Expert Panel Wants World Bank to Stop Ranking Countries

For years now, one of the World Bank’s most popular reports–the annual Doing Business Report, which ranks countries in terms of how easy it is to start a business–has also been its most controversial. Major emerging powers, who often rank poorly, have been among the report’s most vocal critics. Brazil and India have been particularly ...

By , a professor at Indiana University’s Hamilton Lugar School of Global and International Studies.

For years now, one of the World Bank's most popular reports--the annual Doing Business Report, which ranks countries in terms of how easy it is to start a business--has also been its most controversial. Major emerging powers, who often rank poorly, have been among the report's most vocal critics. Brazil and India have been particularly caustic. That persistent discontent led World Bank president Jim Kim to commission an independent study on the subject. Its report was released today.

For years now, one of the World Bank’s most popular reports–the annual Doing Business Report, which ranks countries in terms of how easy it is to start a business–has also been its most controversial. Major emerging powers, who often rank poorly, have been among the report’s most vocal critics. Brazil and India have been particularly caustic. That persistent discontent led World Bank president Jim Kim to commission an independent study on the subject. Its report was released today.

The report’s authors–led by South African planning minister Trevor Manuel–want the report to continue, but with significant modifications. In particular, the expert panel isn’t fond of the report’s overall rankings, which inevitably attract the most attention:

The ranking of countries, especially the Ease of Doing Business index, is a matter of controversy. The Panel believes the Bank should make a clean break with this practice. It should retain the rankings for each item, ranking each country separately in terms of contract enforcement, ease of resolution and so on, but it should not provide an overall or aggregate ranking. While the data on the 11 individual indicators should continue to be collected, aggregated into 11 cardinal scores, ranked and disseminated, the overall Ease of Doing Business index ranking should be dropped. 

The panel also recommended making the Doing Business report’s limitations more clear and rebranding it to emphasize its focus on a limited slice of the business community. Perhaps most fundamentally, the panel worried that Doing Business represents an anti-regulatory ideology:

The other point of contention was what the Doing Business report implicitly defined as a "good" regulatory and legal environment. One view that has become strong is that minimal regulation and very low taxes create the most attractive environment for business. However, regulation is necessary to protect societal and environmental interests, and taxes are necessary to provide public services and build infrastructure. The Doing Business project has, rightly or wrongly, been associated with a broad deregulation agenda. Some academics argue that seven of the 10 indicators imply that less regulation is unambiguously better – which may be the case for individual firms, but certainly not for a country from a macroeconomic point of view.

Major emerging powers were well represented on the panel, which featured experts from Brazil, India, China, Russia, and Manuel’s South Africa. The panel also included Canadian, Korean, German, and French nationals.

After reviewing a draft of the panel’s findings earlier this month, Bank president Jim Kim sounded unconvinced about the wisdom of ending the broad rankings that the panel disliked:

It is indisputable that Doing Business has been an important catalyst in driving reforms around the world. The Panel has made valuable suggestions for how to enhance the report, which merit consideration. 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. I am committed to the Doing Business report, and rankings have been part of its success. 

The ultimate decision on how to proceed will be delicate for the Bank leadership, which is intent on investing the emerging powers more fully in its work.

David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist

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