IFC deceptions on Doing Business

22 September 2009

by Alex Wilks, Eurodad

Excitement caused by the International Finance Corporation´s (IFC) April announcement that it was changing how it scored countries in its controversial Doing Business publication (see Update 66) turned to dismay as the 2010 edition shows that very little has actually changed.

Singapore is again top of the rankings, while other countries such as Georgia are praised and given a better ranking for abolishing their social taxes. Belarus gets a good score for making it easier to fire people. Conversely, as the International Trade Union Confederation pointed out, Cambodia is said to be "making it more difficult to do business" because it introduced a social security contribution.

World Bank managing director and former Nigerian finance minister, Ngozi Ikonjo-Iweala, spoke out against jurisdictions with lax regulation and poor financial transparency, telling a conference in Washington DC that "we must hit financial centres very hard … we need to hit Dubai and Jersey and Switzerland hard – this is the future of development". However, these jurisdictions are numbers 33, 5 (the UK) and 21 respectively in the Bank´s Doing Business ranking.

Research by NGO ActionAid International shows that the ´paying taxes´ indicator still rewards countries for cutting business taxes, irrespective of what the best level might be.

The World Bank has prided itself over the last decade in becoming seen as a ´knowledge bank´. Many newspapers and officials uncritically cite the Bank´s work without digging deeper. This is not the view of many researchers, such as Christian von Drachenfels of the German Development Institute. He and colleagues last year published Seven Theses on Doing Business, none of them complementary. They argue: "the reports basically advocate for minimum regulation. This perspective largely neglects the economic and social benefits of regulation".

At a time when every world leader is preaching the virtues of regulation, the IFC risks being seen as dangerously out of step.