If you want to attract business to your country, you have to have the right parameters for business to operate. Specifically, your country has to offer access to markets and freedom to use this access to the greatest degree possible. Bloomberg ranked the best countries for doing business recently, and their results are insightful. The top ten countries are listed below.
The index measures six factors—the cost of setting up a business; degree of economic integration; cost of labor and materials; cost of moving goods; less tangible costs like corruption, property rights violations, inflation, and taxes; and readiness of the consumer base. In sum, these six factors left the United States in third place, with Hong Kong at the top and Brazil at the bottom. The list ranked only the top 50 economies in the world.
Hong Kong has a sterling reputation, offering a corruption-free government, low taxes, and access to growing Asian markets. Hong Kong beats the U.S. on a number of important factors, like corporate income tax rates. Hong Kong charges 16.5%, less than half of the U.S.’s 35% rate. This is why many countries, like GE, Boeing, and GM, have made Hong Kong the center of their Asian operations.
A few other items of note:
- A substantial gap exists between the competitiveness of the upper Eurozone countries—the Netherlands (2), Germany (6), France (8), and Austria (9)—and the embattled southern European countries, which don’t make an appearance until substantially later—at 20 (Italy), 21 (Spain), 26 (Ireland), and 29 (Portugal).
- The U.S. ranks highly in large part because of its resilient consumer base. Even with high costs in other areas, the U.S. makes the grade because of their large group of conspicuous consumers.
- Hong Kong’s free market ways continue to be praised and respected. After decades of open markets, Hong Kong is still business friendly and the main access point to Asian markets. Other indices of economic freedom—like the Heritage/WSJ and Frasier Institute’s indices—also rank Hong Kong number 1.
Countries that have a lot going for them—like the U.S. with its vast resources and huge consumer base—can learn a lot from places like Hong Kong. Despite not having a lot of obvious economic advantages, Hong Kong has been a pro-business haven for decades thanks to government staying out of the way. Imagine what southern Europe would look like right now absent a sovereign debt crisis and bloated welfare state.