Explained: The Ease of Doing Business rankings controversy 

Synopsis: Recommendations to improve the ranking methodology employed by now scrapped Ease of Doing Business index report. 

Introduction 

Few days ago, the executive board of the International Monetary Fund (IMF) backed its Managing Director, Kristalina Georgieva, stating full confidence in her. The purpose was to end the long and increased questioning about Georgieva’s role in manipulating the World Bank’s Ease of Doing Business rankings when she was the chief executive there. 

What is the controversy and how Kristalina Georgieva is linked with it? 

In August 2020, the World Bank suspended its EoDB rankings after finding some “data irregularities”. “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. Kristalina Georgieva was the Managing Director of the IMF at that time. 

How can the ranking methodology be improved? 

Recently, the World Bank also published the findings of an external panel review of its EoDB methodology. It stated that “the current methodology should be significantly modified, implying a major overhaul of the project. 

Some of the key recommendations are: 

First, A substantial methodological shift away from hypothetical case studies and in favour of more data collection from representative samples of “actual” business owners and operators on their de facto experiences of doing business. 

Second, don’t ignore the government functions that provide essential public goods to the private sector: transport and communications infrastructure, a skilled workforce, law and order, etc. 

Third, do not rank countries on their tax rates.   

Fourth, eliminate the indicators “Protecting Minority Shareholders” and “Resolving Insolvency.” 

Five, make the “Contracting with Government” indicator more relevant. 

Six, restore and improve the “Employing Workers” indicator, but do not rank countries based on this information. 

Seven, improve the transparency and oversight of Doing Business. 

Source: This post is based on the article ” Explained: The Ease of Doing Business rankings controversy ” published in The Indian Express on 13th October 2021.