Last week, the World Bank Doing Business rankings for 2011 were released. These rankings are, in my opinion, the best direct measure of the competitiveness of one country’s business environment. The reason is that while other rankings are often based on small samples of the opinions of businessmen, this one is based on very concrete metrics of how long it takes to do things. For example:
- Starting a business in New Zealand takes 1 procedure that lasts 1 day and costs 0.4% of average income. In Malaysia, there are 9 procedures taking 17 days and costing 18% of average income.
- In Hong Kong, registering a property takes 5 procedures over 36 days, costing 4% of the cost of the property. In Georgia, a major reformer over the last few years, registering a property takes 1 procedure, lasts just 2 days and costs 0.1% of the property’s value.
- Paying taxes in Germany is a chore – 16 payments, taking 215 hours – compared to Kuwait where a similar number of payments only takes half the time.
This is not to say that Georgia and Kuwait are more productive than Hong Kong and Germany. What it means is that – in those areas at least – it’s easier to do business. The focus is on efficient regulation – not wasting anyone’s time more than you have to. The reason that this is so important for governments is that, while building a very productive labour force takes generations, they control every last aspect of the ease of doing business.
Take Rwanda, which has actively changed its business system in the last five years. The number of procedures required for opening a business is down from 9 to 2, while the number of documents required for exporting is down from 14 to 8. Making a country an easy place to do business is a decision a government can make overnight. The graph below shows for a number of countries how many procedures it takes to set up a business in both 2007 and 2011.
In the overall rankings for ease of doing business, Ireland ranks 9th, down one place from last year but still in the top ten worldwide and up from 15th in 2005. The registration of property, where Ireland ranks 78th, is the only blackspot across the nine different headings produced by the World Bank.
Staying one of the world’s best places to do business will key for countries like Ireland, as they struggle to recover from a domestically-driven recession. Without wanting to encourage complacency, I think it’s probably a good idea to take a step back from the overwhelming flow of negative news and see if Ireland’s competitiveness is reaping dividends.
Just how good is Ireland at attracting business? Short answer – very good. The property bubble may have created a whole load of jobs that couldn’t be sustained across construction and retail in particular – and we’re living with the consequences of that now. However, it also suppressed jobs Ireland should have been attracting from overseas. And the halving of property costs in the country now means Ireland is much more competitive than we were five years ago. If this sounds like guff, read the latest IBM GILD report on investment . Five cheery headlines you probably missed last week, amidst all the doom and gloom:
- Ireland is in the top ten – not per capita but in absolute terms – when it comes to attracting business support service jobs. No mean feat when you consider that the top six in the ranking are all significantly larger economies.
- Ireland is also in the top ten – actually up one place to ninth – for jobs created in R&D. Again, only Taiwan is of a similar scale, in terms of economies in the top ten.
- Amazingly, Ireland was also one of the largest FDI job creators in 2009: 19th in the world, again in an absolute sense, not per capita.
- Dublin is one of the top 20 cities in the world for attracting FDI projects in 2009.
- Overall, Ireland created more FDI jobs per capita in 2009 than any other country: almost 2 jobs for every 1,000 inhabitants.
Five fantastic headlines which you probably didn’t see last week. So much for 2009 – and indeed 2008, when the picture was just as cheery. What about 2010 and 2011? The great news is that the pipeline has continued into 2010. Here are a dozen good news stories from around the country during the last month, with an average of 100 jobs each:
- 50 jobs in business market research in Galway
- 60 jobs in finance in Dublin
- 275 jobs in accountancy in Dublin, Cork, Limerick and Waterford
- 100 jobs in online betting in Dublin
- 30 jobs in insurance in Cavan
- 20 jobs in nutrition products in Mayo
- 105 jobs in energy in Dublin
- 250 jobs in healthcare in Mayo
- 50 jobs in software in Galway
- Up to 120 jobs in IT in Dublin
- 50 jobs in finance in Sligo
- 100 jobs in software in Dublin
I am by no means suggesting that these 1,200 new jobs are a panacea. But it’s important to remember that many of the jobs Ireland has lost in the last three years are jobs that probably shouldn’t have existed in the first place. Given that these jobs had to go sooner or later, announcements like the twelve above are unambiguously good news. They represent Ireland catching up on where it should be. It’s also worth noting that, as a modern services economy, Ireland’s future lies not in attracting 20 projects of 1,000 jobs each a year, but 200 projects with 100 jobs each.
Despite the doom and gloom of the recession, making sure the country is a good place to do business must remain a priority – for the Irelands of this world as well as the Georgias and Rwandas.