Welcome to the Finfacts Blog

Monday, July 02, 2018

Best countries in world to start or run a business in 2018

Ireland has had a positive environment for business for many decades as successive governments sought to make the country an attractive location for foreign direct investment (FDI), besides the offer of low tax rates. During the general election campaign in early 2011, Enda Kenny, taoiseach/ prime minister, stressed the aspiration that by 2016 the country would be "the best small country in the world in which to do business."

“I will seek the trust of the Irish people to implement Fine Gael’s plan to get Ireland working again,” Kenny said on Jan 27, 2011. “I firmly believe that by 2016, Ireland can become the best small country in the world in which to do business, the best country in which to raise a family and the best country in which to grow old with dignity and respect.”

"Since coming into office 7 months ago I have told nearly all audiences that by 2016 I intend to make Ireland the best small country in the world in which to do business," Kenny said on October 28, 2011. "An integral part of this vision is to transform Ireland into the Digital Capital of Europe."

In 2016, the available metrics showed that Ireland wasn’t the best small country in the world in which to do business while in Europe, there are several rankings of tech activity and startups in cities, but there is a dearth of statistics. Still, Ireland where many foreign tech firms focus on sales and administration, the claim that Ireland is the Digital Capital of Europe, remains aspirational.

Ireland has very low employer firm startup rate- UK is 4 times bigger

World Bank’s ‘Doing Business 2018’

Doing Business’ is the most comprehensive annual report on business regulation reforms and ease of doing business in 190 countries.

The OECD area is home to seven of this year’s top 10 economies on the ease of doing business ranking, namely New Zealand (ranked first for a second consecutive year); Denmark (3); South Korea (4), United States (6), United Kingdom (7), Norway (8) and Sweden (10). Singapore was at (2); Hong Kong, China (5) and Republic of Georgia (9).

Ireland is at 17 of 190 countries, behind Lithuania and ahead of Canada.

World Economic Forum Competitiveness Index 2017/2018

For the ninth consecutive year, the World Economic Forum's annual competitiveness report’s Global Competitiveness Index (GCI) 2017/2018 (latest published in September 2017), has Switzerland as the world’s most competitive economy, narrowly ahead of the United States and Singapore. Other G20 (comprising the 19 leading advanced and emerging economies + the European Union) economies in the top 10 are Germany (5), the United Kingdom (8) and Japan (9). China is the highest ranking among the BRICS group of large emerging markets, moving up one rank to 27.

Singapore (4), Netherlands (5), Hong Kong, China (6), Sweden (7) and Finland (10) complete the top 10.

Ireland is at 24 of 137 countries, behind Malaysia and ahead of Qatar.

The Global Competitiveness Report competitiveness ranking is based on the Global Competitiveness Index (GCI), which was introduced by the World Economic Forum in 2005. Defining competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country, GCI scores are calculated by drawing together country-level data covering 12 categories — the pillars of competitiveness — that collectively make up a comprehensive picture of a country’s competitiveness. The 12 pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

IMD Swiss business school

The top five most competitive economies according to the IMD World Competitiveness Rankings of 63 countries in May 2018, remained the same as in the previous year, but their order changed. The United States returned to the first spot, followed by Hong Kong, Singapore, the Netherlands, and Switzerland. The United States improves three positions from last year while Hong Kong drops one spot and Singapore remains at (3). The return of the United States to the top is driven by its strength in economic performance (1) and infrastructure (1). Hong Kong improved on its government efficiency (1) and business efficiency (1). The Netherlands is at (4) and Switzerland (5). The remaining places in the top 10 are occupied largely by Nordic countries: Denmark, Norway, and Sweden rank (6), (8) and (9) respectively. These countries show strong performance in the overall productivity of the private sector and its management practices. The United Arab Emirates (7) and Canada (10) close the top of the rankings.

Ireland at (12) and Luxembourg (11) leave the top 10, dropping six and three places respectively.

IMD uses 340+ criteria — List of all criteria

The US leads the IMD World Digital Competitiveness Ranking 2018 followed by Singapore (2), Sweden (3), Denmark (4), and Switzerland (5). Rising from the (3) spot, the US overtakes Singapore and Sweden to top the ranking. Norway (6), Finland (7), Canada (8), Netherlands (9) and the UK (10) complete the top 10.

Ireland is at (20) with New Zealand ahead and Iceland behind.

2018 Best Countries Rankings

The Best Countries rankings evaluate 80 countries across 24 rankings drawn from a survey of more than 21,000 global citizens. It is produced by US News and World Report magazine in partnership with Y&R's brand strategy firm, BAV Group, and the Wharton School of the University of Pennsylvania.

Switzerland (1), Canada (2), Germany (3), United Kingdom (4), Japan (5), Sweden (6), Australia (7), United States (8), France (9) and the Netherlands (10) are in the top 10.

Ireland is at (20) with China ahead and South Korea behind.

The Entrepreneurship subranking has Germany at (1), Japan (2), United States (3), United Kingdom (4), Switzerland (5), Sweden (6), Canada (7), Singapore (8), Netherlands (9) and Norway (10).

Ireland is at (20) with New Zealand ahead and Italy behind.

Forbes’ Best Countries for Business

This ranking is a compendium of other reports (Freedom House, Heritage Foundation, Property Rights Alliance, United Nations, Transparency International, World Bank Group, Aon, Marsh & McLennan and World Economic Forum) and it has focused on factors such as property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance. The last one was dropped in the December 2017 rankings.

Despite the Brexit chaos, the United Kingdom was ranked (1) for 2018, followed by New Zealand (2), Netherlands (3), Sweden (4), Canada (5), Hong Kong , China (6), Denmark (7), Ireland (8), Singapore (9), Switzerland (10). Full list

Global Innovation Index

The Global Innovation Index is the result of a collaboration between Cornell University of the United States, INSEAD, the French business school, and the World Intellectual Property Organization (WIPO) as co-publishers.

The 2018 ranking will be published on July 10, 2018.

The Top 10 in 2017 of 137 countries were Switzerland (1), Sweden (2), Netherlands (3), United States (4), United Kingdom (5), Denmark (6), Singapore (7), Finland (8), Germany (9), Ireland (10).

The Irish ranking is massively compromised by multinational firm tax avoidance.

The 2017 report says:

Ireland holds the top position in IP payments, ICT services exports, and FDI net outflows, and shows a better ranking than in 2016 in a number of important indicators, including PISA results, researchers, global R&D companies, gross capital formation, and GDP per unit of energy use.

1) Most of the IP (intellectual property) payments are tax-free transfers to Irish shell companies in Bermuda and the Cayman Islands. They do not reflect research activities in Ireland;

2) About 50% of Irish annual services exports are fake — think of Google and Facebook booking one-third of their global revenues and Microsoft booking a quarter.

3) Ireland having a net foreign direct investment (FDI) to the rest of the world is the biggest joke of all — giant US companies like Medtronic, Allergan and Accenture became “Irish” by transferring their headquarters to Ireland to reduce their tax payments — Accenture told us two years ago that it was never American as it was a spin-out by Arthur Andersen, to become a Bermudan company in 2001, before the US accountancy firm crashed. The consultancy firm moved its headquarters to Ireland in 2009 as Bermuda invoked tax-dodging! The large FDI outflows from Ireland are a fiction.

4) As for “global R&D companies” in November 2015, Catherine Mann, the then chief economist of the Organisation for Economic Cooperation and Development (OECD), a think-tank for 35 mainly rich countries, said in Dublin that Ireland will have to sell itself as more than just a low-tax destination in the new era of global tax transparency. She also highlighted the poor links between the FDI sector and the rest of the economy, with Ireland having one of the lowest EU spends on R&D (research and development), despite housing some of the most innovative firms in the world.

"Global capital has come into Ireland...but somehow it hasn't translated into Irish-owned firms," said Dr. Mann. "The patents are here, but they're not being linked into the domestic economy, not being levered up by domestic firms or married to domestic workers."

5) Patent applications from Ireland to the European Patent Office in 2017, per 1 million inhabitants, were below the EU average, despite the presence of a large number of global firms.

The Economist Intelligence Unit’s The Inclusive Internet Index: Measuring Success 2018

The Inclusive Internet Index, commissioned by Facebook and conducted by The Economist Intelligence Unit, in its second year expanded to cover 86 countries, up from 75 in 2017. The index provides a rigorous benchmark of national-level Internet inclusion across four categories: Availability, Affordability, Relevance, and Readiness. This year’s index, which covers 91% of the world’s population, is published alongside a new global Value of the Internet Survey, which polled 4,267 respondents from 85 countries, from Singapore and Switzerland to Cambodia and Ethiopia, to gauge perceptions on how Internet use affects people’s lives.

Countries are evaluated based on 54 indicators organized around four major categories:

  • Availability, which captures the quality of breadth of the infrastructure available for internet access, including network availability, access points for landline and mobile connections, and the basic electricity infrastructure needed to support internet connectivity in urban and rural areas.
  • Affordability, which measures the cost of Internet access relative to income, the competitive environment for wireless and broadband operators and the measures taken to decrease costs and promote access.
  • Relevance, which looks at the availability of Internet content in the local language(s) and the value of being connected to get access to relevant services like news, entertainment, health advice and business and financial information.
  • Readiness, which examines the capacity to take advantage of accessing the Internet, including the level of literacy, educational attainment, cultural acceptance, privacy and security, and trust in the sources of online information.

Each country is assigned a score for each of the four categories, as well as an overall index score.

Sweden (1), Singapore (2), the US (3), Denmark (4) and South Korea had the highest overall index scores. France (6), United Kingdom (7), Chile (8), Poland (9) and Canada (10) complete the top 10.

Ireland is at (21) behind Italy and Taiwan, and ahead of Switzerland.

Full rankings list 

European Innovation Scorecard

The 2018 index was published in June 2018.

Sweden (1) remains the EU innovation leader, followed by Denmark (2), Finland (3), Netherlands (4), UK (5) and Luxembourg (6) — this group of countries is called innovation leaders.

Germany (7), Belgium (8), Ireland (9), Austria 10) and France (11) are called strong innovators.

Luxembourg. Lithuania, the Netherlands, Malta, the UK, Latvia, and France are the fastest growing innovators.

Ireland is cited for “innovation in SMEs, employment impacts, and sales impacts.”

The Ireland profile shows high Knowledge-intensive services exports (exaggerated); new innovations to market (mainly from foreign-controlled firms and developed elsewhere); employment in Knowledge-intensive activities is 75% above the EU average (about half of employment in the Irish ICT sector, are administration positions); business spending on R&D is low; intellectual assets (patents) are low and entrepreneurship is also low.

Some of the venture capital funding appears to be for young Irish tech firms but while they may have operations in Ireland, they are effectively run from elsewhere.

Business (foreign and indigenous) has one of the lowest levels of funding of university research in the EU.

According to Irish official data, the majority of foreign-controlled exporters do not have any R&D spending while the lack of separate innovation data on the small indigenous exporting sector that would reveal the actual reality, is a disservice to it.

Wonder why Ireland’s average material standard of living is below the EU average?

Irish 2017 per capita standard of living again below Italy and EU-28 average

The best?

Last October, the Economist Intelligence Unit published a study based on a survey of over 2,600 executives in 45 cities around the world, as well as one-on-one interviews with 15 business leaders, city officials and other experts, on confidence in the digital environment. Dublin was not included.

Seven of the 10 highest confidence levels in the survey are recorded in emerging Asian cities.

Key findings from the research include:

  • Executives in London and Madrid are some of the most confident in the world in their city’s ability to support their digital ambitions, ranking ninth and (10) respectively.
  • Confidence in the overall environment was lowest in Berlin, which ranks (45) overall. The city also ranked 45th for innovation and entrepreneurship despite the city’s vibrant startup ecosystem.
  • Forty-eight percent of all respondents believe their city’s ICT infrastructure is ineffective for their transformation needs.
  • Executives in Rome have limited confidence in their city’s overall environment (35), compared with those in Milan (24), where confidence is substantially higher than Italy’s capital across all categories except ICT infrastructure.
  • There were mixed results for European cities on the Barometer when it comes to overall confidence in the environment. Following London and Madrid, ranking for the other cities were: Barcelona (12), Copenhagen (16), Paris (20), Oslo (21), Milan (24), Brussels (25), Antwerp (28), Amsterdam (29), Marseilles (30), Stockholm (31), Birmingham (32), Rome (35), Frankfurt (36) and Rotterdam (41).

It makes sense generally for non-tech startups to be born in a native city or country because existing contacts are important while it may make sense to develop a tech startup in a city with a significant tech cluster. In Asia, for example, a less expensive base in Kuala Lumpur with easy access to Singapore and Shanghai could be a wise choice.

If  Patrick and John Collison, natives of County Limerick, Ireland, had founded Stripe, their online payments service in Ireland in 2010 rather than San Francisco, it would likely be now part of a bigger multinational firm — companies like Google (it has acquired over 200 startups since 2004) and Apple depend on acquiring startups for key innovations and this is the typical route for an Irish tech startup with high growth potential and reliant on local venture capital for funding.

Bloomberg Businessweek: How Two Brothers Turned Seven Lines of Code Into a $9.2 Billion Startup

Finfacts: Irish tax break addiction and failed entrepreneurship

As for the best countries for business, in Europe, Sweden, Denmark, the Netherlands, Switzerland, and Finland take the honours as they also do with quality of life indicators — OECD’s Better Life Index.  However, a Swiss basket of grocery items was +91% more expensive than France in 2017.

In Asia it’s Singapore, Hong Kong, China and New Zealand — Singapore is one of the world’s most expensive countries while spacious housing in Hong Kong costs a goldmine!

Trump’s America is excluded.