Bhutan drops six places in business ease index

Bhutan’s ranking dropped to the second last position in South Asia just ahead of war torn Afghanistan

Bhutan slid six places down from its last year’s position to stand at 148, much below all other South Asia region countries except for Afghanistan, under the latest ‘Ease of Doing Business’ index for 2013, released by the International Finance Corporation (IFC), on Tuesday.

Of the 185 countries where the study was conducted, Bhutan continues to be among the most difficult countries to do business while Singapore remains at the top for the seventh year in a row.

Each year, IFC, publishes a “Doing business” report in which they rank countries according to the “ease of doing business” in those countries. According to the index, “Economies are ranked on their ease of doing business, from top to bottom among 185 countries.”

IFC is an international financial institution which offers investment, advisory, and asset management services to encourage private sector development in developing countries. It is an autonomous part of the World Bank Group.

Doing business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business. Bhutan’s ranking has slid in several parameters from its positions in last year’s report except for dealing with construction permits and resolving insolvency which remained constant at 124 and 185.

Opportunity to start business in a country was taken as an important benchmark of the index. In Bhutan the benchmark was relatively poor as it slid by eight positions to 94.

Similarly, getting credit facility, protection of investment, payment of tax and cross border trade declined by two, three, four and one positions coming to 129, 150, 71 and 172. Although, restriction on loans this year, due to the Indian rupee shortfall has made doing business difficult in the country, the report states “Bhutan improved its credit information system by launching the operation of a public credit registry in 2012.”

Despite being known for hydropower production and exports, Bhutan’s ranking in the area of getting electricity to do business has plummeted from the already 135 low to 136 this year. This ranks Bhutan below most of the south Asian neighbors. Nepal ranks the best in the region in allowing access to reliable and affordable electricity for businesses.

Globally, Bhutan stands at 85 in the ranking of 185 economies on the ease of registering property, two steps down from last year’s ranking. According to the report, registering properties for starting a business takes 92 days in Bhutan, against 100 days in the South Asian region on an average, while according to the OECD, it should not take more than 26 days.

On the other hand, the latest report states Bhutan has advanced the furthest toward the frontier in regulatory practice in contract enforcement since 2005 compared to the other 184 countries included in the study.

Ease of employing workers was also considered an important area for criterion. Implementation of a minimum wage in the private sector for the first time by Bhutan and Kosovo is said to have made employing workers easier.

In 2008, the IFC report stated implementing the labor law, cutting down procedural steps, and speeding up property registration have made Bhutan one of the top business friendly countries in South Asia.

However, Bhutan’s ease of doing business rank fell from 119 to 148 during the period of 2008 to 2013, which is obviously not a good sign.

The report flies in the face of the governments promises to strengthen Bhutan’s fledgling private sector which is currently facing an unprecedented financial crisis and credit crunch.

Georgia, Rwanda, Belarus, China, Colombia, Ghana and Armenia are among the countries that the report found have improved the most their business regulatory environment since 2005. The report states “among the 50 economies with the biggest improvements since 2005, the largest share, a third are in Sub-Saharan Africa.”

One of the findings shows that European economies in fiscal distress are making efforts to improve the business climate, and this is beginning to be reflected in the indicators tracked by Doing Business, with Greece being among the 10 economies that improved the most in the Doing Business measures in the past year.

 

Methodology

According to IFC’s Doing business website, data are collected in a standardized way. The Doing Business team, with academic advisers, designs a questionnaire which uses a simple business case to ensure comparability across economies and over time with assumptions about the legal form of the business, its size, its location and the nature of its operations. Questionnaires are administered through more than 9,600 local experts, including lawyers, business consultants, accountants, freight forwarders, government officials and other professionals routinely administering or advising on legal and regulatory requirements. These experts have several rounds of interaction with the team, involving conference calls, written correspondence and visits by the team. The data from questionnaires are subjected to numerous rounds of verification, leading to revisions or expansions of the information collected.

Since standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. Finally, the data not only highlight the extent of specific regulatory obstacles to business but also identify their source and point to what might be reformed.

This is the 10th edition of the Doing Business report. First published in 2003 with five indicator sets measuring business regulation in 133 economies, the report has grown into an annual publication covering 11 indicator sets and 185 economies.

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2 comments

  1. let them know that, we follow GNH. we must be given some credits on this ambiguous and arbitrary philosophy. PM is good in bluffing on this. 

  2. David Luechauer

    I wonder if Dasho Karma Ura, Sonam Gyamtsho,  Lyonchen Jigme Yoser Thinley, Dr Saamdu Chettri happened to catch this article and the overwhelming implications it has for Bhutan or the Bhutanese people.  The irony and paradox of this article appearing just a few short days after receiving the news of Bhutan’s failed bid to secure a seat on the UN Security council is palpable.  To fall six places on an internationally regarded measure of business practices at precisely the time when these and other intellectual – political – thought leaders are out out  trumpeting the virtues and values of GNH speaks volumes about the disconnect between their perceptions and the cold hard realities confronting most Bhutanese people.  Incidentally, and to be fair, this measure has nothing or relatively little to do with GNH or GDP save for the fact that one would hope that the pursuit of GNH would lead Bhutan to be moving up rather than down on this index.  In short, it is yet another indicator that despite all “official proclamations” to the contrary and despite all the rhetoric being promulgated by far-too-many in power Bhutan is not trending toward the hope and promise of either GNH or GDP.  

    Growing the private sector, promoting entrepreneurial thinking, and supporting the development of homegrown small to midsize businesses in everything from producing goods to rendering services is  where leaders at levels in the Bhutanese political-educational complex should be devoting their time and attention.  Instead of running off to New York, Brazil and points around the globe promoting GNH and bidding for “seats”/”acclaims” from the world community – its high time the people of Bhutan demand that their political leaders stay home and focus on the real needs and issues of the Bhutanese people.  

    Reports of this nature are proof positive that real reform is necessary in everything from the way business is taught to the way business is practiced in Bhutan.  However, few things could be more beneficial to the average person on the streets of Bhutan than for the world in general and the world business sector particular to view this nation as place that is both easy and inviting to do business.  More importantly the reliance and dependence on issues related to the Rupee would fall dramatically to the extent that other nations began setting up operations and trading more vigorously with Bhutan.

    Rather than seen as bad news – which it is – a report like this could and should spur serious conversations about the real and viable routes to move Bhutan forward.  Its time for political – educational leaders in Bhutan to start talking, teaching and addressing the pragmatic issues of “micro-economic policy implementation”  not ethereal and largely untested notions like GNH.  Perhaps instead of pursuing “happiness” the new mantra could be what’s good for Bhutanese Business will be good for the Bhutanese ……I hope to see Bhutan moving up the rankings the next time this report is issued.

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