New methodology in WB ‘Doing Business’ report draws flak

The National Competitiveness Council says it will put in writing its complaint against the new methodology applied in the 2014 report, which made it appear that the Philippines has slid in its ranking

MANILA, Philippines – The decision of the World Bank to change the methodology in the annual World Bank-IFC Ease of Doing Business report has come under fire from Philippine authorities after it led to “confusion” in the rankings of the 189 countries covered in the report, including the Philippines.

Under the new methodology, the Philippines was to have slid in ranking to 95 from 86 but according to the National Competitiveness Council, the latest ranking is an “improvement 13 countries from a rank of No. 108 based on last year’s published report of the IFC.”

Guillermo Luz, National Competitiveness Council (NCC) private sector co-chairman, said on Wednesday, October 29, that he will call the attention of the WB on the matter, due to the confusion generated by the different set of numbers presented in IFC’s Doing Business website.

“This new methodology [was] applied this year and we were not informed of these additional requirements. I have told them that I wasn’t happy with a change that is not communicated in a timely manner and I will put my complaint in writing,” Luz said in an interview on ANC.

Speaking to reporters through a video conference from Washington DC, World Bank Global Indicators Group director Augusto Lopez-Claros said that they changed the ranking methodology, expanded coverage of data, and broadened scope indicators.

Because of this, he said, “a country could see a drop in the rankings.”

Since its 2012 report, the World Bank revised its ranking methodology and now uses a metric called distance tool frontier to rank the surveyed economies, with 100 as the highest value and 0 the lowest.

Values of the frontier are derived from the scores achieved by each economy from the 28 indicators gathered by the report.

Lopez-Claros said the new metric was introduced to address shortcomings in previous surveys which caused other countries to drop despite good indicators “because other countries are doing more.”

‘No apple-to-apple comparison’

Such changes, however, drew criticism from the Philippine business sector.

“When you confuse the investor community, you will lower the credibility of the instrument,” said Ruy Moreno, director for operations of NCC.

The rankings “are no longer an apple to apple comparison,” Philippine Chamber of Commerce and Industries president Alfredo Yao told Rappler.

“It’s very hard to trust the figures anymore,” Yao said.

Yao added the Philippines should no longer look at the data, and instead address the pressing issues that are more visible than those reported figures.

Among those pressing issues is port congestion.

Manila’s temporary months-long daytime truck ban was among the reasons cited by the report for the Philippines’ lower ranking. It said the ban made trading across the Philippines’ borders “more difficult.” (READ: After truck ban, Manila ports start to breathe)

The report aims to “shed light” on how easy or difficult it is for a local entrepreneur to open and run a small- to medium-sized business when complying with relevant regulations. It covers 189 economies, including the 31 Organization for Economic Co-operation and Development (OECD) high income economies.

The report though did not take into account macroeconomic stability, corruption, level of labor skills, proximity to markets, and regulations on foreign investment or financial markets.

In the latest report, Singapore ranked 1st as the best place to open a business.

Within the Association of Southeast Asian Nations (ASEAN) bloc, Malaysia ranked 18th; Thailand, 26th; Vietnam, 78th; Brunei Darussalam, 101st; Indonesia, 114th; Cambodia, 135th; Lao PDR, 148th; and Myanmar at 177th. – Rappler.com