What is the Ease of Doing Business Index?
Curiosity is fundamental to human nature, driving us to explore, learn, and seek ways to improve our lives. It is the only thing that beats fear, by the way. This innate curiosity extends to our interactions with the world of business and economies. As entrepreneurs, investors, and policymakers, we are drawn to compare and measure the ease of doing business across different countries and regions. Thus, we get the notion Ease of Doing Business Index and specialists playing around with it. It is complicated, informative, and engaging.
So, what is the Ease of Doing Business Index? Who determines it? What parameters go into consideration? Let’s learn a bit more!
Ease of Doing Business Index
Ease of Doing Business Index (EoDB) refers to the simplicity and efficiency with which entrepreneurs and businesses can start, operate, and conduct their commercial activities within a country. It is a measure (from 1–190) of the overall business environment, including the ease of starting a business, obtaining permits, accessing credit, protecting investors’ rights, paying taxes, enforcing contracts, and more. A higher ease of doing business ranking indicates a more favorable and supportive environment for businesses and investment.
Who determines the Ease of Doing Business index?
The Ease of Doing Business index is determined and published by the World Bank Group. Specifically, it is produced by the World Bank’s “Doing Business” project, which aims to provide objective measures of business regulations and their enforcement across different countries and regions.
The “Doing Business” report assesses and ranks economies based on various indicators related to the ease of starting and operating a business, obtaining permits, getting credit, protecting investors, paying taxes, enforcing contracts, and more. Still, it is a journey to start a business, write a business plan, and calculate everything ahead of time; the DB metric can show some things or inspire.
The World Bank team collects data through extensive research, surveys, and interactions with experts, business leaders, and government officials in each country. The data collected is then analyzed and used to generate the Ease of Doing Business rankings, which provide valuable insights into the business regulatory environment and the ease of conducting business activities in different parts of the world. The annual report makes a big help to policymakers, investors, and businesses to make informed decisions and understand the business climate in various economies.
10 Topics to determine the index
The formula is complex. The World Bank’s “Doing Business” project collects data on various indicators (you can learn more with the source) to determine the Ease of Doing Business index. Below, we add the shortened description of the critical data points:
1. Starting a Business
This notion unites all the metrics for procedures, time, cost, and minimum capital required to register and establish a new business. For example, according to the researcher, New Zealand represented takes rate 1 (with a DB of 86.8) in the number of procedures. No wonder Peter Jackson chose to film his “The Lords of the Rings” trilogy there.
2. Dealing with Construction Permits
It means the procedures, time, and cost of obtaining construction permits and licenses. China, Luxembourg, United Arab Emirates were the best countries dealing with the Building quality control index (one more constituent parameter) in 2019.
3. Getting Electricity
Procedures, time, and cost to obtain a permanent electricity connection for a business. Besides, the reliability of supply and transparency of tariffs index (0–8) was in Ireland and Costa Rica.
4. Registering Property
Procedures, time, and cost to transfer property ownership and register real estate. In terms of costs, Saudi Arabia takes the first place. However, speaking about procedures and duration, Georgia is the first.
5. Getting Credit
What legal framework does one get for secured transactions, credit information systems, and the ease of obtaining credit? Let’s dive into the depth of the credit information index (0–8), which measures the comprehensiveness of credit information (available to lenders and other institutions, allowing them to assess the creditworthiness of potential borrowers). It is the best in Ecuador, Israel, United Kingdom, according to research in 2019.
6. Protecting Minority Investors
How well are minority investors protected? The strength of minority shareholder protections against related-party transactions and other forms of abuse is crucial.
7. Paying Taxes
The number of taxes, time spent on tax compliance, and total tax rate as a percentage of commercial profits. The most significant number of payments per year were in Hong Kong SAR and China at the rate of 3. Besides, the time to comply with VAT refund ( in hours) was the best in Croatia, the Republic of Korea, and the Netherlands.
8. Trading Across Borders
This group of metrics represents the time to export (Canada, Poland, and Spain are tops), cost (Hungary, Luxembourg, Norway, France, Netherlands, and Portugal), and documents required to import and export goods.
9. Enforcing Contracts
The time (Singapore with 120 best and 1,340 worst performances) and cost (Bhutan with its 0.1% of claim rate) involved in resolving a commercial dispute through the court system.
10. Resolving Insolvency
This group includes the time, cost, and recovery rate for creditors in insolvency proceedings. For example, Norway has the best recovery rate of 92.9 cents on the dollar.
The World Bank team gathers this data through surveys, questionnaires, and interactions with each country’s government officials, experts, and business professionals. The information collected is then used to calculate the Ease of Doing Business rankings, providing valuable insights into the regulatory environment and business climate in different economies.
Can the Ease of Doing Business index help the beginning entrepreneur?
The Ease of Doing Business index is valuable for beginning entrepreneurs as it helps compare business climates and regulatory environments in different countries. It provides insights into administrative processes, risk assessment, access to finance, and policy advocacy. You can check the extended ranking from the Doing Business database. While it’s not the sole factor, knowing this index is essential for making informed decisions when choosing a country to start a business. Besides, services, like our money transfer services also simplify procedures connecting partners worldwide.
The Benefits EoDB Brings
Here are the same bullet points in a shorter form:
- Country Selection: Compare business climates, and find favorable locations for your business.
- Regulatory Insights: Understand business regulations and administrative processes.
- Risk Assessment: Assess potential risks in specific countries, and prioritize efficiency. We wrote about general and most often online business risks with the latest statistics; please look.
- Access to Finance: Higher ranking means better access to funding and resources. Still, nowadays technologies of online money transfers can contribute to businesses and simplify sending funds between parties.
- Policy Advocacy: Use the index to advocate for positive policy changes.
- Business Growth: Favorable environment supports growth and scaling.
- Networking and Collaboration: Connect with other entrepreneurs in vibrant communities.
Conclusion
Overall, the Ease of Doing Business index empowers beginning entrepreneurs with essential information and insights, enabling them to make well-informed decisions, reduce uncertainties, and navigate the initial challenges of starting a business more effectively. Good luck!
About Author
Ben Adam is a dedicated in-house copywriter at Wittix, a leading money transfer services company. With a passion for crafting compelling content and respect for clients, Ben has created engaging and informative articles that captivate readers and provide valuable insights into finance, money transfer, and related topics.
