World Bank probing whether ‘Doing Business’ report was manipulated to benefit China, other nations
- The World Bank is investigating allegations its global ease of doing business rankings may have been manipulated to benefit China, Saudi Arabia and two other countries
- The probe follows a review that found a member of the development economics department had made changes to data used for ‘Doing Business 2020’, sources say
World Bank officials launched an investigation this week into possible manipulation of data used for its annual “Doing Business” report, which may have altered the standing of China and several other countries in the rankings, after identifying an individual responsible for the falsifications, according to two people familiar with the matter.
The report, published yearly since 2003, uses data on each country’s taxation policies, regulation frameworks and other measures to rank the ease with which a firm can conduct operations within each of the jurisdictions.
One of the sources said the World Bank investigation was launched after an official in the development economics department was identified as having “fudged” the data on some countries including China. The department is responsible for compiling the data used for the report.
The second source said the individual allegedly manipulated data on China, Saudi Arabia and two other countries. A third source said Azerbaijan and the United Arab Emirates were also among countries “most affected”.
“The actual allegation of when this happened involves 2018-19 data, which came out recently when people looked at the numbers,” the second source said. “A bit of due diligence was done and the chief economist said let’s shut it down until we figure out what’s going on.”
A World Bank spokesperson declined to comment, saying “we generally do not comment on personnel issues”.
Last week, the World Bank announced that “a number of irregularities have been reported regarding changes to the data in the ‘Doing Business 2018’ and ‘Doing Business 2020’ reports, published in October 2017 and 2019”.
“The changes in the data were inconsistent with the ‘Doing Business’ methodology,” the statement said, adding that the World Bank was conducting “a systematic review and assessment of data changes that occurred subsequent to the institutional data review process for the last five ‘Doing Business’ reports”.
China’s ranking jumped to 31 in the latest report from 84 in 2016 – one of the most substantial jumps among the 190 countries ranked – with a raw score that rose to 77.9 from 62.93. Saudi Arabia’s ranking improved to 62 from 82, and its score rose from 63.17 to 71.60, in the same time frame.
Asked about reports that China’s position in the annual rankings was affected by data manipulation, Hua Chunying, spokeswoman for the Ministry of Foreign Affairs, said on Tuesday that Beijing supports a transparent World Bank investigation.
“We urge the World Bank to conduct internal investigations in accordance with the principles of fairness, objectivity and transparency, in accordance with the rules and procedures of multilateral institutions, and to effectively safeguard the reputation of the World Bank and its member states,” Hua said.
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“These efforts to reduce obstacles to the operation of companies resulted in substantial improvements in China’s ranking,” Kujis said.
The report has come under internal scrutiny before, owing to concern that its conclusions can run counter to the World Bank’s overall development agenda for lower- and middle-income countries.
“Empirical evidence on the results of business-regulation reforms captured by the report is mixed and suggestive at best,” according to an independent review panel tasked by the World Bank in 2013 to evaluate the report on its 10th anniversary.
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“Correlations between the report’s topics and developmental outcomes often do point to a negative association between the regulatory burden and economic development and growth,” the review panel said. “However, such correlations do not justify a causal interpretation: it is notoriously difficult to establish a causal relationship between such variables at country level.”
Isabel Ortiz, director of the Global Social Justice Program at the New York-based Initiative for Policy Dialogue, and Leo Baunach, Washington-based director of the International Trade Union Confederation and Global Unions group, said in an opinion piece published on Wednesday that possible data manipulation was not as concerning as the way it interferes with efforts to protect workers.
“The report has encouraged countries to take part in the ‘deregulation experience’ including reductions in employment protection, lower social security contributions (denominated as ‘labour tax’) and lesser corporate taxation,” Ortiz and Baunach wrote, adding that the World Bank rejected “almost all the recommendations” from the independent review.
The World Bank is turning to independent reviewers again in its assessment of data changes over the past five years. Also, publication of the “Doing Business” report will be paused until the investigation is complete.