Do the world’s best business locations also enjoy the most economic freedoms?

Using different methodologies, the World Bank’s index for “ease of doing business” and the Heritage Foundation’s recently published “index of economic freedom” result in contrasting rankings. The key takeaway? It would seem that being an easy place to do business does not guarantee economic freedom or vice versa. Here’s what we found:

Ease of doing business index

The World Bank believes that effective business regulation gives small companies the opportunity to grow and innovate. Its “ease of doing business” study benchmarks economies with respect to regulatory best practice affecting 11 areas: 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 and labour market regulation
More information on the grading and methodology can be found at: www.doingbusiness.org

Economic freedom index

The Heritage Foundation believes economic freedom is the fundamental right of every human to control his or her own labour and property. The foundation uses quantitative and qualitative factors grouped into the four following categories:
Rule of law Property rights, government integrity, judicial effectiveness
Government Government spending, tax burden, fiscal health
Regulatory efficiency Business freedom, labour freedom, monetary freedom
Open markets Trade freedom, investment freedom, financial freedom
More information on the grading and methodology can be found at: www.heritage.org

According to the World Bank study, El Salvador for example, continues to push through regulatory changes making it easier to do business. The Heritage Foundation index highlights how El Salvador’s freedom to invest has declined largely due to bureaucratic and institutional weaknesses

Indexes by region

Tap on a location to see how its ease of doing business and economic freedom rankings compare regionally

China’s ranking for ease of doing business leapt more than 30 places last year when Beijing’s reform efforts increased the efficiency of business processes. However, China’s economic freedom still lags the world average. State-owned enterprises continue to dominate many sectors and the leadership appears to be stepping back from liberalisation, increasing the likelihood of less openness to imports and investment. China’s trade war with the US further complicates the reform process. The Philippines’ rankings also vary widely with the country’s gains in economic freedom offset by inefficient business practices

Indicator spotlight: Investors can start a business in 1.5 days in Hong Kong, home to the world’s most-free economy, according to the Heritage index

India climbed 23 spots in the World Bank’s latest report after a series of reforms made it easier for investors to do business. The country also jumped 13 places in the freedom index, but Heritage's report blamed corruption, underdeveloped infrastructure, a restrictive and burdensome regulatory environment, and poor financial and budget management for continuing to undermine overall development

Indicator spotlight: Foreign investment into Nepal is hampered by the country’s political uncertainty and difficult business climate

The United Arab Emirates continues to rise in both indexes. It ranks top regionally and, having climbed 10 spots in the ease of doing business index, now places 11th in the world. A continuous and focused reform agenda keeps the UAE’s economy competitive and vigilant, according to the World Bank

Indicator spotlight: Israel has become an easier place to do business due to reforms making it simpler to register property

With the economy in a downward spiral for several years, South Africa has been suffering a decline in the World Bank's report. Its economic freedom has also decreased as a result of fading global competitiveness, growing political instability, and weakened rule of law

Indicator spotlight: According to the World Bank, Rwanda approved the largest number of reforms in the Africa region

Now ranked 31st in the survey, Russia has steadily become an easier place to do business. In 2011 Russia ranked a lowly 120th in the world. President Vladimir Putin reacted by signing a “100 steps” decree, setting a goal to place 20th by 2018. However, economic freedom remains low because reforms have taken a back seat to political stability

Indicator spotlight: Despite being one of the world’s wealthiest countries, Luxembourg has become a harder place to do business

The US has been one of the 10 easiest places to do business for a decade. Economic freedom, however, has diminished in the country in recent years. The 2017 freedom report cited the substantial expansion in the size and scope of the US government as well as increased regulatory and tax burdens in many sectors. The loss of trust and confidence has accompanied a growing perception of cronyism severely undermining America’s global competitiveness

Indicator spotlight: Brazil’s policies to increase employment may have come at the expense of investment

European countries generally dominate the top rankings in both indexes but a number of Asian countries are vying for top honours