With the world’s banks doing business fail, what should happen next? – Global issues – News from the pink report
GENEVA, Sep 24 (IPS) – Last week, the World Bank announced it was “halting” its “Doing Business” report, which ranks countries based on how easy it is to open and operate a business. business.
He cited the results of a survey which found that the World Bank had changed the ranking under funding pressure. It was not the first time that the ranking had come under criticism. A 2008 internal evaluation report highlighted their lack of transparency, while in 2018 the Bank’s chief economist, Paul Romer, resigned, denouncing the manipulation of the data.
In truth, the rankings had been struggling with a credibility problem for some time. My colleagues and I have seen this firsthand. And there were several reasons for this.
First, Doing Business had become too politicized. It was originally intended as a way to measure improvements in countries’ business environments. He used an index based on the number of procedures and the time needed to, for example, set up a business or obtain a building permit – there were ten indicators.
However, the Bank has also used it to rank countries, celebrating top scorers and reformers. Governments quickly saw a good ranking as an end in itself, regardless of its impact on their development. A shift in rank could be politically damaging.
The ranking ostensibly promised a rigorous assessment of each country’s business environment. Yet, with a small team in Washington DC operating in what the survey described as a toxic environment, much of the work to assess the ten indicators in 190 countries was assigned to national panels of volunteers, who were invited to modify or approve pre-filled questionnaires.
Not all were experts in the field and some did not even work in the country. Many we spoke to barely glanced at the questionnaire before signing up. In addition, questionnaires in English have posed problems in countries where the language is not widely spoken.
The result was that governments didn’t always see their hard work reflected in the rankings, leading to lobbying campaigns that, perhaps unsurprisingly, favored those who carried the most weight and not always in the right way.
Some governments have complained that their score has changed for few reasons, and in the case of Chile, depending on the ruling party. The lack of transparency in the changes, for example, contrasts with the UNCTAD Global Business Registration Index, which specifically invites input from the public.
The survey confirmed a perception that rankings were helped by paying the World Bank to advise on reforms instead of turning to development institutions such as UNCTAD or UNDP.
He noted that “the vast majority of Bank employees we spoke to raised the issue of the inherent conflict of interest that advisory services create”.
The methodology also had its flaws. He made little distinction between good procedures, such as complying with environmental rules, and unnecessary red tape, such as requiring another stamped and notarized copy of a document.
And if the business environment reforms are measured by the number of days and procedures saved, they have not measured their impact.
For example, at the start of Covid, we helped Benin move the process of setting up a business online, meaning it could be done from a cell phone instead of spending days doing the research. queuing in government offices under the tropical sun. He also reduced the total time to two hours. But it didn’t stop there.
As a result of these changes, which have made life easier for people short of time or far from the capital, the number of businesses created has increased by 43%, half started by people under 30, half in rural areas. and a third belonging to women. This impact, more than a simple ranking, should be the real cause for celebration.
So what happens next? The Bank’s board said it would “work on a new approach to assess the business and investment climate”. What might it look like, how can it foster real development, how can it be depoliticized, and is it still relevant today?
Doing Business aims to promote development by facilitating the functioning of the private sector.
Therefore, it is not only necessary to measure whether the reforms facilitate procedures on paper, but whether they actually lead to the creation of more companies, and if so where and by whom? In other words, is there a real impact on development?
It should also measure whether the procedures are clearly understood. Because the lack of clarity on what documents to prepare, where to go, how much to pay and what to expect often discourages business owners from registering, thus perpetuating the informal economy. Hanoi Municipality in Vietnam shows how well this can be done.
The team should be sufficiently staffed to function without relying heavily on volunteers, and any literature review should be rechecked through field visits to government offices, supported by surveys of private companies.
The independence of the team could be protected by a committee made up of members of other development organizations. This committee would oversee the development of each report. He would also hear appeals from governments who feel that the index does not adequately reflect their situation.
The construction of the index should be published online, including the data collected, decisions on outliers and any other assumptions, so that a member of the public with adequate statistical expertise can reasonably generate the same results.
In the interests of transparency, the review of government appeals should also be published.
The index should be less political. It means no ranking. Reforms are not a race and quality takes precedence over quantity. An improved business environment is a means to an end, but not an end in itself.
The final question, however, is whether such a clue is still needed at a time when many governments, driven by Covid and the demands of young entrepreneurs, are moving their administrative procedures online.
Earlier this year, Bhutan allowed small business owners to register their businesses through a government website and receive automatically generated legal documents via email within seconds.
As more governments embrace this same platform and technology, countries will soon be separated by hours or minutes rather than weeks and days. The procedures will be reduced to one step.
In this scenario, it is not certain that there is anything left for Doing Business to measure.
Ian Richards, UN development economist, helps governments improve their business environment and attract investment.
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© Inter Press Service (2021) – All rights reservedOriginal source: Inter Press Service
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