Corruption at the World Bank

But if it can’t rank business friendly countries, who can?

COVERY STORY | THE INDEPENDENT | Since the World Bank announced it has decided to abandon its flagship “Doing Business” series after several internal audits and the publication of a damning investigation, debate has raged over the way forward.

The World Bank announced on Sept. 22 that it would abandon the periodic report, which ranked economies based on the ease and efficiency of conducting business operations and was often touted by governments when their country’s position moved up the list.

A series of audits revealed serious ethical improprieties, conflict of interest within the Bank’s advisory services and data manipulation in the development of the Doing Business rankings.

Since the Doing Business Report’s launch in 2003, the World Bank has ranked countries on the “ease of doing business” and guided regulatory changes attractive to private investors with scant regard to the fact that what is good for business is not always good for people and the planet.

But separate external panel report by the Center for Global Development (CGD) released soon after the audit revelations argued that rather than canceling the report project altogether, the World Bank could redesign the project.

The CGD suggested scrapping country rankings which have for over 17 years kept the 190 countries rankings on tenterhooks and prohibiting  World Bank staff members involved in the project from providing paid consulting services to the nations the report ranks.

World Bank President David Malpass on Sept.22 said the lender will find new ways to be involved in encouraging growth for the private sector of developing nations after the cancellation.

Since then, however, the GCD’s Justin Sandefur, who helped draft the overhaul proposal, thinks the discontinuation makes sense.

“DB was simply too ad hoc, too subjective, and too prone to political interference, that it had become a significant drag on the credibility of World Bank research,” he said.

But Malpass said in an interview with Bloomberg TV  that the World Bank was discontinuing the report, but the World Bank “is going to be very, very involved in the business climate of developing countries”.

“That’s critical for them in establishing jobs and getting growth, attracting new investment. That’s the purpose of the report.”

If that happens, it will be the second major overhaul of how the World Bank does business with, especially, the low developing countries.

The policy prescriptions behind the Doing Business rankings have been described as a “new face of the much-criticised Structural Adjustment Programs (SAPs)” which were widely implemented through World Bank and International Monetary Fund loans in the 1980s and 90s.

Critics said all are rooted in the failed idea that deregulation and privatisation encourage investment and boosts development and economic growth. Many pointed at evidence of the negative consequences of SAPs. Others described the Doing Business prescriptions as skewed and failed tools of trickle-down economists.

“With the Doing Business index, the Bank made itself both the referee and the rule maker of its global benchmarking and investor-friendly policy reforms exercise,” wrote Flora Sonkin;  Policy Researcher at Society for International Development (SID) and  Bhumika Muchhala,  Senior policy researcher at the Third World Network .

They added: “Governments that want to signal to the world that they are open for international business race each other to cut red tape and win a place on the Bank’s “top ten improvers” list. But this regulatory race to the bottom erodes worker and environmental protections in the meantime. The reports’ recommendations have concrete effects on shaping policy in developing countries.”