About ‘Doing Business’ report

https://www.observerbd.com/news.php?id=340572
Published : Friday, 19 November, 2021 at 12:00 AM

https://www.observerbd.com/news.php?id=340572
M S Siddiqui

About ‘Doing Business’

report
The Doing Business (DB)
report ranks countries based
on their regulatory and legal
environments, ease of
business startups, financing,
infrastructure and other
business climate measures.
The DB rankings have been
issued annually since 2004
in the form of a report
published by the World
Bank Group.

In its original incarnation,

the DB report contained five
sets of indicators for 145
economies, whereas the
most recent 2017 report
includes 10 sets of
indicators for 190
economies. Each economy
is ranked on the individual indicators and also in an overall table based on its
score across 10 indicators. The more regulations are slashed, the better a country
does in the ranking. Most indicators are based on a standardized case study such
as the conditions facing a small firm in the largest commercial city -this study
characterizes the country.

DB report has an Ease of Doing Business Index and associated rankings that
purport to measure the regulations affecting business in countries throughout the
world-regulations that affect business formation and operation. The rankings are
premised on the assumption that everyday economic activity in countries is
fashioned by laws, regulations and institutional arrangements. It has a set of
assumptions about the relationship between law and development.

The DB project stresses the importance of a well-functioning legal and

regulatory system in creating an effective market economy and, as a corollary,
the deleterious effects that a poor regulatory environment can have on output,
employment, investment, productivity, and living standards. Nevertheless, the
way in which the rankings are compiled encourages countries to 'game' the
system.

In contrast, there is a criticism that the rankings embody, explicitly or implicitly,

a particular set of preferences, whose relationship with matters of economic
development is at best uncertain. Moreover, the DB project largely, if not
entirely, mirrors the law on the books which may not necessarily reflect what
happens in practice in a particular country.

The Doing Business project is one of the most prominent knowledge products
produced by the World Bank. It enjoys a high public profile with millions of
hits on its website each year and has become a major resource for academics,
journalists, and policymakers. This is not altogether surprising given the
intellectual prestige and respectability of the World Bank. World Bank Group
research informs the actions of policymakers, helps countries make better-
informed decisions, and allows stakeholders to measure economic and social
improvements more accurately. Such research has also been a valuable tool for
the private sector, civil society, academia, journalists, and others, broadening
understanding of global issues," the Washington DC-based institution
announced.

The authors of the DB reports have claimed considerable success in persuading

countries to institute reforms consistent with their recommendations and leading
economies across the world have hailed their own efforts to climb the DB
rankings. Developing countries may be particularly receptive to ideas advanced
by the World Bank because of the scale of its 'legal technical assistance'
operations and donor countries may use the DB rankings in gauging whether a
particular destination is safe for investment. Perhaps the most use of the DB
rankings is made by the smaller developing countries as a way of trying to show
foreign investors that they have improved their business environment.

The World Bank Group remains firmly committed to advancing the role of the
private sector in development and providing support to governments to design
the regulatory environment that supports this. In addition, because the internal
reports raised ethical matters, including the conduct of former Board officials as
well as current and/or former Bank staff, management reported the allegations
to the Bank's appropriate internal accountability mechanisms.

"After reviewing all the information available to date on Doing Business,

including the findings of past reviews, audits, and the report the Bank released
on 16th September 2021 on behalf of the Board of Executive Directors, World
Bank Group management has taken the decision to discontinue the Doing
Business report. Concerns had been raised in the past even within the bank
about the rankings. In 2013, a panel recommended doing away with the ranking
system, arguing that it could be misinterpreted as a "one-size-fits-all template
for development." In 2018, the World Bank's then-chief economist, Paul Romer,
told The Wall Street Journal that the report's methodology was flawed and
unfair. Romer then resigned.

The World Bank Group says it will stop producing the Doing Business report
after an investigation unearthed data irregularity in Doing Business reports of
2018 and 2020. World Bank leaders, including then-Chief Executive Kristalina
Georgieva, applied "undue pressure" on staff to boost China's ranking in the
bank's "Doing Business 2018" report, according to an independent investigation
released Thursday. The World Bank in 2018 announced a $13 billion-paid in
capital increase that boosted China's shareholding stake to 6.01% from 4.68%.
The report, prepared by law firm Wilmer Hale at the request of the bank's ethics
committee, raises concerns about China's influence at the World Bank.

The independent external review, done by a firm, investigated how improper

changes to the data for China (Doing Business 2018) and Saudi Arabia, the
United Arab Emirates, and Azerbaijan (Doing Business 2020) were effected,
and who at the Bank directed, implemented, or knew about the changes.

The World Bank Group has canceled the entire "Doing Business" report on
business climates, saying internal audits and the Wilmer Hale investigation had
raised "ethical matters, including the conduct of former Board officials, as well
as current and/or former Bank staff." It said Georgieva, and a key adviser,
Simeon Djankov, had pressured staff to "make specific changes to China's data
points" and boost its ranking at a time when the bank was seeking China's
support for a big capital increase.

The global financial institution said that going forward, it will be working on a
new approach to assessing the business and investment climate. The role of law
in promoting economic development has long been a controversial one. Certain
legal systems may be conducive to higher rates of economic development but
the necessary causal link between the two is difficult to establish. Nevertheless,
the DB project and associated rankings have sparked the attention of politicians
and policy makers across the globe.

Interestingly, Bangladesh policy makers hardly accept the Doing Business

Report with a plea of robust growth of GDP by more than 6 percent in last 3
decades despite the poor ranking in Doing Business Index. But Government has
entrusted the Bangladesh Investment Development Authority (BIDA) to work
on one stop service to improve in the Doing Business Index mostly to give
better service of registration of new business to bring down ranking from 178 to
below 100 by the current year.
The writer is a legal economist