103381 Regional Profile 2016 Landlocked Economies Doing Business 2016 LANDLOCKED ECONOMIES 2 © 2016 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 Some rights reserved 1 2 3 4 18 17 16 15 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 2016 LANDLOCKED ECONOMIES 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 28 Getting electricity ....................................................................................................................... 40 Registering property .................................................................................................................. 49 Getting credit .............................................................................................................................. 61 Protecting minority investors ................................................................................................... 72 Paying taxes ................................................................................................................................ 81 Trading across borders .............................................................................................................. 94 Enforcing contracts .................................................................................................................. 110 Resolving insolvency ................................................................................................................ 118 Distance to frontier and ease of doing business ranking .................................................... 126 Resources on the Doing Business website ............................................................................ 129 Doing Business 2016 LANDLOCKED ECONOMIES 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is also shows the regional average, the best performance for a local entrepreneur to open and run a small to globally for each indicator and data for the following medium-size business when complying with relevant comparator regions: . The data in this report are current regulations. It measures and tracks changes in as of June 1, 2015 (except for the paying taxes indicators, regulations affecting 11 areas in the life cycle of a which cover the period January–December 2014). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2016 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 189 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 47 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2016 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and recommends economies. The indicators are used to analyze economic regulatory reforms. The data, along with information on outcomes and identify what reforms have worked, where ordering the Doing Business 2016 report, are available on and why. the Doing Business website at This regional profile presents the Doing Business http://www.doingbusiness.org. indicators for economies in Landlocked Economies. It Doing Business 2016 LANDLOCKED ECONOMIES 5 THE BUSINESS ENVIRONMENT CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 LANDLOCKED ECONOMIES 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s permits, getting electricity, registering property, regulatory environment for business, a good place to getting credit, protecting minority investors, paying start is to find out how it compares with the regulatory taxes, trading across borders, enforcing contracts environment in other economies. Doing Business and resolving insolvency. The labor market provides an aggregate ranking on the ease of doing regulation indicators are not included in this year’s business based on indicator sets that measure and aggregate ease of doing business ranking, but the benchmark regulations applying to domestic small to data are presented in the economy profile. medium-size businesses through their life cycle. The ease of doing business ranking compares Economies are ranked from 1 to 189 by the ease of economies with one another; the distance to frontier doing business ranking. Doing Business presents results score benchmarks economies with respect to for 2 aggregate measures: the distance to frontier score regulatory best practice, showing the absolute and the ease of doing business ranking. The ranking of distance to the best performance on each Doing economies is determined by sorting the aggregate Business indicator. When compared across years, the distance to frontier scores, rounded to two decimals. An distance to frontier score shows how much the economy’s distance to frontier score is indicated on a regulatory environment for local entrepreneurs in an scale from 0 to 100, where 0 represents the worst economy has changed over time in absolute terms, performance and 100 the frontier. (See the chapter on while the ease of doing business ranking can show the distance to frontier and ease of doing business). only how much the regulatory environment has The 10 topics included in the ranking in Doing Business changed relative to that in other economies. 2016: starting a business, dealing with construction Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands in regional average (figure 1.2). Another perspective is the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business ranking (figure 1.3) other economies in the region and compared with the and the distance to frontier scores (figures 1.4 and 1.5). Figure 1.2 How economies in Landlocked Economies rank on the ease of doing business Note: The rankings are benchmarked to June 2015 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 2016 LANDLOCKED ECONOMIES 8 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Landlocked Economies (Scale: Rank 189 center, Rank 1 outer edge) Regional average ranking Source: Doing Business database. Figure 1.4 Distance to frontier scores on Doing Business topics - Landlocked Economies (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2015 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 2016 LANDLOCKED ECONOMIES 9 Figure 1.5 How far has Landlocked Economies come in the areas measured by Doing Business? Source: Doing Business database. 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. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. 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 119 of the Doing Business 2016 report for more details on the distance to frontier score. Doing Business 2016 LANDLOCKED ECONOMIES 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business The absolute values of the indicators tell another part of tells only part of the story, so do changes in that ranking. the story (table 1.1). Policy makers can learn much by Yearly movements in rankings can provide some comparing the indicators for their economy with those indication of changes in an economy’s regulatory for the lowest- and highest-scoring economies in the environment for firms, but they are always relative. An region as well as those for the best performers globally. economy’s ranking might change because of These comparisons may reveal unexpected strengths in developments in other economies. An economy that an area of business regulation—such as a regulatory implemented business regulation reforms may fail to rise process that can be completed with a small number of in the rankings (or may even drop) if it is passed by procedures in a few days and at a low cost. others whose business regulation reforms had a more significant impact as measured by Doing Business. Table 1.1 Summary of Doing Business indicators for Landlocked Economies Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 189 (Central African 2 (Macedonia, FYR) 96 1 (New Zealand) (rank) Republic) Starting a Business 31.36 (Central African 99.86 (Macedonia, FYR) 80.48 99.96 (New Zealand) (DTF Score) Republic) Procedures (number) 15.0 (Bolivia*) 1.0 (Macedonia, FYR) 6.6 1.0 (New Zealand*) Time (days) 90.0 (Zimbabwe) 1.0 (Macedonia, FYR) 20.1 0.5 (New Zealand) Cost (% of income per 330.1 (South Sudan) 0.1 (Macedonia, FYR*) 38.7 0.0 (Slovenia) capita) Paid-in min. capital (% 540.1 (Central African 0.0 (29 Economies*) 33.0 0.0 (105 Economies*) of income per capita) Republic) Dealing with Construction Permits 185 (Afghanistan) 10 (Macedonia, FYR) 104 1 (Singapore) (rank) Dealing with Construction Permits 22.94 (Afghanistan) 83.14 (Macedonia, FYR) 64.26 92.97 (Singapore) (DTF Score) Procedures (number) 27.0 (Tajikistan*) 10.0 (6 Economies*) 15.3 7.0 (5 Economies*) Time (days) 448.0 (Zimbabwe) 74.0 (Macedonia, FYR) 170.6 26.0 (Singapore) Cost (% of warehouse 76.6 (Afghanistan) 0.1 (Slovak Republic*) 6.5 0.0 (Qatar) value) Building quality control 1.5 (Afghanistan) 14.0 (5 Economies*) 9.6 15.0 (New Zealand) index (0-15) Getting Electricity 187 (South Sudan) 5 (Switzerland) 116 1 (Korea, Rep.) (rank) Doing Business 2016 LANDLOCKED ECONOMIES 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance Getting Electricity 22.64 (South Sudan) 94.42 (Switzerland) 58.22 99.88 (Korea, Rep.) (DTF Score) Procedures (number) 9.0 (Tajikistan) 3.0 (3 Economies*) 5.5 3.0 (14 Economies*) Time (days) 427.0 (South Sudan) 23.0 (Austria) 107.3 18.0 (Korea, Rep.*) Cost (% of income per 16,315.4 (Burundi) 27.6 (Czech Republic) 2,491.9 0.0 (Japan) capita) Reliability of supply and transparency of 0.0 (19 Economies*) 8.0 (Slovak Republic*) 2.9 8.0 (18 Economies*) tariff index (0-8) Registering Property 184 (Afghanistan) 5 (Slovak Republic) 81 1 (New Zealand) (rank) Registering Property 27.50 (Afghanistan) 90.99 (Slovak Republic) 65.90 94.46 (New Zealand) (DTF Score) Procedures (number) 10.0 (Uganda) 2.0 (Belarus) 5.3 1.0 (4 Economies*) Time (days) 250.0 (Afghanistan) 3.0 (Belarus) 39.3 1.0 (3 Economies*) Cost (% of property 16.0 (South Sudan) 0.0 (Slovak Republic*) 4.7 0.0 (Saudi Arabia) value) Quality of the land 3.0 (Central African administration index 26.5 (Slovak Republic) 14.5 28.5 (3 Economies*) Republic*) (0-30) Getting Credit (rank) 181 (San Marino) 2 (Rwanda) 89 1 (New Zealand) Getting Credit (DTF 5.00 (San Marino) 95.00 (Rwanda) 47.26 100.00 (New Zealand) Score) Strength of legal rights 0.0 (Bolivia*) 11.0 (Rwanda) 5.0 12.0 (3 Economies*) index (0-12) Depth of credit 0.0 (14 Economies*) 8.0 (5 Economies*) 4.4 8.0 (26 Economies*) information index (0-8) Credit registry 0.1 (Mali) 95.2 (Kosovo) 8.8 100.0 (Portugal) coverage (% of adults) Credit bureau coverage 1.0 (Lesotho) 100.0 (Serbia) 24.7 100.0 (22 Economies*) (% of adults) Protecting Minority 189 (Afghanistan) 8 (Mongolia) 98 1 (3 Economies*) Investors (rank) Protecting Minority 10.00 (Afghanistan) 73.33 (Mongolia) 50.12 83.33 (3 Economies*) Investors (DTF Score) Strength of minority investor protection 1.0 (Afghanistan) 7.3 (Mongolia) 5.0 8.3 (3 Economies*) index (0-10) Doing Business 2016 LANDLOCKED ECONOMIES 12 Lowest regional Best regional Best global Indicator Regional average performance performance performance Extent of conflict of interest regulation 1.7 (Afghanistan) 7.7 (Kazakhstan*) 5.1 9.3 (Singapore*) index (0-10) Extent of shareholder governance index (0- 0.3 (Afghanistan) 7.7 (Mongolia) 4.9 8.0 (4 Economies*) 10) 1 (United Arab Paying Taxes (rank) 189 (Bolivia) 7 (Macedonia, FYR) 95 Emirates*) Paying Taxes (DTF 99.44 (United Arab 12.18 (Bolivia) 94.17 (Macedonia, FYR) 69.58 Score) Emirates*) Payments (number per 56.0 (Central African 3.0 (Hong Kong SAR, 7.0 (4 Economies*) 27.9 year) Republic) China*) Time (hours per year) 1,025.0 (Bolivia) 52.0 (San Marino) 250.9 55.0 (Luxembourg) Total tax rate (% of 83.7 (Bolivia) 12.9 (Macedonia, FYR) 37.6 25.9 (Ireland) profit) Trading Across 179 (South Sudan) 1 (5 Economies*) 85 1 (16 Economies*) Borders (rank) Trading Across 20.57 (South Sudan) 100.00 (5 Economies*) 71.61 100.00 (16 Economies*) Borders (DTF Score) Time to export: Border 216 (Bolivia) 0 (6 Economies*) 54 0 (15 Economies*) compliance (hours) Cost to export: Border 815 (Paraguay) 0 (7 Economies*) 214 0 (18 Economies*) compliance (USD) Time to export: Documentary 243 (Afghanistan) 1 (6 Economies*) 65 0 (Jordan) compliance (hours) Cost to export: Documentary 430 (Kazakhstan) 0 (6 Economies*) 141 0 (20 Economies*) compliance (USD) Time to import: Border 480 (South Sudan) 0 (5 Economies*) 67 0 (19 Economies*) compliance (hours) Cost to import: Border 850 (Afghanistan) 0 (9 Economies*) 267 0 (28 Economies*) compliance (USD) Time to import: Documentary 360 (South Sudan) 1 (5 Economies*) 86 1 (21 Economies*) compliance (hours) Cost to import: Documentary 1,025 (Burundi) 0 (8 Economies*) 211 0 (30 Economies*) compliance (USD) Doing Business 2016 LANDLOCKED ECONOMIES 13 Lowest regional Best regional Best global Indicator Regional average performance performance performance Enforcing Contracts 177 (Central African 6 (Austria) 92 1 (Singapore) (rank) Republic) Enforcing Contracts 33.24 (Central African 78.24 (Austria) 56.91 84.91 (Singapore) (DTF Score) Republic) Time (days) 1,642.0 (Afghanistan) 225.0 (Bhutan*) 533.2 150.0 (Singapore) Cost (% of claim) 83.1 (Zimbabwe) 9.7 (Luxembourg) 35.5 9.0 (Iceland) Quality of judicial 4.0 (South Sudan) 15.5 (Macedonia, FYR) 7.9 15.5 (3 Economies*) processes index (0-18) Resolving Insolvency 189 (South Sudan) 18 (Austria) 103 1 (Finland) (rank) Resolving Insolvency 0.00 (South Sudan) 78.89 (Austria) 39.94 93.81 (Finland) (DTF Score) Recovery rate (cents on 0.0 (6 Economies*) 82.7 (Austria) 30.7 92.9 (Japan) the dollar) Time (years) 5.0 (Niger*) 1.1 (Austria) 2.6 0.4 (Ireland) 76.0 (Central African Cost (% of estate) 4.5 (Switzerland) 18.8 1.0 (Norway) Republic) Strength of insolvency 0.0 (5 Economies*) 14.0 (Macedonia, FYR) 7.5 15.0 (4 Economies*) framework index (0-16) * 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). Note: The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 14 STARTING A BUSINESS WHAT THE STARTING A BUSINESS Formal registration of companies has many INDICATORS MEASURE immediate benefits for the companies and for business owners and employees. Legal entities can Procedures to legally start and operate a outlive their founders. Resources are pooled as company (number) several shareholders join forces to start a company. Formally registered companies have access to Preregistration (for example, name services and institutions from courts to banks as well verification or reservation, notarization) as to new markets. And their employees can benefit Registration in the economy’s largest from protections provided by the law. An additional business city 1 benefit comes with limited liability companies. These Postregistration (for example, social security limit the financial liability of company owners to their registration, company seal) investments, so personal assets of the owners are not put at risk. Where governments make registration Time required to complete each procedure easy, more entrepreneurs start businesses in the (calendar days) formal sector, creating more good jobs and Does not include time spent gathering generating more revenue for the government. information What do the indicators cover? Each procedure starts on a separate day (2 procedures cannot start on the same day). Doing Business measures the ease of starting a Procedures that can be fully completed business in an economy by recording all procedures online are recorded as ½ day. officially required or commonly done in practice by an entrepreneur to start up and formally operate an Procedure completed once final document is industrial or commercial business—as well as the received time and cost required to complete these procedures. No prior contact with officials It also records the paid-in minimum capital that Cost required to complete each procedure companies must deposit before registration (or (% of income per capita) within 3 months). The ranking of economies on the ease of starting a business is determined by sorting Official costs only, no bribes their distance to frontier scores for starting a No professional fees unless services required business. These scores are the simple average of the by law distance to frontier scores for each of the component indicators. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Conducts general commercial or industrial and that there has been no prior contact with activities. officials. It also assumes that the entrepreneur will pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per capita.  Is a limited liability company, located in the largest business city , is 100% domestically 1  Has a turnover of at least 100 times income per owned with between 10 and 50 employees. capita.  Does not qualify for any special benefits.  Does not own real estate. For the 11 economies with a population of more than 100 million, data for a second city have been added. 1 Doing Business 2016 LANDLOCKED ECONOMIES 15 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in business suggest an answer (figure 2.1). The average Landlocked Economies to start a business? The global ranking of the region and comparator regions provide a rankings of these economies on the ease of starting a useful benchmark. Figure 2.1 How economies in Landlocked Economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 16 STARTING A BUSINESS The indicators underlying the rankings may be more and the paid-in minimum capital requirement (figure revealing. Data collected by Doing Business show what 2.2). Comparing these indicators across the region and it takes to start a business in each economy in the with averages both for the region and for comparator region: the number of procedures, the time, the cost regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in Landlocked Economies Procedures (number) Doing Business 2016 LANDLOCKED ECONOMIES 17 STARTING A BUSINESS Time (days) Doing Business 2016 LANDLOCKED ECONOMIES 18 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2016 LANDLOCKED ECONOMIES 19 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 20 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making it often as part of a larger regulatory reform program. easier to start a business—streamlining procedures by Among the benefits have been greater firm satisfaction setting up a one-stop shop, making procedures simpler and savings and more registered businesses, financial or faster by introducing technology, and reducing or 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 Landlocked Economies (table 2.1)? Table 2.1 How have economies in Landlocked Economies made starting a business easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Afghanistan made starting a business more costly by DB2016 Afghanistan increasing the registration and publication fees. Azerbaijan made starting a business easier by abolishing the DB2016 Azerbaijan requirement to use a corporate seal. Burkina Faso made starting a business easier by reducing the DB2016 Burkina Faso minimum capital requirement. Belarus made starting a business simpler by expanding the DB2016 Belarus geographic coverage of online registration and improving online services. Kazakhstan made starting a business simpler by eliminating registration fees for small and medium-size firms, shortening DB2016 Kazakhstan registration times and eliminating the legal requirement to use a company seal. Moldova made starting a business easier by eliminating an DB2016 Moldova inspection by the Territorial State Fiscal Inspectorate. The former Yugoslav Republic of Macedonia made starting a DB2016 Macedonia, FYR business simpler by introducing compulsory online registration carried out by certified agents. Mongolia made starting a business easier by reducing the DB2016 Mongolia number of days required to register a new company. Niger made starting a business easier by reducing the DB2016 Niger minimum capital requirement. Rwanda made starting a business easier by eliminating the DB2016 Rwanda need for new companies to open a bank account in order to register for VAT. San Marino made starting a business easier by encouraging DB2016 San Marino the use of the online system for obtaining the operator code and business license. Doing Business 2016 LANDLOCKED ECONOMIES 21 DB year Economy Reform The Slovak Republic simplified the process of starting a DB2016 Slovak Republic business by introducing court registration at the one-stop shop. Uganda made starting a business easier by introducing an DB2016 Uganda online system for obtaining a trading license and by reducing business incorporation fees. Uzbekistan made starting a business easier by introducing an DB2016 Uzbekistan online one-stop shop and streamlining registration procedures. Zambia made starting a business more difficult by increasing DB2016 Zambia the registration fees. Afghanistan made starting a business more difficult by DB2015 Afghanistan increasing the publication fees and prolonging the time required for registration. Armenia made starting a business easier by streamlining DB2015 Armenia postregistration procedures. Austria made starting a business easier by reducing the minimum capital requirement, which in turn reduced the DB2015 Austria paid-in minimum capital requirement, and by lowering notary fees. Azerbaijan made starting a business easier by reducing the DB2015 Azerbaijan time to obtain an electronic signature for online tax registration. Switzerland made starting a business easier by introducing DB2015 Switzerland online procedures. The Czech Republic made starting a business easier by DB2015 Czech Republic substantially reducing the minimum capital requirement and the paid-in minimum capital requirement. Hungary made starting a business more difficult by increasing DB2015 Hungary the paid-in minimum capital requirement. Moldova made starting a business easier by abolishing the DB2015 Moldova minimum capital requirement. The former Yugoslav Republic of Macedonia made starting a DB2015 Macedonia, FYR business easier by making online registration free of charge. Malawi made starting a business easier by streamlining company name search and registration and by eliminating DB2015 Malawi the requirement for inspection of company premises before issuance of a business license. Rwanda made starting a business more difficult by requiring companies to buy an electronic billing machine from a DB2015 Rwanda certified supplier, but also made it easier by launching free mandatory online registration. The Slovak Republic made starting a business easier by DB2015 Slovak Republic reducing the time needed to register with the district court Doing Business 2016 LANDLOCKED ECONOMIES 22 DB year Economy Reform and eliminating the need (and therefore the fee) for the verification of signatures by a notary public. Swaziland made starting a business easier by shortening the DB2015 Swaziland notice and objection period for obtaining a new trade license. Tajikistan made starting a business easier by enabling the DB2015 Tajikistan Statistics Agency to issue the statistics code for the new business at the time of registration. Afghanistan made starting a business easier by reducing the DB2014 Afghanistan time and cost to obtain a business license and by eliminating the inspection of the premises of newly registered companies. Armenia made starting a business easier by eliminating the DB2014 Armenia company registration fees. Azerbaijan made starting a business easier by introducing DB2014 Azerbaijan free online registration services and eliminating preregistration formalities. Burundi made starting a business easier by allowing registration with the Ministry of Labor at the one-stop shop DB2014 Burundi and by speeding up the process of obtaining the registration certificate. Belarus made starting a business easier by reducing the DB2014 Belarus registration fees and eliminating the requirement for an initial capital deposit at a bank before registration. Bhutan made starting a business easier by reducing the time DB2014 Bhutan required to obtain the security clearance certificate. Kazakhstan made starting a business easier by reducing the DB2014 Kazakhstan time it takes to register a company at the Public Registration Center. Kosovo made starting a business easier by creating a one- DB2014 Kosovo stop shop for incorporation. Mali made starting a business more difficult by ceasing to DB2014 Mali regularly publish the incorporation notices of new companies on the official website of the one-stop shop. Mongolia made starting a business easier by eliminating the requirement to get company statutes and charters notarized DB2014 Mongolia as well as the requirement to register a new company with the local tax office. Niger made starting a business easier by replacing the requirement for a copy of the founders’ criminal records with DB2014 Niger one for a sworn declaration at the time of company registration. Nepal made starting a business easier by reducing the administrative processing time at the company registrar and DB2014 Nepal by establishing a data link between agencies involved in the incorporation process. Doing Business 2016 LANDLOCKED ECONOMIES 23 DB year Economy Reform Rwanda made starting a business easier by reducing the time DB2014 Rwanda required to obtain a registration certificate. The Slovak Republic made starting a business more difficult DB2014 Slovak Republic by adding a new procedure for establishing a limited liability company. Swaziland made starting a business easier by shortening the DB2014 Swaziland administrative processing times for registering a new business and obtaining a trading license. Tajikistan made starting a business more difficult by requiring DB2014 Tajikistan preliminary approval from the tax authority and the submission of additional documents at registration. Uzbekistan made starting a business easier by abolishing the paid-in minimum capital requirement and by eliminating the DB2014 Uzbekistan requirement to have signature samples notarized before opening a bank account. West Bank and Gaza made starting a business less costly by DB2014 West Bank and Gaza eliminating the paid-in minimum capital requirement. Zambia made starting a business easier by raising the DB2014 Zambia threshold at which value added tax registration is required. Belarus made starting a business more difficult by increasing DB2013 Belarus the cost of business registration and the cost to obtain a company seal. Burundi made starting a business easier by eliminating the requirements to have company documents notarized, to DB2013 Burundi publish information on new companies in a journal and to register new companies with the Ministry of Trade and Industry. Chad made starting a business easier by setting up a one- DB2013 Chad stop shop. Hungary made starting a business more complex by increasing the registration fees for limited liability companies DB2013 Hungary and adding a new tax registration at the time of incorporation. Kazakhstan made starting a business easier by eliminating the DB2013 Kazakhstan requirement to pay in minimum capital within 3 months after incorporation. Lao PDR made starting a business easier by allowing DB2013 Lao PDR entrepreneurs to apply for tax registration at the time of incorporation. Lesotho made starting a business easier by creating a one- stop shop for company incorporation and by eliminating the DB2013 Lesotho requirements for paid-in minimum capital and for notarization of the articles of association. DB2013 Macedonia, FYR FYR Macedonia made starting a business easier by simplifying Doing Business 2016 LANDLOCKED ECONOMIES 24 DB year Economy Reform the process for obtaining a company seal. Mongolia made starting a business easier by eliminating the DB2013 Mongolia minimum capital requirement for limited liability companies. The Slovak Republic made starting a business easier by speeding up the processing of applications at the one-stop DB2013 Slovak Republic shop for trading licenses, income tax registration and health insurance registration. Uzbekistan made starting a business easier by introducing an DB2013 Uzbekistan online facility for name reservation and eliminating the fee to open a bank account for small businesses. Serbia made starting a business easier by eliminating the DB2013 Serbia paid-in minimum capital requirement. Kosovo made starting a business easier by eliminating the DB2013 Kosovo minimum capital requirement and business registration fee and streamlining the business registration process. Uganda introduced changes that added time to the process of obtaining a business license, slowing business start-up. But DB2012 Uganda it simplified registration for a tax identification number and for value added tax by introducing an online system. Uzbekistan made starting a business easier by reducing the DB2012 Uzbekistan minimum capital requirement, eliminating 1 procedure and reducing the cost of registration. Tajikistan made starting a business easier by allowing entrepreneurs to pay in their capital up to 1 year after the DB2012 Tajikistan start of operations, thereby eliminating the requirements related to opening a bank account. Moldova made starting a business easier by implementing a DB2012 Moldova one-stop shop. Rwanda made starting a business easier by reducing the DB2012 Rwanda business registration fees. Mali made starting a business easier by adding to the services DB2012 Mali provided by the one-stop shop. Burkina Faso made starting a business easier by replacing the requirement for a copy of the founders’ criminal records with DB2012 Burkina Faso one for a sworn declaration at the time of the company’s registration. The Central African Republic made starting a business easier by reducing business registration fees and by replacing the DB2012 Central African Republic requirement for a copy of the founders’ criminal records with one for a sworn declaration at the time of the company’s registration. Chad made starting a business easier by eliminating the DB2012 Chad requirement for a medical certificate and by replacing the requirement for a copy of the founders’ criminal recor ds with Doing Business 2016 LANDLOCKED ECONOMIES 25 DB year Economy Reform one for a sworn declaration at the time of the company’s registration. Armenia made starting a business easier by establishing a one-stop shop that merged the procedures for name DB2012 Armenia reservation, business registration and obtaining a tax identification number and by allowing for online company registration. Bhutan eased the process of starting a business by making its DB2012 Bhutan criminal records search electronic and making the rubber company stamps available on the local market. Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the DB2011 Kazakhstan need to have the memorandum of association and company charter notarized. Luxembourg eased business start-up by speeding up the DB2011 Luxembourg delivery of the business license. The Kyrgyz Republic eased business start-up by eliminating DB2011 Kyrgyz Republic the requirement to have the signatures of company founders notarized. FYR Macedonia made it easier to start a business by further DB2011 Macedonia, FYR improving its one-stop shop. Uganda made it more difficult to start a business by DB2011 Uganda increasing the trade licensing fees. Tajikistan made starting a business easier by creating a one- DB2011 Tajikistan stop shop that consolidates registration with the state and the tax authority. West Bank and Gaza made starting a business more difficult DB2011 West Bank and Gaza by increasing the lawyers’ fees that must be paid for incorporation. Zambia eased business start-up by eliminating the minimum DB2011 Zambia capital requirement. Zimbabwe eased business start-up by reducing registration DB2011 Zimbabwe fees and speeding up the name search process and company and tax registration. Kosovo made business start-up more difficult by replacing the tax number previously required with a “fiscal number,” DB2011 Kosovo which takes longer to issue and requires the tax administration to first inspect the business premises. Serbia made starting a business easier by creating a one-stop DB2010 Serbia shop for company registration. Tajikistan made starting a business easier by reducing the DB2010 Tajikistan minimum capital requirement and speeding up the issuance of tax identification numbers. Doing Business 2016 LANDLOCKED ECONOMIES 26 DB year Economy Reform West Bank and Gaza made starting a business more difficult DB2010 West Bank and Gaza by increasing the minimum capital requirement. FYR Macedonia made starting a business easier by integrating DB2010 Macedonia, FYR procedures at a one-stop shop. Luxembourg made starting a business easier by allowing DB2010 Luxembourg entrepreneurs to reserve a company name online and by eliminating the capital duty. The Kyrgyz Republic made starting a business easier by eliminating the minimum capital requirement, reducing the DB2010 Kyrgyz Republic registration time and abolishing certain postregistration fees as well as the need to open a bank account before registration. Moldova made starting a business easier by implementing an expedited company registration service and making the DB2010 Moldova authentication of specimen signatures when opening a corporate bank account optional. Mali made starting a business easier by creating a one-stop shop where all registration procedures can be completed, DB2010 Mali including registering a company with the registrar and tax agency, applying for online publication and obtaining a national identification number. Niger made starting a business easier by eliminating the procedures to register with the Conseil Nigérien des DB2010 Niger Utilisateurs des Transports Publics (CNUT) and with the chamber of commerce. Rwanda made starting a business easier by eliminating the notarization requirement; introducing standardized memoranda of association; putting publication online; DB2010 Rwanda consolidating name-checking, registration fee payment, tax registration and company registration procedures; and reducing the time required to process completed applications. Kazakhstan made starting a business easier by simplifying DB2010 Kazakhstan documentation requirements and eliminating the requirement to register at the local tax office. Ethiopia made starting a business easier by streamlining DB2010 Ethiopia registration procedures. Hungary made starting a business easier by implementing DB2010 Hungary online registration, with registration confirmed 1 hour after application. Botswana made starting a business easier by simplifying the DB2010 Botswana process to obtain a business license and the process to register for taxes. Burkina Faso made starting a business easier by allowing DB2010 Burkina Faso online publication of the articles of incorporation directly on Doing Business 2016 LANDLOCKED ECONOMIES 27 DB year Economy Reform the website of the one-stop shop, by reducing registration fees and by streamlining tax registration. Belarus made starting a business easier by simplifying registration formalities, abolishing the minimum capital DB2010 Belarus requirement, limiting the role of notaries and eliminating the need for approval of the company seal. The Central African Republic simplified business start-up by DB2010 Central African Republic establishing a one-stop shop (Guichet Unique de Formalité des Entreprises), which merged several procedures into one. Afghanistan simplified business start-up by taking company registration out of the commercial courts; establishing a new DB2010 Afghanistan company registry that acts as a one-stop shop combining company registration, tax registration and publication in the official gazette; and introducing flat registration fees. Armenia made starting a business easier by making the registration forms available online and by eliminating the DB2010 Armenia minimum capital requirement and the requirement to obtain approval from the National Police Department to prepare the company seal. 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 2016 LANDLOCKED ECONOMIES 28 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 (number) many builders opt out. They may pay bribes to pass 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 receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water and Doing Business records all procedures required for a sewerage business in the construction industry to build a warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety Does not include time spent gathering mechanisms, liability and insurance regimes, and information professional certification requirements. Each procedure starts on a separate day. The ranking of economies on the ease of dealing with Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final document is received average of the distance to frontier scores for each of the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Assumptions about the construction company Building quality control index (0-15) Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business city. Liability and insurance regimes (0-2)  Is 100% domestically and privately owned Professional certifications (0-4) with five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 LANDLOCKED ECONOMIES 29 The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of  Will be a new construction (there was no them nationals with the technical expertise previous construction on the land), with no and professional experience necessary to trees, natural water sources, natural reserves obtain construction permits and approvals. or historical monuments of any kind on the plot.  Has at least one employee who is a licensed architect or engineer and  Will have complete architectural and registered with the local association of technical plans prepared by a licensed architects or engineers. BuildCo is not architect. If preparation of the plans requires assumed to have any other employees who such steps as obtaining further are technical or licensed experts, such as documentation or getting prior approvals geological or topographical experts. from external agencies, these are counted as procedures.  Has paid all taxes and taken out all necessary insurance applicable to its  Will include all technical equipment required general business activity (for example, to be fully operational. accidental insurance for construction  Will take 30 weeks to construct (excluding all workers and third-person liability). delays due to administrative and regulatory  Owns the land on which the warehouse will requirements). be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita. • Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a  The warehouse: borehole will be dug. If there is no sewerage  Will be used for general storage activities, infrastructure, a septic tank in the smallest size such as storage of books or stationery. The available will be installed or built. warehouse will not be used for any goods  Will not require water for fire protection requiring special conditions, such as food, reasons; a fire extinguishing system (dry chemicals or pharmaceuticals. system) will be used instead. If a wet fire  Will have two stories, both above ground, protection system is required by law, it is with a total constructed area of assumed that the water demand specified approximately 1,300.6 square meters below also covers the water needed for fire (14,000 square feet). Each floor will be 3 protection. meters (9 feet, 10 inches) high.  Will have an average water use of 662 liters  Will have road access and be located in the (175 gallons) a day and an average periurban area of the economy’s largest wastewater flow of 568 liters (150 gallons) a business city (that is, on the fringes of the day. Will have a peak water use of 1,325 liters city but still within its official limits). For 11 (350 gallons) a day and a peak wastewater economies the data are also collected for flow of 1,136 liters (300 gallons) a day. the second largest business city.  Will have a constant level of water demand • Will not be located in a special economic and wastewater flow throughout the year. or industrial zone. Will be located on a land  Will be 1 inch in diameter for the water plot of approximately 929 square meters connection and 4 inches in diameter for the (10,000 square feet) that is 100% owned by sewerage connection. BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2016 LANDLOCKED ECONOMIES 30 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in dealing with construction permits suggest an answer Landlocked Economies to legally build a warehouse? The (figure 3.1). The average ranking of the region and global rankings of these economies on the ease of comparator regions provide a useful benchmark. Figure 3.1 How economies in Landlocked Economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 31 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more the time and the cost (figure 3.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to comply with formalities to build a warehouse in the region and for comparator regions can provide each economy in the region: the number of procedures, useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in Landlocked Economies Procedures (number) Doing Business 2016 LANDLOCKED ECONOMIES 32 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2016 LANDLOCKED ECONOMIES 33 DEALING WITH CONSTRUCTION PERMITS Cost (% of warehouse value) * Indicates a “no practice” mark. 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 practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the econom y at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 34 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index (0-15) * Indicates a “no practice” mark. 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 practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the econom y at the bottom of the ranking on the relevant indicator. Note: The index ranges from 0 to 15, with higher values indicating better quality control and safety mechanisms in the construction permitting system. The indicator is based on the same case study assumptions as the measures of efficiency. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 35 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in Landlocked Economies (table where safety is at stake. Construction is one of them. In 3.1)? an effort to ensure building safety while keeping Table 3.1 How have economies in Landlocked Economies made dealing with construction permits easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Armenia made dealing with construction permits easier by exempting lower-risk projects from requirements for DB2016 Armenia approval of the architectural drawings by an independent expert and for technical supervision of the construction. Azerbaijan made dealing with construction permits easier by DB2016 Azerbaijan establishing a one-stop shop for issuing preapprovals for project documentation. Kazakhstan made dealing with construction permits easier by DB2016 Kazakhstan eliminating the requirement to obtain a topographic survey of the land plot. Niger made dealing with construction permits easier by DB2016 Niger reducing the time required for companies to obtain a water connection. Rwanda made dealing with construction permits easier by DB2016 Rwanda adopting a new building code and new urban planning regulations. Serbia made dealing with construction permits less costly by eliminating the land development tax for warehouses. On DB2016 Serbia the other hand, it also introduced a mandatory inspection of foundation works. West Bank and Gaza made dealing with construction permits easier by streamlining the process for obtaining the civil DB2016 West Bank and Gaza defense permit and for submitting the stamped concrete casting permit to the municipality. DB2015 Kosovo Kosovo made dealing with construction permits easier by establishing a new phased inspection scheme and Doing Business 2016 LANDLOCKED ECONOMIES 36 DB year Economy Reform substantially reducing the building permit fee. Mali made dealing with construction permits easier by DB2015 Mali reducing the time needed to obtain a geotechnical study. Nepal made dealing with construction permits easier by DB2015 Nepal implementing a new electronic building permit system. Rwanda made dealing with construction permits easier by DB2015 Rwanda eliminating the fee for obtaining a freehold title and by streamlining the process for obtaining an occupancy permit. Tajikistan made dealing with construction permits less costly DB2015 Tajikistan by reducing the fee to obtain the architectural planning assignment. Azerbaijan adopted a new construction code that streamlined procedures relating to the issuance of building DB2014 Azerbaijan permits and established official time limits for some procedures. Burundi made dealing with construction permits easier by DB2014 Burundi establishing a one-stop shop for obtaining building permits and utility connections. Botswana made dealing with construction permits easier by DB2014 Botswana eliminating the requirement for an environmental impact assessment for low-risk projects. Kosovo made dealing with construction permits easier by eliminating the requirement for validation of the main DB2014 Kosovo construction project, eliminating fees for technical approvals from the municipality and reducing the building permit fee. FYR Macedonia made dealing with construction permits easier by reducing the time required to register a new DB2014 Macedonia, FYR building and by authorizing the municipality to register the building on behalf of the owner. Mongolia made dealing with construction permits easier by eliminating the requirement for a technical review of the DB2014 Mongolia building plans by the state for low- and medium-risk construction projects. DB2014 Rwanda Rwanda made dealing with construction permits easier and less costly by reducing the building permit fees, Doing Business 2016 LANDLOCKED ECONOMIES 37 DB year Economy Reform implementing an electronic platform for building permit applications and streamlining procedures. Burundi made obtaining a construction permit easier by DB2013 Burundi eliminating the requirement for a clearance from the Ministry of Health and reducing the cost of the geotechnical study. The Central African Republic made obtaining a construction DB2013 Central African Republic permit more costly. Malawi made dealing with construction permits more DB2013 Malawi expensive by increasing the cost to obtain the plan approval and to register the property. FYR Macedonia made dealing with construction permits DB2012 Macedonia, FYR easier by transferring oversight processes to the private sector and streamlining procedures. Paraguay made dealing with construction permits easier by DB2012 Paraguay implementing a risk-based approval system and a single window for obtaining construction permits. Burkina Faso made dealing with construction permits less DB2012 Burkina Faso costly by reducing the fees to obtain a fire safety study. Burundi made dealing with construction permits easier by DB2012 Burundi reducing the cost to obtain a geotechnical study. Armenia made dealing with construction permits easier by DB2012 Armenia eliminating the requirement to obtain an environmental impact assessment for small projects. Hungary implemented a time limit for the issuance of DB2011 Hungary building permits. Kazakhstan made dealing with construction permits easier by DB2011 Kazakhstan implementing a one-stop shop related to technical conditions for utilities. Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 DB2011 Rwanda and implementing new time limits for the issuance of various permits. Burkina Faso made dealing with construction permits easier DB2011 Burkina Faso by cutting the cost of the soil survey in half and the time to process a building permit application by a third. Doing Business 2016 LANDLOCKED ECONOMIES 38 DB year Economy Reform Mali eased construction permitting by implementing a DB2011 Mali simplified environmental impact assessment for noncomplex commercial buildings. Paraguay made dealing with construction permits easier by DB2011 Paraguay creating a new administrative structure and a better tracking system in the municipality of Asunción. Uzbekistan increased all fees for procedures relating to DB2011 Uzbekistan construction permits. Mali made dealing with construction permits easier by DB2010 Mali speeding up the process for obtaining a water connection. Tajikistan made dealing with construction permits easier and DB2010 Tajikistan less time consuming by eliminating several procedures. Uzbekistan made dealing with construction permits less DB2010 Uzbekistan costly by reducing the building permit fees. The Kyrgyz Republic made dealing with construction permits easier by streamlining the fee structure, introducing a risk- based system of approval and construction supervision, DB2010 Kyrgyz Republic allowing low-risk projects to take responsibility for construction supervision and simplifying the process of obtaining utility connections. FYR Macedonia reduced the time required for dealing with DB2010 Macedonia, FYR construction permits through changes in the permitting process. Kazakhstan made dealing with construction permits easier by eliminating the requirement to pay for a new electrical DB2010 Kazakhstan connection, tightening time limits for the issuance of building permits and reducing the cost of topographic surveys. The Czech Republic streamlined its construction permitting DB2010 Czech Republic process by reducing the internal processing time for registering new plots. Belarus made dealing with construction permits easier by DB2010 Belarus simplifying the environmental and project design approval processes. DB2010 Burkina Faso Burkina Faso made dealing with construction permits easier by establishing a one-stop shop for processing building Doing Business 2016 LANDLOCKED ECONOMIES 39 DB year Economy Reform permits in Ouagadougou. 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 2016 LANDLOCKED ECONOMIES 40 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely on INDICATORS MEASURE self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity connection first step for a customer is always to gain access by (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized Obtaining external installation works and warehouse, as well as the time and cost to complete possibly purchasing material for these works them. These procedures include applications and Concluding any necessary supply contract and contracts with electricity utilities, clearances from obtaining final supply other agencies and the external and final connection works. In addition, this year Doing Business adds Time required to complete each procedure two new measures: the reliability of supply and (calendar days) transparency of tariffs index (included in the Is at least 1 calendar day aggregate distance to frontier score and ranking on Each procedure starts on a separate day the ease of doing business) and the price of electricity (omitted from these aggregate measures). Does not include time spent gathering The ranking of economies on the ease of getting information electricity is determined by sorting their distance to Reflects the time spent in practice, with little frontier scores for getting electricity. These scores follow-up and no prior contact with officials are the simple average of the distance to frontier Cost required to complete each procedure (% scores for each of the component indicators. To of income per capita) make the data comparable across economies, several assumptions are used. Official costs only, no bribes Assumptions about the warehouse Excludes value added tax The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business Duration and frequency of outages city. For 11 economies the data are also collected for the second largest business city. Tools to monitor power outages  Is located in an area where similar warehouses Tools to restore power supply are typically located. In this area a new Regulatory monitoring of utilities’ performance electricity connection is not eligible for a Financial deterrents aimed at limiting outages special investment promotion regime (offering special subsidization or faster service, for Transparency and accessibility of tariffs example), and located in an area with no Price of electricity (cents per kilowatt-hour)* physical constraints. For example, the property Price based on monthly bill for commercial is not near a railway. warehouse in case study  Is a new construction and is being connected *Price of electricity is not included in the calculation of to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 LANDLOCKED ECONOMIES 41 The warehouse (continued):  Has two stories, both above ground, with Assumptions about the monthly consumption a total surface area of approximately  It is assumed that the warehouse operates 8 1,300.6 square meters (14,000 square hours a day for 30 days a month, with feet). The plot of land on which it is built equipment utilized at 80% of capacity on is 929 square meters (10,000 square feet). average, and that there are no electricity cuts  Is used for storage of goods. (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a power factor of 1 (1 kVA = 1 kW). The monthly Assumptions about the electricity connection energy consumption is therefore 26,880 kWh, and the hourly consumption 112 kWh (26,880 The electricity connection: kWh/30 days/8 hours).  Is a permanent one.  If multiple electricity suppliers exist, the  Is a three-phase, four-wire Y, 140-kilovolt- warehouse is served by the cheapest supplier. ampere (kVA) (subscribed capacity) connection (where the voltage is 120/208  Tariffs effective in March of the current year are used for calculation of the price of V, the current would be 400 amperes; electricity for the warehouse. where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 LANDLOCKED ECONOMIES 42 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in 4.1). The average ranking of the region and comparator Landlocked Economies to connect a warehouse to regions provide a useful benchmark. electricity? The global rankings of these economies on the ease of getting electricity suggest an answer (figure Figure 4.1 How economies in Landlocked Economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 43 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in Landlocked Economies Procedures (number) Doing Business 2016 LANDLOCKED ECONOMIES 44 GETTING ELECTRICITY Time (days) Doing Business 2016 LANDLOCKED ECONOMIES 45 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 46 GETTING ELECTRICITY Reliability of supply and transparency of tariff index (0-8) Source: Doing Business database. Note: The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Doing Business 2016 LANDLOCKED ECONOMIES 47 GETTING ELECTRICITY What are the changes over time? 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 practices and internal wiring installations. In an effort to Landlocked Economies (table 4.1)? Table 4.1 How have economies in Landlocked Economies made getting electricity easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Bhutan made getting electricity easier by speeding up the DB2016 Bhutan process for obtaining a new connection. The utility in Botswana made getting electricity easier by DB2016 Botswana enforcing service delivery timelines for new connections and improving the stock of materials for connection works. The utility in Uganda reduced delays for new electricity connections by deploying more customer service engineers DB2016 Uganda and reducing the time needed for the inspection and meter installation. Malawi reduced the time required to get electricity by DB2015 Malawi engaging subcontractors to carry out external connection works. In Rwanda the electricity company made getting electricity DB2015 Rwanda less costly by eliminating several fees. Burundi made getting electricity easier by eliminating the electricity utility’s monopoly on the sale of materials needed DB2014 Burundi for new connections and by dropping the processing fee for new connections. Belarus made getting electricity easier by speeding up the process of issuing technical specifications and excavation DB2014 Belarus permits and by reducing the time needed to connect to the electricity network. FYR Macedonia made getting electricity easier by reducing the time required to obtain a new connection and by setting DB2014 Macedonia, FYR fixed connection fees per kilowatt (kW) for connections requiring a capacity below 400 kW. Mongolia made getting electricity easier by increasing the efficiency of the utility’s internal processes, enforcing time DB2014 Mongolia limits at different stages of the connection process and eliminating the fees for testing the installation. Doing Business 2016 LANDLOCKED ECONOMIES 48 DB year Economy Reform Armenia made getting electricity easier by streamlining DB2013 Armenia procedures and reducing connection fees. Rwanda made getting electricity easier by reducing the cost DB2013 Rwanda of obtaining a new connection. Switzerland made getting electricity less costly by revising the DB2012 Switzerland conditions for connections. In Ethiopia delays in providing new connections made getting DB2012 Ethiopia electricity more difficult. Afghanistan made getting electricity easier by improving the DB2012 Afghanistan efficiency of the electricity department in Kabul and introducing a new fee schedule for connections. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 49 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. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. For the 11 economies with a population of more than 100 million, data for a second city have been added. 2 Doing Business 2016 LANDLOCKED ECONOMIES 50 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in property suggest an answer (figure 5.1). The average Landlocked Economies to transfer property? The global ranking of the region and comparator regions provide a rankings of these economies on the ease of registering useful benchmark. Figure 5.1 How economies in Landlocked Economies rank on the ease of registering property Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 51 REGISTERING PROPERTY The indicators underlying the rankings may be more time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to complete a property transfer in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 5.2 What it takes to register property in economies in Landlocked Economies Procedures (number) Doing Business 2016 LANDLOCKED ECONOMIES 52 REGISTERING PROPERTY Time (days) Doing Business 2016 LANDLOCKED ECONOMIES 53 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. 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 practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 54 REGISTERING PROPERTY Quality of Land Administration Index (0-30) * Indicates a “no practice” mark. 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 practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: The index ranges from 0 to 30, with higher values indicating better quality of the land administration system. Doing Business 2016 LANDLOCKED ECONOMIES 55 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such as property registration reforms has Doing Business by computerizing land registries, introducing time limits recorded in Landlocked Economies (table 5.1)? for procedures and setting low fixed fees. Many have cut the time required substantially—enabling Table 5.1 How have economies in Landlocked Economies made registering property easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Belarus made transferring property easier by introducing a DB2016 Belarus new expedited procedure. Bhutan made transferring property easier by introducing a DB2016 Bhutan computerized land information system. Switzerland made transferring property easier by introducing DB2016 Switzerland a national database to check for encumbrances. Kazakhstan made transferring property easier by eliminating the requirement to obtain a technical passport for the DB2016 Kazakhstan transfer and to have the seller’s and buyer’s incorporation documents notarized. The Kyrgyz Republic made transferring property easier by DB2016 Kyrgyz Republic introducing an online procedure for obtaining the nonencumbrance certificates. Chad made transferring property less costly by lowering the DB2016 Chad property transfer tax. Uzbekistan made transferring property easier by eliminating the requirement to provide several different nonencumbrance DB2016 Uzbekistan certificates, though it also increased the costs associated with property transfers. Azerbaijan made transferring property easier by introducing an online procedure for obtaining the nonencumbrance DB2015 Azerbaijan certificate. Doing Business 2016 LANDLOCKED ECONOMIES 56 DB year Economy Reform Kazakhstan made registering property easier by introducing DB2015 Kazakhstan effective time limits and an expedited procedure. Kosovo made transferring property more difficult by DB2015 Kosovo increasing the fee for the registration of property transactions. San Marino made transferring property easier by lowering the DB2015 San Marino property registration tax rate. Serbia made transferring property more difficult by eliminating the expedited procedure for registering a DB2015 Serbia property transfer. Zambia made transferring property more difficult by DB2015 Zambia increasing the property transfer tax rate. Burundi made transferring property easier by creating a one- DB2014 Burundi stop shop for property registration. Belarus made transferring property easier by introducing a DB2014 Belarus fast-track procedure for property registration. The Czech Republic made transferring property more costly DB2014 Czech Republic by increasing the property transfer tax rate. Kazakhstan made it easier to transfer property by introducing DB2014 Kazakhstan a fast-track procedure for property registration. Kosovo made transferring property easier by introducing a DB2014 Kosovo new notary system and by combining procedures for drafting and legalizing sale and purchase agreements. Lesotho made transferring property easier by streamlining DB2014 Lesotho procedures and increasing administrative efficiency. FYR Macedonia made property registration faster and less DB2014 Macedonia, FYR costly by digitizing the real estate cadastre and eliminating the requirement for an encumbrance certificate. DB2014 Malawi Malawi made transferring property easier by reducing the Doing Business 2016 LANDLOCKED ECONOMIES 57 DB year Economy Reform stamp duty. Niger made transferring property easier by reducing the DB2014 Niger registration fees. Rwanda made transferring property easier by eliminating the requirement to obtain a tax clearance certificate and by DB2014 Rwanda implementing the web-based Land Administration Information System for processing land transactions. Chad made transferring property easier by lowering the DB2014 Chad property transfer tax. Uganda made transferring property easier by eliminating the DB2014 Uganda need to have instruments of land transfer physically embossed to certify payment of the stamp duty. Uzbekistan made transferring property easier by reducing the DB2014 Uzbekistan notary fees. Burundi made property transfers faster by establishing a DB2013 Burundi statutory time limit for processing property transfer requests at the land registry. The Czech Republic made registering property easier by allowing the cadastral office online access to the commercial DB2013 Czech Republic registry’s database and thus eliminating the need to obtain a paper certificate from the registry before applying for registration at the cadastre. Uganda made transferring property more difficult by introducing a requirement for property purchasers to obtain an income tax certificate before registration, resulting in delays at the Uganda Revenue Authority and the Ministry of DB2013 Uganda Finance. At the same time, Uganda made it easier by digitizing records at the title registry, increasing efficiency at the assessor’s office and making it possible for more banks to accept the stamp duty payment. West Bank and Gaza made transferring property more costly DB2013 West Bank and Gaza by increasing the property transfer fee. Doing Business 2016 LANDLOCKED ECONOMIES 58 DB year Economy Reform Serbia made transferring property quicker by offering an DB2012 Serbia expedited option. Zambia made registering property more costly by increasing DB2012 Zambia the property transfer tax rate. The Czech Republic speeded up property registration by DB2012 Czech Republic computerizing its cadastral office, digitizing all its data and introducing electronic communications with notaries. Uganda increased the efficiency of property transfers by DB2012 Uganda establishing performance standards and recruiting more officials at the land office. FYR Macedonia made registering property easier by reducing DB2012 Macedonia, FYR notary fees and enforcing time limits. Rwanda made transferring property more expensive by DB2012 Rwanda enforcing the checking of the capital gains tax. Swaziland made transferring property quicker by streamlining DB2012 Swaziland the process at the land registry. The Central African Republic halved the cost of registering DB2012 Central African Republic property. Belarus simplified property transfer by doing away with the DB2012 Belarus requirement to obtain the municipality’s approval for transfers of most commercial buildings in Minsk. Malawi made property registration slower by no longer DB2012 Malawi sustaining last year’s time improvement in Compliance Certificate processing times at the Ministry of Lands. Mali eased property transfers by reducing the property DB2011 Mali transfer tax for firms from 15% of the property value to 7%. Hungary reduced the property registration fee by 6% of the DB2011 Hungary property value. Lao PDR made resgistering property faster by moving to a DB2011 Lao PDR title system. Doing Business 2016 LANDLOCKED ECONOMIES 59 DB year Economy Reform Austria made it easier to transfer property by requiring online DB2011 Austria submission of all applications to register property transfers. Malawi eased property transfers by cutting the wait for DB2011 Malawi consents and registration of legal instruments by half. Tajikistan made transferring property more costly by DB2010 Tajikistan increasing the state duty for property transactions. West Bank and Gaza reduced the time required for DB2010 West Bank and Gaza registering property by completing a major project to computerize records at the land registry. Zimbabwe made transferring property less costly by DB2010 Zimbabwe introducing a new policy on the capital gains tax that resulted in a reduction in the actual amount paid. Belarus continued to improve the property registration process by increasing efficiency at the land registry in Minsk, DB2010 Belarus which reduced the time required to verify ownership, and by eliminating the requirement to have incorporation documents notarized during property transfers. Botswana made registering property more difficult by adding DB2010 Botswana a requirement to notify the tax agency of the value added tax payment. Burkina Faso streamlined property registration by allowing the payment of transfer taxes at the land registry, reorganizing the land registry, setting statutory time limits for DB2010 Burkina Faso procedures and simplifying property valuation by government officials through the use of tables of values based on materials used. The Czech Republic made registering property easier through DB2010 Czech Republic ongoing reorganization of the registry combined with computerization. Ethiopia made transferring property easier by decentralizing DB2010 Ethiopia administrative tasks and merging procedures at the land registry and municipality. Doing Business 2016 LANDLOCKED ECONOMIES 60 DB year Economy Reform FYR Macedonia made registering property easier by setting new time limits for registering a title deed at the real estate DB2010 Macedonia, FYR cadastre and by making it possible to obtain a nonencumbrance certificate from the real estate registry rather than through the court. The Kyrgyz Republic made registering property easier by DB2010 Kyrgyz Republic simplifying documentation requirements and making notarization optional. Moldova made registering property easier and less time DB2010 Moldova consuming by eliminating the requirement for a cadastral sketch. Nepal made transferring property easier by reducing the DB2010 Nepal registration fee. Rwanda reduced the time required to transfer property DB2010 Rwanda through ongoing improvements in the property registration process. Afghanistan made registering property easier by reducing DB2010 Afghanistan property transfer taxes. 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 2016 LANDLOCKED ECONOMIES 61 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 lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) 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 movable property, as security to generate capital— Depth of credit information index (0–8) 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 The ranking of economies on the ease of getting collateral (for more details on each case, see the Data credit is determined by sorting their distance to Notes section of the Doing Business 2016 report). frontier scores for getting credit. These scores are These scenarios assume that the borrower: the distance to frontier score for the strength of  Is a private limited liability company. legal rights index and the depth of credit Has its headquarters and only base of information 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. Doing Business 2016 LANDLOCKED ECONOMIES 62 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and getting credit suggest an answer (figure 6.1). The collateral and bankruptcy laws in economies in average ranking of the region and comparator regions Landlocked Economies facilitate access to credit? The provide a useful benchmark. global rankings of these economies on the ease of Figure 6.1 How economies in Landlocked Economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 63 GETTING CREDIT Another way to assess how well regulations and the strength of legal rights index for Landlocked institutions support lending and borrowing in the region Economies and comparators on the strength of legal is to see where the region stands in the distribution of rights index. Figure 6.3 shows the same thing for the scores across regions. Figure 6.2 highlights the score on depth of credit information index. Figure 6.2 How strong are legal rights for borrowers and lenders? Region scores on strength of legal rights index Note: Higher scores indicate that collateral and bankruptcy laws are better designed to facilitate access to credit. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 64 Figure 6.3 How much credit information is shared—and how widely? Region scores on depth of credit information index Note: Higher scores indicate the availability of more credit information, from either a credit registry or a credit bureau, 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 2016 LANDLOCKED ECONOMIES 65 GETTING CREDIT What are the changes over time? 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 Landlocked Economies (table 6.1)? Table 6.1 How have economies in Landlocked Economies made getting credit easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Afghanistan improved access to credit information by DB2016 Afghanistan launching a credit registry. Kazakhstan improved access to credit by adopting a new law DB2016 Kazakhstan on secured transactions allowing a general description of a combined category of assets granted as collateral. In the Kyrgyz Republic the credit bureau improved access to DB2016 Kyrgyz Republic credit information by beginning to distribute both positive and negative credit information. The Lao People’s Democratic Republic improved access to credit information by eliminating the threshold for the DB2016 Lao PDR minimum size of loans to be included in the credit registry’s database and by expanding borrower coverage. Lesotho improved access to credit information by DB2016 Lesotho establishing its first credit bureau. Mali improved its credit information system by introducing regulations that govern the licensing and functioning of DB2016 Mali credit bureaus in the member states of the West African Economic and Monetary Union (UEMOA). In Mongolia the credit registry began distributing data from a DB2016 Mongolia utility company, improving access to credit information. Niger improved its credit information system by introducing regulations that govern the licensing and functioning of DB2016 Niger credit bureaus in the member states of the West African Economic and Monetary Union (UEMOA). In Rwanda the credit bureau started to provide credit scores DB2016 Rwanda to banks and other financial institutions while the credit registry expanded borrower coverage, strengthening the Doing Business 2016 LANDLOCKED ECONOMIES 66 DB year Economy Reform credit reporting system. In Uganda the credit bureau expanded borrower coverage, DB2016 Uganda improving access to credit information. Uzbekistan improved access to credit by adopting new laws on secured transactions that allow a general description of DB2016 Uzbekistan assets granted as collateral and establish a modern, unified, notice-based collateral registry. The credit registry in West Bank and Gaza began to distribute DB2016 West Bank and Gaza credit data from retailers and utility companies. DB2016 Zambia In Zambia the credit bureau began to provide credit scores. In Zimbabwe the credit bureau began to provide credit DB2016 Zimbabwe scores. The Czech Republic improved access to credit by adopting a new legal regime on secured transactions that allows the DB2015 Czech Republic registration of receivables at the collateral registry and permits out-of-court enforcement of collateral. Hungary improved access to credit by adopting a new legal regime on secured transactions that implements a functional DB2015 Hungary approach to secured transactions, extends security interests to the products and proceeds of the original asset and establishes a modern, notice-based collateral registry. The Lao People’s Democratic Republic improved access to DB2015 Lao PDR credit by implementing a modern, unified, notice-based collateral registry. Rwanda improved access to credit by establishing clear priority rules outside bankruptcy for secured creditors and DB2015 Rwanda establishing clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures. The Slovak Republic improved its credit information system DB2015 Slovak Republic by implementing a new law on the protection of personal data. Tajikistan improved access to credit information by beginning DB2015 Tajikistan to provide credit scores. Doing Business 2016 LANDLOCKED ECONOMIES 67 DB year Economy Reform In Zambia, the credit bureau improved access to credit DB2015 Zambia information by starting to exchange credit information with retailers and utilities. Afghanistan strengthened its secured transactions system by DB2014 Afghanistan implementing a unified collateral registry. Bhutan improved access to credit information through new regulations governing the licensing and functioning of the DB2014 Bhutan credit bureau and guaranteeing borrowers’ right to access their data. Moldova strengthened its secured transactions system by DB2014 Moldova introducing new grounds for relief from an automatic stay during insolvency and restructuring proceedings. FYR Macedonia strengthened its secured transactions system by providing more flexibility on the description of assets in a DB2014 Macedonia, FYR collateral agreement and on the types of debts and obligations that can be secured. Rwanda strengthened its secured transactions system by providing more flexibility on the types of debts and DB2014 Rwanda obligations that can be secured through a collateral agreement. Tajikistan improved access to credit information by DB2014 Tajikistan establishing a private credit bureau. Uzbekistan improved access to credit information by expanding the scope of credit information and requiring that DB2014 Uzbekistan more than 2 years of historical data be collected and distributed. Ethiopia improved access to credit information by establishing an online platform for sharing such information DB2013 Ethiopia and by guaranteeing borrowers’ right to inspect their personal data. Hungary improved access to credit information by passing its DB2013 Hungary first credit bureau law mandating the creation of a database with positive credit information on individuals. Kazakhstan strengthened secured creditor rights by DB2013 Kazakhstan introducing new grounds for relief from an automatic stay during rehabilitation proceedings. Doing Business 2016 LANDLOCKED ECONOMIES 68 DB year Economy Reform Mongolia improved access to credit information by adopting a law that provides for licensing of credit reference bureaus DB2013 Mongolia and guarantees borrowers’ right to inspect their personal data. Uzbekistan improved access to credit information by DB2013 Uzbekistan guaranteeing borrowers’ right to inspect their personal data. West Bank and Gaza improved access to credit information DB2013 West Bank and Gaza by guaranteeing borrowers’ right to inspect their personal data. Access to credit using movable property in Tajikistan became DB2012 Tajikistan more complicated because the movable collateral registry stopped its operations in January, 2011. Lao PDR improved access to credit information by DB2012 Lao PDR establishing a public credit registry. Access to credit in Niger was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be used as collateral DB2012 Niger (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Paraguay improved its credit information system by DB2012 Paraguay establishing an online platform for financial institutions to exchange information with the public credit registry. In Rwanda the private credit bureau started to collect and distribute information from utility companies and also started DB2012 Rwanda to distribute more than 2 years of historical information, improving the credit information system. The Slovak Republic improved its credit information system DB2012 Slovak Republic by guaranteeing by law the right of borrowers to inspect their own data. Hungary reduced the amount of credit information available from private credit bureaus by shortening the period for DB2012 Hungary retaining data on defaults and late payments (if repaid) from 5 years to 1 year. FYR Macedonia improved its credit information system by DB2012 Macedonia, FYR establishing a private credit bureau. Doing Business 2016 LANDLOCKED ECONOMIES 69 DB year Economy Reform Malawi improved its credit information system by passing a DB2012 Malawi new law allowing the creation of a private credit bureau. Access to credit in Mali was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be used as collateral DB2012 Mali (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Moldova improved its credit information system by DB2012 Moldova establishing its first private credit bureau. Mongolia improved its credit information system by DB2012 Mongolia eliminating the minimum threshold for loans included in the database. Armenia improved its credit information system by DB2012 Armenia introducing a requirement to collect and distribute information from utility companies. Bhutan improved its credit information system by launching DB2012 Bhutan the operation of a public credit registry. Access to credit in Burkina Faso was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be DB2012 Burkina Faso used as collateral (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Access to credit in the Central African Republic was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be DB2012 Central African Republic used as collateral (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Access to credit in Chad was improved through amendments to the OHADA Uniform Act on Secured Transactions that broaden the range of assets that can be used as collateral DB2012 Chad (including future assets), extend the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. DB2011 Azerbaijan Azerbaijan improved access to credit by establishing an online platform allowing financial institutions to provide Doing Business 2016 LANDLOCKED ECONOMIES 70 DB year Economy Reform information to, and retrieve it from, the public credit registry. Belarus enhanced access to credit by facilitating the use of DB2011 Belarus the pledge as a security arrangement and providing for out- of-court enforcement of the pledge on default. Uganda enhanced access to credit by establishing a new DB2011 Uganda private credit bureau. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that DB2011 Rwanda loans of all sizes be reported to the central bank’s public credit registry. Serbia improved access to credit information by guaranteeing DB2010 Serbia by law borrowers’ right to inspect their own data. Zambia improved its credit information system by making it mandatory for banks and nonbank financial institutions DB2010 Zambia registered with the central bank to use credit reference reports and to provide data to the credit bureau. Tajikistan improved its credit information system through a DB2010 Tajikistan new law allowing the creation of a private credit bureau. Rwanda strengthened its secured transactions system by allowing a wider range of assets to be used as collateral, permitting a general description of debts and obligations in DB2010 Rwanda the security agreement, allowing out-of-court enforcement of collateral, granting secured creditors absolute priority within bankruptcy and creating a new collateral registry. FYR Macedonia’s public credit bureau improved its database DB2010 Macedonia, FYR and expanded its coverage by including more information and lowering the minimum threshold for loans reported. Nepal improved access to credit information by starting to DB2010 Nepal distribute historical data. Azerbaijan’s public credit registry improved the credit information system by providing banks with online access to DB2010 Azerbaijan its database, increasing the data available on borrowers and introducing penalties for banks that send information that is late or incorrect. DB2010 Kyrgyz Republic The Kyrgyz Republic strengthened its secured transactions system through amendments to its civil code and pledge law Doing Business 2016 LANDLOCKED ECONOMIES 71 DB year Economy Reform making secured lending more flexible, allowing a general description of encumbered assets and of debts and obligations and providing for the automatic extension of a security right to proceeds of the original asset. Afghanistan strengthened its secured transactions system through a new law broadening the range of assets that can be used as collateral (including future assets), allowing a DB2010 Afghanistan general description of debts and obligations in a security agreement and permitting out-of-court enforcement of security interests. Armenia improved its credit information system through a new law establishing a legal and regulatory framework for the DB2010 Armenia activities of credit bureaus, including collecting credit information and preparing credit reports. 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 2016 LANDLOCKED ECONOMIES 72 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of WHAT THE PROTECTING MINORITY INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. Effective regulations define related-party transactions precisely, promote clear and efficient disclosure requirements, require Extent of disclosure index (0–10) shareholder participation in major decisions of the Review and approval requirements for related-party company and set detailed standards of accountability transactions ; Disclosure requirements for related-party for company insiders. transactions What do the indicators cover? Extent of director liability index (0–10) Doing Business measures the protection of minority Ability of minority shareholders to sue and hold interested investors from conflicts of interest through one set of directors liable for prejudicial related-party transactions; indicators and shareholders’ rights in corporate Available legal remedies (damages, disgorgement of profits, governance through another. The ranking of economies fines, imprisonment, rescission of the transaction) on the strength of minority investor protections is 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 conflict of interest regulation index extent of shareholder governance index. To make the (0–10) data comparable across economies, a case study uses Simple average of the extent of disclosure, extent of director several assumptions about the business and the liability and ease of shareholder indices transaction. Extent of shareholder rights index (0-10) The business (Buyer): Shareholders’ rights and role in major corporate decisions  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of ownership and control index (0-10) (or at least a large private company with Governance safeguards protecting shareholders from undue multiple shareholders). board control and entrenchment  Has a board of directors and a chief executive Extent of corporate transparency index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Corporate transparency on ownership stakes, compensation, specifically required by law. audits and financial prospects The transaction involves the following details: Extent of shareholder governance index (0–  Mr. James, a director and the majority 10) shareholder of the company, proposes that Simple average of the extent of shareholders rights, extent the company purchase used trucks from of ownership and control and extent of corporate another company he owns. transparency indices  The price is higher than the going price for Strength of investor protection index (0–10) used trucks, but the transaction goes forward. Simple average of the extent of conflict of interest  All required approvals are obtained, and all regulation and extent of shareholder governance indices required disclosures made, though the transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2016 LANDLOCKED ECONOMIES 73 PROTECTING MINORITY INVESTORS Where do the region’s economies stand today? How strong are investor protections against self-dealing protection of minority investors, a higher ranking does in economies in Landlocked Economies? The global indicate that an economy’s regulations offer stronger rankings of these economies on the strength of investor investor protections against self-dealing in the areas protection index suggest an answer (figure 7.1). While measured. the indicator does not measure all aspects related to the Figure 7.1 How economies in Landlocked Economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 74 PROTECTING MINORITY INVESTORS The strength of minority investor protection index is the highlight the scores on the various minority investor average of the extent of conflict of interest regulation protection indices for Landlocked Economies. index and the extent of shareholder governance index. Comparing the scores across the region and with The index ranges from 0 to 10, rounded to the nearest averages both for the region and for comparator regions decimal place, with higher values indicating stronger can provide useful insights. minority investor protections. Figures 7.2 and 7.3 Figure 7.2 How extensive are conflict of interest regulations? Extent of conflict of interest regulation index (0-10) Note: Higher values indicate stronger regulation of conflicts of interest. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 75 Figure 7.3 How extensive is shareholder governance? Extent of shareholder governance index (0-10) Note: Higher scores indicate stronger rights of shareholders in corporate governance. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 76 PROTECTING MINORITY INVESTORS What are the changes over time? Economies with the strongest protections of minority reforms to strengthen minority investor protections may investors from self-dealing require detailed disclosure move ahead on different fronts—such as through new or and define clear duties for directors. They also have well- amended company laws, securities regulations or functioning courts and up-to-date procedural rules that revisions to court procedures. What minority investor give minority shareholders the means to prove their case protection reforms has Doing Business recorded in and obtain a judgment within a reasonable time. So Landlocked Economies (table 7.1)? Table 7.1 How have economies in Landlocked Economies strengthened minority investor protections—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Azerbaijan strengthened minority investor protections by introducing requirements that related-party transactions DB2016 Azerbaijan undergo external review and be voted on by disinterested shareholders. Kazakhstan strengthened minority investor protections through new provisions requiring both immediate disclosure of related-party transactions and detailed disclosure in annual financial statements; expanding the way evidence can be obtained at trial; requiring that a change in the rights DB2016 Kazakhstan associated with shares be subject to approval by a vote of two-thirds of the affected shares; prohibiting subsidiaries from acquiring shares issued by their parent company; and requiring disclosure of information about board members’ other directorships as well as their primary employment. FYR Macedonia strengthened minority investor protections by DB2016 Macedonia, FYR providing for both fines and imprisonment of interested directors in prejudicial related-party transactions. Rwanda strengthened minority investor protections by introducing provisions allowing holders of 10% of a company’s shares to call for an extraordinary meeting of shareholders, requiring holders of special classes of shares to DB2016 Rwanda vote on decisions affecting their shares, requiring board members to disclose information about their directorships and primary employment and requiring that audit reports for listed companies be published in a newspaper. Doing Business 2016 LANDLOCKED ECONOMIES 77 DB year Economy Reform Zimbabwe strengthened minority investor protections by DB2016 Zimbabwe introducing provisions allowing legal practitioners to enter into contingency fee agreements with clients. Burkina Faso strengthened minority investor protections by introducing greater requirements for disclosure of related- party transactions to the board of directors and by making it DB2015 Burkina Faso possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. The Central African Republic strengthened minority investor protections by introducing greater requirements for disclosure of related-party transactions to the board of DB2015 Central African Republic directors and by making it possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Switzerland strengthened minority investor protections by DB2015 Switzerland increasing the level of transparency required from publicly traded companies. The Lao People’s Democratic Republic strengthened minority investor protections by introducing requirements for directors to disclose in detail their conflicts of interest to the other DB2015 Lao PDR board members and for companies to promptly disclose related-party transactions to the Securities Commission and to include the information in their annual reports. The former Yugoslav Republic of Macedonia strengthened DB2015 Macedonia, FYR minority investor protections by requiring prior review of related-party transactions by an external auditor. Mali strengthened minority investor protections by introducing greater requirements for disclosure of related- party transactions to the board of directors and by making it DB2015 Mali possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Mongolia strengthened minority investor protections by DB2015 Mongolia introducing a requirement for public joint stock companies to publicly disclose related-party transactions within 2 business Doing Business 2016 LANDLOCKED ECONOMIES 78 DB year Economy Reform days. Niger strengthened minority investor protections by introducing greater requirements for disclosure of related- party transactions to the board of directors and by making it DB2015 Niger possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Chad strengthened minority investor protections by introducing greater requirements for disclosure of related- party transactions to the board of directors and by making it DB2015 Chad possible for shareholders to inspect the documents pertaining to related-party transactions and to appoint auditors to conduct an inspection of such transactions. Uzbekistan strengthened minority investor protections by introducing a requirement for public joint stock companies to disclose information about related-party transactions in their DB2015 Uzbekistan annual report; setting higher standards for disclosure of such transactions to the board of directors; and establishing the right of shareholders to receive all documents related to such transactions. FYR Macedonia strengthened investor protections by allowing shareholders to request the rescission of unfair DB2014 Macedonia, FYR related-party transactions and the appointment of an auditor to investigate alleged irregularities in the company’s activities. Rwanda strengthened investor protections through a new law DB2014 Rwanda allowing plaintiffs to cross-examine defendants and witnesses with prior approval of the questions by the court. Armenia strengthened investor protections by introducing a requirement for shareholder approval of related-party DB2013 Armenia transactions, requiring greater disclosure of such transactions in the annual report and making it easier to sue directors when such transactions are prejudicial. Lesotho strengthened investor protections by increasing the disclosure requirements for related-party transactions and DB2013 Lesotho improving the liability regime for company directors in cases of abusive related-party transactions. Doing Business 2016 LANDLOCKED ECONOMIES 79 DB year Economy Reform Moldova strengthened investor protections by allowing the DB2013 Moldova rescission of prejudicial related-party transactions. Mongolia strengthened investor protections by increasing the DB2013 Mongolia disclosure requirements for related-party transactions. Tajikistan strengthened investor protections by making it DB2013 Tajikistan easier to sue directors in cases of prejudicial related-party transactions. Kosovo strengthened investor protections by introducing a requirement for shareholder approval of related-party DB2013 Kosovo transactions, requiring greater disclosure of such transactions in the annual report and making it easier to sue directors when such transactions are prejudicial. Kazakhstan strengthened investor protections by regulating the approval of transactions between interested parties and DB2012 Kazakhstan making it easier to sue directors in cases of prejudicial transactions between interested parties. Belarus strengthened investor protections by introducing DB2012 Belarus requirements for greater corporate disclosure to the board of directors and to the public. Burundi strengthened investor protections by introducing new requirements for the approval of transactions between interested parties, by requiring greater corporate disclosure DB2012 Burundi to the board of directors and in the annual report and by making it easier to sue directors in cases of prejudicial transactions between interested parties. Kazakhstan strengthened investor protections by requiring DB2011 Kazakhstan greater corporate disclosure in company annual reports. Tajikistan strengthened investor protections by requiring DB2011 Tajikistan greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Swaziland strengthened investor protections by requiring greater corporate disclosure, higher standards of DB2011 Swaziland accountability for company directors and greater access to corporate information for minority investors. Swaziland reduced the time to import by implementing an Doing Business 2016 LANDLOCKED ECONOMIES 80 DB year Economy Reform electronic data interchange system for customs at its border posts. Tajikistan strengthened investor protections through amendments to the joint stock companies law enhancing disclosure requirements for related-party transactions, DB2010 Tajikistan increasing director liability in cases where related-party transactions harm the company and allowing shareholders to request the rescission of such transactions. Rwanda strengthened investor protections through a new company law requiring greater corporate disclosure, DB2010 Rwanda increasing director liability and improving shareholders’ access to information. FYR Macedonia strengthened investor protections by introducing regulations on the approval of related-party DB2010 Macedonia, FYR transactions, increasing disclosure requirements in the annual report and making it easier to sue directors in cases where related-party transactions harm the company. Mali strengthened investor protections through an DB2010 Mali amendment to its civil procedure code increasing shareholders’ access to corporate information during trial. 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 2016 LANDLOCKED ECONOMIES 81 WHAT THE PAYING TAXES INDICATORS PAYING TAXES Taxes are essential. The level of tax rates needs to MEASURE be carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank Tax payments for a manufacturing company better on the ease of paying taxes in the Doing in 2014 (number per year adjusted for Business study tend to perceive both tax rates and electronic and joint filing and payment) tax administration as less of an obstacle to Total number of taxes and contributions paid, business according to the World Bank Enterprise including consumption taxes (value added tax, Survey research. sales tax or goods and service tax) Method and frequency of filing and payment What do the indicators cover? Time required to comply with 3 major taxes Using a case scenario, Doing Business records the (hours per year) taxes and mandatory contributions that a medium- size company must pay in a given year as well as Collecting information and computing the tax measures of the administrative burden of paying payable taxes and contributions. This case scenario uses a set Completing tax return forms, filing with of financial statements and assumptions about proper agencies transactions made over the year. Information is also Arranging payment or withholding compiled on the frequency of filing and payments as well as time taken to comply with tax laws. The Preparing separate tax accounting books, if ranking of economies on the ease of paying taxes is required determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores Profit or corporate income tax for each of the component indicators, with a Social contributions and labor taxes paid by threshold and a nonlinear transformation applied to the employer one of the component indicators, the total tax rate . 3 Property and property transfer taxes The financial statement variables have been updated to be proportional to 2012 income per capita; Dividend, capital gains and financial previously they were proportional to 2005 income transactions taxes per capita. To make the data comparable across Waste collection, vehicle, road and other taxes economies, several assumptions are used.  Taxes and mandatory contributions are  TaxpayerCo is a medium-size business that measured at all levels of government. started operations on January 1, 2013.  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 paid by the and mandatory contributions paid during company. the second year of operation are recorded.  A range of standard deductions and exemptions are also recorded. 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 of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 LANDLOCKED ECONOMIES 82 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with information for assessing the tax compliance burden for taxes in economies in Landlocked Economies—and how businesses (figure 8.1). The average ranking of the region much do firms pay in taxes? The global rankings of these provides a useful benchmark. economies on the ease of paying taxes offer useful Figure 8.1 How economies in Landlocked Economies rank on the ease of paying taxes Note: All economies with a total tax rate below the threshold of 26.1% applied in DB2015, receive the same distance to frontier score for the total tax rate (a distance to frontier score of 100 for the total tax rate) for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 83 PAYING TAXES The indicators underlying the rankings may be more major taxes (corporate income tax, VAT or sales tax and revealing. Data collected by Doing Business show what it labor taxes and mandatory contributions)—as well as the takes to comply with tax regulations in each economy in total tax rate (figure 8.2). Comparing these indicators the region—the number of payments per year and the across the region and with averages both for the region time required to prepare, and file and pay taxes the 3 and for comparator regions can provide useful insights. Figure 8.2 How easy is it to pay taxes in economies in Landlocked Economies —and what are the total tax rates? Payments (number per year) Doing Business 2016 LANDLOCKED ECONOMIES 84 PAYING TAXES Time (hours per year) Doing Business 2016 LANDLOCKED ECONOMIES 85 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 86 PAYING TAXES What are the changes over time? Economies around the world have made paying taxes concrete results. Some economies simplifying faster and easier for businesses—such as by compliance with tax obligations and reducing rates have consolidating filings, reducing the frequency of seen tax revenue rise. What tax reforms has Doing payments or offering electronic filing and payment. Business recorded in Landlocked Economies (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How have economies in Landlocked Economies made paying taxes easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Kosovo made paying taxes easier for companies by DB2016 Kosovo abolishing the annual business license fee. Rwanda made paying taxes easier for companies by DB2016 Rwanda introducing electronic filing and making its use compulsory. Serbia made paying taxes easier for companies by introducing an electronic system for filing and paying VAT DB2016 Serbia and social security contributions as well as by abolishing the urban land usage fee. On the other hand, Serbia increased the property tax and environmental tax rates. The Slovak Republic made paying taxes easier for companies by introducing an electronic filing and payment system for VAT—and made paying taxes less costly by reducing the DB2016 Slovak Republic corporate income tax rate and making medical health insurance tax deductible. At the same time, the Slovak Republic reduced the limit on losses carried forward. Swaziland made paying taxes less costly for companies by reducing the corporate income tax rate. On the other hand, DB2016 Swaziland Swaziland raised the ceiling for the National Provident Fund contribution. Tajikistan made paying taxes easier for companies by introducing an electronic filing and payment system for DB2016 Tajikistan corporate income tax, VAT and labor taxes. On the other hand, it increased real estate tax fees. Doing Business 2016 LANDLOCKED ECONOMIES 87 DB year Economy Reform Zambia made paying taxes easier for companies by implementing electronic filing and payment for VAT. At the DB2016 Zambia same time, Zambia made paying taxes more costly by increasing the property transfer tax rate. Azerbaijan made paying taxes easier for companies by DB2015 Azerbaijan introducing an electronic system for filing and paying social insurance contributions. Belarus made paying taxes easier for companies by introducing an electronic system for filing and paying contributions for the obligatory insurance for work accidents—and by simplifying the filing requirements for DB2015 Belarus corporate income tax and VAT. On the other hand, it increased the ecological tax rate and made bad debt provisions nondeductible for purposes of the corporate income tax. Hungary made paying taxes easier and less costly for companies by abolishing the special tax that had been DB2015 Hungary temporarily introduced in 2010 and by reducing the vehicle tax rate. Kazakhstan made paying taxes more complicated for companies by introducing a mandatory contribution to the DB2015 Kazakhstan National Chamber of Entrepreneurs and by increasing the vehicle and environmental taxes. Moldova made paying taxes easier for companies by introducing an electronic system for filing and paying social security contributions. On the other hand, it increased the DB2015 Moldova minimum salary used for calculating the environmental tax liability. Furthermore, Moldova increased the employers’ health insurance contribution rate and introduced new filing requirements for VAT. Mongolia made paying taxes easier for companies by DB2015 Mongolia introducing an electronic system for filing corporate income tax, VAT and social security contributions. Swaziland made paying taxes less costly for companies by DB2015 Swaziland reducing the corporate income tax rate. Doing Business 2016 LANDLOCKED ECONOMIES 88 DB year Economy Reform Tajikistan made paying taxes easier for companies by DB2015 Tajikistan introducing an electronic system for filing and paying corporate income tax, VAT and labor taxes. West Bank and Gaza made paying taxes easier for companies DB2015 West Bank and Gaza by introducing the option to make either 1 or 4 advance payments of corporate income tax. Zambia made paying taxes easier for companies by abolishing the medical levy and by introducing an online DB2015 Zambia system for filing corporate income tax, VAT and some labor taxes. At the same time, it also increased the property transfer tax. Armenia made paying taxes easier by merging the employee DB2014 Armenia and employer social contributions and individual income tax into one unified income tax. Burundi made paying taxes less costly for companies by DB2014 Burundi reducing corporate income tax rate. Burkina Faso made paying taxes easier for companies by DB2014 Burkina Faso abolishing the separate capital gains tax on real estate properties. Lao PDR made paying taxes less costly for companies by DB2014 Lao PDR reducing the corporate income tax rate—though it also introduced a new property transfer tax. Moldova made paying taxes easier for companies by introducing an electronic filing and payment system for the DB2014 Moldova value added tax, corporate income tax, land improvement tax and tax on immovable property. FYR Macedonia made paying taxes easier for companies by DB2014 Macedonia, FYR encouraging the use of electronic filing and payment systems for corporate income and value added taxes. Paraguay made paying taxes easier for companies by making DB2014 Paraguay electronic filing and payment mandatory for corporate income and value added taxes. DB2014 Rwanda Rwanda made paying taxes easier and less costly for Doing Business 2016 LANDLOCKED ECONOMIES 89 DB year Economy Reform companies by rolling out its electronic filing system to the majority of businesses and by reducing the property tax rate and business trading license fee. Serbia made paying taxes more costly for companies by DB2014 Serbia increasing the corporate income tax. South Sudan made paying taxes more costly for companies DB2014 South Sudan by increasing the corporate income tax rate. The Slovak Republic made paying taxes more costly for DB2014 Slovak Republic companies by increasing the corporate income tax rate and by adjusting land appraisal values. Tajikistan made paying taxes easier and less costly for companies by reducing the corporate income tax rate, DB2014 Tajikistan merging the minimal income tax with the corporate income tax and abolishing the retail sales tax. At the same time, Tajikistan increased the land and vehicle tax rates. Uzbekistan made paying taxes easier for companies by DB2014 Uzbekistan eliminating some small taxes. Belarus made paying taxes easier and less costly for DB2013 Belarus companies by reducing the profit tax rate and encouraging the use of electronic filing and payment systems. Botswana made paying taxes more costly for companies by DB2013 Botswana increasing the profit tax rate. The Czech Republic made paying taxes faster for companies DB2013 Czech Republic by promoting the use of electronic facilities. DB2013 Ethiopia Ethiopia introduced a social insurance contribution. Hungary made paying taxes easier for companies by abolishing the community tax. At the same time, Hungary DB2013 Hungary increased health insurance contributions paid by the employer. Lao PDR made paying taxes less costly for companies by DB2013 Lao PDR reducing the corporate income tax rate. Doing Business 2016 LANDLOCKED ECONOMIES 90 DB year Economy Reform Malawi introduced a mandatory pension contribution for DB2013 Malawi companies. Mali made paying taxes less costly for companies by reducing the corporate income tax rate—though it also introduced a DB2013 Mali new tax on land. At the same time, Mali simplified the processes of paying taxes by introducing a single form for joint filing and payment of several taxes. Moldova made paying taxes more costly for companies by reintroducing the corporate income tax—but also made tax DB2013 Moldova compliance easier by encouraging electronic filing and payment. The Slovak Republic made paying taxes easier for companies DB2013 Slovak Republic by implementing electronic filing and payment of social security and health insurance contributions. DB2013 Swaziland Swaziland introduced value added tax. Hungary made paying taxes costlier for firms by introducing a DB2012 Hungary sector-specific surtax The Kyrgyz Republic made paying taxes costlier for firms by DB2012 Kyrgyz Republic introducing a real estate tax, though it also reduced the sales tax rate. The Czech Republic revised its tax legislation to simplify DB2012 Czech Republic provisions relating to administrative procedures and relationships between tax authorities and taxpayers. Burundi made paying taxes easier for companies by reducing DB2012 Burundi the payment frequency for social security contributions from monthly to quarterly. DB2012 Bolivia Bolivia raised social security contribution rates for employers. Belarus abolished several taxes, including turnover and sales taxes, and simplified compliance with corporate income, value DB2012 Belarus added and other taxes by reducing the frequency of filings and payments and facilitating electronic filing and payment. DB2012 Armenia Armenia made tax compliance easier for firms by reducing the number of payments for social security contributions and Doing Business 2016 LANDLOCKED ECONOMIES 91 DB year Economy Reform corporate income, property and land taxes and by introducing mandatory electronic filing and payment for major taxes. Paraguay made paying taxes more burdensome for DB2012 Paraguay companies by introducing new tax declarations that must be filed monthly. Rwanda reduced the frequency of value added tax filings by DB2012 Rwanda companies from monthly to quarterly. Zimbabwe reduced the corporate income tax rate from 30% to 25%, lowered the capital gains tax from 20% to 5% and DB2011 Zimbabwe simplified the payment of corporate income tax by allowing quarterly payment through commercial banks. A revision of Azerbaijan’s tax code lowered several tax rates, DB2011 Azerbaijan including the profit tax rate, and simplified the process of paying corporate income tax and value added tax. Reductions in the turnover tax, social security contributions and the base for property taxes along with continued efforts DB2011 Belarus to encourage electronic filing made it easier and less costly for companies in Belarus to pay taxes. Chad increased taxes on business through changes to its DB2011 Chad social security contribution rates. Burkina Faso reduced the statutory tax rate and the number DB2011 Burkina Faso of taxes for business and introduced simpler, uniform compliance procedures. Burundi made paying taxes simpler by replacing the DB2011 Burundi transactions tax with a value added tax. The Czech Republic simplified its labor tax processes and DB2011 Czech Republic reduced employer contribution rates for social security. DB2011 Hungary Hungary simplified taxes and tax bases. Lao PDR replaced the business turnover tax with a new value DB2011 Lao PDR added tax. Doing Business 2016 LANDLOCKED ECONOMIES 92 DB year Economy Reform FYR Macedonia lowered tax costs for businesses by requiring DB2011 Macedonia, FYR that corporate income tax be paid only on distributed profits. DB2011 Tajikistan Tajikistan lowered its corporate income tax rate. Moldova reduced employer contribution rates for social DB2011 Moldova security. DB2011 Niger Niger reduced its corporate income tax rate. Niger made paying taxes easier for companies by eliminating DB2010 Niger the tax on interest. Uganda reduced the time required for companies to prepare, DB2010 Uganda file and pay value added tax through improved efficiency of taxpayer services and banks. Uzbekistan made paying taxes easier for companies through DB2010 Uzbekistan a new tax code combining corporate income tax provisions. Malawi made paying taxes less time consuming for DB2010 Malawi companies by encouraging the use of electronic systems. Moldova made paying taxes less costly for companies by DB2010 Moldova reducing employers’ social security contribution rate. FYR Macedonia made paying taxes easier and less costly for DB2010 Macedonia, FYR companies by clarifying social security payments and reducing employers’ social security contribution rates. Lao PDR made paying taxes easier for companies by DB2010 Lao PDR consolidating several taxes into one improved form and improving the lodgment process and staffing at the tax office. Kazakhstan made paying taxes less costly for companies by DB2010 Kazakhstan reducing social tax rates and the corporate income tax rate. The Kyrgyz Republic made paying taxes less costly for DB2010 Kyrgyz Republic companies by reducing the rates of several taxes, including the corporate income tax. DB2010 Czech Republic The Czech Republic made paying taxes easier for companies by making electronic filing mandatory for all taxes and Doing Business 2016 LANDLOCKED ECONOMIES 93 DB year Economy Reform introducing a single tax institution and unified filing. Belarus made paying taxes easier and less costly for companies by encouraging the use of electronic systems, DB2010 Belarus reducing the number of payments for the property tax, adjusting the ecological tax rates and lowering turnover tax rates. Kosovo made paying taxes less costly for companies by DB2010 Kosovo reducing the corporate income tax rate. 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 2016 LANDLOCKED ECONOMIES 94 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port Documentary compliance – cost (US$) & time operations and inadequate infrastructure all lead to (hours) extra costs and delays for exporters and importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting and -Required by origin, transit and destination economies importing goods. Under the new methodology introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with three Border compliance – cost (US$) & time sets of procedures—documentary compliance, (hours) border compliance and domestic transport—within the overall process of exporting or importing a Customs clearance and inspections shipment of goods. The ranking of economies on the Inspections by other agencies ease of trading across borders is determined by Port or border handling sorting their distance to frontier scores for trading across borders. These scores are the simple average Obtaining, preparing and submitting of the distance to frontier scores for the time and documents during clearance, inspections and port or border handling cost for documentary compliance and border compliance to export and import. Domestic transport* Loading and unloading of shipment To make the data comparable across economies, a few assumptions are made about the traded goods Transport between warehouse and terminal/port and the transactions: Transport between terminal/port and border Time Obtaining, preparing and submitting  Time is measured in hours, and 1 day is 24 documents during domestic transport hours (for example, 22 days are recorded Traffic delays and road police checks while as 22 × 24 = 528 hours). If customs shipment is en route clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose that * Although Doing Business collects and publishes data on documents are submitted to a customs the time and cost for domestic transport, it does not use agency at 8:00 a.m., are processed these data in calculating the distance to frontier score for overnight and can be picked up at 8:00 trading across borders or the ranking on the ease of trading a.m. the next day. In this case the time for across borders. customs clearance would be recorded as Cost 24 hours because the actual procedure  Insurance cost and informal payments for took 24 hours. which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 LANDLOCKED ECONOMIES 95 Assumptions of the case study  For each of the 189 economies covered by  Shipping cost based on weight is assumed to Doing Business, it is assumed that a shipment be greater than shipping cost based on travels from a warehouse in the largest business volume. city of the exporting economy to a warehouse  If government fees are determined by the in the largest business city of the importing value of the shipment, the value is assumed economy. For 11 economies the data are also to be $50,000. collected, under the same case study assumptions, for the second largest business  The product is new, not secondhand or used city. merchandise.  The import and export case studies assume  The exporting firm is responsible for hiring different traded products. It is assumed that and paying for a freight forwarder or customs each economy imports a standardized shipment broker (or both) and pays for all costs related of 15 metric tons of containerized auto parts to international shipping, domestic transport, (HS 8708) from its natural import partner—the clearance and mandatory inspections by economy from which it imports the largest value customs and other government agencies, port (price times quantity) of auto parts. It is or border handling, documentary compliance assumed that each economy exports the fees and the like for exports. The importing product of its comparative advantage (defined firm is responsible for the above costs for by the largest export value) to its natural export imports. partner—the economy that is the largest  The mode of transport is the one most widely purchaser of this product. Precious metal and used for the chosen export or import product gems, live animals and pharmaceuticals are and the trading partner, as is the seaport, excluded from the list of possible export airport or land border crossing. products, however, and the second largest product category is considered as needed.  All electronic submissions of information requested by any government agency in  To identify the trading partners and export connection with the shipment are considered product for each economy, Doing Business to be documents obtained, prepared and collected data on trade flows for the most submitted during the export or import recent four-year period from international process. databases such as the United Nations Commodity Trade Statistics Database (UN  A port or border is defined as a place Comtrade). For economies for which trade flow (seaport, airport or land border crossing) data were not available, data from ancillary where merchandise can enter or leave an government sources (various ministries and economy. departments) and World Bank Group country  Government agencies considered relevant offices were used to identify the export product are agencies such as customs, port and natural trading partners. authorities, road police, border guards,  A shipment is a unit of trade. Export shipments standardization agencies, ministries or do not necessarily need to be containerized, departments of agriculture or industry, while import shipments of auto parts are national security agencies and any other assumed to be containerized. government authorities. Doing Business 2016 LANDLOCKED ECONOMIES 96 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in Landlocked across borders suggest an answer (figure 9.1). The Economies to export and import goods? The global average ranking of the region and comparator regions rankings of these economies on the ease of trading provide a useful benchmark. Figure 9.1 How economies in Landlocked Economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 97 TRADING ACROSS BORDERS The indicators reported here are for trading a shipment and import is collected from local freight forwarders, of goods by the most widely used mode of transport customs brokers and traders. Comparing these indicators (whether sea, land, air or some combination of these). across the region and with averages both for the region The information on the time and cost to complete export and for comparator regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in Landlocked Economies Time to export: Border compliance (hours) Doing Business 2016 LANDLOCKED ECONOMIES 98 TRADING ACROSS BORDERS Cost to export: Border compliance (USD) Doing Business 2016 LANDLOCKED ECONOMIES 99 TRADING ACROSS BORDERS Time to export: Documentary compliance (hours) Doing Business 2016 LANDLOCKED ECONOMIES 100 TRADING ACROSS BORDERS Cost to export: Documentary compliance (USD) Doing Business 2016 LANDLOCKED ECONOMIES 101 TRADING ACROSS BORDERS Time to import: Border compliance (hours) Doing Business 2016 LANDLOCKED ECONOMIES 102 TRADING ACROSS BORDERS Cost to import: Border compliance (USD) Doing Business 2016 LANDLOCKED ECONOMIES 103 TRADING ACROSS BORDERS Time to import: Documentary compliance (hours) Doing Business 2016 LANDLOCKED ECONOMIES 104 TRADING ACROSS BORDERS Cost to import: Documentary compliance (USD) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 105 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their 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 Landlocked Economies (table 9.1)? based inspections and electronic data interchange Table 9.1 How have economies in Landlocked Economies made trading across borders easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Armenia reduced the time and cost for documentary and DB2016 Armenia border compliance for trade with the Russian Federation by joining the Eurasian Economic Union. Mali reduced the time for documentary compliance for both DB2016 Mali exporting and importing by introducing an electronic data interchange system. Niger increased the time and cost for documentary and DB2016 Niger border compliance for importing by making a preshipment inspection mandatory. Rwanda increased the time and cost for documentary and DB2016 Rwanda border compliance for importing by making preshipment inspection mandatory for all imported products. Tajikistan made trading across borders easier by making it DB2016 Tajikistan possible to submit customs declarations electronically. Zambia increased the documentary and border compliance time for both exporting and importing by shifting all DB2016 Zambia clearance authority to a central processing center at the initial stage of implementing a web-based customs platform (ASYCUDA World). Bolivia made trading across borders more difficult by DB2015 Bolivia increasing customs clearance time. DB2015 Central African Republic The Central African Republic made trading across borders more difficult by increasing border checks and security Doing Business 2016 LANDLOCKED ECONOMIES 106 DB year Economy Reform controls at the border post with Cameroon. Kazakhstan made trading across borders easier by opening a DB2015 Kazakhstan new border station and railway link that helped reduce congestion at the border with China. Uganda made trading across borders easier by implementing DB2015 Uganda the ASYCUDA World electronic system for the submission of export and import documents. Uzbekistan made trading across borders easier by reducing DB2015 Uzbekistan the number of documents to export and import and by making it possible to submit documents electronically. Azerbaijan made trading across borders easier by DB2014 Azerbaijan streamlining internal customs procedures. Burundi made trading across borders easier by eliminating DB2014 Burundi the requirement for a preshipment inspection clean report of findings. The Central African Republic made trading across borders DB2014 Central African Republic easier by rehabilitating the key transit road at the border with Cameroon. Rwanda made trading across borders easier by introducing an DB2014 Rwanda electronic single-window system at the border. Swaziland made trading across borders easier by streamlining DB2014 Swaziland the process for obtaining a certificate of origin. Chad made trading across borders more difficult by DB2014 Chad introducing a new export and import document. Uzbekistan made trading across borders easier by eliminating the need to register import contracts with customs, DB2014 Uzbekistan tightening the time limits for banks to register export or import contracts and reducing the number of export documents required. DB2013 Botswana In Botswana exporting and importing became faster thanks to the introduction of a scanner by the country’s customs Doing Business 2016 LANDLOCKED ECONOMIES 107 DB year Economy Reform authority and an upgrade of South Africa’s customs declaration system, both at the Kopfontein–Tlokweng border post. Burundi reduced the time to trade across borders by enhancing its use of electronic data interchange systems, DB2013 Burundi introducing a more efficient system for monitoring goods going through transit countries and improving border coordination with neighboring transit countries. The Czech Republic reduced the time to export and import by DB2013 Czech Republic allowing electronic submission of customs declarations and other documents. Hungary reduced the time to export and import by allowing DB2013 Hungary electronic submission of customs declarations and other documents. Lao PDR reduced the time to export and import by implementing the ASYCUDA electronic data interchange DB2013 Lao PDR system at at the Thanaleng–Friendship Bridge border crossing. Trading across borders in Malawi became easier thanks to DB2013 Malawi improvements in customs clearance procedures and transport links between the port of Beira in Mozambique and Blantyre. Niger reduced the time to import by expanding and DB2013 Niger optimizing the use of an electronic data interchange system for customs clearance. Uzbekistan reduced the time to export by introducing a single DB2013 Uzbekistan window for customs clearance and reduced the number of documents needed for each import transaction. More efficient processes at Palestinian customs made trading DB2011 West Bank and Gaza easier in the West Bank. Zambia eased trade by implementing a one-stop border post DB2011 Zambia with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border Doing Business 2016 LANDLOCKED ECONOMIES 108 DB year Economy Reform posts. Mali eliminated redundant inspections of imported goods, DB2011 Mali reducing the time for trading across borders. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with DB2011 Rwanda Uganda and other neighbors, leading to an improvement in the trade logistics environment. Swaziland reduced the import time of trading across borders DB2011 Swaziland by implementing an electronic data interchange system for customs at its border posts. Kazakhstan speeded up trade through efforts to modernize DB2011 Kazakhstan customs, including implementation of a risk management system and improvements in customs automation. Ethiopia made trading easier by addressing internal DB2011 Ethiopia bureaucratic inefficiencies. Belarus reduced the time to trade by introducing electronic DB2011 Belarus declaration of exports and imports. Burkina Faso reduced documentation requirements for DB2011 Burkina Faso importers and exporters, making it easier to trade. Armenia made trading easier by introducing self-declaration desks at customs houses and warehouses, investing in new DB2011 Armenia equipment to improve border operations and introducing a risk management system. Azerbaijan reduced the clearance and border crossing time DB2010 Azerbaijan for goods by streamlining and regrouping agencies behind a single customs service window. Belarus reduced the transit time for trade by implementing a DB2010 Belarus risk-based inspection system and improving operations at the border crossing. DB2010 Burkina Faso Burkina Faso reduced the time needed for trading across borders by creating a one-stop shop for commercial trade Doing Business 2016 LANDLOCKED ECONOMIES 109 DB year Economy Reform documents. The Kyrgyz Republic made trading across borders easier and DB2010 Kyrgyz Republic less time consuming by eliminating some previously required documents and simplifying inspection procedures. Malawi reduced delays in clearing goods by implementing a DB2010 Malawi risk-based inspection system and a postdestination clearance program for preapproved traders. Paraguay reduced the time required for trading across DB2010 Paraguay borders by implementing an electronic single-window system for exports and improving the risk-based inspection system. Rwanda reduced the time required for trading across borders by introducing administrative changes such as expanded DB2010 Rwanda operating hours and enhanced border cooperation and by eliminating some documentation requirements. Mali reduced the time required for trading across borders by implementing an electronic data interchange system, DB2010 Mali improving the terminals used by Malian traders and streamlining documentation requirements. Armenia reduced the time required for trading across borders by encouraging greater competition in the banking and DB2010 Armenia transport sectors and customs brokerage service industry and by reducing the number of goods requiring inspection and the number of documents needed to clear goods. Uganda reduced the time required for trading across borders through expanded operating hours at the port of Mombasa DB2010 Uganda and improvements in customs processes and in border cooperation. The Slovak Republic reduced the time for trading across DB2010 Slovak Republic borders by introducing more electronic systems for customs administration. 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 2016 LANDLOCKED ECONOMIES 110 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 Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators The dispute in the case study involves the breach of a  The value of the dispute is 200% of the sales contract between 2 domestic businesses. The income per capita or the equivalent in local case study assumes that the court hears an expert on currency of USD 5,000, whichever is greater. the quality of the goods in dispute. This distinguishes  The seller sues the buyer before the court the case from simple debt enforcement. To make the with jurisdiction over commercial cases worth data comparable across economies, Doing Business 200% of income per capita or $5,000. uses several assumptions about the case:  The seller requests a pretrial attachment to  The dispute concerns a lawful transaction secure the claim. between two businesses (Seller and Buyer), both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest  The judge decides in favor of the seller; there business city. is no appeal.  The buyer orders custom-made goods,  The seller enforces the judgment through a then fails to pay. public sale of the buyer’s movable assets. Doing Business 2016 LANDLOCKED ECONOMIES 111 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial the ease of enforcing contracts suggest an answer (figure dispute through the courts in economies in Landlocked 10.1). The average ranking of the region and comparator Economies? The global rankings of these economies on regions provide a useful benchmark. Figure 10.1 How economies in Landlocked Economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 112 ENFORCING CONTRACTS The indicators underlying the rankings may also be judicial processes index (figure 10.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to enforce a contract through the courts in each the region and for comparator regions can provide economy in the region: the time, the cost and quality of useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in Landlocked Economies Time (days) Doing Business 2016 LANDLOCKED ECONOMIES 113 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 114 ENFORCING CONTRACTS Quality of Judicial Processes Index (0-18) Source: Doing Business database. Note: Higher values indicate more efficient judicial processes. Doing Business 2016 LANDLOCKED ECONOMIES 115 ENFORCING CONTRACTS What are the changes over time? 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 Landlocked Economies (table 10.1)? Table 10.1 How have economies in Landlocked Economies made enforcing contracts easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Armenia made enforcing contracts easier through a new law requiring that cases be assigned to judges randomly—and DB2016 Armenia through a fully automated system—in courts throughout the country. Kazakhstan made enforcing contracts easier by introducing a DB2016 Kazakhstan simplified fast-track procedure for small claims and by streamlining the rules for enforcement proceedings. The Czech Republic made enforcing contracts easier by DB2015 Czech Republic amending its civil procedure code and modifying the monetary jurisdictions of its courts. Kazakhstan made enforcing contracts easier by introducing DB2015 Kazakhstan an electronic filing system for court users. Kosovo made enforcing contracts easier by introducing a DB2015 Kosovo private bailiff system. The Czech Republic made enforcing contracts easier by DB2014 Czech Republic simplifying and speeding up the proceedings for the execution and enforcement of judgments. Uzbekistan made enforcing contracts easier by introducing an DB2014 Uzbekistan electronic filing system for court users. Rwanda made enforcing contracts easier by implementing an DB2013 Rwanda electronic filing system for initial complaints. The Slovak Republic made enforcing contracts easier by adopting several amendments to the code of civil procedure DB2013 Slovak Republic intended to simplify and speed up proceedings as well as to limit obstructive tactics by the parties to a case. Moldova made the process of enforcing a contract more DB2013 Moldova difficult by abolishing the specialized economic court. Doing Business 2016 LANDLOCKED ECONOMIES 116 DB year Economy Reform Serbia made enforcing contracts easier by introducing a DB2013 Serbia private bailiff system. Nepal improved oversight and monitoring in the court, DB2012 Nepal speeding up the process for filing claims. Moldova made enforcement of judgments more efficient by DB2012 Moldova introducing private bailiffs. Lesotho made enforcing contracts easier by launching a DB2012 Lesotho specialized commercial court. Belarus modified its code of economic procedure, altering DB2012 Belarus the time frames for commercial dispute resolution. Malawi simplified the enforcement of contracts by raising the DB2011 Malawi ceiling for commercial claims that can be brought to the magistrates court. Burkina Faso made enforcing contracts easier by setting up a DB2011 Burkina Faso specialized commercial court and abolishing the fee to register judicial decisions. Uganda continues to improve the efficiency of its court DB2011 Uganda system, greatly reducing the time to file and serve a claim. Zambia improved contract enforcement by introducing an electronic case management system in the courts that DB2011 Zambia provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. West Bank and Gaza speeded up contract enforcement by recruiting and training new judges, by appointing DB2010 West Bank and Gaza “enforcement judges” solely to handle matters relating to the enforcement of judgments and by fully implementing case management software. Ethiopia made enforcing contracts easier by reducing delays in the courts—through backlog reduction, improved case DB2010 Ethiopia management and internal training, and an expanded role for the enforcement judge. Mali improved its contract enforcement process through amendments to its civil procedure code introducing case time DB2010 Mali limits and allowing a summons to be served, with no intervention by the judge, upon the filing of the complaint at the competent court. Botswana made resolution of commercial disputes more DB2010 Botswana efficient by introducing case management and improving the use of information technology. Doing Business 2016 LANDLOCKED ECONOMIES 117 DB year Economy Reform Burkina Faso improved its contract enforcement system by DB2010 Burkina Faso reducing court fees and introducing alternative dispute mechanisms. 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 2016 LANDLOCKED ECONOMIES 118 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to Time required to recover debt (years) creditors. By clarifying the expectations of creditors Measured in calendar years and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable businesses and sustainably grow the economy. Cost required to recover debt (% of debtor’s estate) What do the indicators cover? Doing Business studies the time, cost and outcome of Measured as percentage of estate value insolvency proceedings involving domestic legal Court fees entities. These variables are used to calculate the Fees of insolvency administrators recovery rate, which is recorded as cents on the dollar recovered by secured creditors through Lawyers’ fees reorganization, liquidation or debt enforcement Assessors’ and auctioneers’ fees (foreclosure or receivership) proceedings. To Other related fees determine the present value of the amount recovered by creditors, Doing Business uses the Outcome lending rates from the International Monetary Fund, Whether business continues operating as a supplemented with data from central banks and the going concern or business assets are sold Economist Intelligence Unit. piecemeal In addition, Doing Business evaluates the adequacy Recovery rate for creditors and integrity of the existing legal framework applicable to liquidation and reorganization Measures the cents on the dollar recovered by proceedings through the strength of insolvency secured creditors framework index. The index tests whether economies Outcome for the business (survival or not) adopted internationally accepted good practices in determines the maximum value that can be four areas: commencement of proceedings, recovered management of debtor’s assets, reorganization Official costs of the insolvency proceedings are proceedings and creditor participation. deducted The ranking of economies on the ease of resolving Depreciation of furniture is taken into account insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores Present value of debt recovered are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency proceedings of individuals and financial institutions. Commencement of proceedings index (0-3) The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through a study of laws and regulations as well as public Reorganization proceedings index (0-3) information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 LANDLOCKED ECONOMIES 119 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies in region and comparator regions provide a useful Landlocked Economies? The global rankings of these benchmark for assessing the efficiency of insolvency economies on the ease of resolving insolvency suggest proceedings. Speed, low costs and continuation of viable an answer (figure 11.1). The average ranking of the businesses characterize the top-performing economies. Figure 11.1 How economies in Landlocked Economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 120 RESOLVING INSOLVENCY The indicators underlying the rankings may be more these indicators across the region and with averages revealing. Data collected by Doing Business show the both for the region and for comparator regions can average recovery rate and the average strength of provide useful insights. insolvency framework index (figure 11.2). Comparing Figure 11.2 How efficient is the insolvency process in economies in Landlocked Economies Recovery Rate (0–100) Source: Doing Business database. Doing Business 2016 LANDLOCKED ECONOMIES 121 Total Strength of Insolvency Framework index (0-16) Source: Doing Business database. * Indicates a “no practice” mark. See the data notes for details. 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 practice or if a competing regulation prohibits such practice. Either way, a “ no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: Higher values indicate insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones. Doing Business 2016 LANDLOCKED ECONOMIES 122 RESOLVING INSOLVENCY What are the changes over time? A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Landlocked Economies (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How have economies in Landlocked Economies made resolving insolvency easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Kazakhstan made resolving insolvency easier by allowing creditors to initiate reorganization proceedings and encouraging sales of assets as a going concern. Kazakhstan DB2016 Kazakhstan also improved its bankruptcy regime, by explicitly authorizing post-commencement finance and granting it priority over existing unsecured claims. Moldova improved its insolvency system by introducing a licensing system for insolvency administrators, by increasing DB2016 Moldova qualification requirements to include a professional exam as well as training and by establishing supervisory bodies to regulate the profession of insolvency administrators. Rwanda improved its insolvency system by introducing provisions on voidable transactions and the approval of DB2016 Rwanda reorganization plans and by establishing additional safeguards for creditors in reorganization proceedings. Switzerland made resolving insolvency easier by introducing a moratorium period while the debtor is preparing a composition (reorganization) agreement, allowing creditors DB2015 Switzerland greater participation in the composition (reorganization) procedure and clarifying claw-back provisions applicable to voidable transactions. Kazakhstan made resolving insolvency easier by clarifying and simplifying provisions on liquidation and reorganization, introducing the concept of creditors’ meetings, expanding the DB2015 Kazakhstan rights of creditors during insolvency proceedings, authorizing payment in kind to secured creditors and clarifying the process for submitting creditors’ claims. The former Yugoslav Republic of Macedonia made resolving insolvency easier by establishing a framework for electronic DB2015 Macedonia, FYR auctions of debtors’ assets, streamlining and tightening the time frames for insolvency proceedings and the appeals Doing Business 2016 LANDLOCKED ECONOMIES 123 DB year Economy Reform process and establishing a framework for out-of-court restructurings. Uganda made resolving insolvency easier by consolidating all provisions related to corporate insolvency in one law, establishing provisions on the administration of companies DB2015 Uganda (reorganization), clarifying standards on the professional qualifications of insolvency practitioners and introducing provisions allowing the avoidance of undervalued transactions. Belarus improved its insolvency process through a new insolvency law that, among other things, changes the appointment process for insolvency administrators and DB2014 Belarus encourages the sale of assets in insolvency. The law also regulates the liability of shareholders and directors of the insolvent company. Moldova made resolving insolvency easier by introducing new restructuring mechanisms, reducing opportunities for DB2014 Moldova appeals, adding moratorium provisions and establishing strict statutory periods for several stages of the insolvency proceeding. Rwanda made resolving insolvency easier through a new law clarifying the standards for beginning insolvency proceedings; preventing the separation of the debtor’s assets during DB2014 Rwanda reorganization proceedings; setting clear time limits for the submission of a reorganization plan; and implementing an automatic stay of creditors’ enforcement actions. Belarus enhanced its insolvency process by exempting the previously state-owned property of a privatized company from the bankruptcy proceeding, requiring that immovable DB2013 Belarus property not sold in the auction be offered to creditors for purchase and allowing immovable property to be sold without proof of state registration in a bankruptcy auction if there are no funds to pay for the registration. Kazakhstan strengthened its insolvency process by introducing an accelerated rehabilitation proceeding, extending the period for rehabilitation, expanding the powers of and improving qualification requirements for insolvency DB2013 Kazakhstan administrators, changing requirements for bankruptcy filings, extending the rights of creditors, changing regulations related to the continuation of operations, introducing a time limit for adopting a rehabilitation plan and adding court supervision requirements. Doing Business 2016 LANDLOCKED ECONOMIES 124 DB year Economy Reform Moldova strengthened its insolvency process by extending DB2013 Moldova the duration of the reorganization proceeding and refining the qualification requirements for insolvency administrators. The Slovak Republic improved its insolvency process by redefining the roles and powers of creditors and trustees, DB2013 Slovak Republic strengthening the rights of secured creditors and redefining rules for the conversion of restructuring into a bankruptcy proceeding. Uganda strengthened its insolvency process by clarifying rules on the creation of mortgages, establishing the duties of DB2013 Uganda mortgagors and mortgagees, defining priority rules, providing remedies for mortgagors and mortgagees and establishing the powers of receivers. Uzbekistan strengthened its insolvency process by introducing new time limits for insolvency proceedings and DB2013 Uzbekistan new time limits and procedures for the second auction and by making it possible for businesses to continue operating throughout the liquidation proceeding. Serbia strengthened its insolvency process by introducing private bailiffs, reducing the starting prices for the sale of assets, prohibiting appeals, expediting service of process and DB2013 Serbia adopting an electronic registry for injunctions to make public all prohibitions on the disposal or pledge of movable or immovable property. Zambia strengthened its insolvency process by introducing further qualification requirements for receivers and DB2013 Zambia liquidators and by establishing specific duties and remuneration rules for them. Serbia adopted legislation introducing professional DB2012 Serbia requirements for insolvency administrators and regulating their compensation. Switzerland introduced a unified civil procedure code and DB2012 Switzerland made a number of changes to its federal bankruptcy law. Malawi adopted new rules providing clear procedural DB2012 Malawi requirements and time frames for winding up a company. Moldova amended its insolvency law to grant priority to DB2012 Moldova secured creditors. FYR Macedonia increased the transparency of bankruptcy DB2012 Macedonia, FYR proceedings through amendments to its company and bankruptcy laws. Doing Business 2016 LANDLOCKED ECONOMIES 125 DB year Economy Reform Burundi amended its commercial code to establish DB2012 Burundi foreclosure procedures. Armenia amended its bankruptcy law to clarify procedures for appointing insolvency administrators, reduce the processing DB2012 Armenia time for bankruptcy proceedings and regulate asset sales by auction. Austria passed a new law that simplifies restructuring DB2012 Austria proceedings and gives preferential consideration to the interests of the debtors. Belarus amended regulations governing the activities of DB2011 Belarus insolvency administrators and strengthened the protection of creditor rights in bankruptcy. The Czech Republic made it easier to deal with insolvency by introducing further legal amendments to restrict setoffs in DB2011 Czech Republic insolvency cases and suspending for some insolvent debtors the obligation to file for bankruptcy. Amendments to Hungary’s bankruptcy law encourage DB2011 Hungary insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. The Kyrgyz Republic streamlined insolvency proceedings and updated requirements for administrators, but new formalities DB2011 Kyrgyz Republic added to prevent abuse of proceedings made closing a business more difficult. Serbia passed a new bankruptcy law that introduced out-of- DB2011 Serbia court workouts and a unified reorganization procedure. Tajikistan improved its insolvency process by amending its DB2010 Tajikistan insolvency law to reduce the duration and cost of proceedings. Rwanda improved its insolvency process through a new law DB2010 Rwanda aimed at streamlining reorganization procedures. Malawi enhanced its insolvency process through a new law DB2010 Malawi limiting the liquidator’s 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 2016 LANDLOCKED ECONOMIES 126 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 LANDLOCKED ECONOMIES 127 identical to the simple average used by Doing Business . than it would have had before (line D is bigger than line 4 Thus Doing Business uses the simplest method: C in figure 14.2 of the Doing Business 2016 report). weighting all topics equally and, within each topic, giving The nonlinear transformation is not based on any equal weight to each of the topic components . 5 economic theory of an “optimal tax rate” that minimizes An economy’s distance to frontier score is indicated on a distortions or maximizes efficiency in an economy’s scale from 0 to 100, where 0 represents the worst overall tax system. Instead, it is mainly empirical in performance and 100 the frontier. All distance to frontier nature. The nonlinear transformation along with the calculations are based on a maximum of five decimals. threshold reduces the bias in the indicator toward However, indicator ranking calculations and the ease of economies that do not need to levy significant taxes on doing business ranking calculations are based on two companies like the Doing Business standardized case decimals. study company because they raise public revenue in other ways—for example, through taxes on foreign The difference between an economy’s distance to companies, through taxes on sectors other than frontier score in any previous year and its score in 2015 manufacturing or from natural resources (all of which are illustrates the extent to which the economy has closed outside the scope of the methodology). In addition, it the gap to the regulatory frontier over time. And in any acknowledges the need of economies to collect taxes given year the score measures how far an economy is from firms. from the best performance at that time. Calculation of scores for economies with 2 cities Treatment of the total tax rate covered The total tax rate component of the paying taxes For each of the 11 economies in which Doing Business indicator set enters the distance to frontier calculation in collects data for the second largest business city as well a different way than any other indicator. The distance to as the largest one, the distance to frontier score is frontier score obtained for the total tax rate is calculated as the population-weighted average of the transformed in a nonlinear fashion before it enters the distance to frontier scores for these two cities (table distance to frontier score for paying taxes. As a result of 13.1). This is done for the aggregate score, the scores for the nonlinear transformation, an increase in the total tax each topic and the scores for all the component rate has a smaller impact on the distance to frontier indicators for each topic. score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 LANDLOCKED ECONOMIES 128 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more The ease of doing business ranking ranges from 1 to 189. Doing Business topics in 2014/15 The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 decimals. which economies improved the ease of doing business the most. First, it selects the economies that in 2014/15 Doing Business 2016 LANDLOCKED ECONOMIES 129 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 11,400 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 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 LANDLOCKED ECONOMIES 130