A red faced World Bank dumps the 'Doing Business' report NZ's MBIE cherishes and uses as a performance measure

By Gareth Vaughan

The Ministry of Business, Innovation and Employment (MBIE) has long cherished New Zealand's high rankings in the World Bank's Doing Business Report.

In November 2019 MBIE cheered the 2020 report with NZ ranking first out of 190 economies for the ease of doing business for the fourth straight year, and number one for the ease of starting a business for the twelfth consecutive year.  

"The Ministry of Business, Innovation and Employment’s General Manager [for] Business Integrity Services Ross van der Schyff says the report’s ranking reflects advantages for businesses operating in New Zealand’s business regulatory system," MBIE trumpeted.

The significance with which MBIE has held the World Bank report is demonstrated in its 2019-20 Annual Report. Among the performance measures featured was "maintain position in the World Bank Ease of Doing Business Survey," with the indictor being "ease of doing business ranking."

The trouble is the World Bank has now binned the report after "data irregularities" in the 2018 and 2020 Doing Business reports emerged, and World Bank management initiated a series of reviews and audits.

"After reviewing all the information available to date on Doing Business, including the findings of past reviews, audits, and the report the Bank released today on behalf of the Board of Executive Directors, World Bank Group management has taken the decision to discontinue the Doing Business report," the World Bank announced last week.

In comments attributed to Sanjai Raj, its General Manager for Market Integrity, MBIE says NZ has no influence on how the World Bank undertakes its global rankings.

"The World Bank Ease of Doing Business report was just one of a range of international benchmarking activities that help provide a relative perspective of the New Zealand business environment compared to other countries," Raj said.

"The World Bank’s recent decision not to continue the Ease of Doing Business report and the evidence on which it was based does not reflect negatively on New Zealand in any way, and MBIE is confident in celebrating New Zealand as a great place to do business," said Raj.

Other examples of international benchmarking MBIE uses for perspective on NZ's business environment include the Transparency International Corruption Perceptions Index, and thematic reviews with the the Organisation for Economic Co-operation and Development and other international organisations to help identify emerging best practice, an MBIE spokesman says.

'Those in countries with the highest rankings, such as Vivier in top-spot winning NZ, reap the most benefits'

MBIE hasn't been alone in seizing on NZ's position atop the World Bank report. Others who have include Vivier & Company Ltd. Vivier is still registered as a NZ company by MBIE's Companies Office five years after being kicked off NZ's Financial Service Providers' Register at the Financial Markets Authority's behest after the Court of Appeal said "alarm bells should sound" over the way Vivier was operating.

Vivier has been keen to talk up NZ's position in the World Bank survey, and its association with the country. 

"Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses. Those in countries with the highest rankings, such as Vivier & Co. in top-spot winning New Zealand, reap the most benefits. These benefits can be passed on to clients which is why it is worthwhile to consider the rankings carefully when deciding where to do business," Vivier says.

Earlier this year interest.co.nz reported on disgruntled Vivier investors, and the company seemingly being controlled by shadowy convicted British fraudster Ian Andrews, formerly Ian Leaf. And in July the Financial Markets Authority published a warning about Vivier making statements with the potential to mislead investors on the extent to which NZ's financial markets legislation applies to Vivier, and the extent to which Vivier’s operations in NZ are regulated.

"We note that Vivier is not a registered financial service provider in New Zealand and is not regulated in New Zealand," the regulator said.

The Doing Business 2020 report notes that for starting a business, Georgia and NZ have the lowest number of procedures required at one, and in NZ it takes the shortest time to start a business at 0.5 days. 

The World Bank's Doing Business report also came under fire from the Center for Global Development last year for its "extreme libertarian stance" for measuring the costs of government regulation but not the benefits.

'Improper changes'

The report done for the World Bank Board, by law firm WilmerHale investigating data irregularities, is damning.

It looked at how "improper changes" to the data for China, Saudi Arabia, the United Arab Emirates and Azerbaijan were effected, who at the World Bank directed and implemented or knew about the data changes, how their direction or pressure manifested, and what internal circumstances whether related to policies, personnel or culture, allowed the changes to happen.

These "improper changes" played out against the backdrop of World Bank management being "consumed with sensitive negotiations" over a capital increase campaign, WilmerHale says. The World Bank's then-President, Jim Yong Kim and then-CEO, Kristalina Geotgieva, were overseeing the capital increase campaign.

They and their senior staff, including Simeon Djankov who was one of the report's founders and an advisor to Georgieva, are blamed by WilmerHale for the problems.

The World Bank says it will be working on a new approach to assessing the business and investment climate.

"We are deeply grateful to the efforts of the many staff members who have worked diligently to advance the business climate agenda, and we look forward to harnessing their energies and abilities in new ways," the World Bank says.

Geotgieva, who has been managing director of the International Monetary Fund since 2019, denies she pressured World Bank staff to alter data to favor China when World Bank CEO. Yong Kim also left the World Bank in 2019 and is now Vice Chairman and Partner at Global Infrastructure Partners in Washington DC.

The full WilmerHale report is here. 

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