LONDON, Sept. 17 Reuters - Economists at investment funds expressed dismay on Friday over revelations that World Bank leaders made undue pressure on staff to boost China's ranking in its influential Doing Business 2018 report and series' subsequent cancellation.
They said that the World Bank's decision to demonetize Doing Business reports, which rate countries based on how easy it is to do business in them, could make it harder for investors to assess where to put their money.
The more I think about this, the worse it looks, says Tim Ash in BlueBay Asset Management in emailed comments.
Which quantitative model of country risk has built this into ratings? Money and investments are allocated on the back of this series. An investigation by law firm WilmerHale https: www.reuters.com. com business sustainable-business world-bank - kills-business - climate-report - after-ethics probe-cites - undue-pressure - 2021 - 09-16 at the request of the World Bank's ethics committee found World Bank Chiefs including Kristalina Georgieva, now Chairman International Monetary Fund, had applied pressure to boost China's scores.
At the time, the Washington-based multilateral lender was looking for China's support for a big capital increase.
Georgia said she disagreed with the findings and interpretations of the report, published on Thursday, and had briefed the IMF's executive board.
Economists said such reports - by the World Bank and others - were useful, but had long been vulnerable to manipulation.
They said some governments, particularly in poorer emerging markets, who want to show voters progress, could become obsessed with their position in the reports, which assess everything from ease of paying taxes to legal rights.
Charles Robertson, chief economist at Renaissance Capital, said ease of doing business scores had been losing credibility for years. Some countries employ investment firms, including his own, and sometimes former government leaders to advise them on how to improve their rankings.
There have been wide divergences between some countries corruption ranking s and the ease of doing business scores, which implies that these were just face-value improvements rather than reflecting underlying economic change, he said.
As an economist, the thought is it a real shame that we lose access to the underlying data. It is really interesting, for example, to know that it takes a company in Brazil 900 hours to process taxes, whereas elsewhere it takes only 70, Robertson added.
The Doing business reports have been published annually since 2003 and BlueBay's Ash said they had become important for banks and businesses in terms of assessing country risk around the world.
The findings of the investigation raise questions about impartiality of the reports and fairness of those putting them together.
The bigger question is how, if it is even possible, the Bank can remedy the apparent corruption of the institution that the review documents, Alex Cobham, chief executive of advocacy group Tax Justice Network, said on Twitter.