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.
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.
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.