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Hong Kong economy

World Bank ranks Hong Kong No 5 on list of easiest places in the world to do business

As the city slips one spot in this year’s annual Doing Business Report, the government is working on legislation to improve corporate insolvency

PUBLISHED : Wednesday, 01 November, 2017, 6:08pm
UPDATED : Wednesday, 01 November, 2017, 10:55pm

Hong Kong slipped one place to fifth in the World Bank’s ranking of the easiest places to do business on Wednesday, prompting a government spokesman to say officials were working to strengthen legislation to improve the score.

For the second straight year, New Zealand topped the international financial body’s Doing Business Report, followed by Singapore, Denmark and South Korea.

China remained unchanged from last year at 78th while Taiwan slipped four places from 11th to 15th.

The report, introduced in 2003, measures the ease of doing business in 190 economies using 11 indicators on business regulation, such as how easy it is to start a business, protect minority investors and secure credit.

Hong Kong ranked well in four indicators: starting a business (third), paying taxes (third), access to electricity (fourth) and construction permits (fifth).

But the city performed poorly in the areas of trading across borders, resolving insolvency and registering property – although the report did credit the city for improving “the quality of its land administration system by enhancing its reliability and establishing a complaints mechanism”.

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The city had an overall score of 83.44 out of a perfect 100. Hong Kong’s slip to the fifth place was mainly because of a lower score in “resolving insolvency” – which studies the time, cost and outcome of proceedings for businesses that cannot pay debts – for the corporate sector, a government spokesman said.

He pledged that the government would review the insolvency policy from time to time for more effective processing of winding-up cases and better protection of creditors.

“The government is also preparing a bill for the introduction of a statutory corporate rescue procedure which will help strengthen the relevant regime.”

The bill, which has been in the legislative process since 2014, is similar to the US Chapter 11 law that allows US companies breathing space to reorganise and find new investors so it can eventually repay its creditors and prevent a single creditor from winding it up – or selling its assets to repay debt.

Hong Kong currently has no bankruptcy protection law, so a single creditor can wind up a company.

The report once again reaffirmed the city’s position as one of the best business climates in the world, the spokesman said, but officials were working on more reforms.

“The government would strive to cut red tape, eliminate outdated or unnecessary regulations on business, enhance regulatory efficiency and reduce business compliance costs, with a view to further improving the ease of doing business in Hong Kong.”

The report said Hong Kong made starting a business more expensive by reintroducing a HK$2,000 (US$250) registration fee, but the spokesman insisted the cost of starting a business in Hong Kong had always been low and the business registration fee only went back to its normal level in April after being frozen for the past 20 years.

“The government will continue to work closely with the business sector and other stakeholders, with a view to reforming the existing regulatory regimes to ensure that regulation is appropriate.”