Why World Bank junked its ease of business report
The World Bank Group has junked, due to irregularities, its “Doing Business Reports”, after an external investigation showed senior former bank leaders including then World Bank chief executive Kristalina Georgieva had been working with economists to upgrade China’s 2018 ranking.
According to the Doing Business 2018 report, China had a score of 65.3 with a global ranking of 78, the same notch as the previous year’s.
If adjusted for parameters such as Starting a Business and (ease in) Getting Credit, China’s ease of doing business score would have fallen that year to 64.5, translating to a global ranking of 85, a later World Bank review showed. “Taking as given the published data for all other countries, China’s global ranking in Doing Business 2018 would have been 85, a decline of 7 places relative to the previous year,” the Bank’s review states.
The rankings have acquired the status of a prestige tag for emerging economies and become a key influencer of wide-ranging policies. They purport to show which countries are most welcoming of private investment and business.
The action came after an external investigation’s findings that the rankings could be manipulated. The investigation implicated Georgieva, who is now
managing director of the International Monetary Fund, the global lender of last resort, and former World Bank president Jim Yong Kim. Georgieva has denied wrongdoing, saying in statement on Friday: “I disagree fundamentally with the findings and interpretations... ”
The rankings have set in motion far-reaching economic policies that focus on winding down red tape and easing regulations to facilitate quicker investments, setting off global competition to reach the top.
“After data irregularities on Doing Business 2018 and 2020 were reported internally in June 2020, World Bank management paused the next Doing Business report and initiated a a series of reviews and audits of the report and its methodology,” the World Bank Group said in a statement on Thursday.
The trust countries repose in the Doing Business Report and its rankings is critical for policymaking in many developing nations to bring down poverty levels and push income-generating investment, acting on the bank’s advice.
The World Bank Group further said: “Going forward, we will be working on a new approach to assessing the business and investment climate. We are deeply grateful to the efforts of the many staff members who have worked diligently to advance the business climate agenda, and we look forward to harnessing their energies and abilities in new ways.”
The World Bank’s board said its current executive directors authorised the release of “Investigation of Data Irregularities in Doing Business 2018 and Doing Business 2020 – Investigation Findings and Report to the Board of Executive Directors”.
This is an independent external review of the “facts and circumstances around previously reported data irregularities in the 2018 and 2020 Doing Business Reports,” the bank said. This investigation’s findings released by the bank showed senior officials may have manipulated rankings.
Among 190 countries, India ranked 63rd in Doing Business in 2020. A 63rd rank meant India has improved its ranking by 79 positions in the five years between 2014 and 2019.
“This (World) Bank publishes these data, but how seriously it is to be taken depends on countries. Nobody enforces them. This government has given it utmost importance than most previous governments as have many other comparable countries,” noted economist Abhijit Sen said.
The then World Bank president Jim Yong Kim too has been implicated by the investigation. “For instance, President Kim discussed the report and China’s performance with senior Chinese government officials on September 12; the then executive director for China met with members of the Bank’s East Asia and Pacific regional office on September 14 to inform them that if China’s rankings improved within ‘everyone would be relieved’,” the investigation stated.
“It was against that backdrop that the data irregularities pertaining to China occurred,” the probe said.
According to the investigation, during the 2020 Doing Business Report, at the direction of a senior World Bank Group official, Saudi Arabia’s ranking was upgraded, displacing Jordan. “In August 2019, the Doing Business team generated a draft of its Top Improvers list for Doing Business 2020 that had Jordan as the top reformer with Saudi Arabia placing second,” it states. The places of the two countries changed in the final report. “The following month, September 2019, Mr Djankov -- by then serving as the DEC director -- instructed the Doing Business team to find a way to alter the data such that Jordan fell from its first-place position in the Top Improvers List”.
Simeon Djankov was one of the founders of the Doing Business Report, who at the time was serving as the adviser to Georgieva.