92067 Doing Business 2015 Liberia Economy Profile 2015 Liberia Doing Business 2015 Liberia 2 © 2014 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 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 Liberia 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 22 Getting electricity ....................................................................................................................... 32 Registering property .................................................................................................................. 38 Getting credit .............................................................................................................................. 45 Protecting minority investors ................................................................................................... 52 Paying taxes ................................................................................................................................ 60 Trading across borders .............................................................................................................. 65 Enforcing contracts .................................................................................................................... 70 Resolving insolvency .................................................................................................................. 78 Labor market regulation ........................................................................................................... 81 Distance to frontier and ease of doing business ranking ...................................................... 88 Resources on the Doing Business website .............................................................................. 91 Doing Business 2015 Liberia 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). 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 11 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, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for Liberia. To allow useful comparison, it also information on ordering Doing Business 2015, are provides data for other selected economies (comparator available on the Doing Business website at economies) for each indicator. The data in this report are http://www.doingbusiness.org. current as of June Doing Business 2015 Liberia 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 Liberia 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW 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 business Region: Sub-Saharan Africa based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Low income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 4,294,077 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 410 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 174 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 168* distance to the best performance in each Doing Business Change in rank: -6 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 46.6 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 46.6 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 0 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and 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. Doing Business 2015 Liberia 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 2015 Liberia THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Liberia and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Liberia 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Liberia (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Liberia (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Liberia 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Liberia come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 Liberia 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Liberia Best performer globally Sierra Leone DB2015 Rwanda DB2015 Nigeria DB2015 Guinea DB2015 Indicator Liberia DB2015 Liberia DB2014 Ghana DB2015 Kenya DB2015 DB2015 Starting a Business 30 31 96 175 143 129 112 91 New Zealand (1) (rank) Starting a Business (DTF 92.41 92.19 83.73 55.44 74.02 77.13 81.66 85.02 New Zealand (99.96) Score) Procedures (number) 4.0 4.0 8.0 6.0 10.0 8.7 8.0 6.0 New Zealand (1.0)* Time (days) 4.5 4.5 14.0 8.0 30.0 30.8 6.5 12.0 New Zealand (0.5) Cost (% of income per 17.4 19.1 19.2 82.6 42.7 31.6 52.3 37.9 Slovenia (0.0) capita) Paid-in min. capital (% 0.0 0.0 2.8 416.0 0.0 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 143 144 106 159 95 171 34 120 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 62.00 60.85 69.14 55.92 71.02 50.00 81.55 66.80 China (95.53) (DTF Score) Doing Business 2015 Liberia 12 Best performer globally Sierra Leone DB2015 Rwanda DB2015 Nigeria DB2015 Guinea DB2015 Indicator Liberia DB2015 Liberia DB2014 Ghana DB2015 Kenya DB2015 DB2015 Hong Kong SAR, Procedures (number) 22.0 22.0 13.0 26.0 8.0 17.0 10.0 16.0 China (5.0) Time (days) 74.0 74.0 201.0 166.0 125.0 105.9 77.0 166.0 Singapore (26.0) Cost (% of warehouse 6.4 7.1 2.0 1.6 9.3 26.4 4.1 3.1 Qatar (0.0)* value) Getting Electricity 166 166 71 154 151 187 62 172 Korea, Rep. (1) (rank) Getting Electricity (DTF 52.61 51.69 78.29 57.61 58.85 31.37 79.48 45.51 Korea, Rep. (99.83) Score) Procedures (number) 4.0 4.0 4.0 4.0 6.0 9.0 4.0 8.0 12 Economies (3.0)* Time (days) 465.0 465.0 79.0 69.0 158.0 257.2 34.0 82.0 Korea, Rep. (18.0)* Cost (% of income per 2,065.4 2,288.5 1,778.0 7,155.6 1,020.2 478.0 3,073.9 4,237.5 Japan (0.0) capita) Registering Property 177 177 43 122 136 185 15 158 Georgia (1) (rank) Registering Property 39.57 39.49 79.23 60.14 56.88 26.56 89.20 50.63 Georgia (99.88) (DTF Score) Procedures (number) 10.0 10.0 5.0 6.0 9.0 12.1 3.0 7.0 4 Economies (1.0)* Time (days) 44.0 44.0 46.0 44.0 72.0 69.6 32.0 56.0 3 Economies (1.0)* Cost (% of property 12.9 12.9 1.1 8.6 4.3 18.6 0.1 10.8 4 Economies (0.0)* value) Getting Credit (rank) 160 157 36 131 116 52 4 151 New Zealand (1) Getting Credit (DTF 20.00 20.00 65.00 30.00 35.00 60.00 90.00 25.00 New Zealand (100) Score) Strength of legal rights 4 4 7 6 7 6 11 5 3 Economies (12)* index (0-12) Doing Business 2015 Liberia 13 Best performer globally Sierra Leone DB2015 Rwanda DB2015 Nigeria DB2015 Guinea DB2015 Indicator Liberia DB2015 Liberia DB2014 Ghana DB2015 Kenya DB2015 DB2015 Depth of credit 0 0 6 0 0 6 7 0 23 Economies (8)* information index (0-8) Credit registry coverage 1.7 1.4 0.0 0.0 0.0 0.1 2.4 1.0 Portugal (100.0) (% of adults) Credit bureau coverage 0.0 0.0 14.1 0.0 4.9 5.8 15.7 0.0 23 Economies (100.0)* (% of adults) Protecting Minority 181 180 56 162 122 62 117 62 New Zealand (1) Investors (rank) Protecting Minority 28.33 28.33 58.33 39.17 45.83 57.50 46.67 57.50 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 3.7 3.7 6.7 3.3 4.7 6.0 6.3 6.7 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 2.0 2.0 5.0 4.5 4.5 5.5 3.0 4.8 France (7.8)* 10) Strength of minority investor protection 2.8 2.8 5.8 3.9 4.6 5.8 4.7 5.8 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 77 62 101 184 102 179 27 130 (1)* Paying Taxes (DTF United Arab Emirates 74.75 76.97 71.53 28.27 71.49 39.15 85.79 65.39 Score) (99.44)* Payments (number per Hong Kong SAR, 33.0 33.0 32.0 57.0 30.0 47.0 17.0 33.0 year) China (3.0)* Time (hours per year) 150.5 150.5 224.0 440.0 201.5 907.9 107.0 353.0 Luxembourg (55.0) Trading Across Borders 149 148 120 141 153 159 164 133 Singapore (1) (rank) Trading Across Borders 56.40 56.06 67.10 60.25 54.49 50.12 44.67 63.61 Singapore (96.47) Doing Business 2015 Liberia 14 Best performer globally Sierra Leone DB2015 Rwanda DB2015 Nigeria DB2015 Guinea DB2015 Indicator Liberia DB2015 Liberia DB2014 Ghana DB2015 Kenya DB2015 DB2015 (DTF Score) Documents to export 10 10 6 7 8 9 7 7 Ireland (2)* (number) Time to export (days) 15.0 15.0 19.0 36.0 26.0 22.9 26.0 25.0 5 Economies (6.0)* Cost to export (US$ per 1,320.0 1,320.0 875.0 915.0 2,255.0 1,564.0 3,245.0 1,185.0 Timor-Leste (410.0) container) Cost to export (deflated 1,320.0 1,370.6 875.0 915.0 2,255.0 1,564.0 3,245.0 1,185.0 US$ per container) Documents to import 12 12 7 8 9 13 9 8 Ireland (2)* (number) Time to import (days) 29.0 29.0 41.0 31.0 26.0 33.9 27.0 28.0 Singapore (4.0) Cost to import (US$ per 1,320.0 1,320.0 1,360.0 1,480.0 2,350.0 1,959.5 4,990.0 1,575.0 Singapore (440.0) container) Cost to import (deflated 1,320.0 1,370.6 1,360.0 1,480.0 2,350.0 1,959.5 4,990.0 1,575.0 US$ per container) Enforcing Contracts 174 174 96 133 137 140 62 109 Singapore (1) (rank) Enforcing Contracts 35.43 35.43 57.59 49.74 48.96 47.71 63.94 55.68 Singapore (89.54) (DTF Score) Time (days) 1,280.0 1,280.0 710.0 276.0 465.0 509.8 230.0 515.0 Singapore (150.0) Cost (% of claim) 35.0 35.0 23.0 45.0 47.2 57.7 82.7 39.5 Iceland (9.0) Procedures (number) 40.0 40.0 38.0 49.0 44.0 40.2 23.0 39.0 Singapore (21.0)* Resolving Insolvency 169 169 161 119 134 131 101 143 Finland (1) (rank) Resolving Insolvency 4.60 4.60 22.45 37.62 33.31 33.76 41.77 30.68 Finland (93.85) (DTF Score) Doing Business 2015 Liberia 15 Best performer globally Sierra Leone DB2015 Rwanda DB2015 Nigeria DB2015 Guinea DB2015 Indicator Liberia DB2015 Liberia DB2014 Ghana DB2015 Kenya DB2015 DB2015 Time (years) 3.0 1.9 3.8 4.5 2.0 2.5 2.3 Ireland (0.4) Cost (% of estate) 42.5 42.5 22.0 8.0 22.0 22.0 29.0 42.0 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 1 0 0 0 going concern) Recovery rate (cents on 8.6 8.5 24.3 17.6 27.1 27.9 19.5 10.6 Japan (92.9) the dollar) Strength of insolvency 0.0 0.0 3.0 9.0 6.0 6.0 10.0 8.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practic e or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the r anking on the relevant indicator. * 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 2015 Liberia 16 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 well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Liberia 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Liberia? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 4.0 procedures, takes 4.5 days, average of the 2 largest business cities. See the chapter costs 17.4% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.0% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Liberia - Paid-in minimum capital (% of income per capita): 0.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Liberia 18 STARTING A BUSINESS Globally, Liberia stands at 30 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Liberia to The rankings for comparator economies and the regional start a business. Figure 2.2 How Liberia and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 Liberia 19 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Liberia (table 2.1)? Table 2.1 How has Liberia made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia made starting a business easier by eliminating the DB2010 requirement to obtain an environmental impact assessment when forming a general trading company. Liberia made starting a business easier by introducing a one- DB2012 stop shop. Liberia made starting a business easier by eliminating the DB2014 business trade license fees. 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 2015 Liberia 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Liberia is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid in minimum capital requirement: LRD 0 the study of laws, regulations and publicly available City: Monrovia information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time 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). Table 2.2 Summary of time, cost and procedures for starting a business in Liberia - Time to No. Procedure Cost to complete complete Reserve a unique company name The applicant can search the name online or at the Liberian Business Registry (LBR) helpdesk. The reservation of the name costs LRD 1,400 Less than one day 1 and lasts for 120 days. LRD 1,400 (online procedure) Agency: Liberia Business Registry * Register at the Liberia Business Registry The entrepreneur submits the company registration application to the Liberia Business Registry (LBR) office. The application must include the following documents: Consolidated application for a limited liability company contains: 1. Registration Form (RF – 001) 2. Articles of incorporation 3. Copy of ID documents as attachments to forms A or B 1 day 4. Additional parts: (simultaneous with 2 no charge - Empowered person form (A) or Registered agent form (B) in case of a previous company representative procedure) - Incorporator(s) form (E) - Shares and shareholder(s) form (F) - Information for TAX authority form (Q) LBR officers review the application and request the Tax Identification Number (TIN) and BPS from the Ministry of Finance on behalf of the entrepreneur. Doing Business 2015 Liberia 21 Time to No. Procedure Cost to complete complete Agency: Liberia Business Registry * Pay fees and obtain proof of payment The entrepreneur proceeds to the bank window in order to pay the associated registration fees. Upon payment of the fee, the Bank officer 1 day issues a flag receipt of the Government of Liberia as proof of payment. (simultaneous with 3 This receipt has to be returned to the initial officer who accepted the no charge previous application. procedure) Agency: Liberia Business Registry (Central Bank window) Receive the Business Registration Certificate The entrepreneur returns to the Liberia Business Registry office to submit the proof of fee payment. The officer then journalizes the dossier and provides the entrepreneur with the receipt slip, thereby approving the dossier for processing. The entrepreneur can track the status of the application online; and upon approval, the company 2 days LRD 4,000 4 receives a Business Registration Certificate. The amount of LRD 4,000 is charged for business registration. As of June 27 2012, companies no longer need to pay a fee of LRD 4,200 for the business license. Agency: Liberia Business Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Liberia 22 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 excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 Liberia 23 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build economy, except for 11 economies for which the data a warehouse in Liberia? According to data collected by are a population-weighted average of the 2 largest Doing Business, dealing with construction permits there business cities. See the chapter on distance to frontier requires 22.0 procedures, takes 74.0 days and costs 6.4% and ease of doing business ranking at the end of this of the warehouse value (figure 3.1). Most indicator sets profile for more details. refer to a case scenario in the largest business city of an Figure 3.1 What it takes to comply with formalities to build a warehouse in Liberia - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Liberia 24 DEALING WITH CONSTRUCTION PERMITS Globally, Liberia stands at 143 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Liberia to legally build a warehouse. Figure 3.2 How Liberia and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 Liberia 25 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in Liberia (table 3.1)? Table 3.1 How has Liberia made dealing with construction permits easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia made dealing with construction permits easier by reducing the building permit fee and eliminating the requirement to obtain a tax waiver certificate before DB2010 submitting a building permit application. In addition, the cost of obtaining a power generator declined, and with the reopening of Libtelco fixed telephone connections became more readily available. 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 2015 Liberia 26 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Liberia are based on BUILDING A WAREHOUSE a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction LRD 1,554,536 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Monrovia service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Liberia - Time to No. Procedure Cost to complete complete Submit plans to Ministry of Public Works The application file should include 2 copies of the site plan; letter of request addressed to the Deputy Minister; the land deed; and the architectural, structural, and mechanical drawings. These documents are passed from one official to another for approval at the Ministry of Public Works (MPW) before the building permit is issued. Physically all departments are located in different parts of the city which may delay the approval. The documents are submitted internally at the MPW in the following order: • Office of the Deputy Minister, Technical Services • Office of the Assistant Minister, Technical Services (initial recipient) • Land-Use Planning and Zoning Division (initial site plan and document review). There are no thorough checks with the National Archives on the authenticity of the land documents, ensuring that is the 1 responsibility of the owner of the warehouse. 1 day no charge • Chief of Zoning (physical site approval) • Chief of Architecture (design approval) • Chief of Electromechanical Engineering (electrical and mechanical approval) • Chief of Engineering (structural approval and billing) • Finance Section (payments) • Land-Use Planning and Programming (signature on permit) • Office of the Deputy Minister, Technical Services (permit attached) A temporary building permit can be granted after the second step above, when the Land-Use Planning and Zoning Division conducts an initial site plan and document review. This temporary permit can be obtained within one week. It is granted for a maximum of 90 days, but this is an exception rather than the rule. In practice, a permit is accorded after all steps mentioned above have been completed. As a result of the weak enforcement of building regulations, partly a result of the post-conflict situation, many private construction projects take Doing Business 2015 Liberia 27 Time to No. Procedure Cost to complete complete place without following the official guidelines. Agency: Ministry of Public Works (MPW) Receive inspection from Ministry of Public Works (Zoning Division) It takes about 3 days for the Zoning Division to process an application. The Zoning Division will contact the applicant to inform them that they will need an inspection. There are only 4 inspectors and resources are 1 day no charge 2 limited, so the applicant has to provide transportation for them. Agency: Ministry of Public Works (Zoning Division) Obtain payment slip from the Ministry of Public Works Once all the technical departments have reviewed the application, the Finance Department creates a payment slip. BuildCo must pick up the payment slip and then go the Central Bank to pay the fees. The fee for 1 day USD 700 3 design approval for commercial buildings is USD 0.05 per sq. ft. Agency: Ministry of Public Works (MPW) Obtain construction permit from the Ministry of Public Works BuildCo must return to the Ministry of Public Works (MPW) with the payment receipt and the application is then processed for final approval. The process at the MPW from submission of plans (procedure 1) to approval used to take 3 months, but reforms introduced in 2008 reduced the processing time for simple building permits to 1 month. The MPW established a 30-day statutory time limit for the issuance of building permits. The MPW also introduced a checklist to clearly define all of the documents required to complete the application. Now all 4 applications are scrutinized on submission to check for completeness 28 days no charge and accuracy before being forwarded for processing. The reform eliminated the Minister’s signature on building permits for simple construction projects. By rule, the Minister's consent is only required for projects with a value greater than USD 1 million or that involve a foreign government. However, in practice the Minister or Deputy Minister still approves projects that are less than USD 1 million in value. Agency: Ministry of Public Works (MPW) Obtain construction clearance from the City Corporation of Monrovia After obtaining the design approval from the MPW, BuildCo must 5 obtain a separate construction clearance from the Planning Department 2 days USD 560 at the City Corporation of Monrovia. The Planning Department takes 1 day to review the plans and then prepares a payment slip which is usually paid the next day. Doing Business 2015 Liberia 28 Time to No. Procedure Cost to complete complete City Corporation of Monrovia as of May 1, 2009 abolished 3% fee charge, based on project value, for issuing a building permit and replaced it with a fixed fee of USD 0.04 per sq. ft. for new commercial and industrial construction projects. However, practitioners note that this fee is "negotiable". Applicants can pay a less amount, which is official, for a clearance that will last for a shorter period of time. There are no fee schedules posted at the City Corporation and often, builders are asked to pay much higher fees. Agency: City Corporation of Monrovia Receive inspection from the Ministry of Public Works - I The construction of the warehouse can commence after the building permit is obtained. There is no requirement to request inspections at any stage of the construction process. However, building inspectors and engineers are often dispatched from the Ministry of Public Works to inspect construction sites to see to what extent the construction 6 conforms with the originally submitted drawings. Over the course of 6 - 1 day no charge - 7 months, inspections occur randomly at a rate of every 3 weeks or as often as every week. Construction work stops only if the plans have not been complied with. Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - II 7 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - III 8 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - IV 9 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - V 10 1 day no charge Agency: Ministry of Public Works (MPW) Doing Business 2015 Liberia 29 Time to No. Procedure Cost to complete complete Receive inspection from the Ministry of Public Works - Vl 11 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - VII 12 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - VIII 13 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - IX 14 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - X 15 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - XI 16 1 day no charge Agency: Ministry of Public Works (MPW) Receive inspection from the Ministry of Public Works - XII 17 1 day no charge Agency: Ministry of Public Works (MPW) Doing Business 2015 Liberia 30 Time to No. Procedure Cost to complete complete * Register with the Liberia Water and Sewer Corporation 18 1 day no charge Agency: Liberia Water and Sewer Corporation (LWSC) Receive inspection from the Liberia Water and Sewer Corporation The Liberia Water and Sewer Corporation inspects the site to prepare a cost estimate for the pipes and installation. 1 day no charge 19 Agency: Liberia Water and Sewer Corporation (LWSC) Obtain water and sewage connection Water connections can be made if existing pipelines pass through the construction site. If that is the case, then the water connection should take 1 -- 2 weeks. The cost for water connection includes LRD 250.00 for the connection itself and USD 50.00 for the meter. If a water pipeline does not pass through the area, then BuildCo must buy all the 14 days USD 54 20 necessary materials to extend an existing pipeline to the construction site before the connection is made. This will inevitably add cost and time to the utility connection process. Agency: Liberia Water and Sewer Corporation (LWSC) Request and obtain occupancy permit In the recent year the Ministry of Public Works started more rigorously enforcing the regulations of the Zoning Law. According to article 5. A of the Zoning Law all new building must obtain an occupancy permit before being used. Stricter enforcement has led to wider practice by 10 days no charge 21 companies to obtain the occupancy permit. This is issued within 10 days. Agency: Ministry of Public Works (MPW) Register the building at the Probate Court This registration of the completed building occurs in two stages. First BuildCo must register the building with the Probate Court, similar to a notarization procedure. Registration at the Probate Court takes 3 days and costs LRD 300.00. The case considered here assumes that BuildCo 22 does not employ a lawyer (lawyer’s fees would amount to USD 250.00). 3 days LRD 300 Registration is not required, but companies do so to increase the resale value. Agency: Probate Court * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2015 Liberia 31 Source: Doing Business database. Doing Business 2015 Liberia 32 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and 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 complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 Liberia 33 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Liberia? According to data collected by Doing Business, business city of an economy, except for 11 economies for getting electricity there requires 4.0 procedures, takes which the data are a population-weighted average of the 465.0 days and costs 2065.4% of income per capita 2 largest business cities. See the chapter on distance to (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Liberia - Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Liberia 34 GETTING ELECTRICITY Globally, Liberia stands at 166 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Liberia to connect a The rankings for comparator economies and the regional warehouse to electricity. Figure 4.2 How Liberia and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 Liberia 35 GETTING ELECTRICITY Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in Liberia practices and internal wiring installations. In an effort to (table 4.1)? Table 4.1 How has Liberia made getting electricity easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform In Liberia obtaining an electricity connection became easier DB2013 thanks to the adoption of better procurement practices by the Liberia Electricity Corporation. Source: Doing Business database. Doing Business 2015 Liberia 36 GETTING ELECTRICITY What are the details? The indicators reported here for Liberia are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Liberia Electricity Name of utility: identified by Doing Business. Data are collected from the Corporation (LEC) distribution utility, then completed and verified by electricity regulatory agencies and independent City: Monrovia professionals such as electrical engineers, electrical The procedures are those that apply to a warehouse and contractors and construction companies. The electricity electricity connection matching the standard distribution utility surveyed is the one serving the area assumptions used by Doing Business in collecting the (or areas) in which warehouses are located. If there is a data (see the section in this chapter on what the choice of distribution utilities, the one serving the largest indicators cover). The procedures, along with the number of customers is selected. associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Liberia - Time to No. Procedure Cost to complete complete Client submits application and awaits estimate of connection fees from Liberia Electricity Corporation (LEC) The company has to submit an application letter along with a copy of the business registration (in the future, also a photo) to the Customer Service Department. Customer service forwards the application letter to 14 calendar days LRD 0 1 the commercial manager, who screens the application and forwards it to the Technical Department. Agency: Liberia Electricity Corporation (LEC), Monrovia * Client obtains external inspection from Liberia Electricity Corporation (LEC) The Technical Department will come out and inspect the premises.The main purpose of the inspection (as with most business-activity-related inspections in Liberia) is to prove that the business exists. The inspector will draw sketches of the location, etc. to determine Liberia Electricity Corporation’s capacity to deliver power. Inspectors submit a report to their department, which then gets forwarded to the Commercial 1 calendar day LRD 0 2 Department. Once the Commercial Department approves the application, it notifies the Computer section to prepare an invoice. Once the invoice is prepared, it gets sent back to the Commercial Department and they contact the customer to come pick up the invoice. The customer comes to LEC and signs a ledger to accept payment invoice. Agency: Liberia Electricity Corporation (LEC), Monrovia Doing Business 2015 Liberia 37 Time to No. Procedure Cost to complete complete Client obtains external works from Liberia Electricity Corporation (LEC) Only Liberia Electricity Corporation (LEC) can carry out the external works. The utility currently has the material readily available in stock, which has greatly reduced delays by many months. 3 The works consist of expanding the overhead network by installing poles, 75 calendar days USD 8,400 a transformer and its accessories and extending wires to the warehouse. Agency: Liberia Electricity Corporation (LEC), Monrovia Client obtains inspection of internal wiring, meter installation, and final connection from Liberia Electricity Corporation (LEC) When the external works have been completed, and the electrician has finished doing the internal installation, the utility will inspect the wiring and turn on the supply. The client will need to pay a security deposit and a registration fee. The cost of the meter is included in the registration fee. Security deposit: Based on the requirement for the case study, it is estimated that the load will be 202 amps and that a 70 mm2 wire will be used. The deposit fee will correspond to 16% of the cost of 202 amps, approximately the monthly load. This deposit goes into an escrow account as a guarantee. If bills are not paid, then the amounts are 376 calendar days LRD 5,156.28 4 deducted from this escrow account. If the client stops the connection, then he/she is reimbursed. And there are no interests on the escrow account. Registration fee: There is also a registration fee equivalent to 20% of the Bill of Quantity. When the type of material and the quantity needed has been determined, and also what needs to be done, and the labor cost, the customer will be required to pay a registration fee equivalent to 20% of the Bill of Quantity. Agency: Liberia Electricity Corporation (LEC), Monrovia * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 Liberia 38 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 accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Liberia 39 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Liberia? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 10.0 procedures, which the data are a population-weighted average of the takes 44.0 days and costs 12.9% of the property value 2 largest business cities. See the chapter on distance to (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Liberia - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Liberia 40 REGISTERING PROPERTY Globally, Liberia stands at 177 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Liberia to transfer property. Figure 5.2 How Liberia and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 Liberia 41 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Liberia (table 5.1)? Table 5.1 How has Liberia made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia made transferring property easier by digitizing the DB2014 records at the land registry. 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 2015 Liberia 42 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 through information collected from local property lawyers, Property value: LRD 1,554,536 notaries and property registries. These procedures are those that apply to a transaction matching the City: Monrovia standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Liberia Time to No. Procedure Cost to complete complete Obtain a Transfer deed form The parties obtain a Transfer deed form to provide to the surveyor who will be conducting the survey of that property. At that time, the seller will also provide a copy of his deed to the new owner. The transfer deed can 1 day USD 4 1 be obtained in shops. Agency: Shop Buyer contacts a surveyor to conduct the survey of the property One of the requirements prior to transferring a property in Liberia is to conduct a survey of that property by a licensed surveyor. The potential buyer will contact a certified surveyor to conduct the survey of the property to be transferred. The property cannot be surveyed during the notice period. Any person wishing to introduce a claim of ownership 21 days 2 on that property must come forward during the notice period. If there (simultaneous USD 50 are no disputes recorded after the notice period, then the surveyor will with Procedure 3) conduct the survey of the property with the potential buyer as a witness, and anyone else who wishes to be present. Agency: Private licensed surveyor * Publication of survey in newspaper and radio by surveyor By law, the surveyor must inform the public that the survey or re-survey 1 day of a particular property will be conducted on a set date. The notice will included in 3 (simultaneous also provide the location of that property. The notice is published in local Procedure 2 with Procedure 2) newspapers and is also aired for a period of 15 days. But the law is silent as to the length of this notice. Doing Business 2015 Liberia 43 Time to No. Procedure Cost to complete complete Agency: Newspaper/radio Parties contract a lawyer to start official transfer process The parties give the lawyer the deed on which the sketch of the property has been done by the licensed surveyor. The transfer process will then 10 - 15% property 4 start. 2 days value Agency: Lawyer Lawyer visits Registry to check the status and ownership of the property The records are kept in ledgers and the search for ownership is done manually by checking the ledgers. An application for search for Deeds/Titles document is completed. It takes a week for CNDRA to 5 search for the deeds. CNDRA will contact MOFA in case they do not 4 days USD 4 (250 LB$) have the entire file. Agency: Center for National Documents & Records / National Archives (CNDRA) Lawyer visits Bureau of Internal Revenue of the Ministry of Finance (Real Estate Division) to check for outstanding taxes on the property Bureau of Internal Revenue (Real Estate Tax Division) at the Ministry of Finance Comments: The Real Estate Tax division will issue an official Tax Receipt evidencing that all delinquent real property taxes have been paid 3 days no cost 6 in full. This Tax Receipt is mandatory, as of June 1st, 2009 in order to have the deed probated at the Probate Court. Agency: Bureau of Internal Revenue at the Ministry of Finance Parties sign the deed form at the lawyer's office Once all verifications are done by the lawyer to ensure that the property is free of all encumbrances and established the rightful ownership of the property, both parties can now sign the deed, which will be probated at 1 day no cost 7 the Probate Court. The deed must have a vivid description of the building. Agency: Lawyer Doing Business 2015 Liberia 44 Time to No. Procedure Cost to complete complete Lawyer visits Probate Court to request the transfer The lawyer visits the Probate Court to request the transfer (1 business day). The Court will then publish a notice of the transaction for 4 business days. If there are no objections, on the fifth business day, the lawyer can pick up the deed with the seal of approval from the Court. 7 days no cost 8 The Probate court rules state that only lawyers are allowed to submit the deed for probate. Agency: Probate Court Parties register the deed at the Registry The buyer will complete the Registration Form for Deeds and Titles Documents. A bill form will be provided at that time and payment is made at the MOF. Documents to be provided at time of registration: 15 USD (1,050 9 1. A copy of the Real Estate Tax receipt (obtained in procedure 5) 4 days LD$) 2. Flag receipt from the Ministry of Finance as proof of payment 3. Original and Two copies of Bill form 4. Probated Deed Agency: Land Registry Seller goes to Bureau of Internal Revenues to change the owner’s name on the property The parties will change the ownership name at the Bureau of Internal Revenues. It is in the interest of the seller to ensure that the name is 1 day no cost 10 changed so that the new owner is responsible for future taxes. Agency: Bureau of Internal Revenues * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Liberia 45 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 borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 Liberia 46 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Liberia stands at 160 in the ranking of 189 and bankruptcy laws in Liberia facilitate access to credit? economies on the ease of getting credit (figure 6.1). The The economy has a score of 0 on the depth of credit rankings for comparator economies and the regional information index and a score of 4 on the strength of average ranking provide other useful information for legal rights index (see the summary of scoring at the end assessing how well regulations and institutions in Liberia of this chapter for details). Higher scores indicate more support lending and borrowing. credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Liberia and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 Liberia 47 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Liberia and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 Liberia 48 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Liberia (table 6.1)? Table 6.1 How has Liberia made getting credit easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia strengthened its legal framework for secured transactions by adopting a new commercial code that broadens DB2012 the range of assets that can be used as collateral (including future assets) and extends the security interest to the proceeds of the original asset. 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 2015 Liberia 49 GETTING CREDIT What are the details? The getting credit indicators reported here for Liberia are The data on the legal rights of borrowers and lenders are based on detailed information collected in that economy. gathered through a survey of financial lawyers and The data on credit information sharing are collected verified through analysis of laws and regulations as well through a survey of a credit registry and/or credit bureau as public sources of information on collateral and (if one exists). To construct the depth of credit bankruptcy laws. For the strength of legal rights index, a information index, a score of 1 is assigned for each of 8 score of 1 is assigned for each of 10 aspects related to features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 4 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? 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 automatically Yes 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 No include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's No name? Does a notice-based collateral registry exist in which all functional equivalents can be No registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by No providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2015 Liberia 50 Strength of legal rights index (0–12) Index score: 4 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through No public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 0 Are data on both firms and individuals distributed? No No 0 Are both positive and negative credit data distributed? No No 0 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on No No 0 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per No No 0 capita distributed? By law, do borrowers have the right to access their No No 0 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an No No 0 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 0 Number of individuals 0 0 Percent of total 0.0 1.7 Doing Business 2015 Liberia 51 Source: Doing Business database. Doing Business 2015 Liberia 52 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 Liberia 53 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Liberia? The economy has a score of 2.8 not measure all aspects related to the protection of on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Liberia stands at 181 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Liberia and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 Liberia 54 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for Liberia in 2014. A summary of scoring for the minority investors indicators into context is to see where protecting minority investors indicators at the end of this the economy stands in the distribution of scores across chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 Liberia 55 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 Liberia 56 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 Liberia 57 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 Liberia 58 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Liberia are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Liberia. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Liberia Answer Score Extent of disclosure index (0-10) 4.0 Which corporate body can provide legally sufficient Board of directors excluding 2 approval for the Buyer-Seller transaction? (0-3) interested members Is disclosure by the interested director to the board of Full disclosure of all material facts 2 directors required? (0-2) Is disclosure of the transaction in published periodic filings No disclosure obligation 0 (annual reports) required? (0-2) Is immediate disclosure of the transaction to the public No disclosure obligation 0 and/or shareholders required? (0-2) Must an external body review the terms of the transaction No 0 before it takes place? (0-1) Extent of director liability index (0-10) 1.0 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1 1) Can shareholders hold the interested director liable for the Not liable 0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Not liable 0 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a No 0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0 plaintiff? (0-1) Can both fines and imprisonment be applied against the No 0 interested indrector? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 6.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? No 0 (0-1) Can the plaintiff obtain any documents from the defendant Any relevant document 3 Doing Business 2015 Liberia 59 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from At the discretion of the court 0 the company? (0-2) Strength of minority investor protection index (0-10) 2.8 Extent of conflict of interest regulation index (0-10) 3.7 Extent of shareholder rights index (0-10.5) 3.0 Can shareholders amend company bylaws or statutes with a Yes 1.5 simple majority? Can shareholders owning 10% of the company's share No 0 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of Yes 1.5 directors before the end of their term. Must a company obtain its shareholders’ approval every No 0 time it issues new shares? Are shareholders automatically granted subscription rights No 0 on new shares? Must shareholders approve the election and dismissal of the No 0 external auditor? Can shareholders freely trade shares prior to a major No 0 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 1.5 Is the CEO barred from also serving as chair of the board of Yes 1.5 directors? Must the board of directors include independent board No 0 members? Must a company have a separate audit committee? No 0 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected Yes 1.5 shares? Must a potential acquirer make a tender offer to all No 0 shareholders upon acquiring 50% of a company? Is cross-shareholding between 2 independent companies No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its Yes 1.5 parent company? Extent of corporate transparency index (0-9) 1.5 Must ownership stakes representing 10% be disclosed? Yes 1.5 Must information about board members’ other directorships as well as basic information on their primary employment No 0 be disclosed? Must the compensation of individual managers be No 0 disclosed? Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties No 0 and other factors influencing the reporting? Must annual financial statements be audited by an external No 0 Doing Business 2015 Liberia 60 auditor? Must audit reports be disclosed to the public? No 0 Extent of shareholder governance index (0-10) 2.0 Source: Doing Business database. PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paidof by the 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power 0.8. The threshold is defined as and mandatory the total contributions tax rate at the 15th percentilepaid during of the company. overall distribution for all years included in the analysis. It is calculated and adjusted on a the yearly basis. second The thresholdyear of is not operation based are recorded. on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set  range Alower at the end ofstandard of deductions the distribution and of tax rates levied on medium-size  Taxes and mandatory contributions are exemptions enterprises in the manufacturing sector as observed through the paying taxes indicators. are also This reduces recorded. the bias in the indicators toward economies that do not need to levyat measured all levels significant government. ofon taxes companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 Liberia 61 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Liberia—and how much do firms pay in taxes? frontier and ease of doing business ranking at the end of On average, firms make 33.0 tax payments a year, spend this profile for more details. 150.5 hours a year filing, preparing and paying taxes and Globally, Liberia stands at 77 in the ranking of 189 pay total taxes amounting to 33.3% of profit (see the economies on the ease of paying taxes (figure 8.1). The summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Liberia. Figure 8.1 How Liberia and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 Liberia 62 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 rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in Liberia payments or offering electronic filing and payment. (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Liberia made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia made paying taxes easier for companies by reducing the DB2013 profit tax rate and abolishing the turnover tax. 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 2015 Liberia 63 PAYING TAXES What are the details? The indicators reported here for Liberia are based on LOCATION OF STANDARDIZED COMPANY the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Monrovia chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration 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 25% of taxable Taxable Corporate income tax 5 60 income or income or 21.2 2% of turnover turnover gross Social security 12 60 4.75% 5.4 salaries type of Municipal tax 1 0 fee scale 4.5 business Assessed Property tax 1 0 1.5% Value of 2.2 building Money market included in Tax on interest 0 0 15% 0.4 account other taxes interest Social security contributions gross not 0 not included 0 3% 0 on employee salaries included value not Goods and Service Tax 12 31 7% 0 added included Doing Business 2015 Liberia 64 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 value of fuel small Fuel tax 1 0 0 consumpti amount on revenue stamps required small Stamp duty 1 0 LD 100 0 on legal amount document s Totals 33.0 150.5 33.3 Source: Doing Business database. Doing Business 2015 Liberia 65 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 a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 Liberia 66 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Liberia? population-weighted average of the 2 largest business According to data collected by Doing Business, exporting cities. See the chapter on distance to frontier and ease of a standard container of goods requires 10 documents, doing business ranking at the end of this profile for more takes 15.0 days and costs $1320.0. Importing the same details. container of goods requires 12 documents, takes 29.0 Globally, Liberia stands at 149 in the ranking of 189 days and costs $1320.0 (see the summary of four economies on the ease of trading across borders (figure predefined stages and documents at the end of this 9.1). The rankings for comparator economies and the chapter for details). Most indicator sets refer to a case regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a Liberia to export and import goods. Figure 9.1 How Liberia and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 Liberia 67 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 Business tools to facilitate trade—including single windows, risk- recorded in Liberia (table 9.1)? based inspections and electronic data interchange Table 9.1 How has Liberia made trading across borders easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia reduced the time needed for trading across borders by creating a one-stop shop that brings together government DB2010 ministries and agencies and by streamlining the inspection process. Liberia made trading across borders faster by implementing DB2012 online submission of customs forms and enhancing risk-based inspections. 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 2015 Liberia 68 TRADING ACROSS BORDERS What are the details? The indicators reported here for Liberia are based on LOCATION OF STANDARDIZED COMPANY a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the indicators Port Name: Monrovia cover). Information on the required documents and the time and cost to complete export and import is City: Monrovia collected from local freight forwarders, shipping lines, The predefined stages, and the associated time and cost, customs brokers, port officials and banks. for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Table 9.2 Summary of predefined stages and documents for trading across borders in Liberia Stages to export Time (days) Cost (US$) Customs clearance and inspections 2 355 Documents preparation 8 315 Inland transportation and handling 3 400 Ports and terminal handling 2 250 Totals 15 1,320 Stages to import Time (days) Cost (US$) Customs clearance and inspections 1 355 Documents preparation 22 590 Inland transportation and handling 3 250 Ports and terminal handling 3 125 Totals 29 1,320 Doing Business 2015 Liberia 69 Documents to export Bill of lading Cargo Acceptance Note (shipping note) Certificate of origin Commercial invoice Customs export declaration Customs release form Export permit Inspection report (from BIVAC) Packing List Terminal handling receipts Documents to import Bill of lading Certificate of origin Commercial invoice Confirmation receipt of payment of customs fees and duties Customs import declaration Exit Note (issued by ASYCUDA) Gate Pass (issued by NPA) Import Permit Declaration (IPD) Inspection Report (from BIVAC) Official receipt of payment of port charges (from NPA) Packing list Release Order (issued by Customs) Source: Doing Business database. Doing Business 2015 Liberia 70 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 Liberia 71 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial cities. See the chapter on distance to frontier and ease of dispute through the courts in Liberia? According to data doing business ranking at the end of this profile for more collected by Doing Business, contract enforcement takes details. 1280.0 days, costs 35.0% of the value of the claim and Globally, Liberia stands at 174 in the ranking of 189 requires 40.0 procedures (see the summary at the end of economies on the ease of enforcing contracts (figure this chapter for details). Most indicator sets refer to a 10.1). The rankings for comparator economies and the case scenario in the largest business city of an economy, regional average ranking provide other useful except for 11 economies for which the data are a benchmarks for assessing the efficiency of contract population-weighted average of the 2 largest business enforcement in Liberia. Figure 10.1 How Liberia and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 Liberia 72 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in Liberia (table 10.1)? Table 10.1 How has Liberia made enforcing contracts easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Liberia made enforcing contracts easier by creating a DB2013 specialized commercial court. 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 2015 Liberia 73 ENFORCING CONTRACTS What are the details? The indicators reported here for Liberia are based on COURT NAME a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on what the Claim value: LRD 381,872 indicators cover). These procedures, and the time and cost of completing them, are identified through Monrovia Sixth Circuit study of the codes of civil procedure and other court Court name: Court regulations, as well as through questionnaires completed by local litigation lawyers (and, in a City: Monrovia quarter of the economies covered by Doing Business, by judges as well). Table 10.2 Summary of time, cost and procedures for enforcing a contract in Liberia Sub-Saharan Indicator Liberia Africa average Time (days) 1,280 650 Filing and service 10 Trial and judgment 730 Enforcement of judgment 540 Cost (% of claim) 35.0 45.1 Attorney cost (% of claim) 25.1 Court cost (% of claim) 6.9 Enforcement Cost (% of claim) 3.0 Procedures (number) 40 39 Number of procedures (without bonus points) 41 Specialized commercial courts -1 Total number of procedures (including bonus points) 40 Doing Business 2015 Liberia 74 No. Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff hires a lawyer: Plaintiff hires a lawyer. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 3 assigning a reference number to the case). Plaintiff requests service of process on Defendant: Plaintiff requests in writing to the court for an order 4 that process be served on Defendant. 5 Court order for service: Upon Plaintiff’s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 6 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. Attempt at physical delivery: An attempt to physically deliver summons and complaint to Defendant is 7 made. * Proof of service: Plaintiff submits proof of service to court, as required by law or standard practice. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Guarantees securing attached property: Plaintiff submits guarantees or bonds to secure Defendant 8 against possible damages to attached property. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 9 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Custody of assets attached prior to judgment: If physical attachment is ordered, Defendant's attached 10 assets are placed in the custody or control of an enforcement officer or private bailiff. Report on pre-judgment attachment: Court enforcement officer or private bailiff issues and delivers a 11 report on the attachment of Defendant’s property to the judge. Hearing on pre-judgment attachment: A hearing takes place as a matter of law or standard practice to 12 resolve the question of whether Defendant’s assets can be attached prior to judgment. This process m ay include the submission of separate summons and petitions. Doing Business 2015 Liberia 75 No. Procedures Trial and judgment: Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 13 or defense on the merits of the case (see assumption 4). Plaintiff’s written reply to Defendant's answer: Plaintiff responds to Defendant’s answer with a written 14 pleading, which may or may not include witness statements or expert (witness) statements. Filing of written submissions: Plaintiff and Defendant file written pleadings and submissions with the court 15 and transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Request for interlocutory order: Defendant raises preliminary issues, such as jurisdiction, statute of * limitation, etc. Checked as ‘yes’ if commonly raised by the Defendant as a matter of practice, regardless of justification. Court’s issuance of interlocutory order: Court decides the preliminary issues the Defendant raised by * issuing an interlocutory order. Check as ‘yes’ if this is commonly the case in commercial cases. Plaintiff’s appeal of court's interlocutory order: Plaintiff appeals the court's interlocutory order, which 16 suspends the court proceedings. Check as ‘yes’ if an appeal by Plaintiff is common in this case. Request for oral hearing or trial: Plaintiff lists the case for trial on the court’s calendar or applies for the 17 date(s) for the oral hearing or trial. * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 18 adjournment to prepare for the oral hearing or trial as a matter of common practice. Trial (prevalent in common law): The parties argue the merits of the case at (an) oral session(s) before the 19 court. Witnesses and expert witnesses are questioned and cross-examined during trial. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 20 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. Order for submission of final arguments: The judge sets a deadline for the submission of final factual and 21 legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 22 Judgment date: The judge sets a date for delivery of the judgment. 23 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 24 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 25 judgment. Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 26 in favor of Plaintiff (see assumption 6). Doing Business 2015 Liberia 76 No. Procedures Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 27 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 28 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 29 enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). 30 Plaintiff advances enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 31 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a private bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 32 private bailiff requests Defendant to voluntarily comply with the judgment. Contestation of selection of assets identified for sale: A party, Plaintiff or Defendant, which was not 33 involved in the designation of the assets for attachment, contests the selection of assets for enforcement of judgment through a sale. 34 Plaintiff identifies Defendant's assets for attachment: Plaintiff identifies Defendant's assets for attachment. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 35 assets). Report on execution of attachment: A court enforcement officer or private bailiff delivers a report on the 36 attachment of Defendant's movable goods to the judge. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 37 opposes aspects of the enforcement process before the judge. Call for public auction: Judge calls a public auction by, for example, advertising or publication in the 38 newspapers. 39 Sale through public auction: The Defendant’s movable property is sold at public auction. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 40 Plaintiff had advanced previously. 41 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Doing Business 2015 Liberia 77 Source: Doing Business database. Doing Business 2015 Liberia 78 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) 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 of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 Liberia 79 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, Liberia characterize the top-performing economies. How scores 0.0 out of 3 points on the commencement of efficient are insolvency proceedings in Liberia? proceedings index, 0.0 out of 6 points on the According to data collected by Doing Business, resolving management of debtor’s assets index, 0.0 out of 3 points insolvency takes 3.0 years on average and costs 42.5% of on the reorganization proceedings index, and 0.0 out of the debtor’s estate, with the most likely outcome being 4 points on the creditor participation index. Liberia’s total that the company will be sold as piecemeal sale. The score on the strength of insolvency framework index is average recovery rate is 8.6 cents on the dollar. Most 0.0 out of 16. indicator sets refer to a case scenario in the largest Globally, Liberia stands at 169 in the ranking of 189 business city of an economy, except for 11 economies for economies on the ease of resolving insolvency (figure which the data are a population-weighted average of the 11.1). The rankings for comparator economies and the 2 largest business cities. See the chapter on distance to regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in Liberia. Figure 11.1 How Liberia and comparator economies rank on the ease of resolving insolvency Doing Business 2015 Liberia 80 Source: Doing Business database. Doing Business 2015 Liberia 81 Figure 11.2 Recovery Rate (0-100) - Liberia Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - Liberia Source: Doing Business database. Doing Business 2015 Liberia 82 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 Liberia LABOR MARKET REGULATION What are the details? The data reported here for Liberia are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No Less than 6 months for an oral contract (Sect. 1501 - LPL) Maximum length of a single fixed-term contract (months) 2 years for a written contract (Sect. 1505(1) - LPL [would be 3 years if work were outside Liberia]) Maximum length of fixed-term contracts, including renewals (months) No Limit Minimum wage applicable to the worker assumed in the case study 52.00 (US$/month) Ratio of minimum wage to value added per worker 0.82 Source: Doing Business database. Doing Business 2015 Liberia 84 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Rigidity of hours index Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in workload? Maximum working days per week 6.0 Premium for night work (% of hourly pay) 0% Premium for work on weekly rest day (% of hourly pay) 50% Major restrictions on night work? No Major restrictions on weekly holiday? No Paid annual leave for a worker with 1 year of tenure (in working days) 0.0 Paid annual leave for a worker with 5 years of tenure (in working days) 24.0 Paid annual leave for a worker with 10 years of tenure (in working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 16.0 working days) Source: Doing Business database. Doing Business 2015 Liberia 85 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Difficulty of redundancy index Data Maximum length of probationary period (months) 3.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? Yes Source: Doing Business database. Doing Business 2015 Liberia 86 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 4.3 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 20.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 40.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 21.3 of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of Doing Business also assesses the mechanisms available unemployment protection schemes as well as data on to resolve labor disputes. More specifically, it collects whether employers are legally required to provide data on what courts would be competent to hear labor health insurance for employees with permanent disputes and whether the competent court is contracts. specialized in resolving labor disputes. Social protection schemes and benefits & Labor disputes indicator Data Availability of unemployment protection scheme? No Health insurance existing for permanent employees? Yes Availability of courts or court sections specializing in labor disputes? Yes Source: Doing Business database. Doing Business 2015 Liberia 87 Doing Business 2015 Liberia 88 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 Liberia 89 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 Liberia 90 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 Liberia 91 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 Liberia 92