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Wednesday October 20th, 2021
Economy

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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