World Bank: it’s easier to do business in Russia than China

World Bank: it’s easier to do business in Russia than China

Oct 29, 2013 12:05am by Luke Smolinski

The World Bank’s annual Ease of Doing Business indicators were published on Tuesday – and they make a pleasant read for Russian policy makers. In the last year, Russia has climbed 19 places to position 92, and is now the leading Bric nation. (That is, the country is 92nd out of 189 nations when it comes to the ease of doing business.) Ukraine – the country that has improved the most over the past year – rose 28 notches to 112.It is now easier to set up shop and do business in Russia than China, according to the index. China has climbed three spots to 96, but has been leapfrogged by Russia. Brazil went up two places to 116. India, the laggard of the Bric group, has dropped three rankings to 134.

There are caveats. “What we measure is very narrow,” cautions Rita Ramalho of the World Bank, who oversaw the writing of the report. The index measures the enforcement of contracts, access to credit and electricity, and the ease of cross-border trade and paying tax, among other things. It applies mostly to domestic companies and chiefly concerns the amount of red tape: the level of government intervention is harder to measure.

Nevertheless, Vladimir Putin should be pleased, somewhat. His goal is to achieve a top 20 ranking by 2018. Ramalho admits that there has been a “huge reform effort” and says she expects this to continue; further cuts to regulation have been proposed but are not yet enforced.

Effective (but bland) reforms to property registration and electricity market have done most to push Russia up the league table. Getting electricity is simpler and less costly, and transferring property is quicker, as a result of fewer state agencies, better pricing and less red tape. Dealing with construction permits is now “very complex” instead of “very very complex”, Ramalho says.

To climb higher up the rankings, Moscow really needs a change in mentality, Ramalho says. Seeing business as a help rather than a hindrance would be a start. In its recent report on Russia, the IMF applauded the progress made on tax administration for instance but noted more needed to be done:

Recent improvements in the business environment have focused mostly on large enterprises, with little progress made regarding SMEs. Further deregulation should address customs inefficiencies and other red tape. […] Fighting corruption is one of the top priorities

Ukraine has shown the most reformist zeal. The country has pushed through a slew of business reforms in the past year, from insolvency rights to approving construction.

China by contrast has made few big changes, according to the World Bank report: court proceedings have been made quicker, but it will take two to three years for any of these reforms to have an impact.

Over a longer timeframe, the most striking is the progress of Africa and former members of the Soviet Union. Of the 12 countries that have improved the most in Ease of Doing Business since 2005, all bar one (Macedonia) is from those two regions. Leading the way is Rwanda.