of Ease doing business
The ease of doing business index ranks economies from 1 to 175. The index is calculated as the ranking on the simple average of country percentile rankings on each of the 10 topics covered in Doing Business 2007. The ranking on each topic is the simple average of the percentile rankings on its component indicators (table 12.1). One example: The ranking on starting a business is the average of the country percentile rankings on the procedures, time, cost and paid-in minimum capital requirement to register a business. In Iceland it takes 5 procedures, 5 days and 3% of annual income per capita in fees to open a business. The minimum capital required amounts to 16% of income per capita. On these 4 indicators Iceland ranks in the 7th, 1st, 8th and 48th percentiles. So on average, Iceland ranks in the 18th percentile on the ease of starting a business. It ranks in the 55th percentile on protecting investors, 18th percentile on trading across borders, 10th percentile on enforcing contracts, 7th percentile on closing a business and so on. Higher ranks indicate simpler regulation and stronger protections of property rights. The simple average of Icelands percentile rankings on all topics is 20%. When all countries are ordered by their average percentile rank, Iceland is in 12th place. Each indicator set studies a different aspect of the business environment. Country rankings vary, sometimes significantly, across indicator sets. For example, Iceland ranks in the 7th percentile on closing a business, its highest ranking, and in the 55th percentile on protecting investors, its lowest. This points to priorities for reform: Protecting investors is one place to start in further improving business conditions in Iceland. Across all 175 economies the average correlation coefficient between the 10 sets of indicators is 0.39, and the coefficients between any 2 sets of indicators range from 0.16 (between employing workers and trading across borders) to 0.66 (between closing a business and enforcing contracts). The low correlations suggest that countries rarely score universally well or universally badly on the indicators. In other
words, there is much room for partial reform. When an economy has no laws or regulations covering a specific areafor example bankruptcyit receives a "no practice" mark. Similarly, if regulation exists but is never used in practice, or if a competing regulation prohibits such practice, the economy receives a "no practice" mark. This puts it at the bottom of the ranking. ease The of doing business index is limited in scope. It does not account for a countrys proximity to large markets, the quality of its infrastructure services (other than services related to trading across borders), the security of property from theft and looting, macroeconomic conditions or the strength of underlying institutions. There remains a large unfinished agenda for research into what regulation constitutes binding constraints, what package of reforms is most effective and how these issues are shaped by the country context. The Doing Business indicators provide a new empirical data set that may improve understanding of these issues. Doing Business 2007 uses a simple method to calculate the top reformers (table 1.1). First, it selects the economies that reformed three or more of the ten Doing Business topics (table 12.2). This year, 23 economies met this criterion: Armenia, Australia, Bulgaria, China, Croatia, Czech Republic, El Salvador, France, Georgia, Ghana, Guatemala, India, Israel, Latvia, Lithuania, Mexico, Morocco, Nicaragua, Nigeria, Peru, Romania, Rwanda and Tanzania. Second, these selected economies are ranked on the percentage improvement in the ease of doing business from the previous year. For example, Mexico, Nicaragua, and Nigeria reformed in three aspects of business regulation each. But Mexicos rank improved from 75 to 44, Nicaraguas from 71 to 68 and Nigerias from 102 to 90. These represent a 41%, 4%, and 12% improvement, respectively. Mexico therefore ranks ahead of Nigeria in th...