World Bank Report: Countries ranked by ease of doing business

Doing Business 2009 is a World Bank report that ranks which countries have the best business environments. The report noted progress in the Asia-Pacific and, unfortunately, a bit of a negative trend in Chile.

In its report, the World Bank analyzed 181 countries. Chile ranked 40th, falling four slots since the last report. Chile was rated second among Latin American nations. Meanwhile, nations in the Asia Pacific have tended to occupy the top positions, especially Singapore and New Zealand, which ranked first and second.

The report takes into consideration the laws and conditions in each country in its ranking. These two factors can facilitate or impair businesses. The “2009” in the report’s title refers to 2008 measures and reforms implemented and which will affect businesses in 2009. According to the World Bank, rules that allow business to prosper, while ensuring transparency are vital to fighting the effects of the informal economy, where there is no access to financing and workers are vulnerable.

Reforms to facilitate business

The report is based on 10 indicators that measure the ease of doing business in a given economy. The factors include the following: procedure for starting a business, obtaining permits and licenses, property registration, tax payment system, procedures to close a business, employing workers, access to credit, protecting investors, international trade and legal contracts.

Economies that lead the rankings belong to the Organization for Economic Cooperation and Development (OECD), which is comprised of developed nations such as the United States, Japan, South Korea, New Zealand, Australia and the nations of the EU, among others.

Ranked just below the OECD are Eastern Europe and Central Asia (the former Soviet Republics). This regional group is followed by East Asia and the Pacific, which, in turn, is followed by the Middle East and North Africa. Latin America and the Caribbean are second to the last, followed by Southeast Asia and sub-Saharan Africa.

In fact, Eastern Europe and Central Asia take the lead in reforms to encourage the subject business. In fact, the report begins with the following statement in its Overview section: “Rankings on the ease of doing business do not tell the whole story about an economy’s business environment. The indicator does not account for all factors important for doing business—for example, macroeconomic conditions, infrastructure, workforce skills or security. But improvement in an economy’s ranking does indicate that its government is creating a regulatory environment more conducive to operating a business.”

In its Overview, the World Bank also states that it focuses on how accommodating countries are to regulatory frameworks. It states, "In the past year reformers focused on easing business start-up, lightening the tax burden, simplifying import and export regulation and improving credit information systems."

Chile and the Asia Pacific

Chile experienced progress on only one of the report’s indicators, the strength of legal contracts. It fell in the rankings in the other categories, such as opening and closing of businesses, access to credit and foreign trade.

Within Latin America, Chile is ranked below Puerto Rico (35), which received the highest rating in the region. After Chile, came Colombia (53) Mexico (56), Peru (62), Argentina (113), Brazil (125) and Venezuela (174). The Colombian case is the most remarkable, because last year it was ranked 66th.

While New Zealand and Singapore top the list, the other highlight in the Asia-Pacific is Hong Kong, in fourth place. Thus, it remained unchanged since 2008. Australia achieved a significant increase from 10th to 9th.

The World Bank had high praise for the economies which led the rankings. “Singapore further simplified its online business start-up service. New Zealand introduced a single online procedure for business start-up, lowered the corporate income tax and implemented a new insolvency act. Hong Kong (China) streamlined construction permitting as part of a broader reform of its licensing regime.” (Page 3)

Other Asia-Pacific standouts included: Japan (12th) which retained its 2008 ranking.; Thailand, which rose from 19th to 13th; Malaysia, which jumped from 25th to 20th; Korea, which dropped from 22nd to 23rd; China, up 90 to 83rd; Taiwan dropped from 58 to 61st; Vietnam, from 87 to 92nd; and India, which dropped from 120 to 122nd.

The Thai case is important because it moved up a great deal in the rankings since 2008. This is due to the implementation of major reforms, as was the case in Colombia.

Page 7 of the report mentions the two Asian giants. “Among emerging market reformers, India has focused on technology, implementing electronic registration of new businesses, an electronic collateral registry and online submission of customs forms and payments. China has focused on easing access to credit. In 2006 a new credit registry allowed more than 340 million citizens to have credit histories for the first time. A new company law lowered the minimum capital requirement and strengthened investor protections. And in 2007 a new property law expanded the range of assets that can be used as collateral.

The report seems to indicate that, once again, the Asia-Pacific economies are strengthening, while others are implementing needed reforms. It also addresses the general stagnation in Latin America, including Chile, which is not moving at the same pace as the rest of the world’s economy.