# World Bank scrapping Ease of Doing Business Index is a reminder to focus on fundamentals
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-09-28
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: World Bank Scraps Ease of Doing Business Index: A Timely
Meta Description: The demise of the World Bank's Ease of Doing Business Index highlights the importance of focusing on a company's fundamentals rather than a
URL: https://financedigest.com/world-bank-scrapping-ease-of-doing-business-index-is-a-reminder-to-focus-on-fundamentalshtml

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_By **Martin Soderberg,** Managing Partner, SPEAR Capital_

![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/picture133-450x450-1736837746113-compressed.jpg)

Many people place great stock in the World Bank’s Ease of Doing Business Index. The list outlines the levels of business regulation in 190 economies. Long used as a [way for countries to attract investors](https://www.financedigest.com/5-ways-that-start-ups-can-attract-investors.html "5 Ways That Start-Ups Can Attract Investors") and a guide for investors to decide where to invest, the Index purportedly assessed the business climate on 12 broad parameters integral to starting, sustaining and winding down a business. The 2020 [report was the 17th in the series of annual](https://www.financedigest.com/rawbank-publishes-its-2018-annual-report.html "RAWBANK publishes its 2018 Annual Report") studies. It was also the last.

The global financial institution decided to scrap the Index earlier this month after an internal audit found “undue pressure” by top [bank officials to manipulate data](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation") had resulted in country rankings changed to favour China. Investigators found that attempts had also been made to find ways to manipulate [Saudi Arabia’s](https://www.financedigest.com/avaya-opens-customer-experience-center-saudi-arabia.html "Avaya Opens Customer Experience Center in Saudi Arabia") ranking. And, as [Bloomberg points out](https://www.bloomberg.com/opinion/articles/2021-09-19/world-bank-s-ease-of-doing-business-list-deserved-to-die), the Index didn’t actually study conditions on the ground, meaning that countries only had to make changes on paper to rise up the list.

The Index’s demise should act as a [timely reminder that investors are better off focusing on the fundamentals of a specific business](https://www.financedigest.com/uks-sunak-to-halve-support-that-helps-businesses-pay-fuel-bills-the-times.html "UK’s Sunak to halve support that helps businesses pay fuel bills -The Times"), rather than perceptions of the country it operates in.

**The trouble with perception**

The trouble with things like the [Ease of Doing Business](https://www.financedigest.com/german-businesses-expect-only-mild-recession-as-disruptions-ease.html "German businesses expect only mild recession as disruptions ease") Index is that it can drive the perceptions of investors and, by extension, the fortune of countries. But [real change](https://www.financedigest.com/open-banking-the-real-step-change-for-the-global-payments-industry.html "Open banking: The real step change for the global payments industry") is difficult. There was always, therefore, going to be an incentive for countries to [improve their ranking at whatever cost](https://www.financedigest.com/workplace-planning-software-cuts-costs-and-improves-employee-wellbeing-and-productivity-a-win-win-for-all.html "Workplace planning software cuts costs and improves employee wellbeing and productivity – a win-win for all").

Small wonder, then, that there was often a [big difference between a country’s position](https://www.financedigest.com/pimco-cut-big-position-in-russia-cds-by-adding-bonds-in-q2.html "PIMCO cut big position in Russia CDS by adding bonds in Q2") on the Index and the reality of doing business on the ground there. Speaking from personal experience, there have been [times when doing business](https://www.financedigest.com/tough-times-and-risky-business-which-emerging-market-assets-are-a-bet-worth-taking.html "Tough times and risky business – which emerging market assets are a bet worth taking") in a country such as Zimbabwe (which at times has been ranked in the 170s on the Index) has been easier than in the UK (ranked 8th in 2020). Even if a country has all the laws and regulations in place [needed to rise to the top of an Index, that doesn’t mean that it’ll have the infrastructure and general conditions needed to make doing business](https://www.financedigest.com/4-kinds-of-software-your-new-business-needs.html "4 Kinds of Software Your New Business Needs") easy.

It’s also [worth noting that while the Index did provide some context](https://www.financedigest.com/service-the-cfo-why-context-is-worth-80-iq-points.html "Service & The CFO: Why Context Is Worth 80 IQ Points") behind the rankings, a lot more stock was placed in the overall ranking than the sub-scores. Even if there was a lot more difference between positions 60-70 than in the top 50, there’s no doubt that a country would much rather be in position 23 than 48.

**Good company, bad country**

As such, there’s a good argument to be made that [investors should care less about the country a company operates in than its overall fundamentals](https://www.financedigest.com/ravenpack-opens-its-big-data-analytics-platform-to-fundamental-investors.html "RavenPack Opens Its Big Data Analytics Platform to Fundamental Investors"). In fact, if a company is thriving [despite operating in a country perceived to be bad for business](https://www.financedigest.com/5-ways-to-grow-your-business-despite-a-bad-credit-score.html "5 Ways to Grow Your Business despite a Bad Credit Score"), then it might actually be a more worthwhile investment than a middling company in a thriving economy.

In the current [global economic](https://www.financedigest.com/the-demand-for-agile-banking-during-the-global-economic-slowdown.html "The demand for ‘Agile Banking’ during the global economic slowdown") reality, that might be more true than ever. [Emerging market](https://www.financedigest.com/medical-nonwoven-disposables-market-scope-emerging-trends-analysis-and-forecast-2028.html "Medical Nonwoven Disposables Market Scope Emerging Trends, Analysis and Forecast 2028") countries have been hit particularly hard by COVID-19’s economic ructions. Post-pandemic, entities in these [markets will be more receptive than ever to investors](https://www.financedigest.com/thoracic-drainage-devices-market-rising-new-business-opportunities-for-investors.html "Thoracic Drainage Devices Market Rising New Business Opportunities for Investors").

While there are undoubtedly risks in [emerging markets](https://www.financedigest.com/the-emergency-immobilizers-market-to-be-digitally-instilled.html "The Emergency Immobilizers Market to be digitally instilled"), they are well known and understood. Investors can therefore mitigate for them. And once trade returns to anything resembling normal in these markets, investors can [expect to see outsized returns](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit").

**Countries still need to make an effort**

That said, even without the Index, countries shouldn’t give up on trying to make doing business easier. In countries where it’s easy to do business, more people start businesses, [creating more targets for investors](https://www.financedigest.com/brexit-creates-a-complicated-picture-for-commodities-investors.html "Brexit creates a complicated picture for commodities investors").

Ultimately, the best [way to attract](https://www.financedigest.com/5-ways-lenders-can-attract-the-younger-generations.html "5 Ways Lenders Can Attract The Younger Generations") investors isn’t by trying to climb rankings on an index, but to ensure that all the conditions are in place to help businesses succeed. That includes infrastructure, regulation, education, governance, and any one of a number of [factors that make it easy for people on the ground to do business](https://www.financedigest.com/7-factors-to-consider-before-your-business-moves-to-a-subscription-model.html "7 Factors to Consider Before Your Business Moves to a Subscription Model") and for investors to find, and invest in, those businesses.


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