Bermuda has dropped from first place to sixth in an annual report of the best places in the world for multinationals to operate, based on cost and speed of operation.

The island was top-ranked in 2022, followed by Luxembourg and Germany, according to data compiled by entity portfolio management organisation Mercator by Citco in its annual Mercator Entity Management Report.

Malaysia emerged as the most favourable location overall in which to base entities in 2023 – based on the overall cost and time involved in managing them – followed by Singapore and Australia.

Taiwan, Vietnam and Norway are the lowest ranked countries.

Bermuda was ranked 19th overall by Mercator in 2021.

Kariem Abdellatif, head of Mercator, said: “While Bermuda has dropped from the overall top spot in 2022, it is important to note that this is not due to greater inefficiencies or changes to the regulatory framework in Bermuda.

“Instead, 2023 saw other jurisdictions climbing the ranks and increasing the speed and reducing cost in which multinationals can manage and maintain entities – particularly in APAC – with jurisdictions such as Malaysia, Singapore and Australia taking the top three positions this year.”

Europe retained the top spot as the cheapest region for multinationals to operate entities in this year amid greater disparity globally, with the digitalisation drive playing out at different speeds around the world.

Mercator said combined global average costs for multinationals to complete entity-related activities reduced by four per cent in 2023.

An uptick in the use of digital tools drove greater cost efficiency in some regions, easing the processes of entity management, while the growth of the legal and company secretarial support sector also played a part as a range of providers helped to reduce costs.

For the second year running, Europe ranked as the lowest cost region for multinationals to operate in, driven by the ongoing implementation of the EU Digitalisation Directive and a highly competitive legal service market, Mercator said.

In comparison, the Middle East and Africa and Latin America are most expensive, with many jurisdictions within those regions still requiring wet-ink signatures and multiple steps for notarisation, translation and legalisation of foreign documents.

The data – sourced directly from Mercator’s EPM technology platform, Entica – also showed North America is the fastest region, benefiting from widespread adoption of e-signatures and electronic filings, with average time to complete tasks decreasing by 14 per cent in 2023.

However, all other regions saw either an increase or no discernible change in time, with the efficiency gap widening between those jurisdictions embracing digitalisation and those jurisdictions still relying on traditional legalisation methods, physical filings and in-person meetings.

Mercator said this is most pronounced in Asia-Pacific, which has some of the most efficient processes for multinationals as well as some of the most complex.

This disparity results in global average time increasing by 48 per cent.

Mr Abdellatif added: “Overall, we continue to see the digitalisation drive revolutionising how multinationals manage and maintain their global portfolio of entities and 2023 has seen more jurisdictions across the world embrace digital tools to streamline processes and increase efficiency.

“What is becoming increasingly clear, however, is that the gap is widening between global financial centres with streamlined, tech-driven solutions – such as Singapore, the United Kingdom and the United States – and those jurisdictions still relying on traditional in-person processes.

“In those jurisdictions, the added complexity not only creates administrative burdens for in-house teams, but also costs multinationals more time and money.”

He added: “Of course, the purpose of this report is not to advise multinational companies on where to base entities or subsidiaries – this is obviously dictated by necessity – but to set expectations and provide foresight on the relative cost and time it takes to complete key activities to keep entities in compliance around the world.”

The statistics that form the basis of the report cover the period between October 2022 and November 2023, and are drawn directly from Mercator by Citco’s proprietary EPM technology platform – Entica – which individually records all the activities undertaken for clients.

The data covers more than 180 jurisdictions and 20 different types of corporate secretarial tasks. The data represents $3.41 trillion in market capital across all major business sectors and relates purely to the activities of multinational companies.

Mercator said it is the pioneer of entity portfolio management, an industry that sits at the intersection of traditional governance services, legal technology offerings and operational support services for overseas entities. Its clients are the general counsel of multinational companies.