(Associated Press) Under fire for allegations that it bowed to pressure from China and other governments, the World Bank has dropped a popular report that ranked countries by how welcoming they are to businesses.
The report is important to many companies and investors around the world: They use the World Bank’s “Doing Business” report to help decide where to invest money, open manufacturing plants or sell products.
Eager to attract investment, countries around the world, especially developing economies, have sought to improve their rankings in the World Bank’s report.
Sometimes, nations would pursue substantive policy changes — by, for example, making it easier for businesses to pay taxes, obtain loans or enforce contracts. Sometimes, they would take a more aggressive tack: Like pushy high schoolers cajoling a teacher for a higher grade, they would lobby the World Bank to provide a higher score on the “Doing Business” report
Countries that have scored a high ranking have often touted their success. In 2017, for example, Prime Minister Narendra Modi took to Twitter to celebrate India’s big improvement in 2017. In Rwanda, the country’s development board employs a “Doing Business economist.”
But the World Bank has long been accused of using sloppy methodology and of succumbing to political pressure in producing the rankings. This week, the bank dropped the report after investigators had reviewed internal complaints about “data irregularities” in the 2018 and 2020 editions of “Doing Business” and possible “ethical matters” involving World Bank staff members.
In an investigation conducted for the bank, the law firm WilmerHale concluded that staff members fudged the data to make China look better under pressure from Kristalina Georgieva, then the CEO of the World Bank and now head of the International Monetary Fund, and the office of Jim Yong Kim, then the World Bank’s president.
The investigation found that Georgieva “became directly involved in efforts to improve China’s ranking.'”
According to the investigation, she also lambasted the bank’s China director for “mismanaging” the bank’s relations with Beijing and for failing to appreciate how important the “Doing Business” rankings were to the Chinese leadership.
Under pressure from the top, the investigators found, the bank staff decided to give China more credit for a new law involving so-called secured transactions — typically, loans that involve collateral. The upshot was that China ended up back where it was the rankings — No. 78. (Other changes affected the rankings of Azerbaijan, the United Arab Emirates and Saudi Arabia.)
WilmerHale concluded that bank staffers knew that the changes to the report were “inappropriate” but feared retaliation — including dismissal — if they expressed concern. The law firm referred to a “toxic culture” at the bank.