Study: Singapore is No. 1 spot in the world for small businesses

The U.S. ranks third in a World Bank survey of the friendliest regulatory environments for startups and small companies.

Singapore, New Zealand and the United States have the world's friendliest business climates for small companies, according to a World Bank report released this week.

For the fourth year in a row, those three countries occupied the top spots in the annual "Doing Business" report card created by the World Bank and its private-sector lending arm, the International Finance Corp. The 2009 edition ranks 181 countries on their small-business regulatory environments.

Compiled with the help of 6,700 business experts and government officials around the world, "Doing Business 2009" analyzes how difficult it is to comply with 10 different sets of business regulations that affect company lifecycles, from startup to closure. The World Bank's research team examined the number of procedures required to start a business and the ease and cost of transactions such as obtaining construction permits, hiring workers, getting credit, paying taxes, enforcing contracts and declaring bankruptcy. Each category is given equal weight to create an overall "ease of doing business" index and ranking.

"It has a very specific focus on the regulatory environment," said Penelope Brook, the World Bank Group's director of indicators and analysis.

Other factors that affect regional businesses, such as domestic infrastructure and security, are not considered - which explains how frequently violent Georgia landed in the top 20.

While this year's top-10 list remained almost unchanged from last year's (Australia moved up to No. 9, knocking Norway down one spot), a wave of business-friendly reforms is pushing a new crop of countries up the ranking. The "Doing Business" team identified 239 pro-business reforms in 113 economies between June 2007 and June 2008, the highest number recorded since the project began six years ago.

Heading this year's list of most-active reformers was the Middle East's Azerbaijan, which moved up 64 spots in the overall ranking to 33rd place, thanks to reforms made in seven of the 10 measured sectors. Most notably, Azerbaijan slashed the time required to start a business from 122 to 16 days, reformed its civil code and created an online tax-filing system.

Singapore retained its ranking as the world's easiest location in which to do business, thanks to its low import and export costs, strong legal protections for investors, and employer-friendly labor regulations. Incorporating a new business takes only four days - fast by most standards, but sluggish by New Zealand's. There, entrepreneurs can register a new venture in just 24 hours.

The U.S. came in at No. 3 in the overall "Doing Business" ranking. Its advantages include labor laws that are among the least rigid in the world and streamlined bureaucracy for getting a new venture off the ground.

Also at the top of the list were Hong Kong, Denmark, the United Kingdom, Ireland and Canada.

While the trend toward pro-business reforms is a global one, the catalysts for improvement vary by region. Some governments in Eastern Europe have been motivated by regulatory requirements for joining the European Union, while officials in Latin America are striving to make their economies more competitive within regional trading blocs, according to the World Banks' Brook.

"There's a desire to give local entrepreneurs the chance to be part of the local growth story," Brook said. "Being able to build a business should depend on having drive, skills and good ideas more than who you know and your connections."
- September 10, 2008: 6:38 PM EDT (CNNMoney.com)