International Finance
Economy

Ease of Doing Business: New Zealand grabs top spot

Toppled Singapore, which had led the World Bank’s index for 11 years

Toppled Singapore, which had led the World Bank’s index for 11 years

IFM Correspondent

October 28, 2016: New Zealand managed to unseat Singapore from the top position in the World Bank’s ‘Ease of Doing Business’ Index, a globally followed ranking that is released each year by the World Bank. It ranks countries – as one would expect – according to the ease with which businesses can be set up and run in the nation. Singapore had had an unbroken stint at the top for 11 years.

The reasons

The World Bank attributed reductions in labour-related taxes and new regulations that make paying taxes easier as the key reasons for moving New Zealand to the top spot from its previous position as runner-up.

Methodology

A set of 10 parameters/topics is used to zero in on the ranking for each country. These include the ease of starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The rankings are determined by sorting the aggregate distance to frontier (the distance of each economy to the ‘frontier’, which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005) scores on the 10 topics, each consisting of several indicators. Equal weight is given to each topic.

Doing Business 2017: The Top 10

The Doing Business 2017 team studied 190 economies around the world. In general, European countries fared better, with Denmark, Norway, UK, Sweden and Macedonia all finding spots in the Top 10. New Zealand, Singapore, Hong Kong, Korea and the US also featured in this list.

Most of the top ten shifted around a bit, with Denmark staying in third place, Hong Kong edging higher to fourth from fifth, exchanging places with South Korea, and Norway rising to sixth. The United States, the United Kingdom and Sweden ranked slightly lower.

Other economies: Notable points

Brunei showed the biggest improvement in rankings over last year, moving to the 72nd position from last year’s 84th with a new insolvency law passed, increased protection for minority investors and more reliable supply of electricity.

Somalia came in at the bottom, indicating that it is the hardest country to do business in, while the most improvement was seen among several of the emerging market countries. The reason behind this trend is seen to be a move by the governments of these countries to pursue business-friendly reforms.

Implications of the rankings

The World Bank says better performance in the ‘Doing Business’ rankings generally equates to lower levels of income inequality and reduced poverty. “Simple rules that are easy to follow are a sign that a government treats its citizens with respect,” the World Bank’s chief economist Paul Romer said in a statement. “They yield direct economic benefits – more entrepreneurship, more market opportunities for women, more adherence to the rule of law.”

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