Private sector investment remains a crucial driver of economic growth particularly in developing nations where growth has slowed in recent years, with many countries facing challenges such as inflation, supply chain disruptions, geopolitical tensions, high debt, and limited fiscal space.
According to the International Monetary Fund and the World Bank, private sector generates about 90 percent of jobs, 75 percent of investment, more than 70 percent of output, and over 80 percent of government revenues in developing economies.
This underlines the need for governments to create a robust and responsive business environment to nurture private sector growth, attract domestic and foreign investment and enable firms operate efficiently while providing necessary conditions for entrepreneurship and competitiveness.
Over the years, various frameworks, and benchmarks have been developed by policymakers and international organisations to provide insights into the strengths and weaknesses of national business environments.
The World Bank’s "Doing Business" was one such benchmark that ran annually from 2003-2020, focused on assessing the ease of doing business especially for Small and Medium Enterprises (SMEs) by measuring key regulatory areas such as starting a business, getting permits, accessing credit, and paying taxes.
The World Economic Forum’s Global Competitiveness Report published between 2004 and 2020 integrated both macroeconomic factors and micro aspects of competitiveness into a single index.The report measured factors including institutions, policies, and infrastructure that influence sustainable economic growth.
The OECD’s “Better Policies for Sustainable Development 2030” launched in 2017 focuses on the alignment of policies and regulations with sustainable development goals. The framework provides guidance to governments on improving policy coherence to ensure that their policies promote long-term sustainable development.
Meanwhile, the Ibrahim Index of African Governance assesses the quality of governance in African countries, with a particular focus on factors that influence economic opportunity, such as the rule of law and public sector effectiveness.
Sector-specific benchmarks have also been developed to assess the business environment providing targeted insights for reform within sectors.
For example, UNIDO's Competitive Industrial Performance Index launched in 2002 evaluates a country’s ability to produce and export manufactured goods, while the International Finance Corporation Creating (IFC) Creating Markets initiative has since 2017 focused on transforming markets by improving the regulatory environment, enhancing access to finance, and addressing sector-specific barriers to growth.
The OECD’s Digital Economy Indicator launched in 2000 assesses a country’s readiness for digital business, touching on digital infrastructure, digital skills, innovation, e commerce and research and development.
The latest introduction to the global benchmarks is the Business Ready (B-READY) framework launched by the World Bank in October 2024. Central to the B-READY report is its new analytical framework, which benchmarks economies based on three pillars.
The Regulatory Framework pillar focuses on the laws and regulations that govern business operations, assessing their clarity, fairness, and effectiveness.
The Public Services pillar examines the quality and accessibility of essential services, such as utilities, infrastructure, and government services, that support businesses.
While the Operational Efficiency pillar evaluates how well firms can navigate compliance; including evaluating the ease of regulatory compliance, efficiency of administrative processes, and effective use of public services relevant to firms.
The new report broadens the focus from small businesses to the entire business sector and one of the significant contributions is the rigorous data collection process providing granular data and insights for data-driven decision-making by policymakers on specific areas for reform.
While the various benchmarks and frameworks provide valuable insights into national business environments, the real challenge lies in translating these insights into action and targeted reforms for economic growth.
As countries continue to refine their business environments in 2025, the true test will be their ability to deliver on the reforms that enhance regulatory efficiency, encourage innovation, improve competitiveness, and ensure equitable opportunities for all.
Governments can achieve this by prioritising reforms that streamline administrative processes, simplify tax systems, and reduce barriers to entry for businesses.
Public private dialogue (PPD) and partnership will also be key to ensure that reforms are aligned with market needs and address private sector challenges.
PPD will also help governments understand the evolving needs of business, particularly in rapidly changing sectors such as technology, and ensure that policies are flexible and adaptive to these changes.
Investment in digital infrastructure and skills will also unlock the potential of artificial Intelligence and emerging technologies to drive innovation and enhance operational efficiency.
Social inclusion policies that prioritize education, healthcare and economic opportunities will ensure that the benefits of growth are shared across society.
Ultimately, governments must be accountable and committed to the long-term implementation of reforms with regular progress monitoring to ensure reforms deliver tangible and sustainable results.
The Writer is an Industrial Policy, Governance and Private Sector Development Expert and currently Senior Advisor (Global Lead), Industry & Commerce at the Tony Blair Institute for Global Change.