry support is also strong and the constituency for reform advocacy efforts is clear. National and state budgets are the primary losers, as they are currently retaining income that is due to be returned to the private sector, but all analyses suggested that this is a constraint that can be overcome.
Armed with the CIBER results, processors affected by the poor regulation now have a powerful argument, supported by an estimate of the financial loss to the value chain, to take to the government when advocating for reform of this tax scheme.
Challenges and Points for Further Discussion
Successful pilot applications of the CIBER tool indicate that it is an effective approach for implementing bottom-up business environment reform activities. The use of the value chain as the analytic lens offers a number of innovations for policy reform efforts, most importantly through the identification of committed communities—value chain stakeholders—that can advocate for reform over the long term as needed to overcome entrenched interests. This has the potential to dramatically increase the sustainability of reform efforts after projects have ended as well as to provide demonstration effects through the successful achievement of targeted reforms. Among the challenges that remain are scaling the CIBER tool to match the needs of smaller or larger projects than those assisted in the initial applications and ensuring that a sufficient level of information is available through in-depth value chain analysis prior to or concurrent with CIBER implementation.
- CIBER: Enhancing Competitiveness Impacts of Business Environment Reforms: A Value Chain Approach for Analysis and Action. USAID Report.DAI. 2008.
- Competitiveness Impacts of Business Environment Reform: A Bottom-Up Approach, Millis,Bryanna; Charette, Dan; Developing Alternatives 13, Winter 2009; pp. 5-12.