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Doing business in Asia
Friday, 13 January 2012 23:54

One thing that is very striking in Asia is how some countries have done extremely well, whereas many others are very much lagging behind -- despite all the talk of an "Asian Century".  An important factor driving this disparity is the ease of doing business. 

Singapore and Hong Kong, Asia's most dynamic economies, top the World Bank's list of the world's easiest economies in which to do business.  Korea is now moving fast up the list, breaking into the world's top 10 for the first time.  But India, Indonesia and the Philippines are way, way behind. 

The World Bank's Doing Business Project provides objective measures of business regulations and their enforcement across 183 economies and selected cities at the subnational and regional level.  It looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle.  By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages countries to compete towards more efficient regulation.

The Doing Business index is based on the following criteria: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.  Singapore and Hong Kong score very highly on most of these criteria to top the list followed by New Zealand, United States and Denmark.  Elsewhere in Asia, Korea jumped to 8th place from 15th last year.

Rising middle income countries in South East Asia, Thailand and Malaysia, came in the top 20 at 17th and 18th places respectively.  This may explain why Thailand keeps growing fast despite its ongoing political stability.  Japan, the fading giant of Asia, is languishing at 20th place, and must aim to do much better if it is to ever climb out of its morosity.  Its rankings for starting a business, paying taxes, and dealing with construction permits, are like those of a third-world country.

Two of Asia's remaining communist countries, China and Vietnam, are ranked at 91st and 98th respectively.  In China, where corruption is still required for getting many things done, the worst scores are for dealing with construction permits, starting a business, and getting electricity.  In Vietnam, protecting investors and paying taxes are the big problem areas. 

Interestingly, China and Vietnam score better than emerging Asia's three big democracies, Indonesia (129th), Indonesia (132rd) and the Philippines (136th).  This is a harsh reminder that democracy is no guarantee of effective governance.  In fact, these countries barely scrape in ahead of the very backward Cambodia which is ranked 138th.

The big story in this is that it should be very easy to make dramatic progress in making it easier to do business.  For example, Indonesia, India and the Philippines all score very poorly when it comes to "starting a business", something which is not rocket science.  But corrupt and incompetent bureaucracies block their systems.

And the case of Korea shows how very possible it is to make progress.  Following financial crises, the Korean government has undertaken several waves of regulatory reform including through lower and simpler taxes, easier trade, greater protections for investors and creditors, easier and cheaper business start-up, and smoother permiting, driven by the Presidential Council on National Competitiveness. 

The Korean example should be a source of inspiration, not only for Indonesia, India and the Philippines, but also Japan, which is now being quietly overtaken by the land of the morning calm.  


Doing Business 2012: Doing business in a more transparent world.


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