China Belt And Road Initiative Countries Up 244 Places In World Bank Ease of Doing Business Rankings

Op/Ed By Chris Devonshire-Ellis 

China’s Belt & Road Initiative was originally launched, albeit known as the ‘One Belt One Road’ back in 2013. Now we are seven years down that path, and able to measure to some degree, the success, failure – and impact of these investments.

One way of doing so is to examine the differences in each countries World Bank ‘Ease Of Doing Business’ rankings since 2013 and to look at any difference. There are 135 countries that have both signed up to China’s Belt & Road and that are also monitored by the World Bank.

Ease of Doing Business rankings are important because they shed some light on how economies are developing, and the standards employed within local commerce and trade. Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.

A nation’s ranking on the index is based on the average of 10 subindices:

• Starting a business – Procedures, time, cost, and minimum capital to open a new business
• Dealing with construction permits – Procedures, time, and cost to build a warehouse
• Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse
• Registering property – Procedures, time, and cost to register commercial real estate
• Getting credit – Strength of legal rights index, depth of credit information index
• Protecting investors – Indices on the extent of disclosure, extent of director liability, and ease of shareholder suits
• Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as share of gross profit
• Trading across borders – Number of documents, cost, and time necessary to export and import
• Enforcing contracts – Procedures, time, and cost to enforce a debt contract
• Resolving insolvency – The time, cost, and recovery rate (%) under bankruptcy proceeding

One way in that rankings can be used is to examine whether there has been any change in these parameters because better or new infrastructure has or is being put in place, although the actual Ease of Doing Business Rankings concentrate on the regulations directly affecting businesses and do not directly measure more general conditions such as a nation’s proximity to large markets or quality of infrastructure.

However, comparing the Ease of Doing Business Rankings with the development of nations within China’s Belt & Road Initiative will tell us if there is any meaningful impact. I have made simple comparisons between their rankings in 2013 and 2020, based upon the Ease of Doing Business Rankings as produced by the World Bank. 2014 figures are based on statistics collected in 2013, and 2020 figures (the latest available) based on measurements during 2019.

The results are a mixed bag, but do show that overall, the countries that have signed off with China’s Belt & Road Initiative have seen collective ease of doing business rankings improve by 244 places. This at least indicates that China holds the overall balance in its favor in terms of having partnered with developing economies, although it is not a spectacular gain.

Adjusting the picture regionally presents a rather different figure:

Overall, the picture is positive, with apparent ease of business gains being made in much of the global regions that China has signed up BRI partners. What is dragging the position down appear to be political issues in the Middle East, which includes a heavily US sanctioned Iran, coupled with a poor ranking from Saudi Arabia where previous freedoms have recently been significantly curtailed. South America also performs poorly, however many LatAm countries have suffered with poor economic performance, corruption and US sanctions. China is also a late investor in the region with results from BRI projects still yet to be realized.

To China’s credit, it has also invested in truly difficult markets, which have also dragged down its overall score. Some of these, such as Afghanistan (which shares a border with China) and some of the North African and Middle Eastern nations with political and conflict problems such as Sudan, will take years to put right. Others are smaller economies whose performance has suffered in the past seven years due to political instability, the financial crisis or natural disasters.

Yet the overall improvements of countries within the European sphere – including a heavily sanctioned yet improving business environment in Russia, Turkey and the EU in general is highly positive. So too are many of the African nations part of China’s BRI, whose own regulatory and commercial performance shows a great deal of encouragement. The same is true in Central Asia, and especially of Uzbekistan and Kazakhstan, where regime changes and reform are having a significant impact.

All in all however, despite the fact it is a diverse group of results, China’s Belt & Road Initiative is on the right side of the Ease of Doing Business Rankings. My own view is that as increasing numbers of projects start to come to fruition, this correlation should become more apparent. We will be revisiting these numbers again, twelve months from now.

Related Reading

• China’s Belt And Road Initiative: All Participating Countries By Income Group
• Corporate Law Standards & Protocols Along The Belt And Road Initiative: A Mix Of Civil, Common & Religious Legal Frameworks