Fraudulent intervention by China and Saudi Arabia suspended World Bank’s Doing Business Report (3)

 

Behind the fraudulent intervention

 

Doing Business Rank consists of 10 items for evaluation. The overall ranking (i.e. Ease of Doing Business) is determined by the weighted average of the rankings of those 10 items. They are;

(1) Starting a Business, (2) Dealing with Construction Permits, (3) Getting Electricity, (4) Registering Property, (5) Getting Credit, (6) Protecting Investors, (7) Paying Taxes, (8) Trading Across Borders, (9) Enforcing Contracts and (10) Resolving Insolvency

 

Most of data in each item are transparent and appropriate. But several items are left for arbitrary evaluation. How to evaluate 190 countries depends largely on the judgehimself. In addition, there is much room for intervention by the secondary and tertiary judge who are usually the boss of the primary judge. This is not peculiar to the World Bank. Most of ranking job has the same problem to some extent.

 

 There is another kind of intervention. China and Saudi Arabia are the major investors of the World Bank. Therefore, World Bank executives could hardly ignore the intentions of both countries. China urged chief executive officer Kristalina Georgiwae (currently the managing director of the IMF) to review the draft and offering the capital increase of World Bank as the carrot. Georgiwae forced her subordinates to amend the draft. The World Bank CEO paid special consideration to China, which was an economic powerhouse. It might be a kind of domestic culture of World Bank to obey boss without question. (Note; Georgiwa has issued a statement denying the allegations.[1]) The case in Saudi Arabia seems to be the same.

 

Although China and Saudi Arabia have different governance systems, both of political systems are authoritarianism. China is on the way to economic super power and aims to overtake the United States. In Saudi Arabia, Crown Prince Muhammad bin Salman is waving the flag of Vision 2030 to become a regional power. Both countries are extremely sensitive to their ranking in the world. The attitude of Chinese or Saudi Arabian diplomats and economic bureaucrats in charge might follow the direct instructions of their leader, President Xi Jinping or Crown Prince Muhammad bin Salman. They would force the World Bank staff to take the necessary actions.

 

The same thing could take place in all rankings like the sovereign rating handled by S & P, Moody's, etc. They frequently face to complaints from the country evaluated because their rating affects the interest rate on government bond. However, if their rating is suspicious, rating agency would not only lose their credibility but also customers. Therefore, rating agency will reject fraudulent intervention. That is the reason why the sovereign rating is trusted by everyone.

 

 

By Areha Kazuya

E-mail: Arehakazuya1@gmail.com

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[1] IMF chief says she 'did not pressure anyone' while at World Bank

http://jordantimes.com/news/business/imf-chief-says-she-did-not-pressure-anyone-while-world-bank

2021/9/25 Jordan Times