Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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category. These are then adjusted, on the basis of a linear
transformation, to produce index values on a 1-10 scale. An
arithmetic average of the ten category index values is then
calculated to yield the aggregate business environment score
for each country, again on a 1-10 scale.
The use of equal weights for the categories to derive the
overall score reflects in part the theoretical uncertainty
about the relative importance of the primary determinants
of investment. Surveys of foreign direct investors’ intentions
yield widely differing results on the relative importance of
different factors. Weighted scores for individual categories
based on correlation coefficients of recent foreign direct
investment inflows do not in any case produce overall
results that are significantly different to those derived from a
system based on equal weights.
For most quantitative indicators the data are arrayed in
ascending or descending order and split into five bands
(quintiles). The countries falling in the first quintile are
assigned scores of 5, those falling in the second quintile
score 4 and so on. The cut-off points between bands are
based on the average of the raw indicator values for the top
and bottom countries in adjacent quintiles. The 2008-2012
ranges are then used to derive 2013-2017 scores. This
allows for intertemporal as well as cross-country
comparisons of the indicator and category scores.
The indices and rankings attempt to measure the average
quality of the business environment over the entire
historical or forecast period, not simply at the start or at the
end of the period. Therefore in the forecast we assign an
average grade to elements of the business environment over
2013-2017, not to the likely situation in 2017 only.
The scores based on quantitative data are usually calculated
on the basis of the numeric average for an indicator over the
period. In some cases, the “average” is represented, as an
approximation, by the recorded value at the mid-point of the
period (2010 or 2015). In only a few cases is the relevant
variable appropriately measured by the value at the start of
the period (for example, educational attainments). For one
indicator (the natural resources endowment), the score
remains constant for both the historical and forecast
periods.
The main sources used for the historical period scores
include CIA, World Factbook; Economist Intelligence Unit,
Country Risk Service; Economist Intelligence Unit, Country
Measurement and grading issues
Sources