Last week's Spring Meetings of the World Bank and the International Monetary Fund came with the usual signs of big international gatherings: tight security, politicians, celebrities, uplifting declarations, and lots of television cameras. But as is often the case, the real action took place behind the scenes. This year, for example, the Spring Meetings in Washington D.C. provided the venue for a meeting of an independent panel charged with the task of reviewing Doing Business, one of the World Bank's most prominent publications. Businesses, development specialists, and policymakers rely heavily on Doing Business as a guide for understanding potential barriers and for proposing and implementing practical institutional reforms. Any recommendations made by the review panel would be closely watched for clues about the future course of the Bank. Some insiders say that there's talk of outsourcing the survey to some other organization -- or perhaps even axing it altogether.
In publication since 2003, Doing Business was inspired by academic research into the importance of sound legal environments for economic growth. The survey currently synthesizes expert assessments by roughly 10 thousand contributors from 185 countries into a picture of the ease of doing business around the world. It serves as a guide to important requisites such as the costs of starting a business, obtaining permits, hiring and firing, and so on. The project thus brings together a large amount of data that either didn't really exist before or weren't comparable across different countries and presents them in a way that is easy to understand and use.
Of late, however, the Doing Business project has come in for a lot of flak. "It's not just that some reforms promoted by the Doing Business rankings might be irrelevant for the majority of businesses in developing countries," says Christina Chang, an economist at CAFOD, a large UK-based aid organization. But "in some instances they're actively harmful to poor men and women." It's a criticism shared by many in the realm of non-government aid organizations.
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In the run-up to the tenth anniversary of Doing Business, the World Bank's recently appointed president, Jim Yong Kim, appointed a panel to conduct a thorough review of the project. Chaired by Trevor Manuel, a broadly pro-market former finance minister from South Africa, the panel includes several prominent scholars, including Timothy Besley of the London School of Economics. Rather oddly, though, the process has given a uniquely democratic platform to the survey's most vocal critics -- above all humanitarian groups such as CAFOD, Oxfam, Christian Aid, Save the Children, and others.
A joint submission by these organizations to the review panel claims that the Doing Business assessments are "mostly irrelevant to the majority of businesses struggling to do well in developing country markets." The groups call for the World Bank and other donors to stop using Doing Business as a benchmark assessing the 185 countries covered in the study. The critics claim that the project s gives government incentives to skew policy away from the needs of the majority of the poor and towards thoughtless institutional fixes aimed at helping countries improve their Doing Business rankings, such as corporate tax cuts or deregulation.
This controversy comes at an odd time. Since 2000, many previously poor countries have made enormous economic progress -- above all in Africa. Some of the new wealth was, admittedly, the result of a rise in commodity prices. According to a 2010 report by the consulting group McKinsey, however, "resources accounted for only about a third of the newfound growth. The rest resulted from internal structural changes that have spurred the broader domestic economy" -- just the sorts of changes that Doing Business tends to highlight.
Many of those changes have their roots in sounder macroeconomic management. Compared to the 1990s, deficits and debt burdens went down in most of Sub-Saharan Africa. Policymakers across the continent succeeded in reducing inflation from an Africa-wide average of 22 percent in the 1990s to 8 percent in this century. More importantly, they also undertook institutional reforms of the kind recommended by the Doing Business project: corporate tax cuts, reduction of red tape, streamlining of licensing and issuance of permits, and the liberalization of labor markets.