Special Report

Best (and Worst) Countries for Business

Most entrepreneurs start their businesses locally, and while in some countries conditions are favorable to do business, in others conditions are difficult. According to a recently released World Bank report, it takes roughly 20 days to start a business on average globally, but in some nations it can take four or five times as long.

The report, “Doing Business 2016: Measuring Regulatory Quality and Efficiency”, rated 189 economies in 10 separate areas of business regulations, including starting a business, permits, getting electricity, property registration, access to credit, and taxes. The report concluded that Singapore is the ideal economy for doing business, while it is virtually impossible to do business in Eritrea. Based on this report, 24/7 Wall St. reviewed the best and worst countries for doing business.

Click here to see the best countries for business.

Click here to see the worst countries for business.

Researchers assessed each area of business regulation based on either efficiency, subjective measures of quality, or both. Efficiency is the number of steps and time involved in such areas of doing business as starting a new business, getting a construction permit, and establishing a new electricity connection, among others. The quality can be how reliable that new electricity connection tends to be.

While efficiency and quality typically go hand in hand, that is not always the case. Dr. Rita Ramalho, lead author of the Doing Business 2016 report, told 24/7 Wall St. that some countries have highly efficient administrations despite poor quality outcomes. However, “having low efficiency and good quality — that really doesn’t exist,” Ramalho said.
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Click through the map above to see how each country ranks for ease of doing business. 

A supportive environment benefits more than just the businesses it regulates. “We do see that countries with simpler business processes tend to have a higher level of firm creation and a higher level of job creation,” Ramalho said. “By making it easier for the private sector, you’re more likely to have more firms, more jobs, and a more dynamic economy.” When regulations allow entrepreneurs to function and be creative, the whole economy improves.

Wealth typically coincides with a supportive business environment, but not always. For example, Macedonia, which ranks 10th best on the list, has a gross national income of just $5,070 per capita. On the other hand, Venezuela, with a GNI of $12,820, ranks the fourth worst.

Because a country’s business environment is a matter of policy, countries have the ability to improve by introducing efficient, quality regulation. In the last year, 122 economies made 231 reforms. And although high-income countries have a better average score than low-income countries, “we see that the gap is reducing, so the low income countries are improving more than the high income countries,” Ramalho noted.

To identify the best and worst countries for business, 24/7 Wall St. reviewed the “Doing Business 2016: Measuring Regulatory Quality and Efficiency” report. We reviewed countries with the 10 highest and 10 lowest index values, or the “Distance to Frontier Score” — in the World Bank’s Doing Business 2016: report. The report evaluated the business climates in 189 national economies around the world based on 10 categories of business regulations. The cost of starting a business, which is expressed as a percentage of the gross national income (GNI) per capita, also came from the report. The total tax rate, which is the percentage of profits companies effectively pay in taxes, was also included in the report. Gross domestic product (GDP) per capita, and GDP growth came from the International Monetary Fund (IMF) and are as of the most recent period available.

These are the best and worst countries for doing business.

The Best Countries for Doing Business

10. Macedonia
>Distance-to-frontier score:
80.18
> Cost of starting a business (as pct. of income): 0.1%
> Total tax rate: 12.9%
> Income per capita: $5,070

Based on 10 measures of a country’s regulatory climate, Macedonia is the 10th best country for doing business. In particular, it is easier to start a business in Macedonia than it is in all countries reviewed other than New Zealand. Starting a business in Macedonia is a one-step, one-day process, whereby entrepreneurs can register all necessary documents in an online filing system accessible 24/7. This recently established process eliminates the need for notary services and reduces the time, cost, and procedures for starting a business. A similar system is in place for Macedonia’s construction permitting process, whereby all necessary documents are available online, accompanied by a comprehensive list of steps and requirements, and reviewed by a certified architect. Perhaps as a result, Macedonia received nearly the best possible rating for building quality control.

A healthy business climate often leads to greater wealth, but the best countries for business are not necessarily wealthy nations. The former Yugoslav country has a GNI per capita of just $5,070, by far the lowest of any country with a healthy business climate.

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9. Finland
>Distance-to-frontier score:
81.05
> Cost of starting a business: 1.0%
> Total tax rate: 37.9%
> Income per capita: $47,380

No country has a better legal framework to assist failing companies than Finland. It takes 11 months on average for a company gone bankrupt to regain solvency, and investors typically recover about 90% of assets. By contrast, bankruptcy proceedings in the United States take 18 months, and investors recover 80.4% of assets, on average. Finnish law allows some bankrupt companies to take on new loans while insolvent, and all parties involved are permitted to participate in corporate reorganization. Unlike the United States, the Scandinavian country also has far more early screenings for insolvency cases, allowing for speedier proceedings.

Over the past year, Finland reduced its corporate income tax rate and increased the social security contributions employers are required to pay, making taxes for businesses less costly overall. Each year, companies pay around 38% of profit in taxes on average.

8. Norway
>Distance-to-frontier score:
81.61
> Cost of starting a business: 0.9%
> Total tax rate: 39.5%
> Income per capita: $103,050

With a GNI per capita of $103,050, Norway is one of the richest countries in the world. Wealth often coincides with a healthy business environment, and the Scandinavian country is no exception. While companies in many countries register their businesses by mail, Norway established in the past year an online system for entrepreneurs to register their businesses and bank accounts. The new system likely helped reduce the time required to start a business. Now, it takes just four steps and four days on average to start a company compared to the five steps and seven days it took two years ago. While property registration is still done by mail in Norway, it is a one-step process that typically takes just three days. The country is currently developing an online property registry.

7. Sweden
>Distance-to-frontier score:
81.72
> Cost of starting a business: 0.5%
> Total tax rate: 49.1%
> Income per capita: $46,219

Like other Scandinavian countries, Sweden is one of the best nations for business. Sweden performs well in every measure of business ease and particularly well in infrastructure measures. Establishing a new electricity connection in Sweden is a three-step process and takes just 52 days on average compared to the five steps and 90 days it takes in the United States. Since last year, the Swedish government also made starting a business much easier by requiring its business registration office to process registrations within five days. Now, starting a business is a three-step process and takes an average of seven days to complete. These steps are also relatively cheap to do, costing around $230 or just 0.5% of Sweden’s income per capita.

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6. United States
>Distance-to-frontier score:
82.15
> Cost of starting a business: 1.1%
> Total tax rate: 43.9%
> Income per capita: $55,200

The United States is the largest economy in the world and the sixth best for doing business. Other than New Zealand, no country has a better credit framework. All American adults are covered by a credit bureau and have some of the most extensive legal rights in the world. The U.S. legal framework also supports recoveries from total financial ruin. The country boasts multiple success stories whereby soon after declaring bankruptcy, a previously insolvent company reemerged with a new corporate structure and focus. Kodak, Marvel, and Fruit of the Loom — today major multinational corporations — all returned to profitability partly due to the U.S.’s favorable reorganization and refinancing laws. Starting a business in America, however, is not as easy as it is in other business-friendly countries. Starting a company is a six-step process, and the procedure takes about six days on average.

5. United Kingdom
>Distance-to-frontier score:
82.46
> Cost of starting a business: 0.1%
> Total tax rate: 32.0%
> Income per capita: $42,690

Bureaucratic and regulatory conditions in the United Kingdom are among the most business friendly in the world. The country scores within the 75th percentile in eight out of 10 measures of ease of doing business. Entrepreneurs have a significant advantage in the U.K. With no capital, an entrepreneur can start a business in the U.K. in under five days.

In particular, the U.K. has improved its tax system in the past year. Over the 12 months through June 2015, the country has reduced the corporate income tax rate and decreased the contributions to social security that employers are required to pay. Other changes in the country were not as beneficial. Court fees associated with enforcing contracts went up in the U.K over that time.

4. South Korea
>Distance-to-frontier score:
83.88
> Cost of starting a business: 14.5%
> Total tax rate: 33.2%
> Income per capita: $27,090

No country in the world has better access to reliable electricity than South Korea. It takes just 18 days for a typical enterprise to establish a new electricity connection, tied for the fastest time in the world. For businesses, loss of electricity often leads to a significant loss of revenue. Not only do businesses in Seoul — South Korea’s capital — lose power very rarely, but also they receive compensation for outages that last longer than five minutes.

South Korean businesses are also protected by one of the most efficient judicial systems in the world. Court cases in South Korea are filed and conducted entirely online, one of only a few nations where this is the case. The typical commercial dispute in South Korea is resolved in just 230 days — a relatively short turnaround. Despite being generally conducive to business, South Korea has a comparatively high cost of entrepreneurship. The average cost of starting a business in South Korea is 14.5% of the country’s GNI per capita, one of the higher such rates among the better countries.

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3. Denmark
>Distance-to-frontier score:
84.40
> Cost of starting a business: 0.2%
> Total tax rate: 24.5%
> Income per capita: $61,310

Since June 2014, Denmark has implemented an online platform to facilitate simultaneous business and tax registration for entrepreneurs. Under the improved conditions, it takes three days to start a business in Denmark. Denmark is one of 122 nations to implement business friendly reforms between June 2014 and June 2015. Though the Scandinavian country ranks 29th in the world for ease of starting a business, its handling of international trade is the most business friendly in the world. With no fees for documentation or border compliance for imports and exports, along with a documentation time that can be measured in minutes, no nation makes it easier, or cheaper, for businesses to trade with other nations.

With conditions so conducive to doing business, Denmark’s people are relatively prosperous and the national economy is growing modestly. GNI per capita is slightly more than $61,000 and the economy grew by 1.1% and 1.6% in the last two years, respectively.

2. New Zealand
>Distance-to-frontier score:
86.79
> Cost of starting a business: 0.3%
> Total tax rate: 34.3%
> Income per capita: $43,837

New Zealand is home to roughly 4.5 million people, and its economy depends largely on agriculture, manufacturing, and tourism. The country has one of the best environments in the world for business. New Zealand ranks highest in the world in ease of starting a business, obtaining credit, registering property, and protecting minority investors. An entrepreneur in New Zealand can start a business in half a day, with no minimum capital required. By contrast, it takes five times as long to start a business in Australia, New Zealand’s closest neighbor.

With the exception of Singapore, no other country has more ideal conditions for doing business. And conditions continue to improve. Since last year, regulators in New Zealand have improved payment monitoring and confirmation processes, ultimately reducing the time it takes to establish an electricity connection.

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1. Singapore
>Distance-to-frontier score:
87.34
> Cost of starting a business: 0.6%
> Total tax rate: 18.4%
> Income per capita: $51,150

Despite making no significant reforms, Singapore is once again the best country for business. Singapore is notable for its swift and transparent judicial system. The average commercial dispute takes just 150 days to resolve, the shortest turnaround worldwide. Moreover, since early last year, litigants and lawyers have been able to file cases, exchange documents, schedule hearings, and hold conferences entirely online.

A streamlined construction process contributes to the city state’s favorable business. It takes only 26 days to get a construction permit in Singapore, the quickest proceedings of any country. Additional hurdles to owning property are fairly low. Business owners are charged on average just 0.3% of their property’s value in construction-related fees, one of the lowest such compliance costs in the world. Business owners also pay an effective tax rate of just 18.4%, one of the lowest rates worldwide.

The Worst Countries for Doing Business

10. Equatorial Guinea
>Distance-to-frontier score:
40.03
> Cost of starting a business: 99.4%
> Total tax rate: 20.7%
> Income per capita: $13,340

The Central African nation of Equatorial Guinea is a resource-rich country, which has led to a great deal of wealth in the country. The country’s current GNI per capita of $13,340 is the highest of any nation on the continent. This prosperity, however, has not translated into improved welfare for the population. According to the UN, nearly one in 10 children do not live to the age of five, and less than 50% of the population has access to clean drinking water.

The nation’s wealth has also not improved the ease of doing business in the country. According to the Doing Business report, it takes 135 days and 18 separate procedures to start a business, the longest and second most procedures of the 185 countries measured.

9. Angola
>Distance-to-frontier score:
39.64
> Cost of starting a business: 22.5%
> Total tax rate: 21.7%
> Income per capita: $5,300

The sub-Saharan nation of Angola is one of the least business friendly countries in the world. It would cost an entrepreneur in Angola 22.5% of the country’s GNI per capita of $5,300 and take over a month to start a business. While the process is expensive and time consuming, it has improved since last year. Since June 2014, the country has made it easier to start a business by improving the registration process and reducing registration fees. The corporate tax rate has also been reduced since last year. Like in many of the worst countries for business, it is hard to sustain an enterprise through financial difficulty. In Angola, there is no framework whatsoever to assist companies that declare bankruptcy.

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8. Haiti
>Distance-to-frontier score:
39.56
> Cost of starting a business: 235.3%
> Total tax rate: 23.8%
> Income per capita: $830

Haiti, which shares an island with the Dominican Republic, is the poorest nation in the Western Hemisphere. The nation’s economy and public welfare have been hindered by years of dictatorship as well as a 7.0 earthquake that devastated the capital, Port-Au-Prince. These obstacles have likely contributed to the nation’s poor business climate.

According to the Doing Business 2016 report, “Formal registration of a company is so complicated [in Haiti] that the process cannot be completed without using the services of third parties – lawyers and notaries.” It also takes nearly 100 days to start a business, close to five times the global average time. When considering the fact that the expenses of starting a business are more than double the country’s GNI per capita, it is not surprising that there are only six registered private companies per 100,000 working-age adults compared to 1,507 private companies per 100,000 working-age people in New Zealand.

7. Chad
>Distance-to-frontier score:
38.22
> Cost of starting a business: 150.4%
> Total tax rate: 31.3%
> Income per capita: $1,010

Chad, Africa’s fifth-largest nation, is one of the worst countries in the world to do business. Poor infrastructure and recurring internal conflict since Chad gained independence in 1960 have hurt residents and businesses. Chad’s GNI per capita of $1,010 is one of the lowest worldwide. It takes 67 days and it costs nearly $8,000 to establish an electricity connection in the country, far longer and relatively expensive compared to other countries. Once established, the connection is one of the least reliable worldwide.

Despite its unsupportive business environment, Chad has made regulatory improvements in the past year. Chad, along with five other member nations of the Organization for the Harmonization of African Business Law (OHADA) — an organization that governs business regulation among 17 African countries — recently lowered its property transfer tax, making it easier for entrepreneurs to trade land and real estate.

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6. Congo, Dem. Rep.
>Distance-to-frontier score:
38.14
> Cost of starting a business: 29.3%
> Total tax rate: 27.5%
> Income per capita: $410

The Democratic Republic of Congo is one of the least business friendly countries in the world. The country ranks especially poorly in getting electricity and enforcing contracts. It costs about $63,000 to connect a building with electricity, and enforcing contracts costs an average of 80.6% of the claim. Despite an expansive list of obstacles to doing business in the Central African nation, conditions have improved in some areas. Since June 2014, the country has made it easier for entrepreneurs to start a business by reducing the minimum capital requirement and simplifying the registration process.

The unfriendly business environment in the Democratic Republic of Congo is likely a symptom of many other complex problems. The nation is home to abundant resources, which were the focal point of a five year war involving multiple countries. The war resulted in an estimated 6 million deaths.

5. Central African Republic
>Distance-to-frontier score:
36.26
> Cost of starting a business: 204.0%
> Total tax rate: 0.0%
> Income per capita: $330

A supportive business climate often coincides with a developed economy. Central African Republic, with a GNI of just $330 per capita, is one of the poorest countries in the world and the fifth worst for doing business. The country’s internal conflict and poor infrastructure combined with inefficient, low quality business regulations are some of the obstacles businesses face. It takes nearly 100 days to establish a new electricity connection, and it costs close to $5,000. Once established, the connection is one of the most unreliable electricity sources in the world. Businesses in the Central African Republic reported losing about one-fourth of their revenue due to power outages.

4. Venezuela
>Distance-to-frontier score:
35.51
> Cost of starting a business: 88.7%
> Total tax rate: 9.9%
> Income per capita: $12,820

Government regulation is an important factor for doing business in a country — and governments strive to find a middle ground between too tight regulation that would frustrate businesses and too loose regulation that would fail to protect businesses and consumers alike. Under the rule of former President Hugo Chavez, a large share of the nation’s economy has been nationalized, including the oil and gas extraction industry — the cornerstone of the Venezuelan economy. Tight government regulation has done the country no favors in the “Doing Business 2016” report.

Starting a company in Venezuela requires 17 separate procedures — the second most of any nation measured — and it takes 144 days, longer than any country reviewed. Also, a lawyer is required for legal assistance when incorporating a company, which can cost nearly 90% of the country’s GNI per capita.

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3. South Sudan
>Distance-to-frontier score:
34.78
> Cost of starting a business: 330.1%
> Total tax rate: 6.9%
> Income per capita: $960

Gaining independence from Sudan in 2011, South Sudan is one of the youngest nations in the world. It is also one of the worst countries for business. While 122 economies have implemented reforms since June 2014, South Sudan is not one of them. The 23 procedures required to obtain a construction permit take about 124 days to complete, making it one of the most complex and time-consuming permitting systems in the world.. Additionally, infrastructure is so poor in South Sudan that it often takes well over a year to connect a building with electricity. A healthy regulatory framework promotes prosperity for both employers and employees. In South Sudan, however, there are no restrictions on overtime work and no paid vacation for workers in the country. Only two economies in the world are less hospitable for business.

2. Libya
>Distance-to-frontier score:
31.77
> Cost of starting a business: 26.9%
> Total tax rate: 22.0%
> Income per capita: $7,920

Although wealth often coincides with supportive business environment, Libya is an exception. The oil-rich country’s GNI of $7,920 per capita is far higher than other countries ranked as poorly for doing business. It is Libya’s lack of regulation that makes it one of the least hospitable countries in the world for business. There are no procedures in place for property registration and no official means of obtaining construction permits. Additionally, it takes 118 days to establish electrical connectivity in a new building in Libya- one of the longest turnarounds worldwide.

Like many of the worst countries for business, Libya has recently been hampered by violent political turmoil. Long time dictator Muammar Gaddafi was killed in the 2011 Libyan civil war. Since then, the country has yet to fully stabilize.

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1. Eritrea
>Distance-to-frontier score:
27.61
> Cost of starting a business: 38.1%
> Total tax rate: 9.2%
> Income per capita: $530

With a per capita GNI of $530, Eritrea is one of the poorest countries in the world. Government regulation, when it exists, is also the farthest removed from what most consider best practices. While business can be hindered in some nations due to lengthy and expensive processes regarding construction permits, Eritrea has no regulations or policies at all regarding new building construction. Similarly, while regulations slowing international trade can hurt business, too little regulation can as well. Eritrea has no documentation or broader compliance procedures in place for imports and exports.

Like many of the countries with the most room for improvement, Eritrea is a relatively young African nation. Gaining independence in 1993 after three decades of war, the country has since been involved in armed conflicts with neighboring countries. In the past several years, the international community has condemned Eritrea for its increasing lack of transparency.

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