Singapore skyline

Singapore retains its lead in business environment rankings

  • Singapore remains the best place in the world to do business in the next five years, according to EIU’s business environment rankings (BERs) for the fourth quarter of 2022. Canada and the US are ranked second and third, with western Europe still well represented in the top 20.
  • The biggest improvements over the past three years, since before the ructions caused by the pandemic and the war in Ukraine, are in the business environments of Greece, Qatar, the US and the UAE. The biggest deteriorations are in Latin America, the lowest-ranking region, as well as in Russia and Ukraine.
  • Two major trends stand out: first, China’s zero-covid policy is harming its business environment and encouraging firms to choose alternative markets—in our latest ranking China has been overtaken by India and Indonesia; second, Europe’s energy transition away from reliance on Russia is driving growth and investment in other natural gas exporters, notably in the Middle East.

Our BERs illustrate the impact of the pandemic in 2020, the asymmetric recovery in 2021 and the war in Ukraine in 2022—and all the policy changes that these have prompted—on global operating environments. The BERs measure the attractiveness of the business environment in 82 countries on a quarterly basis, using a standard analytical framework with 91 indicators. Our rankings for the fourth quarter of 2022 show that western Europe and North America remain the best places in the world to do business. Asia ranks third, narrowly ahead of eastern Europe, while the Middle East and Africa region marginally outperforms Latin America.

Table showing change in Business Environment Rankings

Western Europe and North America are the regional leaders

The fact that 11 of the top 20 countries in the global ranking are in western Europe reflects the high level of political stability in that region, the presence of large and competitive domestic markets and a strong degree of openness to world trade. Many west European countries were able to roll out significant fiscal support for citizens and businesses during the pandemic in 2020 and again in 2022 as rising inflation raised the cost of living. The short-term economic outlook of the region is poor, as an energy crunch looms this winter, but in the medium term greater investment under the €750bn (US$740bn) EU recovery fund will support the business environment and end Europe’s dependency on Russian energy. Investment will be particularly significant in the digital sector, in pursuing the green agenda and in the transition away from reliance on Russia in the energy sector.

Biggest winners: Compared with the fourth quarter of 2019, Greece’s ranking increased by 16 places. This significant improvement reflects its poor starting point, given a long-delayed recovery from the government debt crisis that began in 2009, but also the impact of a pro-business majority government that has undertaken reforms, cut taxes and restored confidence in the country. Meanwhile, the US rose by ten places in the rankings. Its performance in most of our categories—including policy towards private enterprise and competition and the labour market—remains very strong. 

Biggest losers: Russia’s business environment has suffered irreparable damage as a result of sweeping Western sanctions and the withdrawal from the country of hundreds of Western banks and businesses. Following a major recession in 2022, we expect Russia to seek to build ties with China in the coming years, but market opportunities will remain limited and cross-border transactions severely constrained by sanctions. Ukraine’s economy has been devastated by the war, but the country will benefit from substantial reconstruction aid when the most acute phase of the conflict is past and the war may engender a reform shock.

Asia’s ranking improves owing to FTAs

Singapore will retain the world’s best business environment in the forecast period, with Hong Kong, New Zealand, Australia and Taiwan also ranking in the global top 20. As a region, Asia’s score for policy towards foreign trade is improving. This partly reflects the impact of free-trade agreements (FTAs) adopted in the past five years, the effects of which will be felt in our five-year forecast period (2023‑27). 

Biggest winners: The countries that have improved their ranking the most since before the pandemic are Bangladesh, Hong Kong and Vietnam, all of which have risen by six places. Bangladesh and Vietnam, which have favourable policies for foreign investors, are benefiting from firms pursuing a China+1 policy of having supply chains in China and another Asian market at a time when China’s zero-covid policies are constraining business operations. In terms of absolute improvements in score, India and Indonesia are the front-runners. Their huge populations represent substantial market opportunities as well as a large labour force. A common thread in their success has been reforms to lower the tax burden for businesses, enhance tax compliance, increase labour market flexibility and improve infrastructure quality through public investment and reduced bureaucratic barriers.  

Biggest loser: China improved from 56th place in our business environment ranking in 2019 to 46th in 2021, on the back of a rapid initial economic recovery from the pandemic-induced shock, but then fell back by nine places to 55th in our latest rankings. This reflects the stringent zero-covid protocols implemented in 2022, which have led to a deterioration in the business environment and which we expect will continue throughout 2023. The country now ranks below India and Indonesia. Its zero-covid policies will keep domestic demand subdued until at least mid-2023, and a property sector crisis will constrain investment in the housing market. Growth will continue to slow over the medium to long term as the population ages and the country’s drive for self-sufficiency reduces productivity.

Middle East benefits from rising global oil prices

A protracted period of low global oil prices has been followed by a sharp rebound in international oil prices since the start of this year, strengthening the macroeconomic environment in the Middle East region. High oil prices are enabling oil-producing economies to invest more heavily in technology and infrastructure upgrades. The region is also benefiting from Europe’s reorientation of its gas supply from Russian pipeline gas to liquefied natural gas suppliers elsewhere, notably in the Gulf and the US. Cuts in capital spending in response to the fiscal deterioration that accompanied the pandemic have constrained the region’s macroeconomic score. However, the effect on the business environment has been positive, as countries have been forced to prioritise reforms that support business operations, such as improved frameworks for public-private partnerships, subsidies programmes and foreign investment. Poor governance and management of macroeconomic policy, as well as low income per head and limited market opportunities, mean that countries in Africa are generally low down in the BER rankings.

Biggest winners: Qatar, which climbs 11 places, has implemented a US$220bn investment programme over the past decade, mainly focused on infrastructure. Its BER score has benefited from the expansion of Hamad International Airport, further development of the road network and plans for tourism infrastructure, all accelerated by preparations for hosting the 2022 World Cup (in November-December). The North Field Expansion, a US$30bn natural gas project in the Persian Gulf, will further support business opportunities in 2023-27. The UAE was another winner, gaining ten places in the rankings.

Biggest losers: The score for the Middle East and Africa overall continues to be weighed down by poor governance and endemic insecurity in many parts of the region, including the spillover from the conflicts in Syria, Yemen and Libya, alongside political unrest in a number of countries, including Iraq and Lebanon. The region includes five of the bottom ten countries globally.

Latin America is the lowest-ranking region

Latin America scores extremely poorly for political effectiveness, reflecting problems with corruption, crime, weak institutions and often incoherent policy towards business. The region has made progress in one category, policy towards foreign direct investment (FDI), overtaking the Middle East and Africa. Improvements will be seen in countries that are undergoing reforms, but will be slower than in other emerging-market regions, reflecting difficulties in governability. Furthermore, many structural economic issues were exacerbated by the pandemic and the subsequent global recession in 2020, especially a sharp rise in public debt. 

Biggest winners: Argentina, Cuba and the Dominican Republic have all improved their rankings. Argentina’s improvement (albeit from a low base) reflects the government’s restructuring of its debts with private creditors in 2022 and an IMF deal that provides external funding subject to progress on policy tightening. Our expectation that the left-wing Frente de Todos government will lose power in the October 2023 general election to a more market-friendly administration, led by the centre-right Juntos por el Cambio coalition, supports our view that the business environment will improve.

Biggest losers: Chile falls by 13 places compared with before the pandemic, and Peru by 11, with scores for political environment and policy towards FDI declining for both. In Chile, this reflects policy uncertainty associated with an unresolved constitutional reform process that creates uncertainty and hurts political effectiveness, and the plans of the left-wing government, which wants to expand the role of the state in the economy. Peru’s deterioration reflects a worsening political environment under the left-wing Castillo government.

The analysis and forecasts featured in this piece can be found in EIU Viewpoint, our new country analysis solution. EIU Viewpoint provides unmatched global insights covering the political and economic outlook for nearly 200 countries, helping organisations identify prospective opportunities and potential risks.