This was the report that China tried to kill: the World Bank’s annual Doing Business report that ranks and compares how easy – or not so easy – it is for a small or medium-sized company to do business in a country. China had a point; it is tough to compare data across 189 countries and not let some subjectivity come into play. But most of us suspect that Beijing’s stance had more to do with consistently low rankings. The Mandarins won’t be happy with the 2014 Doing Business report, just issued. Especially with the news that it is now easier (by a smidgeon) to do business in Russia than it is in China (#92 versus #96). Russia climbed 20 positions since the previous report, while China dropped five. The difference is that Moscow uses the World Bank rankings to measure progress, but Beijing just wants to hide the results.
There is a whole lot more in this year’s report, of course. The Top Ten for ease of doing business won’t surprise as they are the usual suspects: Singapore, Hong Kong, New Zealand, United States, Denmark, Malaysia, South Korea, Georgia, Norway and the United Kingdom. Well, maybe Georgia is something of a surprise! Georgia is ranked #1 for property registration, #2 for dealing with construction permits, and it only takes two days to start a business (#8). Georgia has also enacted new regs that move them up to #3 in ease of getting credit. Pretty impressive. Could be part of what is spurring Russia forward, too.
The economies that improved the most in 2012/2013 include: Ukraine, Rwanda, Russia, the Philippines, Kosovo, Djibouti, Côte d’Ivoire, Burundi, Macedonia and Guatemala. Admittedly, most of these are starting from a low base, but the trend is great. There has been particular progress in Sub-Saharan African countries.
The United States ranks #4 overall for ease of doing business (about as high as we can go given the difficulty of competing with city-states like Singapore and Hong Kong) , but that doesn’t mean there isn’t room for improvement. Our toughest problem is paying taxes, where we only rank #64 in the world. That’s because small businesses in America have to spend 175 hours every year preparing for an average of 11 different tax filings. And those tax payments add up to 46.3% of small business profits. Could this be considered shooting oneself in the foot? That said, the United States is a really, really good place to get credit (#3), so ignore all those news stories about how tough credit conditions are. It could be a whole lot worse. We are pretty good at ease of starting a new business (#20), getting electricity (#13), protecting investors (#6), enforcing contracts (#11), and resolving insolvency (#17). Our ease of trading across borders is good (#22), but could be improved. Exporting only requires three documents, but it takes an average of six days to actually get your goods moved out of the country. Importing, perversely, requires five documents, but it only take five days to bring shipments in. We could use some improvement in registering property (#25) and dealing with construction permits (#34), where it takes an average of 16 procedures and 91 days to get a project started. That’s the cost of a litigious society.
A detailed look at the rankings lends perspective to China‘s desire to kill the rankings. The country was 96th for overall ease of doing business. It seems odd for a country largely run by engineers that it takes 270 days and 25 legal procedures to get construction permits (#185). Starting a new business is nearly as bad (#158): 13 procedures and 33 days required. It may take 5 legal procedures and 145 days to get power to your plant (#119). Protecting investors? Not so much (#98). Better marks for ease of registering property (#48), getting credit (#73, showing progress over recent past reports), and resolving insolvencies (#78). China is really good at enforcing contracts (#19). Trading across borders (#74) could use some work. While China has fairly low shipping costs, they aren’t the most efficient at moving cargo. It takes an average of 21 days to export a container, and 24 days to bring one in.
If you are doing business internationally or involved in developing business policies, the World Bank report is must reading. If you are considering opening operations in another country, it is essential.