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.
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.