NCPA - National Center for Policy Analysis


August 13, 2004

The International Finance Corporation, the World Bank's private-sector development arm, released a report that surveyed some 130 countries on how hospitable they are to businesses.

Index scores ranged from 0 to 100, with higher values representing more rigid regulation in five main categories -- : the ease of getting credit, starting business, enforcing contracts, hiring and firing workers, and closing down a business.

  • In the United States it takes on average 5 days to start up a business, as compared to the Organization for Economic Cooperation and Development (OECD) average of 25 days.
  • U.S. companies are also fairly flexible in hiring workers and firing them, receiving index scores of 33 and 5, respectively.

According to the report, there were a number of other countries that are highly friendly to business:

  • Denmark received a hiring flexibility and firing index of 33 and 17, respectively; it only takes 4 days to start up a business.
  • City-states such as Hong Kong and Singapore performed well in all categories, including both getting an index score of 1 for flexibility of firing workers.
  • Canada, Britain, Ireland and Malaysia were also highly ranked.

Ultimately, the IFC concludes that heavier regulation brings bad economic outcomes. But even free-market nations cannot become complacent. IFC's chief economist says "the countries with the best business climates tend to be also the ones that are continually reforming it."

Source: Andrew T. Giles, "In Search of Fair Business Climes," Forbes, July 26, 2004.


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