Ease of Doing Business Index

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World map of the Ease of Doing Business Index. Green nations rank higher, red nations lower. Grey represents nations lacking sufficient data. Each colour represents one quartile of the ranked nations.
World map of the Ease of Doing Business Index. Green nations rank higher, red nations lower. Grey represents nations lacking sufficient data. Each colour represents one quartile of the ranked nations.

The Ease of Doing Business Index is an index created by the World Bank.[1] Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights. Empirical research funded by the World Bank shows that the effect of improving these regulations on economic growth is strong.[2]

"Empirical research is needed to establish the optimal level of business regulation—for example, what the duration of court procedures should be and what the optimal degree of social protection is. The indicators compiled in the Doing Business project allow such research to take place. Since the start of the project in November 2001, more than 800 academic papers have used one or more indicators constructed in Doing Business and the related background papers by its authors."[3]

Contents

[edit] Methodology

The index is based on the study of laws and regulations, with the input and verification by more than 5,000 government officials, lawyers, business consultants, accountants and other professionals who routinely advise on or administer legal and regulatory requirements.

The Ease of Doing Business index is meant to measure regulations directly affecting businesses and does not directly measure more general conditions such as a nation's proximity to large markets, quality of infrastructure, inflation, or crime. A nation's ranking on the index is based on the average of 10 subindices:

  • Starting a business - Procedures, time, cost and minimum capital to open a new business
  • Dealing with licenses - Procedures, time and cost of business inspections and licensing (construction industry)
  • Hiring and firing workers - Difficulty of hiring index, rigidity of hours of index, difficulty of firing index, hiring cost and firing cost
  • Registering property - Procedures, time and cost to register commercial real estate
  • Getting credit - Strength of legal rights index, depth of credit information index
  • Protecting investors - Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
  • Paying taxes - Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit
  • Trading across borders - Number of documents, number of signatures and time necessary to export and import
  • Enforcing contracts - Procedures, time and cost to enforce a debt contract
  • Closing a business - Time and cost to close down a business, and recovery rate[4]

Looking at one example, Australia, the best performing nation on the first subindex "Starting a business", there are 2 procedures required to start a business and taking on average 2 days to complete. The official cost is 0.8% of the Gross National Income per capita. There are no minimum capital required. In Guinea-Bissau, the second worst performing nation on the first subindex, there are 17 procedures required to start a business taking 233 days to complete. The official cost is 255.5% of the gross national income per capita. A minimum capital of 1006.6% of the gross national income per capita is required.

While fewer and simpler regulations often imply higher rankings, this is not always the case. Protecting the rights of creditors and investors, as well as establishing or upgrading property and credit registries, may mean that more regulation is needed.

[edit] Research and influence

More than 800 academic papers have used data from the index.[5] The effect of improving regulations on economic growth is very strong. Moving from the worst one-fourth of nations to the best one-fourth implies a 2.3 percentage point increase in annual growth.[6]

The various subcomponents of the index in themselves provide concrete suggestions for improvement. Many of them may be relatively easy to implement and uncontroversial (except perhaps among corrupt officials who may gain from onerous regulations requiring bribes to bypass). As such, the index has influenced many nations to improve their regulations. Several have explicitly targeted to reach a minimum position on the index, for example the top 25 list. Between April 2006 and June 2007 there were 200 reforms in 98 economies. The 10 top reformers were Egypt, Croatia, Ghana, FYR Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China, and Bulgaria. Several nations did the opposite. They include Venezuela and Zimbabwe.[7]

The correlations between the subindices are low, which suggest that countries rarely score universally well or universally badly on the indicators. In other words, there is usually much room for partial reform even in the best ranking nations.[8]

The annual Reformers' Club event brings together individuals from top reformer countries who have been instrumental in initiating and implementing business environment reform. These reformers are acknowledged for their success in improving the ease of doing business in their country.[9] Presentations and case studies are available online.[10]

Somewhat similar annual reports are the Indices of Economic Freedom and the Global Competitiveness Report. They, especially the later, look at many more factors that affect economic growth, like inflation and infrastructure. These factors may however be more subjective and diffuse since many are measured using surveys and they may be more difficult to change quickly compared to regulations.

[edit] Criticism

The Doing Business methodology regarding labor regulations has been criticized because of the support for flexible employment regulations.[11] For instance, the easier it is to dismiss a redundant worker for economic reasons in a country, the more one goes up in the rankings. The Employing Workers index was revised in Doing Business 2008 to be in full compliance with the 188 ILO conventions. A country can have all ILO conventions ratified and still rank #1 on the Ease of Employing Workers.

A new unpublished study commissioned by the Norwegian government alleges methodological weaknesses, an uncertainty in the ability of the indicators to capture the underlying business climate, and a general worry that many countries may find it easier to change their ranking in Doing Business than to change the underlying business environment.[12].

However, the analysis in this study relies on incorrect statistical procedure, making its findings and recommendations suspect. In particular, the authors of the study use Bayesian probabilities to argue that all indicators in Doing Business have an uncertainty range. This may be true for the time estimates, but is not true for number of procedures or cost figures, which are drawn from the laws and regulations of each country. This incorrect application artificially blows up the supposed uncertainty intervals around Doing Business indicators.

[edit] Ranking

Ranking of all nations from 2008 report (2006/04-2007/06): [13]

Rank Country
1 Flag of Singapore Singapore
2 Flag of New Zealand New Zealand
3 Flag of the United States United States
4 Flag of Hong Kong Hong Kong
5 Flag of Denmark Denmark
6 Flag of the United Kingdom United Kingdom
7 Flag of Canada Canada
8 Flag of Ireland Ireland
9 Flag of Australia Australia
10 Flag of Iceland Iceland
11 Flag of Norway Norway
12 Flag of Japan Japan
13 Flag of Finland Finland
14 Flag of Sweden Sweden
15 Flag of Thailand Thailand
16 Flag of Switzerland Switzerland
17 Flag of Estonia Estonia
18 Flag of Georgia (country) Georgia
19 Flag of Belgium Belgium
20 Flag of Germany Germany
21 Flag of the Netherlands Netherlands
22 Flag of Latvia Latvia
23 Flag of Saudi Arabia Saudi Arabia
24 Flag of Malaysia Malaysia
25 Flag of Austria Austria
26 Flag of Lithuania Lithuania
27 Flag of Mauritius Mauritius
28 Flag of Puerto Rico Puerto Rico
29 Flag of Israel Israel
30 Flag of South Korea South Korea
31 Flag of France France
32 Flag of Slovakia Slovakia
33 Flag of Chile Chile
34 Flag of Saint Lucia Saint Lucia
35 Flag of South Africa South Africa
36 Flag of Fiji Fiji
37 Flag of Portugal Portugal
38 Flag of Spain Spain
39 Flag of Armenia Armenia
40 Flag of Kuwait Kuwait
41 Flag of Antigua and Barbuda Antigua and Barbuda
42 Flag of Luxembourg Luxembourg
43 Flag of Namibia Namibia
44 Flag of Mexico Mexico
45 Flag of Hungary Hungary
46 Flag of Bulgaria Bulgaria
47 Flag of Tonga Tonga
48 Flag of Romania Romania
49 Flag of Oman Oman
50 Flag of the Republic of China Taiwan
51 Flag of Botswana Botswana
52 Flag of Mongolia Mongolia
53 Flag of Italy Italy
54 Flag of Saint Vincent and the Grenadines Saint Vincent and the Grenadines
55 Flag of Slovenia Slovenia
56 Flag of the Czech Republic Czech Republic
57 Flag of Turkey Turkey
58 Flag of Peru Peru
59 Flag of Belize Belize
60 Flag of the Maldives Maldives
61 Flag of Samoa Samoa
62 Flag of Vanuatu Vanuatu
63 Flag of Jamaica Jamaica
64 Flag of Saint Kitts and Nevis Saint Kitts and Nevis
65 Flag of Panama Panama
66 Flag of Colombia Colombia
67 Flag of Trinidad and Tobago Trinidad and Tobago
68 Flag of the United Arab Emirates United Arab Emirates
69 Flag of El Salvador El Salvador
70 Flag of Grenada Grenada
71 Flag of Kazakhstan Kazakhstan
72 Flag of Kenya Kenya
73 Flag of Kiribati Kiribati
74 Flag of Poland Poland
75 Flag of the Republic of Macedonia Republic of Macedonia
76 Flag of Pakistan Pakistan
77 Flag of Dominica Dominica
78 Flag of Brunei Brunei
79 Flag of the Solomon Islands Solomon Islands
80 Flag of Jordan Jordan
81 Flag of Montenegro Montenegro
82 Flag of Palau Palau
83 Flag of the People's Republic of China China
84 Flag of Papua New Guinea Papua New Guinea
85 Flag of Lebanon Lebanon
86 Flag of Serbia Serbia
87 Flag of Ghana Ghana
88 Flag of Tunisia Tunisia
89 Flag of the Marshall Islands Marshall Islands
90 Flag of the Seychelles Seychelles
91 Flag of Vietnam Vietnam
92 Flag of Moldova Moldova
93 Flag of Nicaragua Nicaragua
94 Flag of Kyrgyzstan Kyrgyzstan
95 Flag of Swaziland Swaziland
96 Flag of Azerbaijan Azerbaijan
97 Flag of Croatia Croatia
98 Flag of Uruguay Uruguay
99 Flag of the Dominican Republic Dominican Republic
100 Flag of Greece Greece
101 Flag of Sri Lanka Sri Lanka
102 Flag of Ethiopia Ethiopia
103 Flag of Paraguay Paraguay
104 Flag of Guyana Guyana
105 Flag of Bosnia and Herzegovina Bosnia and Herzegovina
106 Flag of Russia Russia
107 Flag of Bangladesh Bangladesh
108 Flag of Nigeria Nigeria
109 Flag of Argentina Argentina
110 Flag of Belarus Belarus
111 Flag of Nepal Nepal
112 Flag of the Federated States of Micronesia Federated States of Micronesia
113 Flag of Yemen Yemen
114 Flag of Guatemala Guatemala
115 Flag of Costa Rica Costa Rica
116 Flag of Zambia Zambia
117 Palestinian flag Palestine
118 Flag of Uganda Uganda
119 Flag of Bhutan Bhutan
120 Flag of India India
121 Flag of Honduras Honduras
122 Flag of Brazil Brazil
123 Flag of Indonesia Indonesia
124 Flag of Lesotho Lesotho
125 Flag of Algeria Algeria
126 Flag of Egypt Egypt
127 Flag of Malawi Malawi
128 Flag of Ecuador Ecuador
129 Flag of Morocco Morocco
130 Flag of Tanzania Tanzania
131 Flag of The Gambia Gambia
132 Flag of Cape Verde Cape Verde
133 Flag of the Philippines Philippines
134 Flag of Mozambique Mozambique
135 Flag of Iran Iran
136 Flag of Albania Albania
137 Flag of Syria Syria
138 Flag of Uzbekistan Uzbekistan
139 Flag of Ukraine Ukraine
140 Flag of Bolivia Bolivia
141 Flag of Iraq Iraq
142 Flag of Suriname Suriname
143 Flag of Sudan Sudan
144 Flag of Gabon Gabon
145 Flag of Cambodia Cambodia
146 Flag of Djibouti Djibouti
147 Flag of the Comoros Comoros
148 Flag of Haiti Haiti
149 Flag of Madagascar Madagascar
150 Flag of Rwanda Rwanda
151 Flag of Benin Benin
152 Flag of Zimbabwe Zimbabwe
153 Flag of Tajikistan Tajikistan
154 Flag of Cameroon Cameroon
155 Flag of Côte d'Ivoire Côte d'Ivoire
156 Flag of Togo Togo
157 Flag of Mauritania Mauritania
158 Flag of Mali Mali
159 Flag of Afghanistan Afghanistan
160 Flag of Sierra Leone Sierra Leone
161 Flag of Burkina Faso Burkina Faso
162 Flag of Senegal Senegal
163 Flag of São Tomé and Príncipe São Tomé and Príncipe
164 Flag of Laos Laos
165 Flag of Equatorial Guinea Equatorial Guinea
166 Flag of Guinea Guinea
167 Flag of Angola Angola
168 Flag of East Timor Timor-Leste
169 Flag of Niger Niger
170 Flag of Liberia Liberia
171 Flag of Eritrea Eritrea
172 Flag of Venezuela Venezuela
173 Flag of Chad Chad
174 Flag of Burundi Burundi
175 Flag of the Republic of the Congo Congo
176 Flag of Guinea-Bissau Guinea-Bissau
177 Flag of the Central African Republic Central African Republic
178 Flag of the Democratic Republic of the Congo Democratic Republic of the Congo

[edit] See also

[edit] Notes

[edit] External links

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