Doctoring data, toxic culture exposed in Doing Business ranking team
In a stunning development, the World Bank has said it is pulling the plug on its Doing Business report after data irregularities were internally reported and ethical concerns were raised. If taken seriously, this could prompt a change in policy for the federal and provincial governments in Pakistan who have been relying on the Bank’s Ease of Doing Business ranking index to push through reforms.
“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,” it said in a statement from Washington on September 16. “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.”
[Read the full statement: World Bank Group to Discontinue Doing Business Report ]
After reviews and audits, the board of executive directors decided to discontinue the Doing Business report, it said. Doing Business was started in 2002 and the 2020 studies were the 17th cycle.
The international donor’s ranking was used by Pakistan to inform reform and policy. In 2019, for example, the World Bank Group’s Doing Business 2020 study said that after Pakistan pushed through six regulatory reforms it ranked among the “world’s top 10 business climate improvers”. “Due to a concerted improvement in business regulation, Pakistan climbed 28 places and rose to a rank of 108 in the global ease of Doing Business rankings this year from 136 the previous year.”
The federal, Sindh and Punjab governments were heavily invested in this approach. In Karachi, specifically, the Ease of Doing Business ranking was taken seriously. Changes were made so it became easier to obtain a construction permit, get electricity and register property. The chief minister declared it part of the government’s agenda.
The State Bank of Pakistan tracked Pakistan’s ranking and the prime minister tasked a high level steering committee to oversee reforms so Pakistan improved on 10 indicators.
Reforms by the Government of Pakistan under the leadership of Prime Minister Imran Khan stress on the importance of improving the business climate. These reforms boost the rank of Pakistan in the World Bank’s Ease of Doing Business Index.#YearOfReforms pic.twitter.com/qPDq4N3vtJ— Government of Pakistan (@GovtofPakistan) August 18, 2019
The Board of Investment bought into the Ease of Doing Business formula and pushed it as well on several fronts.
In and of themselves, the reforms such as online tax payments to make it easier to do business had certain merits. However, the findings from the bank’s internal investigations serve as a cautionary tale for countries such as Pakistan that may be placing too much stock in external validation from agencies such as the bank.
It all started when the Doing Business 2018 report was released. At the time the bank was “consumed with sensitive negotiations” over its capital increase campaign. There was concern that one key stakeholder would reduce their financial commitment, leading China to worry how ownership shares would be recalculated. China started to complain that its Ease of Doing Business ranking did not reflect its economic reforms.
[Read the complete World Bank internal inquiry report here]
The internal investigation then found that some staffers had cooked the books, to put it crudely, to “stimulate” China’s ranking out of fear that the country would be angry if its ranking fell.
The second case that was investigated was Saudi Arabia’s. The Doing Business staff found a way to boost Saudi Arabia’s ranking so it was above Jordan. The third case was for Azerbaijan in which some reforms were not counted and its ranking was damaged.
This news prompted Valentin Lang, an Assistant Professor at the University of Mannheim, to post a series of tweets critiquing the bias in international donor agency rankings and ways of measuring up countries.
Now that it’s clear how the #WorldBank manipulated its #DoingBusiness index – it’s important to stress that this is NOT an isolated case.— Valentin Lang (@valentin_lang) September 17, 2021
Research has long shown systematic biases in similar Bank and #IMF figures.
A short 🧵 on this literature: pic.twitter.com/IJKVYK7gaM
For example, he said that one study on biased decision-making in international financial institutions such as the World Bank and IMF proved that “US allies receive better inflation forecasts as domestic elections approach”. Another study analyses how IMF “surveillance announcements may be influenced by political power that member countries exert at the IMF”. And yet another study proves that World Bank projects “receive inflated evaluations when large corporations participate as project contractors”.
One consultant working with the Sindh government said that it was a “big disappointment” to hear the news of corruption at such a high level in the bank. However, given how much work has already been done perhaps the World Bank’s ranking will not be needed. One solution is to engage independent auditors to validate the government’s performance.
“The Government of Sindh has worked really hard on Ease of Doing Business as evidenced by the last two World Bank Reports and by our own data,” Abdullah Zaidi, the director for the Doing Business Reform Implementation Unit, Investment Department, told SAMAA Digital in a text message on Monday. “This is why the discontinuation of the report, due to reasons not relevant to us, is somewhat concerning. Having said that, our work stands and on its own feet and we are willing to engage with the World Bank on any future regulatory assessments.”
The advantage of the Ease of Doing Business ranking is that it helped countries compare performance, but perhaps now the government will wait to see for a new mechanism the Bank develops. One option is to measure up performance subjectively for countries.
The Sindh government, for example, was working on several fronts to achieve a higher Ease of Doing Business ranking. The hope is that if you rank higher you can attract more investment. Here are some the reforms by department and the impact the department itself considered it had made:
Management of Sindh Business Registration Portal for online partnership registrations under the Industries & Commerce Department: Before the Sindh Business Registration Portal was launched, registration was manual and time-consuming. In 2016, the department registered 1,496 partnerships, 1,591 in 2017, and 1,669 in 2018. After the portal’s launch in February 2019, partnership registrations went up: 2,009 registrations were executed in 2019 (an increase of 20.37%), 1,224 in 2020 (a 39% drop due to COVID-19) and an estimated 2,137 so far in the 2021 (an increase of 75%).
A single-window facility at the Sindh Building Control Authority (SBCA) for the approval of Category -1 building plans: During 2020, the SBCA issued 2,170 construction permits for (Categories 1, 2, 3 and 4). So far in 2021, an estimated 2,820 construction permit approvals are expected with a year-on-year increase of 43%.
A case-flow management system in Sindh under the Sindh High Court, Law & Parliamentary Affairs Department: Reports are now available on the Sindh High court website. Some highlights are that the average disposal time for commercial cases is 380 days. From Nov 2020 to July 2021, at 26 courts, 1,125 cases were instituted, 2,200 were disposed and as of July 2021, 1,129 are pending.