Business-friendly countries

August 25, 2004

Free Market Foundation

The International Finance Corporation, the World Bank’s private-sector development arm, released a report that surveyed some 130 countries on how hospitable they are to businesses.

Index scores ranged from 0 to 100, with higher values representing more rigid regulation in five main categories the ease of getting credit, starting business, enforcing contracts, hiring and firing workers, and closing down a business.

In the United States it takes on average 5 days to start up a business, as compared to the Organisation for Economic Co-operation and Development (OECD) average of 25 days.

U.S. companies are also fairly flexible in hiring workers and firing them, receiving index scores of 33 and 5, respectively.

According to the report, there were a number of other countries that are highly friendly to business:

Denmark received a hiring flexibility and firing index of 33 and 17, respectively; it only takes 4 days to start up a business.

City-states such as Hong Kong and Singapore performed well in all categories, including both getting an index score of 1 for flexibility of firing workers.

Canada, Britain, Ireland and Malaysia were also highly ranked.

Ultimately, the IFC concludes that heavier regulation brings bad economic outcomes. But even free-market nations cannot become complacent. IFC’s chief economist says “the countries with the best business climates tend to be also the ones that are continually reforming it”.

Source: Andrew T. Giles, In Search of Fair Business Climes, Forbes, July 26, 2004.

For text
http://www.forbes.com/business/forbes/2004/0726/147.html

For the World Bank databasehttp://rru.worldbank.org/DoingBusiness/

For more on Economic Freedomhttp://www.ncpa.org/iss/int/

FMF Policy Bulletin 17 August 2004