Analysis | SUNBIZ

Incorrect Data Taints World Bank Report

While many took to social media to criticise the authorities, not many provided suggestions or solutions, let alone basic advice from what one would assume to be the primary stakeholders of such an exercise - business owners themselves.
02 Nov 2019 14:39
Incorrect Data Taints World Bank Report

Analysis:

The World Bank recently released a report which ranked 190 countries around the world on the ease of doing business, where Fiji was ranked 102 based on submissions by only 43 listed contributors.

While many took to social media to criticise the authorities, not many provided suggestions or solutions, let alone basic advice from what one would assume to be the primary stakeholders of such an exercise – business owners themselves.

Taken at face value, these people are making uninformed assumptions.

More importantly, the report doesn’t accurately reflect the situation on the ground.

Fixing the results

There are more 150 thousand registered businesses in Fiji, yet only 43 total submitters determined our global rankings for the Ease of Doing Business report.

Out of the 43 entities that made submissions for the report, five were from a single law firm, which is close to 12 per cent of the total number of contributors.

Suspiciously, their lawyers are some of the loudest critics on Twitter. The fact that such a large number of the contributors came from a single organisation, calls into question the veracity of the data submitted and thus the integrity of the results. Other organisations also made multiple submissions albeit to a lesser degree.

Don’t get me wrong, my concern isn’t the fact that results may be manipulated by entities who could be biased against the Government; it is that incorrect data means skewed results, making it harder to find solutions that help us identify problems.

Further blunders in the report

The cost required to start a business as a percentage of income per capita is set at 14.5 per cent in the report. This does not take into account a major inflationary factor – the cost of paying for a lawyer to prepare the documents which is set at an average of $1200.

This indicator is a vastly inaccurate assumption. We have spoken to businesses that have registered their business for a fraction of that cost. If this were a mandatory requirement, it would be an inhibitory factor for many young Fijians looking to start an SME.

However, no Fijian is required to pay $1200 to start a company, this is an average cost reported as being charged by lawyers. In fact, the Government seeks to empower new startups by young Fijians via schemes like the Young Entrepreneurship Scheme.

Another major error that further invalidates the findings is the claim that FNPF registration takes 11 days when many businesses have done this within a single day. New businesses cannot even register with FNPF until they have recruited their first employee.

There are other minor inconsistencies with the results. For example, the claim that 40 days are required to register a business is directly contradicted by the reports own calculations which puts this figure at 39 days.

One particular misinformed twitter user stated –

“Unbelievable. Fiji’s @WorldBank #EaseofDoingBusiness ranking falls again – to 102. In 2006 we ranked 34. Ease of Starting Business ranking stays at 163 (out of 190 countries).

Even more unbelievable, the top-ranked country is right next door and we seem unable to ask it for help”

This “expert” seems to have missed a direct message from the World Bank.

As per the World Bank, each methodology expansion was recalculated for one year to provide comparable indicator values and scores for the previous year. Rankings are calculated for Doing Business in 2020 only. Year-to-year changes in the number of economies, number of indicators and methodology affect the comparability of prior years.

This means the current results cannot be properly compared to previous years.

Since the ease of doing business reports started in 2004, Fiji has reduced the cost of starting a business by 51.98 per cent.

Bank’s ease of doing business

According to an investigative piece written by Reuters, it was revealed that the World Bank’s Ease of Doing Business results were severely compromised by political methodology. This was revealed by a senior economist at the bank.

Irregularities in how the survey’s methodology was updated from year to year were found by Paul Romer, who has been the World Bank’s Chief Economist since late 2016, and there are intentions to correct and republish the ranking for the past four years.

The irregularities resulted in shifts to Chile’s ranking, which was 55th in the 2017 rankings, but were as high as 25th a decade ago.

Chile’s position in the rankings reflect the country’s politics: During this time, Chile underwent a regime change, switching between electing socialist Michelle Bachelet and conservative Sebastián Piñera to the presidency. During Piñera’s tenure, Chile rose in the rankings; when Bachelet held office, those rankings fell.

This volatility resulted from new metrics added to the ranking that dragged down the country’s score, rather than any meaningful change in Chile’s business environment.

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