Commentary on Political Economy

Thursday, 16 September 2021

Georgina, Georgina... What Have You Done!?

 World Bank Cancels Flagship ‘Doing Business’ Report After Investigation

Probe faults leaders including Kristalina Georgieva, now IMF managing director, who disagrees with findings

International Monetary Fund Managing Director Kristalina Georgieva said she fundamentally disagreed with the investigation’s findings. PHOTO: BRENDAN SMIALOWSKI/AGENCE FRANCE-PRESSE/GETTY IMAGES


Updated Sept. 16, 2021 1:21 pm ET

The World Bank canceled a prominent report rating the business environment of the world’s countries after an investigation concluded that senior bank management pressured staff to alter data affecting the ranking of China and other nations.

The leaders implicated include then World Bank Chief Executive Kristalina Georgieva, now managing director of the International Monetary Fund, and then World Bank President Jim Yong Kim.

The Doing Business report has been the subject of an external probe into the integrity of the report’s data. On Thursday, the bank released the results of that investigation, which concluded that senior bank leaders including Ms. Georgieva were involved in pressuring economists to improve China’s 2018 ranking. At the time, she and others were attempting to persuade China to support a boost in the bank’s funding.

The Chinese Embassy in Washington didn’t immediately respond to a request for comment. Mr. Kim didn’t respond to an email seeking comment.

Ms. Georgieva said: “I disagree fundamentally with the findings and interpretations of the Investigation of Data Irregularities as it relates to my role in the World Bank’s Doing Business report of 2018.”

The Doing Business report has been a flagship publication for the World Bank, which conducts economic research alongside its primary work of providing financing in poor countries. The report’s annual release drew media coverage around the world, and countries jockeyed to improve their ranking by making policy changes.

For years, the report was viewed as a success because it motivated governments to improve the ability of businesses to obtain licenses, connect to electricity or pay their taxes—all factors considered in the rankings.

Chinese officials in 2018 were eager to see their ranking improve, and so Mr. Kim and Ms. Georgieva and their staff held a series of meetings to discuss ways that the report’s methodology could be altered to improve China’s rankings, according to the investigative report by the law firm WilmerHale.

Ultimately, the team identified three data points that could be altered to raise China’s score, the investigative report said. For example, China had passed a law related to secured transactions, such as when someone makes a loan with collateral. The World Bank staff determined it could satisfy upper management by giving China a significant improvement to its score for legal rights, citing the law as the reason.

World Bank employees knew the changes were inappropriate but “a majority of the Doing Business employees with whom we spoke expressed a fear of retaliation,” the investigative report said.

Although the data gathering process for the report was finished, the World Bank’s economists reopened the data tables and altered China’s data, the investigative report said. Instead of ranking 85th among the world’s countries, China climbed to 78th due to the alterations. A series of smaller changes detailed in the investigative report also affected the rankings of Azerbaijan, the United Arab Emirates and Saudi Arabia.

“You had enormous discretion by World Bank staff combined with super high stakes for World Bank client countries getting named and shamed in the media, and it was just a recipe for political interference,” said Justin Sandefur, a senior fellow at the Center for Global Development who has long criticized the Doing Business report.

Concerns about Doing Business first became public in 2018 when the World Bank’s chief economist, Paul Romer, said, in an interview with The Wall Street Journal, that he was concerned the report was susceptible to campaigns to alter its data for political purposes. Mr. Romer said that he lacked confidence in a series of methodological changes to the report that had improved the ranking of Chile under conservative governments, but hurt its ranking under socialist governments.

The World Bank denied that the report had been manipulated, and Mr. Romer resigned shortly afterward.

Following the discovery of data irregularities in 2020, the bank halted publication of the report, and commissioned the external investigation.

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