Data concerns reopen debate over World Bank Doing Business rankings

BURLINGTON, Vt. — Reports that the World Bank’s Doing Business rankings might have been subject to manipulation have reopened a debate about whether or not the project, which aims to evaluate countries’ openness to the private sector, ought to continue at all.

Groups that have long criticized Doing Business are making the case that recent concerns that data might have been manipulated to benefit certain countries are symptoms of a deeper overemphasis on deregulation that pushes client countries to undervalue social services, environmental protection, and human rights.

The project’s defenders say Doing Business was never meant to be a comprehensive policy framework but instead offers a valuable snapshot of rules and regulations that can help drive pro-growth reforms.

Last month the World Bank issued a statement describing “a number of irregularities” regarding data changes in the “Doing Business 2018” and “Doing Business 2020” reports. The concerns that data appeared to have been manipulated were raised internally by bank staff and related to China, Azerbaijan, the United Arab Emirates, and Saudi Arabia, according to the Wall Street Journal.

The bank, which seven years ago rejected an independent panel’s recommendation to do away with the ranking system, has subsequently paused the publication of its next Doing Business report, originally planned for October, while it conducts “a systematic review and assessment of data changes” in the last five reports, as well as an audit of the data collection process and data integrity controls.

For critics of the project’s overall ideological orientation, data integrity issues — while alarming — are almost beside the point.

“Regardless of data manipulation, the Doing Business Report has always been an act of ideological interference in policymaking,” wrote Isabel Ortiz, director of the Global Social Justice Program at the Initiative for Policy Dialogue in New York, and Leo Baunach, director of the Washington Office of the International Trade Union Confederation and Global Unions group, in an op-ed for Inter Press Service earlier this month.

On Sept. 8 the Oakland Institute, a human rights and environmental policy think tank, charged in an op-ed on the progressive news site Common Dreams that the Doing Business project promotes “destructive practices that favor multinational corporations instead of policies that put people and planet first.”

“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,” wrote Jayati Ghosh, professor of economics at Jawaharlal Nehru University in New Delhi, on Sept. 10.

In response to this flurry of criticisms, others have come to the project’s defense.

“It is arguably the most effective existing tool to stimulate country-based reform efforts that promise to improve these institutional underpinnings of productivity and wealth creation,” Michael Klein, a former World Bank Group vice president, who oversaw the project’s launch, wrote on the Brookings Institution’s website.

“The World Bank should make it clear that the project is fundamentally sound and will continue, while the future of aggregate rankings needs to be debated again. Country-specific judgment with useful data beats judgment without data,” Klein added.

As Klein’s comments suggest, the Doing Business project’s highly-visible and influential rankings have been debated before.

In 2013, an independent review panel chaired by South African politician Trevor Manuel recommended that the bank should do away with its aggregate rankings.

“The decision to retain or drop the aggregate rankings table is the most important decision the Bank faces with regard to the Doing Business report,” the review stated.

“Removing it would defuse many of the criticisms levelled against the report, but would diminish the report’s influence on policy and public discussion in the short term. In the long term, however, doing so may improve focus on underlying substantive issues and enhance the report’s value,” the panel argued.

The bank’s management rejected that recommendation, opting to keep the rankings and paving the way for countries’ continued efforts — apparently, sometimes illegitimate — to improve their spot.

The problem, according to Justin Sandefur, senior fellow at the Center for Global Development and a frequent critic of the index, is that a ranking that only measures the costs of regulations should not be used as a comprehensive guide for making policy decisions.

“It’s become such a marquee product for the bank that it sort of drives policy conversations, but isn’t necessarily anchored in the consensus view of bank experts on each topic,” Sandefur told Devex earlier this year.

The project collects useful information, he added, but pasting that data into a ranking that countries use to set their tax policies leads to a distorted view.

“I would love to see a serious team of tax experts ... say, ‘ok, we’re collecting this information, now let’s talk about what are best practices in domestic resource mobilization and taxation in developing countries and what can we say about the coherence and overall quality of [a particular country’s] tax policy.’”

“The index shouldn’t be used on its own as some sort of policy evaluation,” he added.