How effective is the World Bank’s “Doing Business” report? How relevant are its performance indicators? How objective are its rankings? More importantly, how accurate is it as a reflection of an economy’s overall business climate?
For Singapore, which has topped the “Ease of Doing Business” rankings for the 7th consecutive year, these questions may not be pertinent. However, for poor performers like China, which ranked 91st in the recent edition, these questions are begging to be asked.
In fact, these questions, and more, have spurred China and other governments to pressure the World Bank to discontinue the “Doing Business” project.
In a nutshell, the annual “Doing Business” report rates global economies according to a range of performance indicators such as time and cost to register a business, pay taxes, trade across borders, obtain funding, get a construction license, or enforce contracts. These separate indicators are then collated and averaged into a single index for global rankings.
However, according to critics, this methodology attempts to paint a rather complex reality through numerical components, and is therefore inherently flawed.
For example, a problem in one area can pull a country’s index down even if other indicators are strong. Moreover, analysts believe that other variables need to be gauged for a more complete picture. Case in point: China has the world’s highest investment grade, and yet it ranks near the bottom of the list.
“An in-depth review of the project is imperative to express a more coherent representation of an economy’s business environment and investment climate. Improving the methodology, adding more indicators, and restructuring its components, among other measures, will give the ‘Doing Business’ report more traction.”
Commenting on the issue, Ms. Christine Lim, General Manager of Singapore company incorporation specialist Rikvin said, “Even if Singapore is a consistent frontrunner in ‘Doing Business’ rankings, we acknowledge that the report can be further refined. Singapore’s regulatory environment is generally pro-business, and the ease of registering a Singapore company cannot be overemphasized. That said, from a ranking perspective, other relevant variables may escape scrutiny.”
“As such, we believe that an in-depth review of the project is imperative to express a more coherent representation of an economy’s business environment and investment climate. Improving the methodology, adding more indicators, and restructuring its components, among other measures, will give the ‘Doing Business’ report more traction,” she concluded.
Meanwhile, the World Bank has asked its South African cabinet minister Trevor Manual to lead a commission to review the issue.