SINGAPORE is a very safe place to do business, according to findings from French credit insurance firm Coface's Business Climate@ratings.
The study, released yesterday, provides two ratings for 150 countries - a rating on risks inherent in the business climate, and a more holistic rating that takes into account the business climate, economic and financial prospects and company payment behaviour.
Singapore's ratings of A1 in both areas signify the lowest category of risk on a scale with seven levels in increasing order, numerically up to A4 and then alphabetically up to D.
This places Singapore in the top band, which includes Germany, Australia and Japan.
The purpose of the ratings is to assess the overall quality of a country's business environment - whether financial information there is available and reliable, whether the institutional framework is favourable to inter-company transactions and whether the legal system provides fair and efficient creditor protection.
The business climate rating mainly comprises business data compiled by Coface on the quality of information available on companies and the legal protection given to creditors.
This rating is supplemented by an assessment of institutional framework quality, which reflects the quality of institutions whose strengths and weaknesses can affect companies.
The parameters considered include such standards as public service effectiveness (government, education, health, infrastructure), regulatory quality, rule of law and extent of corruption. They are based on data from external sources.
These are: a government effectiveness indicator maintained by the World Bank Institute, based on the quality of public services provided and civil service efficiency; the Human Development Index, created by the United Nations to rank the quality of life in countries; and an infrastructure quality index (energy, transport, telecommunications) published by the World Economic Forum.
Not all countries received the same business climate and overall ratings, owing to imbalances in levels of financial information, creditor protection and the institutional environment.
For 39 countries including China and India, or 26 per cent of the 150 countries, the business climate was rated lower than the country's overall risk level.
For 17 countries including Turkey and Israel, or 11 per cent, the business climate was rated higher.
This article was first published in The Business Times on Jun 5, 2008
