So what is behind the enormous discrepancy?

Earlier, Forbes magazine in its own list of the best countries for business and ranked Korea a more realistic 32nd.

But Korean businesspeople were left scratching their heads. "If Korea is the fourth best place in the world to do business, then why aren't multinationals rushing to set up operations here?" asked one baffled executive with a major conglomerate.

Singapore ranked first, followed by New Zealand and Denmark.

The World Bank has ranked Korea as the fourth best place to do business out of 189 countries. The ranking came in the bank's annual "Doing Business" report Wednesday which saw Korea overtaking not just the U.S. and Japan but Hong Kong.

◆ Infrastructure

The World Bank has been assessing the business-friendliness of countries since 2003 and Korea has steadily risen from 16th in 2010 to fourth place this year.

The World Bank bases its evaluation mostly on infrastructure which is conductive to business. Its 10-point list of criteria includes "construction permits, getting electricity, registering property and enforcing contracts." Those areas are Korea's strong points.

But the evaluation did not include the Achilles heel of the Korean corporate landscape, which is labor relations.

Korea is notorious for its militant unions. "The most common complaints among domestic and foreign businesspeople are frequent strikes by unions and red tape, like regulations that ban hotels within a few hundred meters from a school, but the World Bank's evaluation did not reflect any of these factors, so it's difficult to take the ranking seriously," said Kim Dong-wook at the Korea Employers Federation.

◆ Poor Labor Relations, Red Tape

Unlike the World Bank, Forbes, the International Institute for Management Development and the World Economic Forum ranks Korea about average.

In this year's global competitiveness evaluation by the WEF, Korea ranked 26th, while the IMD's corporate efficiency list placed Korea 37th. The WEF and IMD make the evaluations based on culture, political and economic conditions and labor relations rather than infrastructure.

The IMD evaluates a country's labor market based on 24 categories, including salaries, working hours, labor relations, labor population and the number of highly-educated foreign workers. Korea cannot score high in most of those categories.

The WEF also asks 100 executive from each country about the overall business environment. This year, it said many executives complained about the government's fickle policies, bureaucratic inefficiency, tough accessibility to financial services and strict labor regulations.

Forbes analyzes inflation, unemployment, taxation and corporate-friendly policies in around 120 countries, and economic indicators, and expert opinions are also included in the final ranking.

Those categories do not exist in the World Bank's evaluation.

"Looking at the evaluations of many institutions, we can see that Korea gets low grades in terms of software," said Kim Sung-tae at the state-run Korea Development Institute.