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Wednesday, 30 October 2019

World Bank annual business rankings significantly impact government policy

EXPLAINER- Why World Bank annual business rankings significantly impact government policy: Since its 2003 inception, the World Bank’s annual Ease of Doing Business report has grown to become a key yardstick for measuring economic indicators, and now has a significant impact on policy and regulation across the world, the Economist writes. Research shows a clear correlation between Doing Business rankings and public governance priorities, with many governments gearing their policies specifically towards moving up in the rankings specifically. India, China and Saudi Arabia, all of whom soared up the rankings in recent years, made a concerted effort to improve their regulatory climates — spurred on (at least in part) by the report.

Egypt is one of 42 economies that has undertaken regulatory reform in three or more of the 10 categories, the 2020 report shows (pdf). And having risen from #131 in 2016 to #114 this year the reforms are clearly having an effect.

Just why does the annual report spur governments to action? Researchers point out that the Ease of Doing Business indicators have a “tremendous” market share, and while this is partly due to the World Bank’s reputation and status, it’s also because of the way the information is put to use. The rankings allow members of the public to lobby for reform within their countries, employing comparisons with rival states to spur competition. Rankings are more accessible yardsticks than lengthy reviews, and so governments are more likely to take action to improve a particular aspect of their country’s business climate in response to a ranking — especially if it compares unfavorably with that of a rival country. Significantly, research shows that the indicators have a measurable impact on the attitudes of potential investors, encouraging governments to make speedy regulatory changes in the hope of attracting more FDI.

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