Asjadul Kibria |
Posted:
02, 2021, 20:32:15

The director of the International Monetary Fund (IMF) is now criticized for her alleged role in manipulating certain data during her tenure at the World Bank as managing director. She has been criticized for pressuring the bank’s internal team to artificially raise China’s ranking in the flagship Doing Business report in 2018. An independent investigation was carried out by US law firm WilmerHale. He identified that Kristalina Georgieva, now managing director of the IMF, intervened in the ranking process when it emerged that China was going to drop several notches in the global index.

In 2014, China ranked 96th in the index, which improved to 90th in 2015 and 84th in 2016. In 2017 and 2018, the ranking remained unchanged at the 78th position. In 2019, it improved significantly, with China ranking 46th and in 2020 it was at 31st. In the unpublished index for 2021, China ranks 25th. Economies are ranked by their ease of doing business, from 1 to 190, in the index. A great ease of doing business means that the regulatory environment is more conducive to starting and operating a local business. The World Bank has published the index annually since 2003. Over the past 18 years, the bank has revised and corrected the ranking methodology from time to time to make the index and relevant reports more acceptable. Nevertheless, several flaws in the index have been identified by many experts.

Now, the data tampering allegation has raised the question of whether China used its monetary power to influence the ease of doing business investigation. The allegation against Georgieva also mentioned that she had pressured the team to improve China’s position “when the World Bank looked for more money from the country.” China is the third largest shareholder of international financial institutions.

Georgieva, a Bulgarian citizen and political economist, was Managing Director of the World Bank Group from 2017 to 2019. She later became Managing Director of the IMF. She rejected the allegation, however, saying briefly that she “had not pressured anyone to change the reports.”

The WilmerHale report also mentioned that there were pressures related to determining the rankings of Saudi Arabia, UAE and Azerbaijan in the “Doing Business 2020” report released in 2019. The report, however , did not fund any evidence that members of the President’s office or the board of directors of the World Bank were involved in these changes.

Nonetheless, the allegation sparked debate and outrage among leading economists, policymakers and the media. At least two former chief economists at the World Bank, directly and indirectly, have backed Georgieva by saying that the allegation is questionable and that the investigation is flawed. Joseph Stiglitz, also winner of the Noble Prize for Economics, said: “The current efforts to eliminate Georgieva are not only unfair, but could cripple the management of the Fund for years to come.

Referring to the WilmerHale report’s flaws, he said the report indicated a possible “quid pro quo,” meaning the bank could attempt to raise capital and offered improved rankings to help get it. Stiglitz argued that China has always supported the capital increase while the United States (United States) under President Donald Trump dragged its feet. Thus, he added in his article published in Project Syndicate, that if the intention had been to ensure the increase in capital, “the best way to do it would have been to lower the ranking of China”.

In a moderated article, also published in Project Syndicate, Kaushik Basu, another former chief economist at the World Bank, said: “Yes, countries have always lobbied and scrambled to improve their rankings. But I never gave in to any of these pressures. Nor, to my knowledge, any of my predecessors. He also said, “Some senior officials will no doubt be shown the door. But now is also the time to take stock of the overall Doing Business situation.”

Basu also argued that while the World Bank’s decision to stop publishing Doing Business was “an understandable initial reaction,” the interruption should be used to “develop a better relationship, instead of ending it for the sake of it. good “. On September 16, the World Bank Group withdrew its flagship publication, the “Doing Business” report following allegations of data tampering.

Jeffery Sachs, director of the Center for Sustainable Development at Columbia University, is blunt in his argument. In a strong article published in the Financial Times, he described the whole thing as “anti-Chinese hysteria” which “is at the heart of the action against Georgieva of the IMF”. Sachs argued that the attack on Georgieva was not actually about “the alleged sanctity of World Bank data or the quality of its management.” It is about the role of China in a multilateral institution based in Washington. Many in the US Congress want Georgieva to be absent because she is not Beijing’s nemesis. ‘

Shanta Devarajan, who helped oversee the World Bank’s Doing Business report in 2017, also said he never felt pressure to change China’s scores and alleged that the WilmerHale report did used “only half of his statements”.

However, The Economist, the world’s leading weekly, argued in its editorial that “Georgieva, a valued servant of several international institutions, should resign”. The Financial Times, in its editorial, took a relatively soft stance, saying: “Georgieva’s two years at the IMF have been solid otherwise. All the more reason not to sweep this scandal under the rug. The longer the questions remain unanswered, the greater the damage. ended. “

Many have previously argued that the real value of the index is low due to its conceptual flaws. He focused more on the costs of regulation than on the benefits. Despite its limitations, the index is an essential global indicator for measuring a country’s business environment. This is pushing some developing countries to improve their rankings by putting more effort into regulatory changes, at least on paper, instead of removing a number of barriers to the ease of doing business in the real world. Some believe that a better ranking is the panacea for growth. For example, the Bangladesh Investment Development Authority (BIDA) predicted that Bangladesh would improve its position to 99th place by 2021. Bangladesh ranked 168th out of 190 in the 2020 index. Again, the methodological change in l index helped India improve its ranking. In 2014, India was ranked 142nd. It jumped to the 63rd position among 190 countries in the 2020 report.

Now the data tampering allegation comes as a shock. This kind of shock is long overdue, however, to thoroughly review the exercise of the Doing Business index and prevent developing countries from rushing to improve their rankings only.

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