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Keith Savard and Heather Wickramarachiwith Ross C. DeVol and Apanard (Penny) Prabha

GlobalOpportunity IndexAttracting ForeignInvestment

March 2013

Global Opportunity IndexAttracting Foreign Investment

Keith Savard and Heather Wickramarachiwith Ross C. DeVol and Apanard (Penny) Prabha

Acknowledgments

The Global Opportunity Index is a foundational element of the Milken Institute’s Access to Global Capital Initiative, which seeks to improve capital flows around the world. The Initiative has been developed in partnership with Liquidnet, an institutional trading network that facilitates trading in 41 markets globally. The authors would like to thank Liquidnet for its support and in particular Founder and CEO Seth Merrin for his vision, passion, and energy in bringing this concept to fruition, as well as Milken Institute Managing Director Mindy Silverstein for her leadership on this project. We would also like to thank Google Inc. for its support of the transparency indicators highlighted in the Index and its ongoing advocacy of global transparency and free flows of information. Additionally, thanks are due to our colleagues Glenn Yago and Joel Kurtzman for their insights and their work in measuring access to capital globally, which helped lay the foundation for the Opportunity Index. Our former colleague Tong Li contributed valuable ideas to this project and helped manage data collection and synthesis. Milken Institute Editor Edward Silver also deserves thanks for improving the manuscript.

About the Milken Institute

A nonprofit, nonpartisan economic think tank, the Milken Institute works to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital, and enhance health. We produce rigorous, independent economic research—and maximize its impact by convening global leaders from the worlds of business, finance, government, and philanthropy. By fostering collaboration between the public and private sectors, we transform great ideas into action.

©2013 Milken Institute This work is made available under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License, available at creativecommons.org/licenses/by-nc-nd/3.0/

Contents

Executive Summary ............................................................................................ 1

Introduction ......................................................................................................... 5

Index Overview: The Value of FDI ..................................................................... 7

Index Construction and Results ......................................................................... 9

Rankings for 2011 ...............................................................................................11

Index Composite Scores 2007-2011 ...................................................................17

Correlating the Global Opportunity Index to Foreign Investment ................ 21

Conclusion .......................................................................................................... 23

Appendixes ........................................................................................................ 25

About the Authors ............................................................................................. 40

ON THE WEB

Data for each nation and interactive tools can be found at www.globalopportunityindex.org

1

Executive Summary

The Global Opportunity Index answers a pressing need for information that is vital to a thriving global economy. What policies can governments pursue to attract foreign direct investment (FDI), expand their economies, and accelerate job creation? What do multinational companies, other investors, and development agencies need to know before making large-scale, long-term commitments of capital and other resources?

Natural endowments and hardworking people may not be enough, nor even a sophisticated banking system and industrial base, if the costs and conditions of doing business prompt investors to look elsewhere. In a world in which distances diminish every day, that’s easier to do than ever before. Likewise, countries that invest in their infrastructure, suppress corruption, and maintain sound regulations should be known and rewarded for those comparative advantages.In many cases, the way nations perform on these important standards contradicts expectations, including those of the companies themselves that seek to invest.

The Global Opportunity Index, part of the Milken Institute’s Access to Global Capital Initiative, is designed to assist companies and countries as they explore opportunities for foreign directinvestment. It fi lls gaps in information that frequently discourage mutually benefi cial transactionsthat spur development and job growth. Moreover, the index provides a baseline assessment for countries seeking to improve their business environments and attract foreign investors, the kind that commit “patient” capital to strategic projects rather than move it around as a fl eeting portfolio tactic.

Our index stands out among those that crowd the development landscape. While others take a more general approach, our assessment focuses on the key drivers of FDI. We consider not only economic variables that infl uence investment, but also business, legal, and regulatory policies that governments can modify to encourage capital fl ows. It is built on a solid foundation, with strong theoretical and empirically tested underpinnings based on numerous studies.

For 2011, the index ranked 98 countries on six continents for which data was available. Sixty-seven variables were assessed across five categories related to national economies and supporting infrastructure.

As can be seen in Figure ES1, there is a striking relationship between the Global Opportunity Indexand foreign direct investment.1 The higher the score, the greater the inflows. The index, represented by the predicted line in the chart, can explain more than 65 percent of the variationin FDI per capita across advanced, emerging, and developing nations. If you control for the mix of projects—oil and natural gas extraction, for instance, which attracts higher volumes of FDI relative to other sectors— you can explain more than three-fourths of the variation in investment among countries.

1. See Appendix 2 for regression results and signifi cance levels.

2

Global Opportunity Index: Attracting Foreign Investment

Rank Country Composite Score

1 Hong Kong SAR, China 8.54

2 Singapore 8.49

3 Denmark 7.88

4 Canada 7.84

5 United Kingdom 7.82

6 Netherlands 7.76

7 Finland 7.67

8 Switzerland 7.59

9 Australia 7.55

10 Ireland 7.46

Global Opportunity Index Top 10 (2011)

Tabl

e: E

S1

0

2

1

3

4

5

6

7

8

9

10

Luxe

mbo

urg

Hon

g K

ong

SAR

, Chi

naB

elgi

um

Aus

tria

Sing

apor

eIc

elan

dIr

elan

dSw

itze

rland

Nor

way

Cyp

rus

Net

herla

nds

Swed

enA

ustr

alia

Can

ada

Uni

ted

Kin

gdom

UA

EE

ston

iaIs

rael

Spai

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ark

Chi

leT

rini

dad-

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ago

Fran

ceB

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Cro

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Om

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d St

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Finl

and

Cze

ch R

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licPa

nam

aU

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tvia

Ger

man

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land

Cos

ta R

ica

Hun

gary

Jord

anLi

thua

nia

Nam

ibia

Bot

swan

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aly

Serb

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tius

Peru

Jam

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Bra

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Arm

enia

Dom

inic

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exic

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bia

Gre

ece

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nia

and

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Rep

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El S

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Nic

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pan

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Rep

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enez

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Indo

nesi

aM

ozam

biqu

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ayE

cuad

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dia

Sene

gal

Sri L

anka

Uga

nda

Tan

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ves

Ben

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d’lv

oire

Paki

stan

Phili

ppin

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Mal

awi

Bur

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log

(FD

I p

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apit

a)

Actual

Predicted

Figu

re :

ES1

Actual vs. predicted FDI per capita

3

Executive Summary

Country Percent Increase

Mozambique 20.8

Botswana 15.6

Ukraine 15.4

Sri Lanka 14.9

Dominican Republic 11.0

Turkey 7.2

Uganda 6.8

Colombia 6.4

Guatemala 5.4

China 4.7

Top 10 most improved 2007-2011

Tabl

e: E

S2

Tabl

e: E

S1

0

2

1

3

4

5

6

7

8

9

10

Luxe

mbo

urg

Hon

g K

ong

SAR

, Chi

naB

elgi

um

Aus

tria

Sing

apor

eIc

elan

dIr

elan

dSw

itze

rland

Nor

way

Cyp

rus

Net

herla

nds

Swed

enA

ustr

alia

Can

ada

Uni

ted

Kin

gdom

UA

EE

ston

iaIs

rael

Spai

nLe

bano

nD

enm

ark

Chi

leT

rini

dad-

Tob

ago

Fran

ceB

ulga

ria

Cro

atia

Om

anU

nite

d St

ates

Finl

and

Cze

ch R

epub

licPa

nam

aU

rugu

ayLa

tvia

Ger

man

yPo

rtug

alSl

oven

iaB

eliz

eSl

ovak

iaPo

land

Cos

ta R

ica

Hun

gary

Jord

anLi

thua

nia

Nam

ibia

Bot

swan

aIt

aly

Serb

iaM

auri

tius

Peru

Jam

aica

Bra

zil

Arm

enia

Dom

inic

an R

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licT

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bia

Gre

ece

Bos

nia

and

Her

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Arg

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orea

Rep

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Afr

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El S

alva

dor

Mol

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Nic

arag

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pan

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rab

Rep

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epub

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mal

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enez

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Indo

nesi

aM

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biqu

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ayE

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gal

Sri L

anka

Uga

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Tan

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Ben

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stan

Phili

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Mal

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Bur

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log

(FD

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Actual

Predicted

4


The movement in scores is consistent with the general change in FDI fl ows of recent years. Foreign direct investment now accounts for a whopping 11 percent of global GDP and more than 80 million jobs, according to the United Nations Conference on Trade and Development (UNCTAD). There is little doubt that countries, especially those not endowed with large markets or natural resources, will seek guidance in adopting policies to attract this investment and enhance their positions in the world economy. The Global Opportunity Index addresses this vital need. At the same time, it provides companies with clarity about the investment climate in host countries based on a systematic, data-driven scale, enabling strategic transactions that will benefi t all parties for years to come.

• Hong Kong, Singapore, and Denmark achieved the highest scores.

• Several African countries—most notably Mozambique and Botswana—showed impressive percentage increases since 2007.

• Latin American nations the Dominican Republic, Colombia, and Guatemala were among the 10 most improved since 2007.

• This contrasts with the marked deterioration in the scores of Japan and the United States.

• China ranked highest among the BRIC nations, recording the only meaningful increase between 2007 and 2011.

• Ireland remained in the top 10, but with the exception of Italy, all other eurozone periphery nations declined in that period; Greece plunged below China and many other emerging nations.

• Each one-unit increase in the Global Opportunity Index is associated with a 46-percent increase in FDI per capita.

Some of the takeaways were predictable, some less so

Each one-unit increase in the Global Opportunity Index is associated with a 46-percent increase in FDI per is associated with a 46-percent increase in FDI per is associated with a 46-percent increase in FDI per capita.is associated with a 46-percent increase in FDI per is associated with a 46-percent increase in FDI per capita.capita.

Colombia, and Guatemala were among the 10 most other emerging nations.

•

This contrasts with the marked deterioration in the

other emerging nations.

Each one-unit increase in the Global Opportunity Index Each one-unit increase in the Global Opportunity Index is associated with a 46-percent increase in FDI per capita.is associated with a 46-percent increase in FDI per

increases since 2007. and Botswana—showed impressive percentage increases since 2007.

Latin American nations the Dominican Republic,

increases since 2007. and Botswana—showed impressive percentage

Latin American nations the Dominican Republic,

This contrasts with the marked deterioration in the scores of Japan and the United States.

Latin American nations the Dominican Republic, Colombia, and Guatemala were among the 10 most Colombia, and Guatemala were among the 10 most Latin American nations the Dominican Republic, Latin American nations the Dominican Republic,

increases since 2007.

•

scores of Japan and the United States.

increases since 2007.

Colombia, and Guatemala were among the 10 most Colombia, and Guatemala were among the 10 most Colombia, and Guatemala were among the 10 most Colombia, and Guatemala were among the 10 most • Latin American nations the Dominican Republic,

Colombia, and Guatemala were among the 10 most improved since 2007.

• This contrasts with the marked deterioration in the scores of Japan and the United States. This contrasts with the marked deterioration in the

in that period; Greece plunged below China and many in that period; Greece plunged below China and many of Italy, all other eurozone periphery nations declined of Italy, all other eurozone periphery nations declined in that period; Greece plunged below China and many other emerging nations.

Each one-unit increase in the Global Opportunity Index is associated with a 46-percent increase in FDI per capita.

of Italy, all other eurozone periphery nations declined in that period; Greece plunged below China and many of Italy, all other eurozone periphery nations declined of Italy, all other eurozone periphery nations declined in that period; Greece plunged below China and many

and Botswana—showed impressive percentage

Latin American nations the Dominican Republic, Colombia, and Guatemala were among the 10 most

in that period; Greece plunged below China and many other emerging nations.

of Italy, all other eurozone periphery nations declined

This contrasts with the marked deterioration in the This contrasts with the marked deterioration in the

5

Introduction

Business is more globalized than ever, yet billions of people cannot take full advantage of global commerce and fi nance—in part because they lack suffi ciently developed markets or access to the long-term commitments of capital needed to build companies, create jobs, and grow theireconomies. Ineff ective or cumbersome government policies and regulatory regimes compound the problem, further limiting connections with the global economy and preventing countries from benefi ting from robust infl ows of capital.

Meanwhile, amid an ongoing economic malaise and in some cases domestic austerity, businesses in developed markets are avidly pursuing opportunity in foreign markets that have not reached their potential. Yet poor governance and regulatory practices, along with a lack of information on which countries are more open to foreign investment, inhibit the fl ow of capital.

It is the opportunity presented by this confluence of factors that led to the creation of theMilken Institute Access to Global Capital Initiative and the Global Opportunity Index. This novelproject, founded in partnership with the global institutional trading network Liquidnet Holdings,is predicated on working closely with leading multinational fi rms (the Initiative’s “Corporate Partners”) and domestic authorities to implement best practices in governance and regulation, with the goal of opening markets and enhancing access to capital. Flowing from this project, the index defi nes and quantifi es metrics that measure economic and fi nancial openness and arelinked with policy options available to governments. The Initiative strives ultimately to promote an effi cient global marketplace for foreign investment, with more information and less friction.

ON THE WEB


7

Index Overview: The Value of FDI

The Global Opportunity Index is designed to assist companies and countries in making informeddecisions about foreign direct investment. We believe it is unique for not only examining core economic variables, but also highlighting policies that have been empirically shown to support and often propel foreign investment. It provides a baseline for countries seeking to improve theirbusiness climates in the interests of stronger growth and higher living standards.

In destination countries, adopting the standards and working to meet them would make direct investments by one or more of the Initiative’s corporate partners more likely. Lead investments could also draw the attention of other companies and stimulate fresh capital fl ows. Local fi rms may prosper by being connected to the global network, thus fi nding new customers and gainingaccess to more resources for growth.

For prospective investors, the index integrates a wide array of data from numerous sources,constructing a more eff ective tool for understanding the relative appeal of various geographies. Our associated website, www.globalopportunityindex.org, provides a dynamic environment to better appreciate the relative advantages of countries in specifi c categories.

There has long been a general belief that FDI off ers a steadier source of external fi nance than equitiesand bonds, and the recent fi nancial crisis has only reinforced this view. Not only does FDI enhance a country’s overall investment picture, it can contribute spillover gains through technology transferand the import of managerial expertise from more advanced economies. The box below highlightsthe value of FDI and access to global capital.

National benefi ts of FDI and access to global capital

ECONOMY

• Accelerated growth and development through increased effi ciency and investment

• Job creation and poverty reduction

• Productivity spillover

• Trade effect through promoting access to foreign markets

INNOVATION & TECHNOLOGY

• Technology, best-practice, and R&D transfer effects, includinginventory and supply-chain management and quality-control standardization

• Demonstration effects as new products and marketing techniquesare introduced

• Management know-how advances as ties between local and multinational fi rms expand

SOCIETY

• Human capital increases in value as foreign fi rms create jobs, train workers, and launch collaborative projects

8


From the academic perspective, a number of significant studies have demonstrated the benefits of FDI and examined the influences that increase its flow.2 For example, Busse and Groizard (2008) pointed out that several studies “find that countries with better financial systems and financial market regulations can exploit FDI more efficiently and achieve a higher growth rate.” In addition to the importance of financial systems, Durban (2004) found that countries with better developed institutional frameworks (including business regulations and property rights) can harness FDI flows toward real output expansion. Dubba-Norris et al. (2010) found that for low-income countries, the benefits of FDI were accentuated by better infrastructure and institutional quality—represented by the Control of Corruption index from the World Bank governance indicators.3 Thus, policy choices can have direct impacts on foreign investment and economic growth.

2. See Figures 4 and 5 in the Milken Institute white paper “Opportunities to Improve Growth and Development in Countries Worldwide” for regression results highlighting the relationship between foreign investment openness and economic growth, and institutional variables and economic development.

3. A more extensive survey of selected studies can be found in Appendix 1 of the Milken Institute white paper “Opportunities to Improve Growth and Development in Countries Worldwide.”

9

The Global Opportunity Index benchmarks and tracks countries’ progress on 67 variables aggregated in the following categories: Economic Fundamentals (EF), Regulatory Barriers (RB), Ease of Doing Business (DB), Regulatory Quality (RQ), and Rule of Law (RL) (see Appendix 1). Each measures an aspect of economic and institutional factors’ power to attract foreign investment. The composite index value assigned is the average of the five categories. Each category value is normalized and ranges from 10, indicating the most favorable conditions for investment, to 0, signaling the least favorable.4

The 2011 index covers 98 countries, which are ranked in Table 1. For reference, Appendix 3 has rankings for 2007 through 2010. The index methodology will be reviewed each year to reflect changes in data sources.

Economic Fundamentals (EF)

Economic Fundamentals measures the extent to which a country’s macroeconomic environment is conducive to foreign direct investment. A value of 10 indicates very strong economic fundamentals, while a value of 0 indicates relatively weak conditions. The subcomponents are:

• Macro-performance

• Trade and FDI openness

• Quality and structure of labor force

• Financial infrastructure

• Physical infrastructure

Regulatory Barriers (RB)

Regulatory Barriers reflects the extent to which a country’s laws and regulations prevent the free flow of trade and investment. A value of 10 indicates minimal regulatory barriers to trade and investment flows, while a value of 0 indicates many hindrances. The subcomponents are:

• Restrictions on free flow of capital

• Restrictions on international trade

• Restrictions on ownership of banks

4. Although equal weights are used in the construction of the composite index, one can experiment with category weights at the Global Opportunity Index website.

Index Construction and Results

10


Ease of Doing Business (DB)

Ease of Doing Business measures explicit and implicit costs associated with business operations. A value of 10 indicates very low costs of doing business in a country, while a value of 0 indicates very high costs. The subcomponents are:

• Costs of starting a business

• Costs of enforcing contracts

• Costs of resolving insolvency

• Accounting and disclosure requirements

• Costs of terrorism and crime

• Tax burden

Regulatory Quality (RQ)

Regulatory Quality assesses the effectiveness of policymaking and enforcement in a country. A value of 10 indicates very high quality of policymaking and efficient enforcement of policies and regulations, while a value of 0 indicates the opposite. The subcomponents are:

• Burden of regulation

• Quality of regulation

• Quality of policymaking

• Corruption

Rule of Law (RL)

Rule of Law reflects the extent to which a country’s legal system protects investors and property rights to support and enhance business investment. A value of 10 indicates commitment to the rule of law, while a value of 0 indicates the opposite. The subcomponents are:

• Legal infrastructure

• Protection of property rights

• Protection of investor rights

11

Rankings for 2011

Table 1 shows the 2011 Global Opportunity Index composite scores and rankings. Hong Kong and Singapore lead the index, with Canada, Switzerland, Australia, and five members of the European Union rounding out the top 10. Hong Kong, with the highest score in the overall index, also leads two of the category indexes, Ease of Doing Business and Regulatory Quality,5 while placing in the top five of the rest. For example, in DB, no nation scored higher than Hong Kong on 11 of the 22 variables, including such key areas as ease of starting a business, enforcing contracts, resolving insolvency, time to prepare taxes, and top marginal corporate and personal income tax rate. This is not surprising given the overall quality of institutions and infrastructure there, which is reflected in minimal regulatory barriers, an open and efficient business environment, and transparent governance.

Singapore fared similarly, leading the Rule of Law sub-index and placing in the top five of the remaining four sub-indexes. Singapore is first or tied for first in 10 of the 11 variables in RL, such as efficiency in settling legal disputes, property rights, ease of shareholder suits and the strength of investor protection. Indeed, protection of investors in terms of property and shareholder rights, together with quality physical and financial infrastructure, helps explain why Singapore and Hong Kong are magnets for foreign investment. They provide valuable examples for developing and emerging countries, especially those contemplating further liberalization such as China and India.

The bottom ranks, where Burundi, Venezuela, and Cote d’Ivoire occupy the last three positions, represent countries with severe institutional deficiencies. Burundi ranked last in Economic Fundamentals and Ease of Doing Business, while residing in the bottom 10 of the remaining components. This is not surprising given the strains of doing business and weak legal structure there.

Venezuela declined from its position in 2007, falling more than 0.5 points and 14.1 percent. The South American petrostate scores poorly in a number of areas but was last in Rule of Law, recording a score of 1.2. Venezuela ranked at the bottom in nine of the 12 variables under that category. During the past several years, nationalization of foreign firms’ assets has made it a precarious location for FDI.

It is important to note that these rankings are subject to change. Many of the indicators that make up the index (for example, tax burden, accounting standards, and property rights protection) can be modified within the country by government policies.

5. See Appendix 4 for 2011 component rankings.

12


Rank CountryOI

Score1 Mean: 5.73 10


2 Singapore 8.49

3 Denmark 7.88

4 Canada 7.84


6 Netherlands 7.76

7 Finland 7.67

8 Switzerland 7.59

9 Australia 7.55

10 Ireland 7.46

11 Estonia 7.37

11 Luxembourg 7.37

13 Sweden 7.34

14 Belgium 7.33

15 Iceland 7.31

16 Norway 7.24

17 Austria 7.18

18 Chile 7.11

19 Cyprus 6.99

20 Malaysia 6.96

21 France 6.94

22 United States 6.91

23 Japan 6.79

24 Latvia 6.72

25 Mauritius 6.71

26 Lithuania 6.67

27 Germany 6.66

27 Slovenia 6.66

29 Botswana 6.60

30 Oman 6.42

31 Portugal 6.41

32 Hungary 6.4

33 Israel 6.38

34 Kuwait 6.36

35 Korea, Rep. 6.29

36 Poland 6.26

37 Bulgaria 6.15

37 South Africa 6.15

39 United Arab Emirates 6.14

40 Croatia 6.06

41 Spain 6.04

42 Czech Republic 5.93

43 Uruguay 5.87

44 Slovak Republic 5.86

45 Romania 5.82

46 Peru 5.79

47 Panama 5.74

48 Italy 5.73

49 Namibia 5.66

Rank CountryOI


50 Turkey 5.65

51 Jordan 5.60

51 Tunisia 5.60

53 China 5.55

54 Ghana 5.52

55 Sri Lanka 5.47

56 Costa Rica 5.40

57 Mexico 5.39

58 Armenia 5.38

59 Trinidad and Tobago 5.27

60 Greece 5.22

61 Moldova 5.19

62 Colombia 5.14

63 Jamaica 5.03

63 Morocco 5.03

65 Brazil 5.01

66 Indonesia 4.97

67 Ukraine 4.94

68 Nigeria 4.90

69 Uganda 4.88

70 Malawi 4.85

71 Egypt, Arab Rep. 4.77

72 Russian Federation 4.76

73 Dominican Republic 4.74

74 India 4.71

75 Guatemala 4.70

76 Kyrgyz Republic 4.62

77 Argentina 4.57

78 Serbia 4.56

79 Nicaragua 4.55

80 El Salvador 4.48

81 Mozambique 4.47

81 Tanzania 4.47

83 Gambia, The 4.44

84 Paraguay 4.41

85 Kenya 4.40

86 Pakistan 4.35

87 Bosnia and Herzegovina 4.33

88 Philippines 4.30

89 Ecuador 4.17

90 Belize 4.15

91 Lebanon 4.08

92 Senegal 4.02

93 Benin 3.87

94 Lesotho 3.85

95 Mali 3.71

96 Côte d’Ivoire 3.37

97 Venezuela 3.24

98 Burundi 2.96

Global Opportunity Index 2011Ta

ble:

1

13

Rankings for 2011

Table 2 breaks out average component scores for industrialized and developing countries based on geographic region. Not surprisingly, industrialized countries led the rest in all five component scores. Among developing countries, the transitional economies of Europe led in economic and regulatory environment, while Middle Eastern countries led the way in terms of Ease of Doing Business and Regulatory Quality. Emerging Asia scored in the middle of the overall rankings but led developing countries in Rule of Law. Considering the strength of protections and firm approach to law and order in Malaysia, the leading Asian country in the RL sub-index, that was a predictable result.

On balance, sound regulatory environments and low explicit and implicit business costs were the components that most influenced Global Opportunity Index composite scores, whereas weak legal systems kept developing countries’ results down. This is especially apparent when considering property rights and shareholder protections in Latin America, where four of the bottom five countries in the sub-index are located. Venezuela had the lowest score on the Rule of Law component.6

Average of components for 2011 Global Opportunity Index

2011

OI

Eco

nom

ic

Fu

nd

amen

tals

(EF

)

Reg

ula

tory

Bar

rier

s(R

B)

Eas

e of

Doi

ng

B

usi

nes

s

(DB

)

Reg

ula

tory

Q

ual

ity

(R

Q)

Ru

le o

f L

aw

(RL

)

IndustrializedCountries

7.14 6.3 8.19 7.39 6.49 7.33

Europe 5.82 5.56 7.73 6.65 4.6 4.55

Middle East 5.56 4.54 6.07 6.67 5.35 5.18

Asia 5.12 4.38 6 5.09 4.88 5.25

Americas and the Caribbean

4.99 4.17 7.19 5.34 4.26 3.98

Africa 4.73 2.82 6.53 4.97 4.85 4.69

Tabl

e:

2

Table 3 shows the average score of each component of the index for all countries and for subgroups based on their ranking position. Of the five components, Regulatory Barriers had the highest average score (7.26), while Economic Fundamentals had the lowest (4.77), primarily due to limited financial infrastructure in the bottom half of ranked countries. The next categories in ascending order were Regulatory Quality, Rule of Law, and Ease of Doing Business. The widest gap between the top and bottom 20 was found in Rule of Law, highlighting the divergence in legal infrastructure and investor protection between the two groups.

6. Refer to Appendix 4 for rankings and scores by component.

14


Component averages of 2011 Global Opportunity Index by ranking groups

2011

OI

Eco

nom

ic

Fu

nd

amen

tals

(EF

)

Reg

ula

tory

Bar

rier

s(R

B)

Eas

e of

Doi

ng

B

usi

nes

s

(DB

)

Reg

ula

tory

Q

ual

ity

(R

Q)

Ru

le o

f L

aw

(RL

)

Top 20 7.54 6.39 8.31 7.69 7.43 7.88

Top 50% 6.79 5.89 7.98 7.19 6.25 6.66

All 5.73 4.77 7.26 6.13 5.17 5.33

Bottom 50% 4.67 3.66 6.54 5.07 4.10 3.99

Bottom 20 4.08 2.87 6.22 4.54 3.57 3.21

Tabl

e:

3

A comparison of how the BRICs (Brazil, Russia, India, and China) are positioned in the index illustrates its use as a diagnostic tool for investment purposes. China scored highest among the BRIC nations and was 53rd overall (see Table 4). China’s strength was in Regulatory Quality, with a score of 6.11. China was among the leaders in public debt as a percentage of GDP and ranked high in transparency of government policymaking and public trust of politicians. China’s weakest performance was in RL. It scored below 5, behind India’s 6.2.

0

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2004 2005 2006 2007 2008 2009 2010 2011

FD

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Brazil

Russia

India

China

BRIC FDI per capita 2004-2011

Figu

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1

15

Rankings for 2011

China has demonstrated its desire to be open to trade and investment. It has performed better in attracting foreign greenfield investments, but brownfield investments and portfolio capital flows remain problematic. However, China still maintains extensive capital controls on foreign investment.7 It aspires to achieve convertibility of the renminbi over the long term to quicken foreign investment in property, equities, and bonds. Full capital account convertibility and improvements in the rule of law would enhance China’s attractiveness. Figure 1 demonstrates that while China received the most FDI in 2011, with $120 billion, per-capita FDI was modest compared with Russia and Brazil.

Brazil was 0.54 points below China among the BRICs, but excelled in Regulatory Barriers with a reading of 7.2, the highest component score among the group. Brazil faltered in Regulatory Quality, with a score of 3.8, but it attracted more than one-third of Latin America’s FDI in 2011. For example, Nissan Motor Co. announced that it will build a $1.5-billion factory with the capacity to produce 220,000 vehicles per year, creating 2,000 jobs.8

Russia was third among the BRIC countries, with a score of 4.8. It performed best in Regulatory Barriers, earning a 6.8, though its dismal 2.7 score in Rule of Law may be cause for trepidation. If it hopes to lure high volumes of international capital, Russia will have to upgrade its legal infrastructure, property rights, and investor protections as it complies with World Trade Organization conventions.

India came in slightly behind Russia at 4.7 overall. India benefits from its legacy as a former colony of the United Kingdom, having the highest score on Rule of Law among the BRICs. However, it scores low in the other areas, with a particular vulnerability in Ease of Doing Business. Recent moves to liberalize foreign ownership rules in retail and other sectors should help.

Component averages for BRIC countries

2011

OI

Eco

nom

ic

Fu

nd

amen

tals

(EF

)

Reg

ula

tory

Bar

rier

s(R

B)

Eas

e of

Doi

ng

B

usi

nes

s

(DB

)

Reg

ula

tory

Q

ual

ity

(R

Q)

Ru

le o

f L

aw

(RL

)

China 5.55 5.90 5.40 5.51 6.11 4.82

Brazil 5.01 5.05 7.20 4.64 3.78 4.36

Russia 4.76 5.20 6.80 5.64 3.44 2.73

India 4.71 4.00 4.40 3.96 5.00 6.18

Tabl

e:

4

Given the recent sovereign debt and banking crises among the GIIPS countries (Greece, Italy, Ireland, Portugal and Spain) in the eurozone periphery, a comparison of their investment fundamentals could be useful for evaluating relative risk levels. Despite its recent property market and banking crisis, Ireland maintains strong incentives for cross-border investment. Overall, Ireland is 10th in the Global Opportunity Index with a 7.5 score and first among GIIPS nations (see Table 5). Ireland’s strengths are in Regulatory Barriers, Ease of Doing Business, and Rule of Law. Relative to 2007, Ireland’s scores in Regulatory Quality and Economic Fundamentals fell the most.

7. Tahsin Saadi Sedik and Tao Sun, “Effects of Capital Flow Liberalization—What Is the Evidence From Recent Experiences of Emerging Market Economies?” IMF Working Paper, WP/12/275, November, 2012, pp 12-13.

8. The fDi Report 2012, fDiIntelligence, www.fDiIntelligence.com, accessed December 19, 2012.

16


Portugal was second among the GIIPS, with a score of 6.4, representing a 0.4-point decline since 2007. It maintains a fairly high tally in Regulatory Quality as well as Regulatory Barriers. Neighboring Spain was third in the group at 6.0, for a loss of 0.7 points since 2007. Its biggest decline was in Regulatory Quality.

Italy was the only GIIPS country to repeat its 2007 score of 5.7. It had the highest Economic Fundamentals reading but was harmed by a weak 3.2 on Regulatory Quality. Greece’s 2011 score plunged below China’s and those of many other emerging countries. From 2007, it fell 0.7 points and saw a particular drop in RQ.

Component averages for GIIPS countries

2011

OI

Eco

nom

ic

Fu

nd

amen

tals

(EF

)

Reg

ula

tory

Bar

rier

s(R

B)

Eas

e of

Doi

ng

B

usi

nes

s

(DB

)

Reg

ula

tory

Q

ual

ity

(R

Q)

Ru

le o

f L

aw

(RL

)

Ireland 7.46 5.90 9.00 8.19 5.56 8.64

Portugal 6.41 6.20 8.60 7.69 4.22 5.36

Spain 6.04 5.75 8.40 6.46 4.22 5.36

Italy 5.73 6.35 8.80 5.82 3.22 4.45

Greece 5.22 5.35 8.40 6.01 2.78 3.55

Tabl

e:

5

17

Index Composite Scores 2007-2011

Although 2011 is the Global Opportunity Index’s inaugural year, we have compiled composite scores and rankings for the preceding four years (2007-2010) for comparison.9 Table 6 shows the change in composite scores during all five years. Readings fluctuated only mildly among the top 10 countries, with the exception of Ireland. The former Celtic Tiger slipped almost 11 percent, suffering a decline in Regulatory Quality, including rising public debt and decreases in securities and credit market regulation. Composite scores for the U.S. and Japan contracted as well over the five years (-8.11 percent and -9.35 percent, respectively), primarily due to expanding public debt and tightening regulatory barriers on financial firms.

It wasn’t all bad news, however. African nations, including Botswana (15.59 percent) and Mozambique (20.81 percent), boasted the largest increases in composite scores. Botswana advanced across the board, but particularly in Economic Fundamentals, Regulatory Barriers, and Rule of Law. Improvement is still needed in the macroeconomic environment, which, at 3.25, is in the bottom half of the sub-index. Nevertheless, Botswana highlights the crucial links among governance, foreign investment, and growth. As one of the continent’s leaders in per-capita GDP and inflows of FDI (see Figure 2), its economic success is largely the result of its ability to harness natural resource revenue through good governance practices and policy. The country has been largely free of kleptocracy and civil conflict, with a transparent, law-abiding government that has implemented a hyper-prudent fiscal policy. Investments in human and physical capital and extensive infrastructure upgrades have also raised Botswana’s productivity.

Mozambique similarly demonstrated progress across all components, particularly in Regulatory Quality and Regulatory Barriers, but its low composite score signals the need for improvement in all institutional factors. The former Portuguese colony has averaged real GDP growth of 7.6 percent since 2004. Even at the peak of the global financial and economic crisis, in 2009, it recorded 6.3 percent growth. It has a stable external balance and is a net creditor. Italy’s Eni SpA and Sasol Petroleum International of South Africa are investing aggressively in Mozambique’s new FDI projects in natural gas and liquids.10

9. Refer to Appendix 3 for the ranking of the 2007-2010 results.

10. World Investment Report 2012, UNCTAD, July 2012, p 65.

18


2011 2007Point

Change%

Change

1 Hong Kong SAR, China 8.54 8.32 0.22 2.64

2 Singapore 8.49 8.57 -0.08 -0.93

3 Denmark 7.88 8.07 -0.19 -2.35

4 Canada 7.84 7.73 0.11 1.42

5 United Kingdom 7.82 8.11 -0.29 -3.57

6 Netherlands 7.76 7.98 -0.22 -2.75

7 Finland 7.67 7.90 -0.23 -2.91

8 Switzerland 7.59 7.82 -0.23 -2.94

9 Australia 7.55 7.71 -0.16 -2.07

10 Ireland 7.46 8.34 -0.88 -10.55

11 Estonia 7.37 7.37 0 0

11 Luxembourg 7.37 7.50 -0.13 -1.73

13 Sweden 7.34 7.70 -0.36 -4.67

14 Belgium 7.33 7.53 -0.20 -2.65

15 Iceland 7.31 8.03 -0.72 -8.96

16 Norway 7.24 7.46 -0.22 -2.94

17 Austria 7.18 7.56 -0.38 -5.02

18 Chile 7.11 7.10 0.01 0.14

19 Cyprus 6.99 N/A N/A N/A

20 Malaysia 6.96 6.99 -0.03 -0.42

21 France 6.94 7.14 -0.20 -2.80

22 United States 6.91 7.52 -0.61 -8.11

23 Japan 6.79 7.49 -0.70 -9.34

24 Latvia 6.72 7.09 -0.37 -5.21

25 Mauritius 6.71 6.49 0.22 3.39

26 Lithuania 6.67 6.86 -0.19 -2.77

27 Germany 6.66 7.48 -0.82 -10.96

27 Slovenia 6.66 7.09 -0.43 -6.06

29 Botswana 6.60 5.71 0.89 15.58

30 Oman 6.42 6.34 0.08 1.26

31 Portugal 6.41 6.83 -0.42 -6.14

32 Hungary 6.40 6.54 -0.14 -2.14

33 Israel 6.38 6.92 -0.54 -7.80

34 Kuwait 6.36 6.57 -0.21 -3.19

35 Korea, Rep. 6.29 7.09 -0.80 -11.28

36 Poland 6.26 6.12 0.14 2.28

37 Bulgaria 6.15 6.26 -0.11 -1.75

37 South Africa 6.15 6.63 -0.48 -7.24

39 United Arab Emirates 6.14 6.33 -0.19 -3.00

40 Croatia 6.06 6.28 -0.22 -3.50

41 Spain 6.04 6.70 -0.66 -9.85

42 Czech Republic 5.93 6.56 -0.63 -9.60

43 Uruguay 5.87 5.61 0.26 4.63

44 Slovak Republic 5.86 6.59 -0.73 -11.07

45 Romania 5.82 6.05 -0.23 -3.80

46 Peru 5.79 5.54 0.25 4.51

47 Panama 5.74 5.92 -0.18 -3.04

48 Italy 5.73 5.70 0.03 0.52

49 Namibia 5.66 5.41 0.25 4.62

2011 2007Point

Change%

Change

50 Turkey 5.65 5.27 0.38 7.21

51 Jordan 5.60 6.19 -0.59 -9.53

51 Tunisia 5.60 5.51 0.09 1.63

53 China 5.55 5.30 0.25 4.71

54 Ghana 5.52 N/A N/A N/A

55 Sri Lanka 5.47 4.76 0.71 14.91

56 Costa Rica 5.40 5.67 -0.27 -4.76

57 Mexico 5.39 5.62 -0.23 -4.09

58 Armenia 5.38 5.79 -0.41 -7.08

59 Trinidad and Tobago 5.27 5.95 -0.68 -11.42

60 Greece 5.22 5.91 -0.69 -11.67

61 Moldova 5.19 5.26 -0.07 -1.33

62 Colombia 5.14 4.83 0.31 6.41

63 Jamaica 5.03 5.48 -0.45 -8.21

63 Morocco 5.03 4.94 0.09 1.82

65 Brazil 5.01 5.04 -0.03 -0.59

66 Indonesia 4.97 4.88 0.09 1.84

67 Ukraine 4.94 4.28 0.66 15.42

68 Nigeria 4.90 5.01 -0.11 -2.19

69 Uganda 4.88 4.57 0.31 6.78

70 Malawi 4.85 N/A N/A N/A

71 Egypt, Arab Rep. 4.77 5.03 -0.26 -5.16

72 Russian Federation 4.76 4.68 0.08 1.70

73 Dominican Republic 4.74 4.27 0.47 11.00

74 India 4.71 5.06 -0.35 -6.91

75 Guatemala 4.70 4.46 0.24 5.38

76 Kyrgyz Republic 4.62 4.62 0 0

77 Argentina 4.57 4.83 -0.26 -5.38

78 Serbia 4.56 N/A N/A N/A

79 Nicaragua 4.55 4.54 0.01 0.22

80 El Salvador 4.48 4.91 -0.43 -8.75

81 Mozambique 4.47 3.70 0.77 20.81

81 Tanzania 4.47 4.78 -0.31 -6.48

83 Gambia, The 4.44 N/A N/A N/A

84 Paraguay 4.41 4.37 0.04 0.91

85 Kenya 4.40 4.61 -0.21 -4.55

86 Pakistan 4.35 4.49 -0.14 -3.11

87 Bosnia and Herzegovina 4.33 4.48 -0.15 -3.34

88 Philippines 4.30 4.52 -0.22 -4.86

89 Ecuador 4.17 N/A N/A N/A

90 Belize 4.15 N/A N/A N/A

91 Lebanon 4.08 N/A N/A N/A

92 Senegal 4.02 3.89 0.13 3.34

93 Benin 3.87 3.85 0.02 0.51

94 Lesotho 3.85 3.84 0.01 0.26

95 Mali 3.71 4.06 -0.35 -8.62

96 Côte d’Ivoire 3.37 N/A N/A N/A

97 Venezuela 3.24 3.77 -0.53 -14.05

98 Burundi 2.96 N/A N/A N/A

Change in rankings 2007-2011

Tabl

e:

6

19

Index Composite Scores 2007-2011

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011

FD

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apit

a (U

S$)

Botswana

Kenya

Nigeria

Mozambique

FDI per capita 2004-2011

Figu

re:

2

The sharp rise in Sri Lanka’s score demonstrated that improvement in developing economies was not confined to Africa. Three Latin American countries—the Dominican Republic, Colombia, and Guatemala—were among the 10 most improved between 2007 and 2011, underscoring the widespread interest in the benefits of an improved business environment. This has been reflected in FDI flows. According to UNCTAD, developing economies’ share of FDI inflows rose from roughly 19 percent in 2000 to 52 percent in 2010—for the first time exceeding half the total. Moreover, half of the top 20 FDI recipients that year were developing countries.

ON THE WEB


21

Correlating the Global Opportunity Index to Foreign Investment

As can be seen in Figure 3, there is a striking relationship between the Global Opportunity Index and foreign direct investment.11 The higher the score, the greater the infl ows. The indexcan explain more than 65 percent of the variation in FDI per capita across advanced, emerging, and developing nations. If you control for the mix of projects—oil and natural gas extraction,for instance, which attracts higher volumes of FDI relative to other sectors—you can explain more than three-fourths of the variation in investment among countries.

Based on this estimated relationship, each one-unit increase in the index is associated with a 46 percent increase in FDI per capita.12 Appendix II shows the relationship of the individualindex components with FDI per capita. All are positive, indicating the role that better practices play in spurring investment and economic growth. However, Ease of Doing Business has the strongest explanatory power among institutional components. Among developing nations, Rule of Law takes on a more important role in explaining variations in per-capita FDI.

0

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6

8

10

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2 3 4 5 6 7 8 9Composite Index Score

Fitted values countries

R2=0.6569

Global Opportunity Index vs. FDI per capitaFor each unit increase in composite score, capital fl ows rise 46 percent.

Figu

re:

3

11. Refer to Appendix 3 for the ranking of the 2007-2010 results.

12. When controlling for level of economic development and market size.

ON THE WEB


23

Conclusion

Countries need more than portfolio capital to realize their long-term growth potential. Such fl ows typically aim for the highest return in the shortest time and may do little to build productive capacity or promote the value of human capital. Further, developing markets may lack the fi nancial infrastructure to absorb these investments eff ectively. In many cases, governments would do better to encourage committed capital from across their borders, and surveys indicate that multinational companies are becoming more interested and more optimistic about such investments.

The Global Opportunity Index provides those companies with clarity about the investment climate in host countries based on a systematic, data-driven scale. From the country perspective, the index guides policymakers in carrying out reforms to enhance their position in the global economy. Many changes can be implemented quickly and at relatively low cost, enabling strategic transactions that will benefi t all parties for years to come.

ON THE WEB


25

Appendix 1: Index methodology and technical notes

Com

pon

ent

Sub

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Defi nition

Eco

nom

ic F

un

dam

enta

ls (

EF

)

Macro- performance

Real GDP growth (%) + WEOand WDI

2011 Annual % growth at market prices based on constant local currency

GDP per capita (US$) + WDI 2011 Gross domestic product in current U.S. dollars divided by midyear population

Infl ation (annual %) - WDI 2011 As measured by the annual % change in consumer price index. Deviation from optimal infl ation levels (2-3%)

Real interest rate - WDI 2011 The lending interest rate adjusted for infl ation as measured by the GDP defl ator

Openness Trade openness + WDI 2011 (Exports + imports)/GDP

Direct investment openness + UNCTAD 2011 FDI infl ows/GDP

Labor force Unit labor cost - EIU 2011 Hourly wage in U.S. dollars

Life expectancy at birth (years) + WDI 2010 The number of years a newborn would live if prevailing patterns of mortality at time of birth were to persist throughout its life

Secondary education (% population)

+ WDI 2010 The proportion of the labor force with a secondary education as % of total labor force

Age dependency ratio - WDI 2011 % of dependents (people younger than 15 or older than 64) to the working-age population (ages 15-64)

Financialinfrastructure

Market cap of listed companies (% GDP)

+ S&P 2011 The share price times shares outstanding as % of GDP

Public bond market cap (% of GDP)

+ BIS 2011 Total market cap of government-issued bonds as % of GDP

Private bond market cap (% of GDP)

+ BIS 2011 Total market cap of bonds issued by fi nancial institutions and corporations as % of GDP

Bank assets (% of GDP) + IFS 2011 Bank assets as % of GDP

Domestic credit provided to private sector (% GDP)

+ WDI 2011 Financial resources provided to the private sector

Physicalinfrastructure

Road density + WDI 2009 Km of road per 100 sq. km of land

Rail line density + WDI 2010 Km of rail line per 100 sq. km of land

Internet users (per 100 people) + WDI 2010 People with access to the worldwide network

Mobile phone subscriptions + WDI 2010 Subscriptions per 100 people. Post-paid and prepaid subscriptionsare included

ATMs (per 100,000 adults) + WDI 2010 Automated teller machines per 100,000 adults

Appendixes

26


Com

pon

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Sub

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Sig

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Mos

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Definition

Reg

ula

tory

Bar

rier

s (R

B)

Controls on free flow of capital

Capital controls - AREAER 2011 Weighted average of three indicators: controls on securities, controls on money markets, and controls on direct investment

Controls on other cross-border capital flows

- AREAER 2011 Capital transactions controls on: money market instruments; collective investment securities; derivatives and other instruments; commercial and financial credit

Restrictions on international trade

WTO membership + WTO 2011 Members=1, 0 otherwise

Tariff rate, all products (%) - WDI 2010 Weighted mean applied tariff is the average of effectively applied rates weighted by the product import shares corresponding to each partner country

Restrictions on bank ownership

Restrictiveness on financial conglomerates

- WBS 2011 Weighted average of three indicators: the extent to which banks may own and control nonfinancial firms; the extent to which nonfinancial firms may own and control banks; the extent to which nonbank financial firms may own and control banks

Limits on foreign bank entry/ownership

- WBS 2011 Whether foreign banks may own domestic banks or enter a country’s banking industry. (Lower values indicate greater stringency)

Eas

e of

Doi

ng

Bu

sin

ess

(DB

)

Starting a business

Procedures (number) - WBDB 2011

Starting a business: Time (days) - WBDB 2011

Cost (% income per capita) - WBDB 2011

Enforcing contracts

Time (days) - WBDB 2011

Cost (% of claim) - WBDB 2011

Procedures (number) - WBDB 2011

Resolving insolvency

Time (years) - WBDB 2011

Cost (% of estate) - WBDB 2011

Recovery rate (cents on the dollar)

+ WBDB 2011

Accounting and disclousure

Depth of credit information

index

+ WBDB 2011 Measures rules and practices affecting the coverage, scope, and accessibility of credit information available through either a public credit registry or a private credit bureau

Public credit registry coverage (% of adults)

+ WBDB 2011 Reports the number of people and firms listed in a public credit registry with current information on repayment history, unpaid debts, or credit outstanding

Private credit bureau coverage (% of adults)

+ WBDB 2011 Reports the number of people or firms listed by a private credit bureau with current information on repayment history, unpaid debts, or credit outstanding

Convergence to IFRS-Publicly listed companies

+ ISAPlus 2011 0-IFRSs not permitted; 1-IFRSs permitted; 2-IFRSs required for some; 3-IFRSs required for all

Convergence to IFRS-Private companies

+ ISAPlus 2011 0-IFRSs not permitted; 1-IFRSs permitted; 2-IFRSs required for some; 3-IFRSs required for all

Costs of terrorism and crime

Business costs of terrorism (index)

+ GCI 2011 To what extent does the threat of terrorism impose costs on businesses in your country? [1 = to a great extent; 7 = not at all]

Business costs of crime and violence (GCI)

+ GCI 2011 To what extent does the incidence of crime and violence impose costs on businesses in your country? [1 = to a great extent; 7 = not at all]

Organized crime (index) + GCI 2011 To what extent does organized crime (Mafia-oriented racketeering, extortion) impose costs on businesses in your country? [1 = to a great extent;7 = not at all]

Ethnic tensions (index) + ICRG 2011 An assessment of the degree of tension within a country attributable to racial, nationality, or language divisions. Lower ratings are given to countries where racial and nationality tensions are high, and higher ratings are given to countries where tensions are minimal.

Tax burden Paying taxes: time (hours/year) - WBDB 2011 Measures the time taken to prepare, file, and pay the corporate income tax, value-added or sales tax, and labor taxes, including payroll taxes and social contributions

Extent and effect of taxation (index)

+ GCI 2011 What impact does the level of taxes in your country have on incentives to work or invest? [1 = significantly limits incentives to work or invest; 7 = has no impact on incentives to work or invest]

Corporate tax (%) - IEF 2011 Top marginal corporate tax rate

Personal tax (%) - IEF 2011 Top marginal personal income tax rate

Appendix 1: Index methodology and technical notes (cont.)

27

Appendixes

Com

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Definition

Reg

ula

tory

Qu

alit

y (R

Q)

Burden of regulation

Burden of government regulation (index)

+ GCI 2011 How burdensome is it for businesses in your country to comply with governmental administrative requirements (e.g., permits, regulations, reporting)?[1 = extremely burdensome; 7 = not burdensome at all]

Public debt (% GDP) - WEO 2011 General government gross debt, percent of GDP

Regulatory quality

Credit market regulation (index)

+ EFW 2011 Ownership of banks; foreign bank competition; private sector credit; interest rate controls/negative interest rates

Labor market regulation (index)

+ EFW 2011 Hiring regulations and minimum wage; hiring and firing regulations; centralized collective bargaining; hours regulations; mandated cost of worker dismissal; conscription

Regulation of security exchanges (index)

+ GCI 2011 How would you assess the regulation and supervision of securities exchanges in your country? [1 = ineffective; 7 = effective]

Quality of policymaking

Quality of bureaucracy (index) + ICRG 2011 High points are given to countries where the bureaucracy can govern without drastic policy changes or interruptions in services. In these low-risk countries, bureaucracies are relatively free from political pressure and have established mechanisms for recruitment and training. Countries that lack the cushioning effect of a strong bureaucracy receive low points.

Transparency (index) + GCI 2011 How easy is it for businesses in your country to obtain information about changes in government policies and regulations affecting their activities? [1 = impossible; 7 = extremely easy]

Corruption Corruption Perceptions Index + TI 2011 An aggregate indicator calculated using data from 17 sources that measures the extent of corruption (frequency and/or size of bribes) in the public and political sectors. Countries are ranked.

Public trust of politicians (index)

+ GCI 2011 How would you rate the level of public trust in the ethical standards of politicians in your country? [1 = very low; 7 = very high]

Ru

le o

f L

aw

Legal infrastructure

Judicial independence (index) + GCI 2011 To what extent is the judiciary in your country independent of influences from members of government, citizens, or firms? [1 = heavily influenced; 7 = entirely independent]

Efficiency of legal framework in settling disputes (index)

+ GCI 2011 How efficient is the legal framework in your country for private businesses in settling disputes? [1 = extremely inefficient; 7 = highly efficient] To what extent is the judiciary in your country independent of influences from members of government, citizens, or firms? [1 = heavily influenced; 7 = entirely independent]

Efficiency of legal framework in challenging regulations (index)

+ GCI 2011 How efficient is the legal framework in your country for private businesses in challenging the legality of government actions and/ or regulations? [1 = extremely inefficient; 7 = highly efficient]

Law and order (index) + ICRG 2011 The law subcomponent assesses the strength and impartiality of the legal system, while the order subcomponent assesses popular observance of the law. Thus, a country can enjoy a high rating – 3 – in terms of its judicial system, but a low rating – 1 – if it suffers from a very high crime rate, indicating that laws are often ignored or effective sanctions are lacking (for example, widespread illegal strikes)

Property rights Property rights (index) + GCI 2011 How would you rate the protection of property rights, including financial assets, in your country? [1 = very weak; 7 = very strong]

Property rights (index) + IEF 2011 Measures the degree to which a country’s laws protect private property rights and the extent of government enforcement.Also assesses the likelihood that private property will be expropriated and analyzes the independence of the judiciary, the level of corruption within the judiciary, and the ability of individuals and businesses to enforce contracts

Investor protection

Ease of shareholder suits (index)

+ WBDB 2011 A measure of shareholders’ ability to sue corporate officers and directors for misconduct

Extent of disclosure (index) WBDB 2011 A measure of transparency of related-party transactions

Strength of legal rights (index) + WBDB 2011 Measures the degree of protection collateral and bankruptcy laws provide to borrowers and lenders, thus facilitating lending

Extent of director liability (index) + WBDB 2011 A measure of liability for self-dealing

Strength of investor protection (index)

+ WBDB 2011 The average of indexes gauging the extent of disclosure, extent of director liability, and ease of shareholder suits

Appendix 1: Index methodology and technical notes (cont.)

28


Appendix 2: Econometric results

Ln(FDI per capita) Developing Countries Economic Fundamentals (EF)

Composite Source *** ***

Economic Fundamentals *** ***

Regulatory Barriers *** ***

Ease of Doing Business ** ***

Regulatory Quality *** ***

Rule of Law ** **

Note: Check means statistical signifi cance (all signs are positive); cross means no signifi cance.*** means signifi cance at 1%; ** 5%; *10%. Includes control for economic development.

0

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Regulatory Barriers


2 3 4 5 6 7 8 9 10

R2=0.3061

Regulatory Barriers vs. FDI per capita

Figu

re:

6

29

Appendixes

0

2

4

6

8

10

log

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2 3 4 5 6 7 8 9Ease of Doing Business


R2=0.4425

Ease of Doing Business vs. FDI per capita

Figu

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7

0

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Regulatory Quality


2 3 4 5 6 7 8 9

R2=0.3868

Regulatory Quality vs. FDI per capita

Figu

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8

30


0

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Rule of Law


2 3 4 5 6 7 8 9 10

R2=0.3707

Rule of Law vs. FDI per capita

Figu

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9

0

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2 3 4 5 6 7 8Economic Fundamentals


R2=0.5567

Economic Fundamentals vs FDI

Figu

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10

31

Appendixes

Appendix 3: Index results 2010-2007

Rank2010

CountryOI



2 Singapore 8.59

3 New Zealand 8.21

4 Denmark 7.95


6 Finland 7.79

7 Switzerland 7.76

8 Netherlands 7.72

9 Canada 7.61

10 Ireland 7.56

11 Luxembourg 7.53

12 Australia 7.52

13 Sweden 7.41

14 Norway 7.38

15 Belgium 7.36

16 Austria 7.31

17 Iceland 7.29

18 Estonia 7.22

19 Bahrain 7.17

20 Cyprus 7.11


22 Chile 7.03

23 France 7.01

24 Germany 6.93

25 Japan 6.91

25 Slovenia 6.91

27 Oman 6.90

28 Kuwait 6.84

29 Malaysia 6.78

30 Mauritius 6.76

31 Israel 6.68


33 Lithuania 6.57

34 Latvia 6.53

35 Portugal 6.44

36 Botswana 6.43

37 Korea, Rep. 6.40

38 Hungary 6.38

39 Poland 6.22

40 Montenegro 6.20

41 Bulgaria 6.16


42 Spain 6.09

44 Panama 6.07

45 Jordan 6.03


47 Romania 5.99


49 Costa Rica 5.94

50 Croatia 5.92

51 Uruguay 5.90

52 Thailand 5.87

53 Tunisia 5.86

Rank2010

CountryOI


54 Namibia 5.77

55 Italy 5.75

56 Peru 5.73

57 China 5.61

58 Ghana 5.58

59 Greece 5.52

60 Turkey 5.51



63 Armenia 5.27

64 Sri Lanka 5.15

65 India 5.08

66 Mexico 5.04

67 Malawi 5.02

68 Colombia 5.01

68 Jamaica 5.01

70 Brazil 5.00

71 Indonesia 4.94

71 Morocco 4.94


73 Ukraine 4.89

75 Guatemala 4.84

76 Moldova 4.80


78 El Salvador 4.76

78 Uganda 4.76

80 Argentina 4.74

81 Guyana 4.71

81 Nigeria 4.71

83 Honduras 4.64

84 Paraguay 4.61

84 Serbia 4.61

86 Gambia, The 4.57

86 Nicaragua 4.57

88 Mozambique 4.56

89 Pakistan 4.49

90 Tanzania 4.45


92 Kenya 4.32

93 Philippines 4.31

94 Senegal 4.22


96 Ecuador 4.16

97 Lebanon 4.14

98 Lesotho 3.96

99 Mali 3.88

100 Benin 3.86

101 Zimbabwe 3.81

102 Nepal 3.58


104 Angola 3.51

105 Venezuela 3.15

106 Burundi 2.81

INDEX 2010

32


Rank2009

CountryOI



2 Singapore 8.50

3 New Zealand 8.36

4 Denmark 7.94


6 Netherlands 7.75

7 Australia 7.74

7 Finland 7.74

9 Ireland 7.72

9 Switzerland 7.72

11 Luxembourg 7.65

12 Canada 7.63

13 Belgium 7.50

14 Norway 7.49

15 Iceland 7.42

16 Austria 7.39

17 Estonia 7.31

18 Sweden 7.30

19 Cyprus 7.26


21 Slovenia 7.14

22 Bahrain 7.05

22 France 7.05

24 Chile 6.99

24 Japan 6.99

26 Germany 6.86

26 Mauritius 6.86

28 Latvia 6.74

29 Oman 6.72


31 Israel 6.61

32 Kuwait 6.60

32 Malaysia 6.60

34 Lithuania 6.58

35 Portugal 6.51

36 Korea, Rep. 6.41

37 Hungary 6.40


39 Spain 6.26

40 Jordan 6.23

41 Botswana 6.21

41 Romania 6.21

43 Bulgaria 6.20



46 Poland 6.10

47 Montenegro 6.06

48 Panama 6.05

49 Thailand 5.96

50 Croatia 5.91

51 Namibia 5.83

Rank2009

CountryOI


52 Italy 5.79

53 Peru 5.74

54 Costa Rica 5.69

55 Tunisia 5.66


57 Greece 5.62

58 Uruguay 5.60

59 China 5.59

60 Armenia 5.55

61 Ghana 5.49


63 Turkey 5.35

64 Jamaica 5.21

65 India 5.20

66 Mexico 5.10

67 Malawi 5.07

68 Brazil 5.04

69 El Salvador 5.01

70 Nigeria 4.98

71 Guatemala 4.91

72 Morocco 4.90

73 Colombia 4.86

74 Sri Lanka 4.85

75 Argentina 4.82



77 Ukraine 4.74

79 Guyana 4.71

80 Indonesia 4.70

81 Uganda 4.69

82 Serbia 4.65

83 Pakistan 4.62

84 Paraguay 4.53

85 Kenya 4.45

85 Tanzania 4.45


88 Philippines 4.35

89 Nicaragua 4.30

90 Mozambique 4.27


92 Senegal 4.18

93 Ecuador 4.06

94 Madagascar 3.99

95 Lesotho 3.93

96 Bangladesh 3.85

97 Mali 3.84

98 Benin 3.79


100 Zimbabwe 3.49

101 Venezuela 3.15

INDEX 2009

33

Appendixes

Rank2008

CountryOI


1 Singapore 8.43


2 New Zealand 8.33

4 Ireland 8.20

5 Denmark 8.09

6 Netherlands 7.87


8 Finland 7.86

9 Canada 7.85

10 Iceland 7.82

11 Sweden 7.79

12 Australia 7.70

13 Switzerland 7.65

14 Luxembourg 7.64

15 Belgium 7.59

16 Austria 7.52


18 Estonia 7.50

19 Norway 7.49

20 Germany 7.44

21 Japan 7.37

22 Bahrain 7.35

23 France 7.18

24 Slovenia 7.12

25 Chile 7.01

26 Korea, Rep. 6.99

27 Latvia 6.91

28 Malaysia 6.89

29 Mauritius 6.88

30 Lithuania 6.81

31 Israel 6.76

32 Portugal 6.70


34 Spain 6.56

35 Oman 6.53

36 Kuwait 6.50


38 Hungary 6.43



41 Jordan 6.25

42 Croatia 6.20

43 Romania 6.18

44 Bulgaria 6.16

45 Panama 6.02

46 Thailand 5.99

47 Poland 5.94

48 Botswana 5.90

49 Costa Rica 5.86

50 Greece 5.79

Rank2008

CountryOI


51 Italy 5.68

52 Namibia 5.67

53 Uruguay 5.63

54 China 5.62


56 Peru 5.58

57 Tunisia 5.56

58 Ghana 5.55

59 Armenia 5.48

60 Macedonia, FYR 5.35

60 Mexico 5.35

62 Kazakhstan 5.31


64 Jamaica 5.22

65 Brazil 5.04

66 Colombia 5.03

66 Moldova 5.03

68 Turkey 5.01

69 India 4.97

70 Morocco 4.93

71 Indonesia 4.91

72 Nigeria 4.90

73 El Salvador 4.89


75 Argentina 4.86

76 Malawi 4.79

77 Guatemala 4.78


79 Tanzania 4.73

80 Nicaragua 4.63

81 Uganda 4.61

82 Kenya 4.59

83 Philippines 4.46

84 Paraguay 4.43

85 Pakistan 4.42



88 Mali 4.10

89 Senegal 4.09

90 Mozambique 4.02

91 Bolivia 3.96

92 Bangladesh 3.88

92 Benin 3.88

92 Lesotho 3.88

95 Algeria 3.77


97 Cameroon 3.60

98 Venezuela 3.57

99 Syrian Arab Republic 3.08

100 Chad 2.75

INDEX 2008

34


Rank2007

CountryOI


1 Singapore 8.57

2 Ireland 8.34


4 New Zealand 8.16


6 Denmark 8.07

7 Iceland 8.03

8 Netherlands 7.98

9 Finland 7.90

10 Switzerland 7.82

11 Canada 7.73

12 Australia 7.71

13 Sweden 7.70

14 Austria 7.56

15 Belgium 7.53


17 Luxembourg 7.50

18 Japan 7.49

19 Germany 7.48

20 Norway 7.46

21 Estonia 7.37

22 France 7.14

23 Chile 7.10

24 Korea, Rep. 7.09

24 Latvia 7.09

24 Slovenia 7.09

27 Malaysia 6.99

28 Israel 6.92

29 Lithuania 6.86

30 Portugal 6.83

31 Spain 6.70



34 Kuwait 6.57


36 Hungary 6.54

37 Mauritius 6.49

38 Oman 6.34


40 Croatia 6.28

41 Bulgaria 6.26

42 Jordan 6.19

43 Poland 6.12

44 Romania 6.05


46 Panama 5.92

47 Greece 5.91

48 Thailand 5.88

49 Armenia 5.79

50 Saudi Arabia 5.78

Rank2007

CountryOI


51 Botswana 5.71

52 Italy 5.70

53 Costa Rica 5.67

54 Mexico 5.62

55 Uruguay 5.61

56 Peru 5.54

57 Tunisia 5.51

58 Jamaica 5.48

59 Namibia 5.41

60 Kazakhstan 5.32

61 China 5.30

62 Turkey 5.27

63 Moldova 5.26

64 India 5.06

65 Macedonia, FYR 5.05

66 Brazil 5.04


68 Nigeria 5.01

69 Morocco 4.94

70 El Salvador 4.91

71 Indonesia 4.88

72 Argentina 4.83

72 Colombia 4.83

74 Tanzania 4.78

75 Sri Lanka 4.76



78 Kenya 4.61

79 Uganda 4.57

80 Nicaragua 4.54

81 Philippines 4.52

82 Pakistan 4.49


84 Guatemala 4.46

85 Paraguay 4.37

86 Ukraine 4.28


88 Bolivia 4.08

89 Mali 4.06

90 Algeria 3.98

91 Senegal 3.89

92 Benin 3.85

93 Lesotho 3.84

94 Bangladesh 3.83

94 Ethiopia 3.83

96 Venezuela 3.77

97 Mozambique 3.70

98 Cameroon 3.38

99 Chad 2.62

INDEX 2007

35

Appendixes

Appendix 4: 2011 Component Ratings

Rank CountryEF


1 Netherlands 7.50

2 Singapore 7.30


4 Luxembourg 6.95

5 Switzerland 6.80

6 Hungary 6.75

7 Belgium 6.70

8 Denmark 6.65


9 Austria 6.55

11 Slovenia 6.55

12 Chile 6.50

13 Canada 6.40

14 Estonia 6.40

15 France 6.35

16 Australia 6.35

16 Italy 6.35

18 Korea, Rep. 6.35

19 Germany 6.30

20 Sweden 6.30

20 Iceland 6.30



23 Israel 6.25

25 Latvia 6.25

25 Croatia 6.25

27 Portugal 6.20

28 Ukraine 6.20

29 Malaysia 6.10

30 Japan 6.05

31 Lithuania 6.05

32 Ireland 5.90

32 China 5.90

34 Spain 5.75

35 Bulgaria 5.70

36 Finland 5.65

37 Panama 5.60

38 Poland 5.55

39 Greece 5.35

39 Serbia 5.35


42 Mauritius 5.30

43 Mexico 5.20


45 Kuwait 5.15

46 Brazil 5.05

47 Cyprus 5.00

47 Colombia 5.00


Rank CountryEF


49 Turkey 4.90

51 Norway 4.90

52 Jordan 4.85

53 Peru 4.80


54 Moldova 4.75

56 Romania 4.75

57 Argentina 4.70

58 Oman 4.40

59 Indonesia 4.35

60 Sri Lanka 4.30

60 Lebanon 4.30

62 Philippines 4.30

63 Tunisia 4.25

64 Costa Rica 4.20

65 Morocco 4.15

66 Armenia 4.05

67 Jamaica 4.00

67 India 4.00


70 Uruguay 3.90



73 Ecuador 3.75

74 Belize 3.65

75 Venezuela 3.65

76 Nicaragua 3.50

77 Namibia 3.45

78 Botswana 3.25

79 El Salvador 3.20

80 Paraguay 3.05


82 Pakistan 3.00


84 Ghana 2.85

85 Nigeria 2.70

85 Kenya 2.70

87 Guatemala 2.65

88 Mozambique 2.50

89 Tanzania 2.45

90 Lesotho 2.40

91 Uganda 2.30

92 Senegal 2.15


94 Malawi 2.00

95 Benin 1.90

96 Gambia, The 1.80

97 Mali 1.70

98 Burundi 1.55

ECONOMIC FUNDAMENTALS

36


Rank CountryRB


1 Netherlands 9.40


1 Romania 9.40

4 Singapore 9.20


4 Latvia 9.20

4 Bulgaria 9.20

4 Peru 9.20

9 Switzerland 9.00

9 Denmark 9.00

9 France 9.00

9 Ireland 9.00

13 Hungary 8.80

13 Belgium 8.80

13 Slovenia 8.80

16 Italy 8.80

16 Croatia 8.80

18 Austria 8.60

18 Portugal 8.60

18 Finland 8.60

21 Estonia 8.40

21 Spain 8.40

21 Greece 8.40


25 Canada 8.20

25 Lithuania 8.20

25 Cyprus 8.20

25 Botswana 8.20

25 Nigeria 8.20

30 Chile 8.00

30 Iceland 8.00

30 Poland 8.00


30 Mauritius 8.00

30 Turkey 8.00

30 Guatemala 8.00

37 Costa Rica 7.80

38 Luxembourg 7.60

38 Panama 7.60

38 Norway 7.60

38 Uruguay 7.60

38 El Salvador 7.60

38 Uganda 7.60

44 Australia 7.40

44 Moldova 7.40

44 Nicaragua 7.40

44 Ghana 7.40

44 Malawi 7.40


Rank CountryRB


50 Kuwait 7.20

51 Brazil 7.20

51 Paraguay 7.20

53 Korea, Rep. 7.00

53 Japan 7.00

53 Argentina 7.00

53 Sri Lanka 7.00

53 Belize 7.00

53 Mozambique 7.00

59 Germany 6.80

59 Ukraine 6.80

59 Mexico 6.80

59 Philippines 6.80


63 Jordan 6.80

65 Ecuador 6.60

66 Sweden 6.60


66 Armenia 6.60

66 Jamaica 6.60


66 Kenya 6.60

66 Gambia, The 6.60

73 Indonesia 6.40




77 Senegal 6.20


79 Israel 6.00

79 Malaysia 6.00



79 Oman 6.00

79 Mali 6.00

85 Tunisia 5.80

85 Morocco 5.80

85 Pakistan 5.80

88 Benin 5.80

89 Tanzania 5.60

90 China 5.40

90 Colombia 5.40

90 Namibia 5.40

90 Lesotho 5.40

94 Burundi 5.20

95 Venezuela 5.00

96 India 4.40

97 Lebanon 3.80

98 Serbia 3.80

REGULATORY BARRIERS

37

Appendixes

Rank CountryDB



2 Iceland 8.51

3 Ireland 8.19

3 Finland 8.19

5 Singapore 8.14

5 Lithuania 8.14

7 Norway 8.10

8 Canada 8.01

9 Armenia 7.96

9 Oman 7.96

11 Australia 7.92

12 Korea, Rep. 7.83

13 Portugal 7.69

13 Estonia 7.69

15 Netherlands 7.64

15 Germany 7.64

17 Luxembourg 7.60


19 Sweden 7.51

20 Belgium 7.42

20 Austria 7.42

22 Slovenia 7.37

22 Mauritius 7.37

24 Kuwait 7.23

25 Denmark 7.23

26 Hungary 7.14

27 Malaysia 7.10


29 Switzerland 7.05


31 Latvia 7.01

32 Botswana 6.96

33 Croatia 6.87

33 Chile 6.87

35 France 6.87

36 Romania 6.83



39 Cyprus 6.83

40 Uruguay 6.69

41 Poland 6.60

42 Japan 6.55

43 Spain 6.46

44 Bulgaria 6.42


46 Panama 6.32

47 Ghana 6.28


49 Tunisia 6.19

Rank CountryDB


49 Lebanon 6.19

51 Moldova 6.14

52 Serbia 6.05

53 Greece 6.01

54 Jordan 5.87

55 Nicaragua 5.82

56 Italy 5.82

57 Costa Rica 5.78

58 Sri Lanka 5.78


59 Namibia 5.69


62 Morocco 5.64

63 Israel 5.60

64 Jamaica 5.60

65 Paraguay 5.51

66 China 5.51

67 Argentina 5.46


69 Ukraine 5.37

70 Peru 5.37


72 Turkey 5.37

72 El Salvador 5.37

72 Mexico 5.37

75 Colombia 5.19

76 Tanzania 5.10

77 Senegal 5.05


79 Guatemala 5.01

80 Mozambique 4.82

81 Gambia, The 4.64

82 Brazil 4.64

83 Malawi 4.50

84 Ecuador 4.41

84 Lesotho 4.41

86 Kenya 4.32

87 Pakistan 4.19

88 Indonesia 4.14

89 Mali 4.10

90 Uganda 4.05


92 Nigeria 4.00

93 Belize 3.96

94 India 3.96

95 Philippines 3.82

96 Venezuela 3.69

97 Benin 3.46

98 Burundi 2.46

EASE OF DOING BUSINESS

38


Rank CountryQR



2 Singapore 8.44

2 Switzerland 8.44

4 Australia 8.33

5 Denmark 8.22

6 Sweden 8.11

7 Luxembourg 8.00

8 Finland 7.89

9 Canada 7.67

10 Botswana 7.67

11 Estonia 7.55


13 Oman 7.44

14 Netherlands 7.33

15 Norway 7.33

16 Malaysia 7.33

17 Namibia 7.22

18 Cyprus 7.22

19 Austria 6.89

20 Chile 6.89


22 Japan 6.55

23 Mauritius 6.22

24 Iceland 6.22

24 Tunisia 6.22

26 China 6.11

27 Belgium 6.00


27 Uganda 6.00

30 Kuwait 5.78

30 Uruguay 5.78

30 Israel 5.78

33 Lithuania 5.67


35 Germany 5.56

35 France 5.56

35 Jordan 5.56

38 Ireland 5.56


40 Latvia 5.33

40 Bulgaria 5.33

40 Ghana 5.33

43 Indonesia 5.33

44 Slovenia 5.22

44 Costa Rica 5.22

46 Poland 5.22



48 Panama 5.00

Rank CountryQR


48 Malawi 5.00

48 India 5.00

48 Benin 5.00

53 Turkey 4.89

54 Hungary 4.78

55 Mexico 4.78

55 Guatemala 4.78

55 Gambia, The 4.78

55 Nigeria 4.78

59 Croatia 4.56

59 Sri Lanka 4.56

59 Morocco 4.56

62 Colombia 4.56

63 Korea, Rep. 4.44

64 Portugal 4.22

64 Peru 4.22

66 Armenia 4.22

66 Spain 4.22

66 Jamaica 4.22

66 Mozambique 4.22

70 Lesotho 4.11

70 Kenya 4.11

72 Tanzania 4.00

73 Ecuador 4.00

74 Brazil 3.78

74 Philippines 3.78

76 Pakistan 3.78

77 Moldova 3.67

77 Serbia 3.67

77 El Salvador 3.67

80 Mali 3.56



83 Senegal 3.33

84 Romania 3.22

84 Italy 3.22

86 Nicaragua 3.22


86 Paraguay 3.22

86 Argentina 3.22



92 Belize 2.89

93 Burundi 2.78

94 Greece 2.78

94 Ukraine 2.78

96 Venezuela 2.67

97 Lebanon 2.56


REGULATORY QUALITY

39

Appendixes

Rank CountryRL


1 Singapore 9.36


3 Canada 8.91


5 Ireland 8.64

6 Norway 8.27

7 Denmark 8.27

7 Israel 8.27

9 Malaysia 8.27

10 Sweden 8.18


12 Finland 8.00

13 Japan 7.82


15 Belgium 7.73

16 Australia 7.73

16 Cyprus 7.73

18 Iceland 7.54

19 Chile 7.27

20 Germany 7.00

21 Botswana 6.91

21 Netherlands 6.91

23 France 6.91

24 Estonia 6.82

25 Luxembourg 6.73

26 Switzerland 6.64

26 Mauritius 6.64

28 Namibia 6.54

29 Austria 6.45

29 Kuwait 6.45

31 Oman 6.27

32 India 6.18

33 Poland 5.91

34 Latvia 5.82

34 Korea, Rep. 5.82

36 Ghana 5.73

36 Sri Lanka 5.73


39 Tunisia 5.54

39 Colombia 5.54


41 Uruguay 5.36

41 Malawi 5.36

41 Portugal 5.36

41 Peru 5.36

41 Spain 5.36

47 Slovenia 5.36

48 Lithuania 5.27

49 Tanzania 5.18

Rank CountryRL


50 Turkey 5.09

51 Morocco 5.00

52 Pakistan 5.00

53 Jordan 4.91


53 Romania 4.91

56 China 4.82

56 Mexico 4.82

58 Nigeria 4.82

59 Jamaica 4.73

60 Indonesia 4.64

61 Hungary 4.55



64 Uganda 4.45

64 Italy 4.45

66 Gambia, The 4.36

67 Brazil 4.36

68 Kenya 4.27


69 Panama 4.18

71 Bulgaria 4.09

71 Armenia 4.09

73 Costa Rica 4.00

73 Moldova 4.00

75 Serbia 3.91

76 Croatia 3.82

76 Mozambique 3.82


79 Greece 3.55

79 Ukraine 3.55

79 Lebanon 3.55

82 Senegal 3.36

83 Belize 3.27

84 Benin 3.18

84 Mali 3.18

86 Guatemala 3.09

86 Paraguay 3.09

88 Lesotho 2.91

89 Philippines 2.82

89 Nicaragua 2.82


89 Burundi 2.82


94 El Salvador 2.55

95 Argentina 2.45

96 Ecuador 2.09


98 Venezuela 1.18

RULE OF LAW

40


KEITH SAVARD is senior managing economist at the Milken Institute. He has extensive executive management experience with expertise in evaluating the interrelationship between economic fundamentals and activity in global financial and commodity markets. He also has a background in sovereign risk analysis and applying a disciplined economic approach to investment-portfolio decision-making. Prior to joining the Milken Institute, Savard was director of economic research and chief economist at Samba Financial Group (formerly Saudi American Bank) in London. He also held positions at Zurich Investments, the Institute of International Finance, the U.S. Department of State and the Board of Governors of the Federal Reserve System.

HEATHER WICKRAMARACHI is a senior research analyst with the Milken Institute. Her main areas of expertise are emerging markets, international finance, and foreign direct investment. Wickramarachi received an M.A. in social science, with a focus on international political economy and quantitative methodology, from the University of California, Irvine, and a B.A. in political science from the University of Hawaii at Manoa. She also studied energy planning and sustainable development at the University of Oslo in Norway. Recently, she presented the paper “Do South-South Bilateral Investment Treaties Increase Foreign Direct Investment? Intra-Regional Evidence from MENA Countries” at the International Studies Association’s annual conference.

ROSS C. DEVOL is chief research officer at the Milken Institute. He oversees research on international, national, and comparative regional growth performance; technology and its impact on regional and national economies; access to capital and its role in economic growth and job creation; and health-related topics. Since joining the Institute, DeVol has put his group in the national limelight with groundbreaking research on technology and its impact on regional and national economies. He is an expert on the new intangible economy and how regions can prepare themselves to compete in it. He examines the effects of technology, research and development activities, international trade, human capital and labor force skills training, entrepreneurship, early-stage financing, capital access, and quality-of-place issues on the geographic distribution of economic activity. DeVol is ranked among the “Super Stars” of Think Tank Scholars by International Economy magazine. DeVol appears on national television and radio programs, including CNN’s “Moneyline,” “Wall Street Journal Report with Maria Bartiromo,” Fox Business News, and CNBC. He is frequently quoted in print media, including the Wall Street Journal, the Financial Times, Investor’s Business Daily, Forbes, the Economist, Time, and Bloomberg Businessweek. DeVol earned his master’s degree in economics at Ohio University and received advanced training in economics at Carnegie Mellon University.

APANARD (PENNY) PRABHA is an economist in the Financial Research group at the Institute. Her research focuses on financial institutions, open economy macroeconomics, emerging market economies and financial crises. Her work has been published in the Journal of International Money and Finance, International Review of Finance, Open Economies Review, Journal of International Financial Markets, Institutions & Money, and International Journal of Economics and Finance. Prior to joining the Institute, Prabha was an assistant professor of economics at the University of Illinois at Springfield. While completing her Ph.D., she also held visiting scholar positions at the Claremont Institute for Economic Policy Studies and the Freeman Program in Asian Political Economy at the Claremont Colleges, as well as being a lecturer in economics at Pitzer College and the University of Redlands. Prabha received a Ph.D. in economics from Claremont Graduate University.

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