World Bank criticised for rejecting Doing Business reform

22 July 2014

In response to the World Bank’s rejection of significant reform to its revised Doing Business Report (DBR) methodology (see Observer Summer 2014), civil society organisations wrote a letter in July to Bank president Jim Yong Kim. According to the Bank, the DBR has “benefited from feedback from governments, academics, practitioners and reviewers”. However, the letter’s signatories state that they are “surprised and disappointed by the lack of implementation of those recommendations [set out by an independent panel reviewing DBR in June 2013] in the methodological changes that will be put in place in the 2015 and 2016 editions of the report”. They are concerned that “the Bank is now moving to include the indicators into the Strategic Country Diagnostic process, thus setting the stage for the indicators to be used exactly as a template for setting Bank priorities when negotiating the Country Partnership Frameworks”. According to the letter, improving the DBR, which has been heavily criticised since its introduction in 2003, would require the dropping of aggregate country rankings, the removal of any reference to tax rates in the paying tax indicators, the removal of the Employing Worker Indicator, and introducing peer review (see Observer Autumn 2013, Bulletin May 2014)

An International Labour Office June working paper reviewed three databases that use the DBR Rigidity of Employment index to measure labour market regulation.The index comprises of redundancy cost and rigidity of employment (difficulty of hiring, rigidity of hours, difficulty of redundancy), both based on a hypothetical case study and de jure indicators. The Bank decided to stop reporting this index from 2011, but still produces the raw data underlying it. According to the paper, these databases hold “important methodological shortcomings”, “strong conceptual bias”, and “do not attempt to recognise the social objectives of labour regulations or some potential benefits to the employer”. The report concluded that “such indicators should be based on more balanced conceptual frameworks and robust methodological choices”.