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Contracting abroad: the most competitive countries for contractors

Contractors thinking about contracting overseas can use the World Economic Forum’s Global Competitiveness Report to help them research potential target countries.

The report is a whopping 544 pages long and ranks the competitiveness of 142 countries according to a wide range of business, economic, societal and other factors, such as sustainability, infrastructure and technology and innovation.

Switzerland ranks first in the 2011-2012 competitiveness table, with the UK in tenth place after Germany (sixth) and the United States (fifth). Chad, Haiti and Burundi are in the bottom three, but many emerging and developing economies are rapidly climbing up the competitiveness rankings at the expense of developed nations.

How are countries ranked?

The report applies a consistent matrix of what it calls twelve pillars of competitiveness to quantitatively assess and rank each country. It is a cumulative score of the twelve pillars and the several dozen sub-criteria on which the final ranking is based.

The pillars range from institutions, such as government and legislature, and include an assessment of corruption and efficiency in government, underlying health and primary education and innovation and sophistication factors.

A key element of the report is its executive opinion survey, which conducts 15,000 interviews across 142 countries of leading business executives who provide unique insights into the competitiveness of their host nation. This can be a goldmine of information for contractors looking for buoyant markets that match their expertise.

Key competitiveness criteria for contractors

Each contractor will have differing business and personal criteria for choosing a country in which to work. For example, a contractor with a family considering a long-term overseas contract may be more interested in the education and health infrastructure than a contractor keen to work in a nation with the lowest taxes. Some of the criteria likely to be of interest to contractors considering contracts overseas include:

Total tax rate (summary chart on page 456 of the 2011-2012 version) includes a weighted average of business and income taxes. It features Timor-Leste as the lowest tax regime, with the UK 61st out of 140. There are a number of typical contracting nations ahead of the UK, in terms of tax competitiveness, which include Ireland (24th), Canada (29th), Denmark (29th) and South Africa (36th).

Extent and effect of taxation (page 455) asks: “What impact does the level of taxes in your country have on incentives to work or invest?”. The UK is in 94th place, with the top ten dominated by the Gulf States, Singapore, Hong Kong, Luxembourg and Switzerland.

Burden of government regulation (page 398) assesses the compliance burden on business, including permits, regulations and reporting. The UK is in 83rd place, but still above many other eurozone neighbours, such as Germany (88th), Spain (110th), France (116th), Belgium (127th), Portugal (128th), Greece (133rd) and Italy (140th). The high burden of regulation is likely to be a key factor in the sluggish growth of eurozone countries. Least burdensome contractor locations include Singapore in first place, and Hong Kong in third.

The report presents a wealth of useful information that enables the international contractor to make informed choices about likely destinations that might suit their contracting and personal profiles

Strength of auditing and reporting standards (page 407) is a hugely important factor for contractors who want to be sure that their clients can and will pay them. The UK scores 15th in this table, with the bottom ten – countries to avoid unless payment is up front – dominated by sub-Saharan African nations, Syria and the Ukraine. Ethical behaviour of firms (page 406) shares a similar profile, with the UK in 12th place.

Efficiency of legal framework in settling disputes (page 399) asks about the effectiveness of local laws for settling business disputes. In the UK, it’s clearly effective at 13th place. Portugal and Italy are clearly not countries for contractors to get into disputes with their clients, ranking 131st and 133rd respectively, and many oil and gas contractors will already have experienced why Venezuela is in bottom place at 142.

Brain drain asks if the country attracts talented people, where a high score means “there are many opportunities for talented people within this country” (page 477). Switzerland is first, with the UK in 4th place after Singapore in 2nd and the United States in 3rd. Clearly, the UK’s home market remains a highly attractive place to run a contracting business.

Additional competitiveness criteria to consider

Other key business factors that contractors can use to asses potential overseas contracting markets include:

  • The number of procedures required to start a business (page 457 – UK 34th)
  • Time required to start a business (page 458 – UK 51st)
  • Rigidity of employment (page 472 – UK 19th)
  • Hiring and firing practices (page 473 – UK 36th).

The report presents a wealth of useful information that enables the international contractor to make informed choices about likely destinations that might suit their contracting and personal profiles.

Published: 23 December 2011

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