World Bank’s Doing Business list rigged to attract foreign investments?

The World Bank is currently sifting through the last five Doing Business reports, a list very dear to Vucic that apparently measures the “quality of the business environment”, as there are suspicions that some countries have unjustifiably made progress or declined on the list.

Danica Popović, professor at the Faculty of Economics in Belgrade, says that in the case of Serbia, the list is only a political instrument and one of the mechanisms of support that the international community gives to President Aleksandar Vučić.

“Methodological changes” is the justification used by the World Bank to explain a significant jump or drop of a country on the Doing Business list, which classifies countries according to the quality of their business environment.

The annual Doing Business report, launched in 2002, has become an influential global metric to assess the business environment and relative competitiveness of countries. High rankings are prized by governments seeking to attract investment and motivation for policymakers to improve conditions for business. A country moving up in the rankings tends to boost foreign direct investment.

Serbia has been ranked on the Doing Business list since 2007, and in the period from 2014 to 2016, it has “jumped” 44 positions, from 91st to 47th place, boasting, at that time, a “quantum leap” in economic progress, although, due to a change in the ranking methodology, the progress was actually slower.

As reported recently by the Financial Times, the World Bank has admitted that “a number of irregularities have been reported regarding changes to the data in the Doing Business 2018 and Doing Business 2020 reports”.

The four countries most affected by the irregularities in the 2020 and 2018 reports, were China, Saudi Arabia, the United Arab Emirates and Azerbaijan, the World Bank said.

Discover the most important foreign investments in Serbia in 2019: click here!

But data integrity was not the only problem with ranking countries in this way. The global investor focus on the index had encouraged countries to prioritize creating low-tax, low-regulation environments, sometimes at the expense of macroeconomic considerations.

“Serbia is not the only one that has rigged its ranking; many countries have done so in the sense that they have superficially applied and implemented the reforms in the areas that the World Bank analyzes for the purpose of compiling the Doing Business list”,  Danica Popovic, professor of the Belgrade Faculty of Economics, explains.

According to her, a good example of such a practice is India, which provided data only for the city of Mumbai, receiving many points for improving the business environment, although the rest of the country has no electricity for at least four hours per day.

In the case of Serbia, the World Bank only considers data for Belgrade, although it is a well-known fact that conditions for doing business vary from town to town.

Professor Milojko Arsić believes that the desire to be “accurate and verifiable” is the weak point of the list.

“This is why in order for Serbia to rank better, it only had to shorten the deadline for the issuance of building permits, without making great progress in the field of construction or urban planning, for instance,” Professor Arsic adds.

Many countries have thus improved their ratings, but not the real economic context, and it often happened that they ranked high on the Doing Business list, but not on the lists that assess the quality of state administration or the level of corruption.

“The consequence of such an approach is that “forced reforms” increase corruption. Also, there is another type of damage that Serbia suffers because of this,” says Danica Popovic and adds: “It doesn’t matter how much corruption, scandal or growth there is; the World Bank and International Monetary Fund officials will still say that Serbia can achieve a growth rate of 7% or more, which is absurd ”.

(Nova, 24.09.2020)

This post is also available in: Italiano

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