World Bank suspends business climate index over data ‘irregularities’

The World Bank has suspended the publication of its global business climate index after identifying “irregularities” in its data that may have affected the ranking of certain countries.

The annual Doing Business report, first 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 a motivation for policymakers to improve conditions for business. A country moving up in the rankings tends to boost foreign direct investment.

“A number of irregularities have been reported regarding changes to the data in the Doing Business 2018 and Doing Business 2020 reports,” the World Bank said in a statement.

In response, the multilateral lender said it needed to conduct a “systematic review” of the last five such reports and had halted the publication of future ones until that process was complete. “We will act based on the findings and will retrospectively correct the data of countries that were most affected by the irregularities,” it said.

“This is a huge admission by the World Bank with far-reaching implications,” said January Makamba, a member of parliament and former deputy minister in Tanzania. “A lot of policy recommendations and prescriptions, and judgment[s] on FDI direction . . . in developing countries have been based on this report,” he added on Twitter.

The Doing Business report has come under scrutiny before. In 2018, Paul Romer, the World Bank’s chief economist, resigned after alleging in a media interview that Chile’s ranking, which dropped from 34 in 2014 to 55 in 2018, may have been deliberately skewed by World Bank staff ideologically opposed to Chilean President Michelle Bachelet’s socialist government.

Conversely, in the 2018 report, India jumped to position 100 from 130 the year before, in a move celebrated by the World Bank but challenged by some academics, including Justin Sandefur at the Center for Global Development, a US think-tank.

Following Mr Romer’s resignation, Mr Sandefur also raised questions over India’s performance, arguing that the large improvement was based on a change in World Bank methodology and not an equivalent change in the business environment.

The World Bank said it had briefed those most affected by the data irregularities identified in the 2020 and 2018 reports, but did not identify the countries.

In the 2020 report the countries that recorded the greatest improvement in their business ranking were Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India and Nigeria.

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