For decades CAFOD has helped poor men and women set up micro and small enterprises. We know that helping people start and run a business is only half the job. Without the right business environment, the odds are stacked against their success and they can easily end up back at square one, or never getting off the ground in the first place.
This is why we have been so interested in the World Bank’s Doing Business project and congratulated President Jim Yong Kim for taking the decision to commission a comprehensive review of this flagship publication.
The Doing Business project ranks countries’ business regulations and laws across ten key indicators, but the group of experts led by Former South African Minister of Planning and Finance, Trevor Manuel, who reviewed the project, found that many of these indicators were a poor tool for policy-makers.
We would tend to agree. For a long time CAFOD has been asking why the Bank is using indicators that drive down labour standards and corporate tax rates; questioning the usefulness of indicators on “getting credit” which place Zambia sixth in the world rankings while 90% of small businesses in the country cite this issue as a major problem. And why the project doesn’t cover corruption – a major hurdle to business success in many countries.
The Panel’s report will not be comfortable reading for the lobby groups who have defended Doing Business in corridors of power and in the media, who have even claimed the review process itself was a “tragedy”. But a tool that gives guidance to policy makers in developing countries on how to manage their private sector regulation matters too much not to be open to scrutiny and reform.
But the project should not be abandoned. The Panel is absolutely right to call on the Bank to keep Doing Business, but to do it better and make it fit-for-purpose.
They have recommended some far-reaching changes including:
• renaming the report (because it does not actually tell you that much about what “Doing Business” is like in any country);
• re-homing it in the research department (so that it is more aligned with the Bank’s broader development thinking and clearly promoted as a “knowledge” document); and finally
• removing the controversial ranking of countries (as it suggests that the indicators show the “right” reform under any circumstances).
But whether or not the Panel’s report is adopted and what happens next is far from a done deal. The Panel raises many questions it does not fully answer and its report does not contain comprehensive ideas for reform. This is not the first time that far-reaching changes to Doing Business have been proposed. In 2008 the World Bank’s independent evaluator reached similar conclusions, but little changed and the same problems persist. The Panel does recommend ongoing processes and further examination in order to reach the best results for Doing Business.
Those key decisions now lie with the Bank’s leadership – specifically President Kim and the Executive Directors, representing different countries and regions that make up its board. This will not be an easy consensus as, although countries are almost unanimous in the view that something needs to change, they do not yet agree on what that change should be.
The debate has become polarised and politicised. Whilst US officials have heavily supported the project, China has often been portrayed as its sole critic. But criticisms of Doing Business come from a wide-range of governments and a wide range of groups – labour unions, small business groups, civil society and academics have all voiced concerns. Refusing to listen to critics or refusing to change the project as result of evidence from the ground is no way to defend it. The only real way forward is an open consultation with a broad range of groups.
This project is too important and the stakes too high to leave to politics. The 2008 financial crisis has shown very clearly that everyone is affected by what kind of regulatory regime is in place. This publication should be an important guide for policy-makers in the developing countries wishing to provide jobs and a route out of poverty for the poorest men and women.
The World Bank’s Doing Business report is its highest profile publication and an incredibly influential project. To ignore these calls for reform and to let this become an increasingly irrelevant and criticised project will be doing the World Bank and the small businesses we work with a real disservice.
Originally on Huffington Post