Can the World Bank’s Doing Business Be Rescued?

In an interesting post about the World Bank, Nancy Birdsall of the Center for Global Development expresses two concerns about the future of the organization. First, she fears the effects of the seemingly endless process of internal restructuring – covered here, for example. Second, she fears that the World Bank may lose its ability to be an effective supplier of ‘global public goods’ in the 21st century.

One does not have to agree with her framing of the issue to see that one of the least controversial, most cost-efficient, and public goods-like functions of the World Bank is to produce internationally comparable data that can serve both as input into research and into policy discussions. The Doing Business project is a case in point, as my colleague Marian L. Tupy and I wrote last year:

In publication since 2003, Doing Business was inspired by academic research into the importance of sound legal environments for economic growth. The survey currently synthesizes expert assessments by roughly ten thousand contributors from 185 countries into a picture of the ease of doing business around the world. It serves as a guide to important requisites such as the costs of starting a business, obtaining permits, hiring and firing, and so on. The project thus brings together a large amount of data that either didn’t really exist before or weren’t comparable across different countries and presents them in a way that is easy to understand and use.

Following a controversial review last year, the report is undergoing methodological changes phased over several years. That makes comparisons over time more difficult.

The methodological changes consist, in part, of introducing new measures of “regulatory quality.” For example, in the area of insolvency legislation, those changes will reflect the World Bank’s Principles for Effective Insolvency and Creditor/Debtor Regimes and the UN’s Legislative Guide on Insolvency Law.

I argued earlier this week on Financial TimesBeyond Brics that this is a fundamental shift for a project that was traditionally grounded in simple and transparent measures of different characteristics of legal regimes and their enforcement – such as, how costly or time-consuming certain legal procedures were.

“Regulatory quality,” in contrast, can mean different things to different people. A set of guidelines created by the World Bank or the UN or may not reflect dominant expert opinion, which can itself evolve. That ambiguity creates space for further revisions in the future, thus eroding the comparability of data over time and weakening the usefulness of the project, either for scholarly purposes or for benchmarking of policy.

Although it is far-fetched to argue that the World Bank has either the necessary knowledge or the right incentives to be a producer of ‘global public goods,’ the Doing Business project comes closer to that standard than most other activities of the bank. And if we were to take Ms. Birsdall’s narrative at its face value, the current marginalization of the project, done through the successive methodological changes watering down its main virtues, could be seen as a perfect illustration of what she describes as a “growing gap between what the world needs from the bank and what the bank has the remit to do.”