Sweden fell behind Denmark (sixth), Norway (eighth) and Finland (13th), but nudged ahead of Iceland (15th) in the eighth annual "Doing Business 2011: Making a Difference for Entrepreneurs" rankings compiled by the International Finance Corporation and the World Bank.
For the fifth year running, Singapore topped the rankings of the report, which ranks 183 economies on key aspects of business regulation for domestic firms. Hong Kong was second, followed by New Zealand, the UK and the US.
"Governments worldwide have been consistently taking steps to empower local entrepreneurs," Neil Gregory, acting director of global indicators and analysis at the World Bank, said in a statement.
"The economies most affected by the financial crisis — especially in Eastern Europe — have been targeting regulatory reforms over the past year to make it easier for small and medium-size enterprises to recover and to create jobs," he added.
Sweden performed best in trade across borders, coming in seventh, registering property (15th), closing a business (18th) and dealing with construction permits (20th). However, it lagged behind in access to credit, coming in 72nd place.
Other criteria for the survey included starting a business, investor protection, paying taxes and enforcing contracts.
Over the past five years, 85 percent of the countries have improved conditions for operating a business. China and India are among the countries that have recorded the greatest improvements.
"New technology underpins regulatory best practice around the world. Technology makes compliance easier, less costly, and more transparent," said Janamitra Devan, vice president for financial and private sector development for the World Bank.
Chad came in last, followed by the Central African Republic and Burundi. Nine of the last 10 countries on the list are in Africa, lagging behind Timor-Leste.