From ‘Doing Business’ report to ‘B-Ready’ report: some reflections

In a statement released on September 16, 2021, World Bank Group (WBG) indicated discontinuation of its ‘Doing Business’ report, whereby it pointed out ’After data irregularities on Doing Business 2018 and 2020 were reported internally in June 2020, World Bank management paused the next Doing Business report and initiated a series of reviews and audits of the report and its methodology.

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 today on behalf of the Board of Executive Directors, World Bank Group management has taken the decision to discontinue the Doing Business report.’

The declaration, nonetheless, did not come out of the blue. In fact, such an announcement was highly likely after criticism over the previous few years on the Report, both in terms of its methodology, and also how weights were assigned with regard to qualitative aspects on the basis of pre-determined mindset that reflected inherent bias of the producers of that report. In fact, World Bank’s own chief economist, Paul Romer, back in 2018 criticised the report, as reportedly highlighted in a January 12, 2018, Wall Street Journal (WSJ) article ‘World Bank unfairly published its own competitiveness report’, according to which he emphasised that national ranking for the past four years needed to be recalculated.

For instance, in Pakistan, governments continued to celebrate improvements in its rankings in a rather premature and less cautious way – and in much similar way it carelessly gives more than a pat on its back, perhaps for political milage – when neoliberal, and over-board austerity minded International Monetary Fund, and a number of risk rating agencies indicate improvement in country’s macroeconomic and growth performance – and future outlook even as the report was attracting a lot of criticism!

With regard to the shortcomings of the ‘Doing Business’ report, internationally renowned economist Jayati Ghosh in her Project Syndicate (PS) published article ‘Stop Doing Business’ back in September 2020 pointed out: ‘The World Bank’s Doing Business index has been both conceptually and operationally suspect since its inception in 2003, but mainstream economists have only recently started to criticize it. Although the Bank’s own recent acknowledgement of some of the problems is welcome, the index has already caused huge damage to developing countries, and it should be scrapped.’

In fact, in a series of articles back in November 2019, and then again in an article in September 2020, all published in Business Recorder (BR), I tried to caution the government against chewing more than it was from these rankings in terms of celebrating for the improvement in business environment, when a plain look of ground realities did not support any significant level of improvement.

Indicating in one of my articles, I, while giving reference to a Financial Times (FT) published article ‘World Bank suspends its business climate index over data “irregularities”’, which highlighted a marked improvement in Pakistan’s ranking from 46th position to 31 in one year, pointed out: ‘Given such marked change in roughly one year, the government of Pakistan should have questioned the stark improvement in its ranking, rather than getting on the bandwagon of good economic management, when during most of that time the focus of economic team was mostly concerned about macroeconomic crisis of a near-default situation on debt payments.’

In an effort to improve its ‘Doing Business’ report, the WBG has recently launched in its place ‘Business Ready (B-Ready) 2024’ report, in which it has rightly expanded the factors influencing business environment of countries from mainly government regulation, and some focus on tax environment in the ‘Doing Business’ report to ‘business entry, business location, utility services, labor, financial services, international trade, taxation, dispute resolution, market competition, and business insolvency.’

Notwithstanding, the positive step of expanding the list of factors, the report still needs to go deeper, and wider in its scope for highlighting, for instance, how it captures the quality of price discovery a business environment faces in a particular country, especially developing countries with less developed real, and financial sectors markets; which means how it assesses, and includes the extent of transaction costs, and information asymmetries in markets.

An important factor missing is internalizing assessment on ‘green washing’, and more broadly environmental standards that are in line with meeting key global warming goals, to decipher as much as possible the responsibility shared by businesses in forging a greener environment, and how tax, and subsidy incentivization of public policy, for instance, differentiates one country from another on the business ready scale in a comparative way both intra-industries within a particular sector, and between countries.

Moreover, there is a need to see how strongly and meaningfully the business environment establishes the link between epidemiology, economy, and environment, given the fast-unfolding nature of existential threats like climate change, and related ‘Pandemicene’ phenomena.

Also, the yardstick for judging which business environment in terms of various underlying factors is considered better needs to be clarified to indicate whether an overall neoliberal policy framework is being carried forward, or the WBG has formulated the performance yardstick in the light of the misgivings of this framework; especially the negative impact of such framework in terms of negative fallout on economic and environmental sustainability, and on inequality and poverty.

Copyright Business Recorder, 2024