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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.

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 to justify their work claims to show 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

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]

For example Australia ranked third on the first subindex "Starting a business" behind only New Zealand and Canada. In Australia there are 2 procedures required to start a business which take on average 2 days to complete. The official cost is 0.8% of the Gross National Income per capita. There is no minimum capital requirement. By contrast, in Guinea-Bissau which ranked worst (181st) on this same 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 investment 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.

Research and influence

More than 800 academic papers have used data from the index. 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.[5]

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, Macedonia, Georgia, Colombia, Saudi Arabia, Kenya, China, and Bulgaria. Several nations did the opposite. They include Venezuela and Zimbabwe.[6]

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.[4]

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.[7] Presentations and case studies are available online.[8]

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.

Criticism

The Doing Business methodology regarding labor regulations has been criticized because of the support for flexible employment regulations.[9] For instance, the easier it is to dismiss a 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 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.[10]

Ranking

Ranking of all nations from 2010 report (2008/06-2009/05) [11]

2010 Rank 2009 Rank Country
1 1  Singapore
2 2  New Zealand
3 3  Hong Kong
4 4  United States
5 6  United Kingdom
6 5  Denmark
7 7  Ireland
8 8  Canada
9 9  Australia
10 10  Norway
11 16  Georgia
12 12  Thailand
13 15  Saudi Arabia
14 11  Iceland
15 13  Japan
16 14  Finland
17 24  Mauritius
18 17  Sweden
19 23  South Korea
20 18  Bahrain
21 19  Switzerland
22 20  Belgium
23 21  Malaysia
24 22  Estonia
25 27  Germany
26 25  Lithuania
27 29  Latvia
28 26  Austria
29 30  Israel
30 28  Netherlands
31 31  France
32 69  Macedonia
33 47  United Arab Emirates
34 32  South Africa
35 33  Puerto Rico
36 34  Saint Lucia
37 49  Colombia
38 38  Azerbaijan
39 37  Qatar
40 36  Cyprus
41 80  Kyrgyzstan
42 35  Slovakia
43 50  Armenia
44 42  Bulgaria
45 39  Botswana
46 61  Taiwan
47 41  Hungary
48 48  Portugal
49 40  Chile
50 44  Antigua and Barbuda
51 55  Mexico
52 46  Tonga
53 57  Slovenia
54 43  Fiji
55 45  Romania
56 65  Peru
57 68  Samoa
58 82  Belarus
59 58  Vanuatu
60 56  Mongolia
61 52  Kuwait
62 51  Spain
63 64  Kazakhstan
64 53  Luxembourg
65 60  Oman
66 54  Namibia
67 143  Rwanda
68 59  Bahamas
69 73  Tunisia
70 62  Saint Vincent and the Grenadines
71 77  Montenegro
72 72  Poland
73 63  Turkey
74 66  Czech Republic
75 67  Jamaica
76 70  Saint Kitts and Nevis
77 83  Panama
78 74  Italy
79 79  Kiribati
80 75  Belize
81 78  Trinidad and Tobago
82 89  Albania
83 76  Dominica
84 81  El Salvador
85 85  Pakistan
86 102  Dominican Republic
87 71  Maldives
88 90  Serbia
89 86  China
90 99  Zambia
91 88  Grenada
92 87  Ghana
93 91  Vietnam
94 108  Moldova
95 84  Kenya
96 94  Brunei
97 92  Palau
98 93  Marshall Islands
99 103  Yemen
100 104  Jordan
101 98  Guyana
102 95  Papua New Guinea
103 110  Croatia
104 96  Solomon Islands
105 97  Sri Lanka
106 116  Egypt
107 111  Ethiopia
108 101  Lebanon
109 100  Greece
110 117  Guatemala
111 105  Seychelles
112 106  Uganda
113 107  Kosovo
114 109  Uruguay
115 114  Swaziland
116 119  Bosnia and Herzegovina
117 113  Nicaragua
118 112  Argentina
119 115  Bangladesh
120 118  Russia
121 120  Costa Rica
122 129  Indonesia
123 123  Nepal
124 122  Paraguay
125 121  Nigeria
126 124  Bhutan
127 125  Micronesia
128 130  Morocco
129 127  Brazil
130 128  Lesotho
131 126  Tanzania
132 131  Malawi
133 132  India
134 144  Madagascar
135 140  Mozambique
136 134  Algeria
137 142  Iran
138 133  Ecuador
139 137  West Bank and Gaza
140 135  Gambia
141 136  Honduras
142 145  Ukraine
143 138  Syria
144 141  Philippines
145 139  Cambodia
146 147  Cape Verde
147 155  Burkina Faso
148 156  Sierra Leone
149 159  Liberia
150 146  Uzbekistan
151 154  Haiti
152 164  Tajikistan
153 150  Iraq
154 149  Sudan
155 148  Suriname
156 162  Mali
157 152  Senegal
158 151  Gabon
159 160  Zimbabwe
160 168  Afghanistan
161 158  Bolivia
162 153  Comoros
163 157  Djibouti
164 173  Timor-Leste
165 166  Togo
166 161  Mauritania
167 165  Laos
168 163  Côte d'Ivoire
169 170  Angola
170 169  Equatorial Guinea
171 167  Cameroon
172 172  Benin
173 171  Guinea
174 174  Niger
175 175  Eritrea
176 177  Burundi
177 178  Venezuela
178 176  Chad
179 179  Congo
180 180  São Tomé and Príncipe
181 181  Guinea-Bissau
182 182  Democratic Republic of the Congo
183 183  Central African Republic

Notes

External links

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