Jamaica gets better at doing business
The World Bank's Doing Business report summarises data on some key elements necessary for a country to effectively conduct business. The report assesses the regulative framework in a country that enhanced doing business against those that restrict the smooth flow of businesses.
The Doing Business report presents quantitative indicators on doing business and the protection of property rights across 189 countries and ranks them accordingly. The 2015 Doing Business report measures regulations affecting 10 areas of the life of a business and ranks each country based on its performance on each. These include starting a business, zoning and urban planning, dealing with construction permits, getting electricity, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Jamaica's ranking on the index has improved significantly this year, a positive leap of 36 places moving from ranking 94th in 2014 and 58th in 2015.
Where did Jamaica improve?
According to the report, Jamaica made the requirements for starting a business more efficient, reduced the cost of getting electricity connection, improved the credit information system by creating a credit bureau and implement laws to broaden the group of assets that can be used as collateral to obtain loans and secure investment. Jamaica has the best ranking in the Caribbean and ranks fifth in the region if Latin America is included. The ranking for these countries are as follows: Trinidad and Tobago, 79th; The Bahamas, 97th; St Lucia, 100th; Barbados, 106th; Columbia, 34th; Mexico, 39th; Chile, 41st; Panama, 52nd and Guatemala 73rd. Trinidad and Tobago is among the top 10 most improved on three or more aspects of the report. As usual, Singapore tops the ranking as the best country to do business globally.
What changed this year?
Unlike previous years, the 2015 Doing Business report ranks countries on their distance to frontier score. This overall distance to frontier score is an average of the distance to frontier score of the 10 criteria assessed in the report. The distance to frontier basically measures how far a country is from achieving its best possible business environment. Each country is then assessed based on where they are on their own frontier compared to each other. This year's Doing Business report has introduced changes in eight of the 10 indicators in two aspects.
1. Indicators measuring the efficiency of a transaction have been expanded to include the quality of the transaction and;
2. Those transactions that already included quality have been expanded to include good practices in that specific field.
What does this year's Doing Business report add?
This year's report has added more features on the strengths of the legal rights and depth of the credit information. It also includes more features on minority shareholders rights and a measure of the strength of the legal framework for insolvency. The report has added an additional city in the countries with population size of more than 100 million and the ease of doing business score is based on how far a country is from achieving its own objectives. The top-20 economies on the 2015 Doing Business report perform well on the doing business indicators, as well as on an international data set which captures variety of elements related to competitiveness. According to the report, economies that perform well on the Doing Business report are not those without regulations, but those whose governments have taken the time to assess the countries' situation and put measures in place to remove hindrances to the development of the private sector.
What Doing Business report continues to cover?
More specifically, Doing Business addresses the key areas as follows: procedure, time, and cost paid in minimum capital necessary to start a business; procedure, time and cost to complete all formalities to build a warehouse, procedure time and cost to get connected to the electrical grid; procedure, time and cost to transfer a property, moveable collateral laws and credit information system, minority shareholders' rights in related-party transactions, payment time and total tax rate for a firm to comply with all the tax regulations. Documents, time and cost to import and export via seaport; procedure, time and cost to report and resolve a commercial dispute and the time, cost, outcome and recovery rate for commercial insolvency. The Doing Business report neglects certain aspects of the business environment, including macroeconomic stability, market size, security and the magnitude of bribery and corruption in a country. Furthermore, the report does not measure all the aspects relating to the firms and investors or the overall competitiveness of the economy.
Dr André Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on twitter @DrAndreHaughton; or email email@example.com.