What are some of the most important indicators that a country is good for investment and business growth? Is it just gross domestic product (GDP), consumer price indices (CPIs), tax incentives, or the type of foreign investment policies a government adopts?
It should not surprise you to hear that it is all of the above and much more.
The intricacies that make one country lucratively viable for business investment and another simply bad for business investment are deeply rooted in the fundamentals of the economy.
As a business owner, or at least interested in running a business or investment abroad, understanding some, if not all, of these subtleties will put you in a better position to make the right investment decision. It will give you, at the very least, a clear indication of the best and worst countries for business.
HOW THE 5 MAIN ECONOMIC INDICATORS AFFECT BUSINESS SUCCESS
Learning to predict the type of effect each of these indicators has on a country's economic prowess could save you a lot of money and earn you Tax Advantages.
Suppose, for example, that if you have invested heavily in France and you follow the CPI, you may notice that inflation is rising in that country. A sophisticated investor would know that this could indicate an imminent interest rate hike by the central bank.
Knowing that this type of increase tends to hurt your stocks, you may decide to protect yourself by reducing your holdings in the country for the time being.
As someone looking to make business investments in other countries, let's take a look at some of the most important economic indicators that should guide you in this endeavour:
- Gross Domestic Product: Representing the market value of all services and final goods produced in a country over a given period of time, a country's GDP is important because it tells you how well the economy is performing and how big it is. If a country has a growing GDP and inflation is not a particular problem, then businesses in that country are generally better off.
- Consumer price index: Measuring changes in the prices of typical consumer goods and services purchased by households in a country, the CPI is often used as an indicator of inflation. Inflation can negatively or positively affect a country's currency, which in turn will determine how expensive it is for you to invest in that country.
- PMI Manufacturing and Services: this is simply an indicator of the health of a country's manufacturing sector over a specific period of time. Knowing a country's PMI will tell you how well or poorly companies are doing and why.
- Employment indicators: this is perhaps the most important indicator to monitor. The level of productivity and wealth of a country's citizens directly determines how much money they have to spend on goods and services. If the unemployment rate rises, these citizens will have less disposable income and, as such, consumer spending will fall, which in turn will damage the GDP as well as the country's overall economic growth prospects; this is bad for business.
- Central Bank Minutes: The central bank of a country directly determines the financial policies that will govern its economy for a fiscal year. Listening to what the central bankers say or reading the official communiqués of central bank minutes will give you clues about future policy actions that will directly affect businesses.
Although these are five of the most important indicators that show in which direction a country's economy is heading and whether it is good for business, they should NOT be used as the sole source of information.
They should only serve as a starting point for further research in specific areas and market niches.
WHY GOING GLOBAL IS A GREAT IDEA
Starting a business in foreign countries these days is that it doesn't have to be as difficult as it was in the past.
Yes, there are still regulations, taxes and foreign policies for surfing, but thanks to technology and the free flow of information on the Internet, these requirements are now easier to find and understand.
Just because you own a small business in the United States or the United Kingdom doesn't mean you have to think locally. You can easily expand and make your business a global brand. While the challenges are there, the potential rewards far outweigh any obstacles you might encounter.
Here are some excellent reasons why you might consider going global:
- You diversify your markets and capture new customer bases
- Globalization could easily extend the life of your current products. Whatever product you've already established in your home country could very well be the next hot thing in a foreign country.
- Significantly reduce your dependence on your local market and spread the risk globally
- It will teach you new ways of working, show you how to compete in more competitive markets and enable you to develop as a brand.
- It will allow you to better resist seasonal fluctuations. For example, if you have a product that sells very well in winter and it is summer in your country, you can easily sell it in other countries that will experience winter during the same period.
But before you consider starting a business in another country, you need to do your research. Find out what kinds of cultural differences might make this market opposed to your brand and products. Find out what kind of policies the government has against your particular brand and see if there is a viable potential for your business.
That's why we've compiled this list for you today; to show you which countries are the best places in the world to start a business and which are not very promising at the moment.
TOP 10 COUNTRIES TO START A BUSINESS
Now that we know what to look for in a country to determine whether or not it is ideal for doing business, let's look at some of the most lucrative countries you should focus on (in no particular order):
GDP: 2.6 trillion in December 2017
At a glance
- GDP growth: 1.8%.
- GDP per inhabitant: $ 39 000
- Public debt/GDP: 89%.
- Population : 66M
- Unemployment: 4.9%.
- Balance of Trade/GDP: -4.4%.
- Inflation: 0.7%.
This country is at the forefront of the listing Forbes 2018 of the best countries in which to do business. And for good reason!
They say that the figures do not lie and that as things stand, the UK, despite all the uncertainty about Brexit, is still one of the best countries in which to start a business.
But apart from the strong economic indicators, there are other factors at play that are propelling the UK to the top. These include these:
- Ease of incorporation: in the UK this can be done in an hour and will cost you £14 or about $20.
- Tax advantages: The UK government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
In addition, the UK has one of the lowest corporate tax rates among G20 countries and, as such, is very attractive to commercial investors.
GDP: $ 313 billion in December 2017
At a glance
- GDP growth: 2%
- GDP per capita: 56,000 $
- Public debt / GDP: 113%
- Population: 5.6M
- Unemployment: 2.1%
- Balance of trade / GDP: 19%
- Inflation: -0.5%
According to the World Bank, Singapore presents one of the healthiest environments for starting a business. In addition to the excellent figures from the shared economic indicators above, the country also has the following advantages:
- He is politically stable
- It is one of the richest in the world, which means that the population has a lot of disposable income
- He has a strong workforce
- It does not impose any tax on dividends or capital gains
- It has many free trade agreements that open up huge markets
- You can easily register and start your business online
- Tax advantages: the Singapore government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
Singapore also offers affordable air tickets to its neighboring countries. This means that as a business owner, you will have affordable access to other exploratory markets such as Thailand, Indonesia, the Philippines and Malaysia.
GDP: $ 399 billion in December 2017
At a glance
- GDP growth: 1.1%
- GDP per capita: 75,000 $
- Public debt / GDP: 36%
- Population: 5.3M
- Unemployment: 4.7%
- Balance of trade / GDP: 5%
- Inflation: 3.6%
One of the best things about Norway is that communication with the government can be done reliably online. You can easily register a business and you will also find that complying with tax laws in this country is a fairly simple process.
Another additional benefit of starting a business in Norway is that it is a highly technologically advanced nation with a majority of Norwegians very willing to adapt, as well as pay, for new technologies.
This means that you will easily find a highly skilled workforce, especially in the fields of information technology, design, finance and music.
Other things that make this nation one of the best for doing business include:
- The population is generally wealthy, which means that they have a lot of disposable income
- It’s politically very stable
- It has a well-developed communication and transport infrastructure
- It is a major player in the EU and has long-standing trade relations with other EU countries
- Tax advantages: the Norwegian government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
Norway is a very transparent country and has minimal levels of corruption. For these reasons, Norway is a very attractive option for any simple commercial investor who wants to start an honest business.
GDP: $ 211 billion in December 2017
At a glance
- GDP growth: 3.6%
- GDP per capita: 44,000 $
- Public debt / GDP: 33%
- Population: 4.8M
- Unemployment: 5.1%
- Trade balance / GDP: -2.8%
- Inflation: 0.6%
In addition to the figures from the economic indicators given above, several other advantages make this nation an attractive destination for businesses:
- It has a skilled workforce that is not too expensive
- There are no pay, capital gains or payroll taxes
- Incorporating a business takes a day while registering a property can take as little as two days
- Tax advantages: the New Zealand government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
It also has a wealth of information easily accessible online via Statistics New Zealand which can help you conduct in-depth research in any sector in which you wish to invest. This immediately gives you an added advantage as you get to know the culture and spending habits. of the population and the performance of businesses in your niche.
GDP: $ 339 billion in December 2017
At a glance
- GDP growth: 2%
- GDP per capita: 46,000 $
- Population: 7.4M
- Balance of trade / GDP: 4.6%
- Unemployment: 2.7%
- Inflation: 2.6%
Hong Kong's economy has grown steadily over the past few decades, reflecting the practical and economically sound trade policies adopted by the region. As a free market economy, Hong Kong is highly dependent on international trade and finance.
It has a highly qualified workforce and a brilliantly designed and constructed transport and communication infrastructure. Hong Kong's economy is doing so well that it has even established itself as the benchmark exchange for Chinese companies wishing to trade abroad.
On the other hand, because Hong Kong has limited natural resources, it imports almost everything, from food to raw materials. This may seem a little daunting to aspiring industry titans, but remember that Hong Kong does not impose any tariffs on imported products, with the exception of four: hydrocarbon oil, hard alcohol, methyl alcohol and tobacco.
Tax advantages: the Hong Kong government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
GDP: $ 1.1 trillion in December 2017
At a glance
- GDP growth: 2.3%
- GDP per capita: $ 8,500
- Public debt / GDP: 50%
- Population: 129M
- Unemployment: 3.9%
- Balance of trade / GDP: -2.2%
- Inflation: 2.8%
Given the high crime rate in many parts of Mexico, few investors would immediately jump into the idea of starting a business there. However, despite these challenges, Mexico still presents one of the best possible destinations to start a business.
This is mainly due to the extensive business registration reforms that have taken place in the country. These reforms have largely led to an increase in the registration of businesses as a whole.
It is now much easier to register and start a business in Mexico. It only takes about eight days for your business to be up and running legally in the country.
Add to that the fact that it has a willing and willing workforce that is considered affordable compared to the other countries on this list and Mexico is a wonderful destination overall.
It also has free trade agreements with 46 different nations, opening up huge potential markets for all investors wishing to participate in the large manufacturing economy.
GDP: $ 679 billion in December 2017
At a glance
- GDP growth: 1.4%
- GDP per capita: 80,000 $
- Public debt / GDP: 33%
- Population: 8.5M
- Unemployment: 3.3%
- Balance of trade / GDP: 10.5%
- Inflation: -0.4%
With an unemployment rate of just 3.3%, a booming economy and a notoriously stable political climate, Switzerland is undoubtedly one of the best countries in the world for everything except the tropical climate.
It has a highly skilled workforce that is ready and willing to work (although it is not as affordable as in other countries on this list).
The country benefits from a highly developed service sector and a manufacturing industry specializing in high-tech and knowledge-based production. It also has one of the most sophisticated financial sectors in the world, which makes it perfect for safe, calculated and stable investments.
Besides the excellent figures showing economic growth and feats, Switzerland also has other factors which make it an attractive destination for starting a business. These include:
- A very transparent and easy to navigate legal system
- Constant economic and political stability
- Low corporate tax
- Efficient capital markets
- Outstanding communication and transportation infrastructure
- Tax advantages: the Swiss government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
In addition, it is a trusted and valued member of the EU that opens up some of Europe's most advanced and gigantic markets to investors.
GDP: $ 1.6 trillion in December 2017
At a glance
- GDP growth: 1.5%
- GDP per capita: 43,000 $
- Public debt / GDP: 99%
- Population: 37M
- Unemployment: 7%
- Trade balance / GDP: -3.3%
- Inflation: 1.4%
Although the Great White North has high standards of living, the country has made impressive gains in its manufacturing, services and mining sectors. These gains have greatly contributed to transforming the country from an essentially rural economy to an essentially urban and industrialized economy.
It also has a huge oil and natural gas sector, which places it in third place in the world oil reserves behind Venezuela and Saudi Arabia.
Canada enjoys extremely balanced bilateral trade with the United States, which opens up a huge market for commercial investors seeking to exploit the United States through Canada.
The country has a very stable political climate, excellent health care and a substantially skilled workforce. All these elements make it a lucrative destination for commercial investors who wish to profit from the service sector or industry.
Tax advantages: the Canadian government offers various tax advantages to founders, investors and even employees, which makes the country very attractive from a financial point of view.
GDP: $ 330 billion in December 2017
At a glance
- GDP growth: 5.1%
- GDP per capita: 69,000 $
- Public debt / GDP: 73%
- Population: 4.8M
- Unemployment: 7.9%
- Balance of trade / GDP: 3.3%
- Inflation: -0.2%
This small trade-dependent country has a strong economy that has been buzzing in recent times but has come out stronger.
After officially leaving the EU-IMF bailout program that saw Ireland stabilize its economy during the 2007 economic crisis, the country experienced rapid economic growth. As such, the government has increased public spending and significantly reduced certain taxes, which is good news for business owners.
Since the collapse of the construction sector (thanks to the same economic crisis), Ireland has become increasingly dependent on exports for its economic growth. This makes it one of the best destinations for any business owner who wants to start a manufacturing business geared towards the production of export goods.
The country has a large workforce despite its relatively small size; is experiencing an unprecedented period of economic growth (with GDP growth above 26% in 2015) and is politically very stable.
Tax benefits: The Irish government offers various tax benefits to founders, investors and even employees, which makes the country very attractive from a financial point of view.
GDP: $ 3.6 trillion in December 2017
At a glance
- GDP growth: 1.9%
- GDP per capita: 43,000 $
- Public debt / GDP: 68%
- Population: 83M
- Unemployment: 4.2%
- Trade balance / GDP: 8.3%
- Inflation: 0.4%
As one of the largest economies in the world and the largest in Europe, Germany is a wonderful investment destination and a major exporter of vehicles, machinery, household goods and chemicals.
But the main selling point of this country is that it has a huge workforce, highly qualified and highly educated. While this labor is not as affordable as it is in many of the countries on this list, Germany offers many advantages.
But despite all this, the economy suffers from low levels of investment, making it a ready and ripe market for foreign investors ready to assume the wages imposed by the available labor force.
As a member of the EU, Germany benefits from strict manufacturing and production standards. Starting a business will not only allow you to tap into the largely well-funded EU markets, but will also give you the opportunity to raise your production standards. Standardized at all levels, this will give your brand a highly competitive advantage in the global market.
OTHER GOOD COUNTRIES
Depending on how you define them, there are around 200 countries in the world. Although these ten countries that we have highlighted represent great opportunities, there are other wonderful countries. Where else should you look to start a new business?
- United States
Political and economic stability are among the factors that make these countries the best to start a business. They also have excellent governance with favorable policies that are not only welcoming for business investment but actually encourage innovation and entrepreneurship.
This, combined with the availability of disposable income for locals as well as favorable trade deals with other equally important markets in their region, make them perfect for business investment.
TIPS FOR STARTING A BUSINESS IN ANOTHER COUNTRY
While technological advances have made it much easier to find what it would take to start a business in a foreign country, the actual business remains a daunting task. Imagine how difficult it is to start, manage and start a profitable business in your own country. Now multiply this several times to get a clearer idea of the difficulty of creating one in a foreign country.
To get started, you'll need to comply with a long list of local and foreign regulations, as well as things like exchange rates and language barriers. All of these are essential and could very well ruin your prospects. Here are some tips to consider before starting a business in another country:
- Find the business practices that apply to your niche
- You should familiarize yourself with the laws, regulations, banking trends and tax laws that govern the country in which you wish to invest as a business owner. You must have local lawyers on the ground; people who will give you a clear idea of what it takes to incorporate your business, acquire the right properties, pay for labor and make a real profit.
- Have a clear understanding of the political climate of the country
- One of the most consistent problems with the countries that have been named the worst for business is the fact that all of them have an unstable political climate. The opposite is true for the countries that have been named the best to start a business; they all have very stable political climates. The political climate of a country largely determines the type of economic growth from which it could benefit as well as the financial policies that will govern it during a fiscal year. It also indirectly determines its levels of corruption as well as the bureaucracy involved in starting a business.
- Studying cultural differences
- A bikini maker can have a huge market share in the most liberal and westernized countries, but you cannot objectively expect the same business to be as successful in a conservative Muslim country. You should be aware of the cultural differences that govern the country in which you wish to invest. What might be a big business in the United States might not sell as well in China - and vice versa. You should also study the different social customs involved as well as the language barriers. In some countries, an agreement is only reached if the parties concerned have shaken hands, had tea or taken a steam bath together. These are just some of the special cultural differences that you should watch out for when you travel internationally.
- Get local advice
- You will need to hire lawyers from your home country as well as your destination country. But you will also need to get local advice from businessmen and local members of the workforce. These are people who know the ins and outs of management and work in the destination country of your choice. They will teach you things you cannot read in a report or online. They will show you how to work with local people to keep your business running smoothly. And the closer they are to your niche, the better.
CONCLUSION: GOING ABROAD IS DIFFICULT BUT USEFUL
Starting a business in a foreign country is a great idea for all the right reasons (new markets, more advanced technology, better workforce and cheaper prices). But before you can take advantage of all this, you need to find the right country in which to start this business. This guide gives you a good idea of where to start and which countries to avoid.
QUESTIONS AND ANSWERS
After all of this, you must have a good understanding of what to look for when starting a business. But here are some answers to frequently asked questions you may still have.
WHAT ABOUT CHEAP LABOR IN POOR COUNTRIES?
The importance of cheap labor will depend on your type of business. If you are developing advanced robotic technology, it is likely that you will not find workers with the skills to help you. On the other hand, if you don't need skilled workers, you still need to balance those savings with other things like tariffs and regulations. As always, the problems are complicated and you have to do your homework.
WHAT IF BOTTLES ARE NEEDED TO DO BUSINESS IN A COUNTRY?
Run away! And that is why all of the countries on our "best" list have stable governments with relatively low levels of corruption. It is a very bad idea to pay bribes, as it is almost certainly technically illegal anywhere you are. And that means you may face blackmail or even criminal penalties in the future.
WHY NOT SIMPLY CHOOSE THE UNITED KINGDOM?
Although Forbes has named the UK the best country to run a business in 2018, that's an opinion. In addition, it is a general opinion. Remember: your business is not generic - it is specific. She therefore has specific needs. You will probably do well in one of the countries we have highlighted. But if you want to make the best decision for your own business, you need to do more homework.