EuCham sees slightly worse business climate in Hungary

Entrepreneurs usually have personal experiences about doing business in a country, and their perceptions can be very different, depending on the business sector or geographic region. The EuCham research combines several factors into scores and a ranking which can be regarded as objective, according to the press release.

The EuCham score measures the overall business context constituted by the corporate environment, legislation, government policies, social climate and conditions which enable or prevent private sector activities from starting, operating and expanding, both in the short and long term.

An economy’s EuCham score is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the best. Denmark tops the 2017 ranking with a score of 87, followed by Sweden, Finland, Norway and the United Kingdom.

EuCham research differs from others in that it also takes corruption into consideration, based on Transparency International’s Corruption Perceptions Index (CPI). The index is used to determine how corrupt each country’s public sector is seen to be on a scale from 0 (highly corrupt) to 100 (very clean). A low score can be a sign of widespread bribery, lack of punishment for corruption, or a government not responding to social needs.

Another important element used in the EuCham methodology is the World Bank’s Distance To Frontier (DTF) score. This measures the distance of each country’s economy to the frontier, mirroring the best performance on each indicator across all economies (e.g. starting a business, paying taxes, trading across borders, property registration). The difference is shown on a scale from 0 (lowest performance) to 100 (frontier); a score of 70 means that the economy is 30 points away from the frontier.

The EuCham score, used for the ranking, is the weighted average of the CPI and DTF scores (50% weight each). A high score indicates the country is favorable for business, while low scores indicate the countries least favorable for business. Another important element of the research is that it also contains the previous yearʼs ranking, thus showing the evolution of the business environment of each country.

This year, Hungary ranked 28th of 46 countries in the survey, below Slovakia, Romania and Croatia. This is one position lower than in 2016, while Romania climbed three positions compared to last year (from 29th to 26th), Poland two positions (from 18th to 16th) and Latvia two positions (from 21st to 19th). Among the countries that performed worse this year are Slovenia (slipping from 19th to 21st) and Croatia (26th to 27th). The bottom three positions are occupied by Russia, Azerbaijan and Ukraine.