BOFIT Viikkokatsaus / BOFIT Weekly 2018/45

Russia rose from 35th place last year to 31st place this year, and China jumped from 78th to 46th place. The 190-country comparison assesses among other things trade across borders, permitting, regulation, contract enforcement, paying taxes, access to credit and getting electricity.

Although China’s rank changed considerably, such a change is not uncommon in this comparison. This is due to the peculiar features of the scoring system. First, only the number one or two economic centres of each country are designated as representative of the whole country. Russia is represented by Moscow and St. Petersburg, and China by Shanghai and Beijing. Second, instead of using a comprehensive and representative set of measures, points are allocated based on narrowly-defined standard cases. For example, in assessing ease of trading across borders, the survey focuses on importation of car parts. In assessing ease of getting a building permit, only warehouse construction is evaluated. Third, in place of actual practice, the evaluation focuses on official procedures, giving considerable weight to the content of laws and regulations.
This approach has been chosen because of its lower demands in data collection and comparison. The peculiarity of this approach is indicated by the results. Georgia and Macedonia FYR make it to the top ten, but Netherlands and Switzerland fall behind Rwanda and Russia. This order differs dramatically from similar comparisons performed by other institutions.

Due to the narrowness of the measures, countries can rapidly improve their rankings through precisely targeted reforms. For example, president Putin decreed in 2012 that Russia’s Doing Business ranking be raised from 120th place to 20th place by 2018. During the next three years, Russia’s score on getting electricity, paying taxes and receiving building permits rose sharply. Even though there are real reforms behind these point gains, they do not reflect the general pace of reforms in Russia.

In addition to China, also India and Turkey rose considerably, albeit more modestly, in the ranking. China’s point gains came mainly from streamlining of tax payments, property registration and building permits.