For the past decade, Singapore has led the world being the easiest place for business. Consistently being ranked number one, the country boasts impressive conditions that most nations are still working towards. What follows is an analysis of the key success factors leading up to this result and, with massive improvements coming from both developing and developed countries, what areas Singapore should improve on if it is looking to extend its rule over the world for another decade.
According to the latest report released on October 27 titled “Doing Business 2016 Measuring Regulatory Quality and Efficiency” from the “Doing Business” project run by the World Bank, Singapore is still crowned as king due to a combination of 10 factors that are measured across all aspects of doing business.
However, other countries are hot on its heel with its closest competitor, New Zealand, actually besting Singapore in 3 out of 10 factors and matching head to head in one more.
What Makes a Country “Easiest for Business”?
In order to grasp the true meaning of the rankings, a clear definition of the phrase is essential. According to the report, a “high ease of doing business ranking” means that the regulatory environment is more conducive starting and the operating local firms.
The rankings would not be applicable if a quantifiable comparison system was not available. The rankings are determined by giving a score on 10 topics and taking the total distance to frontier (DTF), with equal weight on all 10 topics.
These 10 topics are measuring the conductivity of the regulatory environment with respect to (in no particular order):
- 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
Readers may read up more on the methods at the “Doing Business” website.
Will Singapore Stay in the Lead?
After a deeper analysis on the year-on-year change for the grading on the 10 topics for Singapore, it is clear that in terms of DTF, it is still number one with an increasing percentage points for 3 of 10 factors.
Yet when it comes down to the rankings of the 10 topics themselves, it is clear that Singapore may be losing its lead soon. Even though its percentage points are on the rise, those of other countries are rising faster with Singapore falling in rank in 4 out of 10 factors The country ranked second, New Zealand, has only less than a percentage point than the first place.
In order to pinpoint where and how Singapore is behind those on its tail, it’s necessary to have an understanding of why SG is ahead.
One of the key characteristic of the Singaporean business environment is the ease at which one is able to enforce a contract. Having been continuously ranked the best, Singapore has the world record for resolving a commercial dispute at 150 days with the costs being only 25.8% of the value of the claim.
One key aspect of Singapore’s court system is the use of technology to automate some parts. Litigants are able to submit their claim online, pay court fees online, and serve the initial summons electronically.
Keeping Singapore the Easiest Place for Business
The report indicates that there are two Singapore can go to keep its lead.
First of all, there is a very strong correlation between the countries that improved the most on the 10 topics and the number of regulatory reforms that those countries had in any year. Myanmar is mentioned here with 45 reforms made the previous year.
Second of all, Singapore had absolutely no reforms made last year in contrast to its two closest competitors, New Zealand and Denmark, both of which implemented one reform each.
This led to a marginal increase of Singapore’s DTF percentage points. In contrast, its closest competitors are moving up in the tenths of a decimal point.
Comparison across the 10 topics reveals that Singapore will have to put a lot of effort into making reforms in the three topics namely, registering property, getting credit, and, trading across borders. This is because these are the areas that the two countries closest on its heels are number one at, where Singapore’s rank is in around the 20s, with trading across borders actually being ranked at 41.
For example, in terms of registering property, one of the key outstanding aspect of the leader, New Zealand, was the advancement it has made in terms of digitizing property management. New Zealand allows online registration of property transfers with customers filing their applications online through the land registry’s web portal and lawyers immediately able to process the applications.
With much improvement from other countries, if Singapore truly wishes to keep its place as the country easiest to do business in, it must not be complacent and pass reforms to better the business environment, especially working on areas it is lagging behind.
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