World Bank keeps Ease of Doing Business Index despite criticism

Reuters: The World Bank on Friday said it intends to keep ranking nations on the ease of conducting business, despite criticism from countries like China that feel the scorecard unfairly stigmatises fast-growing developing economies.

World Bank President Jim Yong Kim said the Bank is committed to keeping its flagship ‘Doing Business’ report, including the rating, which compares the ease of starting and conducting a business in 185 countries.

The decision to keep the rankings was seen as a test case for Kim, at the helm of the global development lender for nearly a year, on how he will balance competing priorities from World Bank board members.

“The World Bank Group’s work on business climate development, including the Doing Business report, is core to our mission of ending poverty, and in fact we expect it to grow,” Kim said in a statement. “I am committed to the Doing Business report, and rankings have been part of its success.”

The report is prepared by the bank and its private-sector lending arm, the International Finance Corporation. It has become one of the bank’s most popular publications since it began in 2003.

Smaller developing countries often use the report to show outside investors how much they’ve improved their business environment. Government officials may use it as an incentive to promote business-friendly legal changes, such as eliminating red tape.

“We believe that the Doing Business country rankings serve as an important benchmarking tool at a time when all of us are focused on supporting demand and job creation,” a US Treasury official said in a statement. The United States, which is ranked number four, has said it supports the report and its ratings.

Others have criticized the report’s methodology and said it has a bias against all regulations, including protections for workers. According to several sources, China pushed especially hard for modifying the report and getting rid of the ratings system, arguing the World Bank should not rank its members.

China was ranked number 91 in the most recent report, prompting suspicions that its opposition was motivated by the low ranking. China’s executive board director, Shaolin Yang, could not be reached for comment on Kim’s decision on Friday afternoon.

“Going forward, I will be pushing World Bank Group staff to focus their efforts on improving all aspects of Doing Business, including its data, methodology, and rankings,” Kim said.

Shortly after coming to the World Bank last July, Kim appointed an independent panel to review the report and make recommendations about its future. The World Bank’s board discussed the panel’s findings on Friday, and they will be released publicly in coming weeks.

A former US Treasury official Scott Morris said Kim was motivated to appoint the panel because several board members were very critical of the report last summer and wanted it abolished.

Morris, now a visiting fellow with the Centre for Global Development in Washington, said some countries were uncomfortable with the transparency of the ranking system, posing a dilemma for the World Bank on its role and whether it should rank its members.