World Bank fights back

2013-11-03 14:00

Doing Business report attracts praise and criticism alike because its rankings are often divorced from actual economic conditions and performance

The World Bank struck a defensive pose this week with the release of the 2014 edition of its popular, and widely reviled, Doing Business (DB) report.

The new edition follows a damning report by an independent review panel led by Trevor Manuel earlier this year.

Manuel’s panel criticised the “arbitrary” summary of various measures of “business friendliness” in a neat ranking of 189 economies according to the “ease of doing business”.

The effect can easily mislead as the rankings are often divorced from the actual economic conditions and performance of a country.

But the underlying data is useful, as it can highlight particular areas where countries lag behind their peers.

This year’s report stated: “The panel’s recommendations came too late for significant changes to this year’s report, but the project will explore options for improvement in coming editions.”

For many, the DB report epitomises the World Bank’s championing of all-out deregulation and race-to-the-bottom labour standards.

In earlier years, the ranking included scores for employment regulations that essentially rewarded countries that made it cheap and easy to fire workers.

After mounting criticism from the world’s unions, these indicators were removed from the rankings.

This year, the authors were at pains to justify the rankings and argued that they were not blindly “antistate”.

They said: “DB is not about less regulation, but about better regulation.”

The objective is to “catalyse reforms” that help the private sector operate, they added.

Countries with no rules whatsoever around construction permits do not get a good score, in fact, they get the worst score in the report.

“There is no evidence suggesting that economies that do well on (the DB) indicators tend to have governments driven by a ‘smaller government’ philosophy. Indeed, the data suggest otherwise. It is generally the bigger governments, not the small ones, that tend to provide more of the protections and efficient rules promoted by Doing Business,” said the report.

Denmark has an enormous state compared with its GDP, but is fifth on the rankings, it notes.

Singapore, Hong Kong, New Zealand and the US are also in the top five.

The bottom of the DB report’s rankings consists of such half-functioning states and war zones as Chad, the Central African Republic, Libya, South Sudan and the Democratic Republic of the Congo.

The DB report is based on the surveys of lawyers who are asked to score the regulatory burden faced by a hypothetical medium-sized company in the country in which they are based.

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