Mid-March, IATP joined 345 other civil society organizations, social movements, trade unions, academic allies and independent experts from 75 countries to launch a campaign to bring an end to the World Bank’s Doing Business Report (DBR).
Launched in 2002, annual DBR has become a global tool with an outsized influence for assessing the “ease of doing business” in the 190 countries that the World Bank covers. In addition, the DBR assesses the regulations that investors need to adhere to for employing workers and contracting with government. In other words, DBR reports on various aspects related to the regulatory frameworks in these countries — not only the “when (do governments introduce these)” and the “what (are the characteristics of these governments)” but also the “effects” of deregulation on economic activity and investment environment. “Ease of doing business” scores and rankings are used by the international private sector to assess the desirability of investing in a country. However, what the World Bank considers beneficial for foreign investors is likely the most harmful for local communities given the unequal power relations in which erosion of regulatory protections occurs.
This is a newer, and in some ways, more insidious approach to the deregulatory agenda first carried out under the Structural Adjustment Programs (SAPs) of the 1980s-90s. Under SAPs, lending to developing countries was conditioned on those governments withdrawing from public investments and liberalizing their economies. DBR is a more sophisticated approach that pressures leaders of developing countries to deregulate their economies on their own in the hopes of attracting foreign investment.
For example in 2017, The Hindu reported how “The low rank last year galvanised India to act. There was an explicit order from the PM (Narendra Modi) to ensure faster reforms to improve India’s rankings.” The 2020 enactment of the Omnibus Law in Indonesia is a more recent example of a country that has explicitly targeted its policy reforms to climb on the DBR ranking. The Omnibus Law has amended the relevant requirements and restrictions for foreign investment that were stipulated in various laws governing several business sectors including agriculture and services. Though the bill faced massive pushback from labor unions and social movements for its impacts on workers’ rights and the environment, the World Bank endorsed it, as it signals that Indonesia is “open for business” and will help attract investors.
The result is a high-stakes competition among countries, despite the foundational problems of the index and the limited meaning of year-over-year ranking comparisons. The assumptions inherent to the SAP — that liberalizing trade and deregulating markets is the only development path to economic growth — continue to inform the DBR (and rankings). In fact over the last two decades, the Doing Business Report has encouraged policies that have worsened inequalities, including deregulations that erode labor protections and undermine environmental policies. In the agricultural sector, the rankings encourage governments to enable land grabbing by foreign investors, regardless of environmental or social impact. As one report notes: “Smallholder farmers, pastoralists, and indigenous people are casualties of this approach, as governments and foreign corporations work hand-in-hand to dispossess them of their land — and gain World Bank approval in the process.”
As the world struggles to respond to and recover from the health and economic crises triggered by the COVID-19 pandemic, the limitations of the current model of economic growth have become especially clear. As our joint letter notes, the United Nations Conference on Trade and Development (UNCTAD)’s latest Trade and Development Report stresses that a just recovery will require the world to address a key weak aspect of the development paradigm: “Mainstream economic analysis has contributed to the lack of preparedness of policymakers by promoting the wrong notion of resilience — one focused on doing business and foreign investors, rather than good jobs and income security — with an attendant narrowing of the aims and objectives of economic policy.”
This message on rethinking resilience from UNCTAD is important not only in the context of developing countries, but also in the context of developed countries, who need to rethink their assumptions, too. It also resonates with our message on World Food Day, which focused on the fragility of the current agriculture and food systems, nested as they are in an unequal, racialized and gendered socioeconomic order that is based on the same flawed assumptions that inform DBR.
In August 2020, the World Bank announced the temporary suspension of DBR in order to investigate a number of irregularities. But the Bank has now decided to proceed with the publication of the DBR 2021 report in March 2021, though an External Panel Review of the DB methodology is still ongoing. The release of the DBR and its world rankings is likely to incentivize the deregulatory race to the bottom. Please join us in calling on the World Bank to end its harmful Doing Business rankings by signing here.