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Saturday May 25th, 2024

World Bank Doing Business index scrapped after manipulating ranking for China, others

ECONOMYNEXT – Washington based World Bank has scrapped its Ease of Doing Business Index after its ethics office found the ranking was manipulated to show better results by countries such as China and Saudi Arabia.

In the months leading up to the release of the 2018 ranking, Chinese officials, including country’s executive director for the agency had repeatedly met World Bank President Jim Yong Kim, a Harvard doctor, then-chief executive Kristalina Georgieva and others, a probe had found.

The Executive Director had told members of the East Asia and Pacific Department on September 14, that ‘everyone would be relieved’ if the rankings improved. Chinese officials had ‘expressed their concern’ to President Kim over the existing 2017 rankings.

A Chinese official had met the East Asia department on October 13 and said he expected 2018 report “would better reflect China”. On October 14, he had dinner with CEO Goergieva and told her she was the responsible person to ensure that China’s reforms were acknowledged in the report.

On October 16, the Doing Business team had finalized rankings where China had dropped to 85 from 78.

President Kim had summoned the officials linked to the Doing Business Index and there was another meeting with senior staffers from his office.

“The group discussed methodological changes to the report that might boost rankings, including by incorporationg data from Taiwan, China and/or Hong Kong SAR into China’s data,” the report based on interviews with World Bank staffers said.

President Kim’s aides had directed the team to simulate the results and later to add Macao to the rankings to check. But the World Bank did not rank Macao separately.

After Hong Kong was added to China, its ranking would improve to 70, from the 78 instead of dropping to 85. At a meeting with Chief Executive Georgieva on October 18, it had been suggested by officials to use the highest scoring city rather than an average of Beijing and Shanghai as had been done earlier to boost rankings.

China’s Executive Director was meanwhile asked how the country would respond to a drop in the ranking.

“The ED responded that China would not be pleased if the country’s rankings dropped,” the report said.

Simeon Djankov, a high level Development Economics official who had helped start the index had worked with the team to find ways to improve the ranking such as its Legal Righst, Getting Credit and Paying Taxes indicators.

“These changes boosted China’s score by nearly a point and increased its ranking by seven places to 78, the same ranking as the country had in Doing Business 2017,” the report said.

“A member of the Doing Business leadership and then sent the proposed changes to the three data points to Mr Djankov, who wrote in response, “Excellent work, Please go ahead with the report publication.”

Georgieva, who is now heading the International Monetary Fund, has denied she pressured staff over the index. During the time of China’s scores controversy, the World Bank was trying to boost its capital.

In the 2020 rankings, an incident relating to Saudi Arabia was investigated.

In September 2018, Saudi Arabian officials had expressed displeasure at the country’s performance to President Kim.

World Bank was also giving paid consultancy to Saudi Arabia on how to improve the rankings.

In 2019, the Doing Business team had found that Jordan was the ‘Top Improver’ in reforms and Saudi Arabia was second. Djankov had told the team to “find a way to alter the data such that Jordan fell from first-place position in the Top Improver list.”

A Legal Rights index was boosted to 4 from 3 and the compliance time for value added tax was reduced. It also improved UAEs score but not its rank.

In another instance, this time involving Azerbaijan, Djankov had ordered an inquiry on whether the country had influenced private data collectors. Though an ‘internal audit’ found no problems, Azerbaijan’s reforms were frozen, dropping the country from the ‘Top Improvers’ list.

The ethics investigators said unlike in the case of China, they woas no evidence to suggest a direct involvement in President Kim or Chief Executive Georgieva in the Azeri affair.

The report also noted that there was a ‘toxic culture’ under Djankov, staffers feared retaliation and had described him as a “bully” who managed “by terror and intimidation.”

The report only dealt with the three cases, and it is not clear whether how many others, if any occurred.

“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,” the World Bank said in a statement.

“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.”

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings


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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.


Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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