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This piece by Essential Edge contributor Peter Hulm was published 8 June, 2013.
Sion, Switzerland — The World Bank’s annual Cost of Doing Business Report, a key publication for development economists and journalists since 2003, hardly seems like a topic for heated controversy, but that is exactly what is happening in today’s rapidly evolving global marketplace. A number of countries that received relatively mediocre scores are pressuring the World Bank to abandon its ranking system altogether, or to make changes that would leave it emasculated. Others question the validity of the Report’s criteria for judging competitiveness.
Last May, the website for Russia Today, Moscow’s 24/7 multilingual TV news channel, reported that China wanted to do away with the report altogether on the grounds that the World Bank should not be engaged in ranking its member countries.
Brazil, Argentina, India and other developing countries have also protested against the Bank’s ranking system in the past.
When the Korean-American physician and anthropologist, Jim Yong Kim assumed the presidency of the World Bank in July 2012, he appointed a review panel to evaluate the report, which published is 10th edition this year.
A number of middle-income countries have since stepped up pressure to have the report watered down or dropped completely. Russia Today, which usually refers to itself as “RT,” notes that the World Bank’s deputy director, Bin Han, who is Chinese, complained late last year that the report “used wrong methodologies, failed to reflect facts, misled readers and added little value to China’s improvement of the business environment.” The Financial Times also reported that China was seeking to play down the Report.
Doing Business 2013, relying on figures from July 2012, ranks China as 91 out of 185 member countries. Despite its slightly higher than average ranking, China was criticized for long delays in obtaining construction permits and difficulties with tax authorities.
That is in contrast to Singapore which is in first place when it comes to efficiently handling the costs of doing business as rated by World Bank standards. Russia placed even more dismally than China at 112. The bottom of the list, 185th, went to the Central African Republic.
Mark Weisbrot, writing in the Guardian, noted that the principles guiding the Report were developed with the support of the US government and American-backed aid agencies. As a result, the Report tends to place a heavy emphasis on Washington’s preferred free market principles.
In 2013, the Report dropped labor regulations from its list of ratings criteria. The omission looked particularly ill-advised when the collapse of the Rana Plaza clothing factory in Bangladesh killed more than 1100 people, and even more so when it was pointed out that the Rana Plaza disaster came after a series of Bangladesh factory fires starting last November that had already cost the lives or more than 400 workers.
Ajay Chhibber, an assistant UN security General as well as the director of the UNDP’s regional bureau for Asia and the Pacific, underscored the gaps in the report in a May 16 Financial Times Guest Post, entitled “Bangladesh Exposes Flaws in World Bank’s Doing Business Index.”
Chhibber pointed out that the report “rates countries higher if they have fewer restrictions on hours of work and on requirements for laying-off workers. It also gives high marks to fewer restrictions on permits for construction, ignoring safety and environmental concerns.” Chhibber went on to say that “The Ease of Doing Business Index labour provisions are consistent with the letter but not the spirit of ILO regulations.”
The Report also overlooks a number of key factors affecting business competitiveness, including transport facilities and corruption, which many see as more important than the paperwork involved in making exports competitive. Environmental regulation is not explicitly mentioned.
On a personal note. talking to a friend working as a development professional a couple of years ago, I tried to sell hi on the idea of using the Cost of Doing Business Report to get better official help for businesses in developing countries. The World Bank boasts that it has used its Cost of Doing Business principles to assist 80 countries in improving regulations. My friend’s reply was that the Report’s analysis was so superficial that he could not use it. That is pretty much what aid workers told economists in the debate that followed this year’s report.
I am in favor of any reasonable proposal to improve reporting on countries’ economic, social and welfare performance, but I am not sure that the Cost of Doing Business Report deserves to survive in its present form. Surely the World Bank can do better and can find more useful indicators in deploying its resources.
It hardly inspires confidence that the review panel chief is a neo-liberal and that the World Bank has excluded NGO and civil society critics from its reviewers.
Sources,
The World Bank Cost of Doing Business Report (produced with the International Finance Corporation).