World Bank's 'Doing Business' rankings are actively harming the poor

CAFOD, the UK development aid organisation, has warned that the World Bank’s ‘Doing Business’ rankings are actively harming the poor. This is a further example of a tendency in international agencies to use data selectively which then provides an inaccurate analysis which, in turn, leads on to inappropriate policy recommendations. 

Social Justice Ireland has published a briefing setting out a range of examples of such selective use of data by the Troika (the IMF, the European Commission and the European Central Bank) in their recent reports on Ireland. That Briefing was presented to these organisations at their meeting with Social Justice Ireland on October 22, 2012.

The annual World Bank 'Doing Business' report, released October 23, 2012, ranks the business-friendliness of different economies according to a checklist of reforms.  But CAFOD said the ‘one-size-fits-all regime’ is undermining the fight against poverty. 

“It is not just that some reforms promoted by the Doing Business rankings might be irrelevant for the majority of businesses in developing countries – in some instances they are actively harmful to poor men and women,” said CAFOD’s economist Christina Chang.

“The World Bank’s mandate is to reduce poverty. Yet the rankings skew vital resources away from small and micro-enterprises that account for the majority of jobs in poor countries - jobs that are critical in reducing poverty.

According to CAFOD the Bank has already removed some of the most egregious aspects of these rankings – for example rewarding countries for reducing rights for workers, but the direction of travel remains the same. As a result, we are seeing countries like Zambia devote huge effort to raising themselves up the rankings, despite these reforms providing no benefits for the majority of its poorest citizens.

In this year's rankings, Zambia ranks 12th globally for ease of access to business credit but 98 per cent of Zambian small businesses have reported credit as the overriding obstacle to their success. Zambia is also rewarded for a regulatory regime that gives tax breaks to its profitable copper mining sector – even though it is reducing money available to invest in health, education or support for small businesses.

The report was also condemned by the International Trade Union Confederation which said it made unfounded claims that weakening labour regulations would stimulate job creation.  It also stated that countries which reduced dismissal notice periods or severance pay were "addressing one of the main factors deterring employers from creating jobs in the formal sector".

The UK aid agency CAFOD is calling on the World Bank to remember its only remit is helping poor countries reduce poverty.

Doing Business is a World Bank tool ranking the business-friendliness of different governments according to a checklist of primarily deregulatory reforms. Regardless of the realities facing poor countries, Doing Business follows a regime of one size fits all, which can undermine progress on development as governments are encouraged to implement policies which can favour business but not their own population and economy.

Under pressure from civil society groups and disgruntled governments, new World bank President Jim Yong Kim has ordered a timely review of the Doing Business project on the eve of its tenth anniversary.

In a new briefing paper, CAFOD highlights the anti-development priorities of the Doing Business rankings and calls on the review to be an independent and comprehensive overhaul that puts poor men and women first.

The CAFOD Document can be downloaded below 

The CAFOD website may be accessed here.

Social Justice Irelands critique of the IMF and European Commision's selective use of data may be accessed here