World Bank selling consulting services to governments for improving their score of its ease of doing business is conflict of interest: expert panel

In a significant development, a group of external advisers to the World Bank recommended scrapping its model of Doing Business rankings following a damning independent probe which found countries trying to “manipulate their scores.”

The 84-page report, written by senior economists and academics, has been published on the bank’s website following three weeks of its submission to the World Bank’s chief economist Carmen Reinhart.

In a statement on Thursday, the World Bank said it would cancel its “Doing Business” series on country business climates, citing internal audits and a separate independent investigation by law firm WilmerHale which concluded that senior World Bank leaders, including Kristalina Georgieva, who now heads the International Monetary Fund, pressured staff to alter data to favor China during her time as World Bank CEO.

Despite the findings of multiple internal audits and the separate independent investigation, Georgieva denied the findings.

Acknowledging the findings, David Malpass, the President of the World Bank in his first public comments told CNBC that the WilmerHale report “speaks for itself”. The bank will explore finding new approaches to help countries improve their business climates.

According to the review which was written by a group assembled by the World Bank in December 2020, following a series of internal audits which shed light on data irregularities with countries, including China, Saudi Arabia, the United Arab Emirates and Azerbaijan, trying to manipulate the ease of doing business, the group called for a series of remedial actions and reforms to address the “methodological integrity” of the Doing Business report, citing “a pattern of government efforts to interfere” with the World Bank’s scoring system.

“The World Bank needs an introspection. It has been advocating country reforms for better governance, transparency, and practices. Now it has to use the prescription for its own reform,” said Mauricio Cardenas, the Columbia University professor and former Colombian finance minister who chaired the expert panel.

The experts faulted the Doing Business series for lack of transparency about the underlying data and questionnaires used to calculate the rankings, called for a firewall between the Doing Business team and other World Bank operations, and creation of a permanent, external review board.

“We have been informed of multiple cases where national governments have attempted to manipulate the DB scores by exerting pressure on individual contributors,” reads the report pointing to lawyers, accountants, or other professionals. “World Bank staff mentioned several countries where they believe government officials have instructed contributors how to respond. And even in the absence of explicit government pressure, of course, the perceived threat of retaliation may influence the scores contributors report.”

The experts called on the World Bank to stop selling consulting services to governments aimed at improving a country’s score citing an obvious conflict of interest.

“The World Bank should not simultaneously engage in scoring countries’ business environment while accepting payment to coach countries on how to improve their scores,” reads the report. The World Bank offered these “Reimbursible Advisory Services,” to a number of countries, including some of those implicated in the data manipulation investigation, such as China and Saudi Arabia, said the report.

According to the report, in December 2020, an internal audit found that the management of the bank had pressured 9 of 15 staff to manipulate data from 2018 through 2020 in the Doing Business index, boosting Saudi Arabia to the “most reformed” spot globally and buoying the rankings of the United Arab Emirates and China, while dropping Azerbaijan from the top 10 rankings.

According to a separate WilmerHale report, changes to Saudi Arabia’s data were “likely the result of efforts by a senior bank staff member to achieve a desired outcome and reward Saudi Arabia for the important role it played in the Bank community, including its significant and ongoing RAS projects.”

The report shows that there is “a governance problem” at the World Bank, said Justin Sandefur, a senior fellow at the Center for Global Development in Washington along with a member of the expert panel that produced the report. Both said, they had not seen any assurances that similar problems would not continue with other data sets.



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