Low rating for credit conditions brings down Taiwan’s overall ranking.
Poor performance in one category — regarding legal rights in obtaining credit — has dragged down Taiwan’s overall rating in the World Bank’s recently released 2020 Doing Business survey of 190 countries and economies. In the latest edition, Taiwan fell back two places from last year to rank number 15, the same position it held in 2018.
The annual survey scores practical conditions in 10 categories: applying for business incorporation, getting a building permit, obtaining an electricity connection, transferring property, getting access to credit, protecting minority investors, paying taxes, engaging in international trade, enforcing contracts, and resolving insolvency.
In eight of those categories, Taiwan ranked within the top 40 economies. It did best – ranking sixth in the world – in the area of “dealing with construction permits,” which measures the time and cost involved in applying to build a warehouse. Other categories in which Taiwan did especially well were “Getting electricity,” where it ranked ninth, and “Enforcing contracts,” eleventh.
As has been the case in previous years, the category in which Taiwan performed the worst was “Getting credit,” particularly the portion dealing with the effectiveness of collateral and bankruptcy laws in facilitating lending. Many of the items in this category involve the presence or absence of a “floating charge” system that enables a creditor to have a securitized interest in a fund of moveable assets in a company. Legal experts say that this approach is more prevalent in common law jurisdictions than in civil law jurisdictions such as Taiwan, yet Taiwan received a lower rating in the category than other civil law countries in the region, such as Japan, South Korea, and China.
In fact, Taiwan’s ranking in this area has steadily declined, falling from 90th place in 2018 to 99th last year and 104th in the latest edition, as other economies have passed it moving up the ladder.
Unlike most international competitiveness surveys, Doing Business focuses 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).
In conducting the survey, Doing Business relies on a network of local partners, including legal experts, business consultants, accountants, freight forwarders, government officials, and other professionals.
For the fourth consecutive year, New Zealand received the highest ranking worldwide, followed by Singapore. Rounding out the top of the list were Hong Kong (#3), Denmark (#4), South Korea (#5), and the United States (#6). Others that came in ahead of Taiwan were Georgia (#7), the United Kingdom (#8), Norway (#9), Sweden (#10), Lithuania (#11), Malaysia (#12), Mauritius (#13), and Australia (#14). China continued its rise, improving from #78 in 2018 and #46 last year to #31 in the current ranking.
The 2020 edition of Doing Business is entitled “Tackling Burdensome Regulation” and emphasizes the vital role of government policy in enabling companies to operate effectively. “The objective is to encourage regulation that is efficient, transparent, and easy to implement so that businesses can thrive,” the report states. It notes that “the economies that rank highest on the ease of doing business are not those where there is no regulation, but those where governments have managed to create rules that facilitate interactions in the marketplace without needlessly hindering the development of the private sector.”