First measurement: 2009 MCI

In 2009, the United States Agency for International Development (USAID), through its Promoting Economic Opportunities Program developed the USAID Municipal Competitiveness Index Project, 2009 MCI. The project was started in January 2009 and was implemented during the municipal, legislative and presidential elections period. It was concluded in August 2009, after the transition to the new central government and new local governments.

The Project measured for the first time in the country the local business environment. With the data gathered, the first Municipal Competitiveness Index (MCI) was built. This strategic effort became the baseline for future municipal competitiveness measurements.

The 100 most populated municipalities of the country participated in the USAID MCI 2009 Project, which together represented a population of 4.6 million, equivalent to 81% of the Salvadoran population. The data were collected through two surveys: the first of them was conducted personally among 4,000 business owners from all sizes and economic sectors, with the exception of the agricultural sector. The second survey was focused on the mayors and municipal officials of the 100 municipalities included in the Project.

The ICM 2009 measured the conditions that the investors and entrepreneurs consider when deciding where to invest and set up their businesses or expand the existing ones, then generating jobs and income that bring benefit to the municipality as a whole. The measurement variables or sub-indices were: Transparency, Municipal Services, Proactivity, Informal Payments, Public Safety, Time to compliance, Rates and Taxes, Entry Costs, and Municipal Regulations.

The measurements pointed out the existence of several competitiveness levels among the municipalities. Among the 100 participating municipalities, 5 municipalities reflected Excellent performance; 49, High performance; 44, Average performance; and 2, Low performance. (For more details, please see the "Documents" section on this web page)

Significant findings

The MCI 2009 results revealed a series of interesting findings. Transparency, Municipal Services, Proactivity and Informal Payments were the main underlying factors of municipal competitiveness, since they were the most closely correlated to business success. The results also showed significant business environment differences among the municipalities throughout the country, including within the regions and departments. However, significant improvements could be made in all the municipalities, even in those with the highest scores. When looking at the scores of each sub-index, it is clear that many municipalities that were strong in one area showed weaknesses in other areas. For example, Conchagua reported an Excellent performance in the areas of Transparency (7.97) and Proactivity (7.81); however, its performance was Very Low in the Rates and Taxes sub-index (3.23). Finally, the study results indicated that even when resource endowments are, without any doubt, a significant aspect of competitiveness, they are not directly correlated to a strong business-enabling environment. On the other hand, the data show that business-friendly policies and procedures have a positive impact on the local economic development through improvements to the well-being of the residents.

These findings suggest that all municipalities, even those with high scores, have a big potential for increasing their competitiveness and capacity to attract investment, expanding their business opportunities as well as increasing the number of jobs and their income. Among these opportunities are:

  • Improvement of the regulatory and procedure frameworks
  • Areas for continuous improvement leading to improving the quality of local government management
  • Potential areas for creating and implementing public policies that bring benefit to sustainable and inclusive local economic development
  • Private sector and community joint action platforms to generate jobs at the local level
  • Strengths and opportunities to generate business-enabling environments that attract and retain investment and create local jobs
  • Municipalities offering the best environment conditions for doing business

Dissemination and sustainability

The MCI 2009 prepares the way for a productive dialog between the public sector and the private initiative at the local level. Its results were disseminated among the public (in San Salvador and in a series of three workshops at the regional level) where the public and the private sector held a dialog on the steps to improve the business-enabling environment. These conversations became the first step towards the creation of a network of reformers made up of municipal government leaders, the private initiative and relevant associations in which the MCI would be used as the tool for improving the business-enabling environment in their respective territories and making progress on the decentralization agenda in El Salvador. It was anticipated that the MCI should be prepared every two years to measure the progress of the municipalities in the creation of policies and procedures favorable to trade and also to inform the public and maintain the drive to continue with reform-oriented initiatives.