THE World Bank (WB) is set to recalculate national rankings of ease of doing business going back to at least four years, after it was shown that the rankings were not credible and accurate.
Paul Romer, the WB’s chief economist, since late 2016, found irregularities in how the survey’s methodology was updated from year-to-year and intends to correct and republish the ranking for the past four years.
The Ease of Doing Business (EoDB) Index ranks countries against each other based on how the regulatory environment is conducive to business operation and stronger protections of property rights.
Economies with a high rank (One to 20) have simpler and more friendly regulations for businesses.
The high-profile rankings are intended to encourage governments to remove obstacles to business and incentivise economic development.
The report combines measures of how easy it is for an entrepreneur to start a business, obtain credit, pay taxes and enforce contracts, among other things.
The WB’s rankings measure a total of 11 indicators; the others being construction permits, getting credit, protecting minority investors, paying taxes, trading across borders and enforcing contracts that can be compared across 189 economies from Afghanistan to Zimbabwe, over time.
The EoDB rankings also measure labour market regulations, not included in this year’s ranking.
The indicators are used to analyse economic outcomes and identify what reforms have worked, where and why.
Foreign investors mainly rely on the ease of doing business reports before they invest in any country.
Zimbabwe has consistently ranked poorly in the World Bank’s annual EoDB index, despite recording major milestones in four indicators.
Zimbabwe last year ranked 159 out of 190.
The previous year, it ranked 157 out of 189.
In 2015, the country ranked 153.
EoDB in Zimbabwe averaged 162.60 from 2008 until 2017, reaching an all-time low of 171 in 2011.
Government, through the Office of the President and Cabinet (OPC), in 2016, embarked on a 100-day rapid results initiative approach to the ease of doing business in Zimbabwe.
The period for starting a business was reduced from 30 to 15 days.
Time to process construction permits was reduced to 120 days from 448 days.
Property registration now takes 14 days from 36.
Under the Taxes Indicator, the time taken to pay taxes was reduced to 160 from 242 hours.
The announcement, which has raised several questions on the authenticity of the EoDB Report, was made by Romer in an interview with The Wall Street Journal in which he made a personal apology to Chile, the ranking of which has come down from 34th in 2014 to 57th in 2017.
“I want to make a personal apology to Chile, and to any other country where we conveyed the wrong impression,” Romer told The wall Street Journal.
The problems with the report, he said, were ‘my fault because we did not make things clear enough.’
Romer said he couldn’t defend ‘the integrity’ of the process that led to the methodology changes.
He said the changes were made ‘without focusing on the impact these changes will have on particular countries’.
The last major changes in the methodology and parameter of the EoDB rankings were done under the watch of Romer’s predecessor Kaushik Basu.
Zimbabwe has welcomed the recalculation of the EoDB rankings, as it is likely to see Zimbabwe’s rating improve.
“We feel in the past we have been ranked unfairly and expect that this time around, the recalculation process will be fair,” said Deputy Chief Secretary in the OPC Ray Ndhlukula who is in charge of the EoDB reforms.
Romer’s discoveries cement claims that the Bretton Woods institutions (WB and International Monetary Fund) are Western-controlled institutions formed to exploit Africans.
Zimbabwe has over the years claimed that the Economic Structural Adjustment Programme (ESAP) introduced in the 1990s was destructive to the nation.
ESAP aimed to open up the economy and to reduce Government expenditure, but consumers could not afford the high prices of basic commodities.
Zimbabwe’s external debt soared and so did unemployment.
However, the WB refuted such claims, saying they treat all countries equally.
“Over the 15 years of its existence, the EoDB Index has been an invaluable tool for countries looking to improve their business climate, tracking thousands of reforms.
“Since we developed this vital report, EoDB has undergone a number of reviews—both internal and external—and we are always looking for new ways to refine and strengthen its methodology,” the WB spokesman David Theis said.
“It is important to note that we treat all countries equally in our research and the EoDB indicators and methodology are designed with no single country in mind but so that the overall business climate can be improved,” he said.