13/12/19: World Bank and WEF reports highlight relatively poor competitiveness rankings for Ireland

The latest World Bank "Doing Business" report rankings and the WEF's "Global Competitiveness Report" rankings show Ireland in a mid-tier 1 position (24th ranked in both tables) in terms of competitiveness - hardly an enviable position.

Ireland's position marks a deterioration from 23rd rank in WEF table, driven by relatively poor performance in ICT adoption (hmmm... Silicon Docks economy is ranked 49th in the World), macroeconomic stability (ranked 34th), product markets competitiveness (35th), and financial system (42nd).

Full WEF report here: http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf and full WB report here: https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf WB country profile for Ireland: https://www.doingbusiness.org/content/dam/doingBusiness/country/i/ireland/IRL.pdf.

A summary chart for Ireland from WB report:

Which, again shows poor performance in the area of credit supply, as well as trading across the border (correlated to the effective market size),  but also in access to electricity, registering property, dealing with construction permits, and enforcing contracts.

8/12/2013: Forbes Claims v Reality

I wrote about Forbes' ludicrous 'rankings' relating to Ireland last week (here: http://trueeconomics.blogspot.ie/2013/12/5122013-that-forbes-folly-of-global.html). But there is more to it than what I covered in the first post.

Forbes makes an assertion that Irish labour costs have declined over time. Have they? Really?

Here's CSO latest data (through Q2 2013) based on occupation and sector of employment. Not perfect, but tells us two things:

1. Have earnings declined?
2. If yes, have they declined in areas that are of relevance to investors?

Here are some charts:

Key occupational level of skills, traditionally associated with foreign investment in Ireland (we are not a cheap manufacturing location, after all, and make a claim that we compete on high skills) are Managers, Professionals and Associated Professionals. Chart above shows that for all sectors in the economy, average weekly wages in this occupational category rose between Q2 2010 and Q2 2013. The rate of increase ranges from 11.1% for Business & Services, to 10.9% for Industry, to 10.4% for all sectors. Public Sector posted weakest increase of 5.2%.

So, Forbes: no, there was no relevant decrease in wages that investors can be concerned with in deciding that Ireland is Numero Uno...

But, may be investors reading Forbes are into lower skilled occupational categories? Call centres and generic sales? So, take a look at the Clerical, Sales and Service Employees category next:

 
Things are a bit volatile here, but trends are all up, with exception for Public Sector. Industry - up 7.6%, Business & Services up 1.7%, all economy: up 0.4%, as Public Sector is down 9.9%.

So, Forbes: no, there was no relevant decrease in wages that investors can be concerned with in deciding that Ireland is Numero Uno...

However, of course Forbes investors might look toward Ireland as a manual workers paradise? While I have no idea why they would do so, let's just entertain this possibility:

Forbes' investors won't be looking at employing Production, Transport, Craft and Other Manual Workers in Ireland in Industry were they concerned with wages inflation. In this category, Irish weekly wages rose, on average, 1.5% in Q2 2013 compared to Q2 2010. Across Business and Services sector, wages for this category of least-skilled workers fell over the last 36 months, but by only 0.6%. Not exactly spectacular 'gains in competitiveness'. And across all economy - these were down just 0.7%. In Public Sector we registered a significant decrease of 6.6% in this employment category, but it is unlikely to be a point worthy of consideration for Forbes' investors...

So can anyone from Forbes, perhaps, explain, how on earth can these trends suggest massive competitiveness gains?

Lastly, there is the actual claim made by Forbes: "Nominal wages fell 17% between 2008 and 2011, which helped keep labor costs in check." In Q1-Q3 2013, average weekly wage in Ireland stood at EUR687.87 against same for Q1-Q3 2008 of EUR702.34. In other words, average wages have declined (based on Q1-Q3 averages) only 2.06%. In Q3 2013 average weekly earnings were 3.04% lower than in Q3 2008. Where do 17% come from, one wonders?..

5/12/2013: That Forbes Folly of Global Rankings...

So Forbes Magazine ranked Ireland 1st in the world as location for doing business (http://www.forbes.com/best-countries-for-business/list/#page:1_sort:0_direction:asc_search:). This is a bit of confidence builder for us as a nation looking out at the world, and a comical relief for everyone involved across the board.

Forbes does not release actual data, models and/or full methodologies, but their rationale can be glimpsed from here: http://www.forbes.com/sites/kurtbadenhausen/2013/12/04/ireland-heads-forbes-list-of-the-best-countries-for-business/

Basically, Forbes repackages other sources data and analysis to produce its own rankings.

What do these original (and other, occasionally more reputable) sources tell us about Ireland's position in global league tables?

World Bank Doing Business (2014) report ranks Ireland as follows (http://www.doingbusiness.org/Custom-Query/ireland and http://www.doingbusiness.org/data/exploreeconomies/~/media/giawb/doing%20business/documents/profiles/country/IRL.pdf?ver=2)

• Overall Rank = 15th, unchanged on 2013 report.
• Starting a Business: 12th in 2014, a deterioration on 2013 rank of 9th.
• Dealing with Construction Permits: 115th, a deterioration on 2013 rank of 108th.
• Getting Electricity: 100th, an improvement on 2013 rank of 101st.
• Registering Property: 57th, a deterioration on 2013 rank of 51st.
• Getting Credit (do not laugh): 13th, a deterioration on 2013 rank of 11th. Note: WB references here strength of legal rights, depth of credit information, public registry coverage and private bureau coverage, so these rankings are not reflective of whether the banks actually provide credit or whether the country has a banking system to speak of.
• Protecting Investors: 6th, same as in 2013. Private pensions are not factored in, so expropriation / bail-in of pensions funds is not reflected.
• Paying Taxes: 6th, unchanged on 2013. Note: these refer solely to corporate and labour taxes by employers, so our income tax 'competitiveness' is not reflected here, nor are rates and indirect taxes are factored in.
• Trading Across Borders: 20th, same as in 2013. These relate to business transactions only, and do not reflect on-line trading & shipping to consumers.
• Enforcing Contracts: ranked 62nd, same as in 2013.
• Resolving Insolvency: ranked 8th in 2014, improvement on rank of 9th in 2013. This references solely business insolvency, neglecting to reflect the connection between personal insolvency (dysfunctional and outdated, even post-reforms) and business insolvency, and failing to reflect archaic professional fitness restrictions in the case of insolvency.

Summary: World Bank DB 2014 is nowhere near identifying Ireland as top country in the world for doing business. By DB rankings we are not in top-10 worldwide.


World Economic Forum (WEF) publishes a series of rankings for countries in terms of various aspects of doing business. Top of the line is The Global Competitiveness Report (GCR) http://www.weforum.org/reports/global-competitiveness-report-2013-2014

WEF's GCR 2013-2014 rankings for Ireland are:

• Overall rank = 28th in 2013-2014, which reflects deterioration in our position from 27th in 2012-2013 report.
• We rank 33rd in Basic Requirements for competitiveness;
• The above include: Institutions (rank 16), Infrastructure (26), Macroeconomic Environment (134) and Health and Primary Education (6)
• We rank 24th in Efficiency Enhancers; 
• The above include: Higher Education & Training (rank 18), Goods Market efficiency (11), Labor Market Efficiency (16), Financial Market Development (85), Technological Readiness (13) and Market Size (57).
• We rank 21st in Innovation and Sophistication Factors
• The above include: Business sophistication (rank 18) and Innovation (20)

Full report is linked here: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf

Snapshot on Ireland from the above: "Ireland is ranked 28th this year with a relatively stable performance. The country continues to benefit from its excellent health and primary education system (6th) and strong higher education and training (18th), along with its well-functioning goods and labor markets, ranked 11th and 16th, respectively. These attributes have fostered a sophisticated and innovative business culture (ranked 18th for business sophistication and 20th for innovation), buttressed by excellent technological adoption in the country (13th). Yet the country’s macroeconomic environment continues to raise significant concern (134th), showing little improvement since last year. Of related and continuing concern is also Ireland’s financial market (85th), although this seems to be tentatively recovering since the trauma faced in recent years, and confidence is slowly being restored."

Summary: by WEF GCR we are not in top-10.


WEF also publishes The Global Enabling Trade Report (latest is for 2012). Here are Ireland's ranks in that assessment (see Table 1 http://www3.weforum.org/docs/GETR/2012/GlobalEnablingTrade_Report.pdf):

• Overall rank of 22 in 2012, down from 21 in 2010.
• Market Access sun-index rank: 67th in 2012;
• Border Administration sub-index rank 10th in 2012;
• Transport and communications infrastructure sub-index rank 29th;
• Business environment sub-index rank 25th

Summary: by WEF GETR we are not in top-10.


WEF publishes The Global Information Technology Report (GITR), here are ranks for 2013 for Ireland:

• Networked Readiness Index rank of 27th, deterioration from 25th place in 2012.
• Environment sub-index rank 15th in 2013, composed of Political and regulatory environment (rank 16th) and Business & Innovation environment (rank 24th).
• Readiness sub-index rank 16th in 2013, composed of Infrastructure and digital content (rank 16th), Affordability (rank 61st) and Skills (rank 12th).
• Usage sub-index rank 28th, composed of Individual Usage (rank 21st), Business Usage (rank 22nd) and Government Usage (rank 43rd).
• Impact sub-index rank 33rd, composed of Economic Impacts (rank 18th) and Social Impacts (rank 56th).

You can see the detailed results here: http://www3.weforum.org/docs/WEF_GITR_Report_2013.pdf

Summary: by WEF GITR we are not in top-10.


Forbes survey cites WSJ/Heritage Foundation Index of Economic Freedom as another source. This is linked here: http://www.heritage.org/index/country/ireland

WSJ/H 2013 Index of Economic Freedom ranks Ireland as 11th (not in top-10) and the index shows deterioration year/year in all sub-indices save one: Monetary Freedom (something that Ireland has no control over). There is a handy chart on the right on the linked page to show that Irish scores have declined in every year from 2009 through 2013.

But WSJ/H index is not the state-of-the-art index measuring economic freedom.

Instead, much stronger, methodologically and data-wise is the Economic Freedom of the World index published by Fraser Institute. Here's the link: http://www.freetheworld.com/release.html

Per EFN 2013,

• Ireland's overall rank is 15th in the world, which on a comparable basis represents the worst year since 1990. In 2012 report (2010 data) we were ranked 14th.

Summary: no, per Economic Freedom rankings we are not in top-10.


And so on…

I recently wrote in the Sunday Times that Ireland ranks 7th in the OECD in terms of start-ups actually being registered in the country. And that this data might be skewed by the fact that some start-ups registered here during the crisis period are really re-launches of businesses shut down due to pressures of the costs of 'upward-only' rent contracts. Other start-ups are various tax shells created by the MNCs and IFSC etc.

There are many reasons to treat all of the above rankings with a grain of salt. But the key point is: we are a good location for doing business and we are a good destination for FDI. But we are not top 1, nor even top 5. Which means that instead of glowing the bizarre lights of Forbes-like PR, we should be getting down to the painful and dirty business of real reforms.


PS: As Jamie Smyth of FT pointed out, the first time Forbes had Ireland as Number 1 country in its rankings was in 2007 - the same year when Oliver Wyman had Anglo Irish Bank as its World's Best Bank. I must also add, that whilst Forbes today says that Ireland is number 1 country because of lower labor costs and business costs, plus excellent monetary environment, back in 2007 we had sky-high labor costs and business costs, and rotten monetary and fiscal environments. So, apparently, Forbes' 'methodology' delivers identical outcomes on foot of diametrically contradictory data... hmm... 

8/11/2012: World Bank Doing Business 2013 report

Last night I posted in the data from the World Bank Doing Business 2013 report (link here).

More from World Bank Doing Business Report for 2013:

In the above, SOEs are 21 advanced Small Open Economies that Ireland competes with.

The folowing things jump out:

1. Ireland scores very positively overall in the sub group, ranking the country at 4th best to do business in this group of peer economies. We perform well in Getting Credit (see caveat below), Protecting Investors (another caveat below), Paying Taxes (third caveat below), Resolving (business) insolvency, Starting a Business and enforcing Contracts. We perform poorly-to-horrendously in categories relating to market regulation (Dealing with Construction Permits, Getting Electricity Permits, and Registering Property) and poorly in core exports-linked category of Trading Across Borders.
2. According to the World Bank metric, Ireland ranks as 2nd in the group of Small Open Economies in Getting Credit (business)... unchanged 2006-2013. Let me get this straight: the country experiences wholesale collapse of its banking sector, so spectacular it makes the Government insolvent virtually overnight and is unprecedented in historical terms according to researchers like Carmen Reinhart, our private sector credit contracts dramatically and remains unavailable to SMEs and consumers, Irish banks are now the biggest mess in modern economic history... and World Bank thinks our 'Getting Credit' situation has not changed since 2006 when Ireland was at a height of credit boom?
3. According to the World Bank rankings, Ireland is a much better platform for carry trade and other speculative investment than it is for exporting. This should really, really, really be of some concern to Irish Government, no?
4. After more than 15 years of incessant talk about reforming our energy sector, Irish electricity market remains in the dark ages. As our competitors improve their own domestic energy supply systems, we are sliding in ranking.
5. Despite a wholesale collapse in property markets activity, building and registering property in Ireland still requires navigating a medieval level of bureaucracy. One would have thought that the Government can sort this out. Do note that the improvement (in 2013 rankings) in Registering Property rank is due to 2012 tax incentives passed in the Budget 2012 and expiring in 2013.

8/11/2012: World Bank DB Report 2013: Ireland improves in headline ranking

World Bank Doing Business 2013 Indicators summary for Ireland:

Overall, Ireland's rank has improved in 2013 report compared to 2012 from 16th to 15th. The gains are as follows:

• Starting a Business rankings improved from 14th in 2012 to 10th in 2013 - a good result. The core driver, however, was not an absolute gain in scores in Ireland, but a decline in other countries rankings in this area. Thus, Number of Procedures required to start a business in Ireland remained at 4 - the same level as in every other reprot since 2004. Time (days) required to start business improved from 13 in 2007-2012 reports to 10 in 2013 report. Given there has been absolutely no new legislation or regulatory change, it is hard to explain how such a reduction was achieved. Cost as % of Income per Capita of starting business also declined from 0.4 (2011-2012 reports) to 0.3 in 2013 report. Paid-in Minimum Capital as % of income per capita has remained at zero (same as in every other report since 2004). Now, the problem is that Cost metric as used by the World Bank references GDP per capita and as such underestimates the actual cost of Starting a Business in Ireland by ca 25%. Raising the value to GNP benchmark implies a cost of 0.4%, not 0.3%, implying the ranking of 11, not 10, in 2013 table. This still represents a good achievement.
• Dealing with Construction Permits rankings for Ireland have deteriorated from 102 in the world in 2012 to 106 in the world in 2013. The deterioration occurred in Cost as % of Income Per Capita (rising from 616.9 in 2012 to 626.1 in 2013). The Number of Procedures and Time (days) metrics remained the same in 2011-2013 reports. Frankly, I have no idea what is meant by the cost of registering property at 626.1% of our income per capita.
• Getting Electricity rankings also deteriorated from 92nd in the world to 95th in the world, primarily due to Cost (as % of Income per Capita) rising from 91.1% to 94.2% between 2012 and 2013 reports. It takes on average 205 days for a new business to get an electricity connection in Ireland.
• Registering Property rankings have improved significantly in 2013 from a third-world level of 81st in 2012 report to a quasi-second world rankings of 53rd. The improvement is solely due to reduction in the cost of registering property as 5 of property value from 6.5% in 2012 to 2.5% in 2013 - a temporary measure reflecting property reliefs in Budget 2012.
• Getting Credit rankings deteriorated from 9th in 2012 report to 12th in 2013 report - the change that was driven solely by other countries improvements. Irish scores in all four categories combined in the rankings have not changed since 2005 report. Given realities of current credit environment in Ireland, the World Bank rankings in this area are basically irrelevant. The categories used in assessment are: Strength of Legal Rights, Depth of Credit Information, Public Registry Coverage and Private Bureau Coverage.
• Protecting Investors rankings for Ireland have remained at 6th in both 2012 and 2013 reports and there were no changes in the scores in any of the categories that comprise this sub-index.
• Paying Taxes rankings have slipped from 5th in 2012 to 6th in 2013 on foot of increased time required for completion (80 hours per year in 2013 report against 76 hours in all reports from 2006 through 2012). Effective profit tax entered by the World Bank for 2013 report stands at 11.9% for Ireland, while labour tax and contributions stood at 11.6% and other taxes at 2.9% combining to the total tax rate on profit of 26.4% (up on 2012 report at 26.3).
• Enforcing  Contracts rankings declined from 62nd in 2012 to 63rd in 2013 reports. On average it takes 650 days to enforce a contract in Ireland, same as in 2012, but up on 515 days registered in 2004-2011 reports.
• Trading Across Borders rankings for Ireland have deteriorated from less-than impressive 23rd in 2012 report to even more disturbing (for an open economy) 28th. The main source of deterioration was the rise of the exporting costs from USD1,109 per container to USD1,135. Given that worldwide costs of shipping came actually down in 2012, this suggests rising domestic costs.
• Resolving Insolvency rankings have improved in Ireland from 10th in 2012 report to 9th in 2013 report, primarily because the recovery rate has risen from 86.9 cents on the dollar to 87.5 cents on the dollar.

In summary, good to see an improvement in the headline ranking, but more detailed analysis shows that little is being done in terms of structural change to deliver sustained improvements in many categories.