Aspiring Entrepreneur? Then Go East, Young Man (or Woman)

Singapore is the easiest place in the world for small- and medium-sized domestic companies to do business, with Hong Kong and New Zealand trailing immediately behind, and Malaysia and South Korea rounding out the Asia-Pacific region’s representation in the top 10, according to a World Bank study released late last month.

The institution’s “Doing Business 2014: Understanding Regulations for Small and Medium-Sized Enterprises” ranks 189 economies on their ease of doing business. That composite ranking reflects each economy’s scores on 10 measures ranging from the regulatory environment – such as “dealing with construction permits” and “registering property” – to the commercial infrastructure – “getting credit” and “getting electricity” – to legal protection for businesses – “enforcing contracts” and “protecting investors.” Of particular note for aspiring entrepreneurs, one measure examines the ease of starting a business. New Zealand ranks first on that count, while the United States is in 20^th place and Myanmar comes in last.

Published on October 29, the 2014 report is the eleventh iteration of the World Bank study. The first report, issued in 2003, examined 133 economies, assessing them on the basis of five indicators. Beyond expanding the number of measures it uses to appraise the ease of doing business, the report now covers 189 economies, with Libya, Myanmar, San Marino, and South Sudan being included for the first time this year.

The World Bank reports that for the period 2012-2013, more than 110 economies implemented 238 regulatory reforms that made it easier for small- and medium-sized domestic enterprises to operate. The Washington-based international organization noted that this represented an 18 percent increase in business-friendly reforms over the prior reporting period. The World Bank gave kudos to Ukraine, Rwanda, the Russian Federation, the Philippines, Kosovo, Djibouti, Cote d’Ivoire, Burundi, Macedonia, and Guatemala for having enacted reforms in the past reporting year. (The study covers the period from June 2012 through May 2013.)

While complaints that government regulation is stifling the entrepreneurial spirit are a recurring theme in American political dialogue, the U.S. places fourth overall in the Ease of Doing Business rankings. Its highest scores on the subsidiary measures are for getting credit (3) and protecting investors (6). Its lowest scores are for paying taxes (64) and dealing with construction permits (34). Beyond the U.S. and the aforementioned countries from the Asia-Pacific region, the other countries in the top 10 are Denmark (5), Georgia (8), Norway (9), and the United Kingdom (10).

In keeping with the presence of Denmark and Norway in the top 10, Scandinavia fares well overall, perhaps presenting a challenge to many laissez faire advocates’ perception of the region as a bastion of initiative-crushing social safety nets and government paternalism. Finland, Iceland, and Sweden occupy spots 12-14 in the rankings, so that the entire region is represented in the top 15 places and claims one-third of those spots.

By comparison, Africa is strongly represented among the last 10 spots on the list of 189 economies. Chad comes in dead last, and is joined in the bottom 10 by the Central African Republic, Libya, South Sudan, the Republic of Congo, Eritrea, the Democratic Republic of Congo, and Guinea-Bissau. The two non-African countries in the bottom 10 are Myanmar and Venezuela. Rwanda is the highest-scoring African nation, at 32, with South Africa following at 41.

A few other noteworthy rankings:

• The Baltic states that emerged from the collapse of the former Soviet Union win high marks, with Lithuania, Estonia, and Latvia coming in at 17, 22, and 24, respectively. By contrast, the Russian Federation is ranked at 92.
• Germany places at 21, compared with 28 for the Netherlands, 29 for Switzerland, 38 for France, and 65 for Italy.
• The People’s Republic of China is ranked at 96, compared with 16 for Taiwan, 27 for Japan, 99 for Vietnam, and 134 for India.
• The United Arab Emirates is deemed the nation in the Middle East most accommodating of small- and medium-enterprises, ranked at 23, with Saudi Arabia following at 26 and Israel at 35.

In conjunction with the global rankings, the World Bank has published a wealth of related information, including background on the study’s methodology, country-specific data, and case studies examining reforms in Malaysia, South Korea, Singapore, Colombia, Azerbaijan, and Trinidad and Tobago. As the role of smaller enterprises in innovation and job creation becomes better appreciated, hopefully that information will prompt further reforms as governments look beyond multinational companies in their search for economic growth.