Wednesday, January 22, 2014

22/1/2014: Another 'Doing Business' Scorecard... Another Cloud of Fog...

Remember Forbes 'Best Places to Do Business' scorecard with no methodology but lots of claims to using data from other 'Best' rankings, some with overlapping data sources and some with clearly contradictory (to Forbes' results) assessments?

Reminder of that one is here: and on contradictory inputs, here:

Well, now not to be out-shined by 'The Capitalist Tool', Bloomberg decided to labour out its own list... glorious details of which are here:

Ireland ranks 20th, which is better than last year's 22nd.

And Portugal ranks 17th...

So, wait a second here. Apparently Portugal beats Ireland in:

  • Business Start-up Cost 
  • Labour/Material Cost
  • Transport Cost
Let's take the first one: Business Start-up Cost. 

Per Doing Business Rankings from the World Bank, 2014, Ireland ranks 12th in this category. This is based on 4 procedures required to start a business here, 10 days average time, 0.3% of income per capita as a cost, and zero paid-in minimum capital. Total cost = EUR80-130 depending on specifics of memorandum and articles filed.

For Portugal, World Bank rankings produce rank of 32nd in terms of Starting Business. This is based on 3 procedures required to start a business here, 2.5 days average time, 2.4% of income per capita as a cost, and zero paid-in minimum capital. Total cost = EUR300-360.

I am not sure things are that much 'easier' in Portugal than they are in Ireland, when it comes to registering business.

Now to labour costs (Eurostat): 
  • Nominal Unit Labour Costs (2005=100) in Ireland = 101.3 in 2012 against 103.2 in Portugal.
  • Real Unit Labour Costs (2005=100) in Ireland = 102.8 in 2013 against 93.5 in Portugal
  • ECBs Harmonised Competitiveness Indictors based on Unit Labour Costs: Q3 2013 latest: Ireland = 103.6 against Portugal = 101.1 (source:
So in nominal terms we rank better than Portugal, in real terms we rank lower, but ultimately, the gap is rather smallish at 2.5 points, with standard deviation of massive 22 points across all EEA countries.

But what about 'material cost'? Not sure what it all means, but the overall cost basis in the economy can be gauged by referencing the very same Harmonised Competitiveness Indicators cited above, except based on GDP deflator.
  • Ireland = 101.4 vs Portugal = 102.8 for Q3 2013, as before.
  • Eurostat supplies producer prices in industry, but Portugal does not report either quarterly or monthly data here, while Ireland does. So no Bloomberg-like comparative for us.
  • For domestic market, producer prices in industry are: Ireland = 111.60 in October 2013 against Portugal = 109.00. For non-domestic markets: Ireland = 100.30 against Portugal = not reported. Which suggests that the end comparative can be a small advantage to Ireland (swing across domestic and non-domestic prices is large for Ireland). Note: Spain has 104.73 and Spain is ranked by Bloomberg well ahead of Portugal.
  • Portugal does not report services producer prices data, unlike Ireland. 
So I am not too convinced that Ireland is that much poorer than Portugal on costs basis either.

The point is that all of these rankings are a silly way of rounding up publicity and are hardly indicative of the true realities on the ground. But I am looking forward to seeing Department of Finance and/or NTMA and/or other quango or Government publishing division putting Bloomberg rankings on their 'Ireland is the Best' list, as they are currently doing with the Forbes ranking.

A side-note: it would be helpful if Bloomberg actually published the data behind their rankings calculations. But at least they do provide scant methodological notes, unlike Forbes.
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