65396 Economy Profile: Kyrgyz Republic © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-8833-4 E-ISBN: 978-0-8213-8834-1 DOI: 10.1596/978-0-8213-8833-4 ISSN: 1729-2638 Printed in the United States Doing Business 2012 Kyrgyz Republic 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 37 Registering property .................................................................................................................. 43 Getting credit .............................................................................................................................. 53 Protecting investors ................................................................................................................... 60 Paying taxes ................................................................................................................................ 70 Trading across borders .............................................................................................................. 78 Enforcing contracts .................................................................................................................... 87 Resolving insolvency .................................................................................................................. 94 Data notes ................................................................................................................................. 100 Resources on the Doing Business website ............................................................................ 105 Doing Business 2012 Kyrgyz Republic 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is (except for the paying taxes indicators, which cover the for a local entrepreneur to open and run a small to period January–December 2010). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 10 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts and transparency of government procurement, resolving insolvency. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 183 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 32 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 18 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2012 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and indicators for Kyrgyz Republic. To allow useful recommends regulatory reforms. The data, along with comparison, it also provides data for other selected information on ordering Doing Business 2012, are economies (comparator economies) for each indicator. available on the Doing Business website at The data in this report are current as of June 1, 2011 http://www.doingbusiness.org. Doing Business 2012 Kyrgyz Republic 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Eastern Europe & Central Asia business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Low income medium-size businesses through their life cycle. Economies are ranked from 1 to 183 by the ease of Population: 5,365,167 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 880.00 percentile rankings on each of the 10 topics included in the index in Doing Business 2012: starting a business, DB2012 rank: 70 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2011 rank: 67 investors, paying taxes, trading across borders, Change in rank: -3 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see Note: See the data notes for sources and the data notes for more details). 1 definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. 1 Except for the ease of getting credit, for which the percentile rankings on its component indicators are weighted, the depth of credit information index at 37.5% and the strength of legal rights index at 62.5%. Doing Business 2012 Kyrgyz Republic 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy the regional average (figure 1.2). The economy’s stands in the aggregate ranking on the ease of doing rankings on the topics included in the ease of doing business is useful. Also useful is to know how it ranks business index provide another perspective (figure compared with other economies and compared with 1.3). Figure 1.2 How Kyrgyz Republic and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Kyrgyz Republic ranks on Doing Business topics Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing This measure shows the distance of each economy to business tells only part of the story, so do changes in the ―frontier,‖ a synthetic measure based on the most that ranking. Yearly movements in rankings can efficient practice or highest score observed for each provide some indication of changes in an economy’s Doing Business indicator across all economies and regulatory environment for firms, but they are always years included in the Doing Business sample since relative. An economy’s ranking might change because 2005. Nine areas of business regulation are covered. of developments in other economies. An economy that Comparing the measure for an economy at 2 points in implemented business regulation reforms may fail to time allows users to assess how much the economy’s rise in the rankings (or may even drop) if it is passed regulatory environment as measured by Doing by others whose business regulation reforms had a Business has changed over time—how far it has moved more significant impact as measured by Doing toward (or away from) the most efficient practices and Business. strongest regulations in areas covered by Doing Moreover, year-to-year changes in the overall rankings Business (figure 1.4). The results may show that the do not reflect how the business regulatory pace of change varies widely across the areas environment in an economy has changed over time— measured. They also may show that an economy is or how it has changed in different areas. To aid in relatively close to the frontier in some areas and assessing such changes, Doing Business 2012 relatively far from it in others. introduces the distance to frontier measure. Figure 1.4 How far has Kyrgyz Republic come in the areas measured by Doing Business? Distance to frontier, 2005 and 2011 Note: For economies added to the Doing Business sample after 2005, the starting point is the year in which they were added: 2006 for Montenegro; 2007 for Brunei Darussalam, Liberia and Luxembourg; 2008 for The Bahamas, Bahrain and Qatar; and 2009 for Cyprus and Kosovo. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist— numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Kyrgyz Republic Kyrgyz Republic DB2012 Kyrgyz Republic DB2011 Best performer globally Kazakhstan DB2012 Uzbekistan DB2012 Russian Federation Tajikistan DB2012 Moldova DB2012 Ukraine DB2012 Indicator DB2012 DB2012 Starting a Business 17 13 57 88 111 70 112 96 New Zealand (1) (rank) Procedures (number) 2 2 6 7 9 5 9 6 Canada (1)* Time (days) 10 10 19 9 30 24 24 14 New Zealand (1) Cost (% of income per 3.5 3.7 0.8 9.1 2.0 33.3 4.4 6.4 Denmark (0.0)* capita) Paid-in Min. Capital (% 0.0 0.0 0.0 9.9 1.6 0.0 1.8 27.2 82 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 62 59 147 164 178 177 180 145 China (1) (rank) Procedures (number) 12 12 32 27 51 26 21 25 Denmark (5) Time (days) 142 142 189 291 423 228 375 243 Singapore (26)* Cost (% of income per 171.8 151.1 93.2 79.2 183.8 849.9 1462.3 57.0 Qatar (1.1) capita) Doing Business 2012 Kyrgyz Republic 11 Kyrgyz Republic DB2012 Kyrgyz Republic DB2011 Best performer globally Kazakhstan DB2012 Uzbekistan DB2012 Russian Federation Tajikistan DB2012 Moldova DB2012 Ukraine DB2012 Indicator DB2012 DB2012 Getting Electricity (rank) 181 179 86 160 183 178 169 170 Iceland (1) Procedures (number) 7 7 6 7 10 9 11 9 Germany (3)* Time (days) 337 337 88 140 281 238 274 117 Germany (17) Cost (% of income per 2545.6 2110.9 88.4 660.6 1852.4 1297.9 229.2 1783.3 Japan (0.0) capita) Registering Property 17 17 29 18 45 90 166 136 New Zealand (3) (rank) Procedures (number) 4 4 4 5 5 6 10 12 Portugal (1)* Time (days) 5 5 40 5 43 37 117 78 Portugal (1) Cost (% of property 2.2 2.3 0.1 0.9 0.2 5.3 3.9 0.9 Slovak Republic (0.0) value) Getting Credit (rank) 8 8 78 40 98 177 24 159 United Kingdom (1)* Strength of legal rights 10 10 4 8 3 2 9 2 New Zealand (10)* index (0-10) Depth of credit 4 4 5 4 5 0 4 3 Japan (6)* information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 Portugal (86.2) (% of adults) Private bureau coverage 18.7 11.9 37.6 3.0 35.8 0.0 17.0 3.6 New Zealand (100.0)* (% of adults) Protecting Investors 13 12 10 111 111 65 111 133 New Zealand (1) (rank) Extent of disclosure 8 8 9 7 6 8 5 4 France (10)* index (0-10) Doing Business 2012 Kyrgyz Republic 12 Kyrgyz Republic DB2012 Kyrgyz Republic DB2011 Best performer globally Kazakhstan DB2012 Uzbekistan DB2012 Russian Federation Tajikistan DB2012 Moldova DB2012 Ukraine DB2012 Indicator DB2012 DB2012 Extent of director 7 7 6 1 2 3 2 1 Singapore (9)* liability index (0-10) Ease of shareholder suits 8 8 9 6 6 6 7 7 New Zealand (10)* index (0-10) Strength of investor 7.7 7.7 8.0 4.7 4.7 5.7 4.7 4.0 New Zealand (9.7) protection index (0-10) Paying Taxes (rank) 162 155 13 83 105 168 181 157 Canada (8) Payments (number per 52 48 7 48 9 69 135 41 Norway (4) year) Time (hours per year) 210 202 188 228 290 224 657 205 Luxembourg (59) Trading Across Borders 171 171 176 134 160 177 140 183 Singapore (1) (rank) Documents to export 8 8 9 6 8 11 6 10 France (2) (number) Hong Kong SAR, Time to export (days) 63 63 76 32 36 82 30 71 China (5)* Cost to export (US$ per 3210 3010 3130 1545 1850 3850 1865 3150 Malaysia (450) container) Documents to import 9 9 12 7 10 9 8 11 France (2) (number) Time to import (days) 72 72 62 35 36 83 33 92 Singapore (4) Cost to import (US$ per 3450 3280 3290 1740 1800 4550 2155 4650 Malaysia (435) container) Enforcing Contracts 48 50 27 26 13 42 44 43 Luxembourg (1) (rank) Doing Business 2012 Kyrgyz Republic 13 Kyrgyz Republic DB2012 Kyrgyz Republic DB2011 Best performer globally Kazakhstan DB2012 Uzbekistan DB2012 Russian Federation Tajikistan DB2012 Moldova DB2012 Ukraine DB2012 Indicator DB2012 DB2012 Time (days) 260 260 390 352 281 430 343 195 Singapore (150) Cost (% of claim) 29.0 29.0 22.0 28.6 13.4 25.5 41.5 22.2 Bhutan (0.1) Procedures (number) 38 38 36 30 36 35 30 42 Ireland (21)* Resolving Insolvency 150 144 54 91 60 68 156 117 Japan (1) (rank) Time (years) 4.0 4.0 1.5 2.8 2.0 1.7 2.9 4.0 Ireland (0.4) Cost (% of estate) 15 15 15 9 9 9 42 10 Singapore (1)* Recovery rate (cents on 11.7 15.3 42.7 31.3 41.5 38.2 8.9 23.7 Japan (92.7) the dollar) Note: The methodology for the paying taxes indicators changed in Doing Business 2012; see the data notes for details. For these indicators, the best performer globally is the economy that has implemented the most efficient practices in its tax system and is not necessarily the one with the highest ranking. For more information on “no practiceâ€? marks, see the data notes for details. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures that are officially required or commonly received done in practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur ï‚· Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that all government and nongovernment entities involved in the process ï‚· Has a turnover of at least 100 times income per capita. function without corruption. And it assumes that the business: ï‚· Does not qualify for any special benefits. ï‚· Is a limited liability company, located in the ï‚· Does not own real estate. largest business city. ï‚· Is 100% domestically owned. ï‚· Conducts general commercial or industrial activities. Doing Business 2012 Kyrgyz Republic 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Kyrgyz procedures, takes 10 days, costs 3.5% of income per Republic? According to data collected by Doing capita and requires paid-in minimum capital of 0.0% of Business, starting a business there requires 2 income per capita (figure 2.1). Figure 2.1 What it takes to start a business in Kyrgyz Republic Paid-in minimum capital (% of income per capita): 0.0 Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 16 STARTING A BUSINESS Globally, Kyrgyz Republic stands at 17 in the ranking of and the regional average ranking provide other useful 183 economies on the ease of starting a business information for assessing how easy it is for an (figure 2.2). The rankings for comparator economies entrepreneur in Kyrgyz Republic to start a business. Figure 2.2 How Kyrgyz Republic and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to start a business in Kyrgyz 2.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 2.1 The ease of starting a business in Kyrgyz Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 13 17 Procedures (number) 9 9 9 9 9 4 3 2 2 Time (days) 21 21 21 21 21 15 11 10 10 Cost (% of income per 12.5 11.5 10.4 10.7 8.8 7.4 5.2 3.7 3.5 capita) Paid-in Min. Capital (% 0.7 0.6 0.6 0.5 0.5 0.4 0.0 0.0 0.0 of income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by Kyrgyz Republic on ways to improve the ease of the economies that today have the best performance starting a business. And changes in regional averages regionally or globally on the procedures, time, cost or can show where Kyrgyz Republic is keeping up—and paid-in minimum capital required to start a business where it is falling behind. (figure 2.3). These economies may provide a model for Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2012 Kyrgyz Republic 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In the case of paid-in minimum capital, 82 economies globally and 8 economies in Eastern Europe & Central Asia have no paid-in minimum capital. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 20 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Kyrgyz Republic (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Kyrgyz Republic made starting a business easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. The Kyrgyz Republic eased business start-up by eliminating DB2011 the requirement to have the signatures of company founders notarized. Business start-up was eased by eliminating the minimum capital requirement, reducing the registration time, and DB2010 abolishing various post-registration fees and the need to open a bank account before registration. A new one-stop shop made it easier to start a business by streamlining and simplifying business registration processes DB2009 and eliminating certain requirements such as proof of residence. Obtaining a company seal became optional. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Kyrgyz Republic is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Bishkek firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Private Limited Liability Company professionals and the study of laws, regulations and Start-up capital: 10 times GNI per capita publicly available information on business entry in that economy. Following is a detailed summary of Paid-in minimum capital (% of income per those procedures, along with the associated time capita): 0.0 and cost. These procedures are those that apply to a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Kyrgyz Republic—and the time and cost Time to No. Procedure Cost to complete complete Register at the One stop shop Register with the Social Fund and the State Tax and the National statistics In June 2008 the one-stop shop registration procedure came into force: The applicant submits the full package of documents to the one-stop shop at the Ministry of Justice of the Kyrgyz Republic. According to article 10 of the Law ―On State Registration of Legal Entities‖ of the Kyrgyz Republic, the registration of legal entity (LTD) has to be done in 10 calendar days. Since the amendements to the civil code in April 2009, the one stop shop operates officially in 3 days and interacts electronically with all the agencies. As of April, 2009, only 3 documents are needed fo registartion: KGS 232 (registration 1 - application for the company incorporation; 7 days fee) -letter stating the entrepreneur's decision to create the LLC - founding agreement; - copies of IDs of founders and managers. 1. Applicant submits all the documents to the one-stop-shop in an application. 2. The office accepts the documents and should carry an expertise of the incorporation documents to make sure they comply with legislation during the 3 days period. 3. Upon expiration of the term, the system delivers an order to register and issue a certificate of registration for the legal entity. This certificate contains the OKPO code, INN code (tax payer number) issued by statistics offices and tax authority via electronic data base Doing Business 2012 Kyrgyz Republic 22 Time to No. Procedure Cost to complete complete correspondingly. Obtain permission to make company seal and make a seal KGS 1,100 (125 of The seal-making company requests permission to make its client’s permission cost + 2 company seal. The cost of the seal depends on the delivery time (say, 2 3 days service fees of 450- hours versus 1 day). The faster the delivery, the higher the cost. The 1,500). Presidential decree of 23rd April nb 182 makes the use of the seal optional, however in practice, companies still use it. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy’s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes ï‚· Is a limited liability company operating in ï‚· Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The ï‚· Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long. ï‚· Has 60 builders and other employees. ï‚· Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring ï‚· Is a new construction (there was no special conditions). previous construction on the land). ï‚· Will take 30 weeks to construct (excluding all ï‚· Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2012 Kyrgyz Republic 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to construction permits there requires 12 procedures, build a warehouse in Kyrgyz Republic? According to takes 142 days and costs 171.8% of income per capita data collected by Doing Business, dealing with (figure 3.1). Figure 3.1 What it takes to comply with formalities to build a warehouse in Kyrgyz Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 25 DEALING WITH CONSTRUCTION PERMITS Globally, Kyrgyz Republic stands at 62 in the ranking of ranking provide other useful information for assessing 183 economies on the ease of dealing with how easy it is for an entrepreneur in Kyrgyz Republic construction permits (figure 3.2). The rankings for to legally build a warehouse. comparator economies and the regional average Figure 3.2 How Kyrgyz Republic and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how aspects of the process have changed—and which have easy (or difficult) it is to deal with construction permits not (table 3.1). That can help identify where the in Kyrgyz Republic today, data over time show which potential for improvement is greatest. Table 3.1 The ease of dealing with construction permits in Kyrgyz Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 59 62 Procedures (number) 22 22 22 13 12 12 12 Time (days) 395 395 395 155 142 142 142 Cost (% of income per 809.7 763.4 689.2 432.2 169.8 151.1 171.8 capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practiceâ€? marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 27 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by Republic on ways to improve the ease of dealing with the economies that today have the best performance construction permits. And changes in regional regionally or globally on the procedures, time or cost averages can show where Kyrgyz Republic is keeping required to deal with construction permits (figure 3.3). up—and where it is falling behind. These economies may provide a model for Kyrgyz Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2012 Kyrgyz Republic 28 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practiceâ€? mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 29 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Kyrgyz Republic (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Kyrgyz Republic made dealing with construction permits easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. The process for getting construction permits by streamlining the fee structure, introducing a risk-based system of DB2010 approval and building control, allowing low-risk projects to conduct an internal building control process, and simplifying the process for obtaining utility connections. Dealing with construction permits also became easier, thanks to a one-stop shop making it possible to obtain a designing DB2009 permit, construction license, and occupancy permit at a single place. This reform eliminated several procedures, reduced the time required to build a warehouse, and lowered the cost. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 30 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Kyrgyz Republic BUILDING A WAREHOUSE are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business City : Bishkek through information collected from experts in construction licensing, including architects, Estimated construction lawyers, construction firms, utility KGS 10,670,343 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Kyrgyz Republic —and the time and cost Time to No. Procedure Cost to complete complete File application-intention and obtain City Planning Regulation of Architectural Planning Conditions (AПЗ) from the unit of State Department for Architecture and Construction Supervision In accordance with the Regulation ―On Order for Issuing Permits for Project Designs, Construction and Real Estate Modification and Order for Commissioning Completed Building the Kyrgyz Republic‖ approved by Government of KR on May 30, 2008, by Resolution # 252, the issuance of Architectural Planning Terms (APU) shall be conducted according to One-Stop-Shop principle. The list of documents required for issuance of APU was reduced. In particular, a business is only expected to fill up an established application which contains information on the type of upcoming construction and submit it along with the following documents: copy of the land title that verifies that a land plot was purchased or leased, letter of attorney, invoice on 28 days KGS 18,500 1 advanced payment (advance payment is required while obtaining an APU, the remainder is paid after a business receives the APU). A territorial architecture and construction body, within 3 business days, performs the check for compliance of an application form with requirements set by urban planning documentation. In case of non- compliance, the territorial architecture and construction body issues a Report on Non-compliance of Construction Intends and returns the application without approval. In each case the body is obliged to indicate the established types of permitted land use pursuant to the urban planning documentation. In case the territorial architecture and construction body approves the application, it submits the application for further approval to the sanitary and epidemiology body, fire authority, and environmental Doing Business 2012 Kyrgyz Republic 31 Time to No. Procedure Cost to complete complete authority. After that the application is forwarded to utilities companies by the main coordinating agency- State Construction Department for obtaining technical terms to install such utility systems as power supply, water supply, sewage system, heating and gas supply using One-Stop- Shop principle without participation of the applicant. The State Construction Department has 20 working days within which it must obtain approvals, internally from all utilities, and other relevant authorities. Resolution # 252 gives all utility providers 10 working days to approve the technical conditions. Moreover, utility providers cannot reject the possibility of connection without providing alternative options. Lack of an opportunity to connect an object to utilities systems may not be a ground for refusal of issuing APU. Meanwhile, the Sanitary, Fire and Environmental Services will also have a 10 working days to grant their approvals, after which a silence-is-consent rule will apply. The payment can be made at the counter of State Architecture Department of Bishkek City. Then the shares of each respective utility provider are transferred without BuildCo visiting each separately. APU is executed in two copies, one of this is issued to the applicant and the other is stored in architecture and construction body. As of 12 February 2009, new Government Resolution# 121 introduced amendments to the Regulation ―On Order for Issuing Permits for Project Designs, Construction and Real Estate Modification and Order for Commissioning Completed Building the Kyrgyz Republic‖ approved by Government of KR on May 30, 2008, by Resolution # 252. There are now only two technical conditions that must be obtained in a compulsory manner- for water/ sewage and electricity. The remaining communications can be obtained on voluntary basis by applicants and are not linked to obtaining the Architectural Planning Conditions. Meanwhile, if applicant suggests alternative solutions to connecting to engineering facilities, then requests for technical conditions are not filed at all. Based on functional purpose of the building approvals from sanitary and fire authorities are applied using risk based system. Simple objects would not require approvals from these authorities. Additionally, requirements for documents to be submitted along with application have been clarified. These administrative simplifications made the process of issuance of Architectural Planning Conditions faster and possible to comply within the time-limit of 20 working days (28 calendar days). Despite reforms in disclosing the information on fee schedules the process of cost calculation for this procedure remains closed and indiscreet. * Request and obtain technical conditions to connect to networks for telephone line 2 14 days KGS 720 Resolution #252 provides for the State Architecture Department and its territorial branch in Bishkek to issue the APU without acquiring the technical terms from telephone service providers. For this reason, the Doing Business 2012 Kyrgyz Republic 32 Time to No. Procedure Cost to complete complete procedure is not mandatory and the applicant takes an individual decision on services of which company may be used. The conditions may be requested at any stage of construction. Most applicants requests it right before connecting to telephone services. Although, the local telecom market has various companies that provide fixed line services, it is most likely that the natural monopolist – Kyrgyztelecom would be the one with the widest network services. According to Kyrgyztelecom’s regulations in order to connect to its services the applicants must obtain technical terms beforehand. * Request and obtain topographic and geological survey conclusions of land from Kyrgyz GIIZ Although there are several licensed companies that provide these services KyrgyzGIIZ has the biggest database of maps back from late Soviet years of the country. Engineering –geological studies have not been done since the collapse of Soviet Union, and any new land 3 developed after it would require BuildCo to request the full study. 14 days KGS 7,500 However, there are certain parts of the city that can be considered to have the proper geological study. In that case BuildCo would have to request a certificate on geological survey, assuming that the actual geological survey which is very costly (up to 3,000 USD), or the survey of adjacent plot has been done. The cost for this certificate can be anywhere between 5 to 10,000 KGS. Kyrgyz GIIZ is the only licensed institution in the country with proper equipment and capacity. Request approval of project, expertise of project documents and obtain building permit This procedure consists of three stages: approval of project documents; expertise of documents; issuance of building permit. All three stages are done under one stop shop principle. A single application is filed by the applicant to obtain all these approvals. The approval of project documents consists of two stages: initial review of drawings and plans, and other relevant chapters of the projects is done by the territorial branch of State Architecture Department. BuildCo submits at this stage its application along with the following documents: 4 56 days KGS 25,000 Project documents (drawings, plans); private projects are not required to submit any financial segment of the project (abolished by the Resolution #252). Engineer-geological study (for expertise). Copies of letters authorizing persons responsible for construction works: technical supervision, author supervision; and for contractor (for construction permit). Copies of licenses for construction works (for construction permit). Positive conclusion from respective Institute of State Agency of Doing Business 2012 Kyrgyz Republic 33 Time to No. Procedure Cost to complete complete Architecture and Construction and other licensed agencies which have the right to provide engineering assessment of objects no lower than two stories stating possibility of reconstructing, re-profiling or re- planning of objects (for construction permit). Any other documents are considered illegal. The authority must issue its approval within 10 working days. Following that it will send two copies of all documents for review of State Expertise Authority. According to Resolution #252 (30.05.08), and Government Resolution # 75 as of 4 February 2009, the expertise can be conducted by private companies, but until now there has not been a single license issued for expertise works. The nature of the expert assessment has been changed too. In past, the expert assessment was focused on the cost estimated of the project, which is prohibited by the mentioned above regulation. The expert assessment of the project design documents is conducted by State Expertise Authority and its territorial bodies or privately licensed companies, to check the following aspects: Compliance of the object with requirements set by Architectural Planning Terms, Project Design Terms and City Planning Documentation; Justification of space-planning and construction decisions, construction materials and equipment, solidity and durability of the bearing structure of buildings; Check the results of geotechnical survey; Based on results of the conducted expert assessment, State Expertise Authority prepares a report on compliance of the project design documents with normative requirements. In case of any irregularities, State Expertise Authority prepares another report on bringing the project design documentation in compliance which indicates the said irregularities or a report on refusal of approving the project design. Under current legislation there are categories of objects that do not require state expert assessment. There are notions of mandatory and voluntary expert assessment and possibility for expert assessment of project documentation by private experts or organizations. BuildCo’s case would qualify for the expert assessment. No later than a day following the approval date, which is 20 working days for projects higher than 1000 sq.m., the report with positive expert assessment is submitted to State Architecture and Construction Supervision for issuing a construction permit. The State Architecture and Construction Supervision has to issue the building permit in 10 working days. Otherwise silence is consent principle applies. Amendments regarding construction supervision process were made to Law ―On Changes to Law of the Kyrgyz Republic‖ #101 as of 30 March 2009, ―On City Construction and Architecture of the Kyrgyz Republic‖ Article 40, and Government Resolution # 95 ―On approving the Order on Classification of Construction Object Doing Business 2012 Kyrgyz Republic 34 Time to No. Procedure Cost to complete complete Characteristics and Order of Conducting State Architecture- Construction Supervision, Reconstruction and Other Real Estate Objects in the Kyrgyz Republic‖. According to these reforms the building supervision process is now based on risk based approach. Compulsory state control over building process is applied for buildings that fall into high-risk category. Low risk categories, buildings exceeding 1350 sq.m., are now subject to author and technical supervision, and do not require state supervision. Thus, it removes the need for signing a special contract with State Architecture and Construction Supervision and paying respective fees. Both author and technical supervision can be done by BuildCo staff. At the time of issuing the building permit, BuildCo will receive a schedule of inspections to be carried out by State Architecture and Construction Supervision. The inspections will take place three times: foundation works, structure and final one. All inspections can be notified via phone and do not require a special visit. This brings the overall time to 56 calendar days. Cost consists of the following components: - approval of project documentation – KGS 8260 - the expertise of project documents – KGS 9899.4. T Additionally, the base for calculation of expertise fee was reformed by Order of State Agency of Architecture and Construction on 16 June 2008 and it comprises now based on fixed formula – KGS 7,45 x sqm. (excluding 12% VAT). It abolished the previous fee which was based on project value of 0.3%. - building permit- is free of charge. Total cost: KGS 18,159.4 Request and obtain authorization to conduct earthwork in the road section According to Decision of Bishkek City Council as of 4 February 2009 which eliminated Resolution of Bishkek City Council # 194 as of 9 June 2003, applicants now need to obtain only a warrant (naryad) for 5 days no charge 5 conducting works in public road area. Previous requirement has been eliminated under general administrative simplification process. The authority responsible for issuing this document is now City Road Department under Municipality of Bishkek, formed in August 2008, and replaced the authority of District Administrations. Under the new provision there is no fee related to this procedure. Request and obtain equipment operating authorization Under the existing regulation this authorization is required to allow the use of cranes and excavators, and elevators. Five days before using the equipment BuildCo will file a request, followed by a visit by inspector 6 from the Inspection by Gostechnadzor. The inspector having reviewed 15 days no charge the equipment to be used puts a stamp and signs the technical passport of the new projects. Regulatory simplification reform process also eliminated duplicating legislation concerning the fees for equipment operation authorization. Doing Business 2012 Kyrgyz Republic 35 Time to No. Procedure Cost to complete complete This eliminated the grounds for officers by State Technical Supervision to levy fees. Eliminated fee amount is KGS 1462. Receive connection to water and sewage services 7 10 days KGS 4,253 Connection can be done without prior inspection should the location be with existing utility infrastructure. * Receive connection to telephone 8 10 days KGS 3,380 Connection can be done without prior inspection should the location be with existing utility infrastructure. Request Act of Acceptance of Object for Use Within 10 after completion of construction BuildCo files a request to the State Architecture and Construction Supervision requesting issuance of Act of Acceptance of Object for Use. This approval must be issued within 10 working days. If the Act is not issued within the established timelimit, silence is consent rule applied. The Act must be signed by applicant, author of project, general contractor, 1 day no charge 9 representative of State Architecture and Construction Supervision’s regional branch who performed the technical supervision during construction. The Act must be endorsed by the head of territorial branch of State Architecture and Construction Supervision. Government Resolution #121 as of 12 February 2009 removed requirement for participation of fire and sanitary authorities in the final inspection. Receive inspection and obtain the Act of Acceptance of Object for Use The inspection may take place, based on the case. Sometimes, if the 13 days no charge 10 supervising technical inspector provides sound feedback to the regional head office the inspection may not be required. However, a separate visit is paid to obtain the actual copy of Act. The Act is a legal document that allows the immediate use of building. Request and obtain a technical inventory Before registering the building with the real property registry, it is 6 days KGS 5,100 11 required to obtain a ―technical passport‖. This describes the structure of building, units, dimensions, building layout, and the like. The technical inventory in 10 days costs KGS 2,600, and in 4 working days KGS 5,100. Register the building with the real estate registry Registration of buildings is a mandatory procedure. BuildCo must provide the following documents to the State Agency for Registration of Real Property Rights: - Application. 7 days KGS 1,291 12 - Documents confirming the ownership title (the plot plan, the local plan, and the ―technical passport‖* of the warehouse). - Receipt of payment for registration - State Certificate on Land Ownership - Occupancy Permit - Power of Attorney Doing Business 2012 Kyrgyz Republic 36 Time to No. Procedure Cost to complete complete After examining the submitted documents, a registrar issues a report for registration of the building, makes a log entry, and issues a registration card, a copy of which is provided to BuildCo. According to amendment to Law ―On State Registration of Rights for immovable property‖ as of 30 March 2009 and State Registration Agency Decree # 80 as of June 11, 2008, effective 7 July 2008, the first time registration is now conducted in 7 working days. Fast track option can be done in 5 days, which includes one day for registration and 4 working days for technical inventory. Legal entities may register the building in 7 days for KGS 677.8 and for KGS 1,291 in 1 day. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 37 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information ï‚· Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials ï‚· Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes ï‚· Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land. ï‚· Is 150 meters long. ï‚· Is a new construction being connected to ï‚· Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead ï‚· Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer’s private domain is feet). negligible. The electricity connection: ï‚· Involves installing one electricity meter. The monthly electricity consumption will be 0.07 ï‚· Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2012 Kyrgyz Republic 38 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity requires 7 procedures, takes 337 days and costs connection in Kyrgyz Republic? According to data 2545.6% of income per capita (figure 4.1). collected by Doing Business, getting electricity there Figure 4.1 What it takes to obtain an electricity connection in Kyrgyz Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 39 GETTING ELECTRICITY Globally, Kyrgyz Republic stands at 181 in the ranking perspective in assessing how easy it is for an of 183 economies on the ease of getting electricity entrepreneur in Kyrgyz Republic to connect a (figure 4.2). The rankings for comparator economies warehouse to electricity. and the regional average ranking provide another Figure 4.2 How Kyrgyz Republic and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 40 GETTING ELECTRICITY Even more helpful than rankings for other economies economies, the practices of their utilities may provide a may be the indicators underlying those rankings (table model for Kyrgyz Republic on ways to improve the ease 4.1). If obtaining a new electricity connection requires of getting electricity. Regional and global averages on fewer procedures, less time or less cost in other these indicators may provide useful benchmarks. Table 4.1 The ease of getting electricity in Kyrgyz Republic and comparator economies Kyrgyz Republic Global average Eastern Europe & Central Asia Kazakhstan Uzbekistan Federation Tajikistan Moldova average Ukraine Russian Indicator Rank 181 86 160 183 178 169 170 129 .. Procedures (number) 7 6 7 10 9 11 9 7 5 Time (days) 337 88 140 281 238 274 117 168 111 Cost (% of income per capita) 2545.6 88.4 660.6 1852.4 1297.9 229.2 1783.3 751.2 1,942.3 Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 41 GETTING ELECTRICITY What are the details? The indicators reported here for Kyrgyz Republic are OBTAINING AN ELECTRICITY CONNECTION based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Bishkek utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Severelectro verified by electricity regulatory agencies and independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Kyrgyz Republic—and the time and cost Time to No. Procedure Cost to complete complete Submit application to the Department of Architecture and Construction and await technical conditions from Severlelektro The applicant submits an application for connection to the Department of Architecture and Construction which forwards the application to the 223 calendar days KGS 1,496.0 1 utility. The Architecture Department has all the construction documents and hence the only required document is the application for connection. However, the applicant will most of the time visit Severelectro directly to ensure that the application has been delivered and considered. The payment for technical conditions is also made at Severelektro. Await completion of the external electrical project design by a private design firm and its approval After the technical conditions are issued the customer hires a private 2 electrical design firm to prepare a design of the external part of the 19 calendar days KGS 15,000.0 connection. The internal wiring plan can be prepared together with the external design. On behalf of the customer the electrical design firm receives approvals of the pla at the Depatment of Architecture and Construction. Obtain an excavation permit at the municipality 3 7 calendar days KGS 350.0 Electrical contractor obtains an excavation permit (ордер на раÑ?копки). Await completion of the external connection works by a private electrical contractor 4 60 calendar days USD 22,000.0 After the electrical plan of the external connection is approve the customer hires a private electrical contractor to carry out all the external connection works. Doing Business 2012 Kyrgyz Republic 42 Time to No. Procedure Cost to complete complete The meter is installed together with the rest of the electrical equipment by the hired private electrical contractor. Await and obtain from Severelektro an inspection of the completed works After the external connection works are completed the electrical installation is checked by various departments of Severelektro during one inspection. After the inspection an operation permit is issued. Both 11 calendar days KGS 121.0 5 the internal wiring and the external works are inspected. The electrical contractor is required to submit documents specifying measurements and tests of the wiring. Someone from the applicant’s party is required to be present during the inspection. Await and obtain an inspection and a permission from the State Energy Inspectorate 6 3 calendar days no charge After the inspection by Severelektro the State Energy Inspectorate inspects the electrical installation, seals the meter and grants a permission for supplying the building with electricity. Conclude a supply contract with Severelektro and electricity starts flowing 7 After the inspections are completed and an operation permit is issued, a 14 calendar days KGS 484.0 supply contract can be concluded in the contract department of Severelektro. After the conclusion of the supply contract the representative of Severelektro visits the site to turn on the electricity. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 43 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes ï‚· Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned. ï‚· Are located in the periurban area of the economy’s largest business city. ï‚· Has no mortgages attached and has been under the same ownership for the past 10 ï‚· Have 50 employees each, all of whom are years. nationals. ï‚· Consists of 557.4 square meters (6,000 square ï‚· Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000 ï‚· Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal ï‚· Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes. ï‚· Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2012 Kyrgyz Republic 44 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 5 days and costs 2.2% of the Kyrgyz Republic? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 4 Figure 5.1 What it takes to register property in Kyrgyz Republic Note: For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 45 REGISTERING PROPERTY Globally, Kyrgyz Republic stands at 17 in the ranking of and the regional average ranking provide other useful 183 economies on the ease of registering property information for assessing how easy it is for an (figure 5.2). The rankings for comparator economies entrepreneur in Kyrgyz Republic to transfer property. Figure 5.2 How Kyrgyz Republic and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 46 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to register property in Kyrgyz 5.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 5.1 The ease of registering property in Kyrgyz Republic over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 17 17 Procedures (number) 7 7 7 7 7 4 4 4 Time (days) 8 8 8 8 8 5 5 5 Cost (% of property value) 5.9 5.9 1.9 4.6 3.9 2.8 2.3 2.2 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For more information on “no practiceâ€? marks, see the data notes for details. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 47 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by Republic on ways to improve the ease of registering the economies that today have the best performance property. And changes in regional averages can show regionally or globally on the procedures, time or cost where Kyrgyz Republic is keeping up—and where it is required to complete a property transfer (figure 5.3). falling behind. These economies may provide a model for Kyrgyz Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2012 Kyrgyz Republic 48 REGISTERING PROPERTY Cost (% of property value) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practiceâ€? mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 49 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Kyrgyz Republic (table 5.2)? Table 5.2 How has Kyrgyz Republic made registering property easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. Surveying and notarization requirements were made DB2010 optional for property registration. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 50 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business City: Bishkek through information collected from local property Property Value: 1,913,099.6 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Kyrgyz Republic—and the time and cost Time to No. Procedure Cost to complete complete The seller obtains a Registration Certificate from the Gosregister (Land Registry) In case the parties chose to notarize their sale-purchase agreement, the buyer requests the seller to provide him with the Registration Certificate evidencing his rights to the property. This Certificate indicates the owner of the property and provides information on the existence or absence of encumbrances over the property. KGS 188.10 (regular) 1 day expedited (3 1 The documentation shall include: or KGS days regular) • Application (in the established form); 327.50(expedited) • Copy of ownership document; • Original and a copy of technical passport; • Identification documents; • Copy of resolution of the management body on the sale of the property; The cost of the regular procedure (3 days) is KZS 188.10 and KZS 327.50 for an expedited procedure (1 day). A public notary notarizes the sale-purchase agreement The Law of the Kyrgyz Republic on Amendments to the Civil Code of the Kyrgyz Republic #104 of 30.03.2009 introduced voluntary notary certification of property disposal (sale and acquisition) contract. KGS 40,000 fixed fee Previously, it was mandatory to notarize the sale-purchase agreement + KGS 350 2 with a public notary. Now, parties have a choice to have notaries register 1 day (notarization of such contracts or make a transaction and register it directly with the copies) State Register. Should parties chose to notarize the sale-purchase contract, the cost for the procedure for non-residential properties with a square footage higher than 400 square meters is KZS 40,000 (as prescribed by the Resolution of the Republic of Kyrgyzstan #733 of 19.10.2006 ―On State duties‖. As of June 2009, around half of property Doing Business 2012 Kyrgyz Republic 51 Time to No. Procedure Cost to complete complete transactions are still being notarized. The parties must also notarize copies of their respective charters and/or foundation agreements and corporate registration certificates (to be later presented to the registrar). Notarization of copies will cost KZS 5 per page plus KZS 10 per one document; total approximately KZS 350. During the notarization, the parties will be required to submit copies of the parties’ respective charters and foundation agreements, corporate registration certificates, resolutions of the management bodies on the purchase/sale of the property, powers of attorney, a certificate evidencing the balance sheet value of the property, and certain other corporate documents. The seller shall also present the registration certificate evidencing the seller’s title to the property (obtained in procedure 1). The buyer applies to Gosregister for registration of the title transfer The buyer appears at the local office of Gosregister and presents all the required documents. The buyer (the seller may pay it upon agreement between the parties) pays the registration fee and delivers to the registrar the receipt evidencing the payment and a formal application for the registration of the title transfer. The notarized sale purchase agreement must be presented to the local office of Gosregister no later than 30 days from the moment of its signing (otherwise a penalty fee is charged). The Gosregister issues the receipt about the acceptance of the documents for the registration and conducts the registration during 2 days or 1 day, if the procedure is expedited. The buyer receives his own copy of the agreement where the Registry certified the registration, as well as the copy of record card, where it will be marked that he is the KGS 643.9 (regular owner of this property. The buyer must also visit a separate window at procedure - 2 days) the Registry for a separate application (previously BTI Office). This can be 2 days regular; 1 or KGS 1231 3 done at the same time at the Gosregister. The Land Registry makes day expedited (expedited correspondent alterations in the inventory file of the building and land procedure - 1 day) plot and provides the buyer with the new cadastral plan of the building fees for legal entities and cadastral plan of the land plot. The documentation shall include: • Application (in the established form) • State act on land property right; • Technical original passport; • The signed and notarized sale and purchase agreement (Obtained in Procedure 2); • Powers of attorney (if needed), notarized copies of the buyer charter and/or foundation agreement, corporate registration certificate, resolution of the management body on the purchase of the property. The cost for the procedures was updated with the Order #80 of June 11, 2008 of the Land Registry (Gosregistr). Thus, the cost for the 2 day registration is KZS 643.9 and for the expedited procedure is KZS 1231. Doing Business 2012 Kyrgyz Republic 52 Time to No. Procedure Cost to complete complete In practice, the expedited procedure still takes 2 days. The buyer receives documents of title upon completion of the registration After the registration is completed, the buyer appears at the Gosregister to pick up his copy of the agreement bearing the stamp of the registrar, Already paid in 4 the amended technical passport for the property, and the State act on 1 day procedure 3 land property right. The documentation shall include: the passport of the buyer, or a power of attorney or other documents confirming the rights of the individual to pick up the documents on behalf of the buyer. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 53 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower’s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors’ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors’ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Doing Business uses case scenarios to determine ï‚· Has 100 employees. the scope of the secured transactions system, ï‚· Is 100% domestically owned, as is the lender. involving a secured borrower and a secured lender and examining legal restrictions on the use of The ranking on the ease of getting credit is based on movable collateral. These scenarios assume that the the percentile rankings on its component indicators: borrower: the depth of credit information index (weighted at 37.5%) and the strength of legal rights index ï‚· Is a private, limited liability company. (weighted at 62.5%). ï‚· Has its headquarters and only base of operations in the largest business city. Doing Business 2012 Kyrgyz Republic 54 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Kyrgyz Republic stands at 8 in the ranking of collateral and bankruptcy laws in Kyrgyz Republic 183 economies on the ease of getting credit (figure facilitate access to credit? The economy has a score of 6.1). The rankings for comparator economies and the 4 on the depth of credit information index and a score regional average ranking provide other useful of 10 on the strength of legal rights index (see the information for assessing how well regulations and summary of scoring at the end of this chapter for institutions in Kyrgyz Republic support lending and details). Higher scores indicate more credit information borrowing. and stronger legal rights for borrowers and lenders. Figure 6.1 How Kyrgyz Republic and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 55 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how where institutions and regulations have been well the credit information system and collateral and strengthened—and where they have not (table 6.1). bankruptcy laws in Kyrgyz Republic support lending That can help identify where the potential for and borrowing today, data over time can help show improvement is greatest. Table 6.1 The ease of getting credit in Kyrgyz Republic over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. 8 8 Strength of legal rights 6 6 7 7 7 10 10 10 index (0-10) Depth of credit 0 2 3 3 4 4 4 4 information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (% of adults) Private bureau 0.0 0.2 0.4 1.6 3.7 5.9 11.9 18.7 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 56 GETTING CREDIT One way to put an economy’s getting credit indicators index for Kyrgyz Republic in 2011 and shows the into context is to see where the economy stands in the number of other economies having the same score in distribution of scores across other economies. Figure 2011. Figure 6.3 shows the same thing for the depth of 6.2 highlights the score on the strength of legal rights credit information index. Figure 6.2 Have legal rights for borrowers and lenders Figure 6.3 Have the coverage and accessibility of credit become stronger? information grown? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2011 information index (0–6), 2011 Source: Doing Business database. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 57 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Kyrgyz Republic (table 6.2)? Table 6.2 How has Kyrgyz Republic made getting credit easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. Access to credit was enhanced by making secured lending more flexible and allowing general descriptions of encumbered assets and of debts and obligations. In addition, DB2010 amendments to the Civil Code provide for automatic extension of security rights to proceeds of the original assets. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 58 GETTING CREDIT What are the details? The getting credit indicators reported here for Kyrgyz The data on the legal rights of borrowers and lenders Republic are based on detailed information collected are gathered through a survey of financial lawyers and in that economy. The data on credit information verified through analysis of laws and regulations as sharing are collected through a survey of a public well as public sources of information on collateral and credit registry or private credit bureau (if one exists). bankruptcy laws. For the strength of legal rights index, To construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in public credit registry or private credit bureau (see bankruptcy law. summary of scoring below). Summary of scoring for the getting credit indicators in Kyrgyz Republic Eastern Europe & Indicator Kyrgyz Republic OECD high income Central Asia Strength of legal rights index (0-10) 10 7 7 Depth of credit information index (0-6) 4 5 5 Public registry coverage (% of adults) 0.0 16.2 9.5 Private bureau coverage (% of adults) 18.7 29.4 63.9 Strength of legal rights index (0–10) Index score: 10 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of Yes movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend Yes automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's names? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a Yes debtor defaults outside an insolvency procedure? Doing Business 2012 Kyrgyz Republic 59 Strength of legal rights index (0–10) Index score: 10 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a Yes business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law Yes provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its Yes security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 4 bureau registry Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as No No 0 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes No 1 distributed? Is it guaranteed by law that borrowers can inspect Yes No 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms 1,685 0 Number of individuals 659,449 0 Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 60 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors’ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders’ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices ï‚· Is a publicly traded corporation listed on the economy’s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns. ï‚· Has a board of directors and a chief executive ï‚· The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law. ï‚· All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer. ï‚· Mr. James, a director and the majority ï‚· Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2012 Kyrgyz Republic 61 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Kyrgyz index (figure 7.1). While the indicator does not Republic? The economy has a score of 7.7 on the measure all aspects related to the protection of strength of investor protection index, with a higher minority investors, a higher ranking does indicate that score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Kyrgyz Republic stands at 13 in the ranking of 183 economies on the strength of investor protection Figure 7.1 How Kyrgyz Republic and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 62 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how the global ranking on the strength of investor well regulations in Kyrgyz Republic protect minority protection index over time shows whether the investors today, data over time show whether the economy is slipping behind other economies in protections have been strengthened (table 7.1). And investor protections—or surpassing them. Table 7.1 The strength of investor protections in Kyrgyz Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 12 13 Extent of disclosure 8 8 8 8 8 8 8 index (0-10) Extent of director 1 1 1 7 7 7 7 liability index (0-10) Ease of shareholder 9 9 9 8 8 8 8 suits index (0-10) Strength of investor 6.0 6.0 6.0 7.7 7.7 7.7 7.7 protection index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 63 PROTECTING INVESTORS But the overall ranking on the strength of investor liability and ease of shareholder suits indices may also protection index tells only part of the story. Economies be revealing (figure 7.2). Equally interesting may be the may offer strong protections in some areas but not changes over time in the regional average scores for others. So the scores recorded over time for Kyrgyz those indices. Republic on the extent of disclosure, extent of director Figure 7.2 Have investor protections become stronger? Strength of investor protection index (0-10) Extent of disclosure index (0-10) Doing Business 2012 Kyrgyz Republic 64 PROTECTING INVESTORS Extent of director liability index (0-10) Ease of shareholder suits index (0-10) Note: The higher the score, the stronger the investor protections. The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 65 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Kyrgyz Republic (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Kyrgyz Republic strengthened investor protections—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. Investor protections were strengthened through legal amendments allowing minority investors to take legal actions as shareholders. The amendments also require an independent DB2009 assessment of a related-party transaction before it is approved. Moreover, directors can be held liable for negligence if they harm minority shareholders and will be forced to pay damages and disgorge profits. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 66 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for liability and ease of shareholder suits indices, a score is Kyrgyz Republic are based on detailed information assigned for each of a range of conditions relating to collected through a survey of corporate and securities disclosure, director liability and shareholder suits in a lawyers and are based on securities regulations, standard case study transaction (see the notes at the company laws and court rules of evidence. To end of this chapter). The summary below shows the construct the extent of disclosure, extent of director details underlying the scores for Kyrgyz Republic. Summary of scoring for the protecting investors indicators in Kyrgyz Republic Eastern Europe & Indicator Kyrgyz Republic OECD high income Central Asia Extent of disclosure index (0-10) 8 7 6 Extent of director liability index (0-10) 7 4 5 Ease of shareholder suits index (0-10) 8 6 7 Strength of investor protection index (0-10) 7.7 5.7 6.0 Score Extent of disclosure index (0-10) 8 What corporate body provides legally sufficient approval for the transaction? 3 Whether disclosure of the conflict of interest by Mr. James to the board of directors is 2 required? Whether immediate disclosure of the transaction to the public and/or shareholders is 0 required? Whether disclosure of the transaction in published periodic filings (annual reports) is 2 required? Whether an external body must review the terms of the transaction before it takes place? 1 Extent of director liability index (0-10) 7 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller 1 transaction causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller 2 transaction causes to the company? Whether shareholders can hold members of the approving body liable for the damage that 0 the Buyer-Seller transaction causes to the company? Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 2 Doing Business 2012 Kyrgyz Republic 67 Score Whether Mr. James pays damages for the harm caused to the company upon a successful 1 claim by the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 1 shareholder plaintiff? Whether fines and imprisonment can be applied against Mr. James? 0 Ease of shareholder suits index (0-10) 8 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction 1 documents before filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to 1 investigate the transaction? Whether the plaintiff can obtain any documents from the defendant and witnesses during 3 trial? Whether the plaintiff can request categories of documents from the defendant without 0 identifying specific ones? Whether the plaintiff can directly question the defendant and witnesses during trial? 2 Whether the level of proof required for civil suits is lower than that of criminal cases? 1 Strength of investor protection index (0-10) 7.7 Source: Doing Business database. Notes: Extent of disclosure index (0–10) Scoring for the extent of disclosure index is based on 5 components: Which corporate body can provide legally sufficient approval for the transaction 0 = CEO or managing director alone; 1 = shareholders or board of directors vote and Mr. James can vote; 2 = board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote. Whether disclosure of the conflict of interest by Mr. James to the board of directors is required 0 = no disclosure; 1 = disclosure of the existence of a conflict without any specifics; 2 = full disclosure of all material facts. Whether immediate disclosure of the transaction to the public, the regulator or the shareholders is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Whether disclosure of the transaction in the annual report is required 0 = no disclosure; 1 = disclosure on the transaction only; 2 = disclosure on the transaction and Mr. James’s conflict of interest. Doing Business 2012 Kyrgyz Republic 68 Whether it is required that an external body (for example, an external auditor) review the transaction before it takes place 0 = no; 1 = yes. Extent of director liability index (0–10) Scoring for the extent of director liability index is based on 7 components: Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company 0 = suits are unavailable or available only for shareholders holding more than 10% of the company’s share capital; 1 = direct or derivative suits available for shareholders holding 10% of share capital or less. Whether shareholders can hold Mr. James liable for the damage that the transaction causes to the company 0 = Mr. James is not liable or is liable only if he acted fraudulently or in bad faith; 1 = Mr. James is liable if he influenced the approval or was negligent; 2 = Mr. James is liable if the transaction is unfair or prejudicial to the other shareholders. Whether shareholders can hold the approving body (the CEO or members of the board of directors) liable for the damage that the transaction causes to the company 0 = members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1 = liable for negligence in the approval of the transaction; 2 = liable if the transaction is unfair or prejudicial to the other shareholders. Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 = rescission is unavailable or available only in case of Seller’s fraud or bad faith; 1 = rescission is available when the transaction is oppressive or prejudicial to the other shareholders; 2 = rescission is available when the transaction is unfair or entails a conflict of interest. Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff 0 = no; 1 = yes. Whether both fines and imprisonment can be applied against Mr. James 0 = no; 1 = yes. Ease of shareholder suits index (0–10) Scoring for the ease of shareholder suits index is based on 6 components: What range of documents is available to the plaintiff from the defendant and witnesses during trial Score of 1 for each of the following: information that the defendant has indicated he intends to rely on for his defense; information that directly proves specific facts in the plaintiff’s claim; any information relevant to the subject matter of the claim; and any information that may lead to the discovery of relevant information. Doing Business 2012 Kyrgyz Republic 69 Whether the plaintiff can directly examine the defendant and witnesses during trial 0 = no; 1 = yes, with prior approval by the court of the questions posed; 2 = yes, without prior approval. Whether the plaintiff can obtain categories of relevant documents from the defendant without identifying each document specifically 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital can request that a government inspector investigate the transaction without filing suit in court 0 = no; 1 = yes. Whether shareholders owning 10% or less of the company’s share capital have the right to inspect the transaction documents before filing suit 0 = no; 1 = yes. Whether the standard of proof for civil suits is lower than that for a criminal case 0 = no; 1 = yes. Strength of investor protection index (0–10) Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices. Doing Business 2012 Kyrgyz Republic 70 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless complexity in tax rules avoided. According to Tax payments for a manufacturing company Doing Business data, in economies where it is more in 2010 (number per year adjusted for difficult and costly to pay taxes, larger shares of electronic or joint filing and payment) economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and payments as well as time taken to comply with tax Arranging payment or withholding laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 2 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes ï‚· TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2009. transactions taxes ï‚· The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. ï‚· Taxes and mandatory contributions include ï‚· Taxes and mandatory contributions are corporate income tax, turnover tax and all measured at all levels of government. labor taxes and contributions paid by the company. ï‚· A range of standard deductions and exemptions are also recorded. 2 The threshold is defined as the highest total tax rate among the top 30% of economies in the ranking on the total tax rate. It will be calculated and adjusted on a yearly basis. The threshold is not based on any underlying theory. Instead, it is intended to mitigate the effect of very low tax rates on the ranking on the ease of paying taxes. Doing Business 2012 Kyrgyz Republic 71 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Kyrgyz Republic stands at 162 in the ranking taxes in Kyrgyz Republic—and how much do firms pay of 183 economies on the ease of paying taxes (figure in taxes? On average, firms make 52 tax payments a 8.1). The rankings for comparator economies and the year, spend 210 hours a year filing, preparing and regional average ranking provide other useful paying taxes and pay total taxes amounting to 6.2% of information for assessing the tax compliance burden profit (see the summary at the end of this chapter for for businesses in Kyrgyz Republic. details). Figure 8.1 How Kyrgyz Republic and comparator economies rank on the ease of paying taxes Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 72 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how the process have changed — and which have not easy (or difficult) it is to comply with tax rules in Kyrgyz (table 8.1). That can help identify where the potential Republic today, data over time show which aspects of for easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Kyrgyz Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 155 162 Payments (number per 75 75 75 75 75 48 52 year) Time (hours per year) 202 202 202 202 202 202 210 Total tax rate (% profit) 68.2 67.2 61.4 61.4 59.4 73.2 69.0 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the rank on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 73 PAYING TAXES Equally helpful may be the benchmarks provided by Republic on ways to ease the administrative burden of the economies that today have the best performance tax compliance. And changes in regional averages can regionally or globally on the number of payments or show where Kyrgyz Republic is keeping up—and the time required to prepare and file taxes (figure 8.2). where it is falling behind. These economies may provide a model for Kyrgyz Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2012 Kyrgyz Republic 74 PAYING TAXES Total tax rate (% of profit) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. The best performer globally on an indicator has implemented the most efficient practices in its tax system but is not necessarily the one with the highest ranking on the indicator. In some cases 2 or more economies share the top regional ranking on an indicator. DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 75 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Kyrgyz Republic (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Kyrgyz Republic made paying taxes easier—or not? By Doing Business report year DB Year Reform The Kyrgyz Republic made paying taxes costlier for firms by DB2012 introducing a real estate tax, though it also reduced the sales tax rate. DB2011 No reform. The tax burden on businesses was eased by reducing the DB2010 rates for several taxes and the number of payments for several. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 76 PAYING TAXES What are the details? The indicators reported here for Kyrgyz Republic are that the company completed during the year. based on a standard set of taxes and contributions Respondents are asked how much in taxes and that would be paid by the case study company used by mandatory contributions the business must pay and Doing Business in collecting the data (see the section in what the process is for doing so. The taxes and this chapter on what the indicators cover). Tax contributions paid are listed in the summary below, practitioners are asked to review standard financial along with the associated number of payments, time statements as well as a standard list of transactions and tax rate. Summary of tax rates and administrative burden in Kyrgyz Republic Eastern Europe & Indicator Kyrgyz Republic OECD high income Central Asia Payments (number per year) 52 37 13 Time (hours per year) 210 302 186 Profit tax (%) 6.2 9.3 15.4 Labor tax and contributions (%) 19.5 21.7 24.0 Other taxes (%) 43.4 9.5 3.2 Total tax rate (% profit) 69.0 40.4 42.7 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Sales tax 12 0 2.00% sales 35.4 gross Pension fund contributions 12 71 15.00% 16.9 salaries estimated Tax on property 4 0 KGS 14,000 value of 7.5 (immovable) building taxable Corporate income tax 5 60 10.00% 6.2 profits Medical insurance gross 0 paid jointly 0 2.25% 2.5 contributions salaries KGS 2.6 per number of Fuel tax 1 0 0.3 liter liters Doing Business 2012 Kyrgyz Republic 77 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate KGS 2.9 per Land tax 4 0 square land area 0.1 meter book value Tax on property (movable) 2 0 0.50% 0 of vehicles Value added tax (VAT) 12 79 12.00% value added 0 not included Totals 52 210 69.0 Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 78 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining all the documents (excluding tariffs) associated with exporting and Inland transport and handling importing a standard shipment of goods by ocean transport, and the number of documents necessary Customs clearance and inspections to complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation requirements and procedures at customs and other Does not include ocean transport time regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: ï‚· Is of medium size and employs 60 people. ï‚· Do not require refrigeration or any other ï‚· Is located in the periurban area of the special environment. economy’s largest business city. ï‚· Do not require any special phytosanitary or ï‚· Is a private, limited liability company, environmental safety standards other than domestically owned, formally registered accepted international standards. and operating under commercial laws and regulations of the economy. ï‚· Are one of the economy’s leading export or import products. The traded goods: ï‚· Are transported in a dry-cargo, 20-foot full ï‚· Are not hazardous nor do they include container load. military items. Doing Business 2012 Kyrgyz Republic 79 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Kyrgyz Globally, Kyrgyz Republic stands at 171 in the ranking Republic? According to data collected by Doing of 183 economies on the ease of trading across Business, exporting a standard container of goods borders (figure 9.1). The rankings for comparator requires 8 documents, takes 63 days and costs $3210. economies and the regional average ranking provide Importing the same container of goods requires 9 other useful information for assessing how easy it is for documents, takes 72 days and costs $3450 (see the a business in Kyrgyz Republic to export and import summary of procedures and documents at the end of goods. this chapter for details). Figure 9.1 How Kyrgyz Republic and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 80 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to export or import in Kyrgyz 9.1). That can help identify where the potential for Republic today, data over time show which aspects of improvement is greatest. Table 9.1 The ease of trading across borders in Kyrgyz Republic over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. 171 171 Documents to export 14 14 14 14 8 8 8 (number) Time to export (days) 64 64 64 64 63 63 63 Cost to export (US$ per 2,500 2,500 2,500 3,000 3,000 3,010 3,210 container) Documents to import 15 15 15 15 9 9 9 (number) Time to import (days) 75 75 75 75 72 72 72 Cost to import (US$ per 2,450 2,450 2,450 3,250 3,250 3,280 3,450 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Equally helpful may be the benchmarks provided by on ways to improve the ease of trading across borders. the economies that today have the best performance And changes in regional averages can show where regionally or globally on the documents, time or cost Kyrgyz Republic is keeping up—and where it is falling required to export or import (figure 9.2). These behind. economies may provide a model for Kyrgyz Republic Doing Business 2012 Kyrgyz Republic 81 TRADING ACROSS BORDERS Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2012 Kyrgyz Republic 82 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2012 Kyrgyz Republic 83 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 84 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Kyrgyz Republic (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Kyrgyz Republic made trading across borders easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. The elimination of six previously required documents and DB2010 the simplification of inspection procedures has sped up trading across borders. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 85 TRADING ACROSS BORDERS What are the details? The indicators reported here for Kyrgyz Republic are freight forwarders, shipping lines, customs brokers, based on a set of specific procedural requirements for port officials and banks. The procedural requirements, trading a standard shipment of goods by ocean and the associated time and cost, for exporting and transport (see the section in this chapter on what the importing a standard shipment of goods are listed in indicators cover). Information on the procedures as the summary below, along with the required well as the required documents and the time and cost documents. to complete each procedure is collected from local Summary of procedures and documents for trading across borders in Kyrgyz Republic Eastern Europe & Indicator Kyrgyz Republic OECD high income Central Asia Documents to export (number) 8 7 4 Time to export (days) 63 27 10 Cost to export (US$ per container) 3210 1,774 1,032 Documents to import (number) 9 8 5 Time to import (days) 72 29 11 Cost to import (US$ per container) 3450 1,990 1,085 Procedures to export Time (days) Cost (US$) Documents preparation 23 210 Customs clearance and technical control 3 200 Ports and terminal handling 3 100 Inland transportation and handling 34 2700 Totals 63 3210 Procedures to import Time (days) Cost (US$) Documents preparation 25 280 Customs clearance and technical control 11 370 Ports and terminal handling 3 100 Inland transportation and handling 33 2700 Totals 72 3450 Doing Business 2012 Kyrgyz Republic 86 TRADING ACROSS BORDERS Documents to export Documents to import Transit declaration Transit declaration Railway bill (Transport document) Terminal handling receipts Bill of lading Railway bill (Transport document) Customs export declaration Document certifying the cost of transportation Certificate of Origin Bill of lading Commercial Invoice Certificate of origin Contract Commercial invoice Terminal handling receipts Customs import declaration Certificate of Conformity Doing Business 2012 Kyrgyz Republic 87 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects data relating to the time, cost and procedural Time required to complete procedures complexity of resolving a commercial lawsuit. The (calendar days) ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs, including expert fees assumptions about the case: Enforcement costs ï‚· The seller and buyer are located in the economy’s largest business city. ï‚· The buyer orders custom-made goods, ï‚· The dispute on the quality of the goods then fails to pay. requires an expert opinion. ï‚· The seller sues the buyer before a ï‚· The judge decides in favor of the seller; there competent court. is no appeal. ï‚· The value of the claim is 200% of income ï‚· The seller enforces the judgment through a per capita. public sale of the buyer’s movable assets. ï‚· The seller requests a pretrial attachment to secure the claim. Doing Business 2012 Kyrgyz Republic 88 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Kyrgyz Republic stands at 48 in the ranking of dispute through the courts in Kyrgyz Republic? 183 economies on the ease of enforcing contracts According to data collected by Doing Business, (figure 10.1). The rankings for comparator economies enforcing a contract requires 38 procedures, takes 260 and the regional average ranking provide other useful days and costs 29.0% of the value of the claim (see the benchmarks for assessing the efficiency of contract summary at the end of this chapter for details). enforcement in Kyrgyz Republic. Figure 10.1 How Kyrgyz Republic and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 89 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how time help identify which areas have changed and easy (or difficult) it is to enforce a contract in Kyrgyz where the potential for improvement is greatest (table Republic today, data on the underlying indicators over 10.1). Table 10.1 The ease of enforcing contracts in Kyrgyz Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 50 48 Time (days) 260 260 260 260 260 260 260 260 260 Cost (% of claim) 29.0 29.0 29.0 29.0 29.0 29.0 29.0 29.0 29.0 Procedures (number) 38 38 38 38 38 38 38 38 38 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 90 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by for Kyrgyz Republic on ways to improve the efficiency the economies that today have the best performance of contract enforcement. And changes in regional regionally or globally on the number of steps, time or averages can show where Kyrgyz Republic is keeping cost required to enforce a contract through the courts up—and where it is falling behind. (figure 10.2). These economies may provide a model Figure 10.2 Has enforcing contracts become easier over time? Procedures (number) Time (days) Doing Business 2012 Kyrgyz Republic 91 ENFORCING CONTRACTS Cost (% of claim) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 92 ENFORCING CONTRACTS Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in Kyrgyz Republic (table introducing new technology. Lower-income economies 10.2)? often work on reducing backlogs by introducing Table 10.2 How has Kyrgyz Republic made enforcing contracts easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. DB2011 No reform. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 93 ENFORCING CONTRACTS What are the details? The indicators reported here for Kyrgyz Republic are regulations, as well as through surveys completed by based on a set of specific procedural steps required to local litigation lawyers (and, in a quarter of the resolve a standardized commercial dispute through economies covered by Doing Business, by judges as the courts (see the section in this chapter on what the well). The procedures for resolving a commercial indicators cover). These procedures, and the time and lawsuit, and the associated time and cost, are listed in cost of completing them, are identified through study the summary below. of the codes of civil procedure and other court Summary of procedures for enforcing a contract in Kyrgyz Republic—and the time and cost Eastern Europe & Indicator Kyrgyz Republic OECD high income Central Asia Time (days) 260 411.63 518.03 Filing and service 20 Trial and judgment 90 Enforcement of judgment 150 Cost (% of claim) 29 27.33 19.71 Attorney cost (% of claim) 7 Court cost (% of claim) 12 Enforcement Cost (% of claim) 10 Procedures (number) 38 37.29 31.42 Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 94 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement (foreclosure) proceedings. The recovery rate is a Official costs of the insolvency proceedings are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be business and the case. It assumes that the recovered company: ï‚· Is a domestically owned, limited liability company operating a hotel. ï‚· Has 201 employees, 1 main secured creditor ï‚· Operates in the economy’s largest business and 50 unsecured creditors. city. ï‚· Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2012 Kyrgyz Republic 95 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses Globally, Kyrgyz Republic stands at 150 in the ranking characterize the top-performing economies. How of 183 economies on the ease of resolving insolvency efficient are insolvency proceedings in Kyrgyz (figure 11.1). The rankings for comparator economies Republic? According to data collected by Doing and the regional average ranking provide other useful Business, resolving insolvency takes 4.0 years on benchmarks for assessing the efficiency of insolvency average and costs 15% of the debtor’s estate. The proceedings in Kyrgyz Republic. average recovery rate is 11.7 cents on the dollar. Figure 11.1 How Kyrgyz Republic and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 96 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the changed—and where it has not (table 11.1). That can efficiency of insolvency proceedings in Kyrgyz Republic help identify where the potential for improvement is today, data over time show where the efficiency has greatest. Table 11.1 The ease of resolving insolvency in Kyrgyz Republic over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 Rank .. .. .. .. .. .. .. 144 150 Time (years) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Cost (% of estate) 15 15 15 15 15 15 15 15 15 Recovery rate (cents on 14.7 15.9 12.5 14.7 15.6 14.2 14.2 15.3 11.7 the dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings reflect changes to the methodology. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 97 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by Republic on ways to improve the efficiency of the economies that today have the best performance insolvency proceedings. And changes in regional regionally or globally on the time or cost of insolvency averages can show where Kyrgyz Republic is keeping proceedings or on the recovery rate (figure 11.2). up—and where it is falling behind. These economies may provide a model for Kyrgyz Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2012 Kyrgyz Republic 98 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: The economy with the best performance regionally on each indicator, and the economy with the best performance globally, are included as benchmarks. In some cases 2 or more economies share the top regional or global ranking on an indicator. In cases where no data are displayed above for the economy, this indicates that the economy has received a “no practiceâ€? mark; see the data notes for details. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 99 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Kyrgyz Republic (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Kyrgyz Republic made resolving insolvency easier—or not? By Doing Business report year DB Year Reform DB2012 No reform. The Kyrgyz Republic streamlined insolvency proceedings and updated requirements for administrators, but new formalities DB2011 added to prevent abuse of proceedings made closing a business more difficult. DB2010 No reform. DB2009 No reform. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2012 Kyrgyz Republic 100 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income (GNI) per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2012 reports 2010 income per capita property. Second, they gauge the time and cost of as published in the World Bank’s World Development achieving a regulatory goal or complying with Indicators 2011. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2010 GNI in contract, go through bankruptcy or trade across U.S. dollars is used as the denominator. Data were borders. Third, they measure the extent of legal not available from the World Bank for Afghanistan; protections of property, for example, the protections Australia; The Bahamas; Bahrain; Brunei Darussalam; of investors against looting by company directors or Canada; Cyprus; Djibouti; the Islamic Republic of the range of assets that can be used as collateral Iran; Kuwait; New Zealand; Oman; Puerto Rico according to secured transactions laws. Fourth, a set of (territory of the United States); Qatar; Saudi Arabia; indicators documents the tax burden on businesses. Suriname; Taiwan, China; the United Arab Emirates; Finally, a set of data covers different aspects of West Bank and Gaza; and the Republic of Yemen. In employment regulation. these cases GDP or GNP per capita data and growth rates from the International Monetary Fund’s World The data for all sets of indicators in Doing Business Economic Outlook database and the Economist 3 2012 are for June 2011. Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and income group classifications, available at The Doing Business data are collected in a http://www.worldbank.org/data/countryclass. The standardized way. To start, the Doing Business team, World Bank does not assign regional classifications with academic advisers, designs a questionnaire. The to high-income economies. For the purpose of the questionnaire uses a simple business case to ensure Doing Business report, high-income OECD comparability across economies and over time—with economies are assigned the ―regional‖ classification assumptions about the legal form of the business, its OECD high income. Figures and tables presenting size, its location and the nature of its operations. regional averages include economies from all Questionnaires are administered through more than income groups (low, lower middle, upper middle 9,028 local experts, including lawyers, business and high income). consultants, accountants, freight forwarders, Population government officials and other professionals routinely administering or advising on legal and regulatory Doing Business 2012 reports midyear 2010 population statistics as published in World requirements. These experts have several rounds of Development Indicators 2011. interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2012 team members The Doing Business methodology offers several visited 40 economies to verify data and recruit advantages. It is transparent, using factual information respondents. The data from questionnaires are about what laws and regulations say and allowing subjected to numerous rounds of verification, leading multiple interactions with local respondents to clarify to revisions or expansions of the information collected. potential misinterpretations of questions. Having representative samples of respondents is not an issue; 3 The data for paying taxes refer to January – December 2010. Doing Business 2012 Kyrgyz Republic 101 Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business published a subnational study comparisons and benchmarks are valid across for the Philippines and a regional report for Southeast economies. Finally, the data not only highlight the Europe covering 7 economies (Albania, Bosnia and extent of specific regulatory obstacles to business but Herzegovina, Kosovo, the former Yugoslav Republic of also identify their source and point to what might be Macedonia, Moldova, Montenegro and Serbia) and 22 reformed. cities. It also published a city profile for Juba, in the Information on the methodology for each Doing Republic of South Sudan. Business topic can be found on the Doing Business The subnational studies point to differences in website at http://www.doingbusiness.org/methodology/. business regulation and its implementation—as well as in the pace of regulatory reform—across cities in the same economy. For several economies subnational Limits to what is measured studies are now periodically updated to measure The Doing Business methodology has 5 limitations that change over time or to expand geographic coverage should be considered when interpreting the data. First, to additional cities. This year that is the case for the the collected data refer to businesses in the economy’s subnational studies in the Philippines; the regional largest business city and may not be representative of report in Southeast Europe; the ongoing studies in regulation in other parts of the economy. To address Italy, Kenya and the United Arab Emirates; and the this limitation, subnational Doing Business indicators projects implemented jointly with local think tanks in were created (see the section on subnational Doing Indonesia, Mexico and the Russian Federation. Business indicators). Second, the data often focus on a Besides the subnational Doing Business indicators, specific business form—generally a limited liability Doing Business conducted a pilot study this year on company (or its legal equivalent) of a specified size— the second largest city in 3 large economies to assess and may not be representative of the regulation on within-country variations. The study collected data for other businesses, for example, sole proprietorships. Rio de Janeiro in addition to São Paulo in Brazil, for Third, transactions described in a standardized case Beijing in addition to Shanghai in China and for St. scenario refer to a specific set of issues and may not Petersburg in addition to Moscow in Russia. represent the full set of issues a business encounters. Fourth, the measures of time involve an element of judgment by the expert respondents. When sources Changes in what is measured indicate different estimates, the time indicators reported in Doing Business represent the median The methodology for 3 of the Doing Business topics values of several responses given under the was updated this year—getting credit, dealing with assumptions of the standardized case. construction permits and paying taxes. Finally, the methodology assumes that a business has First, for getting credit, the scoring of one of the 10 full information on what is required and does not components of the strength of legal rights index was waste time when completing procedures. In practice, amended to recognize additional protections of completing a procedure may take longer if the secured creditors and borrowers. Previously the business lacks information or is unable to follow up highest score of 1 was assigned if secured creditors promptly. Alternatively, the business may choose to were not subject to an automatic stay or moratorium disregard some burdensome procedures. For both on enforcement procedures when a debtor entered a reasons the time delays reported in Doing Business court-supervised reorganization procedure. Now the 2012 would differ from the recollection of highest score of 1 is also assigned if the law provides secured creditors with grounds for relief from an Doing Business 2012 Kyrgyz Republic 102 automatic stay or moratorium (for example, if the regulatory environment for local entrepreneurs in each movable property is in danger) or sets a time limit for economy has changed over time. the automatic stay. Ease of doing business Second, because the ease of doing business index now The ease of doing business index ranks economies includes the getting electricity indicators, procedures, from 1 to 183. For each economy the ranking is time and cost related to obtaining an electricity calculated as the simple average of the percentile connection were removed from the dealing with rankings on each of the 10 topics included in the index construction permits indicators. in Doing Business 2012: starting a business, dealing Third, a threshold has been introduced for the total tax with construction permits, registering property, getting rate for the purpose of calculating the ranking on the credit, protecting investors, paying taxes, trading ease of paying taxes. All economies with a total tax across borders, enforcing contracts, resolving rate below the threshold (which will be calculated and insolvency and, new this year, getting electricity. The adjusted on a yearly basis) will now receive the same employing workers indicators are not included in this ranking on the total tax rate indicator. The threshold is year’s aggregate ease of doing business ranking. In not based on any underlying theory. Instead, it is addition to this year’s ranking, Doing Business presents meant to emphasize the purpose of the indicator: to a comparable ranking for the previous year, adjusted highlight economies where the tax burden on business for any changes in methodology as well as additions of 4 is high relative to the tax burden in other economies. economies or topics. Giving the same ranking to all economies whose total Construction of the ease of doing business index tax rate is below the threshold avoids awarding economies in the scoring for having an unusually low Here is one example of how the ease of doing business total tax rate, often for reasons unrelated to index is constructed. In the Republic of Korea it takes 5 government policies toward enterprises. For example, procedures, 7 days and 14.6% of annual income per economies that are very small or that are rich in capita in fees to open a business. There is no minimum natural resources do not need to levy broad-based capital required. On these 4 indicators Korea ranks in th th rd taxes. the 18 , 14 , 53 and 0 percentiles. So on average st Korea ranks in the 21 percentile on the ease of th starting a business. It ranks in the 12 percentile on Data challenges and revisions th getting credit, 25 percentile on paying taxes, 8 th th percentile on enforcing contracts, 7 percentile on Most laws and regulations underlying the Doing resolving insolvency and so on. Higher rankings Business data are available on the Doing Business indicate simpler regulation and stronger protection of website at http://www.doingbusiness.org. All the property rights. The simple average of Korea’s sample questionnaires and the details underlying the st percentile rankings on all topics is 21 . When all indicators are also published on the website. Questions economies are ordered by their average percentile on the methodology and challenges to data can be rankings, Korea stands at 8 in the aggregate ranking submitted through the website’s ―Ask a Question‖ on the ease of doing business. function at http://www.doingbusiness.org. More complex aggregation methods—such as principal components and unobserved components— Ease of doing business and distance to frontier 4 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a This year’s report presents results for 2 aggregate comparable time series since the year the relevant economy or topic measures: the aggregate ranking on the ease of doing was first included in the data set. The time series is available on the business and a new measure, the ―distance to frontier.‖ Doing Business website (http://www.doingbusiness.org). The Doing While the ease of doing business ranking compares Business report publishes yearly rankings for the year of publication as well as the previous year to shed light on year-to-year economies with one another at a point in time, the developments. Six topics and more than 50 economies have been distance to frontier measure shows how much the added since the inception of the project. Earlier rankings on the ease of doing business are therefore not comparable. Doing Business 2012 Kyrgyz Republic 103 yield a ranking nearly identical to the simple average Consider the example of Canada. It stands at 12 in the 5 used by Doing Business. Thus, Doing Business uses aggregate ranking on the ease of doing business. Its the simplest method: weighting all topics equally and, ranking is 3 on both starting a business and resolving within each topic, giving equal weight to each of the insolvency, and 5 on protecting investors. But its 6 topic components. ranking is only 59 on enforcing contracts, 42 on trading across borders and 156 on getting electricity. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a Variation in performance across the indicator sets is ―no practice‖ mark. Similarly, an economy receives a not at all unusual. It reflects differences in the degree ―no practice‖ or ―not possible‖ mark if regulation exists of priority that government authorities give to but is never used in practice or if a competing particular areas of business regulation reform and the regulation prohibits such practice. Either way, a ―no ability of different government agencies to deliver practice‖ mark puts the economy at the bottom of the tangible results in their area of responsibility. ranking on the relevant indicator. Economies that improved the most across 3 or more The ease of doing business index is limited in scope. It Doing Business topics in 2010/11 does not account for an economy’s proximity to large Doing Business 2012 uses a simple method to calculate markets, the quality of its infrastructure services (other which economies improved the most in the ease of than services related to trading across borders and doing business. First, it selects the economies that in getting electricity), the strength of its financial system, 2010/11 implemented regulatory reforms making it the security of property from theft and looting, its easier to do business in 3 or more of the 10 topics macroeconomic conditions or the strength of 7 included in this year’s ease of doing business ranking. underlying institutions. Thirty economies meet this criterion: Armenia, Burkina Variability of economies’ rankings across topics Faso, Burundi, Cape Verde, the Central African Republic, Chile, Colombia, the Democratic Republic of Each indicator set measures a different aspect of the Congo, Côte d'Ivoire, The Gambia, Georgia, Korea, business regulatory environment. The rankings of an Latvia, Liberia, FYR Macedonia, Mexico, Moldova, economy can vary, sometimes significantly, across Montenegro, Morocco, Nicaragua, Oman, Peru, Russia, indicator sets. The average correlation coefficient São Tomé and Príncipe, Senegal, Sierra Leone, between the 10 indicator sets included in the Slovenia, the Solomon Islands, South Africa and aggregate ranking is 0.36, and the coefficients Ukraine. Second, Doing Business ranks these between any 2 sets of indicators range from 0.17 economies on the increase in their ranking on the ease (between protecting investors and getting electricity) of doing business from the previous year using to 0.57 (between starting a business and protecting comparable rankings. investors). These correlations suggest that economies rarely score universally well or universally badly on the Selecting the economies that implemented regulatory indicators. reforms in at least 3 topics and improved the most in the aggregate ranking is intended to highlight economies with ongoing, broad-based reform programs. 5 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to Distance to frontier measure Do It‖ (World Bank, Washington, DC, 2005). Principal components This year’s report introduces a new measure to and unobserved components methods yield a ranking nearly identical to that from the simple average method because both illustrate how the regulatory environment for local these methods assign roughly equal weights to the topics, since the businesses in each economy has changed over time. pairwise correlations among indicators do not differ much. An The distance to frontier measure illustrates the alternative to the simple average method is to give different weights distance of an economy to the ―frontier‖ and shows to the topics, depending on which are considered of more or less importance in the context of a specific economy. 6 7 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2012 Kyrgyz Republic 104 the extent to which the economy has closed this gap The difference between an economy’s distance to over time. The frontier is a score derived from the most frontier score in 2005 and its score in 2011 illustrates efficient practice or highest score achieved on each of the extent to which the economy has closed the gap to the component indicators in 9 Doing Business indicator the frontier over time. sets (excluding the employing workers and getting The maximum (max) and minimum (min) observed electricity indicators) by any economy since 2005. In values are computed for the 174 economies included starting a business, for example, New Zealand has in the Doing Business sample since 2005 and for all achieved the highest performance on the time (1 day), years (from 2005 to 2011). The year 2005 was chosen Canada and New Zealand on the number of as the baseline for the economy sample because it was procedures required (1), Denmark and Slovenia on the the first year in which data were available for the cost (0% of income per capita) and Australia on the majority of economies (a total of 174) and for all 9 paid-in minimum capital requirement (0% of income indicator sets included in the measure. To mitigate the per capita). effects of extreme outliers in the distributions of the Calculating the distance to frontier for each economy rescaled data (very few economies need 694 days to involves 2 main steps. First, individual indicator scores complete the procedures to start a business, but many th are normalized to a common unit. To do so, each of need 9 days), the maximum (max) is defined as the 95 the 32 component indicators y is rescaled to (y − percentile of the pooled data for all economies and all min)/(max − min), with the minimum value (min) years for each indicator. representing the frontier—the highest performance on Take Colombia, which has a score of 0.21 on the that indicator across all economies since 2005. Second, distance to frontier measure for 2011. This score for each economy the scores obtained for individual indicates that the economy is 21 percentage points indicators are aggregated through simple averaging away from the frontier constructed from the best into one distance to frontier score. An economy’s performances across all economies and all years. distance to the frontier is indicated on a scale from 0 Colombia was further from the frontier in 2005, with a to 100, where 0 represents the frontier and 100 the score of 0.43. The difference between the scores shows lowest performance. an improvement over time. Doing Business 2012 Kyrgyz Republic 105 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2012 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 183 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Reports http://www.doingbusiness.org/custom-query/ Access to Doing Business reports as well as subnational and regional reports, reform case Law library studies and customized economy and regional Online collection of business laws and profiles regulations relating to business and gender http://www.doingbusiness.org/reports/ issues http://www.doingbusiness.org/law-library/ Methodology http://wbl.worldbank.org/ The methodologies and research papers underlying Doing Business Contributors http://www.doingbusiness.org/methodology/ More than 9,000 specialists in 183 economies who participate in Doing Business Research http://www.doingbusiness.org/contributors/doing- Abstracts of papers on Doing Business topics business/ and related policy issues http://www.doingbusiness.org/research/ Doing Business 2012 Kyrgyz Republic 106