Korea perplexed by World Bank's 'Doing Business' ranking

By Park Si-soo

A World Bank report that marked Korea as the fourth-best country to do business in out of 189 countries has left many businessmen and analysts perplexed.

Korea climbed one notch from a year earlier, beating Hong Kong, the United States and the United Kingdom, only trailing Singapore, New Zealand and Denmark.

Among the G20, Korea ranked first in the bank’s “Doing Business” report. And it came in third among OECD members.

It is good news for Korea, especially when the Park Geun-hye administration is seeking to attract foreign investment to revitalize the sagging economy.

The report is expected to help the government’s campaign as it will burnish the nation’s image in the minds of the world’s major investors who are searching for profitable investment targets.

Yet the news had many businessmen and analysts scratching their heads, questioning: Is Korea really that attractive?

They said the World Bank seems to have missed some critical blind spots lurking in the Korean economy.

“Written regulations are not everything companies in Korea are required to follow,” said Lee Byung-gi, a senior analyst at the Korea Economic Research Institute. “There are a lot of hidden restrictions interrupting their business activities. In other words, there are many business practices that are not legally justifiable. I think the World Bank evaluation seems to have missed this.”

An industry insider agreed, saying the World Bank evaluation relied too heavily on data that does not reflect real voices from players in the field.

“I think Korea’s economic system is competitive enough and never falls behind those of advanced countries,” he said. “The problem is that the system doesn’t work properly. The World Bank seems to have given Korea a good score after checking its system, not its operation in the real world.”

The World Bank said it evaluated overall business conditions by applying so-called case scenarios in 10 specific categories that can determine how well a country provides support to companies. It checked legal and administrative rules and practices, as well as feedback from 10,700 experts and businessmen from related fields designed to provide best-practice benchmarks that can be followed by developing countries.

Some critics raised questions about the evaluation’s credibility. They said Korea’s ranking varied depending on the evaluation.

The World Economic Forum, for example, recently evaluated Korea’s finance sector and ranked it 87th out of 140 countries, saying it earned low scores in most services, such as accessibility, ease and fees.

Although it was limited in the financial sector, they said Korea’s status in the two reports was so different.

Meanwhile, the Ministry of Strategy and Finance said the high ranking reflects steady gains in the standards achieved by the country in enhancing its general business environment.

“In areas not checked by the World Bank report, such as labor conditions and environment-related rules, the country will continue to strive to make improvements,” said Cha Young-hwan, head of the ministry’s growth strategy office.