World Bank ‘Doing Business’

Since 2003, the World Bank has published Doing Business (DB), which each year identifies regulatory obstacles to private investment through national indicators and recommends that countries eliminate alleged obstacles to “doing business”.

DB claims that investment, employment and economic growth increase when countries improve their DB scores, but the Bank’s own Independent Evaluation Group (IEG) found no evidence of the claimed relation. Time Magazine in the US recently showed that countries with the worst DB scores (including India, Indonesia, Brazil and Argentina) tended to have the highest economic growth, the exact opposite of what DB claims.

Labour regulations are one of the themes covered by DB. An Employing Workers Indicator (EWI) rates countries according to whether they have limits on working time, minimum wages, dismissal notice, severance pay and other labour regulations. Countries with minimal regulations receive the best ratings, and the IFIs have used the EWI to pressure countries to reduce worker protection legislation, sometimes through loan conditions. DB claims that countries that eliminate labour regulations increase employment levels, but here again the Bank’s IEG found no evidence.

Since DB’s EWI measures the absence of labour regulation, the best ratings are given to countries that do away with worker protection legislation, have never had any or are known for their lack of respect for workers’ rights. Among countries that have received excellent EWI scores are Georgia, Kazakhstan and Belarus in CEE; Marshall Islands, Maldives and Afghanistan in developing Asia/Pacific; Saudi Arabia in the Middle East; and Haiti in Latin America/Caribbean.

Countries that have been successful in increasing formal employment and improving social protection often get the worst, or close to the worst, EWI ratings in their region, such as Slovenia in CEE and Brazil and Argentina in Latin America. Among rich countries, the best EWI rating is given to the US while the worst ranking group includes France, Germany, the Netherlands and three Nordic countries.

DB has praised deregulatory reforms in some countries that dismantled labour laws even when they entailed violations of ILO standards. For example, in April 2007 the Bank declared Georgia the “top business reformer of the year” because of its labour and other deregulatory reforms, even though the ILO’s committee of experts on application of conventions and recommendations found the reform and labour practices not to be in conformity with four of the eight CLS conventions.

In 2009 the Bank responded to repeated critiques of DB by the ITUC and ILO and ordered its staff to stop using the EWI in reports and recommendations; removed it from criteria for accessing Bank funds; and convened a consultative group (CG) on the labour aspects of DB where employers, unions and the ILO were invited to take part. The Bank gave the CG three mandates but only provided serious technical assistance for one of these, which was to examine and propose changes to the methodology of the EWI, before it stopped consulting the CG in early 2011.

The changes to the methodology involved identifying “floors” for EWI criteria that were in overt contradiction with ILO conventions on topics such as working hours and annual leave; they do not change the fundamental approach of “rewarding” countries with low levels of protection.

The Bank did no more than carry out exploratory discussions on the two other mandates it gave the CG: (1) creation of a Worker Protection Indicator (WPI), which would “reward” countries that provide comprehensive social protection and comply with CLS; and (2) revision of the Paying Taxes Indicator (PTI), which gives the best ratings to countries that require no tax or social contribution from business and which even the IMF has criticized. The Bank continued consultations with the ILO on the WPI, but these have apparently bogged down and DB staff have stated that they wish to reincorporate the EWI into the report.

The ITUC’s position is that the EWI and other labour matters should be permanently removed from DB, as should the tax rate component of the PTI. Instead, in consultation with unions and the ILO, the Bank should develop a balanced approach on labour regulations outside of DB that encourages countries to create decent jobs, provide good social protection and apply the core labour standards. (November 2011)