World Bank launches more robust, transparent business climate rankings

WASHINGTON, USA – The World Bank on Monday, May 1, unveiled new methodology and improved safeguards for assessing the business climate in up to 180 countries after embarrassing revelations of data irregularities and favoritism toward China forced it to cancel its flagship rankings two years ago.

The bank scrapped its “Doing Business” rankings in September 2021, citing internal audits and an independent probe that found senior World Bank leaders had pressured staff to alter data to favor China. It cited data irregularities that also boosted rankings of other countries, including Saudi Arabia, the United Arab Emirates, and Azerbaijan.

A pilot edition of the new replacement annual series called “Business Ready” will be published in the spring of 2024, covering an initial group of 54 economies in Asia, Latin America, Europe, the Middle East, and Sub-Saharan Africa, the bank said.

More countries will be added in the next two years as the bank refines its methodology and ramps up the new project, which aims to help countries attract investment and boost jobs and productivity to accelerate development.

“‘Business Ready’…reflects a more balanced and transparent approach toward evaluating a country’s business and investment climate,” the bank said in a statement.

World Bank Chief Economist Indermit Gill said the new approach enabled “a fuller and sharper measure of the investment climate of countries,” something he said was badly needed in a global economy in the midst of a generalized slowdown.

“Business Ready” was shaped by recommendations from World Bank experts, governments, the private sector, and civil society groups, and includes for the first time worker rights, as defined by the International Labour Organization, while acknowledging that regulation can also have positive aspects.

“The main thing that went wrong was the data integrity of ‘Doing Business’ was compromised,” Norman Loayza, director of the World Bank’s Indicators Group, which leads the project, told Reuters. “The main point for us is that we need to ensure data integrity and we have a very comprehensive approach to do that.”

Data transparency

To ensure full transparency, Loayza said the bank would publish all collected data – raw data, scores, and the calculations used to obtain the scores – from private sector contributors, as well as from surveys of entrepreneurs, company owners, and managers.

The bank will also make available the tools needed by outsiders to replicate the results of the data assessments.

But World Bank officials were still debating whether to revive the business climate rankings that were at the heart of the “Doing Business” controversy or produce an overall index, Loayza said, with a decision expected prior to the first report.

Loayza said that while the rankings were criticized for encouraging political pressure to try to lift country scores, they also helped spur nearly 4,000 regulatory reforms in developing and developed economies over the past two decades.

He said the new project focuses on 10 topics covering the life cycle of a firm, including business entry, utility services, labor, dispute resolution, market competition, taxation, and insolvency – another move aimed at addressing criticism of the earlier product.

“We take into account not only the perspective of the private entrepreneur, but also the perspective of workers, consumers, and other market participants,” he said, citing the inclusion of factors such as worker safety, environmental sustainability, and market competition.

To lay out the new approach, the bank published two key documents: a Business Ready Manual and Guide, specifying detailed protocols and safeguards, including how the bank interacts with governments and lines of approval, as well as a methodology handbook on its indicators and scoring methodology. – Rappler.com