The way China has gamed the Doing Business rankings is not surprising. Capture of countries such as Pakistan or multilateral organisations like World Health Organisation is par for the course as far as the ruthless principles and related actions of the Chinese Communist Party (CCP) go. It has trampled on the rules of the World Trade Organisation; growing from the markets of open economies across the world, but keeping its own protected. So, if it thinks it needs to rise in the Doing Business rankings to attract global investors, it will do—and has done—anything and everything to get there. Fairness does not figure in conversations with Xi Jinping’s China.
What’s partially surprising is the way former interim president of the World Bank Group and current Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, along with former President of the World Bank Group, Jim Yong Kim, had enabled China in this manipulation. It is partial because, by now, the thinking fraternity should have seen through the way in which the CPC has been able to entrench itself into WHO and prevent an honest audit of the roots of the Made in China, Made by CPC pandemic—the COVID-19. If it can, like viruses do, manage to enter the hub of the global healthcare standards-setter and infect it from within, what stops it from replicating the same RNA in global finance? And it is surprising that someone so senior, so well-paid and with so much status and responsibility would put their careers at extreme risk merely to help China to manipulate its way through the rankings. Or not.
A report sought by the ethics committee of the World Bank Group is unambiguous and shows the ease with which the ease of doing business rankings can be, and perhaps have been, manipulated for customers like China.
* The changes in China’s data in Doing Business 2018 appear to be the product of two distinct types of pressure applied by Bank leadership on the Doing Business team: (1) pressure — both direct and indirect — applied by senior staff in the Office of the President, presumably at the direction of President Kim, to change the report’s methodology in an effort to boost China’s score; and (2) pressure applied by CEO Georgieva and her advisor, Mr. Djankov, to make specific changes to China’s data points in an effort to increase its ranking at precisely the same time the country was expecting to play a key role in the Bank’s capital increase campaign.
This September 15, 2021 16-page report titled, Investigation of Data Irregularities in Doing Business 2018 and Doing Business 2020: Investigation Findings and Report to the Board of Managing Directors, is essential reading for trackers of multilateral institutions. But the roots of the problem go deeper. They impact the rest of the world. At the base is the structural manipulation of these two Bretton Woods institutions, built in the aftermath of World War II, to bring financial stability to the world through multilateralism. There are three elements that need attention and fixing.
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1. Outdated Multilateral Structures
Howsoever grand its stated ambitions, the fact is, like the United Nations Security Council, the World Bank Group and IMF are the spoils of the winners of World War II. The World Bank Group, though financed by the rest of the world, is controlled by the US that decides who its President will be. Likewise, the IMF, again financed by all countries, is controlled by the US and Europe that decide who the Managing Director will be. In the middle, both the institutions play a game of Chinese Checkers, shuffling highly-paid executives from one to the other, building relationships and stakes on the way. This control and capture by the US and Europe cannot go on forever, reforms are needed, leaderships questioned, and accountability instituted.
For two institutions that have pushed countries across the world to ‘reform’ such that Western capital can find a place to park itself and grow, the lack of reforms at the World Bank Group and IMF is shocking. Now that the China crisis has blown up in their faces, it is time to reform these institutions. The monopoly of the US on appointing the World Bank Group President and France the IMF Managing Director has to end. These are global institutions, not national fiefs. And the problem of credibility with these institutions is historic, not new. The G20 Leaders Statement at its 2009 Pittsburgh Summit to reform both the institutions to ensure their credibility and legitimacy was clear — but has gone unheeded so far:
* As part of a comprehensive reform package, we agree that the heads and senior leadership of all international institutions should be appointed through an open, transparent and merit-based process. We must urgently implement the package of IMF quota and voice reforms agreed in April 2008.
Countries like India that are emerging out of the debris of poverty towards becoming the world’s third-largest economy within this decade took this multilateralism too sincerely. They behaved like good sportspersons, giving their best but accepting the results. The shocking revelations that are unfolding—in one institution after another, one scam at a time—is that multilateralism is a slanted game of thrones, where the space for merit or being a rules-abiding nation has no place. For a country to get its dues, it needs to go rogue, manipulate rules, bribe executives. Like China does. The space for fair play is diminishing. And with it, the legitimacy of the multilateral order. If even after this fiasco, the World Bank Group and the IMF do not reform, they never will. The rest of the world will have to find new spaces for economic conversations, one of which is the G20.
2. Corruption in High Places
What is not clear is whether there was any personal gratification for Kim or Georgieva, clearly a facet worth exploring, if the credibility of the two institutions is worth preserving. More so because Georgieva is now the serving Managing Director of IMF, an institution that has played, and continues to play, a big role in imploding economies such as Afghanistan or Pakistan, financing fiscal balance sheets, often competing and sometimes complementing China’s funding. Every action of the IMF will now be seen through the prism of Chinese manipulation and individual corruption.
Questions of credibility will be asked. For instance, did the last bailout package from IMF to Pakistan, despite its one leg stuck in the FATF (Financial Action Task Force) grey list, get sanctioned because China pushed Georgieva? Simmering below will be other similar issues. The scale and span of the World Bank Group is huge. So is the urgency and the high-stakes gaming for China. Could the two have found common cause? An independent investigation into the potential criminality of this manipulation is needed.
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3. Multilaterals, China and WW3
“There’s a war outside still raging you say it ain’t ours anymore to win,” wrote Bruce Springsteen in his 1984 song ‘No Surrender’ in Born in the USA. His words are proving prophetic. China, that sees every global engagement as part of a war effort, is slowly winning without fighting. Although the physical contours of war are around bullying nations in the South China Sea, or an eyeball-to-eyeball stalemate with India, its real war is outside, in several realms, one of which is the capture of multilateral institutions. “The multilateral institution which emerged out of the Bretton Woods conference was firstly an American creation, secondly Anglo-Saxon, and only thirdly an international institution,” write Morten Boas and Desmond McNeill. China is proving this hypothesis to be true. The monopoly of the US on the institutions has begun to rot. China has emerged as the new driver on a ride sponsored by the US, which is unaware of or appears unconcerned with it.
The US monopoly has degenerated into a process where the World Bank Group has been caught openly and brazenly giving China a freeway to finance its state of war. The capture of Doing Business rankings by using the Kim-Georgieva duo is a financial war brigade. The European Commission, led by Germany and France, signed off on the Comprehensive Agreement on Investment with China, as part of an economic conquest brigade, now fixed by the European Parliament. They further opened their doors to the CPC’s telecom war brigade, Huawei, by allowing it to offer 5G services. WHO had already given China a clean chit on COVID-19, without an investigation as part of its cover-up brigade. Using cheap finance and funded by taxpayers, China’s trade wars are now wreaking havoc on the trade balances of several countries—another brigade. By running away from Afghanistan, not only has the US left the Afghans at the mercy of the Taliban, they have handed a strategic geography and one more victory to China and its client state Pakistan, the terror brigade.
In this theatre of several and serial wars, China is gathering all its allies, weapons and useful idiots on the cheap, powering its multi-faced brigades, working to a plan that seeks to win World War III without the uncomfortable bloodshed caused by traditional weapons of war. By succumbing to its money, leaders of institutions are catalysing the rise of a rogue nation. By not stopping them, the US is making a strategic error. The multilateral rules-based order established by the US and Europe in 1944 is at risk to the CPC for which rules are meaningless, institutions meant to be hijacked, the people running them instrument to be bought or co-opted. The spoils of WW2 have run their course and are now making China the winner of WW3. Its victory is getting closer but is not in its hands yet. There is time for the world, still.
This article was first published on ORF.
The author is Vice President at ORF. The views expressed in this article are those of the author and do not represent the stand of this publication.
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