The ability to enforce contracts in a way that is easy to understand and efficient is key to attracting investments to and growth in developing economies. The capacity to enforce contracts is generally considered a qualification for economic growth. A vital relationship exists between the quality of contract enforcement and the quality of the business and investment environment. Lethargic, fickle enforcement of judgments triggers higher interest rates, lower availability of credit, lower investment, higher prices for goods and services,
higher rates of business default and bankruptcy, and lower rates of successful bankruptcy reorganizations.
The Doing Business indicators look at the efficiency of contract enforcement by following the evolution of a sale of goods dispute and tracking the time, cost, and number of procedures involved from the moment the plaintiff files the lawsuit until actual payment.
The BizCLIR methodology probes further into the system of enforcing contracts to understand the role of contracts in a developing economy. BizCLIR's tool takes extra steps to review the whole business, legal and social environment as it relates to investor protection. A team of experts interview stakeholders in government, the private sector, and civil society to understand the process of enforcing contracts. These areas are evaluated using indicators divided among the four pillars:
- Legal/Regulatory Framework
- Implementing Institutions
- Supporting Institutions
- Social Dynamics
Taking this 360-degree approach allows us to scrutinize the business environment from dynamic angles modern indicators disregard. BizCLIR's qualitative assessment of the entire business establishment helps us understand the reasoning underlying the indicator scores. For example, if a Doing Business report shows that it takes 1,800 days to resolve a dispute in Timor-Leste, BizCLIR's analysis will assist our client in understanding the causes of such a period. Perhaps judicial bodies use delay tactics as a means of maintaining power, supporting institutions like bar associations are dependant on poorly trained law students for casework, or maybe the country's contract law is too widely interpreted by the business sector. BizCLIR's analysis offers our clients an opportunity to understand the real problems and determine real solutions in developing economies.
