Governments of 115 economies around the world launched 294 reforms over the past year to make doing business easier for their domestic private sector, paving the way for more jobs, expanded commercial activity, and higher incomes for many, according to the World Bank Group’s Doing Business 2020 study.
This latest edition of the study documents reforms implemented in 10 areas of business activity in 190 economies over a 12-month period ending May 1, 2019. Business-friendly environments are associated with lower levels of poverty, and improved regulatory efficiency can stimulate entrepreneurship, startups, innovation, access to credit, and investment. The study is the 17th in an annual series that evaluates regulations enhancing or constraining business activity for small and medium-size enterprises.
“Governments can foster market-oriented development and broad-based growth by creating rules that help businesses launch, hire, and expand,” World Bank Group President David Malpass said. “Removing barriers facing entrepreneurs generates better jobs, more tax revenues, and higher incomes, all of which are necessary to reduce poverty and raise living standards.”
It is important to note that Doing Business is not meant to be an investment guide, but rather a measurement of indicators of ease of doing business.
The ten economies where business climates improved the most were Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria, the study found. China and Togo appear among the top ten for the second consecutive year, while India makes the list for the third consecutive year, indicating that business regulatory reform is a multi-year process. Bahrain implemented the highest number of reforms, improving in nine out of ten areas measured by the report. China and Saudi Arabia followed with eight reforms each.
The ten economies scoring the highest on the ease of doing business rankings were New Zealand, Singapore, Hong Kong SAR China, Denmark, Republic of Korea, United States, Georgia, United Kingdom, Norway, and Sweden. Top performers typically had online business incorporation processes, electronic tax filing platforms, and online procedures for property transfers.
At the same time, 26 economies took steps that posed new obstacles to business activity. Many of these increased the costs of doing business.
An entrepreneur’s experience differs wildly in high- and low- performing economies. For example, it takes nearly six times as long, on average, to start a business in the economies ranked in the bottom 50 than in economies ranked in the top 20. Transferring property in the 20 top economies requires less than two weeks, compared to three months in the bottom 50. Obtaining an electricity connection in an average bottom-50 economy takes twice as long as in an average top-20 economy; the cost of such a connection is 44 times higher when expressed as a percent of income per capita.
The 10 areas measured in the report are: 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. One additional area, employing workers, is also measured but is not included in the rankings.
Starting a business, dealing with construction permits, getting electricity and paying taxes were the most active reform areas over this period. Reforms in dealing with construction permits and getting electricity have jumped in recent years. Many of the 37 economies, that made construction permitting simpler, streamlined interactions with agencies for pre-approval and inspection. To connect businesses with the power grid more efficiently, 16 economies invested substantially in modernizing electrical infrastructure. One outcome: average global duration of power cuts fell more than 8% between 2017 and 2018.
Since its inception in 2003, more than 3,500 business reforms have been carried out in 186 of the 190 economies Doing Business monitors.