Starting a Business? Consider These Countries

The easiest countries in which to start and operate a business in 2018 aren't necessarily the largest economies.

The world’s second-largest economy is China, for example, but it ranks 78th in terms of the ease of doing business, according to the Doing Business report from World Bank Group, an international financial institution that offers loans and an array of resources to developing countries for capital programs. The rankings examined 190 countries worldwide, based on 10 key indicators:

• Starting a business
• Dealing with construction permits
• Getting electricity
• Registering property
• Getting credit
• Protecting minority investors
• Paying taxes
• Trading across borders
• Enforcing contracts
• Resolving insolvency

If you're starting a business and wondering about your overseas options, here's a rundown of the top five countries where it's easiest to do business, along with the reasons these nations lead the World Bank’s Doing Business list.

Note: The Distance to Frontier (DTF) Score shows, in percentage points, how far, on average, an economy is at a point in time from the best performance achieved by any economy on each Doing Business indicator since 2005 (or the third year that data were collected). The measure is reflected on a scale of 0 to 100, with 100 representing the highest performance, or “frontier.”

• DTF Score 2018: 86.55
• DTF Score 2017: 86.73
• Change in DTF: -0.18

For the second year in a row, New Zealand is the economy with the most business-friendly environment. The country earned top scores for starting a business, registering propert and getting credit (the "starting a business" category looks at the number of steps entrepreneurs can expect to go through to start up and formally operate a business, plus the time and cost it takes to complete those steps). The country also ranked well for protecting minority investors (2) and dealing with construction permits (3). Thanks to a streamlined online process, starting a business can take just a few hours.

• DTF Score 2018: 84.57
• DTF Score 2017: 84.53
• Change in DTF: -0.04

Singapore was the economy with the most business-friendly environment in 2015 and 2016 and has held on to the second place spot for two years. Among the highlights, the country ranked second in terms of enforcing contracts and fourth for protecting minority investors. Singapore also ranked well for starting a business (6) and paying taxes (7).

• DTF Score 2018: 84.06
• DTF Score 2017: 84.07
• Change in DTF: -0.01

Denmark is the third-easiest country in which to do business. It ranked highest in trading across borders (1), and achieved high marks in dealing with construction permits (5), registering property (9) and resolving insolvency (9). The report notes that Denmark made starting a business easier by implementing a new online platform which allows entrepreneurs to complete business and tax registration simultaneously.

• DTF Score 2018: 83.92
• DTF Score 2017: 83.92
• Change in DTF: No change

The Republic of Korea ranked first in enforcing contracts and second in getting electricity. Other areas of strength included: resolving insolvency (5) and starting a business (9). In recent years, the country has made advancements that have made transferring property easier and strengthened minority investor protections. However, 2016 reforms made paying taxes more complicated and costly for companies.

• DTF Score 2018: 83.44
• DTF Score 2017: 83.15
• Change in DTF: +0.29

Hong Kong ranked third for starting a business and paying taxes. It also ranked highly for getting electricity (4) and dealing with construction permits (5). Reforms over the last few years have made it easier to start a business by eliminating the requirement for a company seal; improved access to credit by using a modern collateral registry; made paying taxes easier and less costly for companies; and made it simpler to get electricity by streamlining the process for reviewing connection applications and installing meters.

These five countries are the easiest places in the world to do business, according to the World Bank report. Rounding out the top 10 on the list are: the United States (6), the United Kingdom (7), Norway (8), Sweden (9) and Georgia (10). Falling at the other end of the spectrum are Yemen (186), South Sudan (187), Venezuela (188), Eritrea (189) and Somalia (190).

Entrepreneurs play a vital role in any economy. Individual economies can strengthen investor confidence and growth by implementing measures that make it easier for entrepreneurs to do business. From the entrepreneur's standpoint, starting any business is challenging enough. It can make sense to consider these countries, which make starting and operating a business a little easier. (See also: Evaluating Country Risk for International Investing,)