Which Country Is Best to Start a Small Business in?

The easiest countries in which to start and operate a business aren’t necessarily the largest economies. Every year until it was discontinued in 2021, the United Nations’ World Bank Group—an international financial institution that offers loans, grants, and other resources to low- and middle-income countries for capital programs—published the Doing Business report, which looked specifically at which country is best to start a small business in.

The rankings examined 190 countries worldwide, based on 10 key indicators:

• Starting a business
• Dealing with construction permits
• Getting electricity
• Registering property
• Getting credit
• Protecting minority investors
• Paying taxes
• Trading across borders
• Enforcing contracts
• Resolving insolvency

If you’re starting a business and wondering about your overseas options, here’s a rundown of the top five countries where it’s easiest to do business, along with the reasons these nations lead The World Bank’s Doing Business 2020 list.

Key Takeaways

• Every year until it was discontinued in 2021, the World Bank Group released its Doing Business report, which ranks the best countries to do business in, based on 10 key indicators.
• In 2020, the top five countries ranked best to start a business in were New Zealand, Singapore, Hong Kong (China), Denmark, and South Korea.
• According to the 2020 report, 115 countries made it easier to do business in the past year, although Sub-Saharan Africa and Latin America generally fell behind; no countries in Latin America made the top 50.

Top 5 International Countries to Start a Business in

1. New Zealand

For the fourth year in a row through 2020, New Zealand is the economy with the most business-friendly environment. The country earned top scores for “starting a business,” the indicator that looks at the number of steps that entrepreneurs can expect to go through to start up and formally operate a business, plus the time and cost it takes to complete those steps. It also ranked first for the indicator of “getting credit,” which measures the strength of the country’s legal rights and depth of credit information.

The country also ranked well for registering property (second place) and protecting minority investors (third place). Thanks to a streamlined online process, starting a business in New Zealand only takes about half a day—the shortest time in the world.

2. Singapore

Singapore has maintained a consistent ranking as the world’s second most business-friendly environment. Among the highlights, the country ranked second in terms of enforcing contracts and third for protecting minority investors. Singapore also ranked well for starting a business (fourth place) and dealing with construction permits (fifth place).

Singapore has also simplified construction permits by improving its risk-based approach to inspections, improving the accessibility of soil information to the public, and making it easier to acquire a construction permit.

3. Hong Kong (China)

Hong Kong, a special administrative region considered part of China, has worked its way up the list in recent years. It was ranked first for dealing with construction permits, second for paying taxes, and third for the ease of getting electricity. Reforms over the last few years have made it easier to start a business by doing the following:

• Eliminating the requirement for a company seal
• Improving access to credit by using a modern collateral registry
• Making paying taxes easier and less costly for companies
• Making it simpler to get electricity by streamlining the process for reviewing connection applications and installing meters

4. Denmark

Denmark is the fourth-easiest country in which to do business. It ranked highest in trading across borders (first place), and achieved fourth place for dealing with construction permits, and sixth for resolving insolvency. The report notes that Denmark made dealing with construction permits cheaper by eliminating fees for building permits.

In addition, Denmark also “lowered its paid-in minimum capital requirement from 50,000 kroner ($7,470) to 40,000 kroner ($5,975) for domestic limited liability companies.”

5. South Korea

The Republic of Korea ranked first in enforcing contracts and second in getting electricity. Other areas of strength included: getting electricity (second place) and enforcing contracts (second place). In recent years, the country has made advancements that have made transferring property easier and strengthened minority investor protections.

Overall, in South Korea, it only takes 13 days to get electricity, while getting a road maintenance contract takes as little as 161 days. It’s all about efficiency in this island nation: It is also the fastest economy to award public contracts in just four months, after communicating the opportunity for the bid, collecting the bids, opening and evaluating them, and finally signing the contract and authorizing the beginning of the work.

What Is the World Bank Group?

The World Bank Group is the world’s most prominent development bank, with a stated mandate and mission to reduce world poverty. It has 189 member countries and is headquartered in Washington, D.C.

Why Was the Annual Doing Business Report Discontinued?

Data irregularities in the World Bank Group’s Doing Business 2018 and 2020 reports were reported internally in June 2020. After a review, World Bank Group management discontinued the annual report in September 2021.

What Did the Doing Business Rankings Take into Consideration?

The Doing Business rankings examined 190 countries worldwide, based on 10 key indicators:

• Starting a business
• Dealing with construction permits
• Enforcing contracts
• Getting credit
• Getting electricity
• Resolving insolvency
• Protecting minority investors
• Registering property
• Paying taxes
• Trading across borders

The Bottom Line

These five countries listed are the easiest places in the world to do business, according to the World Bank Group’s Doing Business 2020 report. The report also notes that worldwide, 115 economies made it easier to do business in the past year, with the most notable improvements coming from Saudi Arabia, Jordan, and Togo. By region, Sub-Saharan Africa and Latin America still fall behind in their ease of doing business; in fact, no countries in Latin America make the top 50.

Rounding out the top 10 on the list of countries best to do business in are:

• United States (sixth)
• Georgia (seventh)
• United Kingdom (eighth)
• Norway (ninth)
• Sweden (10th)

Falling at the other end of the spectrum are Libya (186th), Yemen (187th), Venezuela (188th), Eritrea (189th), and Somalia (190th).

Entrepreneurs play a vital role in any economy. Individual economies can strengthen investor confidence and growth by implementing measures that make it easier for entrepreneurs to do business. From the entrepreneur’s standpoint, starting any business is challenging enough. It can make sense to consider these countries, which makes starting and operating a business a little easier.

Read the original article on Investopedia.