Malaysia Leaps Into Top 10 of World Bank Doing Business Rank

Malaysia advanced for the first time into a top 10 ranking of nations the World Bank deems friendliest to businesses as Singapore led the annual competitiveness scorecard for an eighth straight year.

Malaysia vaulted to sixth from 12th a year ago after easing procedures for registering a company, applying for a construction permit and getting electricity, the bank said in its 2014 “Doing Business” report. Rounding out the top five after Singapore were Hong Kong, New Zealand, the U.S. and Denmark, unchanged from a year ago. China slid five spots to 96th, while the U.K. dropped to 10th from seventh.

Bureaucracy has improved under Malaysian Prime Minister Najib Razak’s economic and government transformation programs, even as the Southeast Asian grapples with crime and corruption. While the country moved to 54th from 60th place among 176 countries in Transparency International’s Corruption Perceptions Index last year, it was ranked worst for bribery among 30 countries surveyed.

“Malaysia has done a good job in streamlining business processes in the past few years,” K.M. Loi, secretary-general of Transparency International’s Malaysia arm, said in a phone interview today. “But we still need to strengthen business integrity and anti-bribery practices. Corruption hurts everybody.”

Methodology Questioned

The World Bank’s study, in its 11th year, covered a record 189 economies, assessing them on measures such as the costliness of commercial regulations and the strength of public institutions. Nations are ranked based on indicators such as the time required to start a business, file tax returns and export or import goods.

Jim Yong Kim, World Bank president, pledged in June to improve the report, which he called “an important catalyst in driving reforms around the world.” Non-profit groups such as Oxfam have criticized it and India, which slid two spots to 134th, has questioned its methodology.

“Governments play a crucial role in supporting a dynamic ecosystem for firms,” the Washington-based lender said in the report. “Without good rules that are evenly enforced, entrepreneurs have a harder time starting and growing the small and medium-size firms that are the engines of growth and job creation for most economies around the world.”

Ukraine’s Rise

The report counted 238 policy improvements, an increase of 18 percent from the previous year and the second-highest total since the financial crisis. Ukraine, rising to 112th after coming in 137th a year ago, was identified as the country that made the greatest progress with reforms, having simplified measures in areas such as customs, bankruptcy and a value-added tax.

Greece, whose insolvency helped trigger the European debt crisis, rose in the ranking to 72nd from 78th, while Spain, beset with a 26 percent unemployment rate, slipped to 52nd from 44th, according to the report.

In Malaysia, Najib’s government has tightened anti-corruption legislation and set up specialist courts. It’s also introducing tighter detention laws after a violent crime wave this year, during which AMMB Holdings Bhd. founder Hussain Ahmad Najadi was gunned down and killed in Kuala Lumpur.

Some other emerging economies also gained in the World Bank’s report, with Russia jumping to 92nd from 112th a year ago and being named among the most improved. Brazil rose to 116th from 130th, according to the report.

Kim’s Support

The publication has taken criticism for its ranking methodology. An outside review initiated by the World Bank last October found that the listing may create perverse incentives for governments seeking to perform better.

Starting with next year’s report, responsibility for carrying out the research will move from the International Finance Corp., the World Bank unit that lends to the private sector, to the office of the chief economist, according to the bank.

“I am committed to the ’Doing Business’ report, and rankings have been part of its success,” Kim said in June, addressing the review panel’s conclusions.

The study’s criteria differ from those used in the World Economic Forum’s global competitiveness index, which accounts for macroeconomic stability and the level of public debt. The Geneva-based forum last month gave its top score to Switzerland, which was No. 29 in the World Bank’s latest report.

“We anticipate there will be a number of significant changes in the report’s methodology next year,” Augusto Lopez-Claros, a global indicators and analysis director at the World Bank, said in a conference call from Washington. One probable change will be evaluating several cities per country rather than focusing on the city with the greatest business activity, he said.

The World Bank decided this year to test the “conventional wisdom that doing well favors smaller governments,” Lopez-Claros said, because they are seen as having fewer cumbersome regulations. The report showed that governments with higher spending relative to gross domestic product tended to perform better on the indicators.

Chad is the worst place to do business, switching positions with Central African Republic, which ranked second-to-last, according to the World Bank.

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