The World Bank must bring back the “Ease of Doing Business” report

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The World Bank’s “Ease of Doing Business” report has tracked and encouraged improvements in the business climate around the world. Then it was cancelled.

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The following commentary is co-authored by Curtis S. Chin, former U.S. Ambassador to the Asian Development Bank and first Asia Fellow of the Milken Institute, and Abhinav Seetharaman, Harvard Kennedy School graduate student and former Princeton-Asia-Fellow of the Milken Institute in Singapore.

The conclusion of the World Bank Group and International Monetary Fund (IMF) Spring Meetings in April left an elephant in the room.

Since the cancellation of the World Bank’s Ease of Doing Business index and report late last year, the World Bank has so far failed to adequately replace what had been a benchmark and – although far from perfect – a very useful tool for driving change.

The annual report assesses and ranks countries’ relative ease of doing business since 2003. It is used by a variety of entities—public, private, and not-for-profit—to track and encourage improvements in the business climate.

It ended last year.

In September 2021, an independent investigation by law firm WilmerHale found that top World Bank executives may have manipulated data and exerted undue pressure on staff members to inflate the rankings and scores of China, Saudi Arabia and other selected countries.

It may take a lot of time and effort for the World Bank to restore confidence and reform in depth. Skeptics abound.

Among the leaders highlighted were Kristalina Georgieva, then CEO of the World Bank (now Managing Director of the IMF) and Jim Yong Kim, then President of the World Bank, both of whom allegedly pressured employees to help secure Chinese support for a bank capital increase. The survey report detailed that the World Bank’s Doing Business team eventually raised China’s ranking by seven places, from 85 to 78.

Georgiava said last year that she disagreed “on the substance” with the findings of WilmerHale.

[Ed. note: The IMF had no comment, but the fund is undertaking a review to strengthen its institutional safeguards. Kim was not immediately available to respond to a CNBC request for comment.]

After the WilmerHale investigation into possible behind-the-scenes intervention by China, the World Bank announced an immediate halt to its Doing Business series.

A young girl in Bhutan. The Himalayan country has made a public commitment to move up the World Bank’s Doing Business rankings, and over time it has succeeded.

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The inconvenient truth remains that stopping the report after finding irregularities in the data and ethical concerns in the 2018 and 2020 reports only underscores how much the World Bank and other multilateral agencies still need reform. The report’s abrupt end – a case of throwing the baby out with the bathwater – did a disservice to those who enjoyed and used the index and accompanying data.

Behind-the-scenes interventions and undue pressure continue to interfere with the valuable role that multilateral financial institutions can play in encouraging nations to create a better business environment and harness the power of private capital to lift up the most vulnerable communities. .

Going forward, it would be beneficial to see a more transparent and reformed World Bank Doing Business Index used as a benchmark for needed changes in areas ranging from access to electricity to bankruptcy laws application of the regulations.

Long seen by many as a way to help countries improve their business climate, the index has admittedly not been without controversy. Low-ranked countries have often questioned the findings and methodology, though the World Bank has repeatedly stood up for its staff and the impact of the report.

3 steps for the World Bank to restore trust

The decision to terminate the report should be reconsidered and reversed. Instead of ending the report, the World Bank should recommit to rebuilding trust and producing high quality public documents with impact and integrity.

Such an effort would require three key steps.

First, the World Bank and other leading multilateral development banking institutions need to rectify long-standing problems, starting with introspection and better assessment of past work. What interests are served? How deep is the analysis? Are the conclusions completely unbiased? Addressing these issues in an open and transparent manner is essential to ensuring accountability.

Second, institutions must renew their commitment to the value of third-party data collection and truly independent evaluation and assessments. Accurately informing and educating through reporting will also require leadership and personnel that will not succumb to external pressures from countries seeking to undermine or replace existing Bretton Woods institutions.

And third, the staff and management of multilateral development banks and other international financial institutions – and the boards that guide them – must embrace informed engagement and partnership with the private sector globally.

Why ‘Doing Business’ Matters

As emerging and developing economies struggle to fight poverty in times of pandemic and war, the value of businesses and private capital is more important than ever. Private sector contributions to international development will only grow in importance as inflation and exchange rate volatility continue to hamper many government-led efforts.

Last November, the World Bank announced plans to replace its Doing Business report towards the end of 2023. These include a mandate for increased transparency on methodologies, greater integration of company survey data and less emphasis on numerical rankings.

Other reforms can also yield positive results. Overhauling internal governance structures within all multilateral development banks can help prevent staff members from making inappropriate data changes that help select countries.

Appropriately codifying policies on how these complex situations should be handled can also greatly reduce the risk of data manipulation. Concerns about conflicts of interest should also be addressed.

And having more sophisticated support systems in place can allow employees to challenge questionable orders from superiors while maintaining their job security.

Don’t reward data manipulation

One of the unfortunate consequences of what happened is that countries that had consistently performed poorly in the Doing Business report and welcomed the end of the report may now feel less pressure to change, to the detriment of efforts of poverty reduction. Unlawful manipulation of data should never be rewarded.

Our experience in Asia, including our participation on the board of directors of the Asian Development Bank, shows that the index and the Doing Business report have indeed, as expected, created a series of positive results. Countries big and small had taken the rankings into account and worked to improve their rankings.

For example, the tiny South Asian nation of Bhutan has publicly pledged to respond to the report’s findings and move up the rankings. Concrete steps have been taken and indeed, over time, the nation’s ranking has improved.

One of Southeast Asia’s largest economies, Thailand, has seen the report as a key way to improve its competitiveness in Asia-Pacific.

And in 2020, four ambassadors, including then-US Ambassador to Thailand Michael DeSombre, relied on assessments from the World Bank and others to prescribing a 10-step approach for Thailand improve its domestic business environment and ensure a faster and more sustainable growth trajectory.

It may take a lot of time and effort for the World Bank to restore confidence and make fundamental reforms. Skeptics abound.

The time to act with purpose is now. A return of the report and the Doing Business index will be a good first step.

[Ed. note: The World Bank declined to comment for this article but directed CNBC to its “Business Enabling Environment” project, which is under development.]

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