2018 Prosperity Index Reveals the World’s 5 Strongest Business Environments
The Legatum Prosperity Index has reported the world’s strongest business environments for 2018. The index, which each year ranks 149 countries worldwide, rated the United States, New Zealand, Canada, the United Kingdom, and Singapore as the world’s best business performers last year.
The Prosperity Index’s annual rating of the business environment is part of a wider exercise to rank all 149 nations across a range of measures that also include health, education and personal freedom.
The objective is to help inform global leaders of current performance trends, and to aid them in setting their own agendas for development. The index promises a unique insight into how prosperity is forming and changing across the world and was conceived by a London-based think-tank, the Legatum Institute.
In order to rate a nation’s business environment, the Prosperity Index takes several measures each year. Firstly, it quantifies a country’s entrepreneurial environment by taking a measure of how easy the business community perceives it is to start a successful new business and to gain credit. It also examines a nation’s business infrastructure.
Furthermore, measures are taken of its labor market flexibility in terms of ease of hiring and firing, and costs and regulations. Finally, it looks at investor protection measures as well.
All these factors are gathered to give each nation a final score for its business environment, which is then ranked against all other nations in the Prosperity Index. The year 2018’s top business environments were found in:
1. United States
The United States, while being 17th in the overall Prosperity Index rankings, was the leading nation in the Business Environment pillar. This was due to its high scores across all sub-pillars; it scored second globally for both Access to Credit and Labor Market Flexibility and considerably surpassed global performance across the board.
Entrepreneurial Environment was its weakest sub-pillar, ranking in 23rd globally. However, the USA’s scores in this area have fluctuated over the last decade, and 2018 still saw significant improvement over previous scores.
The US saw a general upward trend in its Business Environment scores over the five years leading to 2018. Its success last year was due in part to a sudden improvement in access to credit for investors after a fairly stagnant period over the last decade.
The US also saw significant improvements in its labor market conditions. The Prosperity Index figures were in line with the Bureau of Labor Statistics findings, which reported healthy growth and predicted a full recovery from recession by 2020.
2. New Zealand
New Zealand performed well across the Prosperity Index rankings, mirroring global perceptions that it is one of the world’s most idyllic places to live and work. Not only did it boast the world’s second-best Business Environment score, but it was also the second best worldwide in overall rankings due to high scores in the Governance, Personal Freedom and Natural Environment pillars.
According to the Prosperity Index, New Zealand had the easiest access to credit in the world in 2018. This, in part, led to a thriving entrepreneurial environment, which ranked seventh globally here. Like the US, New Zealand’s scores for Business Environment showed typically strong and steady improvement over the last 10 years.
The world’s third best Business Environment for 2018 was found to be in Canada, according to the Prosperity Index. Like New Zealand, it scored very highly in the Access to Credit and Entrepreneurial Environment pillars.
However, unlike most other members of the top 5, a significant downward trend was noted in Business Infrastructure scores. This reiterates national concerns regarding delayed infrastructure investment.
4. United Kingdom
Despite a relatively turbulent political period in the year before Brexit, the United Kingdom still maintained a robust Business Environment in 2018. This was due to excellent scores for the nation’s Business Infrastructure and Investor Protections. Its Access to Credit score also ranked the highest in Europe. The nation’s Entrepreneurial Environment score remained strong and stable as well.
Singapore saw more turbulence in its Business Environment scores between 2008 and 2018 than other members of last year’s top 5 Business Environments. It retained its place in 2018’s top 5 due to increased Entrepreneurial Environment scores and positive Labor Market Flexibility figures. However, like Canada, there was a downward trend emerging in its Business Infrastructure scores.
Good News in Business All Around
These were the world’s five best performers for 2018.
However, there was plenty of positive news for global business in general.
According to the Prosperity Index’s report for 2018, “The world’s Business Environment has improved every year since 2004. Overall, each region improved this year, with large gains made in Eastern Europe and Asia-Pacific… the largest drivers of progress [in 2018] have been increases in scores for Access to Credit and Entrepreneurial Environment.”
Now, that’s certainly good news for everyone.