By Karen Lynch
“This year’s results clearly demonstrate government commitment in many economies, large and small, to nurture entrepreneurship and private enterprise,” said Rita Ramalho, Senior Manager of the World Bank’s Global Indicators Group. “No one questions that these things are important any more, such as the need for a simple process to start a business.”1
With its focus on small, domestic companies, the World Bank’s analysis provides an important piece of the puzzle for U.S. companies seeking to form partnerships and other business arrangements abroad in today’s uncertain international trade environment. It rates 11 areas of business regulation: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, and labor market regulation.
In total, 128 governments undertook a record 314 reforms during 2017-2018, as measured by the Doing Business report. The previous record, in Doing Business 2017, was 290 reforms. One result is that registering a business now takes an average of 20 days, compared to 47 days in 2006. In the current report, most improvements came in the areas of starting a business and enforcing contracts.2
New Zealand topped the Ease of Doing Business Index, followed in the Top 10 (in order) by Singapore, Denmark, Hong Kong, South Korea, Georgia, Norway, the U.S., the U.K., and Macedonia.3 Rankings for other major U.S. trading partners include: Canada (22), Germany (24), Japan (39), and Mexico (54).
China and India are among the 10 most improved countries, the report said, because of reforms made in recent months. For example, China (up 30 spots, to 46th place) is credited with launching online company registrations; India (up 23 spots, to 77th place) replaced many sales and other indirect taxes with a national goods and services tax; and both governments reduced the time and cost to export and import.4,5
Wide gaps remain though—for example, between the high-income economies of the Organization for Economic Cooperation and Development and low-income countries in Sub-Saharan Africa. Yet some of the governments showing the most improvement are in more fragile economies such as Afghanistan and Rwanda.6
In the specific ranking for “trading across borders,” a cluster of European nations take the top 26 spots, with their streak broken by Hong Kong at 27. The U.S. is ranked 36, with other major U.S. trading partners ranked as follows: U.K. (30), Canada (50), Japan (56), China (65), and Mexico (66). To determine the ranking, the Ease of Doing Business Index considers the typical time and money it takes to document and clear imports and exports crossing the border.7
In a separate report on cross-border trade, the World Trade Organization (WTO) recently commemorated the second anniversary of the Trade Facilitation Agreement (TFA), which went into effect in February 2017 to expedite the movement, release, and clearance of goods across borders. The WTO cited implementation rates of 100 percent by developed countries, 60.3 percent by developing countries, and 22.8 percent by least-developed countries. Full implementation could reduce the time needed to import and export goods by 47 percent (a day and a half) and 91 percent (almost two days), respectively, over the current global average, the WTO said.8
Despite progress, cross-border trades remain complex, involving up to 20 or more entities—from customs and port authorities to customs brokers, banks, vendors, insurance companies, and freight forwarders. So there is room for more improvement at most borders, the Doing Business 2019 report said. Its authors advocated more training of the individuals involved, in both the public and private sectors.
A different group of countries rises and falls for each category in the Ease of Doing Business Index. For example, in “starting a business,” the Top 10 includes (in order): New Zealand, Georgia, Singapore and Canada (tied for third place), Hong Kong, Jamaica, Australia, Armenia, Azerbaijan, and Ireland. In “enforcing contracts,” the Top 10 includes (in order): Singapore, South Korea, Norway, Kazakhstan, Australia, China, Lithuania, Georgia, the United Arab Emirates, and Austria.9
The World Bank’s Doing Business 2019 and Ease of Doing Business Index provide insights into the market conditions for small businesses around the world, including cross-border trade. This year’s report showed continued improvement in many areas, adding that, “sound and efficient business regulation is critical for entrepreneurship and a thriving private sector.”10
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1. “Doing Business 2019: A Year of Record Reforms, Rising Influence,” World Bank; http://www.worldbank.org/en/news/immersive-story/2018/10/31/doing-business-2019-a-year-of-record-reforms-rising-influence
2. Doing Business 2019, World Bank; http://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf
4. “Economy Profile: China,” World Bank; http://www.doingbusiness.org/content/dam/doingBusiness/country/c/china/CHN.pdf
5. “Economy Profile: India,” World Bank; http://www.doingbusiness.org/content/dam/doingBusiness/country/i/india/IND.pdf
6. “Doing Business 2019: A Year of Record Reforms, Rising Influence,” World Bank; http://www.worldbank.org/en/news/immersive-story/2018/10/31/doing-business-2019-a-year-of-record-reforms-rising-influence
7. “Select Rankings,” World Bank; http://www.doingbusiness.org/en/rankings
8. “Members Discuss Progress and Assistance on Trade Facilitation Agreement’s Second Year,” World Trade Organization; https://www.wto.org/english/news_e/news19_e/fac_14feb19_e.htm
9. “Select Rankings,” World Bank; http://www.doingbusiness.org/en/rankings
10. “Doing Business 2019: A Year of Record Reforms, Rising Influence,” World Bank; http://www.worldbank.org/en/news/immersive-story/2018/10/31/doing-business-2019-a-year-of-record-reforms-rising-influence