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Home / Opinion / Columns /  How World Bank's Doing Business ranking unravelled

Most of us know that the World Bank has discontinued its annual Doing Business study, which produced the Ease of Doing Business index, traditionally seen both as a prestige marker and a significant come-hither factor for countries seeking global investment. But not too many may have read the investigation report by US law firm WilmerHale that led to the Bank’s decision. It details hectic efforts to boost China’s rank on the index, and reads like a thriller, especially its account of 20 days in October 2017, climaxing with the release of the 2018 Doing Business report.

According to the WilmerHale report, in September 2017, as the Bank’s Development Economics (DEC) team was crunching the last bits of data, Chinese officials met Bank president Jim Yong Kim and chief executive officer Kristalina Georgieva, emphasizing that the report should “better reflect China". The Bank was then in the process of raising money for continuing its work, and then-US president Donald Trump had said that he would cut the US contribution because the Bank was lending billions of dollars to China, which, in his view, did not deserve this low-interest cash.

In early October, Kim’s office contacted the DEC, which replied that “as of now it looks like China’s results will not be positive". Dismayed, one of Kim’s aides wrote to another, “I think I’m going to cry."

It was slog-over time now. On 11 October, at the request of Kim’s office (Kim does not seem to have communicated directly with the DEC about China, though it is pretty obvious that his aides were working under his instructions), the DEC head disclosed the final country rankings. China had dropped seven places from the previous year’s report to 85. On 14 October, one of Kim’s senior staff members emailed back, noting that China was not “coming out OK" and inquired whether the DEC had a plan to “address (China’s) chronic complaint" about the report. The DEC head responded saying though China had “improved in absolute terms", its relative ranking had dropped “because other countries in its ranking neighbourhood did much better".

Two days later, the DEC approved the report (with China at No. 85) and authorized its printing. Immediately, Kim’s managers told the DEC head to hold on and asked how China’s score could be boosted. They suggested integrating Hong Kong’s data with China’s. This, of course, would have violated the report’s accuracy, since Hong Kong’s business laws are quite different from China’s. Hong Kong was in fact ranked No. 5 in the then-report. The next day, 17 October, Kim’s office asked what China’s rank would be if free-market Macau’s data too were added.

The DEC responded that it did not collect data for Macau, but if Hong Kong were added, China’s rank would rise to No. 70, from No. 78 the previous year, and that it was ready to print the report with this new calculation.

On 18 October, CEO Georgieva told the DEC that she was now in charge of the China matter. She declared that the China-Hong Kong data merger was not a good idea and asked for new suggestions. The next day, the DEC head mailed Georgieva saying that it was best to go with the report as it was, but an “extensive explanation (could be added) about how China has made substantial progress on a number of indicators".

Later that day, Georgieva informed the DEC that her advisor Simeon Djankov, who was one of the founders of the study, would guide the report to final publication. Djankov hit the ground sprinting, working with the DEC team to identify data points where a shift could be reasonably justified and would cause the “least damage" to other countries’ data. Three such areas were chosen, and after these changes were executed, China rose by seven places to No. 78, same as the previous year. Djankov emailed that this was “excellent work" and gave a go-ahead to print the report.

As the WilmerHale probe report says, the next day, 20 October, Georgieva thanked the DEC head for doing his “bit for multilateralism"; and a week later—the weekend of 28-29 October—she visited the home of a DEC manager, her only time ever, to get a physical copy of the altered Doing Business report. During a conversation in the manager’s driveway, she thanked him for helping “resolve the problem" with China’s ranking.

The 2018 Doing Business report was published on 31 October, with China ranked No. 78. President Kim quit the World Bank in 2019 to join a private infrastructure fund, but Georgieva now heads the International Monetary Fund (IMF). She has denied all China-favouritism charges, but this stain could be a difficult one to scrub off. Last week, economist Jeffrey Sachs wrote an op-ed piece in the Financial Times, fuming that “the case against Georgieva is insubstantial" and “the IMF should not capitulate to anti-China hysteria". In 2018, Sachs, once a maven writing bestsellers on how to end global poverty, raged on Twitter about the US sanctioning Chinese telecom giant Huawei, but shut down his account once his financial links with Beijing were exposed. Last April, in his widely-syndicated column, he said that the charge that China was carrying out a genocide against Uighurs in Xinjiang was a “flimsy claim". No surprises there.

Over the last decade, China has quietly been trying to capture multilateral institutions. The World Health Organization’s actions in the early days of the covid pandemic were a sign of Beijing’s strategic success. Let’s see which way the IMF rolls.

Sandipan Deb is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines

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