Hungary slides down World Bank's Doing Business index

Hungary slides down World Bank's Doing Business index
By bne IntelliNews October 31, 2017

Hungary fell to 48th from 41st on the World Bank’s latest “Doing Business,” index which rates the business climate in 190 countries, published on October 31. Hungary's regional peers all slipped in the ranking. 

Hungary still lags behind its regional rivals with Poland topping the list in 25th position, the Czech Republic in 30th place, followed by Slovenia at 37th, Slovakia at 39th and Romania at 45th. Baltic states, as in previous years, finished in the top ranks. Estonia was seen as the most business-friendly country among new EU members placed 12th, its position unchanged from the previous year. 

The report provides quantitative indicators covering 11 areas of business such as how the regulatory environment makes life of businesses easier or more difficult in terms of starting a business, dealing with construction permits, getting credit and electricity and registering property. It also evaluates protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, and  analyses labour market regulation. 

Hungary slipped seven places in the overall ranking despite an improvement in the distance to frontier (DTF) measure - up from 72.13 points in the previous report to 72.39, which assesses the absolute level of regulatory performance observed on each of the indicators. 

The World Bank report notes that Hungary has made progress in terms of starting a business. Globally, Hungary stands at 79 in the ranking of 190 economies. The process was simplified by implementing online registration, with registration confirmed one hour after application. On the downside, the report highlights the increase in the paid-in minimum capital requirement, the registration fees for limited liability companies and the new tax registration added at the time of incorporation.

Hungary was ranked 90th in dealing with construction permits and 110th in the criteria measuring procedures, time and cost to get connected to the electrical grid. The country was ranked 93rd for paying taxes, 62nd in resolving insolvency and first in trading across borders. As for registering property and getting credit, Hungary was ranked 29th but only 108th for protecting minority investors.

Hungary has moved up to 13th place in the criteria measuring the cost to resolve commercial disputes and the quality of judicial processes, well above the OECD and CEE region average. 

The government has issued a defying statement after the report, saying the contradictory position of the country in various rankings reflects significant deficiencies in these reports, as they use different methodologies. In the recent WEF competitiveness report, Hungary moved up nine spots. Some measures approved by in the spring boosting competitiveness will only be reflected in next year's report, they added. 

The true benchmark for the country's competitiveness is shown by the dynamic growth of investments, the creation of new jobs and stable budget deficit and declining state debt, the Economy Ministry said. The latest survey by the German-Hungarian Chamber of Industry and Commerce showed that German companies are increasingly optimistic about their outlooks in Hungary, the most bullish since 2005, it added.

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