Ease of Doing Business (EoDB) is a ranking mechanism established by the World Bank (WB) that measures the conduciveness of a business environment in an economy. The conduciveness of business environment is measured based on the regulatory reforms established by government in the following 12 domains: Starting a business, Dealing with construction permits, Getting electricity, Registering property, Getting credit, Protecting minority investors, Paying taxes, Trading across borders, Enforcing contracts, Resolving insolvency, Employing workers, and Contracting with the government.
Based on the score of each domain, the ranking of 190 countries is determined on an annual basis.
Bhutan was assessed since 2011 and ranked 142 out of the 190 economies. Over the following three years, Bhutan’s ranked remained at 146 and 141 until 2014, when it was ranked 70th, a jump by 71 from the preceding year. The sharp increase in rank was attributed to many reform initiatives undertaken by the government. However, another reason was also attributed to change in the methodology in the assessment such as the replacement of distance between the border and seaport by the distance between border and land customs.
Bhutan was at its best between 2014 and 2017 with the rankings restraining between 70 and 75, and the national objective to undertake further reform initiatives so that Bhutan could rank 50 at the end of the 12 FYP was already inscribed in the national plan document. However, the rank has been slipping off over the years and, Bhutan further slipped off to 89 in 2019. Due to the pandemic and its impact on the developmental process, the expectation of Bhutan’s rank to improve was bleak.
For 2020, the WB was supposed to publish the Doing Business report in March 2020. However, like any other development activity, the publication was delayed due to the pandemic. However, at the brink of publishing it, the report has met a new fate and the WB has announced to discontinue the report due to ethical issues in the WB headquarters and data irregularities. This means the 190 odd countries of whose business climate was based on the WB’s ranking would be rendered without any assessment of its business environment hereafter.
As per the notification, the WB said that the Doing Business assessment would be discontinued after a review raised ethical matters involving high-level officials of the bank on trying to manipulate the data of some economies from on whom the WB depends for funding support and their capital increase campaign of the recent time.
The review findings raised that the executive officials of the WB were involved in trying to manipulate the data of China since 2017. A similar situation was repeated in 2019 when China’s rank dropped to 78th and further dropped to 85 in 2020. However, data manipulation began after executive officials in the WB attempted to raise China’s rank by using data from other cities which were considered separate countries by the report. The WB further assigned more marks to indicators where China scored less. However, the newly-raised rank of China distorted the ranks of other economies such as Hong Kong and Taiwan.
Furthermore, similar data irregularities were raised by Saudi Arabia, United Arab Emirates, Jordan, and Azerbaijan. In a typical case in point, the executives forced the working staff at the WB headquarter to exclude Jordan from the list of top improvers based on the assumptions that Jordan that time was undergoing series of economic and social pressure despite a revalidation exercise finding no flaws in Jordan’s data.
The finding also pointed out that officials in WB headquarters were involved in manipulating the data of some countries by inflicting fear in staff who were involved in data management, a clear case of misuse of authority at the highest order.
How will this affect Bhutan?
It is unprecedented for countries who base their business climate on the WB’s assessment to know about the decision of putting an abrupt end to the report. More than any other country, the ripple effect the dismissed report would pose to a small landlocked mountainous economy like Bhutan and its economic journey would be unparallel, especially at a time when Bhutan is in the quagmire of the war against pandemic and doing everything to revive the economy. Instantly, the following concerns among others, could be foreseen:
Business environment in limbo: Without the WB’s Doing Business report, the business environment as a whole would be uncertain. In addition to the international investors, the private sector would not understand the reform initiatives that are undertaken by the government to enhance the doing business climate in Bhutan.
Impact to developmental milestone: Despite the impact of the pandemic, Bhutan is all set to graduate from the Least Developed Country (LDC) category in 2023. There will be transition in the government with a set of new development plans, and Bhutan will be in the third quarter of achieving the sustainable development goals. Implementing all these national milestones would require budget. While every pursuit is made to meet the recurrent budget from the internal revenue, meeting capital budget requirement could be at stake. Without external sources, the developmental miles would be impacted.
Baselessness to reform initiatives: In presence of the ranking, the government had a basis to focus the reform initiatives to enhance the doing business environment. This was ensured through a set of questions that were distributed to uncertain individuals in the government, private sector, and non-government agencies who could respond without being manipulated by the service provider. Subsequently, government could focus their pursuit to enhance the services that were required to improve the doing business climate. In fact, the ranking provided a strong basis for the government to undertake reforms appropriately. Without the assessment, the reform recommendation from affected section of the society would be displaced.
Reforms reference points: While the WB Doing Business report and ranking of economies were not robust and perfect enough, it provided a basis for countries to pursue reforms with reference to best performers. The number of procedures cost involved, and time taken to deliver a service could be reduced while this in turn ensured that the service delivery became efficient.
The Doing Business ranking of the WB has been a good basis considered international while validating a business environment of a country. However, the assessment of the report and procedures involved had issues that were never considered for rectification. Such procedural flaws have never demonstrated the true picture of development towards enhancing and improving the doing business climate in a country.
With the decision to discontinue the report 2021, the perplexity must not raise concerns of the private sector on the reforms and the future business climate nor should it be a reason for government agencies to discontinue undertaking the reform initiatives forward.
Like all governments would do, the reform initiatives and developmental programs will have to continue at the current pace. The mere change in the decision should not deter Bhutan on its development journey. The development philosophy of Gross National Happiness should continue to guide Bhutan’s pursuit of enhanced service delivery and a better business environment.
Disclaimer: All views expressed are authors’ personal opinion and do not represent views of any entity