Slight Slippage in World Bank Survey

Four countries edged past Taiwan in the 2018 Doing Business survey. 

In the 15th edition of the World Bank’s annual Doing Business  report, released on October 31, Taiwan (or “Taiwan, China” in the World Bank’s nomenclature) slipped four notches from 11th place last year to 15th among the 190 economies surveyed. The four countries moving up on the list to pass Taiwan were Georgia (#9), Estonia (#12), Finland (#13), and Australia (#14).

For the second year in a row, New Zealand topped the list, followed by Singapore and Denmark. Taiwan’s chief trading rival, South Korea, improved from fifth to fourth on the ranking, changing places with Hong Kong. Others that came in ahead of Taiwan were the United States (#6), the UK (#7), Norway (#8), Sweden (#9), and Macedonia (#10).

China rose from #84 last year to #78 in the latest report.

Unlike most other international competitiveness surveys, Doing Business is based on the practical impact of specific regulations, especially as they affect small and medium-sized enterprises operating in the largest business city in the economy (in Taiwan’s case, Taipei). The 2018 edition is subtitled “Reforming to Create Jobs,” and emphasizes the influence of the regulatory system in either enhancing business activity or constraining it through “red tape and roadblocks.”

This year’s survey measures each economy’s performance in 10 specific categories: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. Doing Business also looks at aspects of labor market regulations, but does not include that data in calculating the ranking.

The category in which Taiwan performed the poorest this year was “Getting Credit,” in which Taiwan ranked in 90th place. This category explores two sets of issues. The first is the strength of legal rights, including the rights of borrowers and lenders through collateral laws and the degree of protection of the rights of secured creditors through bankruptcy laws. The other is the strength of the credit reporting system, as represented by the percentage of adults listed in a credit registry and in the largest credit bureau.

Relatively low scores were also recorded for the categories of “Trading Across Borders” (#55) and “Paying Taxes” (#56). The ranking for “Trading Across Borders” was an improvement over last year’s #68, but was still surprisingly weak for an economy as dependent on international trade as Taiwan’s. Based on information supplied by local freight forwarders, customs brokers, and traders, this section measures the time and expense involved in completing necessary import-export procedures.

It found that for exports, an average of 17 hours is needed for border compliance (the same as last year) but that the time for documentary compliance had been markedly reduced from 31 hours last year to just 5. The costs involved were unchanged, however. For imports, the average border compliance time remained 47 hours, but only 4 hours were needed for documentary compliance compared to 41 last year. In addition, the compliance costs were significantly reduced.

Taiwan’s score in this category was better than the average for the East Asian region, though behind not only Singapore and Hong Kong but also Korea and Japan.

In the “Paying Taxes” section, measuring the number and amount of taxes paid and the time needed for compliance, the overall index for Taiwan lagged behind the regional average.

The categories where Taiwan’s ranking was the strongest were “Getting Electricity” (third highest in the world) and “Dealing with Construction Permits” (fourth highest).

The World Bank describes the objective of the annual exercise as encouraging “regulation that is designed to be efficient, accessible to all and simple to implement.” It notes that “onerous regulation diverts the energies of entrepreneurs away from developing their businesses, but regulation that is efficient, transparent and implemented in a simple way facilitates business expansion and innovation, and makes it easier for aspiring entrepreneurs to compete on an equal footing.”

Each year Taiwan’s National Development Council uses the Doing Business results to help identify areas that need improvement. Taiwan’s ranking has generally improved over the years; as recently as 2011 it was in 33rd place.

“Clearly Taiwan has made a lot of progress,” says AmCham President Andrea Wu, “but what we can see from the new survey is that some other countries are moving forward even more rapidly. Taiwan needs to redouble its efforts to retain its competitiveness.”