Thursday, July 26, 2007


Fortune Small Business has scanned throughout the globe to uncover the question which countries are the most and least friendly to small business and entrepreneurship. From a starting standpoint, entrepreneurship counts as the capital formation and productive behavior on behalf of which investment, value-added and productivity measures are launched. Also, making it easier to setup a business is what makes economies dynamic, together with pro-growth economic and tax policy.

Principally, numerous measures regarding the state of entrepreneurship in each country in the world have been conducted by the World Bank's annual report Doing Business where investors can trace information about the ease of doing business, the complexity of tax code, bankruptcy laws, environmental regulations, the size of flexibility of the labor market and the scope of freedom and barriers to pursue international trade with foreign partners. Empirically, openness is one of the fundamental engines of GDP growth, extracting from Ricardo's theory of comparative advantage. Also, openness shows how anti-globalist movements act irrationally when they launch anti-globalisation strikes against freedom of you and me to trade goods and services internationally.

The results of the entrepreneurial scanning across the globe are not surprising as countries on top the scale imposed friendlier tax codes and business legislation relative to other countries. Not surprisingly, seven out of top ten countries are Anglo-Saxon ones, adding Hong Kong, Denmark and Iceland fulfilling the top 10 scale. The most admirable features of doing and starting business in these countries compose the list of most notable criteria, making it ease to boost the endogenous growth dynamics through productive behavior. Among these features are sound regulation, dynamic financial markets (access to venture capital funds), openness to international trade and globalisation, sound bankruptcy legislation, high degree of competitive mentality, efficient protection and enforcement of property rights, relatively easy enforcement of commercial countracts, flexible and non-barriered labor market, staunch protection of intellectual property and an enviable protection of investors against the expropriation of their entrepreneurial resources. Also, the role of human capital and knowledge transfer (co-partnerships) should not be neglected.

Out of 53 countries, Slovenia achieved 40th place, further establishing, confirming and reputing its business environment as unattractive, unfriendly, and one of the most hostile in developed world. I personally hope that international community will now finally realize that we (myself included) live in a hostile socialist country which has not distanced itself away from the socialist system which heavily punishes productive behavior such as labor supply and entrepreneurship and instead imposes high taxes on wealth creation and work.

Here is a factsheet on Slovenian business environment following the data compelled by World Bank.

It takes nearly 207 days to fulfil all procedures and time, to pass cost adjustment to build a plant, warehouse or business building and also to obtain all the neccessary licenses, permits, notifications, utility connections and inspection approvals to finally start running a business. According to Heritage Foundation, Slovenia's labor market is one of the least competitive in Europe as well as one of the least free in the advanced globe.

To secure property rights and complete all the neccessary steps time and costs, it takes more than 300 days, compared to the overall sum of only 2 days in New Zealand. Focusing on Slovenia further, information sharing in getting credit is widespread and efficient privacy laws virtually don't even exist as the government can intervene the financial data of the banks at any time. I experienced this personally (!).

Getting sufficient information about credit is minimal, as the index value calculated on the methodological basis of the World Bank is very low (3 out of 6). This enables both information sharing, the unavailibility of applied credit information and the violation of privacy laws on your bank account. In providing credit information, private bureau covers zero percent of adults compared to OECD's average of 60 percent.

The protection of investors is one of the fundamental and essential laws in securing financial assets and enforcing transparency of transactions. However, Slovenia's undefined legal code still allows the speculations over transactions approval and thus heating the space to benefit from payment delays which, in effect, seriously hamper the ability of businesses to focus on their primary activities instead of being forced to raise compliance costs to provide for the legal services able to resolve payment delays in front of the court.

Meanwhile, compliance cost is measured in relative firms. The overall compliance cost could distort the marginal revenue and thus the supply market mechanisms through which companies generate organic growth and performance.

And finally, the difficulty of enforcing commercial contracts is astronomic in Slovenia as it takes exactly 1 350 days to enforce the entire contract. According to the analysis, the difficulty of enforcing commercial contracts is usually connected to payment disputes, tracking of the time, procedures and costs. In the United States, it takes 300 days to enforce a typical commercial contract, at 7,7 percent debt cost and 17 procedures compared to double-digit debt cost rate in Slovenia, exceeding 15 percent of the debt as a cost of contract enforcement.

Link: Report on Slovenia's Business Environment

One of the working papers of Institute of Macroeconomic Analysis and Development has nicely compelled the evidence how unfriendly the entrepreneurial environment for doing business in Slovenia really is. Nevertheless, payment disputes, legally weakly protected investors, anti-growth tax policy, red-tape, weak access to venture capital funds, and inflexible labor market are among the very reasons why Slovenia is not one of investment and business haven in the globe (link)

To conclude this day, I shall repeat once again: Slovenia is one of the most hostile, the most socialist and least friendly entrepreneurial countries in the world.


Most Entrepreneurial Countries in the World, Innovative,

Who in the world is entrepreneurial, CNN Money, May 23

1 comment:

Minhaj said...

Seen the list, and there is UK at number 5 that means it is at the top 10. I have been to UK and it is one of the worst places for any entrepreneur, it has become a socialist state, loves welfare, loves high taxes for business, it has bureaucratic laws in place. I definitely don't think it should be at number 5. This seems that the statistics does not give an entirely accurate picture. There are countries which have much better investment climate but they are not mentioned in the top 10.