Battle within the Bank
One of the World Bank’s most popular publications is under fire — from inside Bank headquarters. For the last eight years, the International Finance Corporation, an arm of the Bank focused on private-sector issues, has published with the Bank itself a report titled Doing Business. It ranks countries on several indicators, including how easy it ...
One of the World Bank’s most popular publications is under fire — from inside Bank headquarters.
For the last eight years, the International Finance Corporation, an arm of the Bank focused on private-sector issues, has published with the Bank itself a report titled Doing Business. It ranks countries on several indicators, including how easy it is to start up a business, enforce contracts, get credit, and comply with regulations. The 2011 report was launched last week. Singapore topped the rankings, while Kazakhstan and Rwanda were most improved. As it does every year, the report got major media attention around the world. The IFC believes the report has been a catalyst for countries to streamline their procedures and create more business-friendly environments.
But the report also apparently sparked a heated meeting of the World Bank’s executive directors last month. By most accounts, the BRIC countries led the charge against the publication. None of the BRICs did particularly well in the study. China came in at 79th, Russia at 123th, and Brazil at 127th. India brought up the BRIC rear at 134th. Rogerio Studart, who represents Brazil and several other countries on the Bank’s board, told me the report is rife with methodological and data problems. He points to an independent review conducted by the Bank in 2008, which contained a number of criticisms and suggestions for improvement. More fundamentally, Studart believes the report is ideological and elevates a certain regulatory approach to an unwarranted level of importance.
I’ve always been struck by the exuberance of the propaganda they made out of it and the pressure they would put on some governments by using the rankings to adopt reforms, as if those reforms would solve some fundamental problems that in my view they could not solve. Reducing the number of procedures and the number of days to open up a company — this is always helpful. But portraying that as a way to create more jobs is a total jump.
Studart vows to keep up the fight against the Bank’s association with the report. "As a shareholder, I have a fiduciary responsibility to say that this has a reputation effect that I cannot accept," he said. "This is doing a disservice for the World Bank and for the shareholders." Studart believes that he and other critics are making progress and notes that some new voices on the board objected in this year’s debate.
The criticism has the IFC worried. "I worry when you have important board members like that who are not fully behind a report," says Neil Gregory, director of indicators and analysis for the institution. He attributes much of the discomfort to the ranking component, which is quite unusual in Bank reports. "Because it’s one of the few products the Bank does that ranks countries — and ranks all countries globally — it does attract a certain amount of controversy," he says. "There are those voices on the Board and beyond the Board who don’t like the Bank publishing products which have rankings in them."
Gregory traveled recently to China to try to allay concerns and will be headed to Brazil soon.