BOFIT Weekly Review 2016/43
Russia drops slightly in the Doing Business 2017 rankings
The World Bank’s latest business environment survey ranks Russia 40th out of 190 countries. Russia’s current ranking puts it on par with Bulgaria, Hungary and Belgium. China rose slightly in the rankings to 78th position.
Longer term developments are harder to figure out from the data due to major methodological changes especially in recent years. For example, Russia ranked 36th or 51st last year depending on the methodology applied.
While Doing Business is the widest and best-known international business climate comparison, it has its limits. By concentrating on narrowly defined sample cases, the results cannot necessarily be generalised to the broader business environment. It does not take into account e.g. corruption or the cost of inspections by officials, which are often quite substantial in Russia. Prime minister Dmitri Medvedev recently noted that the inefficiencies caused by officials’ inspections cost firms around 5 % of GDP. In addition, the regional business climate survey used by the Russian administration showed that last year the worst declines were in indicators of official oversight and administrative coercion for firms.
The narrowness of Doing Business survey criteria is also reflected in the fact that some of its results differ markedly from the findings of other surveys. In the Doing Business comparison Russia ranks high in sub-indicator topics such as registering property (9th) and enforcing contracts (12th). In contrast, the WEF competitiveness rankings give Russia significantly lower marks in similar topic categories, e.g. property right enforcement (123rd) and judicial efficiency in dispute resolution (82nd).
Moreover, the Doing Business survey only looks at big cities, i.e. Moscow and St. Petersburg in Russia’s case. However, the differences in business climates across Russia’s regions are large. Russia’s ranking in the survey showed greatest improvement in the sub-indicator for ease of starting a business, which considers, among other things, how long it takes to set up a company. The reported average time was less than 10 days. A survey of the Russian Union of Industrialists and Entrepreneurs (RSPP) found that last year it took less than 10 days to set up a business in only 18 % of Russian regions.