75134 2012 Doing Business in the Arab World 2012 Doing business in a more transparent world C O M PA R I N G R E G U L AT I O N F O R D O M E S T I C F I R M S I N 2 0 E C O N O M I E S © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The �ndings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522- 2422; e-mail: pubrights@worldbank.org. Additional copies of Doing Business 2012: Doing Business in a More Transparent World, Doing Business 2011: Making a Difference for Entrepreneurs, Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org. 2012 Doing Business in the Arab World 2012 Doing business in a more transparent world C O M PA R I N G R E G U L AT I O N F O R D O M E S T I C F I R M S I N 2 0 E C O N O M I E S A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION ii DOING BUSINESS 2012 THE DOING BUSINESS WEBSITE Current features Download reports News on the Doing Business project Access to Doing Business reports as well as http://www.doingbusiness.org subnational and regional reports, reform case studies and customized economy and regional pro�les Rankings http://www.doingbusiness.org/Reports How economies rank—from 1 to 183 http://www.doingbusiness.org/Rankings Subnational and regional projects Differences in business regulations at the Doing Business reforms subnational and regional level Short summaries of DB2012 reforms, lists of http://www.doingbusiness.org/Subnational-Reports reforms since DB2008 http://www.doingbusiness.org/Reforms Law library Online collection of laws and regulations relating to Historical data business and gender issues Customized data sets since DB2004 http://www.doingbusiness.org/Law-library http://www.doingbusiness.org/Custom-Query http://wbl.worldbank.org Methodology and research Local partners The methodology and research papers underlying More than 9,000 specialists in 183 economies who Doing Business participate in Doing Business http://www.doingbusiness.org/Methodology http://www.doingbusiness.org/Local-Partners/ http://www.doingbusiness.org/Research Doing-Business Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet 2012 Contents 1 Executive summary 13 About Doing Business: measuring for impact 23 Doing Business topics 24 Starting a business 30 Dealing with construction permits 34 Getting electricity 40 Registering property 45 Getting credit 52 Protecting investors 57 Paying taxes 61 Trading across borders 66 Enforcing contracts 71 Resolving insolvency 76 References 80 Data notes 98 Ease of doing business and distance to frontier 101 Summaries of Doing Business reforms in 2010/11 103 Country tables 110 Acknowledgments Doing Business in the Arab World 2012 is a region- workers. The employing workers data are not al report drawing on the global Doing Business included in this year’s ranking on the ease of do- project and its database as well as the �ndings ing business. of Doing Business 2012, the ninth in a series of annual reports investigating the regulations that Data in Doing Business 2012 are current as of June enhance business activity and those that con- 1, 2011. The indicators are used to analyze eco- strain it. Doing Business presents quantitative nomic outcomes and identify what reforms of indicators on business regulation and the pro- business regulation have worked, where and why. tection of property rights that can be compared Chapters exploring these issues for each of the 11 across 183 economies—from Afghanistan to Doing Business topics—as well as showing global Zimbabwe—and over time. trends—are being published online this year. The chapters are available on the Doing Business web- Regulations affecting 11 areas of the life of a site at http://www.doingbusiness.org. business are covered: starting a business, deal- ing with construction permits, getting electric- The methodology for the dealing with construc- ity, registering property, getting credit, pro- tion permits, getting credit and paying taxes tecting investors, paying taxes, trading across indicators changed for Doing Business 2012. See borders, enforcing contracts, resolving insolven- the data notes for details. cy (formerly closing a business) and employing 1 Executive summary Against the backdrop of the Arab Spring, Policy makers worldwide recognize the avoiding distortions that impose unreason- governments in 13 of 20 Arab economies role that entrepreneurs play in creating able costs on business. Where business implemented regulatory reforms in the past economic opportunities for themselves and regulation is executed in a discretionary year aimed at improving the business en- for others. To encourage private-sector-led and burdensome way, and competition is vironment for local entrepreneurs. Overall, growth, policy makers often take mea- limited, success depends more on whom these governments implemented 20 such sures to improve the investment climate you know than on what you know or what reforms between June 2010 and May 2011. and boost productivity. Investments in you can do. The burdens and costs fall hard- Morocco was the most active in encourag- infrastructure—ports, roads, telecommu- est on new entrepreneurs and small �rms— ing entrepreneurship through regulatory nications—are seen as a vital ingredient those least able to afford them. But where reform. of private sector development. Security is regulations are relatively easy to comply essential, and in an increasingly complex with and accessible to all who need to use Yet opportunities remain. Entrepreneurs global economy investments in education them, anyone with talent and a good idea across the Arab world continue to face and training are critical. These investments should be able to start and grow a business often complex and costly regulatory pro- typically take time to bear fruit. Another in the formal sector. In the Arab world the cesses to start and run a business—and critical way for policy makers to encourage shift to this kind of regulatory environment, contend with weaker investor and property entrepreneurship is by creating a regulatory so central to the promise of the Arab Spring, rights protections than their counterparts environment conducive to the creation and is far from complete. in other regions. Accessing information growth of businesses—one that promotes needed to comply with regulations can be rather than inhibits competition.4 Through indicators benchmarking 183 challenging. And the playing �eld can be economies, Doing Business measures and uneven, often favoring some incumbent Economic activity requires good rules that tracks changes in the regulations apply- �rms at the expense of competitors, includ- are transparent, predictable and accessible ing to primarily small and medium-size ing new entrants. Firm surveys show that to all. Such regulations should be efficient, domestic companies in 11 areas in their life manufacturing �rms as well as their man- striking a balance between safeguard- cycle (box 1.1). The �ndings suggest that agers are older on average than those in ing important interests of the public and entrepreneurs in the Arab world face a other regions, indicating weaker entry and exit mechanisms.1 Firm entry density in the Middle East and North Africa is among the BOX 1.1 Measuring regulation through the life cycle of a local business lowest in the world.2 This year’s aggregate ranking on the ease of doing business is based on indicator sets that measure and benchmark regulations affecting 10 areas in the life cycle of a business: starting a A clear message emerging from the politi- business, dealing with construction permits, getting electricity, registering property, getting cred- it, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving cal transformation of the Arab world is the insolvency. Doing Business also looks at regulations on employing workers, which are not included demand for more inclusive, broad-based in this year’s aggregate ranking. It focuses primarily on regulations as they apply to small and growth that creates opportunity for many medium-size domestic companies. who have not shared in the bene�ts of Doing Business encompasses 2 types of data and indicators. One set of indicators focuses on private sector development in the past. In the strength of property rights and investor protections as measured by the treatment of a case most Arab economies the unemployment scenario according to the laws and regulations on the books. Doing Business gives higher scores for stronger property rights and investor protections, such as stricter disclosure requirements rate remains in double digits, and the in related-party transactions. The second set of indicators focuses on the cost and efficiency majority of the unemployed are under the of regulatory processes such as starting a business, registering property and dealing with con- age of 30. Policies focused on promoting struction permits. Based on time-and-motion case studies from the perspective of the business, inclusive growth, creating incentives for the these indicators measure the procedures, time and cost required to complete a transaction in private sector to create more good jobs and accordance with all relevant regulations. Any interaction of the company with external parties such as government agencies counts as 1 procedure. Cost estimates are recorded from official fee improving governance can increase em- schedules where these apply. For a detailed explanation of the Doing Business methodology, see ployment opportunities for young people in the data notes and the chapter “About Doing Business: measuring for impact.� the region.3 2 DOING BUSINESS IN THE ARAB WORLD 2012 regulatory environment that is on average FIGURE 1.1 Stronger legal institutions and property rights protections are associated with more ef�cient less business-friendly than those in OECD regulatory processes Average ranking on sets of Doing Business indicators high-income economies. This means costlier and more bureaucratic procedures to start a business, deal with construction Weaker Weaker legal institutions but Weaker legal institutions and less expensive regulatory processes more expensive regulatory processes permits, register property, pay taxes and trade across borders. Getting an electricity connection, a new dimension in this year’s Middle East Latin America Strength of legal institutions 137 Sub-Saharan & North Africa & Caribbean Africa ease of doing business ranking, costs more 93 on average (relative to income per capita) 117 95 in the Arab world than in any other part of East Asia South Asia & Pacific 87 the world except Sub-Saharan Africa. The average cost in the Arab world is around OECD high income 77 Eastern Europe 1,830% of income per capita, while the & Central Asia average in OECD high-income economies 30 is 93% of income per capita. But a less Stronger Stronger legal institutions and Stronger legal institutions but business-friendly regulatory environment less expensive regulatory processes more expensive regulatory processes is not just about complex formalities or red Simple and Complexity and cost Complex and tape. It also means weaker legal protec- inexpensive of regulatory processes expensive tions of minority shareholders and weaker collateral laws and institutions such as Note: Strength of legal institutions refers to the average ranking in getting credit, protecting investors, enforcing contracts and resolving insolvency. Complexity and cost of regulatory processes refers to the average ranking in starting courts, credit bureaus and collateral a business, dealing with construction permits, getting electricity, registering property, paying taxes and trading across registries. borders. The size of the bubble reflects the number of economies in each region and the number is the average ranking on the ease of doing business for the region. While there is much overlap between the Arab world and the Middle East and North Africa, the 2 regions include slightly different sets of economies. Globally, more efficient regulatory pro- Source: Doing Business database. cesses often go hand in hand with stronger legal institutions and property rights protec- tions. There is an association between the strength of legal institutions and property BOX 1.2 Key �ndings in the report rights protections in an economy as cap- Ė Worldwide, 125 economies implemented 245 reforms making it easier to do business in tured by several sets of Doing Business 2010/11, 13% more than in the previous year. Among Arab economies, 13 implemented re- forms making it easier to do business—20 such reforms in all. Half these reforms focused on indicators (getting credit, protecting inves- making it easier to start a business or improving credit information systems. tors, enforcing contracts and resolving Ė Opportunities for regulatory reform and greater transparency remain. Entrepreneurs across insolvency) and the complexity and cost of the Arab world continue to face often complex and costly regulatory processes to start and regulatory processes as captured by several run a business—and contend with weaker investor and property rights protections than their others (starting a business, dealing with counterparts in other regions. construction permits, getting electricity, Ė The regulatory environment varies across economies in the region. While Arab economies have an average ranking on the ease of doing business of 99 (among 183 economies globally), registering property, paying taxes and trad- there is a great range within the region—from Saudi Arabia (12) to Djibouti (170). ing across borders). OECD high-income Ė Morocco was the most active in implementing regulatory reforms in 2010/11. It launched a economies, by a large margin, have the fully operational one-stop shop for obtaining construction permits. It eased the administrative world’s most business-friendly environ- burden of paying taxes for �rms by enhancing electronic �ling and payment of the corporate income tax and value added tax. And it adopted a new law modifying the rules of procedure ment on both dimensions. At the other end governing commercial proceedings. of the spectrum, economies in Sub-Saharan Ė New data show the importance of access to regulatory information. Fee schedules, documen- Africa and South Asia are most likely to tation requirements and information relating to commercial cases and insolvency proceedings have both weaker legal institutions and are not readily accessible in some Arab economies. But the rise in e-government initiatives in more complex regulatory processes as the region and around the world provides an opportunity to increase access to information and transparency. measured by Doing Business. Ė A new measure shows that over the past 6 years 94% of 174 economies covered by Doing Business—and 94% of the 18 Arab economies in the sample—made their regulatory envi- The Arab world breaks away from the gen- ronment more business-friendly. These economies moved closer to the “frontier,� a synthetic eral trend. Regulatory processes on average measure based on the most business-friendly regulatory practices across 9 areas of business have improved over time, particularly in regulation—from starting a business to resolving insolvency. Among Arab economies, the areas such as business start-up. But legal Arab Republic of Egypt made the greatest progress in narrowing the distance to the frontier between 2005 and 2011, followed by Saudi Arabia. institutions related to protecting investors, enforcing contracts and resolving insol- vency are relatively weak compared with those in other regions (�gure 1.1). Today EXECUTIVE SUMMARY 3 economies in the region often combine year. These include the 20 reforms imple- from 4 to 11. And trading across borders has relatively weaker legal institutions with rel- mented by 13 Arab economies (�gure 1.2). become faster. The average time required atively more efficient regulatory processes. to export goods has fallen from 30 days in In recent years regulatory reforms in the 2005 to 21 today, while the average time to TRENDS IN BUSINESS Arab world have focused on simplifying import has fallen from 36 days to 25. REGULATION REFORM IN regulatory processes such as starting a busi- THE ARAB WORLD ness or trading across borders. In 2010/11, Yet economies in the Arab world have lagged 6 Arab economies made it easier to start a behind in implementing institutional reforms Worldwide, 125 economies implemented business (�gure 1.3). Since 2005 the number to improve insolvency regimes, judicial 245 reforms making it easier to do business of Arab economies where starting a business systems, collateral laws and credit informa- in 2010/11, 13% more than in the previous takes 20 days or less has more than doubled, tion systems (box 1.3). No Arab economy implemented reforms in registering property, enforcing contracts or resolving insolvency in FIGURE 1.2 Two-thirds of Arab economies reformed business regulation in 2010/11 2010/11, and only Morocco amended legisla- Share of economies with at least 1 Doing Business reform making it easier to do business (%) tion to strengthen shareholder protections. Eastern Europe Resolving a commercial dispute through the & Central Asia 88 courts in Arab economies takes 651 days on Sub-Saharan Africa 78 average—longer than in any other region OECD except Latin America and the Caribbean and high income 68 South Asia. Creditors in Arab economies can Arab world 65 expect to recover on average only 32.7 cents South Asia 63 on the dollar from insolvent �rms—a recov- ery rate that, along with that in Latin America Middle East & North Africa 61 and the Caribbean, ranks second lowest in East Asia 58 the world after Sub-Saharan Africa’s. & Pacific Latin America & Caribbean 53 In a positive trend, reforms to improve credit information systems have been high on the Source: Doing Business database. agenda of the region’s policy makers in recent years. Seventeen Arab economies have a public credit registry or private credit bureau. But coverage by these institutions, at only 15% of the region’s adult population, remains FIGURE 1.3 Reforms making it easier to start a business were most common in the Arab world in 2010/11 low—lower than in any other region except Number of Doing Business reforms making it easier to do business in the Arab world in 2010/11, by topic Sub-Saharan Africa (12%) and South Asia (10%). Eastern Europe and Central Asia, Starting a business 6 the region with the next highest ranking, has coverage of 40% of its adult population. Getting credit 5 Paying taxes 3 OPPORTUNITIES FOR GREATER Trading across borders ACCESS TO INFORMATION IN 2 BUSINESS REGULATION Dealing with 2 construction permits Institutions play a major role in private sector Protecting investors 1 development. Courts, registries, tax agencies and credit information bureaus are essential Getting electricity 1 to make markets work. How efficient and transparent they are matters greatly to busi- Note: Doing Business recorded no reforms making it easier to register property, enforce contracts or resolve insolvency in the Arab world in 2010/11. ness. To improve the efficiency of processes Source: Doing Business database. and institutions, governments around the world—regardless of national income level—are making greater use of technology. 4 DOING BUSINESS IN THE ARAB WORLD 2012 More than 100 of the 183 economies covered This year Doing Business researched how The �ndings are striking. In the majority by Doing Business use electronic systems for businesses can access information essential of economies in the Arab world, obtaining services ranging from business registration for complying with regulations and formali- such information requires a meeting with an to customs clearance to court �lings.5 This official. In all OECD high-income economies ties, such as documentation requirements saves time and money for business and gov- documentation requirements for trade are ernment alike. It also provides new opportu- for trade or fee schedules for business start- accessible online, at an agency or through nities to increase transparency as well as to up, construction permitting or electricity public notices (�gure 1.4). This is the case facilitate access to information and compli- connections. Because some economies lack in only about 30% of Arab economies. And ance with regulation. But not all economies fully developed information technology infra- documentation requirements for building take advantage of the opportunities for open- structure, the research also explored whether permits are available online or through pub- ness provided by the new technologies. And lic notices in only about 38% of economies economies used other means to make such at times �scal constraints and budgetary in the Arab world. priorities have prevented faster adoption of information easily accessible, such as post- the latest technologies to improve the quality ing fee schedules at the relevant agency or Globally, easier access to fee schedules and of public services. disseminating them through public notices. lower fees tend to go hand in hand. This trend also holds true in the Arab world. In Arab economies where fee schedules for company BOX 1.3 Who reformed business regulations in the Arab world in 2010/11? incorporation are easily accessible, starting a Regulatory reform efforts in the Arab world continue to focus on making regulatory pro- business costs 35% of income per capita on cesses more efficient—and less so on strengthening legal institutions. Regulatory changes average; where they are not, it costs 52% of aimed at making it easier to start a business or improving credit information systems account for half the 20 reforms making it easier to do business that Arab economies implemented in income per capita on average. 2010/11. Six Arab economies made it easier to start a business between June 2010 and May 2011. Beyond information that businesses need Oman introduced online company registration at its one-stop shop. Jordan and the Syrian to comply with regulation, institutions such Arab Republic signi�cantly reduced the paid-in minimum capital requirement. Qatar com- as courts provide information that helps bined commercial registration and registration with the Chamber of Commerce and Industry increase transparency in the marketplace. at its one-stop shop. Saudi Arabia brought together representatives from the Department of Efficient and fair courts are essential for Zakat and Income Tax and the General Organization of Social Insurance at the Uni�ed Center to register new companies with their agencies. And the United Arab Emirates merged the creating the trust needed for businesses to requirements to �le company documents with the Department for Economic Development, build new relationships and expand their to obtain a trade license and to register with the Dubai Chamber of Commerce and Industry. markets—and for investors to invest. But it Four Arab economies improved their credit information system. Algeria guaranteed by law is not only their role in efficient enforcement the right of borrowers to inspect their personal data. Oman launched the Bank Credit and that matters. Doing Business �nds that in Statistical Bureau System, which collects historical information on performing and nonper- forming loans for both �rms and individuals. Qatar’s credit bureau started to distribute histori- close to 75% of a sample of 151 economies— cal data and eliminated the minimum threshold for loans included in the database. And the and in 69% of the 13 Arab economies in this United Arab Emirates passed a new law allowing the establishment of a federal credit bureau group—courts are required by law to publi- under the supervision of the central bank. A �fth economy, the Comoros, strengthened the cize the initiation of insolvency proceedings. legal rights of borrowers and lenders by implementing amendments to the OHADA Uniform Act on Secured Transactions that, among other things, introduce the possibility of out-of-court enforcement.1 THE TOP 20 ECONOMIES ON THE Lebanon was the only Arab economy that made it easier to get electricity. It lowered the EASE OF DOING BUSINESS cost by reducing the application fees and security deposit for a new connection. Globally, the 20 economies with the most Morocco and Oman each implemented reforms in 3 areas covered by Doing Business— business-friendly regulation as reflected Morocco in dealing with construction permits, protecting investors and paying taxes and in their ranking on the ease of doing busi- Oman in starting a business, getting credit and paying taxes. Morocco was the economy that improved the most worldwide in the ease of doing business in 2010/11. ness are Singapore; Hong Kong SAR, No Arab economy implemented reforms in registering property, enforcing contracts or re- China; New Zealand; the United States; solving insolvency in 2010/11. And 5 Arab economies—Bahrain, the Arab Republic of Egypt, Denmark; Norway; the United Kingdom; the Kuwait, Sudan, and West Bank and Gaza—implemented no reforms as recorded by Doing Republic of Korea; Iceland; Ireland; Finland; Business. Iraq made it more difficult to start a business by increasing the cost to obtain a name Saudi Arabia; Canada; Sweden; Australia; reservation certi�cate and the cost for lawyers to draft articles of association. Georgia; Thailand; Malaysia; Germany; and 1. The Organization for the Harmonization of Business Law in Africa (OHADA) is a system of common Japan (table 1.1). An economy’s ranking on business laws and implementing institutions adopted by treaties among 16 West and Central African nations. It was created by 14 initial member economies on October 17, 1993, in Port Louis, Mauritius. the ease of doing business does not tell the EXECUTIVE SUMMARY 5 FIGURE 1.4 Access to documentation requirements for building permits and trading across borders remains dif�cult in the Arab world Share of economies where documentation requirements are easily accessible (%) Average time to import goods (days) 100 94 75 78 71 67 63 56 58 52 49 42 38 38 33 30 30 14 OECD South Asia East Asia Eastern Europe Latin America Sub-Saharan Middle East Arab Easily accessible Not easily high income & Pacific & Central Asia & Caribbean Africa & North Africa world accessible Arab economies by accessibility of QFor building permits QFor trade documentation requirements for trade Note: Documentation requirements are considered easily accessible if they can be obtained through the website of the relevant authority or another government agency or through public notices, without a need for an appointment with an of�cial. The data sample for building permits comprises 159 economies, including 16 in the Arab world. The sample for trade comprises 175 economies, including 20 in the Arab world. Relationships in the second panel are signi�cant at the 5% level after controlling for income per capita. Source: Doing Business database. whole story about its business environment. streamlined business registration and the For example, the Arab Republic of Egypt’s The underlying indicators do not account for documentation requirements for importing top 3 rankings (on starting a business, all factors important to doing business, such goods, and in 2008 it amended its company trading across borders and getting credit) as macroeconomic conditions, market size, law to address approval and disclosure re- average 54, while its lowest 3 (on dealing workforce skills and security. But they do quirements for related-party transactions. In with construction permits, paying taxes and capture some key aspects of the regulatory 2009 it launched a new container terminal enforcing contracts) average 149. and institutional environment that matter at the Jeddah Islamic Port. And in 2010 it for �rms. These 20 economies have imple- expedited the bankruptcy process by provid- For some economies this variance is due mented effective yet streamlined procedures ing for earlier access to amicable settlements in part to the rapid pace of reform in some for regulatory processes such as starting and set time limits for the process to encour- areas of business regulation. One such area a business and dealing with construction age creditors to participate. is business entry: more than 80% of the 183 permits as well as strong legal protections of economies covered by Doing Business (and property rights. They also periodically review DIFFERENCES IN PERFORMANCE 70% of Arab economies) have made it easier and update business regulations as part of ACROSS AREAS OF BUSINESS to start a business since 2003. In Egypt, for a broader competitiveness agenda and take REGULATION example, starting a business is reasonably advantage of new technologies through The economies making such continued ef- straightforward thanks to the implementa- e-government initiatives. forts, often over decades, tend to compare tion of an efficient one-stop shop. But deal- well with others across all 10 areas of busi- ing with construction permits takes about In Saudi Arabia business regulation reforms 7 months, and enforcing a contract through ness regulation included in this year’s ease in the areas covered by Doing Business have the courts takes almost 3 years on average. of doing business ranking—and to do so been a high priority for the government. over time, reflecting a more consistent and In the past 7 years Saudi Arabia made 20 Differences across areas of business regula- comprehensive approach to business regula- improvements in 7 of these areas. These tion provide an opportunity for policy makers tion. In many of the other economies, by reforms included adopting a real prop- interested in regulatory reform. Not surpris- contrast, the degree to which regulations and erty registration law in 2006, establishing institutions are business-friendly varies fairly ingly, different areas of business regulation a commercial credit bureau in 2007 and widely across different areas of regulation.6 interact. Some research suggests that busi- eliminating the paid-in minimum capital ness regulation reforms have greater impact requirement—which, at 1,057% of income This shows up in comparisons of an econ- if combined with effective regulation in other per capita, had been among the highest omy’s 3 highest rankings on Doing Business areas. For example, when India dismantled a in the region. In 2006 Saudi Arabia also topics with its 3 lowest rankings (�gure 1.5). strict licensing regime controlling business 6 DOING BUSINESS IN THE ARAB WORLD 2012 TABLE 1.1 Rankings on the ease of doing business DB2012 DB2012 DB2011 DB2012 DB2012 DB2012 DB2011 DB2012 DB2012 DB2012 DB2011 DB2012 AW rank rank ranka Economy reforms AW rank rank ranka Economy reforms AW rank rank ranka Economy reforms 1 1 Singapore 0 62 59 Poland 2 123 119 Uganda 1 2 2 Hong Kong SAR, China 2 63 60 Ghana 0 124 123 Swaziland 1 3 3 New Zealand 1 64 70 Czech Republic 2 125 127 Bosnia and Herzegovina 2 4 4 United States 0 65 64 Dominica 0 126 120 Brazil 1 5 5 Denmark 1 66 69 Azerbaijan 0 127 125 Tanzania 1 6 7 Norway 0 7 67 71 Kuwait 0 128 130 Honduras 2 7 6 United Kingdom 1 68 76 Trinidad and Tobago 0 129 126 Indonesia 1 8 15 Korea, Rep. 3 69 91 Belarus 3 130 131 Ecuador 0 9 13 Iceland 2 70 67 Kyrgyz Republic 0 13 131 128 West Bank and Gaza 0 10 8 Ireland 0 71 73 Turkey 2 132 139 India 1 11 14 Finland 1 72 65 Romania 2 133 133 Nigeria 0 1 12 10 Saudi Arabia 1 73 68 Grenada 0 14 134 136 Syrian Arab Republic 1 13 12 Canada 1 74 81 Solomon Islands 4 15 135 135 Sudan 0 14 9 Sweden 0 75 66 St. Vincent and the Grenadines 0 136 134 Philippines 1 15 11 Australia 1 76 75 Vanuatu 3 137 144 Madagascar 2 16 17 Georgia 4 77 72 Fiji 0 138 138 Cambodia 1 17 16 Thailand 1 78 74 Namibia 1 139 132 Mozambique 0 18 23 Malaysia 3 79 78 Maldives 0 140 137 Micronesia, Fed. Sts. 0 19 19 Germany 0 80 79 Croatia 1 141 150 Sierra Leone 4 20 20 Japan 0 81 99 Moldova 4 142 146 Bhutan 2 21 31 Latvia 4 82 77 Albania 1 143 142 Lesotho 1 22 34 Macedonia, FYR 4 83 86 Brunei Darussalam 1 144 140 Iran, Islamic Rep. 0 23 21 Mauritius 0 84 80 Zambia 0 145 141 Malawi 2 24 18 Estonia 0 85 82 Bahamas, The 0 146 148 Mali 2 25 24 Taiwan, China 2 86 89 Mongolia 1 147 152 Tajikistan 1 26 22 Switzerland 2 87 83 Italy 1 16 148 143 Algeria 1 27 25 Lithuania 2 88 85 Jamaica 0 149 145 Gambia, The 3 28 27 Belgium 2 89 98 Sri Lanka 2 150 151 Burkina Faso 3 29 26 France 1 90 107 Uruguay 2 151 155 Liberia 3 30 30 Portugal 2 91 87 China 0 152 149 Ukraine 4 31 29 Netherlands 0 92 88 Serbia 2 153 147 Bolivia 0 32 28 Austria 1 93 92 Belize 1 154 157 Senegal 4 2 33 35 United Arab Emirates 2 8 94 115 Morocco 3 155 161 Equatorial Guinea 1 34 32 Israel 2 95 84 St. Kitts and Nevis 1 156 160 Gabon 1 35 36 South Africa 3 9 96 95 Jordan 2 17 157 156 Comoros 1 3 36 38 Qatar 2 97 93 Guatemala 0 158 153 Suriname 0 37 37 Slovenia 3 98 90 Vietnam 1 18 159 162 Mauritania 1 4 38 33 Bahrain 0 10 99 94 Yemen, Rep. 1 160 154 Afghanistan 1 39 41 Chile 3 100 101 Greece 2 161 165 Cameroon 2 40 49 Cyprus 1 101 97 Papua New Guinea 0 162 158 Togo 2 41 39 Peru 3 102 100 Paraguay 2 163 174 São Tomé and Príncipe 4 42 47 Colombia 3 103 109 Seychelles 2 19 164 159 Iraq 0 43 42 Puerto Rico (U.S.) 2 11 104 103 Lebanon 1 165 163 Lao PDR 0 44 45 Spain 1 105 96 Pakistan 0 166 164 Uzbekistan 1 45 50 Rwanda 3 106 102 Marshall Islands 0 167 170 Côte d’Ivoire 3 5 46 40 Tunisia 0 107 110 Nepal 1 168 169 Timor-Leste 2 47 58 Kazakhstan 1 108 105 Dominican Republic 1 169 177 Burundi 4 48 43 Slovak Republic 1 109 106 Kenya 1 20 170 167 Djibouti 1 6 49 53 Oman 3 12 110 108 Egypt, Arab Rep. 0 171 168 Zimbabwe 0 50 44 Luxembourg 0 111 104 Ethiopia 0 172 171 Angola 2 51 46 Hungary 0 112 112 El Salvador 1 173 172 Niger 1 52 48 St. Lucia 0 113 114 Argentina 0 174 166 Haiti 0 53 54 Mexico 3 114 113 Guyana 1 175 173 Benin 2 54 52 Botswana 0 115 111 Kiribati 0 176 181 Guinea-Bissau 2 55 61 Armenia 5 116 116 Palau 0 177 175 Venezuela, RB 0 56 56 Montenegro 3 117 117 Kosovo 0 178 176 Congo, Dem. Rep. 3 57 51 Antigua and Barbuda 0 118 122 Nicaragua 3 179 179 Guinea 1 58 62 Tonga 3 119 129 Cape Verde 3 180 178 Eritrea 0 59 57 Bulgaria 2 120 124 Russian Federation 4 181 180 Congo, Rep. 1 60 55 Samoa 0 121 121 Costa Rica 2 182 183 Central African Republic 3 61 63 Panama 1 122 118 Bangladesh 0 183 182 Chad 2 Note: The rankings for all economies are benchmarked to June 2011 and reported in the country tables. This year’s rankings on the ease of doing business are the average of the economy’s rankings on the 10 topics included in this year’s aggregate ranking (see box 1.1). The number of reforms excludes those making it more dif�cult to do business. a. Last year’s rankings, shown in italics, are adjusted: they are based on the same 10 topics and reflect data corrections. Source: Doing Business database. EXECUTIVE SUMMARY 7 entry and production, the bene�ts were Some economies have gone particularly paid-in minimum capital requirement from greater in states that had more flexible labor far in closing the gap with the regulatory 1,000 Jordanian dinars to half a dinar (less regulations. These states saw real output systems of top-performing economies such than $1)—far below the Arab world average gains 17.8% larger than those in states as Singapore, New Zealand and the Northern of 107% of income per capita. Moreover, with less flexible labor markets.7 In Mexico European economies (�gure 1.7). In narrow- Jordan lowered the overall cost to start a researchers found that a municipal license ing the gap, these economies are moving business from 102% of income per capita in reform across states increased new �rm closer to the “frontier�—a synthetic measure 2004 to 14% today. This is less than a third based on the most efficient practice or registrations by 5% and employment by of the average in the Arab world, though still highest score observed for each indicator. 2.2%.8 The effect was greater in states with 3 times the average in OECD high-income For starting a business, for example, the bar less corruption and better governance.9 economies. is set by New Zealand on the time (1 day), Beyond these country-speci�c studies, Canada and New Zealand on the number of The Comoros, Sudan and Iraq have made no cross-country analysis found that a 10-day procedures (1), Denmark and Slovenia on the substantial progress toward the frontier. In cost (0). Georgia, Norway, Portugal, Sweden reduction in the time to start a business the past 6 years the Comoros implemented and the United Arab Emirates set the bar was associated with a 0.3 percentage point only 1 regulatory reform making it easier to on the number of procedures for register- increase in the investment rate and a 0.36% do business, and Sudan 3, while Iraq had ing property (1), France on the documents increase in the GDP growth rate in rela- no such reforms. Other economies, such as required to export (2), Singapore on the time tively poor and well-governed economies.10 Algeria, Djibouti, and West Bank and Gaza, to enforce contracts (150 days). The frontier Another study points to synergistic effects is thus a proxy for global good practice across implemented a number of business regula- between institutional reforms that reduce all indicators. tion reforms in recent years, but the reforms the costs of high-quality production and have had only a minor impact or have not yet trade reforms. In many developing econo- In the Arab world, Egypt, Saudi Arabia and taken effect. mies production of high-quality output is a Morocco are among those that made the precondition for �rms to become exporters. most progress in closing the gap to the fron- Economies making the greatest progress Institutional de�ciencies that raise the costs tier over the past 6 years. These economies toward the frontier have been able to do so of high-quality production therefore limit the started off with relatively high levels of bu- thanks to broad regulatory reform programs reaucracy and weak protections of property covering multiple areas of regulation and positive effect that trade facilitation can have rights as measured by Doing Business. Since embedded in a long-term competitiveness on income.11 2005, however, Egypt has implemented strategy. Morocco, for example, has imple- 23 reforms making it easier to do busi- mented policy changes across 7 areas of CLOSING THE GAP—A GLOBAL ness, Saudi Arabia 18 and Morocco 14. Yet TREND TOWARD BUSINESS- regulation measured by Doing Business in the economies such as Egypt and Morocco still FRIENDLY REGULATION years since 2005—more areas than almost have some way to go compared with most any other Arab economy. Policy makers often keep an eye on relative other economies, particularly in their legal rankings that compare economies at a point institutions, many of which remain underde- More economies are taking this broad ap- in time. But they increasingly recognize the veloped. By contrast, Saudi Arabia not only proach. In 2010/11, 35 economies globally importance of improvements within econo- focused on easing regulatory burdens over (including Morocco and Oman in the Arab mies over time. And results from recent years the past 4 years; it also passed legislation to world) implemented reforms making it easier are encouraging. In the past 6 years policy strengthen the protections of minority share- to do business in 3 or more areas measured makers in 163 economies globally (including holders, speed up the bankruptcy process by Doing Business—12 of them in 4 or more 17 of the 18 Arab economies in the sample) and improve access to credit. areas. Four years before, only 10 reformed in made domestic regulations more business- Jordan is another Arab economy that has 3 or more areas. friendly (�gure 1.6). They lowered barriers to made substantial progress toward the entry, operation and exit and strengthened frontier. Since 2005 it has implemented 14 That more and more developing economies protections of property and investor rights. regulatory reforms in areas covered by Doing are serious about business regulation reform Only a few economies moved in the opposite Business, almost a third of them focused on is encouraging. Such broad thinking is good direction. Among the Arab economies, Iraq making it easier and less expensive to start a news for entrepreneurs and governments is the only one that did so. business. In the past year Jordan reduced its alike. 8 Percentage points Average ranking across topics 100 90 80 70 60 50 40 30 20 10 0 0 20 40 60 80 100 120 140 160 180 SINGAPORE SINGAPORE NEW ZEALAND HONG KONG SAR, CHINA IRELAND NEW ZEALAND FIGURE 1.6 FIGURE 1.5 UNITED STATES DENMARK HONG KONG SAR, CHINA UNITED STATES permits UNITED KINGDOM NORWAY CANADA Average of Average of Average of UNITED KINGDOM all rankings paying taxes Getting credit SAUDI ARABIA NORWAY KOREA, REP. top 3 rankings: DENMARK FINLAND Enforcing contracts Registering property Resolving insolvency bottom 3 rankings: Starting a business & FINLAND ICELAND AUSTRALIA SWEDEN Dealing with construction SWEDEN AUSTRALIA Source: Doing Business database. Source: Doing Business database. ICELAND IRELAND JAPAN SAUDI ARABIA KOREA, REP. CANADA GERMANY GEORGIA AUSTRIA THAILAND NETHERLANDS MALAYSIA BELGIUM MAURITIUS ESTONIA ESTONIA SWITZERLAND GERMANY DOING BUSINESS IN THE ARAB WORLD 2012 MALAYSIA SWITZERLAND LITHUANIA JAPAN SOUTH AFRICA LATVIA Distance to frontier, 2005 and 2011 ISRAEL TAIWAN, CHINA SPAIN MACEDONIA, FYR LATVIA LITHUANIA PUERTO RICO (U.S.) PORTUGAL TAIWAN, CHINA FRANCE SLOVAK REPUBLIC NETHERLANDS THAILAND BELGIUM PORTUGAL AUSTRIA ST. LUCIA UNITED ARAB EMIRATES CHILE SLOVENIA FIJI CHILE TONGA BAHRAIN ANTIGUA AND BARBUDA QATAR MAURITIUS TUNISIA ITALY RWANDA NAMIBIA SPAIN DOMINICA CYPRUS Within-economy variation in rankings across Doing Business topics FRANCE SOUTH AFRICA HUNGARY ISRAEL MEXICO OMAN BOTSWANA PERU BELIZE KAZAKHSTAN GRENADA LUXEMBOURG PANAMA HUNGARY BULGARIA SAMOA JAMAICA TONGA OMAN COLOMBIA MONGOLIA PUERTO RICO (U.S.) ROMANIA SLOVAK REPUBLIC PERU In the past 6 years 163 economies moved closer to the frontier in regulatory practice ST. LUCIA ST. VINCENT AND THE GRENADINES BOTSWANA SAUDI ARABIA ANTIGUA AND BARBUDA UNITED ARAB EMIRATES MEXICO SLOVENIA MONTENEGRO KUWAIT BULGARIA TUNISIA An economy’s regulatory environment may be business-friendly in some areas, less so in others ARMENIA SAMOA PANAMA VANUATU ST. VINCENT AND THE GRENADINES TURKEY DOMINICA ARMENIA GHANA POLAND GRENADA CZECH REPUBLIC TURKEY ST. KITTS AND NEVIS BELARUS TRINIDAD AND TOBAGO SOLOMON ISLANDS PAKISTAN AZERBAIJAN MALDIVES POLAND MACEDONIA, FYR CROATIA KENYA KUWAIT KIRIBATI KYRGYZ REPUBLIC MOLDOVA CZECH REPUBLIC GUYANA TRINIDAD AND TOBAGO SEYCHELLES FIJI GHANA BRUNEI DARUSSALAM NEPAL VANUATU VIETNAM ROMANIA COLOMBIA NAMIBIA ef�cient regulatory environment (frontier practice). The data refer to the 174 economies included in Doing Business 2006 (2005). Additional economies were added in subsequent years. SRI LANKA MALDIVES PAPUA NEW GUINEA MONGOLIA LEBANON BAHAMAS, THE ZAMBIA JAMAICA bars show the distance between the average of the highest 3 topic rankings and the average of the lowest 3 for each of 183 economies across the 10 topics included in this year’s aggregate ranking. Note: Figure illustrates the variability in the degree to which an economy’s regulatory environment is business-friendly compared with other economies across different areas of regulation. The vertical GREECE YEMEN, REP. SOLOMON ISLANDS ZAMBIA EL SALVADOR ST. KITTS AND NEVIS SWAZILAND JORDAN of the indicators in 9 Doing Business indicator sets (excluding the employing workers and getting electricity indicators) since 2005. The vertical axis represents the distance to the frontier, and 0 the most PALAU MARSHALL ISLANDS Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based on the most ef�cient practice or highest score achieved by any economy on each SERBIA ITALY KAZAKHSTAN MOLDOVA JORDAN CHINA MARSHALL ISLANDS MOROCCO MOROCCO SEYCHELLES ALBANIA SERBIA BANGLADESH BELIZE TANZANIA ALBANIA DOMINICAN REPUBLIC SRI LANKA ARGENTINA VIETNAM PARAGUAY PARAGUAY CROATIA GREECE HONDURAS GUATEMALA NICARAGUA PAPUA NEW GUINEA ECUADOR URUGUAY BOSNIA AND HERZEGOVINA LEBANON GUATEMALA ETHIOPIA ETHIOPIA DOMINICAN REPUBLIC IRAN, ISLAMIC REP. NEPAL URUGUAY GUYANA WEST BANK AND GAZA EGYPT, ARAB REP. PHILIPPINES CAPE VERDE AZERBAIJAN KIRIBATI CAPE VERDE PAKISTAN GEORGIA PALAU UGANDA EL SALVADOR COSTA RICA KENYA SUDAN RUSSIAN FEDERATION LESOTHO ARGENTINA GABON COSTA RICA KYRGYZ REPUBLIC KOSOVO ALGERIA NICARAGUA INDONESIA TANZANIA RUSSIAN FEDERATION WEST BANK AND GAZA BOLIVIA SWAZILAND GAMBIA, THE BRAZIL MALAWI ECUADOR BRAZIL UGANDA YEMEN, REP. BANGLADESH CHINA INDONESIA BHUTAN MICRONESIA, FED. STS. NIGERIA PHILIPPINES MICRONESIA, FED. STS. HONDURAS ZIMBABWE BOSNIA AND HERZEGOVINA MADAGASCAR BHUTAN IRAQ NIGERIA MOZAMBIQUE INDIA BELARUS CAMBODIA UKRAINE MADAGASCAR CAMBODIA SUDAN COMOROS TAJIKISTAN INDIA SYRIAN ARAB REPUBLIC SURINAME MALAWI EGYPT, ARAB REP. BURKINA FASO SYRIAN ARAB REPUBLIC MOZAMBIQUE VENEZUELA, RB IRAN, ISLAMIC REP. SIERRA LEONE MALI DJIBOUTI GAMBIA, THE CAMEROON SIERRA LEONE EQUATORIAL GUINEA EQUATORIAL GUINEA MAURITANIA MAURITANIA RWANDA LESOTHO BENIN LIBERIA UZBEKISTAN COMOROS GUINEA UKRAINE LAO PDR TIMOR-LESTE SENEGAL IRAQ SÃO TOMÉ AND PR�NCIPE SURINAME TOGO BOLIVIA HAITI ALGERIA CÔTE D’IVOIRE GABON CONGO, REP. CAMEROON MALI AFGHANISTAN ANGOLA LAO PDR BURUNDI SENEGAL TAJIKISTAN UZBEKISTAN GUINEA-BISSAU SÃO TOMÉ AND PR�NCIPE AFGHANISTAN TOGO NIGER CÔTE D’IVOIRE BURKINA FASO 2005 HAITI CENTRAL AFRICAN REPUBLIC ZIMBABWE CONGO, DEM. REP. ANGOLA TIMOR-LESTE DJIBOUTI ERITREA NIGER 2011 CHAD BURUNDI BENIN ERITREA VENEZUELA, RB GUINEA-BISSAU CONGO, DEM. REP. CONGO, REP. GUINEA CHAD CENTRAL AFRICAN REPUBLIC EXECUTIVE SUMMARY 9 10 DOING BUSINESS IN THE ARAB WORLD 2012 FIGURE 1.7 Who advanced the most in closing the gap to the frontier? Progress in narrowing distance to frontier, 2005–11 30 25 20 15 Percentage points 10 5 0 -5 -10 KOREA, REP. CONGO, DEM. REP. GEORGIA RWANDA BELARUS BURKINA FASO MACEDONIA, FYR EGYPT, ARAB REP. COLOMBIA KYRGYZ REPUBLIC SAUDI ARABIA MALI CHINA SIERRA LEONE AZERBAIJAN GUINEA-BISSAU SENEGAL CROATIA TAJIKISTAN YEMEN, REP. KAZAKHSTAN MADAGASCAR ANGOLA INDIA RUSSIAN FEDERATION MOROCCO NIGER GUATEMALA GHANA CÔTE D’IVOIRE SYRIAN ARAB REPUBLIC PERU MOZAMBIQUE DOMINICAN REPUBLIC BURUNDI MEXICO FRANCE EQUATORIAL GUINEA NIGERIA MAURITIUS CZECH REPUBLIC SOLOMON ISLANDS TIMOR-LESTE ALBANIA CAMBODIA ARMENIA SLOVENIA INDONESIA JORDAN LATVIA CENTRAL AFRICAN REPUBLIC SÃO TOMÉ AND PR�NCIPE LAO PDR MAURITANIA THAILAND SERBIA TOGO PORTUGAL CAMEROON URUGUAY TUNISIA UKRAINE BENIN AFGHANISTAN CAPE VERDE BOSNIA AND HERZEGOVINA VANUATU ZAMBIA ETHIOPIA PARAGUAY BHUTAN UNITED ARAB EMIRATES HONDURAS MALAYSIA MOLDOVA UZBEKISTAN POLAND NICARAGUA UGANDA BULGARIA MALAWI HONG KONG SAR, CHINA VIETNAM ROMANIA MALDIVES TAIWAN, CHINA BANGLADESH LEBANON CHAD Note: Figure shows the absolute difference for each economy between its distance to frontier in 2005 and that in 2011. Source: Doing Business database. TABLE 1.2 Economies that improved the most across 3 or more areas measured by Doing Business in 2010/11 Ease of doing business rank Reforms making it easier to do business Dealing with Trading Starting a construction Getting Registering Getting Protecting Paying across Enforcing Resolving DB2012 DB2011 Improvement business permits electricity property credit investors taxes borders contracts insolvency 1 Morocco 94 115 -21 — — — 2 Moldova 81 99 -18 — — — — 3 Macedonia, 22 34 -12 — — — — FYR 4 São Tomé 163 174 -11 — — — — and Príncipe 5 Latvia 21 31 -10 — — — — Cape Verde 119 129 -10 — — — 6 Sierra Leone 141 150 -9 — — — — 7 Burundi 169 177 -8 — — — — 8 Solomon 74 81 -7 — — — — Islands Korea, Rep. 8 15 -7 — — — 9 Armenia 55 61 -6 — — — — — 10 Colombia 42 47 -5 — — — Note: Economies are ranked on the number of their net reforms and on how much they improved in the ease of doing business ranking. First, Doing Business selects the economies that implemented reforms making it easier to do business in 3 or more of the 10 topics included in this year’s aggregate ranking (see box 1.1). Regulatory reforms making it more dif�cult to do business are subtracted from the number of those making it easier to do business. Second, Doing Business ranks these economies on the increase in their ranking on the ease of doing business from the previous year using comparable rankings. The larger the improvement, the higher the ranking as the most improved. Source: Doing Business database. EXECUTIVE SUMMARY 11 2005 2011 IRAN, ISLAMIC REP. MICRONESIA, FED. STS. CONGO, REP. DENMARK BOTSWANA COSTA RICA OMAN GREECE LESOTHO TURKEY EL SALVADOR HUNGARY TANZANIA ECUADOR KENYA SOUTH AFRICA CHILE ALGERIA SAMOA DJIBOUTI SLOVAK REPUBLIC MARSHALL ISLANDS SWAZILAND COMOROS HAITI GUINEA JAMAICA SWEDEN SPAIN SUDAN ARGENTINA ERITREA NEPAL GABON UNITED KINGDOM KUWAIT PAPUA NEW GUINEA WEST BANK AND GAZA NETHERLANDS ICELAND BELGIUM SEYCHELLES LITHUANIA FINLAND PAKISTAN SRI LANKA ISRAEL GAMBIA, THE TONGA BOLIVIA GUYANA GRENADA SINGAPORE MONGOLIA BELIZE CANADA KIRIBATI TRINIDAD AND TOBAGO PANAMA PHILIPPINES AUSTRALIA ST. VINCENT AND THE GRENADINES JAPAN UNITED STATES DOMINICA BRAZIL PUERTO RICO (U.S.) NEW ZEALAND ST. LUCIA ESTONIA SURINAME PALAU ANTIGUA AND BARBUDA AUSTRIA NAMIBIA IRELAND SWITZERLAND NORWAY ST. KITTS AND NEVIS GERMANY FIJI ITALY IRAQ ZIMBABWE VENEZUELA, RB Among the 12 economies improving the most compel any evidence that is relevant to the common agenda of reform. Among the proj- in the ease of doing business in 2010/11, subject matter of the claim. In addition, the ects launched through the CNEA in 2010 and two-thirds are low- or lower-middle-income law allows parties to a commercial trial to 2011, many have been completed and several economies. All implemented regulatory directly question the opposing parties and are at an advanced stage of implementation. reforms making it easier to do business in 3 witnesses. As a result of these reforms, The CNEA’s success is due in large part to ef- or more of the 10 areas included in this year’s Morocco moved up 21 places in the ease of fective interagency coordination. Morocco’s aggregate ranking (table 1.2). doing business ranking. business regulation reforms before 2010/11 include, most recently, amendments to Morocco was the economy that improved Such reforms come as part of a broader the company law abolishing the paid-in the most in 2010/11. In the past year it government effort to improve Morocco’s minimum capital requirement for limited launched a fully operational one-stop shop business environment. In 2008 the govern- liability companies. Morocco also plans to for obtaining construction permits. It eased ment established a public-private mecha- establish commercial courts and to simplify the administrative burden of paying taxes for nism for coordinating business environment and standardize the most commonly used �rms by enhancing electronic �ling and pay- reforms, which in turn led to the establish- administrative forms for businesses. ment of the corporate income tax and value ment of the National Committee for the added tax. And in February 2011 it adopted Business Environment (Comité National de a new law modifying the rules of procedure l’Environnement des Affaires, or CNEA), a governing commercial proceedings. The law platform for public-private dialogue that pe- allows parties to a trial to ask the judge to riodically gathers key stakeholders around a 12 DOING BUSINESS IN THE ARAB WORLD 2012 NOTES 5. Public procurement, while not covered 1. World Bank 2009b. by any of the Doing Business indicators, is another area in which a growing number of 2. According to World Bank Group governments are using electronic platforms. Entrepreneurship Snapshots, available at The aim is to increase transparency in the http://econ.worldbank.org/research/ relationships between public officials and entrepreneurship. Firm entry density is suppliers. de�ned as the number of newly registered limited liability �rms per 1,000 working-age 6. This pattern of relatively large variation people (ages 15–64). across indicator sets is not speci�c to Doing Business. A similar pattern can be discerned 3. Gatti and others 2011; World Bank Middle in, for example, the World Economic East and North Africa Region 2011. Forum’s Global Competitiveness Index, a 4. Research shows that business regulations of broader measure capturing such factors as the type measured by Doing Business affect macroeconomic stability, the soundness of the creation of new �rms in the local market, public institutions, aspects of human capital the productivity levels of those �rms and and the sophistication of the business the creation of employment. Cross-country community. The United States and Japan, studies show that greater ease of entry is as leaders in technology, score extremely associated with a higher �rm entry rate well on measures of innovation. But with and greater business density on average. large budget de�cits and high levels of Encouraging evidence from economies as public debt, they do less well on measures of diverse as Colombia, India, Mexico and macroeconomic stability. Portugal also supports these �ndings. For 7. Aghion and others 2008. more on this and other relevant research, see the chapter “About Doing Business: 8. Bruhn 2011. measuring for impact.� 9. Kaplan, Piedra and Seira 2007. 10. Eifert 2009. 11. Rauch 2010. 13 About Doing Business: measuring for impact A vibrant private sector—with �rms making makers intending to change the experience de�ne and underpin the business environ- investments, creating jobs and improving and behavior of businesses will often start ment. Whether the entrepreneur decides to productivity—promotes growth and expands by changing rules and regulations that affect move forward with the idea, to abandon it or opportunities for poor people. To foster a them. Doing Business goes beyond identifying to take it elsewhere might depend in large vibrant private sector, governments around that a problem exists and points to speci�c part on how simple it is to comply with the the world have implemented wide-ranging regulations or regulatory procedures that requirements for opening a new business reforms, including price liberalization and may lend themselves to reform (table 2.1). or getting a construction permit and how macroeconomic stabilization programs. But And its quantitative measures of business efficient the mechanisms are for resolving governments committed to the economic regulation enable research on how speci�c commercial disputes or dealing with insol- health of their country and opportunities regulations affect �rm behavior and eco- vency. Doing Business provides quantitative for its citizens focus on more than macro- nomic outcomes. measures of regulations for starting a busi- economic conditions. They also pay atten- ness, dealing with construction permits, tion to the quality of laws, regulations and The �rst Doing Business report, published getting electricity, registering property, institutional arrangements that shape daily in 2003, covered 5 indicator sets and 133 getting credit, protecting investors, paying economic activity. economies. This year’s report covers 11 in- taxes, trading across borders, enforcing dicator sets and 183 economies. Ten topics contracts and resolving insolvency—as they Until 10 years ago, however, there were no are included in the aggregate ranking on the apply to domestic small and medium-size globally available indicator sets for monitor- ease of doing business and other summary enterprises.3 It also looks at regulations on ing such microeconomic factors and analyz- measures.1 The project has bene�ted from employing workers. ing their relevance. The �rst efforts to address feedback from governments, academics, this gap, in the 1980s, drew on perceptions practitioners and reviewers.2 The initial goal A fundamental premise of Doing Business data from expert or business surveys that remains: to provide an objective basis for is that economic activity requires good capture often one-time experiences of busi- understanding and improving the regulatory rules. These include rules that establish and nesses. Such surveys can be useful gauges environment for business. clarify property rights and reduce the cost of economic and policy conditions. But few of resolving disputes, rules that increase the perception surveys provide indicators with WHAT DOING BUSINESS COVERS predictability of economic interactions and a global coverage that are updated annually. An entrepreneur’s willingness to try a new rules that provide contractual partners with The Doing Business project takes a different idea may be influenced by many factors, in- core protections against abuse. The objec- approach from perception surveys. It looks cluding perceptions of how easy (or difficult) tive: regulations designed to be simple and at domestic, primarily small and medium- it will be to deal with the array of rules that efficient in implementation and accessible size companies and measures the regula- tions applying to them through their life TABLE 2.1 Doing Business methodology allows an objective but limited global comparison Advantages Limitations cycle. Based on standardized case studies, it Transparent, based on factual information about Limited in scope: focuses on 11 areas of regulation affecting presents quantitative indicators on business laws and regulations (with an element of judgment local businesses; does not measure all aspects of business regulation that can be compared across 183 on time estimates) environment or all areas of regulation economies and over time. This approach Comparison and benchmarking valid thanks to Based on standardized case: transactions described in case complements the perception surveys in standard assumptions scenario refer to speci�c set of issues and type of company exploring the major constraints for busi- Inexpensive and easily replicable Focuses on formal sector nesses, as experienced by the businesses Actionable: data highlight extent of speci�c Only reforms related to indicators can be tracked obstacles, identify source, point to what might be themselves and as set out in the regulations changed that apply to them. Multiple interactions with local respondents to Assumes that business has full information on what is re- clarify potential misinterpretation quired and does not waste time when completing procedures Rules and regulations are under the direct Nearly complete coverage of world’s economies Part of data obtained refer to an economy’s largest business control of policy makers—and policy city only 14 DOING BUSINESS IN THE ARAB WORLD 2012 to all who need to use them. Accordingly, WHAT DOING BUSINESS DOES covers 11 areas of a company’s life cycle, some Doing Business indicators give a higher NOT COVER through 11 speci�c sets of indicators. score for more regulation, such as stricter Just as important as knowing what Doing These indicator sets do not cover all as- disclosure requirements in related-party Business does is to know what it does not pects of regulation in the area of focus. transactions. Some give a higher score for do—to understand what limitations must be For example, the indicators on starting a a simpli�ed way of implementing existing kept in mind in interpreting the data. business or protecting investors do not regulation, such as completing business cover all aspects of commercial legisla- start-up formalities in a one-stop shop. Limited in scope tion. The employing workers indicators Doing Business focuses on 11 topics, with the do not cover all areas of labor regulation. The Doing Business project encompasses 2 The current set of indicators does not, for speci�c aim of measuring the regulation types of data. The �rst come from readings example, include measures of regulations relevant to the life cycle of a domestic �rm of laws and regulations by both the local addressing safety at work or the right of (table 2.2). Accordingly: expert respondents and Doing Business. The collective bargaining. second are time-and-motion indicators that Ė Doing Business does not measure all as- Ė Doing Business also does not attempt measure the efficiency in achieving a regula- pects of the business environment that to measure all costs and bene�ts of a tory goal (such as granting the legal identity matter to �rms or investors—or all factors particular law or regulation to society as of a business). Within the time-and-motion that affect competitiveness. It does not, a whole. The paying taxes indicators, for indicators, cost estimates are recorded from for example, measure security, corruption, example, measure the total tax rate, which official fee schedules where applicable. A market size, macroeconomic stability, the is a cost to business. The indicators do not regulatory process such as starting a busi- state of the �nancial system, the labor measure, nor are they intended to mea- ness or registering property is broken down skills of the population or all aspects of sure, the social and economic programs into clearly de�ned steps and procedures. the quality of infrastructure. Nor does it funded through tax revenues. Measuring The time estimates for each procedure are focus on regulations speci�c to foreign business laws and regulations provides based on the informed judgment of expert investment. one input into the debate on the regula- respondents who routinely administer or Ė While Doing Business focuses on the qual- tory burden associated with achieving advise on the relevant regulations.4 Here, ity of the regulatory framework, it is not regulatory objectives. Those objectives Doing Business builds on Hernando de Soto’s all-inclusive; it does not cover all regula- can differ across economies. pioneering work in applying the time-and- tions in any economy. As economies motion approach �rst used by Frederick and technology advance, more areas of Based on standardized case Taylor to revolutionize the production of the economic activity are being regulated. For scenarios Model T Ford. De Soto used the approach in example, the European Union’s body of Doing Business indicators are built on the the 1980s to show the obstacles to setting up laws (acquis) has now grown to no fewer basis of standardized case scenarios with a garment factory on the outskirts of Lima.5 than 14,500 rule sets. Doing Business speci�c assumptions, such as the business being located in the largest business city TABLE 2.2 Doing Business—benchmarking 11 areas of business regulation of the economy. Economic indicators com- Start-up Expansion Operations Insolvency monly make limiting assumptions of this Ė Starting a business Ė Registering property Ė Dealing with Ė Resolving insolvency kind. Inflation statistics, for example, are Minimum capital Procedures, time and construction permits Time, cost and recovery often based on prices of a set of consumer requirement cost Procedures, time and rate Procedures, time and cost goods in a few urban areas. cost Ė Getting credit Credit information Ė Getting electricity Such assumptions allow global coverage systems Procedures, time and and enhance comparability. But they come Movable collateral cost laws at the expense of generality. Doing Business Ė Paying taxes recognizes the limitations of including data Ė Protecting investors Payments, time and on only the largest business city. Business Disclosure and liability total tax rate regulation and its enforcement, particularly in related-party trans- actions Ė Trading across in federal states and large economies, may borders differ across the country. Recognizing gov- Ė Enforcing contracts Documents, time and cost ernments’ interest in such variation, Doing Procedures, time and cost to resolve a com- Business has complemented its global indica- mercial dispute Ė Employing workers tors with subnational studies in a range of economies (box 2.1). This year Doing Business also conducted a pilot study on the second PROPERTY RIGHTS largest city in 3 large economies to assess ADMINISTRATIVE BURDEN RECOVERY RATE ENTRY ACCESS TO CREDIT within-country variations. FLEXIBILITY IN HIRING REALLOCATION OF ASSETS INVESTOR PROTECTIONS ABOUT DOING BUSINESS: MEASURING FOR IMPACT 15 In areas where regulation is complex and Where regulation is particularly onerous, our health. But it does measure something highly differentiated, the standardized case levels of informality are higher. Informality important for our health. And it puts us on used to construct the Doing Business indica- comes at a cost: �rms in the informal sec- watch to change behaviors in ways that will tor needs to be carefully de�ned. Where tor typically grow more slowly, have poorer improve not only our cholesterol rating but relevant, the standardized case assumes a access to credit and employ fewer workers— also our overall health. limited liability company or its legal equiva- and their workers remain outside the protec- One way to test whether Doing Business lent. This choice is in part empirical: private, tions of labor law.6 All this may be even more serves as a proxy for the broader business limited liability companies are the most so for female-owned businesses, according environment and for competitiveness is prevalent business form in many economies to country-speci�c research.7 Firms in the to look at correlations between the Doing around the world. The choice also reflects informal sector are also less likely to pay Business rankings and other major economic one focus of Doing Business: expanding op- taxes. Doing Business measures one set of benchmarks. Closest to Doing Business in portunities for entrepreneurship. Investors factors that help explain the occurrence of what it measures is the set of indicators on are encouraged to venture into business informality and give policy makers insights product market regulation compiled by the when potential losses are limited to their into potential areas of regulatory reform. Organisation for Economic Co-operation and capital participation. Gaining a fuller understanding of the broader Development (OECD). These indicators are business environment, and a broader per- designed to help assess the extent to which Focused on the formal sector spective on policy challenges, requires com- the regulatory environment promotes or in- In constructing the indicators, Doing Business bining insights from Doing Business with data hibits competition. They include measures of assumes that entrepreneurs are knowledge- from other sources, such as the World Bank the extent of price controls, the licensing and able about all regulations in place and comply Enterprise Surveys.8 permit system, the degree of simpli�cation with them. In practice, entrepreneurs may of rules and procedures, the administrative spend considerable time �nding out where WHY THIS FOCUS  burdens and legal and regulatory barriers, to go and what documents to submit. Or Doing Business functions as a kind of cho- the prevalence of discriminatory procedures they may avoid legally required procedures lesterol test for the regulatory environment and the degree of government control over altogether—by not registering for social for domestic businesses. A cholesterol test business enterprises.9 The rankings on these security, for example. does not tell us everything about the state of indicators—for the 39 countries that are BOX 2.1 Comparing regulation within economies: subnational Doing Business indicators and a multicity pilot study Subnational Doing Business studies are conducted at the request of a government and capture differences in business regulation across cities within the same economy or region. They build local capacity by involving government partners and local think tanks. Since 2005 subnational Doing Business reports have compared business regulation in states and cities within such economies as Brazil, China, Colombia, Egypt, India, Indonesia, Kenya, Mexico, Morocco, Nigeria, Pakistan and the Philippines.1 Subnational studies increasingly are being periodically updated to measure progress over time or to expand geographic coverage to additional cities. This year that is the case for the subnational studies in the Philippines; the regional report in Southeast Europe; the ongoing studies in Italy, Kenya and the United Arab Emirates; and the projects implemented jointly with local think tanks in Indonesia, Mexico and the Russian Federation. In 2011 Doing Business published subnational indicators for the Philippines and a regional report for 7 economies in Southeast Europe (Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Moldova, Montenegro and Serbia) that covers 22 cities. It also published a city pro�le for Juba, in the Republic of South Sudan. To further explore variations in business regulation within economies, Doing Business this year collected data on all 10 indicator sets included in the ease of doing business ranking in an additional city in 3 large economies: in Rio de Janeiro in Brazil (in addition to São Paulo), Beijing in China (in addi- tion to Shanghai) and St. Petersburg in the Russian Federation (in addition to Moscow). Subnational studies usually cover only a subset of indicators. The results show no variation between cities within each economy in areas governed by laws or regulations such as the civil procedure code, list- ing rules for companies and incorporation rules. For rules governing secured transactions, for example, entrepreneurs in Brazil all refer to the Judicial Recovery and Bankruptcy Act of 2005, those in China to the Law on Regulation of and Supervision over the Banking Industry of 2006 and those in Russia to the Law on Insolvency of 2002. But the efficiency of regulatory processes—such as starting a business or dealing with construction permits—and that of institutions do differ across cities, because of differences either in local regulations or in the capacity of institutions to respond to business demand. In Russia, dealing with construction permits is more complex in Moscow than in St. Petersburg. In Brazil, starting a business, dealing with construction permits and getting electricity take less time in Rio de Janeiro than in the larger São Paulo. But property registration is slightly more efficient in São Paulo than in Rio de Janeiro. This is thanks to São Paulo’s digitized cadastre. In all 3 economies the number of taxes and contributions varies between cities. In China businesses in both cities have to comply with 3 state- administered taxes (value added tax, corporate tax and business tax). But while companies in Beijing need to comply with 6 locally administered taxes, those in Shanghai must comply with 7. Distance to the port plays a role in the time to import and export. The cities housing a main port—Rio de Janeiro, Shanghai and St. Petersburg—have faster and cheaper inland transport than those where entrepreneurs need to hire someone to go to another city to ship or receive their cargo—São Paulo (to Santos), Beijing (to Tianjin) and Moscow (to St. Petersburg). 1. Subnational reports are available on the Doing Business website at http://www.doingbusiness.org/reports/subnational-reports. 16 DOING BUSINESS IN THE ARAB WORLD 2012 covered, several of them large emerging FIGURE 2.1 A strong correlation between Doing Business rankings and OECD rankings on product markets—are highly correlated with those on market regulation the ease of doing business (the correlation Ranking on OECD product market regulation indicators here is 0.72; �gure 2.1). 40 35 Similarly, there is a high correlation (0.82) 30 between the rankings on the ease of doing 25 business and those on the World Economic 20 15 Forum’s Global Competitiveness Index, a 10 much broader measure capturing such fac- 5 tors as macroeconomic stability, aspects of 0 0 20 40 60 80 100 120 140 human capital, the soundness of public insti- Ranking on the ease of doing business tutions and the sophistication of the business community (�gure 2.2).10 Economies that do Note: Correlation is signi�cant at the 5% level when controlling for income per capita. Source: Doing Business database; OECD data. well on the Doing Business indicators tend to do well on the OECD market regulation indicators and the Global Competitiveness FIGURE 2.2 A similarly strong correlation between Doing Business rankings and World Economic Forum rankings on global competitiveness Index and vice versa. Ranking on Global Competitiveness Index A bigger question is whether the issues on 140 120 which Doing Business focuses matter for de- 100 velopment and poverty reduction. The World 80 Bank study Voices of the Poor asked 60,000 60 poor people around the world how they 40 thought they might escape poverty.11 The 20 0 answers were unequivocal: women and men 0 20 40 60 80 100 120 140 160 180 alike pin their hopes above all on income Ranking on the ease of doing business from their own business or wages earned in employment. Enabling growth—and ensur- Note: Correlation is signi�cant at the 5% level when controlling for income per capita. Source: Doing Business database; WEF 2010. ing that poor people can participate in its bene�ts—requires an environment where from the opportunities and protections that progress over time and make meaningful in- new entrants with drive and good ideas, re- the law provides. Not surprisingly, higher ternational comparisons, and contributing to gardless of their gender or ethnic origin, can rankings on the ease of doing business— public debate and the promotion of greater get started in business and where good �rms based on 10 areas of business regulation can invest and grow, generating more jobs. accountability. measured by Doing Business—are correlated Small and medium-size enterprises are with better governance and lower levels of Since 2006 Doing Business has provided 2 key drivers of competition, growth and job perceived corruption.13 takes on the data it collects: it presents “ab- creation, particularly in developing econo- solute� indicators for each economy for each In this sense Doing Business values good rules mies. But in these economies up to 80% of of the 11 regulatory topics it addresses, and it as a key to social inclusion. It also provides a economic activity takes place in the informal basis for studying effects of regulations and provides rankings of economies for 10 topics, sector. Firms may be prevented from entering their application. For example, Doing Business both by topic and in aggregate.15 In addition, the formal sector by excessive bureaucracy 2004 found that faster contract enforcement as noted in the executive summary, this and regulation. Even �rms operating in the was associated with perceptions of greater formal sector might not have equal access to year’s report introduces a new measure—the judicial fairness—suggesting that justice transparent rules and regulations affecting distance to frontier measure—that illustrates delayed is justice denied.14 their ability to compete, innovate and grow. how an economy’s regulatory environment DOING BUSINESS AS A has changed over time.16 Judgment is required Where regulation is burdensome and com- BENCHMARKING EXERCISE in interpreting all these measures for any petition limited, success tends to depend more on whom you know than on what you Doing Business, in capturing some key di- economy and in determining a sensible and can do.12 But where regulation is transparent, mensions of regulatory regimes, has been politically feasible path for regulatory reform. efficient and implemented in a simple way, found useful for benchmarking—an aspect it becomes easier for any aspiring entrepre- allowing decision makers to make more Reviewing the Doing Business rankings in iso- neurs, regardless of their connections, to considered judgments on the policy options lation may reveal unexpected results. Some operate within the rule of law and to bene�t available, enhancing the ability to assess economies may rank unexpectedly high on ABOUT DOING BUSINESS: MEASURING FOR IMPACT 17 some topics. And some economies that have has a ranking of 24 on the ease of starting a regulations improve �rm productivity and had rapid growth or attracted a great deal of business, 26 on the ease of dealing with con- macroeconomic performance.22 investment may rank lower than others that struction permits, 38 on the ease of paying appear to be less dynamic. taxes and 71 on the ease of registering prop- Simpler business registration translates into erty. Variation in performance across the greater employment opportunities in the formal As economies develop, they strengthen and indicator sets reflects the different priorities sector. Reducing start-up costs for new �rms add to regulations to protect investor and that governments give to particular areas of was found to result in higher take-up rates property rights. Meanwhile, they �nd more business regulation as well as economy-spe- for education, higher rates of job creation for efficient ways to implement existing regula- ci�c circumstances that may allow a faster high-skilled labor and higher average produc- tions and cut outdated ones. One �nding of pace of reform in some areas than in others. tivity because new �rms are often set up by Doing Business: dynamic and growing econo- high-skilled workers.23 Lowering entry costs mies continually reform and update their can boost legal certainty: businesses enter- WHAT RESEARCH SHOWS ON business regulations and their way of imple- ing the formal sector gain access to the legal THE EFFECTS OF BUSINESS menting them, while many poor economies system, to the bene�t of both themselves and REGULATION still work with regulatory systems dating to their customers and suppliers.24 Nine years of Doing Business data, together the late 1800s. with other data sets, have enabled a grow- Assessing the impact of policy reforms poses For reform-minded governments, how ing body of research on how speci�c areas challenges. While cross-country correlations of business regulation—and regulatory can appear strong, it is difficult to isolate much the regulatory environment for local reforms in those areas—relate to social and the effect of regulations given all the other entrepreneurs improves in absolute terms economic outcomes. Some 873 articles have potential factors that vary at the country matters more than their economy’s relative been published in peer-reviewed academic level. Generally, cross-country correlations ranking on the overall ease of doing busi- journals, and about 2,332 working papers are do not show whether a speci�c outcome is ness. The distance to frontier measure aids available through Google Scholar.17 caused by a speci�c regulation or whether it in assessing such improvements over time by showing the distance of each economy to coincides with other factors, such as a more Much attention has been given to exploring the “frontier,� which represents the highest positive economic situation. So how do we links to microeconomic outcomes, such performance observed on each of the Doing know whether things would have been dif- as �rm creation and employment. Recent Business indicators across all economies ferent without a speci�c regulatory reform? research focuses on how business regula- and years included since 2005. Comparing Some studies have been able to test this by tions affect the behavior of �rms by creating the measure for an economy at 2 points investigating variations within an economy incentives (or disincentives) to register and in time allows users to assess how much over time. Other studies have investigated operate formally, to create jobs, to innovate the economy’s regulatory environment as policy changes that affected only certain and to increase productivity.18 Many studies measured by Doing Business has changed �rms or groups. Several country-speci�c have also looked at the role played by courts, impact studies conclude that simpler entry over time—how far it has moved toward (or credit bureaus, and insolvency and collateral regulations encourage the establishment of away from) the most efficient practices and laws in providing incentives for creditors and more new �rms: strongest regulations in the areas covered by investors to increase access to credit. The Doing Business. The distance to frontier mea- Ė In Mexico one study found that a program literature has produced a range of �ndings. sure complements the yearly ease of doing that simpli�ed municipal licensing led to a business rankings that compare economies Lower costs for business registration encourage 5% increase in the number of registered with one another at a point in time. entrepreneurship and enhance �rm productivity. businesses and a 2.2% increase in wage Economies with efficient business registra- employment, while competition from Each indicator set covered by Doing Business tion have a higher entry rate by new �rms as new entrants lowered prices by 0.6% measures a different aspect of the business well as greater business density.19 Economies and the income of incumbent businesses regulatory environment. The rankings of where registering a new business takes less by 3.2%.25 Other research found that the each economy vary, sometimes signi�cantly, time have seen more businesses register in same licensing reform directly led to a across the indicator sets. A quick way to as- industries where the potential for growth 4% increase in new start-ups and that the sess the variability of an economy’s regula- is greatest, such as those that have experi- program was more effective in munici- tory performance across the different areas enced expansionary shifts in global demand palities with less corruption and cheaper of business regulation is to look at the topic or technology.20 Reforms making it easier to additional registration procedures.26 rankings (see the country tables). Korea, for start a business tend to have a signi�cant Ė In India the progressive elimination of the example, stands at 8 in the overall ease of positive effect on investment in product “license raj� led to a 6% increase in new doing business ranking. Its ranking is 2 on market industries such as transport, com- �rm registrations, and highly produc- the ease of enforcing contracts, 4 on the munications and utilities, which are often tive �rms entering the market saw larger ease of trading across borders and 8 on the sheltered from competition.21 There is also increases in real output than less produc- ease of getting credit. At the same time, it evidence that more efficient business entry tive �rms.27 Simpler entry regulation and 18 DOING BUSINESS IN THE ARAB WORLD 2012 labor market flexibility were found to be barriers to trade needs to be accompanied by HOW GOVERNMENTS USE complementary. States with more flexible other reforms, such as making labor markets DOING BUSINESS employment regulations saw a 25% larger more flexible, to achieve higher productivity Quantitative data and benchmarking can be decrease in informal �rms and 17.8% and growth.37 useful in stimulating debate about policy, larger gains in real output than states with both by exposing potential challenges and less flexible labor regulations.28 The same Regulations and institutions that form part of by identifying where policy makers might licensing reform led to an aggregate pro- the �nancial market infrastructure—includ- look for lessons and good practices. For ductivity improvement of around 22% for ing courts, credit information systems, and governments, a common �rst reaction to the �rms affected by the reform.29 collateral, creditor and insolvency laws—play Doing Business data is to ask questions about Ė In Colombia new �rm registrations in- a role in easing access to credit. Enterprise the quality and relevance of the data and creased by 5.2% after the creation of a surveys conducted by the World Bank show about how the results are calculated. Yet the one-stop shop for businesses.30 that access to credit is a major constraint to debate typically proceeds to a deeper dis- Ė In Portugal the introduction of a one-stop businesses around the world.38 Good credit cussion exploring the relevance of the data shop for businesses led to a 17% increase information systems and strong collateral to the economy and areas where business in new �rm registrations and 7 new jobs laws can help alleviate �nancing constraints. regulation reform might make sense. for every 100,000 inhabitants compared Analysis in 12 transition economies found with economies that did not implement that reforms strengthening collateral laws Most reformers start out by seeking exam- the reform.31 increased the supply of bank loans by ples, and Doing Business helps in this (boxes 13.7% on average.39 Creditor rights and the 2.2 and 2.3). For example, Saudi Arabia used A sound regulatory environment leads to stron- existence of credit registries, whether public the company law of France as a model for ger trade performance. Efforts to streamline or private, are both associated with a higher revising its own. Many countries in Africa the institutional environment for trade (such look to Mauritius—the region’s strongest ratio of private credit to GDP.40 And greater as by increasing the efficiency of customs) performer on Doing Business indicators—as a information sharing through credit bureaus have been shown to have positive effects source of good practices for business regula- is associated with higher bank pro�tability on trade volumes.32 One study found that tion reform. In the words of Luis Guillermo and lower bank risk.41 an inefficient trade environment was among Plata, the former minister of commerce, the main factors in poor trade performance Country-speci�c research assessed the industry and tourism of Colombia, in Sub-Saharan African countries.33 Similarly, effect of efficient debt recovery and exit another study identi�ed the government’s It’s not like baking a cake where you processes in determining conditions of credit ability to formulate and implement sound follow the recipe. No. We are all different. and in ensuring that less productive �rms are policies and regulations that promote But we can take certain things, certain either restructured or exit the market: private sector development, customs ef- key lessons, and apply those lessons and Ė The establishment of specialized debt see how they work in our environment. �ciency, quality of infrastructure and access to �nance as important factors in improving recovery tribunals in India sped up the resolution of debt recovery claims and Over the past 9 years there has been much trade performance.34 The same study found allowed lenders to seize more collateral activity by governments in reforming the that economies with more constrained ac- on defaulting loans. It also increased the regulatory environment for domestic busi- cess to foreign markets bene�t more from probability of repayment by 28% and nesses. Most reforms relating to Doing improvements in the investment climate lowered interest rates on loans by 1–2 per- Business topics have been nested in broader than those with easier access. centage points.42 programs of reform aimed at enhancing Research also shows that an economy’s economic competitiveness, as in Colombia, Ė Following a broad bankruptcy reform in ability to enforce contracts is an important Kenya and Liberia, for example. In structur- Brazil in 2005 that, among other things, determinant of its comparative advantage ing their reform programs for the business improved the protection of creditors, the in the global economy: among compa- environment, governments use multiple cost of debt fell by 22% and the aggregate rable economies, those with good contract data sources and indicators.45 And reformers level of credit rose by 39%.43 enforcement tend to produce and export respond to many stakeholders and interest more customized products than those with Ė The introduction of improved insolvency groups, all of whom bring important issues poor contract enforcement.35 Another study regimes that streamlined mechanisms for and concerns to the reform debate. World shows that in many developing economies reorganization reduced the number of liq- Bank Group dialogue with governments production of high-quality output is a pre- uidations by 8.4% in Belgium and by 13.6% on the investment climate is designed to condition for �rms to become exporters: in Colombia as more viable �rms opted for encourage critical use of the data, sharp- institutional reforms that lower the cost of reorganization instead.44 In Colombia the ening judgment, avoiding a narrow focus high-quality production increase the posi- new law better distinguished viable from on improving Doing Business rankings and tive effect that trade facilitation can have on nonviable �rms, making survival more like- encouraging broad-based reforms that income.36 Research shows that removing ly for �nancially distressed but viable �rms. enhance the investment climate. The World ABOUT DOING BUSINESS: MEASURING FOR IMPACT 19 and provide references to the relevant laws, such as starting and legally operating a busi- BOX 2.2 How economies have used Doing regulations and fee schedules, aiding data ness, into separate steps to ensure a better Business in regulatory reform programs checking and quality assurance. Having rep- estimate of time. The time estimate for each To ensure the coordination of efforts resentative samples of respondents is not step is given by practitioners with signi�cant across agencies, such economies as an issue, as the texts of the relevant laws and routine experience in the transaction. Colombia and Rwanda have formed regu- and regulations are collected and answers latory reform committees, reporting di- The Doing Business approach to data col- checked for accuracy. rectly to the president, that use the Doing lection contrasts with that of �rm surveys, Business indicators as one input to inform For some indicators—for example, those on which capture often one-time perceptions their programs for improving the business environment. More than 25 other econo- dealing with construction permits, enforcing and experiences of businesses. A corporate mies have formed such committees at the contracts and resolving insolvency—the lawyer registering 100–150 businesses a year interministerial level. These include econ- time component and part of the cost com- will be more familiar with the process than omies across regions: In East and South ponent (where fee schedules are lacking) an entrepreneur, who will register a business Asia, India; Malaysia; Taiwan, China; Thailand; and Vietnam. In the Middle East are based on actual practice rather than the only once or maybe twice. A bankruptcy at- and North Africa, Egypt; Morocco; Saudi law on the books. This introduces a degree torney or judge dealing with dozens of cases Arabia; the Syrian Arab Republic; the of judgment. The Doing Business approach a year will have more insight into bankruptcy United Arab Emirates; and the Republic than a manager of a company who may have of Yemen. In Eastern Europe and Central has therefore been to work with legal prac- titioners or professionals who regularly un- never undergone the process. Asia, Georgia; Kazakhstan; the Kyrgyz Republic; Moldova; and Tajikistan. In Sub- dertake the transactions involved. Following Saharan Africa, Botswana; Burundi; the Doing Business respondents the standard methodological approach for Central African Republic; the Comoros; Over the past 9 years more than 12,000 pro- time-and-motion studies, Doing Business the Democratic Republic of Congo; Kenya; breaks down each process or transaction, fessionals in 183 economies have assisted Liberia; Malawi; Mali; and Zambia. And in Latin America, Guatemala; Mexico; and in providing the data that inform the Doing Peru. Governments have reported more Business indicators. This year’s report draws than 280 regulatory reforms that have BOX 2.3 How a regional economic forum on the inputs of more than 9,000 profes- been informed by Doing Business since uses Doing Business sionals. Table 13.1 in the data notes lists the 2003. The Asia-Paci�c Economic Cooperation number of respondents for each indicator (APEC) organization uses Doing Business set. The Doing Business website indicates the to identify potential areas of regulatory Bank Group uses a vast range of indicators number of respondents for each economy reform, to champion economies that can and analytics in this policy dialogue, includ- help others improve and to set measur- and each indicator. Respondents are profes- ing its Global Poverty Monitoring indicators, able targets. In 2009 APEC launched the sionals or government officials who routinely World Development Indicators, Logistics Ease of Doing Business Action Plan with administer or advise on the legal and regula- Performance Indicators and many others. the goal of making it 25% cheaper, faster tory requirements covered in each Doing With the open data initiative, all indicators and easier to do business in the region by Business topic. They are selected on the 2015.1 The action plan sets speci�c tar- basis of their expertise in the speci�c areas and data are available to the public at http:// gets, such as making it 25% faster to start covered by Doing Business. Because of the data.worldbank.org. a business by reducing the average time focus on legal and regulatory arrangements, by 1 week. METHODOLOGY AND DATA most of the respondents are legal profes- Drawing on a �rm survey, planners Doing Business covers 183 economies—in- sionals such as lawyers, judges or notaries. identi�ed 5 priority areas: starting a busi- cluding small economies and some of the The credit information survey is answered ness, getting credit, enforcing contracts, poorest economies, for which little or no trading across borders and dealing with by officials of the credit registry or bureau. data are available in other data sets. The construction permits. APEC economies Freight forwarders, accountants, architects Doing Business data are based on domestic then selected 6 “champion economies� and other professionals answer the surveys laws and regulations as well as administra- for the priority areas: New Zealand and related to trading across borders, taxes and tive requirements. (For a detailed explana- the United States (starting a business), construction permits. Japan (getting credit), Korea (enforcing tion of the Doing Business methodology, see contracts), Singapore (trading across bor- Development of the methodology the data notes.) ders) and Hong Kong SAR, China (dealing The methodology for calculating each in- with construction permits). In 2010 and Information sources for the data dicator is transparent, objective and easily 2011 several of the champion economies Most of the Doing Business indicators are organized workshops to develop pro- replicable. Leading academics collaborated based on laws and regulations. In addition, grams for building capacity in their area in the development of the indicators, ensur- most of the cost indicators are backed by of expertise. ing academic rigor. Eight of the background official fee schedules. Doing Business respon- papers underlying the indicators have been 1. APEC 2010. dents both �ll out written questionnaires published in leading economic journals.46 20 DOING BUSINESS IN THE ARAB WORLD 2012 Doing Business uses a simple averaging ap- workers indicators and the getting credit consultations, this year’s report introduces proach for weighting component indicators (legal rights) indicators, in addition to the a threshold for the total tax rate for the and calculating rankings. Other approaches removal of the procedures related to getting purpose of calculating the ranking on the were explored, including using principal an electricity connection from the dealing ease of paying taxes. All economies with a components and unobserved components.47 with construction permits indicators. It also total tax rate below the threshold (which They turn out to yield results nearly identi- includes changes in the ranking methodol- will be calculated and adjusted on a yearly cal to those of simple averaging. Thus ogy for paying taxes. basis) will now receive the same ranking on Doing Business uses the simplest method: the total tax rate indicator. Since the total tax weighting all topics equally and, within each Employing workers methodology. With the rate is 1 of 32 indicators included in the rank- topic, giving equal weight to each of the topic aim of better capturing the balance between ing on the overall ease of doing business, this components.48 worker protection and efficient employment change has minimal effects on the overall regulation that favors job creation, Doing rankings. The correlation between rankings Inclusion of getting electricity Business has made a series of amendments on the ease of paying taxes with and without indicators to the methodology for the employing work- this threshold is 99%. ers indicators over the past 4 years. This year’s ease of doing business ranking The threshold is not based on any underly- includes getting electricity as a new topic. In addition, the World Bank Group has been ing theory. Instead, it is meant to emphasize The getting electricity indicators were intro- working with a consultative group—includ- the purpose of the indicator: to highlight duced as a pilot in Doing Business 2010 and ing labor lawyers, employer and employee economies where the tax burden on busi- Doing Business 2011, which presented the representatives, and experts from civil ness is high relative to the tax burden in results in an annex. During the pilot phase society, the private sector, the International other economies. Giving the same ranking to the methodology was reviewed by experts, Labour Organization (ILO) and the OECD— all economies whose total tax rate is below and data on the time, cost and procedures to review the methodology and explore the threshold avoids awarding economies to obtain an electricity connection were col- future areas of research.51 The consultative in the scoring for having an unusually low lected for the full set of 183 economies. To group completed its work this year, and its total tax rate, often for reasons unrelated to avoid double counting, procedures related to guidance has provided the basis for several government policies toward enterprises. For getting an electricity connection have been changes in methodology (see also the data example, economies that are very small or removed from the dealing with construction notes). A full report with the conclusions that are rich in natural resources do not need permits indicators.49 of the consultative group is available on the to levy broad-based taxes. For more details Doing Business website.52 on the calculation of the threshold, see the Improvements to the methodology data notes. The methodology has undergone continual Follow-on work is continuing to explore improvement over the years.50 Changes have the measurement of worker protection to In addition, this year Doing Business collected been made mainly in response to sugges- complement the measurement of the cost data on labor taxes and social security con- tions providing new insights. For enforcing to employers of labor regulations. The data tributions paid by employees as well as em- contracts, for example, the amount of the on worker protection will serve as a basis for ployers. These data will be made available on disputed claim in the case study was in- the development of a joint analysis of worker the Doing Business website to enable analysis creased from 50% to 200% of income per protection by the World Bank Group and the of the distribution of these contributions capita after the �rst year of data collection, ILO. between employers and employees. as it became clear that smaller claims were unlikely to go to court. Pending further progress on research in this Getting credit methodology. The strength area, this year’s report does not present rank- of legal rights index measures certain rights Another change relates to starting a busi- ings of economies on the employing workers of borrowers and lenders with respect to ness. The minimum capital requirement indicators or include the topic in the aggre- secured transactions. The index describes can be an obstacle for potential entrepre- gate ranking on the ease of doing business. how well collateral and bankruptcy laws neurs. Initially Doing Business measured It does present the data on the employing facilitate lending by measuring 10 aspects of the required minimum capital regardless of workers indicators. Additional data on labor these laws. whether it had to be paid up front or not. In regulations collected in 183 economies are many economies only part of the minimum available on the Doing Business website.53 One aspect of collateral law that is measured capital has to be paid up front. To reflect the relates to whether secured creditors can actual potential barrier to entry, the paid-in Paying taxes methodology. Doing Business continue individual court actions after a minimum capital has been used rather than has bene�ted from dialogue with external debtor starts a court-supervised reorganiza- the required minimum capital. stakeholders, including participants in the tion procedure or whether they are subject International Tax Dialogue, on the survey to an automatic stay or a moratorium. This year’s report includes improvements instrument and methodology for the pay- Previously only economies where secured in the methodology for the employing ing taxes indicators. As a result of these creditors can continue a court action in these ABOUT DOING BUSINESS: MEASURING FOR IMPACT 21 circumstances were rewarded in the scoring the Doing Business website (http://www http://www.enterprisesurveys.org, collect for the strength of legal rights index. Now .doingbusiness.org). business data on more than 100,000 firms 5. De Soto 2000. in 125 economies, covering a broad range economies where secured creditors must of business environment topics. stop individual court actions but their rights 6. Schneider 2005; La Porta and Shleifer 2008. 13. The correlation coefficient between the ease remain protected through other means are 7. Amin 2011. of doing business ranking and the ranking also rewarded (see the data notes for more 8. http://www.enterprisesurveys.org. on the Control of Corruption Index is 0.62, details). The change aligns the methodol- 9. OECD, “Indicators of Product Market and that between the ease of doing business Regulation,� http://www.oecd.org/. The ranking and the ranking on the Transparency ogy for this indicator with guidelines of the measures are aggregated into 3 broad International Corruption Perceptions Index United Nations Commission on International families that capture state control, bar- 0.77. The positive correlation is statistically Trade Law (UNCITRAL) and the World Bank riers to entrepreneurship and barriers to signi�cant at the 5% level. Group. international trade and investment. The 14. World Bank 2003. 39 countries included in the OECD market regulation indicators are Australia, Austria, 15. This year’s report does not present rankings Data adjustments of economies on the employing workers Belgium, Brazil, Canada, Chile, China, the All changes in methodology are explained Czech Republic, Denmark, Estonia, Finland, indicators. Nor does it include this topic in in the data notes as well as on the Doing France, Germany, Greece, Hungary, Iceland, the aggregate ranking on the ease of doing Business website. In addition, data time series India, Ireland, Israel, Italy, Japan, Korea, business. for each indicator and economy are available Luxembourg, Mexico, the Netherlands, New 16. For further details on the construction of the Zealand, Norway, Poland, Portugal, Russia, indicators, the aggregate rankings and the on the website, beginning with the �rst year the Slovak Republic, Slovenia, South Africa, distance to frontier measure, see the data the indicator or economy was included in the Spain, Sweden, Switzerland, Turkey, the notes and the chapter on the ease of doing report. To provide a comparable time series United Kingdom and the United States. business and distance to frontier. for research, the data set is back-calculated 10. The World Economic Forum’s Global 17. According to searches on Google Scholar to adjust for changes in methodology and Competitiveness Report uses Doing Business (http://scholar.google.com) and the Social any revisions in data due to corrections. data sets on starting a business, employing Science Citation Index. workers, protecting investors and getting 18. Djankov and others 2002; Alesina and oth- The data set is not back-calculated for year- credit (legal rights), representing 7 of a total ers 2005; Perotti and Volpin 2005; Klapper, to-year changes in income per capita. The of 113 different indicators (or 6.2%). Laeven and Rajan 2006; Fisman and Sarria- website also makes available all original data 11. Narayan and others 2000. Allende 2010; Antunes and Cavalcanti sets used for background papers. 12. Hallward-Driemeier, Khun-Jush and 2007; Barseghyan 2008; Eifert 2009; Pritchett (2010) analyze data from World Klapper, Lewin and Quesada Delgado 2009; Information on data corrections is pro- Bank Enterprise Surveys for Sub-Saharan Djankov, Freund and Pham 2010; Klapper vided in the data notes and on the website. Africa and show that broadly de jure and Love 2011; Chari 2011; Bruhn 2011. A transparent complaint procedure allows measures such as Doing Business indicators 19. Klapper, Lewin and Quesada Delgado anyone to challenge the data. If errors are are not correlated with ex post firm-level 2009. Entry rate refers to newly registered responses. While countries that do better �rms as a percentage of total registered con�rmed after a data veri�cation process, according to Doing Business generally �rms. Business density is de�ned as the total they are expeditiously corrected. perform better on enterprise surveys, for number of businesses as a percentage of the the majority of economies in the sample working-age population (ages 18–65). there is no correlation. Further, the authors 20. Ciccone and Papaioannou 2007. NOTES find that the gap between de jure and de 21. Alesina and others 2005. 1. For more details on how the aggregate rank- facto conditions grows with the formal regulatory burden. This suggests that 22. Loayza, Oviedo and Servén 2005; ings are created, see the chapter on the ease more burdensome processes in Africa Barseghyan 2008. of doing business and distance to frontier. open up more space for making deals 23. Dulleck, Frijters and Winter-Ebmer 2006; 2. This has included a review by the World and that firms may not incur the official Calderon, Chong and Leon 2007; Micco and Bank Independent Evaluation Group costs of compliance, but they still pay Pagés 2006. (2008) as well as ongoing input from the to avoid them. A few differences in the 24. Masatlioglu and Rigolini 2008; Djankov International Tax Dialogue. underlying methodologies should be kept 2009b. 3. The resolving insolvency indicators measure in mind. The Doing Business methodology the time, cost and outcome of insolvency 25. Bruhn 2011. focuses on the main business city, while proceedings involving domestic entities. In enterprise surveys typically cover the 26. Kaplan, Piedra and Seira 2007. previous reports this indicator set was referred entire country. Doing Business gathers the 27. Aghion and others 2008. to as closing a business. Resolving insolvency considered views of experts who examine 28. Sharma 2009. more accurately reflects the outcomes that the laws and rules underlying the business 29. Chari 2011. are measured: a judicial procedure aimed regulatory framework in a narrow set of at reorganization or rehabilitation, a judicial 30. Cardenas and Rozo 2009. areas; enterprise surveys collect the views procedure aimed at liquidation or winding up, of enterprise managers and the question 31. Branstetter and others 2010. and debt enforcement or foreclosure (in or posed to the manager is seldom identi- 32. Djankov, Freund and Pham 2010. outside the courts). cal to the one being addressed by Doing 33. Iwanow and Kirkpatrick 2009. 4. Local experts in 183 economies are surveyed Business contributors, which is in reference annually to collect and update the data. The to a particular standardized case. World 34. Seker 2011. local experts for each economy are listed on Bank Enterprise Surveys, available at 35. Nunn 2007. 22 DOING BUSINESS IN THE ARAB WORLD 2012 36. Rauch 2010. 47. For more details, see the chapter on the ease 37. Chang, Kaltani and Loayza 2009; Cuñat and of doing business and distance to frontier. Melitz 2007. 48. A technical note on the different aggregation 38. http://www.enterprisesurveys.org. and weighting methods is available on the Doing Business website (http://www 39. Haselmann, Pistor and Vig 2010. The .doingbusiness.org). countries studied were Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, 49. Previous years’ data on dealing with Lithuania, Poland, Romania, the Slovak construction permits are adjusted to reflect Republic, Slovenia and Ukraine. this change. They are made available on the Doing Business website under “historical 40.Djankov, McLiesh and Shleifer 2007; data� (http://www.doingbusiness.org). Houston and others 2010. 50. All changes in methodology are explained 41. Djankov, McLiesh and Shleifer 2007; in the data notes in this year’s report and Houston and others 2010. in previous years’ reports back to Doing 42. Visaria 2009. Business 2007 (data notes and previous 43. Funchal 2008. years’ reports are available at http://www .doingbusiness.org). 44.Dewaelheyns and Van Hulle (2008) on Belgium; Giné and Love (2010) on 51. For the terms of reference and composi- Colombia. tion of the consultative group, see World Bank, “Doing Business Employing Workers 45. One recent study using Doing Business Indicator Consultative Group,� http://www indicators illustrates the difficulties in using .doingbusiness.org. highly disaggregated indicators to identify reform priorities (Kraay and Tawara 2011). 52. http://www.doingbusiness.org/ methodology/employing-workers. 46. All background papers are available on the Doing Business website (http://www 53. http://www.doingbusiness.org. .doingbusiness.org). 2012 Doing Business topics Starting a business Imagine a young Palestinian named Faysal capita, engages in general industrial or com- usually be set up with fewer procedures and who has just earned a degree in business mercial activities and employs between 10 at lower cost.1 from Birzeit University in Ramallah. He and 50 people. has always dreamed of opening a small Making the process of business incorpora- business in his nearby Palestinian village. tion easy also has broader bene�ts for the WHY DOES FORMAL BUSINESS But that would require paying in minimum economy. A growing body of empirical REGISTRATION MATTER? capital of 10,000 Jordanian dinars (219% of research has explored the links between The legal registration of businesses is business entry regulation and social and income per capita), an enormous sum for a bene�cial for several reasons. Legal entities economic outcomes. Using data collected young entrepreneur. Because employment can outlive their founders. Resources are from company registries in 100 economies prospects are dim, Faysal will probably end pulled together as shareholders join forces to over 8 years, analysis found that simple busi- up working as a farm laborer to bring in establish a company’s capital. Formally reg- ness start-up is critical for fostering formal some income. istered companies have access to services entrepreneurship.2 Cumbersome regulations This realistic scenario illustrates how a high and institutions from courts to banks as well and administrative procedures for starting a minimum capital requirement can be a bar- as to new markets—bene�ts that are not business are found to be associated with a rier to starting a business and therefore an available to unregistered �rms. And where smaller number of legally registered �rms, obstacle to job creation and development. �rms are formally registered their employees greater informality (a �nding particularly Some economies have lowered this barrier. can also bene�t from protections provided relevant for many developing economies), a One of these is Jordan, just across the bor- by the law. smaller tax base and more opportunities for der. If Faysal had sought to start a business corruption.3 The legal form under which a company is there 4 years ago, when he was beginning his studies, complying with the minimum capital registered also matters. Limited liability A recent study �nds that barriers to starting requirement would have cost him around companies—the type of company that Doing a business are signi�cantly and negatively 800% of income per capita. Today he would Business focuses on—limit the �nancial correlated with business density, calculated have to pay in only half a dinar (less than $1) liability of company owners to their invest- as the total number of businesses registered to start a business. ments, giving entrepreneurs more freedom as a percentage of the economically active to innovate because their personal assets population (ages 15–64). For example, the Rich or poor, men and women around the are not put at risk. Sole proprietorships do fewer the procedures required to start a busi- world seek to run and pro�t from their own not provide this kind of protection but can ness, the greater the number of registered businesses. But these entrepreneurs will not all have the same experience in establishing FIGURE 3.1 What are the time, cost, paid-in minimum capital and number of procedures to get a local a new company. Regulations governing busi- limited liability company up and running? ness start-up vary greatly across economies, in some cases making the cost of formal Cost (% of income per capita) business registration nearly prohibitive. Formal operation Doing Business measures the procedures, time, cost and paid-in minimum capital Paid-in $ Number of minimum procedures required for a small to medium-size limited capital liability company to start up and operate formally (�gure 3.1). To make the data comparable across 183 economies, Doing Entrepreneur Business uses a standardized business that Time (days) Preregistration Registration, Postregistration is 100% domestically owned, has start-up incorporation capital equivalent to 10 times income per STARTING A BUSINESS 25 notice from 25,000 pounds ($500) to FIGURE 3.2 Arab economies have signi�cantly reduced the paid-in minimum capital requirement 4,000 ($80). Number of Doing Business reforms making it easier to start a business in the Arab world, by Doing Business report year The United Arab Emirates simpli�ed registra- tion formalities—by merging the require- Total number ments to �le company documents with the DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms Department for Economic Development, to 37 obtain a trade license and to register with the Dubai Chamber of Commerce and Industry. 0 reformsQ1–3 reforms Q4–6 reforms Q7–9 reforms Q10 reforms In Iraq starting a business became more DB2006 expensive because of an increase in the cost Arab world averages in starting a business DB2012 to obtain a name reservation certi�cate and Global average in the cost for lawyers to draft articles of Procedures (number) association. 11 8 7 Worldwide over the past 8 years, Doing Time (days) Business recorded 349 reforms making it 41 21 easier to start a business—in 146 econo- 31 mies. Many opted for low-cost administra- Cost (% of income per capita) tive reforms requiring little or no change in 82.4 44.1 regulation. Others went further, introducing 36.2 or amending legislation. Globally, the aver- Paid-in minimum capital (% of income per capita) age time to start a business fell from 50 815.9 days to 31, and the average cost from 89% 107.4 49.1 of income per capita to 36%. In 2010/11, 53 economies around the world made it easier Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for to start a business, with streamlining regis- a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. tration formalities the most common feature Source: Doing Business database. of the reforms. �rms. There is also a signi�cant relationship was the only Arab economy that made it In the Arab world, starting a business takes between the cost of starting a business (as a more difficult. 8 procedures and 21 days on average, costs percentage of gross national income, or GNI) 44% of income per capita and requires and business density. For every 10 percent- Jordan reduced the minimum capital require- paid-in minimum capital of 107% of income age point decrease in entry costs, density ment from 1,000 Jordanian dinars to 1 dinar, per capita. All this represents a signi�cant increased by about 1 percentage point.4 of which only half must be deposited before improvement compared with 7 years ago, company registration. when starting a business took 11 procedures Regulatory reforms can have an impressive Oman introduced online company registration and 41 days on average, cost 82% of income impact when they tackle the right bottleneck. After a reform simplifying business registra- in its one-stop shop and sped up the process per capita and required paid-in minimum tion in different municipalities at different to register a business from 7 days to 3. capital of 816% of income per capita. points in time across Mexico, a study found Qatar combined commercial registration and But the process of starting a business var- that the number of registered businesses registration with the Chamber of Commerce ies widely among Arab economies. While increased by 5% and employment by 2.2%.5 and Industry at the one-stop shop. it takes only 3 procedures in Saudi Arabia, it requires 14 in Algeria. A Saudi entrepre- WHO REFORMED BUSINESS Saudi Arabia brought together representa- neur can start a business in 5 days, but a REGISTRATION—AND WHAT HAS tives from the Department of Zakat and Palestinian one can expect to spend 49 days WORKED? Income Tax and the General Organization on the process—and an Iraqi one 77 days. Starting a business was the most popular of Social Insurance at the Uni�ed Center to And while starting a business costs less than area of reform in the Arab world in 2010/11. register new companies with their agencies. 1% of income per capita in Bahrain, the cost Six Arab economies—Jordan, Oman, Qatar, exceeds 100% of income per capita in Iraq, Saudi Arabia, Syria and the United Arab Syria reduced the minimum capital require- Djibouti and the Comoros (table 3.1). Emirates—made starting a business easier, ment from 1 million Syrian pounds ($19,890) up from only 2 in 2009/10 (�gure 3.2). Iraq to 400,000 ($7,955) in 2011 and lowered Similar variation can be seen in how far Arab the cost of publication for the registration economies have progressed toward the 26 DOING BUSINESS IN THE ARAB WORLD 2012 TABLE 3.1 Who in the Arab world makes Worldwide, many good practices have Creating a single interface starting a business easy—and who emerged over time. Some are common Single interfaces for business start-up not does not? among the 10 economies making it easiest only save time and money. They also can Procedures (number) to start a business, such as offering one-stop make procedural requirements more trans- Fewest Most shops. Most of the top 10 charge only a �xed parent and easier to access. While some Saudi Arabia 3 Iraq 11 registration fee—regardless of company one-stop shops are solely for business Lebanon 5 West Bank 11 size—that is limited to the administrative registration, others carry out many inte- and Gaza cost of providing the registration services. grated functions, including postregistration Oman 5 Djibouti 11b Those making it easiest to start a business formalities with tax authorities or munici- Egypt, 6 Kuwait 12 also use standard registration forms. And Arab Rep. palities. Some one-stop shops are virtual; they require nominal paid-in minimum others are physical, with one or more win- Yemen, Rep. 6a Algeria 14 capital or none at all. Other good practices dows. Models vary. Some one-stop shops include assigning unique company identi�- automatically forward information from the Time (days) cation numbers and adopting technology to company registry to the license authority, Fastest Slowest facilitate the delivery of a range of business as in Saudi Arabia. Others include separate Saudi Arabia 5 Kuwait 32 start-up services. desks with representatives from different Egypt, Arab Rep. 7 Sudan 36 Oman 8 Djibouti 37 agencies, as in Bahrain. Reducing or eliminating the Bahrain 9 West Bank 49 and Gaza minimum capital requirement Today 83 economies around the world have Lebanon 9 Iraq 77 Today 101 economies—including 14 in the some kind of one-stop shop for business reg- Arab world—still require entrepreneurs to istration, including the 53 that established or Cost (% of income per capita) put up a set amount of capital before even improved one in the past 8 years. Among Least Most starting registration formalities. The mini- these 53 are 7 Arab economies: Bahrain, Bahrain 0.7 Yemen, Rep. 83.8 mum capital requirement has its origins in Egypt, Jordan, Morocco, Oman, Qatar and Kuwait 1.2 West Bank 96.0 the 18th century. It was initially intended Saudi Arabia. In most cases, establishing a and Gaza one-stop shop merely requires some admin- to protect investors and creditors. But in Oman 3.1 Iraq 115.7 istrative changes, bringing immediate ben- economies around the world, the deposited Tunisia 4.2 Djibouti 169.8 capital is often withdrawn immediately after e�ts to governments and entrepreneurs. And United Arab 5.6 Comoros 176.2 registration—hardly of any value in insol- it often requires only improved coordination Emirates vency. Nor is it clear that minimum capital between government agencies, eliminating requirements have much value in other the need for an entrepreneur to visit several Paid-in minimum capital % of income per ways. Fixed amounts of capital do not take different agencies to �le similar forms. Most capita US$ into account differences in commercial risks. Comoros 253 2,074 Recovery rates in bankruptcy are no higher But not all reforms creating one-stop shops Bahrain 260 53,191 in economies with minimum capital require- have been successful. Some resulted in “one Oman 272 50,688 ments than in those without.6 And the more stop� shops that added to procedures Mauritania 335 3,550 requirements can have counterproductive rather than simplifying them. Others saw Djibouti 434 6,002 effects on entrepreneurship.7 bene�ts delayed because of lack of publicity. Note: Six Arab economies have no paid-in minimum capital Nonetheless, in the 83 economies that have requirement. Not surprisingly, the economies that one-stop shops offering at least one service a. Morocco also requires 6 procedures. originally introduced the minimum capital besides business registration, start-up is b. The Comoros also requires 11 procedures. Source: Doing Business database. requirement have long since removed it. And more than twice as fast as in those without since 2005, 57 economies have reduced or such services. global frontier in starting a business (�gure eliminated their requirement, lowering the average paid-in minimum capital require- Egypt established its one-stop shop in 2005, 3.3). Saudi Arabia, the Republic of Yemen, ment globally from 184% of income per making services relating to tax registra- Egypt and Jordan made the most progress capita to 49%. tion, chamber of commerce membership, in narrowing the gap to the frontier in the notarization and publication available under past 6 years. Saudi Arabia advanced from In the Arab world, a region once known for the same roof. This was part of a series of 68 percentage points from the frontier to prohibitively high minimum capital require- reforms undertaken over several years to only 5 percentage points away. The Republic ments, Egypt, Saudi Arabia, Sudan, Tunisia, make it easier to start a business. Together, of Yemen progressed from 83 percentage the United Arab Emirates and the Republic the changes reduced the number of proce- points to only 21 percentage points from the of Yemen have all eliminated their require- dures required from 13 in 2004 to 6 in 2011, frontier. Iraq is the only Arab economy that ment. And in the past year Jordan reduced the time from 37 days to 7 and the cost from moved away from the frontier. its requirement to a nominal amount. 66% of income per capita to 6%. The paid-in STARTING A BUSINESS 27 FIGURE 3.3 In the past 6 years almost all Arab economies moved closer to the frontier in starting a business Distance to frontier in starting a business, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 nis ia da n eri a no n wa it co Ira q tes an za da n ros Re p. lic ia uti ia Re p. Su Alg ba roc ira Om Ga Jor mo ub rab bo tan n, Tu Le Ku Mo Em nd Co rab ep iA Dji uri me rab nka pt, A rabR aud Ma Ye Ba S dA st Eg y nA ite ria Un We Sy Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the starting a business indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. minimum capital requirement, amounting to shows that establishing a virtual one-stop ranging from name search to full online busi- 800% of income per capita, was eliminated. shop that collects all required information ness registration. More than 40 offer elec- Egypt now ranks number 2 in the Arab world through a single online interface and shares tronic registration services. on the ease of starting a business (�gure 3.4). it within government can reduce registration time and eliminate redundant requirements Fifty-eight economies introduced informa- Using information and for information. tion and communication technology in communication technology their business start-up processes in the Electronic registration is possible in more Today 110 economies use information and past 8 years, saving time and effort for than 80% of high-income economies but communication technology for services businesses and governments alike. Five only about 30% of low-income ones. Several economies with the fastest business start-up offer electronic registration—New Zealand, BOX 3.1 Using technology to streamline business entry in the Levant Australia, Singapore, Canada, Portugal, Lebanon, Jordan, and West Bank and Gaza all aim to get more new businesses and invest- Denmark and Estonia. Oman’s introduction ments in the formal economy. As part of this effort, these economies of the Levant have set ambitious goals for improving their business entry procedures. of online company registration as an option Lebanon is working to automate its business registration process, connect relevant agen- in 2010 helped reduce the time to register a cies, introduce online capabilities and establish a cost-effective mechanism for registering mi- business from 7 days to 3. crobusinesses in cooperation with the Lebanese Bar Association. Jordan has been simplifying its registration processes—by cutting the number of proce- According to a 2010/11 survey of 34 com- dures in half (by connecting relevant agencies through the Ministry of Industry and Trade’s pany registries that implemented technology one-stop shop), unifying company name databases and streamlining workflows. solutions, nearly all the systems allowed on- In West Bank and Gaza the Ministry of National Economy plans to improve business regis- line name search and back-office processing tration by cutting in half the time required to obtain licenses from municipalities and complete of registration applications.8 About half commercial registration. It also plans to rationalize workflows. supported online company registration and While these neighboring economies are at different stages of implementation, all 3 are �ling of annual accounts. More than two- using information and communication technology to automate business processes and pro- cedures. Some back-office processes have already been automated. The next challenges are thirds allowed electronic data sharing with to put the application process online and to connect the entities involved in business entry other government agencies as well as the through a single web-based interface. dissemination of company information to Other developing economies introducing information and communication technology for the private sector. Within the government, business registration did so as part of broader e-government programs. Successful initiatives information was typically shared with the tax had common features: They were implemented as part of broader legal and regulatory re- authority (59% of systems) and to a lesser forms. And before information and communication technology applications were implement- ed, business processes were reengineered and the legal framework for digital signatures and extent with the collateral registry (26%) and online fee payment was established. the social security agency (18%). Experience 28 DOING BUSINESS IN THE ARAB WORLD 2012 FIGURE 3.4 How do Arab economies rank on FIGURE 3.5 Information on start-up fees is dif�cult to �nd in most Arab economies the ease of starting a business? Share of economies where fee schedules are easily accessible (%) Global ranking (1–183) 97 NEW ZEALAND—EASIEST (1) Saudi Arabia 20 Egypt, Arab Rep. 63 58 57 55 50 45 40 United Arab Emirates 36 Tunisia 60 Yemen, Rep. Oman OECD South Asia Eastern Europe Latin America East Asia Middle East Arab Sub-Saharan high income & Central Asia & Caribbean & Pacific & North Africa world Africa 80 Bahrain Note: Fee schedules are considered easily accessible if they can be obtained through the website of the relevant authority Morocco or another government agency or through public notices, without a need for an appointment with an of�cial. The data Jordan sample comprises 174 economies, including 20 in the Arab world. 100 Source: Doing Business database. Lebanon Qatar 120 potential losses of data; it also aids trans- requirements. In contrast, in more than Sudan parency and information sharing. And it 90% of OECD high-income economies fee Syrian Arab Republic 140 makes it easier to introduce new online schedules for company incorporation could Kuwait services later on. be obtained directly through the relevant Algeria agency’s website or through public notices 160 Mauritania Making access to forms and fee such as notice boards and brochures. Comoros schedules easy Iraq West Bank and Gaza Regardless of the level of automation, the FIGURE 3.6 Starting a business in the Arab world Djibouti easier it is for businesses to access fee costs less where information on the 183 schedules and documentation requirements fees is easily accessible Note: Rankings are the average of the economy’s for a regulatory process, the easier it is to Average cost to start a business (% of percentile rankings on the procedures, time, cost income per capita) and paid-in minimum capital for starting a business. comply with the regulations. Easy access not See the data notes for details. only saves businesses time; it also increases Source: Doing Business database. 52 predictability in the application of regula- tions and fee schedules. of them are in the Arab world—Egypt, Kuwait, Oman, Saudi Arabia and Syria. In This year Doing Business collected additional 35 these 5 Arab economies the average time information in a sample of 174 economies needed to start a business is 13 days; in on the different ways in which governments the other 15 Arab economies it is 24. Not and agencies make such regulatory informa- surprisingly, the Arab economies introduc- tion accessible. In the Arab world it found ing electronic services in the past 8 years that obtaining information on incorporation Easily accessible Not easily include the 3 with the fastest times to fees required scheduling an appointment accessible start a business—Saudi Arabia, Egypt and with an official in the majority of economies (�gure 3.5). While the Comoros, the United Arab economies by accessibility of Oman. More such efforts are under way in fee schedules for company incorporation the region (box 3.1). Arab Emirates and 7 other Arab economies have made information on the steps re- A first step in introducing technology in Note: Relationships are signi�cant at the 5% level after quired to start a business accessible, in 11 controlling for income per capita. Fee schedules are considered the business start-up process is always to Arab economies an entrepreneur still needs easily accessible if they can be obtained through the website of a government agency or through public notices, without a need make registration records electronic. This to go to the registry to obtain informa- for an appointment with an of�cial. The data sample comprises not only improves security and prevents tion on fee schedules and documentation 20 Arab economies. Source: Doing Business database. STARTING A BUSINESS 29 Easy access to fee schedules and low fees establishing a limited liability company in often go hand in hand. Globally, the cost more than 90% of economies. to start a business averages a substantial 2. Klapper, Lewin and Quesada Delgado 2009. 36% of income per capita. Entrepreneurs in 3. Audretsch, Keilbach and Lehmann 2006. lower-income economies face even higher 4. Klapper, Amit and Guillen 2010. costs—an average of 81% of income per 5. Bruhn 2011. capita in Sub-Saharan Africa. Regardless of 6. Djankov, Hart and others 2008. income levels, incorporation fees tend to be 7. Van Stel, Storey and Thurik 2007. lower in economies where fee schedules are 8. Wille and others 2011. The survey, easily accessible, including in the Arab world conducted by Doing Business and the World Bank Group’s Investment Climate Advisory (�gure 3.6). The cost to start a business in Services, received responses on experi- the Arab world averages 35% of income per ence in implementing new or upgraded capita in economies where fee schedules are technology solutions from 26 company easily accessible, 52% in economies where registrars (or their advisers or information they are not. and communication technology vendors) in low- or middle-income economies and 8 in high-income economies. NOTES 1. According to a survey conducted by Doing Business in 2011 covering 183 economies, establishing a sole proprietorship requires fewer procedures and is cheaper than Dealing with construction permits In most Arab economies a �rst-time ap- 7% of employment. In the European Union, to give gifts in exchange for construction plicant for a building permit is likely to have the United States and Japan combined, more approvals is correlated with the level of com- a difficult time. But things are different in than 40 million people work in construction. plexity and cost of dealing with construction economies that are applying e-governance It is estimated that for every 10 jobs directly permits.5 and information and communication tech- related to a construction project, another 8 nology solutions. Bahrain posts fee schedules jobs may be created in the local economy. Revenue and competitiveness and information on procedures online, mak- Small domestic �rms account for most of the Economies that score well on the ease of ing the process faster and more transparent. sector’s output and most of its jobs.2 dealing with construction permits tend to Builders can download free application forms have rigorous yet expeditious and transpar- and submit documentation online, saving Public safety and efficiency ent permitting processes. Speed matters. time and money. Complying with formalities Striking the right balance is a challenge when A study in the United States shows that to build a warehouse in Bahrain takes 12 pro- it comes to construction permitting. Good accelerating permit approvals by 3 months cedures and 43 days, putting the country at regulations ensure the safety standards in a 22-month project cycle could increase 7 in the global ranking on the ease of dealing that protect the public while making the construction spending by 5.7% and property with construction permits. permitting process efficient, transparent tax revenue by 16%.6 and affordable for both building authorities To measure the ease of dealing with con- and the private professionals who use it. If In a 2009 survey of 218 companies in 19 struction permits, Doing Business records procedures are overly complicated or costly, Asia-Paci�c Economic Cooperation (APEC) the procedures, time and cost required for builders tend to proceed without a permit.3 member economies, respondents identi�ed a small to medium-size business to obtain By some estimates 60–80% of building proj- the time and procedures in construction all the necessary approvals to build a simple ects in developing economies are undertaken permitting as the biggest “regulatory impedi- commercial warehouse and connect it to without the proper permits and approvals. In water, sewerage and a �xed telephone line ment� to doing business.7 For many entre- the Philippines 57% of new construction is (�gure 4.1). The case study includes all preneurs, construction regulations are a criti- considered illegal. In Egypt this share might types of inspections and certi�cates needed cal factor when deciding where to establish reach 90%.4 before, during and after construction of the their businesses. A recent competitiveness warehouse. To make the data comparable Overly complicated construction rules also report by KPMG indicated that construc- across 183 economies, the case study as- can increase opportunities for corruption. tion costs and the permitting process were sumes that the warehouse is located in the Analysis of World Bank Enterprise Survey among the top 20 factors in determining the periurban area of the largest business city, data shows that the share of �rms expecting location of a start-up in the United States.8 is not in a special economic or industrial zone and will be used for general storage FIGURE 4.1 What are the time, cost and number of procedures to comply with formalities to activities. build a warehouse? WHY DOES CONSTRUCTION Cost (% of income per capita) PERMITTING MATTER? Completed Good construction regulation matters for warehouse public safety. It also matters for the health Number of of the building sector and the economy as procedures a whole. According to a recent study, the construction industry accounts on average A business in for 6.5% of GDP in OECD economies.1 the construction The building sector is Europe’s largest industry Time (days) industrial employer, accounting for about Preconstruction Construction Postconstruction and utilities DEALING WITH CONSTRUCTION PERMITS 31 away from the frontier, though only by a FIGURE 4.2 Arab economies have made big reductions in time and cost slight distance. The cost of dealing with Number of Doing Business reforms making it easier to deal with construction permits in construction permits remains very high in the Arab world, by Doing Business report year West Bank and Gaza, at 10 times income per Total number capita (table 4.1). DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms Worldwide in the past 7 years, Doing Business 14 recorded 125 reforms making it easier to deal with construction permits in 83 economies. 0 reformsQ1–2 reforms Q3–4 reforms Q5–6 reforms Many opted for low-cost administrative re- forms requiring little or no change in regulation. DB2006 Others went further, introducing or amending Arab world averages in dealing with construction permits DB2012 legislation. The average time to deal with Global average Procedures (number) construction formalities fell from 208 days 18 to 193, and the average cost from 807% of 16 income per capita to 390%. These gains show 16 what is possible when construction regulation Time (days) 159 moves toward global good practices—such as 138 coherent and transparent rules and efficient 193 processes that include the use of one-stop Cost (% of income per capita) shops and risk-based building approvals. 508 308 390 TABLE 4.1 Who in the Arab world makes Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for a dealing with construction permits total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. easy—and who does not? Source: Doing Business database. Procedures (number) Fewest Most WHO REFORMED CONSTRUCTION Djibouti increased the fees for inspections Saudi Arabia 9 Algeria 19 PERMITTING—AND WHAT HAS and the building permit and added a new Bahrain 12 Lebanon 19 WORKED? inspection in the preconstruction phase. The Yemen, Rep. 12 Egypt, Arab Rep. 22 In 2010/11, 15 economies around the world changes added 1 procedure, increased the Iraq 13 Syrian Arab 23 time by 1 day and raised the cost by 458% of Republic made it easier to comply with the formalities income per capita. United Arab 14a Kuwait 24 required to build a warehouse up to the mo- Emirates ment it can be occupied and used as collat- Qatar increased the time to obtain a clear- eral. Most streamlined permitting procedures. Time (days) ance for electricity and water services from Fastest Slowest In the Arab world 2 economies—Mauritania 7 days to 20 and introduced a charge of 100 Bahrain 43 Iraq 187 and Morocco—made it easier to deal with Qatar riyals ($27) for submitting documents United Arab 46 Egypt, Arab Rep. 218 construction permits in 2010/11 (�gure 4.2). and obtaining a preliminary approval (that Emirates Two others—Djibouti and Qatar—made it is, for opening a �le). In addition, the cost Jordan 70 Lebanon 219 more difficult. to obtain a building permit increased, from Qatar 70 Sudan 270 1,350 Qatar riyals ($370) to 3,000 ($825). Saudi Arabia 75 Algeria 281 Mauritania opened a one-stop shop, reducing the number of procedures by 4 and the time Over the past 6 years 13 Arab economies Cost (% of income per capita) to deal with construction permits by 49 days. made progress toward the frontier in dealing Least Most with construction permits, though many Qatar 1.1 Iraq 470 Morocco launched its one-stop shop as a narrowed the gap only slightly (�gure 4.3). United Arab 5.2 Syrian Arab 504 fully operational enterprise. This reduced Egypt made the most progress, narrowing Emirates Republic the number of procedures by 1 and the time the gap by 15 percentage points, followed by Bahrain 10.7 Jordan 534 it takes to deal with construction permits by Jordan (13 percentage points). Saudi Arabia Saudi Arabia 19.4 West Bank and 1,001 7 days. In addition, the cost fell by 11% of and Mauritania also made large strides in Gaza income per capita. closing the gap. West Bank and Gaza was Algeria 21.1 Djibouti 2,286 a. Oman also requires 14 procedures. the only Arab economy that moved further Source: Doing Business database. 32 DOING BUSINESS IN THE ARAB WORLD 2012 FIGURE 4.3 Among Arab economies, Egypt advanced the most toward the frontier in dealing with construction permits in the past 6 years Distance to frontier in dealing with construction permits, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 Re p. ia tes ros an co nis ia Ira q za ia da n wa it no n eri a da n bli c uti Re p. rab ira mo Om roc Ga tan Su ba Alg Jor pu bo n, iA Em Co Mo Tu nd uri Ku Le Re Dji rab me ud ab ka Ma ab t, A Ye Sa r Ba n r yp dA st nA Eg ite We ria Un Sy Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the dealing with construction permits indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. Setting rules and ensuring that they safety, and their technical parameters man- This year Doing Business collected additional are clear and coherent dated in the code. But this approach works data in 159 economies on the different ways Efficient building regulation starts with only when codes are regularly updated. in which building authorities and related establishing a coherent body of rules that agencies make such information accessible. Allowing easy access to information de�nes what is required from builders. Today Easy access to information on documenta- In the majority of the 159 economies cov- 116 economies around the world—including tion and fees required by building authorities ered, understanding which documents are 15 joining this group in the past 7 years— can make compliance with regulations easier needed to apply for a building permit and have a comprehensive set of building rules, and reduce transactions costs for businesses. obtaining necessary forms requires meeting in the form of either a national building with a public official. This is the case in many code or a law that most fully governs the construction process. Ensuring clarity in these rules is important. FIGURE 4.4 Application requirements for building permits are not easily accessible in most Arab economies When regulations lack clarity and may be subject to broad interpretation, there is a risk Share of economies where application requirements are easily accessible (%) that builders and authorities will become 94 confused about how to proceed. This can lead to unnecessary delays, disputes and 75 uncertainty. The adverse effects of ambigu- 67 ous building regulations can become espe- cially apparent in urban settings as more and 56 52 more people move to cities and the need for 42 construction of new buildings grows. Since 38 38 2007, 50% of the world’s population has been living in urban areas, generating more than 80% of global GDP.9 By 2050 the urban population share is expected to reach 70%.10 OECD South East Asia Eastern Latin America Sub-Saharan Middle East Arab world high income Asia & Pacific Europe & & Caribbean Africa & North Africa Yet when provisions are overly precise, Central Asia keeping regulation up to date is challenging. Some building codes specify what materials Note: Application requirements for building permits are considered easily accessible if they can be obtained through the website of the building authority or another agency or through public notices, without a need for an appointment with an of�cial. The data can be used in construction. This seems to sample comprises 159 economies, including 16 in the Arab world. make sense. The materials are tested for Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 33 economies in the Arab world, the region getting a building permit takes 177 days on for building control from the Ministry of where access to application requirements average. Where an appointment with an of- Economic Development. Obtaining the land for building permits remains most difficult �cial is required, the process takes 199 days registry plan, building permit and certi�cate (�gure 4.4). OECD high-income economies on average. The average for such economies of conformity takes less time. A preconstruc- make it easier for businesses. In nearly all in the Arab world alone is even longer—293 tion inspection was eliminated. And separate these economies information on what is days. Many of these economies rank low on applications no longer need to be submitted needed to obtain a building permit is avail- the ease of dealing with construction permits for a water and sewerage connection and an able on the internet, in printed brochures or (�gure 4.5). electricity connection. A single application on posters displayed at the building authority suffices. or a related agency. Policies promoting access to information cannot on their own increase the account- Differentiating projects by risk Worldwide, in economies where entre- ability of officials and actively counteract Not all building projects are associated preneurs have access to such information corrupt practices. But easier access to the with the same social, cultural, economic or online or through brochures, applications are information needed to comply with regula- environmental risks. The construction of a processed more quickly and building permits tory requirements is associated with lower hospital or skyscraper cannot be compared granted in less time. In these economies transactions costs, lower levels of perceived with the construction of a 2-story commer- corruption and stronger voice and account- cial warehouse. Efficient governments have ability mechanisms. implemented rigorous yet differentiated FIGURE 4.5 How do Arab economies rank construction permitting processes to treat on the ease of dealing with Using one-stop shops to improve construction permits? buildings according to their risk level and coordination location. Global ranking (1–183) Before a building plan is approved, appropri- HONG KONG ate clearances are needed to ensure qual- Simple or low-risk buildings require less SAR, CHINA—EASIEST (1) ity and safety. Often several agencies are documentation than more complex struc- Saudi Arabia tures and can be approved faster. This saves Bahrain involved. To prevent overlap and ensure ef- United Arab Emirates �ciency, many economies have opted to put time for both entrepreneurs and authorities 20 the agencies in one location. These one-stop and allows them to direct their efforts and Qatar shops improve the organization of the re- resources more efficiently. Worldwide, the view process—not by reducing the number main criteria used to classify a construction Yemen, Rep. 40 of checks needed but by better coordinating project by its potential risk are based on the the efforts of different agencies. That way building’s use, location and size. Today 86 more resources can be devoted to safety economies have a risk-differentiated ap- 60 Mauritania checks rather than to multiple interactions proach, including Bahrain, Djibouti, Kuwait, Oman between the entrepreneur and the various Sudan, Syria, Tunisia, the United Arab Comoros agencies. Emirates, West Bank and Gaza, and the Morocco 80 Republic of Yemen. Tunisia Despite the clear bene�ts, only 26 econo- Jordan mies around the world have some kind of 100 one-stop shop for construction permitting. These include Bahrain, Jordan, Mauritania, NOTES Algeria Morocco, Qatar and Saudi Arabia. Iraq 1. OECD 2010. 120 Kuwait 2. PricewaterhouseCoopers 2005. West Bank and Gaza Mauritania’s one-stop shop, introduced in 3. Moullier 2009. Sudan early 2011, replaced the old �che de circula- Syrian Arab Republic 4. De Soto 2000. 140 tion (routing slip) system. This saves builders Djibouti 5. World Bank 2009a. time, because they no longer have to follow 6. PricewaterhouseCoopers 2005. Egypt, Arab Rep. up with each agency—the land registry, the 7. Singapore Business Federation 2009. 160 Lebanon �re and safety office, the urban planning 8. KPMG 2009. agency. Instead, everything is processed 9. McKinsey Global Institute 2011. through the one-stop shop. 10. WHO 2010. 183 Morocco’s one-stop shop in Casablanca, which became fully operational in the Note: Rankings are the average of the economy’s percentile rankings on the procedures, time and cost to comply with second half of 2010, led to similar ben- formalities to build a warehouse. See the data notes for details. e�ts. Entrepreneurs no longer need to Source: Doing Business database. request and receive a technical inspection Getting electricity Taw�k, a young Algerian entrepreneur who FIGURE 5.1 Doing Business measures the connection process at the level of distribution utilities manufactures home furnishings in Algiers, is working hard to expand his business by setting up a new warehouse. He negotiated �nancing with the bank, spent weeks getting building and operating permits and invested in new machinery as well as a new building. He has employees lined up and is ready to get started. But he will have to wait. He still Generation Transmission needs to get a new electricity connection for the warehouse—a process that takes more Distribution than 5 months and 6 interactions with the New connections utility and other agencies. Network operation and maintenance Metering and billing The �rst and longest step is to submit an Customer application to the Algerian electricity and gas distribution utility, Sonelgaz’s Société de which takes only 1 day. Finally, the customer consider electricity to be among the biggest Distribution de l’Électricité et du Gaz d’Alger, requests and obtains external works, meter constraints to their business (�gure 5.2). and wait for a technical report and estimate installation and the �nal connection by In addition, managers estimated losses of connection fees. This procedure takes 45 Kahramaa’s contractor—a procedure that due to power outages at an average 5.1% days. Taw�k must also obtain an external takes about 2 months. of annual sales.2 Studies have shown that inspection of the warehouse site by the util- poor electricity supply adversely affects the ity to �nalize the technical report and cost Doing Business measures the procedures, productivity of �rms and the investments estimate—a step that takes 10 days. At this time and cost for a small to medium-size they make in their productive capacity.3 point Taw�k pays the excavation fees to the business to get a new electricity connec- Researchers estimate that eliminating the Direction des Travaux Publics and awaits the tion for a standardized warehouse with electricity outages in Eastern Europe and authorization for excavation. In addition, his standardized electricity needs (�gure 5.1).1 Central Asia would increase GDP by 0.5%.4 electrical contractor must buy a transformer The warehouse is assumed to be located in It is therefore essential for businesses to and other equipment that is locally available the largest business city, in an area where have reliable, good-quality electricity supply. and then build the substation—a step that electricity is most easily available. Around takes around 2 months. But whether electricity services are reliable the world, electricity connections are pro- or not, the �rst step for customers is to get vided by distribution utilities that often retain It does not have to be this way. Getting a new connection, the process measured monopolistic positions even in otherwise an electricity connection in Qatar takes a by the getting electricity indicators. This liberalized electricity markets. Businesses customer only 3 interactions with the util- process represents only a small part of and other customers have little choice. ity and 3 months. The customer’s approved electricity services. Yet the indicators of- electrical contractor submits an application fer information on a number of issues for to Qatar General Electricity and Water WHY DOES GETTING ELECTRICITY which data were previously unavailable, Corporation (Kahramaa), then waits for MATTER? complementing other indicators measuring both the estimate of connection fees and an Infrastructure services, particularly electric- outcomes such as outages. Analysis of data internal inspection from the utility. This pro- ity, are a concern for businesses around the for 140 economies suggests that the getting cedure takes around 1 month, a much shorter world. World Bank Enterprise Surveys show electricity indicators can serve as a useful time than in Algeria. The customer then ob- that managers in 109 economies, 71 of them proxy for the broader performance of the tains the internal inspection from Kahramaa, low- or lower-middle-income economies, electricity sector.5 Greater time and cost to GETTING ELECTRICITY 35 and Qatar, the utilities often carry out the FIGURE 5.2 Firms consider electricity one of their biggest constraints external connection works themselves. As Share of managers identifying issue as the most serious obstacle to their business operation (%) part of this, they obtain the necessary ap- provals, streamlining procedures with other agencies. That means fewer interactions for the customer with authorities. Doing Business measures the number of interactions, the time and the cost a customer faces when applying for a new connection.7 Efficient utilities set standards for the quality of their services, to ensure that customers bear no practices extra costs or delays. And they ensure the safety of consumers, but without imposing an unnecessary burden on the customer. In many of these same economies the safety of Note: The data sample comprises 109 economies. installations is guaranteed by regulating the Source: World Bank Enterprise Surveys (2006–10 data). electrical profession rather than imposing additional checks. get an electricity connection are associated governance is associated with higher per with lower electri�cation rates. Additional capita electricity generation.6 What it takes to get electricity in the Arab connection procedures are more likely to world varies widely. While the process takes occur in economies where the electricity The connection process is governed by many around 6 weeks in Kuwait and Jordan, it takes supply is weak as a result of high losses in laws and regulations covering quality of service, around 6 months in Djibouti (table 5.1). In the transmission and distribution systems. general safety, technical standards, procure- the Comoros and Qatar only 3 procedures ment practices and internal wiring installations. are required; in Egypt and Kuwait there are Electricity services are among the most reg- And it involves institutions including utilities, 7. The cost is only 4% of income per capita ulated areas of economic activity. Whether municipalities, testing agencies, transport in Qatar—but about 8,800% of income per better sector performance in infrastructure agencies, regulatory agencies and agencies capita in Djibouti. services can be linked to the quality of responsible for safety controls. Doing Business regulatory institutions has already received gives insights into the regulatory aspects sur- The Arab world compares well with other attention from researchers and policy mak- rounding electricity connections and measures regions on the time and procedures to ers. A study covering 28 developing econo- how such regulations and institutions affect get electricity. The average time required mies found that a high quality of regulatory businesses when getting a new connection. in the Arab world is 77 days, faster than Doing Business can help identify the bottlenecks in any other region except Latin America TABLE 5.1 Where in the Arab world is getting in a connection process. What policy makers and the Caribbean. The number of proce- electricity easy—and where not? and regulators can do is facilitate this �rst step. dures averages 4.8, less than in any other Procedures (number) region except the OECD high-income Fewest Most HOW DOES GETTING economies (and East Asia and the Pacific, Comoros 3 Mauritania 5b ELECTRICITY VARY ACROSS THE where it is also 4.8). But the average Qatar 3 Algeria 6 ARAB WORLD? cost, at 1,830% of income per capita, is United Arab 4 Oman 6 In economies where the process is most higher than in all other regions except Emirates efficient, such as the United Arab Emirates Sub-Saharan Africa (table 5.2). Saudi Arabia 4 Egypt, Arab Rep. 7 a Tunisia 4 Kuwait 7 TABLE 5.2 Which regions make getting electricity easy—and which do not? Cost Time (days) Procedures Time (% of income Fastest Slowest Rank (number) (days) per capita) Yemen, Rep. 35 Bahrain 90 OECD high income 54 4.7 103 93 Kuwait 42 Qatar 90 Middle East & North Africa 71 5.1 79 1,317 Jordan 43 Comoros 120 Latin America & Caribbean 72 5.5 65 594 Iraq 47 Algeria 159 Arab world 73 4.8 77 1,830 Egypt, Arab Rep. 54 Djibouti 180 East Asia & Paci�c 75 4.8 88 1,079 a. Djibouti and the Republic of Yemen also require 4 Sub-Saharan Africa 122 5.2 137 5,430 procedures. South Asia 128 5.6 145 1,776 b. Bahrain, Iraq, Jordan, Lebanon, Morocco, Sudan, Syria, and West Bank and Gaza also require 5 procedures. Eastern Europe & Central Asia 129 6.6 168 751 Source: Doing Business database. Source: Doing Business database. 36 DOING BUSINESS IN THE ARAB WORLD 2012 In high-income economies in the Arab because other public agencies are excessively changes followed a first stage of regulatory world connection works usually require a bureaucratic, some utilities shift the admin- reforms in April 2010 to reduce the time simple line extension to the closest point istrative hassle to their customers. Among needed to obtain an excavation permit of supply. And in all these economies the procedures most commonly transferred from around 2 months to a little over 3 except Saudi Arabia the distribution util- to customers is applying to the municipality weeks. And in 2011 the utility reviewed ity inspects the internal wiring installation or the department of roads or transport for its internal work processes for connecting or requires installation by an electrical an excavation permit or right of way so that a 2-story warehouse. This shortened the contractor registered with the utility. But the utility can lay the cables or extend wires connection process by another 10 days. in lower-income economies in the region for the connection. Customers seeking a businesses face challenges similar to connection undertake such procedures in 48 Other economies can also serve as good those in Sub-Saharan Africa. Getting a economies. In the Arab world wait times range examples for the Arab world. Tonga is connection often requires the installation from 1 day in West Bank and Gaza—where a one. After reviewing past practices and of a distribution transformer, and internal Palestinian customer applying for a connec- procedures, its electricity commission wiring goes unchecked. tion needs to obtain a clearance from the produced a formal operations manual for Jerusalem municipality—to 34 days in Oman. supervising electrical safety and set time In Egypt customers have to contact 2 agencies limits of 7–15 days for each stage of the WHO REFORMED THE to obtain an excavation permit: the district of- internal wiring inspection. This resulted CONNECTION PROCESS—AND �ce and the Greater Cairo Utility Data Center. in a reduction of 8 days in the time taken WHAT HAS WORKED? by the commission to inspect the internal Economies where getting an electricity Efficient utilities engage with other service wiring over the past year. connection is easy have several good prac- providers to ensure that working relation- tices in common. Some are being adopted by Regulating the electrical profession ships are clear and function smoothly. Take other economies. Over the past 2 years 18 recent efforts in Hong Kong SAR, China. In The safety of internal wiring installations is economies took measures to make it easier March 2011 the government conducted a concern not only for those using a building to get an electricity connection, including a liaison group meeting with CLP Power but also for utilities. One customer’s faulty 9 economies in the past year. One of these Hong Kong Limited. Participants reviewed internal wiring can lead to power outages was Lebanon, the only economy in the Arab the application process for excavation affecting other customers connected to the world to do so in 2010/11. permits relating to electricity supply for same distribution line. In most economies Lebanon made getting electricity less costly 2-story warehouses in nonresidential customers therefore need to comply with as part of an effort to encourage legal con- areas. That led the transport department certain procedures aimed at ensuring quality. nections and limit electricity theft. In 2010 a to further streamline its procedures and But the approach taken to address safety is- decree aimed at “creating a new connection reduce the time for processing proposals sues varies. Overall, the Arab world performs system� reduced the electricity connection for temporary traffic detours from 21 days poorly in ensuring the safety of the internal fees charged by the utility. Most important, to 14. The necessary guidance note for the installation. Half its economies have no the security deposit was reduced from police force and the highway and transport safety standards in place, the largest share 50,000 Lebanese pounds ($33) per kilovolt- departments has been revised. These among regions (�gure 5.3). ampere (kVA) to 10,000 ($7). The applica- tion fee was also lowered. This reduced the overall cost by 29% of income per capita. FIGURE 5.3 Who is responsible for enforcing safety standards? Among economies worldwide that have Economies by type of safety certi�cation for internal wiring (% of total) reformed the connection process, the most effective and common features have in- 25 cluded streamlining procedures with public 39 40 Utility or 45 46 agencies or within the utility, regulating the 63 54 50 other agency electrical profession to ensure the quality of 29 6 Combination 5 internal wiring, increasing the transparency 6 5 of checks 6 7 of the connection cost and lessening the 13 9 Electrical 3 17 contractor burden of security deposits. 13 No regulations 46 48 19 13 50 50 39 for internal Streamlining approval processes 25 wiring safety 16 17 Streamlining approvals by utilities and other public agencies is among the most effective Eastern OECD Latin East Asia South Sub-Saharan Middle Arab Europe & high America & & Pacific Asia Africa East & world ways to reduce connection delays and the Central Asia income Caribbean North Africa duplication of formalities. Where delays occur Source: Doing Business database. GETTING ELECTRICITY 37 Some economies address safety by regu- to submit their application through an elec- Connection costs should be as transparent lating the electrical profession, establish- trical consultant (or contractor) selected as possible, to allow customers to contest ing clear liability arrangements for electri- from a preapproved list. But the utility still them when they feel they are paying more cal contractors. In the economies with inspects the internal installation. than they should. As utilities allocate the the most efficient connection processes, costs for new connections between existing the quality of the internal wiring is the Other economies regulate the connection and prospective customers, they also have responsibility of the electrical contractor process, by requiring customers to obtain to balance considerations of economic ef- who did the installation. The utility simply additional inspections and certi�cations �ciency and fairness. But it is often difficult requests certification by the electrical con- from the utility or outside agencies before in practice to distinguish between capital tractor that the internal wiring was done in a new connection is granted. This approach works needed to connect speci�c custom- accordance with the prevailing standards, leads to a greater burden on customers ers and those needed to accommodate usually established by the relevant profes- and longer average connection delays than projected growth or to improve the safety sional bodies. In the Arab world all Gulf regulating the electrical profession. or reliability of the distribution network. This Cooperation Council economies except leaves room to make new customers pay for As a first step toward creating a support- Saudi Arabia ensure quality standards for investments in the network that will bene�t ive institutional framework for ensuring the internal wiring by requiring customers other customers as well. electrical safety, economies can regulate the electrical profession. Yet regulating the In many economies connection costs are profession might not suffice where profes- not fully transparent. Utilities far too often sional standards are poorly established present customers with individual budgets FIGURE 5.4 How do Arab economies rank on the ease of getting electricity? and qualified electrical professionals in rather than follow clearly regulated capital short supply. Poorly installed wiring is still contribution policies aimed at spreading the Global ranking (1–183) causing many fires.8 �xed costs of expanding the network over ICELAND—EASIEST (1) several customers. Costs can usually be Such risks are even greater in economies divided into 2 categories: a clearly regulated where needed safety checks are lacking. In United Arab Emirates connection fee based on a formula or set as Qatar 39 economies, many of them in the Arab a �xed price; and variable costs for the con- 20 Saudi Arabia world, internal wiring installations are nection, accounting for the actual labor and never checked.9 This is the case in Saudi material required. Jordan Arabia, for example, which has among 40 Tunisia the highest rankings in the Arab world on Where a new connection can be made di- Iraq the ease of getting electricity (figure 5.4). rectly to the low-voltage network, regulated Lebanon Bahrain At the other extreme are governments and �xed fees represent a larger share of 60 Yemen, Rep. that require multiple checks, imposing an the connection cost in high-income econo- Kuwait Oman excessive burden on customers seeking mies. In general, the higher the income per a connection. In 19 economies, many of capita in an economy, the higher the share 80 Syrian Arab Republic them in Eastern Europe and Central Asia, of regulated fees in the total cost. Sweden is West Bank and Gaza internal wiring must undergo an average of among those that provide clear regulation Comoros 2 checks. 100 Egypt, Arab Rep. of fees. For the 140-kVA connection as- Morocco sumed in the case study, costs are �xed and Sudan Increasing the transparency of based on an average for similar projects in connection costs and processes the area. Information on fees also tends to 120 Mauritania The type of connection works can vary be more easily accessible in higher-income depending on the network’s capacity.10 140 If that capacity is constrained, a more TABLE 5.3 Who in the Arab world makes Djibouti getting electricity least costly— complicated connection may be required, effectively leading to an expansion of the and who most costly? distribution network. The resulting capital Cost (% of income per capita) 160 Algeria investments (such as the installation of a Least Most distribution transformer) must be covered Qatar 4.1 Comoros 2,685.1 by the new customer. This obligation, United Arab 14.6 Sudan 3,949.3 183 Emirates more common in low-income economies, Saudi Arabia 18.1 Yemen, Rep. 4,569.8 Note: Rankings are the average of the economy’s substantially raises the total connection percentile rankings on the procedures, time and cost Kuwait 48.2 Mauritania 7,310.9 to get an electricity connection. See the data notes cost (table 5.3). Oman 62.5 Djibouti 8,799.1 for details. Source: Doing Business database. Source: Doing Business database. 38 DOING BUSINESS IN THE ARAB WORLD 2012 systems and have to fear that contracts can FIGURE 5.5 Connection fee schedules are not very accessible in the Arab world be enforced only with signi�cant delays.14 Share of economies where fee schedules are easily accessible (%) But utilities might charge security deposits not only to protect themselves against �nan- Sub-Saharan Africa 35 cial losses from delinquent customers; they South Asia 38 might be tempted to do so to improve their Middle East & North Africa 47 cash flow as well. Arab world 47 Latin America & Caribbean 50 Where cash flow considerations are not the motivation for charging security deposits, East Asia & Pacific 70 but utilities still feel that they must rely on Eastern Europe & Central Asia 88 them to deter nonpayment, they should OECD high income 90 at least consider lessening the financial burden that security deposits represent for Note: Fee schedules are considered easily accessible if they can be obtained through the website of the relevant authority or another government agency or through public notices, without a need for an appointment with an of�cial. The data sample customers. A start would be to return the comprises 181 economies, including 19 in the Arab world. deposit after 1 or 2 years and not at the end Source: Doing Business database. of the connection contract. Returning the deposit with interest is a route that some economies—in a regulation, on a website or Easy access to fee schedules and low fees utilities already pursue. In 19 economies through a brochure or board at a customer often go hand in hand. Regardless of income utilities also allow customers to settle the service office. levels, connection fees tend to be lower in security deposit with a bank guarantee or economies where fee schedules are easily bond rather than deposit the entire amount Low capacity of a network does not nec- accessible. This can be seen in the Arab with the utility. The service cost for such essarily mean high cost for a customer.11 world: getting an electricity connection bank guarantees usually amounts to less Where the new connection requires a costs only about half as much (relative to than the interest that customers would more complicated installation that means income per capita) in economies where fee lose on the deposit. More important, bank installing a distribution transformer, utili- schedules are easily accessible as in those guarantees both allow customers to keep ties can still regulate the cost that custom- where they are not (�gure 5.6). control of their financial assets and improve ers must pay. their cash flow. Lessening the burden of security Efficient utilities make it easy for customers deposits to �nd out what they need to know. They Utilities in 88 of the 183 economies surveyed post all the necessary information about in 2010/11 charge customers security de- procedures and paperwork for new con- posits as a guarantee against nonpayment of nections on their website, in their office or FIGURE 5.6 Electricity connection costs are future electricity bills.13 Security deposits are lower in Arab economies with clear in other public offices. They also post their particularly common in Latin America and disclosure of fees performance standards, such as for turn- the Caribbean and in Sub-Saharan Africa. Average cost to connect to electricity around time. Utilities in OECD high-income (% of income per capita) economies and in Eastern Europe and Because most utilities hold the deposit until Central Asia make it easier for customers the end of the contract and repay it without to �nd information on connection fees than interest, this requirement can impose a 2,419 those in other regions. In the Arab world fee substantial �nancial burden on small and schedules are easily accessible in only 47% medium-size businesses, especially those of economies (�gure 5.5). facing credit constraints. In Mauritania an entrepreneur has to pay a security deposit 1,378 Some energy regulators monitor the fair- ness of the connection cost. Preliminary amounting to 1,109.3% of income per capita. research shows that regulators in 42 of Compare that with the 1.28% of income per 113 economies request quotes presented capita paid in Saudi Arabia or the absence of Easily accessible Not easily by utilities to customers. Such monitoring any deposit required in Bahrain. accessible is good not only for customers but also for Arab economies by accessibility of Because security deposits are supposed to fee schedules for electricity connections the electricity sector. Recent research found that the mere existence of a regulatory protect utilities against the risk of nonpay- agency affects the performance of utilities ment, it is not surprising that they are more Note: The data sample comprises 19 Arab economies. Relationships are signi�cant at the 1% level after controlling in Latin America.12 The quality of the regula- likely to be charged in economies where for income per capita. tors matters too. utilities cannot count on efficient court Source: Doing Business database. GETTING ELECTRICITY 39 NOTES internal wiring mandatory was validated 10 1. For more details on the methodology, see years ago but must still be signed by the the data notes. president before it enters into force. 2. World Bank Enterprise Surveys (2002–10). 10. Doing Business distinguishes between The data sample includes 113 economies. 2 cases: connecting to the low-voltage network and connecting to the medium- 3. Calderon and Servén 2003; Dollar, voltage network. The �rst case involves Hallward-Driemeier and Mengistae 2005; laying low-voltage underground cables or Reinikka and Svensson 1999; Eifert 2007; installing low-voltage overhead wires from Iimi 2008. the metering point to the closest connec- 4. Iimi 2008. tion point on the network. The second case 5. This analysis, by Geginat and Ramalho usually occurs when the utility’s low-voltage (2010), was done in 2009, when the data network lacks the capacity to accommodate sample for the getting electricity indicators the power demand of a customer. This case included only 140 economies. For 2011 the involves installing a distribution transformer indicators cover 183 economies. and connecting it between the customer’s 6. Cubbin and Stern 2006. installation and the utility’s medium-voltage 7. For more details on the methodology, see network. According to the standardized case the data notes. Doing Business records all the study, the customer requests a nontrivial but procedures, the time and the cost required still relatively modest 140-kVA connection. for a business to obtain an electricity By comparison, the demand of a residential connection for a newly constructed building, connection is about 20 kVA. including an extension or expansion of the 11. Connection costs are not just a function of existing infrastructure. All 3 aspects have the general infrastructure in an economy. the same weight, and the ranking on the They vary signi�cantly among economies ease of getting electricity is the simple within income groups, suggesting room average of an economy’s percentile rankings to reduce the cost regardless of existing on those 3 components. infrastructure. 8. “Causes of Fire Emergencies Managed 12. Andres, Guasch and Lopez Azumendi 2008. by Rescue 1122 in Punjab, Pakistan,� 13. The number of economies where utilities Hemming�re.com, http://www.hemming�re. charge security deposits does not include com, accessed August 30, 2011. those where security deposits are rolled over 9. In Senegal, where less than 7% of residential into consumption bills for the �rst 3 months wiring installations meet the standards, a (Tunisia and the United States). decree that would make the inspection of 14. World Bank 2010a. Registering property Imagine a family in Casablanca that has been FIGURE 6.1 What are the time, cost and number of procedures required to transfer property between in the home appliance business for 3 genera- 2 local companies? tions now. Its business has grown to 50 em- ployees. The family members who run it are ready to expand again—and they want to buy Cost (% of property value) a new warehouse. Since the business needs the warehouse right away and the family has Buyer can use the property, no time to spend on repairs, they choose one resell it or use it as collateral that is in good condition and complies with all safety standards, building codes and other Procedures legal requirements. The warehouse is located Land & 2-story warehouse on about 550 square meters of land and has Seller with property 2 spacious stories totaling more than 900 registered and no square meters. The business is buying the title disputes Time warehouse from a local company that has Preregistration Registration Postregistration (days) had the building registered under its name for the past 10 years. But the family will have to put its plans for expansion on hold for a while: property transfers in Morocco take WHY DOES PROPERTY With up-to-date land information, govern- more than 10 weeks and 8 different interac- REGISTRATION MATTER? ments also can map the different needs tions with agencies. Registered property rights are necessary in their cities and strategically plan the to support investment, productivity and provision of services and infrastructure in This is the standard case scenario studied by growth.1 Cadastres or surveys, together with the areas of each city where they are most Doing Business through its registering prop- land registries, are tools used around the needed.3 And land information can help erty indicators. Doing Business records the world to map, prove and secure property in planning the expansion of urban areas. procedures necessary for a business to pur- and use rights. These institutions are part of This is especially important in economies chase a property from another business and the land information system of an economy. prone to natural disasters. When there’s no to transfer the property title to the buyer’s With land and buildings accounting for be- planned urbanization, informal dwellings and name (�gure 6.1). The process starts with tween half and three-quarters of the wealth slums abound, even in areas that surveyors obtaining the necessary documents, such in most economies,2 having an up-to-date identify as being at high risk from disasters. as a copy of the seller’s title, and conducting land information system clearly matters. Tools such as cadastres and survey maps due diligence if required. The transaction is can be used in city planning, as part of the considered complete when it is opposable to Evidence from economies around the world land information system of a city, to avoid third parties and when the buyer can use the suggests that property owners with regis- or mitigate the effects of environmental or property, use it as collateral for a bank loan tered titles are more likely to invest. They climate-related risks on urban populations. or resell it. The ranking on the ease of regis- also have a better chance of getting credit tering property is the simple average of the when using their property as collateral. WHO REFORMED PROPERTY percentile rankings on the procedures, time REGISTRATION—AND WHAT HAS and cost to register property. Every proce- The bene�ts of land registration go beyond WORKED? dure required by law or necessary in practice the private sector. For governments, having In the past 7 years Doing Business recorded is included, whether it is the responsibility of reliable, up-to-date information in cadastres 169 reforms, undertaken in 107 economies, the seller or the buyer and even if it must be and land registries is essential to correctly that increased the efficiency of procedures completed by a third party on their behalf. assess and collect tax revenue. for transferring property. In these economies REGISTERING PROPERTY 41 rights or title. An example is the land registry FIGURE 6.2 Transferring property has become faster and easier in the Arab world in Spain. And some, such as that in Ghana, Number of Doing Business reforms making it easier to register property in the Arab world, include both a deed and a title system.5 by Doing Business report year Title systems usually provide conclusive evi- Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms dence about who holds the rights in a given property. The rights registered are opposable 13 to third parties and in some cases cannot be voided or annulled. To know who the rightful 0 reformsQ1 reform Q2 reforms Q3 reforms owner of the property is and whether anyone else has rights over it, the buyer needs to consult only the property information at the Arab world averages in registering property DB2006 DB2012 land registry.6 Global average Procedures (number) Deed systems, by contrast, do not provide 6 conclusive proof of who owns property. 5 6 Deed systems record property transfers, but the fact that a transfer is registered Time (days) does not necessarily mean that it was valid. 45 33 Because the last registered owner could 59 be holding a title that is not valid, a buyer Cost (% of property value) will usually hire a lawyer to determine the 7.1 “good root� of the title he or she is buying. 5.6 5.7 Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample TABLE 6.1 Who in the Arab world makes for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for registering property easy— a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. and who does not? Source: Doing Business database. Procedures (number) Fewest Most the average time to transfer property fell by made such efforts. While most have improved United Arab 1 Djibouti 7b 59 days, from 122 to 63, and the average their efficiency in registering property as Emirates cost by 4% of the property value, from 10% measured by Doing Business, on average Arab Bahrain 2 Lebanon 8 to 6%.4 In the Arab world in the past 7 years, economies moved less than 5 percentage Oman 2 Kuwait 8 13 reforms in 10 economies led to reductions points closer to the frontier. Saudi Arabia 2 Morocco 8 in the average number of procedures and the Mauritania 4a Algeria 10 average time and cost to register property In 2010/11, 20 economies around the world—but none in the Arab world—made it Time (days) (�gure 6.2). easier for local businesses to register prop- Fastest Slowest The process of registering property varies erty by reducing the time, cost or number Saudi Arabia 2 Algeria 48 widely among Arab economies. While regis- of procedures required. The most common United Arab 2 Mauritania 49 Emirates tering property takes 2 days in Saudi Arabia measures were introducing time limits or ex- Sudan 9 Iraq 51 and the United Arab Emirates, it takes more pedited procedures, reducing taxes or fees, Qatar 13 Egypt, Arab Rep. 72 than 2 months in Egypt. It requires only 1 streamlining procedures and computerizing Oman 16 Morocco 75 procedure in the United Arab Emirates, but cadastres and registries. 10 in Algeria. Property registration costs Cost (% of property value) nothing in Saudi Arabia—the only economy Property registries around the world confer Least Most in the region where this is the case—but different legal effect on the information they Saudi Arabia 0.0 Algeria 7.1 more than 27% of the property value in Syria record. Not all offer conclusive information Qatar 0.3 Jordan 7.5 (table 6.1). on property ownership. Some simply keep a Kuwait 0.5 Comoros 10.5 record of property transactions—that is, they West Bank 0.8 Djibouti 13.0 In the past 6 years Egypt narrowed the gap to record the transfer of deeds. One example and Gaza the frontier in registering property substantially, is the Registry of Deeds and Documents in Egypt, Arab 0.8 Syrian Arab 27.5 by about 21 percentage points (�gure 6.3). It The Bahamas. Others record the changes in Rep. Republic did so through signi�cant cost reductions as the holders of property rights that occur as a a. The Comoros, Syria and Tunisia also require 4 procedures. b. Egypt, Jordan, Qatar, and West Bank and Gaza also require well as measures to streamline administrative result of the deeds presented to the registry— 7 procedures. procedures. Few other Arab economies have that is, they record the changes in holders of Source: Doing Business database. 42 DOING BUSINESS IN THE ARAB WORLD 2012 FIGURE 6.3 Few Arab economies have signi�cantly narrowed the gap to the frontier in registering property Distance to frontier in registering property, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 tes an ab ia da n ep . nis ia ia za Ira q wa it co ros no n da n bli c uti p. eri a ira Om Ar Su ,R tan Ga roc mo ba Jor pu bo Re Alg Em di en Tu auri and Ku Mo Co Le Re Dji rab b u m M k ab t, A ra Sa Ye Ba n Ar yp dA st ian Eg ite We Syr Un Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the registering property indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. To establish this in The Bahamas, lawyers high-income economies and Latin America reducing the global average cost to register conduct searches on the title to the property and the Caribbean stand out for the highest property by 4% of the property value. Jordan at the Registry of Deeds and Documents— compliance. Yet in Latin America and the reduced property transfer fees from 10% of but also at the courts and at the company Caribbean, despite the success of time limits the property value to 7.5% in May 2009. registry—to check whether the companies in the economies that use them, only 5 of 32 Some economies switched to �xed registra- that previously owned the property owned it economies have statutory time limits. tion fees over the past 7 years—including lawfully and transmitted their property rights Egypt in the Arab world. lawfully. These searches add B$300 ($300) In the past 7 years 19 economies introduced and 45 days to the purchaser’s due diligence. time limits. But time limits work only when In Egypt in 2005, 90% of properties were the agency has the capacity to comply with either unregistered or registered at under- At the end of the day all systems are trying them. In most economies time limits there- estimated values.9 Transferring a property to do the same thing: maintain an up-to-date fore supported broader changes. Twelve between domestic companies cost 5.9% of database of rights in property. And deed economies—including Egypt—introduced the property value. Compare that with less and title systems can be equally efficient.7 time limits while at the same time stream- than 0.5% of the property value in New York. Comparison of property registration sys- lining procedures through computerization Basing the registration fee on a percentage of tems—based solely on the procedures, time and reorganization. In 2010/11, 4 economies the property value (3%) encouraged under- and cost to transfer and register property introduced time limits for services provided valuation in Egypt. It also complicated prop- as measured by Doing Business—suggests a by land registries or notaries, reducing the erty registration, required more regulation to number of common good practices. time to transfer property by up to 42 days. secure tax revenues for the government and created opportunities for corruption. Introducing time limits that are Setting low fixed fees complied with Property transfer taxes are an important In August 2006 Egypt lowered the total cost Time limits give citizens a reference for how source of revenue for many governments. of registration by starting to charge the buyer much time a procedure will take at most. If But when transfer fees and taxes are too a flat fee of 2,000 Egyptian pounds ($332) the procedure is not completed within that burdensome, even registered property might rather than 3% of the value of the property. time limit, they know they need to follow up. quickly become informal if the high costs In addition, it capped the notarization and discourage the registration of subsequent registration fees at 30 pounds ($5) and re- Fifty-four economies worldwide set legal transactions. This not only weakens the duced 14 other registration fees to less than time limits for property registration pro- protection of property rights. It also reduces 36 pounds ($6) apiece. The low costs en- cedures, and 13 of them offer expedited potential revenue from property taxes. couraged formal registration of property. As procedures. Globally, 3 of 4 economies with Osamah Saleh, chairman of Egypt’s Mortgage statutory time limits comply with them.8 Over the past 7 years 56 economies lowered Finance Authority, said at the time, “We were Eastern Europe and Central Asia, OECD transfer taxes and other government fees, aiming to reduce property registration fees REGISTERING PROPERTY 43 so that every property holder will have the One-stop shops are an efficient way to mini- FIGURE 6.4 How do Arab economies rank on chance to receive a formal title. The poor mize interactions between agencies and entre- the ease of registering property? especially would bene�t because they would preneurs. Ghana did this under the roof of its Global ranking (1–183) have the chance to use their properties as col- Lands Commission. But not all economies can lateral, start doing business and achieve their afford to bring all agencies involved in prop- SAUDI dreams.� erty transfer under one roof. Even so, many ARABIA—EASIEST (1) have been able to coordinate the functions or United Arab Emirates Streamlining procedures records of at least 2 institutions involved in the Thirty-two economies streamlined pro- property transfer process. In most cases this 20 Oman cedures and linked or improved agencies’ coordination has linked the land registry to systems to simplify property registration in the tax agency or valuation agency. One way Bahrain the past 7 years. These measures reduced to do this is to have a representative of one Qatar 40 Sudan interactions between entrepreneurs and of the institutions present at the other—as in agencies—saving between 1 and 2 proce- Burundi and Ethiopia. Another is to link agen- Yemen, Rep. dures on average—while maintaining securi- cies electronically—as in Denmark, Latvia, 60 Mauritania ty and controls. This feature was particularly Lithuania, Peru and Portugal. Tunisia common in Eastern Europe and Central Asia. Comoros 80 West Bank and Gaza Syrian Arab Republic Kuwait BOX 6.1 Achievements and challenges in improving land management in Jordan Egypt, Arab Rep. In Jordan the Department of Land and Surveys, part of the Ministry of Finance, is the entity 100 Iraq responsible for registering private and public land, surveying land and maintaining the cadas- Jordan Lebanon tre, and managing public land. The department provides roughly 40 services, covering around 180 procedures. A client feedback mechanism that it established highlighted general dissatis- faction with its services—especially with the systems for private land transactions, which were 120 perceived as complicated. This prompted the department to undertake a series of changes aimed at improving the delivery of services relating to private land and, later, to public land. The efforts led to concrete achievements. The Department of Land and Surveys: 140 Morocco Ė Digitized and automated the registration and title systems and the cadastre—and linked Djibouti the registration and cadastre databases—making records more authoritative in con�rming rights. 160 Ė Digitized and archived 95% of paper registry records, making them more accessible and Algeria easier to search. Ė Added national identi�cation numbers to about 68% of land registration documents, to avoid title disputes caused by common family names. 183 Ė Digitized and automated records related to public land surveying and title, enhancing the Note: Rankings are the average of the economy’s public land inventory. percentile rankings on the procedures, time and cost to register property. See the data notes for details. Ė Linked its databases with Ministry of Justice databases to track private land transfers ef- fected by notaries public through irrevocable powers of attorney, a practice that is used to Source: Doing Business database. avoid registration and taxes and has led to numerous title disputes. Ė Implemented twice-yearly customer satisfaction surveys and a complaints system, to help Some economies streamlined procedures identify and guide future improvements. by eliminating the requirement to obtain the With all these achievements in place, however, the efforts to improve land management municipality’s approval for property trans- continued to face obstacles: fers. One of these was Saudi Arabia, where Ė Legal and regulatory framework. The framework for land administration, comprising more today an entrepreneur transferring property than 20 laws and regulations, remains fragmented and contradictory, hindering wider re- is required only to prepare the sale deed and forms. It is also outdated. For example, a lack of laws providing for electronic signature and register the new title. payment means that some transactions must still be conducted in person and in cash. Ė Inadequate public land management. The Department of Land and Surveys lacks the skills and resources to manage public land effectively. This results in lost revenues for the Going electronic Ministry of Finance. It has also allowed widespread illegal encroachment on public land. In 60% of economies around the world the As the government wrestles with wider public sector reform, a reluctance to create new property registries have electronic �les.10 In entities has stymied debate on shifting responsibility for public land management away the Arab world 12 of 20 economies have from the department. an electronic registry—Bahrain, Egypt, Ė Cultural norms. The department initiated a pilot one-stop shop for private land transactions, Iraq, Jordan, Kuwait, Lebanon, Morocco, but it soon proved ineffective. Similar approaches have succeeded for driver’s licenses, passports and civil documents in Jordan. But land is of much greater value, and citizens Oman, Saudi Arabia, Tunisia, the United were less likely to trust the department to conduct the appropriate procedures without Arab Emirates, and West Bank and Gaza. face-to-face contact. Jordan’s Department of Land and Surveys 44 DOING BUSINESS IN THE ARAB WORLD 2012 has particularly focused on digitizing its NOTES records (box 6.1). 1. See Deininger (2003) for a summary and analysis of relevant studies. Digital records have advantages over paper 2. World Bank 1989, p. 87. records. They take less space, and backup 3. Property information held in cadastres and copies ensure that property records will land registries is part of the land information not be compromised in the event of natural available to governments. Land information also includes other geographic, environ- disasters or civil wars. Electronic systems mental and socioeconomic data related to also make errors and overlapping titles land that are useful for urban planning and easier to spot. But this does not mean that development. paper registries cannot be efficient. Thailand 4. Doing Business database. had a very efficient manual system before 5. Property in Ghana falls under either the title going electronic. And having digital records or the deed system, depending on where it is no assurance that an economy has a good is located. This is as a result of the phased system in place to manage this information. introduction of the Land Title Registration Law of 1986, which introduced the title system in Ghana. The capital city of Accra Still, transferring property takes about half falls under the title system. as much time in economies with comput- 6. The title systems offering the strongest con- erized registries as in those without them. clusive evidence are those that do not allow All 31 OECD high-income economies have any kind of legal claim against the registered electronic registries. Thus it is no surprise rights (that is, the registered rights are that OECD high-income economies have absolutely indefeasible). Other title systems are less absolute in the indefeasibility of the fastest property registration, taking 31 the registered rights and allow claims in days on average. The average in the Arab exceptional circumstances (for example, world is 33 days. in the case of a registration that occurred on the basis of a property sale-purchase Twenty-seven economies computerized agreement that is declared null and void their registries in the past 7 years. The after registration took place). land registry in Ramallah computerized its 7. Whether an economy has a title or a deed records in 2008 with the help of a World system has no influence on its ranking on the ease of registering property. There is Bank project. As a result, the time to transfer no statistically signi�cant difference in how property fell by 25% in West Bank and Gaza. economies rank based solely on their choice In 2007 Saudi Arabia implemented a com- of registration system. prehensive electronic system for registering 8. Doing Business database. title deeds—creating a simple, efficient prop- 9. World Bank 2008a. erty transfer process that can be completed 10. Doing Business database. in only 2 days. Today Saudi Arabia tops the global rankings on the ease of registering property (�gure 6.4). In Tunisia, by contrast, the property transfer process still requires a visit to the land registry, because certi�cates can only be obtained in person. 45 Getting credit Doing Business measures 2 types of institu- do retailers or utility companies as well as immovable property.1 In economies with a tions and systems that can facilitate access �nancial institutions share credit information modern secured transactions system, these to �nance and improve its allocation: credit with public or private registries? Are data assets could easily be used as collateral. information registries or bureaus and the on both �rms and individuals distributed in But in most developing economies movable legal rights of borrowers and lenders in credit reports? property would probably be unacceptable to secured transactions and bankruptcy laws lenders as collateral—either because the law (�gure 7.1). These institutions and systems Rankings on the ease of getting credit are does not recognize nonpossessory interests work best together. Information sharing based on the sum of the strength of legal in movable collateral or because it does not helps creditors assess the creditworthiness rights index and the depth of credit informa- provide sufficient protection for lenders ac- of clients (though it is not the only risk tion index. cepting it. This constraint matters. Research assessment tool), while legal rights can fa- shows that in developed economies bor- cilitate the use of collateral and the ability to rowers with collateral get 9 times as much enforce claims in the event of default. LEGAL RIGHTS credit as those without it. They also bene�t Doing Business measures the legal rights of from repayment periods 11 times as long and The 2 types of institutions are measured by borrowers and lenders in secured transac- interest rates up to 50% lower.2 2 sets of indicators. The �rst set of indicators tions (or collateral) laws and bankruptcy analyzes the legal framework for secured laws—to describe how well these laws A modern secured transactions system pro- transactions by looking at how well collateral facilitate lending. vides for the use of security interests in all and bankruptcy laws facilitate lending. For types of movable assets—whether tangible example, does the law allow companies to or intangible, whether present, after-acquired WHY DO SECURED use future crops as collateral? Does the col- or future assets, and wherever located— TRANSACTIONS REGULATIONS lateral need to be described in detail in the including both possessory and nonposses- MATTER? loan agreement, or is a general description sory interests.3 A modern legal framework allowed? Do secured creditors have prior- Movable assets, not land or buildings, for secured lending also establishes clear ity rights to the collateral in a bankruptcy often account for most of the capital stock priority rules to resolve conflicting claims procedure? of private �rms and an especially large between secured creditors when a debtor share for micro, small and medium-size defaults, whether in a bankruptcy procedure The second set of indicators looks at the enterprises. In the developing world 78% or not. One effective way to establish priority coverage, scope and quality of credit infor- of the capital stock of businesses is typi- rights is to record the security interest in a mation available through public credit regis- cally in movable assets such as machinery, centralized collateral registry. tries and private credit bureaus. For example, equipment or receivables, and only 22% in Creditor rights and access to FIGURE 7.1 Do lenders have credit information on entrepreneurs seeking credit? Is the law finance favorable to borrowers and lenders using movable assets as collateral? Research has shown that both legal protec- tion for creditors and institutions for sharing Credit inform credit information are associated with higher ation ratios of private credit to GDP. In developing Potential Can movable assets be economies with poorly functioning legal borrower used as collateral? systems, credit markets might depend only Movable Collateral Credit registries and on credit information sharing. But in devel- asset registry Lender credit bureaus oped economies with effective systems of What types can be Can lenders access bankruptcy, creditor rights can play a greater used as collateral? credit information on borrowers? role.4 Strong creditor rights expand the avail- ability of loans. One reason is that when 46 DOING BUSINESS IN THE ARAB WORLD 2012 highest score (6) on the strength of legal FIGURE 7.2 The Arab world has lagged behind in providing stronger legal rights rights index (table 7.1). Number of Doing Business reforms strengthening legal rights of borrowers and lenders in the Arab world, by Doing Business report year The Comoros implemented amendments to the OHADA (Organization for the Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms Harmonization of Business Law in Africa) Uniform Act on Secured Transactions that 2 broaden the range of assets that can be used as collateral (including future assets), extend 0 reformsQ1 reform the security interest to the proceeds of the original asset and introduce the possibility of out-of-court enforcement. Arab world average strength of legal rights index (0–10) DB2006 DB2012 Implementing a new secured transactions Global average law and its corresponding collateral registry 2.9 takes around 3 years on average. And the 3.3 change may not have a noticeable economic 5.8 impact right away. As with any legislative Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample change, that may take some time—because for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. the impact depends on users’ awareness and Source: Doing Business database. adoption of the new mechanism. Yet a sound secured transactions system sets the stage lenders have better legal protection during laws.5 But for a legal reform to have a real for future bene�ts. bankruptcy and reorganization of the debtor, impact, enforcement of the rights stipulated they become more con�dent about the in laws needs to be possible in practice. The Through experience with collateral reforms return of their investment in cases of default enforceability of contracts matters for the in economies around the world, a number of and therefore more willing to extend credit structure and pricing of loans.6 Where en- good practices have evolved (box 7.1). on favorable terms. forcement of property rights is weak, lenders Allowing out-of-court enforcement tend to offer short-term credit as a way to Legal reform, enforcement and protect themselves from debtor behavior Creditors are unlikely to extend loans secured lending behavior such as defaults.7 by collateral if they must rely on long, costly and burdensome court proceedings to enforce Reforming the legal framework for secured Secured transactions reforms are strength- their rights in case of a default. Quick enforce- transactions can affect the behavior of lend- ening the legal rights of borrowers and ment is particularly important for movable ers. Studies show that banks tend to increase lenders in economies around the world. One property, which depreciates over time. One their lending after amendments of collateral of these is Saudi Arabia. In 2010 it amended way to ensure quick enforcement is to allow its commercial lien law, improving its legal parties to a security agreement to agree to TABLE 7.1 Who in the Arab world has framework for secured transactions and out-of-court enforcement at the time the se- the strongest legal rights for providing for the creation of a uni�ed lien curity interest is created. In this approach the borrowers and lenders— security agreement is essentially considered registry. Saudi Arabia is now transferring and who the weakest? information from the existing registries to to be an execution deed, allowing the secured Strength of legal rights index (0–10) the new one, which along with a uni�ed creditor to seize the collateral or to ask a non- Strongest Weakest database will soon be available to users. judicial official to do so if the debtor contests Comoros 6 Mauritania 3b the enforcement. This has the added bene�t of Saudi Arabia 5 Iraq 3 WHO REFORMED SECURED reducing dependence on the courts and thus Lebanon 4 West Bank and 1 Gaza TRANSACTIONS LAWS—AND freeing up court resources. United Arab 4 Syrian Arab 1 WHAT HAS WORKED? Emirates Republic Today 123 economies globally—including The Arab world has been slow to reform Kuwait 4a Djibouti 1 only 4 in the Arab world (Bahrain, the secured transactions laws. In the past 7 Note: The rankings on legal rights for borrowers and lenders Comoros, Qatar and Saudi Arabia)—allow reflected in the table consider solely the law. Problems may years only 2 Arab economies—Saudi Arabia some sort of out-of-court enforcement. But occur in the implementation of legal provisions and are not and the Comoros—implemented reforms reflected in the scoring. See the data notes for details. not all extrajudicial procedures are efficient. strengthening the legal rights of borrowers a. Bahrain, Jordan, Oman, Qatar and Sudan also score 4 on In some economies, for example, the law the strength of legal rights index. and lenders (�gure 7.2). The Comoros did requires notarization of the agreement. This b. Algeria, Egypt, Morocco, Tunisia and the Republic of Yemen so in 2010/11—and now has the region’s also score 3 on the strength of legal rights index. can protect unsophisticated debtors from Source: Doing Business database. abusive creditors. But if not managed well, GETTING CREDIT 47 notarization might also imply an added cost Allowing a general description of property and permit a generic description of for credit. In other economies the law over- collateral the assets to secure a loan as long as these protects the debtor, making the procedure Some collateral laws require a speci�c de- assets are identi�able—for example, allowing expensive and unappealing to secured credi- scription of the assets in the security agree- the contract to stipulate as the collateral “in- tors. When legal reform introduces a system ment. This increases transactions costs when ventory of general merchandise as of [date] of out-of-court enforcement, it needs to strike revolving assets such as inventory are used and for [amount].� Such contracts typically the right balance—to protect the rights of all as collateral—because every time inventory obligate the debtor to maintain the same those affected, including the debtor and other is purchased or sold, the security agreement aggregate value of inventory and the same creditors. In the past 7 years Doing Business re- needs to be updated and perhaps even rereg- type of goods. For nonpossessory security in- corded 39 legal reforms in this area, including istered. Allowing a general description of the terests to be effective, the debtor needs total the reforms in the Comoros and Saudi Arabia. collateral makes security agreements more freedom to use the assets as long as proper The recent amendments to the OHADA flexible and increases access to �nance. care is taken to preserve their commercial Uniform Act on Secured Transactions allow value. Today 91 economies allow a general out-of-court enforcement of security interests Laws providing the most flexibility allow description of collateral in a single category in some types of movable property. security interests in all types of movable and in combined categories, the Comoros being the only Arab economy to do so. BOX 7.1 Some good practices for secured transactions reform in the Arab world Maintaining a unified registry The Arab world lags behind other regions in �rms’ access to private credit and in the ro- Before accepting collateral, creditors need bustness of secured transactions and movable collateral systems. This is evident in data from an effective way to find out whether the numerous sources. According to World Bank Enterprise Surveys conducted in 2010, the Arab world had the smallest share of �rms (25.07%) with credit lines or loans from �nancial institu- potential borrower has already granted a tions, and substantial collateral requirements (82% of loans require some type of collateral). security interest in the collateral and, if so, (Arab world and Arab economies as used in this box exclude the Comoros, Mauritania and what priority those rights have. A central Sudan.) collateral registry—unified geographically As of September 2011 reform efforts in the area of secured transactions laws and modern and recording interests in all types of mov- movable collateral registries remained very weak in the Arab world. But a handful of econo- able assets—supports the use of movable mies in the region have started to look into reforming their secured transactions and collateral systems. Such efforts are more likely to lead to effective systems if they take into account the collateral to secure loans. If registries are following good practices: not unified across regions, a creditor will Ė Creating a unitary legal system. Developing a stand-alone law to regulate all aspects of secu- have no way of knowing whether a security rity interests in movable property (such as a secured transactions or personal property law) interest in an asset has already been reg- is more efficient and creates less conflict and uncertainty than revising existing provisions istered in another jurisdiction. And a need in multiple laws (such as in the commercial code, civil code, chattel mortgage law and the to search multiple registries increases like). transactions costs. But where registries are Ė Broadening the scope of the secured transactions law by allowing broad pools of assets, with either a speci�c or a general description, to be accepted as collateral. unified and computerized, a creditor can Ė Simplifying the creation of security interests in movable property. Allowing the parties to a immediately check all the registries in an credit agreement to freely agree on the conditions of the transaction eliminates cumber- economy from one location, by searching some and unnecessary formalities for the creation and enforceability of security interests the debtor’s name. in movable property. Ė Modernizing movable collateral registries. A centralized, real-time electronic registry provid- Today 68 economies globally—including ing public access to its records can notify parties about the existence of a security interest 3 in the Arab world (Bahrain, Kuwait and in movable property and establish the priority of creditors relative to third parties. Qatar)—have some sort of centralized reg- Ė Establishing a clear priority scheme for secured creditors. In 2009 the Arab world had the low- istry for movable property used as collat- est ranking among the world’s regions on the strength of legal rights index, which includes eral by companies. But in only 15 of these measures of the extent to which collateral systems establish clear priorities for secured creditors. 68 economies can the collateral registries Ė Improving enforcement mechanisms. According to Doing Business 2010, only 3 Arab econo- be characterized as modern, notice-based mies allow for out-of-court enforcement. Strengthening enforcement mechanisms would ones. These registries offer online access do much to increase access to credit in the Arab world, which ranked last on the ease for registration and searches, register all of enforcing debts as measured in Doing Business 2010. According to a 2010 World Bank types of encumbrances, establish clear pa- survey of �nancial institutions in the Middle East and North Africa, almost 60% considered rameters for priority and maintain a central enforcement of security interests in movable property as the major impediment to granting credit to �rms.1 database searchable by the debtor’s name Ė Raising awareness about the importance of secured transactions and providing training to or a unique identifier. Once registered, stakeholder groups. security interests immediately have effect Ė Developing the capacity of �nancial institutions to extend to businesses loans secured by against third parties. movable property (asset-based lending, inventory and receivables �nancing and the like). 1. Rocha and others 2010. 48 DOING BUSINESS IN THE ARAB WORLD 2012 CREDIT INFORMATION WHY DOES CREDIT of the 20 Arab economies). Banks in the In Bhutan many small and medium-size busi- INFORMATION SHARING region cite lack of transparency among small nesses have difficulty accessing formal credit MATTER? and medium-size enterprises and the weak Credit bureaus and credit registries are es- �nancial infrastructure (credit information, and must rely on personal funds. Women, sential parts of the financial infrastructure creditor rights and collateral infrastructure) who are more likely to run small businesses, that facilitates access to formal finance. as the main obstacles to lending more to face the biggest hurdles.8 But the situation By sharing credit information, they help such enterprises.13 Since 2005 about three- is starting to improve thanks to a new credit reduce information asymmetries, increase fourths of Arab economies have reformed information bureau that started operating in access to credit for small firms, lower their credit information system. Yet on aver- 2009. Imagine Charlotte, a young Bhutanese interest rates, improve borrower discipline age less than a quarter of the adult population entrepreneur who runs a small confectionery and support bank supervision and credit in the region is covered by a credit reporting business in Thimphu. She wants to expand risk monitoring. system. And only 6 of 20 economies in the her pro�table catering business and has region have a private credit bureau. new customers lined up—but she needs more funds. Charlotte approaches Sonam, a Reducing information asymmetries Improving borrower discipline loan officer at her bank, for a line of credit. Borrowers typically have more information about their financial situation and invest- Credit information sharing can act as a Because of the new bureau, Sonam can re- ment opportunities than lenders do. This disciplinary device for borrowers. When view her credit history—and determine that information asymmetry in credit markets creditors are known to share information Charlotte quali�es for a low-interest loan affects the relationship between lenders about customers’ credit records, borrow- program for small businesses. and borrowers, especially borrowers that ers know that defaults on loans from one A credit history is no substitute for risk are small and medium-size enterprises. lender may disrupt future access to credit analysis. But when banks share credit infor- Banks are more likely to lend to larger from all other lenders. So borrowers have mation, loan officers can assess borrowers’ firms, which typically are more transparent greater incentive to repay.14 Research has creditworthiness using objective measures. and use international accounting stan- shown that repayment rates can increase And access to credit information not only dards.9 Sharing information on borrowers by up to 80% when a credit registry bene�ts creditors. It also bene�ts deserving through credit registries or bureaus is starts operation.15 According to a recent borrowers, by increasing their chances to get one way to overcome these asymmetries. study surveying 70 utility companies in credit. Where credit registries or bureaus are Credit reporting systems help lenders the United States, 72% reported that the present, allowing easier access to borrow- learn about borrowers’ characteristics, benefits of credit reporting amounted to at ers’ credit histories, banks are more likely to past behavior, repayment history and cur- least 2–5 times the costs. Half of all cus- extend loans. rent debt exposure. tomers said that they would be more likely to pay their bills on time if those payments Besides providing credit information in the Increasing access to credit for small were fully reported to credit bureaus and form of credit reports, the more advanced firms could affect their credit score.16 credit bureaus offer other services, including Credit bureaus and credit registries are credit scoring. Credit scores, assigned to Supporting bank supervision and one way of increasing access to finance borrowers on the basis of their ability and credit risk monitoring for individuals and small firms.10 With capacity to repay debt, are calculated using For regulators, credit information systems better, cheaper and faster access to credit information from various sources, including provide a powerful tool for supervising information, lending officers can use accu- credit reports. The scores make borrowers banks and monitoring credit risk and rate and objective data to make unbiased aware of how they are affected by the data credit trends in the economy. Regulators decisions in offering loans. And when they that credit bureaus collect. Some banks use often use information from credit bureaus can assess the risk of default, banks have credit scores in their loan approval process. to assess whether current provisioning is more incentive to lend to individuals and small firms. A recent study found that after adequate and to analyze developments in A growing number of credit bureaus calcu- the introduction of new credit reporting credit markets and interest rates. The re- late credit scores. Today, among 6 private systems in developing economies, access sults may guide changes in the legislation credit bureaus in the Arab world, 3 report to credit grew twice as fast for small firms governing financial institutions. Research that they provide credit scores—those in as for large ones.11 in Argentina, Brazil and Mexico found that Bahrain, Egypt and Saudi Arabia. Few Arab credit registries played a valuable role in economies have credit scoring because pub- Research in 27 transition economies shows credit risk evaluation and in supervision, lic credit registries, which typically do not that introducing a credit reporting system is including in calculations of credit risk for provide credit scores, far outnumber private associated with an increase of 4.2 percent- capital or as a check on a bank’s internal credit bureaus in the region. age points in �rms’ reliance on credit.12 Such ratings.17 an effect would be welcome in the Middle East and North Africa (which includes 17 GETTING CREDIT 49 Credit information systems also support The United Arab Emirates adopted a new 7.4). These 13 economies moved 16 per- competition in the credit market. As more law allowing the establishment of a federal centage points closer to the frontier on credit information becomes available, com- credit bureau under the supervision of the average, with 12 of them moving more than petition among banks and nonbank �nancial central bank. 10 percentage points closer. Among these institutions should increase. Research in the Arab economies, the Comoros narrowed Middle East and North Africa found that lack As a result of the steady pace of reforms the gap the most. of credit information systems may curtail to improve credit information systems, and competition in the banking sector.18 the more limited reforms to strengthen Doing Business measures both public credit legal rights, 13 Arab economies made registries and private credit bureaus. Public impressive progress toward the frontier in credit registries are de�ned as databases WHO REFORMED CREDIT getting credit in the past 6 years (figure managed by the public sector (usually the INFORMATION SHARING—AND WHAT HAS WORKED? In the past 7 years 14 Arab economies imple- FIGURE 7.3 The Arab world keeps a steady pace of reform in credit information mented 24 regulatory reforms to improve Number of Doing Business reforms improving credit information systems in the Arab world, credit information systems (�gure 7.3). Four by Doing Business report year implemented reforms in 2010/11—Algeria, Total number Oman, Qatar and the United Arab Emirates. DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms Algeria guaranteed by law the right of bor- 24 rowers to inspect their personal data. 0 reformsQ1 reform Q2 reforms Q3 reforms Q4 reforms Q5 reforms Oman launched the Bank Credit and Statistical Bureau System, which collects historical information on performing and DB2006 Arab world average depth of credit information index (0–6) DB2012 nonperforming loans for both �rms and Global average individuals. 2.2 Qatar started to distribute historical data 3.6 4.2 and eliminated the minimum threshold for loans included in the database. Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. Source: Doing Business database. FIGURE 7.4 In the past 6 years 13 Arab economies narrowed the gap to the frontier in getting credit Distance to frontier in getting credit, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 ab ia wa it no n da n an tes Re p. nis ia da n eri a ia co ros Ira q ep . uti bli c aza Ar ba Jor Om ira Su Alg tan roc mo ,R bo pu dG di Ku Le Em rab Tu uri Mo Co en Dji Re an Sa u rab t, A Ma Ye m rab nk dA yp nA Ba ite Eg ria st Un Sy We Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the getting credit indicators (measuring both legal rights and credit information) since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. 50 DOING BUSINESS IN THE ARAB WORLD 2012 central bank or the superintendent of banks) TABLE 7.2 Who in the Arab world has the Today 13 of the 17 Arab economies with a that collect information on the creditworthi- most credit information— credit reporting system as recorded by Doing ness of borrowers and facilitate the exchange and who the least? Business share both positive and negative of credit information among banks and Depth of credit information index (0–6) information. One of these is Oman, whose �nancial institutions. Private credit bureaus Most Least central bank launched the Bank Credit and are set up in response to commercial oppor- Saudi Arabia 6 Jordan 2 Statistical Bureau System on December tunities and market conditions.19 Although Egypt, Arab Rep. 6 Yemen, Rep. 2 20, 2010. The new system collects positive they are private entities and operate in the Lebanon 5 Syrian Arab 2 and negative information on �rms and indi- private commercial sphere, private credit Republic viduals, including information on any type bureaus are regulated by laws that allow the United Arab 5 Mauritania 1 of credit facility and on both performing and Emirates sharing of data between banks and borrow- nonperforming loans. Morocco 5a Djibouti 1 ers. Regulations on privacy, bank secrecy and data protection stipulate the type of informa- Collecting and distributing data Borrowers covered by credit registries or bureaus tion that may be shared between banks and (% of adults) from retailers and utility companies private credit bureaus. Regulations on access Most Least One effective way to expand the range of in- to credit information specify which data can Bahrain 40.0 Jordan 1.6 formation distributed by credit registries is to be available to banks and borrowers. Some Qatar 32.2 Yemen, Rep. 0.7 include credit information from retailers and economies, including Jordan and the United United Arab 29.2 Algeria 0.3 utility companies, such as electricity provid- Arab Emirates, even mandate by law that Emirates ers and mobile phone companies. Providing data be shared with private credit bureaus. Kuwait 29.0 Djibouti 0.2 information on payment of electricity and Economies such as Ecuador and Morocco Oman 18.9 Mauritania 0.2 phone bills can help establish a good credit have established a public credit registry in Note: The rankings on borrower coverage reflected in the history for those without previous bank loans table include only Arab economies with public or private the central bank with the clear objective of credit registries (17 in total). Another 3 Arab economies have or credit cards. This represents an important building a credit information database that no credit registry and therefore no coverage. opportunity for including people without tra- can later be transferred to a private credit a. Tunisia also scores 5 on the depth of credit information ditional banking relationships. But including index. bureau. Source: Doing Business database. this information can be challenging. Utilities and retailers are regulated by different insti- Among Arab economies, coverage by credit tutions than �nancial companies are. They registries and credit bureaus increased from distributing data from sources other than also might have to be convinced that the an average of 4.4% of the adult population banks and lowering or eliminating minimum bene�ts of reporting bill payment outweigh in 2005 to 15.4% in 2011. The average score loan thresholds. the costs. on the depth of credit information index increased from 2.2 in 2005 to 3.6 in 2011.20 Reporting good as well as bad Today credit bureaus or registries in only 3 Credit information can be broadly divided Arab economies—Egypt, Kuwait and Saudi But 3 Arab economies—the Comoros, Iraq into 2 categories: negative and positive. Arabia—include credit information from and Sudan—still lack any kind of credit Negative information covers defaults and sources other than banks. In Egypt the pri- information system. And in many that late payments. Positive information includes, vate credit bureau I-Score began collecting do have one, the credit bureau or registry for example, on-time loan repayments and both positive and negative data from covers only a tiny fraction of the adult the original and outstanding amounts of retailers in 2009. I-Score is also beginning population. In Djibouti and Mauritania, for loans. to add data from microfinance institutions example, the public credit bureau covers (box 7.2). Kuwait’s private credit bureau only 0.2% (table 7.2). A credit information system that reports began collecting information from retail- only negative information penalizes borrow- ers such as furniture sellers in 2007. And In 2010/11, 22 economies around the world ers who default on payments—but it fails to Saudi Arabia’s started collecting positive implemented reforms to improve their credit reward diligent borrowers who pay on time. and negative data from a mobile telephone reporting system. The most common feature Sharing information on reliable repayment al- company at the end of 2006. Getting of those reforms—implemented by 7 econo- lows customers to establish a positive credit credit remains easiest in Saudi Arabia, as mies, including the United Arab Emirates— history and improves the ability of lenders to measured by Doing Business (figure 7.5). was improving the regulatory framework for distinguish good borrowers from bad ones. sharing credit information. Sharing more than just negative information Lowering or eliminating minimum also ensures that a credit information system Speci�c practices help increase credit loan thresholds will include high-risk borrowers that have ac- coverage and encourage the use of credit cumulated signi�cant debt exposure without Where thresholds for the loans included in information systems. Among the most com- yet defaulting on any loans. a credit bureau’s database are high, retail mon measures have been expanding the and small business loans are more likely to range of information shared, collecting and be excluded. This can hurt those that bene�t GETTING CREDIT 51 BOX 7.2 Adding micro�nance institutions to credit reporting in Egypt FIGURE 7.5 How do Arab economies rank on Most credit bureaus can collect data from banks. But winning the con�dence of micro�- the ease of getting credit? nance institutions, which have special requirements and idiosyncrasies, can take time and Global ranking (1–183) effort. At the beginning of 2011, after nearly 3 years of collecting data from banks, mortgage companies and leasing companies, the Egyptian credit bureau I-Score was still trying to add MALAYSIA—EASIEST (1) data from micro�nance institutions. Out of distrust for the Egyptian information sharing sys- tem, these institutions planned to build a separate micro�nance credit bureau. But the specter of a crisis that had threatened Morocco’s microcredit industry in the ab- sence of a functioning credit bureau was now starting to haunt Egypt’s as well. While the 20 microcredit industry in Morocco had increased lending to micro�nance borrowers, this was accompanied by a corresponding increase in portfolio-at-risk ratios. The debate among Egypt’s microcredit lenders focused on how they could be spared a similar crisis, particularly in an expansionary phase. 40 I-Score and the International Finance Corporation proposed a step toward a solution to Saudi Arabia 3 of Egypt’s largest micro�nance institutions. A cross-tabulation analysis would compare a sample of their loan portfolios with the data in the I-Score database, to see whether there was 60 evidence of cross-lending—that is, whether borrowers, unbeknownst to their micro�nance Egypt, Arab Rep. lenders, had also been granted lines of credit by lenders from other sectors, such as banks. Lebanon The results were both unexpected and alarming for the micro�nance institutions. More 80 United Arab Emirates than 14% (nearly 50,000) of their customers in the sample had been granted credit lines (sometimes 2 or more) by banks. The outstanding balances amounted to nearly 500 million Kuwait Morocco Egyptian pounds ($82.9 million), 3 times the micro�nance institutions’ total outstanding bal- Oman ances. Among these customers, 6,000 were 90 or more days past due—and 460 of these 100 Qatar were the subject of legal actions. About 100 had records of bounced checks. Tunisia In addition, roughly 13,000 of the customers had been granted credit lines by other micro- �nance institutions. The outstanding balances on these amounted to about 14 million pounds 120 ($2.3 million). Bahrain The undeniable evidence of multiple lending, and its associated risk, were enough to dis- suade the micro�nance institutions from keeping their data separate. The 3 major micro�- 140 Algeria nance institutions signed an agreement with I-Score, and smaller institutions plan to join soon. Comoros Jordan To support the needs of the micro�nance institutions, I-Score has agreed to special prices for Yemen, Rep. these lenders, offered technical support, granted a free trial period for newcomers and devel- Mauritania oped ad hoc services. 160 Sudan West Bank and Gaza Source: International Finance Corporation, Credit Bureau Program; I-Score. Iraq Syrian Arab Republic 183 Djibouti the most from credit information systems— threshold for the public credit registry in Note: Rankings on the ease of getting credit are based on such as female entrepreneurs and small and February 2010. The registry’s coverage of the sum of the legal rights index and the depth of credit information index. See the data notes for details. medium-size enterprises, whose loans are individuals and �rms increased to 2.8% of Source: Doing Business database. typically smaller. Public credit registries usu- the adult population. Qatar’s credit bureau, ally set relatively high thresholds for loans, which began operating in March 2011, in- $34,260 on average, since their primary pur- cludes loans of all sizes in its database. 11. Brown and Zehnder 2007. pose is to support bank supervision and the 12. Brown, Jappelli and Pagano 2009. monitoring of systemic risks. Private credit 13. Rocha and others 2010. bureaus tend to have lower minimum loan NOTES 14. Padilla and Pagano 2000. thresholds, $418 on average. Today 12 Arab 1. Alvarez de la Campa and others 2010. 15. Brown and Zehnder 2007. economies have minimum loan thresholds 2. Alvarez de la Campa and others 2010. 16. Turner and others 2009. below 1% of income per capita—Bahrain, 3. World Bank 2011a. 17. Powell and others 2004. Egypt, Kuwait, Lebanon, Morocco, Oman, 4. Djankov, McLiesh and Shleifer 2007. 18. Anzoategui, Martinez Pería and Rocha 2010. Qatar, Saudi Arabia, Syria, Tunisia, the United 5. Haselmann, Pistor and Vig 2010. 19. Jappelli and Pagano 1993. Arab Emirates, and West Bank and Gaza. 6. Bae and Goyal 2009. 20. Straight average of percentages or scores 7. Diamond 2004. across economies. Globally over the past 7 years, 21 economies 8. World Bank 2010b. eliminated their minimum loan threshold, 9. Jappelli and Pagano 2002; Behr, Entzian and more than quadrupling their coverage on Guettler 2011; Brown, Jappelli and Pagano average. Tunisia and West Bank and Gaza 2009. eliminated loan thresholds in 2008. Syria’s 10. Brown, Jappelli and Pagano 2009; Jappelli and Pagano 2002. central bank removed the minimum loan Protecting investors On December 15, 2010, after 11 months of and Company B (“Seller�) where “Mr. James� shareholders to pro�t at the expense of legal standoff, the Swiss corporation Novartis is the controlling shareholder of both Buyer the company’s �nancial health—whether �nally closed a deal to acquire the remaining and Seller and a member of both their boards because company assets are sold at an shares of eye-care company Alcon from mi- of directors. The transaction is overpriced and excessively low price, assets are purchased nority shareholders. Why did it take almost a causes damages to Buyer (�gure 8.1). at an inflated price or loans are given by year? The acquisition had become a related- the company to controlling shareholders on party transaction after Novartis purchased a The ranking on the strength of investor terms far better than the market offers. 25% stake from then majority shareholder protection index is the simple average of the Nestlé and nominated some of its own direc- percentile rankings on the extent of disclo- Investor protections matter for the ability tors to Alcon’s board. Minority shareholders sure, extent of director liability and ease of of companies to raise the capital needed to therefore claimed that the deal required the shareholder suits indices. A higher ranking grow, innovate, diversify and compete. indicates that an economy’s regulations offer Without investor protections, equity mar- approval of a committee of independent di- stronger investor protections against self- kets fail to develop and banks become the rectors. The parties �nally reached an agree- dealing in the areas measured. The indicator only source of �nance. Economies that have ment when Novartis increased its offer to a does not measure all aspects related to the dynamic capital markets tend to effectively level that minority shareholders deemed fair. 1 protection of minority investors, such as dilu- protect investors. In these economies inves- Doing Business measures the strength of tion of share value or insider trading. Nor does tors receive �nancial information they can legal protections of minority investors it measure the dynamism of capital markets trust, they participate in major decisions of against misuse of corporate assets by or protections speci�c to foreign investors. the company, and directors are accountable company directors for their personal gain. for their managerial decisions. If the laws do The indicators distinguish 3 dimensions of WHY DO MINORITY INVESTOR not provide such protections, investors may investor protections: rules on the approval and PROTECTIONS MATTER? be reluctant to invest, unless they become disclosure of related-party transactions (extent One of the most important issues in corpo- controlling shareholders.2 of disclosure index), liability of company rate governance is self-dealing—the use of executives for self-dealing (extent of director corporate assets by company insiders for Minority investor protections can have impor- liability index) and shareholders’ ability to personal gain. Related-party transactions are tant implications for �rm valuation. Research access corporate information before and during the most common example. High ownership on 539 large �rms in 27 economies shows litigation (ease of shareholder suits index). The concentration and informal business rela- that �rm valuation is higher in economies standard case study assumes a related-party tions can create the perfect environment for with good investor protections than in those transaction between Company A (“Buyer�) such transactions, which allow controlling with poor protections.3 Other research shows that corporate risk-taking and �rm growth rates are positively related to the quality of FIGURE 8.1 How well are minority shareholders protected against self-dealing in related-party the system of investor protections. Better transactions? systems may lead corporations to undertake riskier but value-enhancing investments.4 Extent of disclosure Mr. James Disclosure and approval Lawsuit WHO REFORMED INVESTOR requirements 60% ownership, sits 90% ownership, sits PROTECTIONS—AND WHAT HAS Extent of director liability on board of directors on board of directors Ability to sue directors WORKED? for damages Company A Company B Compared with other regions, the Arab Ease of shareholder suits (buyer) (seller) Access by shareholders to world has implemented few reforms in documents plus other Minority Transaction evidence for trial involving investor protections. One exception is shareholders conflict of interest Morocco. In both 2009/10 and 2010/11 Morocco was the only economy in the PROTECTING INVESTORS 53 region that strengthened legal protections of FIGURE 8.2 The Arab world had few investor protection reforms in the past 7 years minority shareholders. Number of Doing Business reforms strengthening investor protections in the Arab world, by Doing Business report year Morocco strengthened investor protections in 2009/10 by requiring greater disclosure in companies’ annual reports. A new decree Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms clari�ed the interpretation of the company law with respect to the type of information in the 7 report of the independent auditor who reviews related-party transactions. In 2010/11 Morocco 0 reformsQ1 reform Q2 reforms Q3 reforms amended Law 53-95 on the Institution of Commercial Jurisdictions, which now allows DB2006 minority shareholders to obtain any noncon�- Arab world averages in protecting investors DB2012 dential corporate document during trial. Global average Strength of investor protection index (0−10) In the Arab world as a whole, 7 investor 4.4 protection reforms have been recorded 4.8 5.2 since 2005, in 4 economies—Egypt, Extent of disclosure index (0−10) Morocco, Saudi Arabia and Tunisia (�gure 5.4 8.2). These economies have started to 6.0 5.3 regulate corporate disclosure and related- Extent of director liability index (0−10) party transactions more closely. And the 4.3 United Arab Emirates has clear rules on 4.6 4.5 director liability. Yet legal protections of Ease of shareholder suits index (0−10) minority shareholders in the region remain 3.6 weak. And only 5 Arab economies moved 3.9 5.7 closer to the frontier in protecting investors over the past 6 years—Egypt, Morocco, Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for Saudi Arabia, Syria and Tunisia (�gure 8.3). a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. Tunisia advanced the most, closing the gap Source: Doing Business database. by about 27 percentage points, followed by Morocco (20 percentage points). FIGURE 8.3 Few Arab economies have narrowed the gap to the frontier in protecting investors Distance to frontier in protecting investors, 2005 and 2011 0 2005 2011 10 20 30 Percentage points 40 50 60 70 80 90 100 wa it az a ia eri a p. an no n Ira q tes da n bli c ros Re p. da n nis ia ia co uti ab Re Om ira Jor pu mo tan roc bo Ku dG Ar Alg rab Le ba Em Re Co n, Su Tu uri Mo Dji k an udi , A ab ab eme Ma Sa t Ar Y Ba n yp Ar st Eg ite d ria n We Un Sy Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the protecting investors indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. 54 DOING BUSINESS IN THE ARAB WORLD 2012 Economies with the strongest protections Ensuring transparency in related- In the past year 6 economies—Belarus, of minority investors from self-dealing party transactions Burundi, Cyprus, Kazakhstan, Lithuania require detailed disclosure, define clear Fifty-two of the 183 economies covered and Sri Lanka—introduced legal provi- duties for directors, offer wide access to by Doing Business stand out for the strict- sions regulating disclosure of related-party corporate information and provide proce- est rules on disclosure of related-party transactions. Why does it matter? Providing dural rules that give minority investors the transactions (both before and after the reliable information on company dealings means to prove their case. While the Doing conclusion of the transaction). These allows investors to monitor the activities of Business protecting investors indicators fo- include France, New Zealand, Singapore companies and assess the performance of cus on laws and stock market regulations, and Albania. Corporate scandals, investor their management. protections for minority investors are not activism, the global financial crisis and only about legislation. They are also about In the Arab world, Kuwait has very strict unification of accounting standards have institutions and a robust enforcement sys- disclosure rules. Directors must reveal any prompted governments around the world tem: securities commissions that ensure conflict of interest to the other members of to strengthen disclosure requirements.6 the correct implementation of regulations the board. In addition, the company must Not surprisingly, this was the most com- on transparency and well-functioning immediately disclose detailed informa- mon feature in investor protection reforms courts that allow investors to obtain a tion on the transaction and the conflict in the past 7 years, accounting for 39 of judgment within a reasonable time.5 of interest to the public, the regulator or the total and 6 of the 13 in the past year. the stock exchange, and it must include More than 10 economies worldwide do not similar information in its annual report. require disclosure of large related-party Other economies, such as Egypt, are also transactions. One of them is Sudan, the implementing good practices in this area TABLE 8.1 Who in the Arab world provides only Arab economy with a score of 0 on (box 8.1). strong minority investor the extent of disclosure index (table 8.1). protections—and who does not? Extent of disclosure index (0–10) Most Least BOX 8.1 Egypt leading corporate governance reforms in the Arab world Saudi Arabia 9 Mauritania 5 Egypt has been a leader in introducing corporate governance practices in the Arab world Lebanon 9 Djibouti 5a since the early 2000s. In 2003 the government established the Egyptian Institute of Directors, Bahrain 8 Iraq 4 under the umbrella of the Ministry of Investment, to spread awareness and build capacity in corporate governance in Egypt and in the Middle East and North Africa more broadly. By tar- Egypt, Arab 8 United Arab 4 Rep. Emirates geting its initiatives to directors and executives of corporations and �nancial institutions, the institute aims to reach those in a position to effect change by implementing sound corporate Oman 8 Sudan 0 governance practices—as a way to reduce �nancial and corruption risks, improve access to �nance, restore investor con�dence and attract domestic and foreign investment. Extent of director liability index (0–10) Considered a world-class center of excellence by the Global Corporate Governance Forum, Most Least the institute has conducted many awareness sessions in Egypt and the Middle East and North Saudi Arabia 8 Mauritania 3c Africa, graduated more than 200 directors certi�ed by the Egyptian Financial Supervisory Kuwait 7 Djibouti 2 Authority and trained hundreds of top executives and directors in the region. It launched a Tunisia 7 Morocco 2 code of corporate governance for private companies in October 2005, a code for state-owned United Arab 7 Comoros 1 enterprises in August 2006 and an audit committee manual in 2008—all serving as reference Emirates points for companies seeking to put in place effective corporate governance systems. Algeria 6b Lebanon 1 The institute continues to establish new links between corporate governance, responsible business and anticorruption to increase corporate engagement in addressing development Ease of shareholder suits index (0–10) issues and improve the business climate. It has expanded its efforts to reach out to and work Easiest Most dif�cult with other economies in the Arab world, such as Oman and the United Arab Emirates. And it has contributed to a continent-wide initiative with the launch of responsible business net- West Bank 7 Oman 2 and Gaza works in the Middle East and Africa, to connect stakeholders and enable the sharing of knowl- edge and experience in governance and responsible business conduct. Morocco 6 Syrian Arab Republic 2 Companies in the Arab world have started to recognize the importance of improving cor- Tunisia 6 United Arab Emirates 2 porate governance and its signi�cant bene�ts for their business. Some of these bene�ts are Egypt, Arab 5 Yemen, Rep. 2 outlined in a 2010 report by the International Finance Corporation that reviews the measures Rep. taken by 11 companies to improve board effectiveness, management control and other cor- Kuwait 5d Djibouti 0 porate governance practices.1 Nearly all the companies reported that the improvements in a. Jordan, Qatar and Tunisia also score 5 on the extent of corporate governance had a strong or substantial effect on their ability to access �nance, with disclosure index. the estimates ranging from $8 million to more than $1 billion over the previous 2 years. Most b. Qatar and Sudan also score 6 on the extent of director of the companies also highlighted the impact of good corporate governance on their reputa- liability index. tion and sustainability.2 c. Egypt also scores 3 on the extent of director liability index. d. The Comoros and Lebanon also score 5 on the ease of 1. IFC 2010a. shareholder suits index. 2. IFC 2010b. Source: Doing Business database. PROTECTING INVESTORS 55 Involving disinterested of the terms of these transactions by an for disclosure and approval of related-party shareholders in the approval of independent body, such as an independent transactions, they are not liable for any harm related-party transactions auditor, before their approval. The independent that results. The other 103 economies have auditor will provide an opinion on the terms rules on the liability of directors, but often Sixty economies require shareholder approv- of the transaction that will help shareholders with loopholes. al of large related-party transactions. Burundi make an informed decision. But 21 economies, and Kazakhstan adopted such rules in 2011. Kuwait, which has the Arab world’s second including Costa Rica and the Philippines, al- In the previous year 5 economies—Albania, highest ranking on the strength of investor low the chief executive officer or whoever is Cyprus, Georgia, Iceland and Rwanda—in- protections, is among the economies that speci�ed in the company statute to approve troduced provisions on shareholder approval hold directors accountable (�gure 8.4). related-party transactions. In 44 economies, of related-party transactions. Liability is established on the simple basis including Azerbaijan, Panama and the United States, these transactions are approved by the that the transaction was prejudicial to mi- Such approval mechanisms work well only board of directors and interested parties are nority shareholders. if the law does not allow many exceptions and if the approval is required at the time allowed to vote. Facilitating access to corporate of the transaction. Other features can also In the Arab world 9 economies require share- documents strengthen shareholder approval provisions. holder approval and do not allow directors Rights of minority investors cannot be Twenty-�ve of the 60 economies requiring with a conflict of interest to vote: Algeria, protected without easy access to corporate approval of related-party transactions by Bahrain, the Comoros, Lebanon, Morocco, information. Without access to documen- disinterested shareholders also require review Oman, Qatar, Saudi Arabia and Tunisia. tary evidence, minority investors may �nd it difficult to prove that directors have been FIGURE 8.4 How do Arab economies rank on the Making directors accountable for managing the company’s affairs improperly. strength of investor protections? their actions Economies can have good laws, but if ac- Global ranking (1–183) Economies with the strongest protections cess to corporate information and evidence regulate not only disclosure and approval of is limited or courts are inefficient, investors NEW ZEALAND—STRONGEST (1) 0 related-party transactions but also set out are unlikely to resort to judicial options. In clear rules of accountability for company the past year 4 economies—El Salvador, directors when such transactions turn out Morocco, Peru and the Solomon Islands— Saudi Arabia 20 to be prejudicial. Directors need clear rules introduced provisions facilitating investors’ Kuwait to ful�ll their responsibilities effectively. In access to corporate documents before and Tunisia the past year only 2 economies—Burundi during a trial relating to director liability. 40 and Kazakhstan—introduced clear rules on West Bank and Gaza Only 15 of the 183 economies covered by the liability of company directors in case of prejudicial related-party transactions. Doing Business permit full access to docu- 60 mentary evidence both before and during Algeria Only 45 of the 183 economies covered by the trial. More than 30 economies—includ- Bahrain Doing Business have clear rules on the liabil- ing Canada, the Dominican Republic and 80 Egypt, Arab Rep. ity of company directors in case of abusive Hong Kong SAR, China—allow shareholders Lebanon related-party transactions. Among those 45, access to any corporate document they Morocco economies take different approaches. Some require, but only before the trial. Cyprus, 100 Oman have a clear catalogue of rights and duties of France and the United Kingdom allow Qatar directors, while others have a special regime shareholders to request the appointment Syrian Arab Republic of liability for directors in the event of an of a government inspector with full powers 120 Iraq abusive related-party transaction. to verify and obtain copies of any corporate Jordan United Arab Emirates document. El Salvador, Kazakhstan, New Comoros Those that prescribe clear rights and duties Zealand and South Africa require that all 140 Yemen, Rep. of directors include Canada, Mexico and company documents related to the case be Mauritania the United Arab Emirates, which have rules open for inspection during the trial. Sudan encouraging directors to be prudent in the 160 company’s day-to-day management. Thirty- In the Arab world, Mauritania, Syria and �ve economies, including Bulgaria and the Republic of Yemen permit limited or no Djibouti China, do not clearly stipulate the liability of access to evidence during the trial, making 183 directors for abusive related-party transac- it virtually impossible for minority investors Note: Rankings are based on the strength of investor tions. In those economies, as long as the to prove their case. By contrast, Morocco protection index. See the data notes for details. interested parties comply with requirements recently amended legislation to allow parties Source: Doing Business database. 56 DOING BUSINESS IN THE ARAB WORLD 2012 to a trial to request the judge to compel any evidence that is relevant to the subject matter of the claim. In addition, parties to the trial only need to identify categories of documents sought, not speci�c documents. In addition, the new law allows parties to a commercial trial to directly question the op- posing parties and witnesses. NOTES 1. Agustino Fontevecchia, “Novartis Is Eye- Care King after Acquiring Alcon,� Forbes. com, December 15, 2010. http://www.forbes. com/2010/12/15/novartis-alcon-p�zer- markets-equities-pharma.html. 2. Dahya, Dimitrov and McConnell 2008. 3. La Porta and others 2002. 4. John, Litov and Yeung 2008. 5. See, for example, Ford (2005); Ahdieh (2003); Black (2001); and Mahoney (1997). 6. Among 152 economies surveyed, 107 permit or require the use of International Financial Reporting Standards through company laws and accounting laws. Adoption rates are high among OECD high-income economies, in Eastern Europe and in Latin America and the Caribbean. 57 Paying taxes Imagine a woman named Amina who owns a way in which those payments are made. The WHY DO TAX RATES AND TAX manufacturing company in Morocco. In 2004 time indicator captures the number of hours ADMINISTRATION MATTER? she had to make 28 payments and spend more it takes to prepare, �le and pay 3 major types Oliver Wendell Holmes, a former U.S. su- than 44 days (358 hours) to comply with tax of taxes: pro�t taxes, consumption taxes, and preme court justice, said, “Taxes are what regulations. Today, thanks to changes over the labor taxes and mandatory contributions. The we pay for a civilized society.� Governments past 7 years, her administrative burden is lighter. total tax rate measures the tax cost borne by need sustainable funding for social programs The government merged many taxes and elimi- the standard �rm (�gure 9.1). and public investments to promote eco- nated others, and now Amina needs to make nomic growth and development. Taxation only 17 payments a year as measured by Doing With these indicators Doing Business com- not only pays for public goods and services; Business. A new electronic �ling and payment pares tax systems and tracks tax reforms it is a key ingredient of the social contract system, now fully implemented, saves Amina 15 around the world from the perspective of between citizens and the economy and days a year (120 hours). This is time she can in- local businesses, covering both the direct thus key to building effective government. vest in developing her business. “New technology cost of taxes and the administrative burden How taxes are raised and spent shapes the makes compliance easier and more transparent,� of complying with them. The methodology legitimacy of governments by promoting said Mahat Chraibi, a partner at PwC Morocco. looks at the statutory incidence of taxes and their accountability to taxpaying citizens and “This is one example of how technology helps to includes all taxes and contributions that the by encouraging effective administration and bridge the development gap.� case study �rm is obliged to pay. This does good public �nancial management.1 not mean that the entire burden falls on the Doing Business records the taxes and mandato- �rm; eventually the cost is shared among the All governments need revenue, but the ry contributions that a medium-size company owners, customers, workers and suppliers of challenge is to carefully choose not only must pay in a given year and also measures the �rm. The indicators do not measure the the level of tax rates but also the tax base. the administrative burden of paying taxes and �scal health of economies, the macroeco- Governments also need to design a tax contributions. It does this with 3 indicators: nomic conditions under which governments compliance system that will not discourage payments, time and the total tax rate borne by collect revenue or the provision of public taxpayers from participating. Tax rates and a case study �rm in a given year. The number of services supported by taxation. burdensome tax administration remain a top payments indicates the frequency with which obstacle to business. Recent �rm surveys the company has to �le and pay different types in 123 economies show that companies of taxes and contributions, adjusted for the consider tax rates to be among the top 3 constraints to their business, and tax admin- istration to be among the top 8.2 FIGURE 9.1 What are the time, total tax rate and number of payments necessary for a local medium- size company to pay all taxes? Why tax rates matter The size of the tax cost for businesses matters Total tax rate Time for investment and growth. Where taxes are high, businesses are more inclined to opt out of the formal sector. A recent study shows To prepare, file and pay that higher tax rates are associated with fewer value added or sales tax, Hours per year formal businesses and lower private invest- % of profit profit tax, and labor before all taxes taxes and contributions ment. Keeping tax rates at a reasonable level can encourage the development of the private sector and the formalization of businesses. This is particularly important for small and Number of payments medium-size enterprises, which contribute (per year) to growth and job creation but do not add 58 DOING BUSINESS IN THE ARAB WORLD 2012 when new tax systems were introduced FIGURE 9.2 In the past 7 years 60% of Arab economies made it easier to pay taxes resulted in very uneven imposition of taxes, Number of Doing Business reforms making it easier to pay taxes in the Arab world, widespread tax evasion and lower-than- by Doing Business report year expected revenue.5 Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms Compliance with tax laws is important to keep the system working for all and to sup- 22 port the programs and services that improve lives. One way to encourage compliance is to 0 reformsQ1–2 reforms Q3–4 reforms Q5–6 reforms keep the rules as clear and simple as possible. Overly complicated tax systems are associ- DB2006 ated with high evasion. High tax compliance Arab world averages in paying taxes DB2012 costs are associated with larger informal Global average sectors, more corruption and less invest- Payments (number per year) ment. Economies with simple, well-designed 26 23 tax systems are able to help the growth of 30 businesses and, ultimately, the growth of Time (hours per year) overall investment and employment.6 234 201 277 WHO REFORMED TAXES—AND Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample WHAT HAS WORKED? for DB2006 comprises 18 economies. The sample for DB2012 also includes Bahrain and Qatar, for a total of 20 economies. In the past 7 years 12 Arab economies Source: Doing Business database. implemented changes aimed at simplifying tax administration and reducing the tax burden—22 such reforms in all (�gure 9.2). signi�cantly to tax revenue.3 Typical distribu- Why tax administration matters In 2010/11, 3 Arab economies—Morocco, tions of tax revenue by �rm size for econo- Efficient tax administration can help en- Oman and the Republic of Yemen—made it mies in Sub-Saharan Africa and the Middle courage businesses to become formally easier to pay taxes or reduced tax rates. East and North Africa show that micro, small registered and the economy to grow—and and medium-size enterprises make up more thus expand the tax base and increase tax Morocco eased the administrative burden of than 90% of taxpayers but contribute only revenues. Administration that is unfair and paying taxes for �rms by enhancing elec- 25–35% of revenue.4 Thus imposing high tax capricious will bring the tax system into dis- tronic �ling and payment of the corporate costs on businesses of this size might not add repute and weaken the legitimacy of govern- income tax and value added tax. much to government tax revenue, but it might ment. In many transition economies in the cause businesses to become informal or, in 1990s, failure to improve tax administration the worst case, to never exist at all. FIGURE 9.3 Among Arab economies, the Republic of Yemen has advanced the most toward the frontier in paying taxes Distance to frontier in paying taxes, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 an tes ia wa it da n uti no n aza Ira q bli c da n nis ia co ros Re p. Re p. eri a ia Om ira ab Jor bo dG pu roc mo tan Em Ar Ku Dji Le ba Re Su Tu Mo Co ab n, Alg uri b udi k an b t, Ar eme Ma ra Sa Ba n ra yp Y dA st nA Eg ite We ria Un Sy Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the paying taxes indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. PAYING TAXES 59 Oman enacted a new income tax law in The Republic of Yemen narrowed the gap the the gross amount, the size of the margin January 2010 that rede�ned the scope of most, by about 33 percentage points, fol- directly affects the ratio. For example, in the taxation. lowed by Egypt. Djibouti was the only Arab Democratic Republic of Congo, where the economy that moved substantially further total tax rate equals 339.7%, the company The Republic of Yemen enacted a new tax law away from the frontier. would have to have a gross pro�t margin of in December 2010 that reduced the general 30% to be able to meet its tax liability.8 corporate tax rate from 35% to 20% and Worldwide in the past year, introducing elec- abolished all tax exemptions except those tronic systems to make compliance easier Making tax compliance easier granted under the investment law for invest- was the most common feature of tax reform Complying with tax regulations in the Arab ment projects. for the �rst time since 2004. Over the past world takes 23 payments and 201 hours a 7 years the most common features were year on average. This reflects improvements, Morocco and the Republic of Yemen, as well reducing tax rates, introducing electronic with tax compliance taking 3 payments and as 7 other Arab economies—Algeria, Egypt, systems and simplifying tax compliance by 33 hours fewer today than it did 7 years ago. Lebanon, Mauritania, Sudan, Syria and reducing the frequency of �ling or allowing Tunisia—moved closer to the frontier in pay- joint payment and �ling of several taxes. And making the process easier continues to ing taxes over the past 6 years (�gure 9.3). be a concern. In 2010/11 Morocco enhanced Reducing tax rates electronic �ling and payment of the corporate TABLE 9.1 Who in the Arab world makes The total tax rate measures the burden of all income tax—through the Simpl-IS system— paying taxes easy and who does the taxes that a company must pay in relation and value added tax—through the Simpl-TVA not—and where is the total tax to its commercial pro�t. Thus all kinds of taxes system. These 2 systems have been available rate highest? that impose a cost on the �rm are considered: for several years, Simpl-TVA since February Payments (number per year) pro�t taxes, property taxes, labor taxes and 2007 and Simpl-IS since February 2009. But Fewest Most mandatory contributions paid by the employer, their use has now spread to the majority of Qatar 3 Algeria 29b certain sales taxes, and other payments that taxpayers. This has reduced the number of Tunisia 8 Djibouti 35 do not require �ling, such as property transfer payments from 28 a year to 17 and the time to Iraq 13 Mauritania 37 taxes, stamp duties, dividend tax, capital gains prepare taxes from 358 hours a year to 238. United Arab 14 Sudan 42 tax, �nancial transactions tax, environmental Emirates tax, and vehicle and road tax. Offering electronic filing and Oman 14a Yemen, Rep. 44 payment Globally, the average total tax rate is 44.9% An electronic system for �ling and paying Time (hours per year) of pro�t. The average for Arab economies taxes, if implemented well and used by most Fastest Slowest is slightly lower, at 42.9%. This average is 16 taxpayers, bene�ts both tax authorities and United Arab 12 Iraq 312 percentage points lower than it was 7 years Emirates �rms. For tax authorities, electronic �ling ago. The reason is that more than half the tax lightens the workload and reduces opera- Bahrain 36 Syrian Arab 336 Republic reforms undertaken by Arab economies since tional costs—such as the costs of processing, Qatar 36 Egypt, Arab 433 2005 were aimed at reducing tax rates, most storing and handling tax returns. At the same Rep. often the corporate income tax rate, or elimi- time, it increases tax compliance and saves Oman 62 Algeria 451 nating certain taxes. time. For taxpayers, electronic �ling saves Saudi Arabia 79 Mauritania 696 time by reducing calculation errors on tax Labor taxes and government-mandated con- returns and making it easier to prepare, �le Total tax rate (% of pro�t) tributions paid by the employer account on and pay taxes.9 And both sides bene�t from a Highest average for 36.2% of the total tax rate in the reduction in potential incidents of corruption, Morocco 49.6 183 economies covered by Doing Business. In which are more likely to occur with more fre- Tunisia 62.9 the Arab world the Comoros and West Bank quent contact with tax administration staff.10 Mauritania 68.3 and Gaza are the only economies that do not require the payment of any social security By 2010, 66 economies had fully implemented Algeria 72.0 c contributions or labor taxes. electronic �ling and payment of taxes. Twenty Comoros 217.9 Note: The indicator on payments is adjusted for the possibility of them adopted the system in the past 7 years. In 5 economies taxes and mandatory con- of electronic or joint �ling and payment when used by the Ten OECD high-income economies have made majority of �rms in an economy. See the data notes for more tributions for the standard case study �rm details. electronic �ling and payment mandatory. And add up to more than 100% of pro�t, ranging a. Saudi Arabia also requires 14 payments a year. this trend is likely to continue. from 105.2% to 339.7%. The Comoros is one b. Egypt also requires 29 payments a year. c. Where the data show that taxes exceed pro�t, the company of these economies, with a total tax rate of Besides Morocco, Qatar and Tunisia are must apply a price markup of more than 120% of the cost of 217.9% (table 9.1). Doing Business assumes goods sold to pay its taxes under the assumptions of the Doing the only other Arab economies that offer Business case study. See the data notes for more details. that the case study �rm has a gross margin electronic �ling. Tunisia has required all Source: Doing Business database. of 20%.7 Because taxes are calculated on 60 DOING BUSINESS IN THE ARAB WORLD 2012 companies with a turnover of at least 2 mil- determine how much tax they owed, then Adopting self-assessment as an lion Tunisian dinars ($1.34 million) to use go to a tax office to pay it. And taxpayers effective tool for tax collection the country’s “télédeclaration� online system could make the payment at any tax office in Driven by a desire to reduce administrative since January 1, 2009. As a result of this fully Tunis, not just the one where their company costs for tax authorities and aided by modern implemented online �ling and payment sys- was registered. This option provided a good technology, most economies have adopted tem, businesses in Tunisia now spend 37% intermediate step in the gradual move to a the principle of self-assessment. Taxpayers less time complying with corporate income fully online �ling and payment system. determine their own liability under the law tax and value added tax than they did before. and pay the correct amount. For govern- Keeping it simple: one tax base, The change was not immediate: when the ments, the computer system and software for one tax system was �rst introduced, taxpayers self-assessment, if they function well, ensure Some 235 years after Adam Smith pro- effective quality control. Self-assessment were reluctant to make online payments. claimed simplicity to be one of the pillars systems generally make it possible to collect The government of Tunisia addressed this of the effective tax system,11 multiple taxes earlier and reduce the likelihood of dis- concern by introducing a new option for pay- taxation—where the same tax base is subject putes over tax assessments.12 They also lessen ing taxes in 2008: “téléliquidation�—online to more than one tax treatment—appears to be the discretionary powers of tax officials and declaration and physical payment. Taxpayers making tax compliance inconvenient and cum- reduce opportunities for corruption.13 To be could �le their tax declaration online and bersome for taxpayers in many economies. effective, however, self-assessment needs to Multiple taxation increases the cost of doing be properly introduced and implemented, with business for �rms because it increases the transparent rules, an automated reporting number of payments they must make and fre- process, penalties for noncompliance and risk FIGURE 9.4 How do Arab economies rank on the ease of paying taxes? quently the compliance time as well. Different assessment procedures for audit processes. forms have to be �lled out, often requiring Global ranking (1–183) different methods for calculating the tax. In Economies that have introduced their tax Haiti, for example, the case study business is system recently or undertaken major revision MALDIVES—EASIEST (1) Qatar subject to the local tax on pro�t in addition to of their tax regulations have tended to adopt United Arab Emirates the corporate income tax. Multiple taxation self-assessment principles. These include Oman Saudi Arabia also complicates tax administration for tax 12 Arab economies—Egypt, Jordan, Kuwait, 20 Kuwait authorities and increases the cost of revenue Lebanon, Mauritania, Morocco, Oman, Bahrain administration for governments. And it risks Qatar, Saudi Arabia, Syria, Tunisia, and West Jordan Lebanon damaging investor con�dence in an economy. Bank and Gaza. 40 West Bank and Gaza Globally, 49 economies have one tax per tax Iraq base for taxes measured by Doing Business, NOTES 60 including 9 in the Arab world—Djibouti, Egypt, 1. FIAS 2009. Tunisia Iraq, Jordan, Morocco, Oman, Qatar, Saudi 2. Companies ranked 16 obstacles to business Djibouti Arabia and the United Arab Emirates. Among in World Bank Enterprise Surveys in 2006–10 80 these 9 are the region’s 4 top-ranked econo- (http://www.enterprisesurveys.org). mies on the ease of paying taxes (�gure 9.4). 3. Hibbs and Piculescu 2010. 4. International Tax Dialogue 2007. Comoros Having one tax per tax base keeps things 100 5. Bird 2010. Sudan simple. Having more types of taxes requires Syrian Arab Republic 6. Djankov, Ganser and others 2010. more interaction between businesses and tax Morocco 7. That is, sales are 120% of the costs of goods Yemen, Rep. agencies. It also complicates tax compliance. 120 sold. In 17 economies globally, businesses must 8. Here, gross pro�t margin refers to sales prepare one return for corporate income tax minus costs divided by sales, where the and another for an additional tax on pro�t. sales have been adjusted to a level at which 140 Egypt, Arab Rep. In India, Lesotho, São Tomé and Príncipe, the case study company’s pro�t in the South Africa and Ukraine, besides the pro�t Democratic Republic of Congo would exceed tax, companies are subject to a tax levied the amount of taxes due. Given the original 160 assumption in the case study of a gross mar- Algeria on dividends distributed to shareholders. In gin of 20%, or 120% of the costs of goods Tunisia social security contributions, work Mauritania sold, in the Democratic Republic of Congo accident insurance contributions, a profes- sales would have to be 142% of the costs of 183 sional training tax and a social lodging tax goods sold for the case study company to be are each levied separately on gross salaries. able to meet its tax obligation. Note: Rankings are the average of the economy’s 9. Che Azmi and Kamarulzaman 2010. percentile rankings on the number of payments, time and total tax rate, with a threshold being applied to the 10. James 2009. total tax rate. See the data notes for details. 11. Smith 1776. Source: Doing Business database. 12. OECD Forum on Tax Administration 2011. 13. Imam and Jacobs 2007. 61 Trading across borders Imagine Ahmad, an entrepreneur in Baghdad who has grown his clothing business to 60 FIGURE 10.1 How much time, how many documents and what cost to export and import by ocean transport? employees in the past decade. He wants to begin importing fabric from Turkey. But that can be costly and slow. Ahmad can expect to spend $3,650 to import a standardized con- Time Time tainer of cargo through the port of Basra in the Cost Cost process as measured by Doing Business—and To export To import to wait for up to 83 days from the time the Documents Documents Full, 20-foot container goods arrive in Basra until they reach Baghdad. Import Doing Business measures the time and cost (excluding tariffs) associated with exporting and importing by ocean transport, and the Export number of documents necessary to complete Port and terminal Customs and Inland the transaction (�gure 10.1).1 The indicators handling border agencies transport cover documentation requirements and procedures at customs and other regulatory But a �rm’s ability to trade overseas can be increases exports by 4.7%.5 Globally, improv- agencies as well as at the port. They also hampered by a range of factors—inadequate ing port efficiency, the customs environment, cover logistical aspects, including the time infrastructure, inefficient port operations, the regulatory environment and the service and cost of inland transport between the excessive documentation requirements, sector could increase trade in manufacturing largest business city and the main port used burdensome and time-consuming customs by up to $377 billion a year in all regions.6 by traders. These are key dimensions of the procedures, heavy-handed inspections and Improving infrastructure naturally plays an ease of trading—the more time-consuming audits by different government agencies. By important part in enhancing trade, but so and costly it is to export or import, the more removing unnecessary obstacles, govern- do policies and regulations that promote difficult it is for local companies to be com- ments can contribute to an environment that efficient border crossing and the emergence petitive and to reach international markets. encourages entrepreneurs to look beyond of reliable logistics services, particularly their own borders for business opportunities. for landlocked economies.7 Another study WHY DOES FACILITATING TRADE A study focusing on Asia-Paci�c Economic in Sub-Saharan Africa shows that a 1-day MATTER? Cooperation (APEC) economies estimates reduction in inland travel times leads to a 7% The bene�ts of trading are well documented. that cutting the days needed to clear exports increase in exports. Put another way, a 1-day Limited access to international markets can by half could enable a small to medium-size reduction in inland travel times is equivalent prevent the growth of businesses and econo- enterprise to increase its share of exports in to a 1.5 percentage point reduction in all mies of scale. Local markets are often small, total sales from 1.6% to 4.5%.3 importing-country tariffs.8 particularly in developing economies, and trade provides potential for greater output International trade plays an important part in Governments can also bene�t directly from at lower cost. Trade also allows developing the development of economies.4 Facilitating trade facilitation, for example, by supporting economies to become part of global sup- trade is therefore a natural concern for policy easier ways to enforce tariff and duty pay- ply chains. Having access to imported raw makers. Researchers �nd that the complexity ments and by making informal “facilitation materials and other inputs is often crucial or ease of customs and administrative proce- payments� to certain customs officers more for businesses, and delays or shortages can dures has an impact on trade flows. A study difficult. Ghana saw customs revenue grow by affect production. Trade can also lead to in Sub-Saharan Africa estimates that reducing 49% in the �rst 18 months after implement- favorable externalities such as the transfer of exporting costs by 10% through improve- ing GCNet, its electronic data interchange know-how.2 ments in the efficiency of the trade process system for customs procedures, according to 62 DOING BUSINESS IN THE ARAB WORLD 2012 a case study.9 In Uganda reforms to improve FIGURE 10.2 Arab economies lead the world in cutting the time and documents required for trade customs administration and reduce corrup- Number of Doing Business reforms making it easier to trade across borders in the Arab world, by Doing Business report year tion helped increase customs revenue by 24% between 2007 and 2008.10 Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms WHO REFORMED IN TRADING 28 ACROSS BORDERS—AND WHAT HAS WORKED? 0 reforms Q1–2 reforms Q3–4 reforms Q5–6 reforms Trade facilitation has been high on Arab gov- ernments’ agendas in recent years, though it became less of a priority in the past year. Arab world averages in trading across borders DB2006 In each of the years 2008/09 and 2009/10, DB2012 6 Arab economies modernized customs Global average Documents to export (number) procedures and port infrastructure (�gure 8 10.2). In 2010/11 only 2 Arab economies 7 6.5 implemented such reforms. Documents to import (number) Djibouti developed the Doraleh Container 10 8 Terminal. Representing an investment of 7.2 around $450 million, this terminal is capable Time to export (days) of serving larger vessels and added 1.2 million 30 twenty-foot equivalent units (TEU) in an- 21 nual handling capacity, making it the largest 22.5 terminal on the east coast of Africa north of Time to import (days) Durban. The new terminal has reduced the 36 time it takes to export goods. 25 25.1 Jordan introduced X-ray scanners for exports Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for in July 2010 to improve the risk management a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. system for customs inspections. This has Source: Doing Business database. reduced the need for physical inspection and FIGURE 10.3 Syria has made impressive strides toward the frontier in trading across borders Distance to frontier in trading across borders, 2005 and 2011 0 2005 2011 10 20 30 Percentage points 40 50 60 70 80 90 100 tes nis ia an ia az a wa it co da n Re p. no n p. uti eri a ros ia da n bli c Ira q ira Om rab dG roc Jor n, ba Re bo Alg mo tan Su pu Em Tu iA an Ku Mo me Le ab Dji Co uri Re ab aud k Ye t, Ar Ma rab r S n yp A dA Ba Eg ian ite st Syr Un We Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the trading across borders indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. TRADING ACROSS BORDERS 63 thus for unloading and reloading containers. In addition, further improvements were made BOX 10.1 How have trade logistics improved in the Arab world? in the automated customs system, reducing All economies in the Arab world have the geographic advantage of direct access to the sea. But the relatively high regional averages for the time to export and import suggest that this the time required to export and import. advantage is not being fully exploited. Exporting in the Arab world takes an average of 21.3 days, and importing 24.9 days. In OECD high-income economies exporting and importing take Thanks to changes like these, the Arab less than 11 days on average. world has made bigger cuts in the time and But underlying these regional averages are large differences among Arab economies. documentation requirements to export and Trading is fastest in the United Arab Emirates (7 days to export or import) and slowest in import in recent years than any other region. Mauritania, Sudan and Iraq (32–80 days to export and 38–83 days to import). The varia- The average time to export fell from 30 days tion reflects differences in security conditions and in the pace of trade facilitation reforms. Economies with relative peace and stability have set the pace for modernization. in 2005 to 21 days in 2011, and the time Better performance in trade logistics depends on good infrastructure, efficient in-house to import from 36 days to 25. The average procedures, reliable means of exchanging information and modern legislation to anchor a number of documents required to export a sound legal framework. Some Arab economies have gone further than others in establishing standard container of cargo was reduced these conditions. from 8 in 2005 to 7 in 2011—and the aver- Among oil exporters in the region, led by the United Arab Emirates and Qatar, the development age number required to import from 10 to 8. of trade logistics has progressed from improving infrastructure (including regional infrastructure) to streamlining in-house procedures and electronically linking the parties involved in trade. Indeed, 14 of 18 Arab economies made prog- Among non-oil exporters, Tunisia has been a leader—implementing an electronic single-window ress in narrowing the distance to the frontier system and reengineering in-house procedures. And Jordan, which implemented the ASYCUDA system in 2000, recently also adopted risk-based inspections. in trading across borders (�gure 10.3). Syria Recently, supply chain security has become a concern in trade logistics reform—because advanced the most, narrowing the distance of the region’s dependence on imported food and the vulnerability of shipping lanes in the by about 30 percentage points, followed Suez Canal and Strait of Hormuz. Economies whose ports are served by these shipping lanes by Djibouti (about 25 percentage points). choose alternative supply routes and maintain large safety stocks for distribution. But to en- Most economies in the region that improved sure the effectiveness of alternative routes that combine neighboring ports and cross-border trade facilitation focused on introducing new transit requires deeper institutional arrangements between national governments. Much could be gained from an integrated customs transit regime, a common insurance guarantee electronic systems or enhancing existing system and a harmonized system of product quality and safety standards. Such cooperation, ones. Others adopted the concept of a single by supporting the diversi�cation of supply routes, could boost supply chain security. customs window to streamline procedures (box 10.1). with officials, which means fewer opportuni- communication and streamline procedures The economies with the most efficient trad- ties for corruption. But introducing an elec- between customs, inspection agencies, port ing environments share common features. tronic system often requires governments to authorities, shipping lines and freight for- They allow traders to exchange information enact legislation on electronic signatures and warders. By 2011 Egypt’s trade reforms had with customs and other control agencies transactions. Otherwise it can lead to redun- cut the time to export from 27 days in 2005 electronically. And they use risk-based as- dancy and delays, requiring paper submission to 12, and the time to import from 29 days to sessments to limit physical inspections to of signed documents after they have been 12 (table 10.1). only a small percentage of shipments, reduc- �led electronically. For small and low-income ing customs clearance times. Jordan’s recent improvements to its economies the infrastructure and training costs of implementing such systems can be automated customs system included elec- Adopting electronic data tronically connecting customs and the port onerous—and meaningful effects for local interchange systems operator (ACT). As a result, containers can traders may take time to materialize. Electronic systems for �ling, transferring, be directed to inspection or released imme- processing and exchanging customs infor- More than half the economies in the Arab diately, with no need to handle paperwork. mation have become an important tool for world have electronic data interchange sys- This cut the time to export from 14 days managing flows of information, now widely tems. In 2009 Egypt and Tunisia introduced in 2010 to 13 days in 2011, and the time to used in complex trading systems. The new- new or updated versions of their electronic import from 18 days to 15. est web-based systems allow traders to systems to better facilitate trade. In 2010 submit their documents from anywhere and Egypt implemented several measures as part Linking agencies through an to pay duties online. The key to success is of the government’s comprehensive plan electronic single window the ability of an economy to accommodate to reorganize its customs administration Increasingly, economies are going a step its regulatory framework to the new informa- to meet international standards. Modern further by virtually linking not only traders and tion technologies. customs centers were established at Egypt’s customs but all agencies involved in trade and major ports, and new information technol- transport through an electronic single-window If implemented effectively, such a system ogy systems were implemented. Known as system. In the best case such a system al- saves precious time and money (not to men- data warehouses, these systems facilitate lows traders to �le standard information and tion paper). It can also reduce interactions 64 DOING BUSINESS IN THE ARAB WORLD 2012 TABLE 10.1 Who in the Arab world makes Who in the Arab world makes importing easy— consignments. Investing in equipment is an- exporting easy—and who does not? and who does not? other way to help expedite the processing of Documents (number) Documents (number) cargo. Many economies, including Albania, Fewest Most Fewest Most Cameroon, Nigeria and the Philippines, have United Arab 4 Syrian Arab 8 United Arab 5 Algeria 9d adopted the use of scanners to limit the need Emirates Republic Emirates to physically open containers. But in some Tunisia 4 Algeria 8 Saudi Arabia 5 Syrian Arab 9 economies the use of scanners has led to Republic further delays because customs agents scan Saudi Arabia 5 Mauritania 8b Djibouti 5 Kuwait 10 all containers. And mandatory scanning fees Djibouti 5 Comoros 10 West Bank and 6 Comoros 10 Gaza have added costs for traders. Efficient use Qatar 5a Iraq 10 Tunisia 7c Iraq 10 of scanners in conjunction with risk-based pro�ling can strike the right balance in Time (days) Time (days) inspection, contributing to the efficiency of Fastest Slowest Fastest Slowest the trade process. United Arab 7 Yemen, Rep. 27 United Arab 7 Lebanon 32 Emirates Emirates Risk-based inspections are the norm in Oman 10 Comoros 30 Oman 9 Mauritania 38 OECD high-income economies. They are Morocco 11 Sudan 32 Egypt, Arab Rep. 12 West Bank and 40 Gaza also becoming increasingly common else- Bahrain 11 Mauritania 34 Bahrain 15 Sudan 46 where. Eleven economies in the Arab world Jordan 15 Iraq 83 use risk-based inspections. About 50% Egypt, Arab Rep. 12 Iraq 80 of goods are inspected in Tunisia, 10–15% Cost (US$ per container) Cost (US$ per container) in Bahrain and only 3% in the United Arab Least Most Least Most Emirates, the Arab economy where it is Morocco 577 Algeria 1,248 United Arab 635 Yemen, Rep. 1,475 easiest to trade across borders (�gure 10.4). Emirates Jordan became the latest Arab economy to Egypt, Arab Rep. 613 West Bank and 1,310 Oman 680 Mauritania 1,523 Gaza implement risk-based inspections with its Saudi Arabia 615 Mauritania 1,520 Saudi Arabia 686 Syrian Arab 1,625 introduction of X-ray scanners for exports in Republic July 2010. This reduced the clearance time United Arab 630 Sudan 2,050 Qatar 730 Sudan 2,900 at customs by 2 days for exporters. Emirates Oman 745 Iraq 3,550 Egypt, Arab Rep. 755 Iraq 3,650 Overcoming geographic barriers through regional cooperation a. Lebanon also requires 5 documents to export. Many landlocked economies face special b. Egypt and Oman also require 8 documents to export. challenges in competing globally because c. Bahrain, Jordan, Lebanon, Qatar and Sudan also require 7 documents to import. of the greater inland distances and mul- d. Egypt and the Republic of Yemen also require 9 documents to import. tiple border crossings involved in their Source: Doing Business database. trade. These economies can accelerate trade through efforts to increase border documents through a single entry point to Using risk-based inspections cooperation agreements and reduce the ful�ll all import, export and transit-related Requiring imports and exports to undergo number of checkpoints so that cargo can regulatory requirements—then shares relevant inspections—for tax, security, environmen- move freely—without being stopped for information with all parties involved in trade, tal, border control, and health and safety customs or other inspections—until it including private participants such as banks reasons—is often necessary. But how these reaches its destination. A trader in Vienna, and insurance companies as well as public inspections are carried out, including how in landlocked Austria, needs only 2 days agencies such as immigration and vehicle cargo is selected for inspection, varies across to transport cargo to the port of Hamburg, registration authorities. economies. Done with a heavy hand, inspec- Germany, 900 kilometers away. A trader tions can be a serious obstacle to efficient in Ouagadougou, in landlocked Burkina Today only 3 economies in the Arab and predictable trade. Faso, needs a week or considerably longer world—Egypt, Tunisia and the United Arab to transport cargo a similar distance to a Emirates—have implemented single-window Over the years customs administrations port in neighboring Ghana or Togo. The systems. Tunisia’s expansion of its electronic around the world, working in tandem with difference is due in part to inadequate single window, called TradeNet, has allowed other border control agencies, have devel- infrastructure. But it also results from ad- traders to quickly �le all documents required oped systems for establishing risk pro�les ditional controls and waiting time at border to clear their cargo online, shortening pro- that allow them to apply physical inspec- posts and checkpoints along the road. cessing delays by 2 days. tions in proportion to the potential risk of TRADING ACROSS BORDERS 65 No Arab economies are landlocked. But a quality of service. Governments can promote NOTES potential need to rely on alternative supply competition by removing high license fees, 1. Trading is assumed to take place through routes involving cross-border transit means onerous eligibility requirements and caps on seaports because maritime transport is that economies in the region could still the number of brokers. After Algeria acceler- the most common means of international bene�t from border cooperation agreements ated the approval of license applications for trade. To this extent the trading across (see box 10.1). brokers, customs clearance fees dropped borders indicators provide the most accurate measures of what traders around the by 40–50%. But having many brokers to world must deal with to export and import, Sparking competition by making choose from is not enough. Appropriate while the standardized case study ensures private participation easier rules and regulations and proper oversight that the data remain comparable across Beyond the customs formalities, private pro- of brokers’ services are crucial to achieving economies and over time. The indicators do good trade practices. not measure the ease of trading by other viders of trade services—such as customs modes, such as land or air, which limits the brokers, transport companies and port ser- assessment of an economy. For example, the vice providers—all have important effects on Improving transparency to indicators do not measure regional trade— the time and cost of trading across borders. minimize costs which is becoming increasingly important, Greater competition among trade service Improving transparency in trade by providing particularly for landlocked economies—even if an economy trades mainly with immediate providers can lead to lower fees and higher easy access to documentation requirements neighbors by land. In addition, the indicators and tariff schedules can reduce transactions measure logistical aspects only between the costs for importing and exporting. Where largest business city of an economy and the FIGURE 10.4 How do Arab economies rank on trading procedures and payment require- port. In low-income economies this logistical the ease of trading across borders? ments are clear, customs brokers and trade route tends to be the most developed and is not representative of the connectivity Global ranking (1–183) consultants are less necessary. to the rest of the economy, which may be more relevant for small and medium-size SINGAPORE—EASIEST (1) Documentation requirements and tariff businesses. 0 United Arab Emirates schedules for trade are not easily accessible 2. For a review of discussions on the role of in the Arab world. Only 5 Arab economies trade in international technology transfer, Saudi Arabia publish documentation requirements see Saggi (2002). 20 online—Bahrain, Jordan, Morocco, Saudi 3. Li and Wilson 2009. Tunisia Arabia and the United Arab Emirates—while 4. Bolaky and Freund 2008. Djibouti 7 disseminate tariff schedules through 5. Hoekman and Nicita 2009. 40 Morocco Oman websites. Egypt publicizes documentation 6. Wilson, Mann and Otsuki 2004. Bahrain requirements through brochures and public 7. Arvis, Marteau and Raballand 2010. Qatar 60 Jordan notices, while the Comoros does so for tariff 8. Freund and Rocha 2010. Egypt, Arab Rep. schedules. But in most Arab economies 9. De Wulf and Sokol 2004. traders must speak to an official to �nd out 10. World Bank 2009a, p. 50. 80 about the documents required or the tariff rates that will apply. And even where this in- Lebanon formation is easily accessible, it is not always 100 up to date or sufficiently detailed. Lack of Kuwait clarity about documentation requirements West Bank and Gaza and tariffs still contributes to considerable Yemen, Rep. 120 Syrian Arab Republic hassles and delays for traders. Algeria Not all trade facilitation reforms require Comoros heavy spending. Initiatives such as providing 140 Mauritania training, clarifying and publicizing the rules Sudan and holding regular meetings with exporters 160 on the clearance process can make a differ- ence. Through a series of efforts to improve customs administration in 2010—such as Iraq training staff and streamlining procedures— 183 the Palestinian Authority reduced document Note: Rankings are the average of the economy’s preparation time for exports by 2 days. percentile rankings on the documents, time and cost required to export and import. See the data notes for details. Source: Doing Business database. Enforcing contracts Imagine a businessman named Khaled who arguments on the merits and that an expert study analyzing 98 developing economies sells electrical appliances in Damascus, provides an opinion on the quality of the suggests that foreign direct investment Syria. If a customer fails to pay, Khaled could goods in dispute. This distinguishes the case tends to be greater where the cost of con- pursue the matter in court—but that would from simple debt enforcement. The time, tract enforcement in debt collection and require 55 different interactions, take around cost and procedures are measured from the property eviction cases is lower, particularly 2.5 years and cost more than 29% of the perspective of an entrepreneur (the plaintiff) when the host economy is more indebted.4 value of the claim. Even if Khaled knew that pursuing the standardized case through local the court would be on his side, he would be courts. WHO REFORMED CONTRACT unlikely to go to court to recover the money ENFORCEMENT—AND WHAT HAS owed him because judiciary procedures are WHY DOES COMMERCIAL WORKED? so costly and time-consuming. He would be DISPUTE RESOLUTION MATTER? In the past 8 years Doing Business recorded better off restricting his sales to trustworthy Effective commercial dispute resolution has 114 reforms that helped improve court effi- customers or people he knows. many bene�ts. Courts are essential for en- ciency in commercial dispute resolution. No Where enforcing contracts through the trepreneurs because they interpret the rules fewer than 23 economies made it easier to courts is efficient, businesses are more likely of the market and protect economic rights. enforce contracts by introducing or expand- to engage with new customers. But where the Efficient and transparent courts encourage ing specialized courts to deal with commer- process is long, complex and bureaucratic, new business relationships because busi- cial cases. Other economies overhauled the businesses prefer to deal only with those nesses know they can rely on the courts if a organization of their courts or their system whom they know and trust—limiting their new customer fails to pay. Speedy trials are of judicial case management that deals with opportunities to grow and prosper. essential for small enterprises, which may commercial dispute resolution. In 2010/11 lack the resources to stay in business while the introduction or expansion of computer- Doing Business measures the time, cost awaiting the outcome of a long court dispute. ized case management systems was among and procedural complexity of resolving a the most common improvements recorded commercial lawsuit between 2 domestic In Italy a study of 27 judicial districts found by Doing Business. businesses (�gure 11.1). The dispute involves that commercial cases last an average of the breach of a sales contract worth twice 53 months, or nearly 4.5 years.1 In efficient The Arab world is the only region where the income per capita of the economy. The judicial districts such as Venice there are no reforms were recorded in the area of case study assumes that the court hears 22 pending cases per 1,000 inhabitants; in enforcing contracts in 2010/11 (�gure 11.2). Reggio Calabria the backlog is more than But in the past 7 years 6 Arab economies FIGURE 11.1 What are the time, cost and twice that. The study concludes that, all improved their court systems: Egypt, Jordan number of procedures to resolve other things being equal, where the backlog and Mauritania established specialized com- a commercial dispute through of pending trials is relatively large, credit is mercial courts or commercial court divisions. the courts? less widely available, the average interest Algeria passed a new code of civil procedure. rate is higher, and the default rate is higher. West Bank and Gaza introduced specialized Court enforcement judges. And the United Arab Time Another study shows that in economies Emirates implemented a new electronic �l- Cost with good contract enforcement in debt ing system. Number of collection cases, �rms tend to produce and procedures export relatively more customized products, Despite the reforms, these 6 economies especially in industries where the continua- have not advanced much toward the frontier Company A Commercial dispute Company B (seller & plaintiff) (buyer & defendant) tion of the relationship is most important.2 in enforcing contracts (�gure 11.3). Indeed, Other research �nds that in economies with the United Arab Emirates has not advanced Filing of Trial & court case judgment Enforcement more effective legal systems, �rms tend to at all. West Bank and Gaza has advanced the be larger on average, especially in sectors most, but only by about 4 percentage points. where proprietorships dominate.3 A recent So the region has seen little improvement ENFORCING CONTRACTS 67 as accessibility, transparency, independence, FIGURE 11.2 No reforms were introduced in the past year to increase the ef�ciency of Arab courts due process, certainty and the competence Number of Doing Business reforms making it easier to enforce contracts in the Arab world, by Doing Business report year of judges and judicial staff. Some economies with efficient commercial dispute resolution Total number have complemented their court systems with DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms alternative dispute resolution systems. Doing 6 Business focuses on how public institutions function in the case of a commercial dispute. Using alternative dispute resolution systems 0 reformsQ1–2 reforms Q3–4 reforms may be more costly than relying on the regular court system and require the agree- Arab world averages in enforcing contracts DB2006 DB2012 ment of the parties involved—an agreement that is only sometimes reached by small and Global average Time (days) medium-size businesses involved in a com- 667 mercial dispute. 651 610 Over the years common features of judicial Procedures (number of steps) reforms relating to commercial dispute 45 45 resolution have included updating claim 38 thresholds, introducing case management Cost (% of claim) systems and automation, creating special- 28.3 ized commercial courts and making judg- 27.0 34.7 ments publicly available. Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample Updating claim thresholds for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. Today around 116 economies operate a 2-tier Source: Doing Business database. civil court system to ensure more efficient processing of commercial cases. Depending in the process of enforcing contracts. It still There is no single sure�re recipe for court on the litigation value of the claim, and in takes 45 procedures on average, just as it did reform. Most economies with successful some cases the subject matter, �rst-instance 6 years ago, though the time and cost have court reform efforts have had to embrace a cases go either to a lower court—often the decreased slightly. holistic approach, looking not only at timely magistrate’s court, city court or justice of disposition of cases but also at such features the peace—or to the higher court. Some FIGURE 11.3 Few Arab economies have advanced toward the frontier in enforcing contracts Distance to frontier in enforcing contracts, 2005 and 2011 0 2005 2011 10 20 30 Percentage points 40 50 60 70 80 90 100 p. ia co no n ia da n ia aza an wa it eri a tes Ira q p. da n bli c uti ros Re nis roc tan Jor rab dG Om ira Re pu bo mo n, Tu Mo Le ba uri iA an Ku Alg Em ab Su Re Dji Co me Ma ud k Ar ab Ye Sa Ba n rab t, r st dA yp A We ite Eg ian Un Syr Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the enforcing contracts indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. 68 DOING BUSINESS IN THE ARAB WORLD 2012 economies further divide lower and higher fees and follow the progress of their cases. transcribe judges’ handwritten decisions jurisdictions. The website also provides comprehensive on typewriters. But thanks to court mod- information on laws and regulations in the ernization efforts, now they can transcribe Regardless of the level, monetary thresholds United Arab Emirates. decisions directly into an electronic system, have to be regularly updated to ensure that to be archived and promptly produced for the workload is adequately distributed. With Other economies in the region have also docketing and distribution. economic growth and inflation, thresholds introduced information technology in their can quickly become outdated—and higher judicial systems, though they do not yet Creating specialized commercial courts overburdened with simple cases. allow electronic �ling. In 2008/09 Jordan courts implemented a computerized case manage- Eighty-seven of the 183 economies covered At least 19 economies around the world ment system called Mizan II, an improved by Doing Business have a specialized com- updated claim thresholds or ceilings for com- version of the original system used in neigh- mercial jurisdiction—established by setting mercial cases in the past 8 years. Many raised boring West Bank and Gaza. Among other up a dedicated stand-alone court, a special- the maximum case value for lower courts, features, Mizan II enables text-message ized commercial section within existing allowing more cases to bene�t from simpli- noti�cations for attorneys and allows online courts or specialized judges within a general �ed procedures. In 2009 Jordan more than access to court records for authorized us- civil court. The majority of Arab economies doubled the maximum case value for its lower ers. Enforcing a contract in Jordan takes 38 have a specialized commercial jurisdic- courts, the conciliation courts, to allow a bet- procedures—the third smallest number in tion: the Comoros, Egypt, Jordan, Kuwait, ter distribution of the caseload. It raised the the region (table 11.1). Lebanon, Mauritania, Morocco, Oman, ceiling for these courts from 3,000 Jordanian Saudi Arabia, Sudan, Tunisia, the United dinars ($4,230) to 7,000 ($9,870). In Egypt employees in the Alexandria and Arab Emirates and the Republic of Yemen. El Mansûra courts of �rst instance used to Introducing case management Seven of these economies rank in the top systems and automation half among Arab economies on the ease of TABLE 11.1 Who in the Arab world makes enforcing contracts (�gure 11.4). Introducing case management and automat- enforcing contracts easy—and ing court processes have been common who does not? As recorded by Doing Business, about 23 practices among economies improving con- Time (days) economies around the world introduced or tract enforcement. Judicial case management expanded the scope of specialized commer- Fastest Slowest involves monitoring and managing cases in cial courts or commercial sections in the past Mauritania 370 Lebanon 721 the court docket from the �ling of the claim 8 years. Egypt established new stand-alone Comoros 506 Sudan 810 until judgment is rendered. It has proved to commercial courts in 2008. Known as spe- Morocco 510 Syrian Arab 872 be an effective tool for reducing procedural Republic cial economic courts, these began operating delays at court and for monitoring the per- Iraq 520 Egypt, Arab 1,010 within the jurisdiction of each circuit court or formance of judges and court officers. By Rep. court of �rst instance. The new courts handle analyzing court workloads, case management Yemen, Rep. 520 Djibouti 1,225 all bankruptcy cases and commercial cases systems can help predict trends and allocate exceeding 10 million Egyptian pounds ($1.65 resources strategically. Case management Procedures (number of steps) million). To allow the assignment of 3 judges can be particularly successful when courts Fewest Most to each commercial court, 25–35 judges are computerized and when support func- Yemen, Rep. 36 Kuwait 50 were trained for the new positions. tions—such as electronic �ling, case tracking, Lebanon 37 Oman 51 document management, deadline reminders In 2008 Jordan set up commercial divisions Jordan 38 Iraq 51 and scheduling of hearings—are performed in its courts of �rst instance and its concili- Tunisia 39 Sudan 53 automatically. ation courts, assigning judges to hear solely Morocco 40a Syrian Arab 55 Republic commercial cases. To start with, 6–7 special- Since 2008 Doing Business has recorded 18 ized commercial judges were assigned to the major reforms in judicial case management conciliation courts, and 12 to the courts of Cost (% of claim) and automation of court proceedings. Today �rst instance. Least Most 16 of the 183 economies covered by Doing Oman 13.5 Syrian Arab 29.3 Business allow electronic �ling of the initial Republic In Saudi Arabia dedicated commercial courts complaint in a case. One is the United Arab Bahrain 14.7 Lebanon 30.8 replaced specialized chambers within the Emirates, which introduced electronic �ling civil courts of �rst instance in 2007. The new Yemen, Rep. 16.5 Jordan 31.2 in its court system in 2007. The website of commercial courts have 3 sitting judges, Kuwait 18.8 Djibouti 34.0 the Dubai courts enables parties to �le sev- while the specialized chambers had had just Sudan 19.8 Comoros 89.4 eral types of petitions electronically, deposit 1 sitting judge. With the greater capacity, money to cover both court fees and experts’ a. Djibouti also requires 40 procedures. Source: Doing Business database. ENFORCING CONTRACTS 69 each judge is now expected to hear about 30 Making judgments publicly In the Arab world third parties can access cases a month. available written decisions in less than 35% of the Many economies require judgments in court economies covered (�gure 11.5). In Kuwait Specialized courts tend to improve ef- and Tunisia judgments are easily accessible. cases to be made publicly available with the �ciency.5 Creating specialized commercial But in several Arab economies, including aim of improving the efficiency of courts courts can result in faster and less costly Jordan and Syria, �nal judgments are avail- and increasing the transparency of judicial contract enforcement. One reason for the able only to the parties involved or to those decisions. Many also impose disclosure greater efficiency is that judges become who can prove an interest in the case. requirements on members of the judiciary expert in handling commercial disputes. in the hope of making it easier to discover Commercial courts often have less formal Making judgments available does not instances of corruption. These practices do procedures: the use of oral arguments is necessarily require large resources. But it not in themselves guarantee a fair trial. But permitted even in economies where the does require that case �les be accessible they can increase the chances for fair trials. general courts require written procedures. and catalogued efficiently so that they can And access to court decisions can support Analysis of Doing Business data shows that be conveniently searched.9 In many low- judicial certainty and promote the develop- commercial disputes are resolved 5 months income economies judgments are available ment of consistent case law.7 As the English faster on average in economies with special- upon request at the courthouse, but only jurist and philosopher Jeremy Bentham ob- ized commercial courts or sections than in if the case number or names of the parties served, “Publicity is the very soul of Justice. those without them.6 are provided. Greater resources for online . . . It keeps the judge himself, while trying, access increase the options for the terms under trial.�8 and speed of search.10 Electronic storage of This year Doing Business collected data on judgments also can reduce the risk of losing FIGURE 11.4 How do Arab economies rank on the ease of enforcing contracts? the public availability of judgments in com- records when physical �les are misplaced or mercial cases in 175 economies. In no fewer destroyed. As access to the latest technolo- Global ranking (1–183) than 122 economies courts ensure that the gies expands—a process driven in part by a LUXEMBOURG—EASIEST (1) general public can access judgments in com- sustained reduction in their cost—a growing 0 mercial cases. In most cases a third party can number of economies have been able to obtain a copy of the decision by requesting modernize the administration of justice and 20 it from the registrar at the courthouse. In facilitate public access to judgments and others, court systems make all decisions on other information generated by the courts. commercial cases, or at least the new ones, 40 Yemen, Rep. available to the public. 60 FIGURE 11.5 Access to judgments in commercial cases is more restricted in the Arab world than in most other regions Share of economies where judgments are publicly available (%) Tunisia 80 Mauritania Morocco West Bank and Gaza 83 83 Qatar 77 75 100 73 Oman Bahrain Kuwait 54 120 Lebanon Algeria Jordan United Arab Emirates 32 29 140 Saudi Arabia Iraq Egypt, Arab Rep. Sudan Comoros 160 Djibouti OECD South Asia Latin Sub-Saharan East Asia Eastern Arab Middle East high income America Africa & Pacific Europe world & North Africa & Caribbean & Central Asia Syrian Arab Republic 183 Note: Judgments in commercial cases are considered publicly available if they are systematically made available to third parties upon request or through legal publications. If judgments are not available because of poor storage of decisions or if a third party must demonstrate particular legal interest in the case to obtain a copy, they are not considered publicly available. The data sample Note: Rankings are the average of the economy’s comprises 175 economies, including 19 in the Arab world. percentile rankings on the procedures, time and cost to resolve a commercial dispute through the courts. Source: Doing Business database. See the data notes for details. Source: Doing Business database. 70 DOING BUSINESS IN THE ARAB WORLD 2012 NOTES 1. Jappelli, Pagano and Bianco 2005. 2. Nunn 2007. 3. Laeven and Woodruff 2007; Cooley, Marimon and Quadrini 2004. 4. Ahlquist and Prakash 2010. 5. Botero and others 2003. 6. Relationships are signi�cant at the 1% level after controlling for income per capita. 7. In some economies the underlying principle that justice must be rendered by the people demands that judgments be made public. In France this principle applies not only in criminal or administrative cases but also in civil and commercial cases. 8. Bentham 1843. 9. Setting clear guidelines on who can access judgments is also important. In some economies those interested in accessing a judgment must show legitimate interest, leaving wide room for discretion by the person who is deciding. In some economies the decision might be made by an entry- level court clerk with little guidance on the matter. 10. Online databases can be either public or private, with a fee required to access a judgment in private databases. In some economies both options may be available, with privately run databases adding value by permitting enhanced search options. 71 Resolving insolvency The global �nancial crisis spurred bankruptcy world, compared with 68.2 cents in OECD reforms around the world. Struggling with a high-income economies and 37.5 cents FIGURE 12.1 What are the time, cost and outcome of the insolvency drop in demand and business revenue, many worldwide.5 Resolving insolvency costs an proceedings against a local businesses could not be saved because they average of 14% of the value of the debtor’s company? lacked access to additional credit or because estate in the Arab world, compared with 9% creditors themselves were in �nancial in OECD high-income economies. Court distress.1 Bankruptcies increased sharply in economies such as Romania, testing their Amending bankruptcy laws in ways that re- Outcome insolvency systems in unprecedented ways.2 flect the growing needs of businesses in the Time Cost Since the onset of the crisis in 2008/09, region and focus on reorganization of debtors could improve this situation. Decriminalizing Recovery rate no fewer than 65 economies have made changes in their insolvency regimes, includ- bankruptcy would help encourage debtors to Secured creditor Insolvent Unsecured ing Kuwait and Saudi Arabia. �le for bankruptcy early on, as soon as the company creditors (bank) need becomes apparent. Creating efficient But systems in the Arab world for resolving reorganization and liquidation proceedings insolvency through restructuring or liquida- may enable viable businesses to continue Secured Other loan claims tion remain weaker than those in most other operating and creditors to recover their in- regions. Many of the region’s bankruptcy vestments faster and at a lower cost than in laws are outdated, and none comply with the past. This may in time lead to a higher insolvency proceedings of individuals or international best practice standards on recovery rate. �nancial institutions.6 insolvency. Moreover, the laws in some of its economies treat debtors as criminals, Doing Business measures the time, cost and outcome of insolvency proceedings involving WHY DOES A GOOD INSOLVENCY going so far as to allow imprisonment. REGIME MATTER? Reorganization is rare, even where the law domestic entities (�gure 12.1). The value of the �rm in the Doing Business case scenario Keeping viable businesses operating provides for it. And reorganization provisions is assumed to be 30% greater if the �rm is is among the most important goals of tend to be creditor driven, with little flexibil- sold as a going concern. The data are derived bankruptcy systems. A good insolvency ity for debtors.3 from survey responses by local insolvency regime should inhibit premature liquidation The region’s insolvency systems also lack practitioners and veri�ed through a study of of sustainable businesses.7 It should also efficient debt enforcement. The formal laws and regulations as well as public infor- discourage lenders from issuing high-risk bankruptcy process tends to be character- mation on bankruptcy systems. loans—and managers and shareholders from ized by a high level of court involvement and taking imprudent loans and making other multiple appeals, and debtors generally face The name of the indicator set was changed reckless �nancial decisions.8 A �rm suffering no penalties for failing to �le for bankruptcy. this year from closing a business to resolv- from bad management choices or a tempo- All this may help explain why creditors and ing insolvency to reflect the fact that the rary economic downturn may still be turned debtors often prefer to resolve the situation case assesses the efficiency of insolvency around. When it is, all stakeholders bene�t. through private negotiations.4 But private proceedings (including foreclosure proceed- Creditors can recover a larger part of their negotiations may not always lead to the ings) and takes into consideration different investment, more employees keep their jobs, most effective solution. outcomes—that is, piecemeal sale or sale and the network of suppliers and customers as a going concern. The ranking on the is preserved. These issues are reflected in comparisons ease of resolving insolvency is based on of the Arab world’s insolvency systems the recovery rate. Swift, low-cost proceed- Some studies find that stronger regula- with those in other regions. As measured ings leading to the continuation of viable tory protections for creditors—such as a by Doing Business, the recovery rate on debt businesses characterize the top-performing higher priority order in receiving proceeds averages 32.7 cents on the dollar in the Arab economies. Doing Business does not measure from the sale of a debtor’s assets and the 72 DOING BUSINESS IN THE ARAB WORLD 2012 ability to actively participate in the insol- FIGURE 12.2 Pace of bankruptcy reform is slow in the Arab world vency proceedings—are associated with Number of Doing Business reforms making it easier to resolve insolvency in the Arab world, lower costs of debt as well as a significant by Doing Business report year increase in the aggregate level of credit.9 If in a case of bankruptcy creditors can Total number DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 of reforms recover most of their investments, they can keep reinvesting in viable firms, 3 improving companies’ access to credit. Similarly, if a bankruptcy regime respects 0 reformsQ1 reform the absolute priority of claims, this allows secured creditors to continue lending and Arab world averages in resolving insolvency DB2006 maintains confidence in the bankruptcy DB2012 system.10 Global average Recovery rate (cents on the dollar) Even when bankruptcy laws are similar 27.8 across economies, the use of bankruptcy 32.7 37.5 procedures can differ because of differenc- es in the efficiency of debt enforcement. Time (years) 3.8 If courts cannot be used effectively in a 3.5 case of default, creditors and debtors are 2.9 likely to engage in informal negotiations Cost (% of estate) outside of court—as is the case in many 14 Arab economies. And in economies with 14 16 weak judiciary systems borrowers are more likely to exhibit risky financial be- Note: An economy can be considered to have only 1 Doing Business reform per topic and year. The data sample havior, which could lead to more defaults for DB2006 (2005) comprises 18 economies. The sample for DB2012 (2011) also includes Bahrain and Qatar, for a total of 20 economies. DB2006 data are adjusted for any data revisions and changes in methodology. and higher levels of financial distress. Source: Doing Business database. Conversely, if a legal system is strong and debt enforcement procedures are well observed, debtors and borrowers are more substantial progress toward the frontier in process. Long proceedings reduce creditors’ likely to avoid taking unnecessary risks and resolving insolvency over the past 6 years chances of recovering outstanding debt. to make prudent financial decisions.11 (�gure 12.3). Speedier court resolution reduces uncer- tainty for all parties involved and improves From the changes in insolvency regimes the value of assets.12 Efficient insolvency WHO REFORMED INSOLVENCY worldwide over the years—whether moti- processes also increase creditors’ debt REGIMES—AND WHAT HAS vated by economic or �nancial crises or part recovery by making it more difficult for the WORKED? of broader judicial or legal reforms—several shareholders of a company to sell its assets Bankruptcy regulation continues to vary trends and good practices have emerged. at an unreasonably low price to a second across regions, and so does the pace of Among these is a uni�ed international company they own. bankruptcy reforms. The Arab world has good practice standard on creditor rights been slow to pick up this pace. Over the past and insolvency set forth by the World In the past 7 years 37 economies around 7 years only 2 Arab economies reformed Bank and the United Nations Commission the world either tightened time limits for their bankruptcy regimes: Kuwait and Saudi on International Trade Law (UNCITRAL). insolvency proceedings or introduced Arabia. Even so, the efficiency in resolving Good practices in many economies are such limits for the �rst time. Saudi Arabia insolvency has improved in the region. The aimed at improving both the efficiency and introduced strict deadlines for bankruptcy average recovery rate increased from 27.8 the outcome of insolvency proceedings. procedures in 2007, reducing the time to cents on the dollar in 2005 to 32.7 cents These include setting time limits for insol- resolve insolvency by 1.3 years on aver- in 2011, while the average time to resolve vency proceedings, introducing specialized age. In 2010 it imposed a time limit on insolvency decreased from 3.8 years to 3.5 courts and establishing new reorganization amicable settlements through amendments (�gure 12.2). proceedings—practices that are relatively to bankruptcy regulations. Today, resolving uncommon in the Arab world. insolvency in Saudi Arabia takes only 1.5 Not surprisingly, among 18 Arab econo- years—the second fastest time in the region mies, the 2 that reformed their bankruptcy Setting time limits after Tunisia’s (table 12.1). regimes—Saudi Arabia and Kuwait—are Establishing time limits for proceedings can the only economies that made relatively enhance the efficiency of the insolvency RESOLVING INSOLVENCY 73 FIGURE 12.3 Among Arab economies, Saudi Arabia has advanced the most toward the frontier in resolving insolvency Distance to frontier in resolving insolvency, 2005 and 2011 2005 2011 0 10 20 30 Percentage points 40 50 60 70 80 90 100 ia eri a wa it co an da n ia lic p. da n no n p. uti tes nia ros Ira q aza nis roc Om rab ub Re Jor Re bo ira rita mo dG Tu Alg Ku Mo Su iA ep n, Le ba ab Dji Em au Co an ud bR me Ar b nk Sa Ara Ye yp t, Ar a M Ba ian Eg d st Syr ite We Un Note: The distance to frontier measure illustrates the distance of an economy to the “frontier�—a synthetic measure based, in this �gure, on the most ef�cient practice or highest score achieved by any of 174 economies on each of the resolving insolvency indicators since 2005. The vertical axis represents the distance to the frontier, and 0 the most ef�cient regulatory environment (frontier practice). Results are shown for the 18 Arab economies included in Doing Business 2006 (2005). Bahrain and Qatar were added in subsequent years. Source: Doing Business database. Promoting specialized courts proceedings from 2.25 years to 1.5 years. and 3 others in this group rank among the Many economies face more insolvencies In December 2010 Israel established an top half of Arab economies (figure 12.4). than they can reasonably handle. Jamaica economic department at the district court of Tel Aviv. The aim was to create a more Another economy, Kuwait, has begun to has a 3-year backlog of insolvency cases. permanent and efficient judicial system encourage out-of-court restructurings. In Promoting specialized courts is among dedicated to handling economic disputes. 2009, in response to the global financial the most efficient ways to ensure that Its judges can hear corporate petitions crisis, Kuwait introduced a stimulus insolvency cases receive attention more and facilitate settlements with creditors. package that included measures aimed at quickly. It also improves the quality of the judicial system, because it allows judges The new system is likely to speed up insol- to specialize in hearing insolvency cases vency proceedings. and thus better equips them to make TABLE 12.1 Who in the Arab world makes Establishing effective resolving insolvency easy—and informed decisions. reorganization proceedings who does not? Specialized courts are rare in the Arab world. In 101 of the 168 practice economies (those Time (years) Bankruptcy cases are heard in specialized with at least 1 bankruptcy case over the past Fastest Slowest courts or sections in a few economies—in 5 years) foreclosure and liquidation are the Tunisia 1.3 Kuwait 4.2 Lebanon, in the bankruptcy court; in Algeria, proceedings most commonly used to resolve Saudi Arabia 1.5 Jordan 4.3 in the commercial section of the tribunal; and insolvency. This holds true in the Arab world Morocco 1.8 Djibouti 5.0 in the Republic of Yemen, in the commercial as well. These proceedings usually provide Sudan 2.0 United Arab 5.1 Emirates court. Establishing specialized courts more no option for formally restructuring a com- Algeria 2.5 Mauritania 8.0 broadly in the region, where court systems pany’s debt in a way that allows the business tend to be slow and bureaucratic, could help to continue operating—even for a business Cost (% of estate) make the judicial process more efficient. that is potentially viable. Least Most Kuwait 1 Qatar 22 Five economies around the world have But in 5 economies in the Arab world Oman 4 Saudi Arabia 22 introduced specialized courts since insolvent businesses are likely to undergo Tunisia 7 Lebanon 22 2005. In 2009 Romania created special reorganization—Bahrain, Morocco, Saudi Algeria 7 Egypt, Arab Rep. 22 insolvency departments within tribunals. Arabia, Tunisia and the Republic of Yemen. Yemen, Rep. 8 United Arab 30 In September 2009 Malaysia established Bahrain has the region’s highest ranking Emirates specialized civil and commercial courts in on the ease of resolving insolvency, with Note: The rankings reflected in the table include only Arab Kuala Lumpur that handle only foreclosure a recovery rate of 66 cents on the dollar, economies with a practice of insolvency (17 in total). Another 3 have no practice. proceedings. This reduced the length of Source: Doing Business database. 74 DOING BUSINESS IN THE ARAB WORLD 2012 requires that secured creditors’ claims be sat- Transparency in insolvency systems is FIGURE 12.4 How do Arab economies rank on is�ed �rst from the proceeds of the sale of the part of this. Publicizing the initiation of the ease of resolving insolvency? debtor’s secured assets. Bulgaria amended its insolvency proceedings is important, since Global ranking (1–183) commerce act in January 2011 to give priority an insolvency case affects many parties, to secured creditors in appealing court deci- especially creditors. Doing so brings JAPAN—EASIEST (1) 0 sions declaring bankruptcy when the debtor’s transparency to the proceedings and helps assets are insufficient to cover the initial ensure that all affected parties are equally expenses. But no Arab economies reformed well informed.14 20 in this area in the past 7 years. Bahrain In recent years Eastern Europe has been the Creditors’ committees are another way to leading region in promoting transparency of Qatar 40 Tunisia increase creditors’ say in bankruptcy pro- insolvency proceedings. In FYR Macedonia Kuwait ceedings. In some cases creditors participate bankruptcy trustees are required to use in the preparation of a reorganization plan an electronic system—an “e-bankruptcy 60 Algeria or determine the fees of the insolvency system�—to record all phases and process Morocco administrator. In Slovenia amendments actions during bankruptcy proceedings. Saudi Arabia to the Financial Operations, Insolvency Bulgaria’s commerce act now requires that Oman 80 Proceedings and Compulsory Dissolution a bankruptcy petition �led by an insolvent Sudan Act that entered into force in July 2010 debtor be made publicly available in the improved the position of creditors and credi- commercial register. 100 Syrian Arab Republic tors’ committees. Jordan This year Doing Business collected ad- Yemen, Rep. Creditors’ committees are not very common ditional data on what information courts 120 in the Arab world. In Egypt, however, regula- are legally required to make public in Lebanon tions clearly de�ne the powers of the general insolvency proceedings. In a sample of 151 creditors’ assembly, including its ability to economies it found that courts in 75% of Egypt, Arab Rep. 140 Djibouti change or appoint a liquidator. the economies are required to publicize the initiation of insolvency proceedings. United Arab Emirates Mauritania Increasing transparency Such requirements are least common in 160 As the recent events of the Arab Spring the Arab world, where courts in only 69% show, governments are increasingly being of economies are required to publicize this held accountable by their citizens. And citi- information (figure 12.5). Among the Arab Comoros 183 Iraq zens are demanding greater transparency in economies in the sample, Kuwait requires West Bank and Gaza its courts to make the most information political, economic and judicial systems. Note: Rankings are based on the recovery rate: how many cents on the dollar creditors recover from an insolvent �rm as calculated by Doing Business. See the data notes for details. FIGURE 12.5 The Arab world has the smallest share of economies where courts are required by law to Source: Doing Business database. publicize the start of insolvency proceedings Share of economies with requirement (%) facilitating restructurings between bor- rowers and lenders. OECD high income 100 Eastern Europe & Central Asia 100 Protecting secured creditors Research has shown that if secured creditors Latin America & Caribbean 92 are not protected or granted priority under the law, they will have less incentive to lend South Asia 83 in the future. That leads to a less developed Sub-Saharan Africa 82 credit market.13 Several insolvency reforms in 2010/11 addressed this concern, mainly in East Asia & Pacific 73 Eastern Europe. Moldova amended its insol- Middle East & North Africa 69 vency law in July 2010 to allow secured credi- tors to seek enforcement of individual claims Arab world 69 in the course of insolvency proceedings. Similarly, Lithuania’s Law on Reorganization Note: The data sample comprises 151 economies, including 13 in the Arab world. of Enterprises, amended in October 2010, Source: Doing Business database. RESOLVING INSOLVENCY 75 public by law. Courts must publish information on the start of insolvency proceedings, the submissions by parties to the proceedings, the final decisions in insolvency cases and other court decisions relating to such cases. NOTES 1. Gramatikov and Vriesendorp 2010. 2. In Romania the number of bankruptcy cases at the beginning of 2009 was about 5,000, 50% more than in 2008. In the �rst half of 2009 the number rose to 12,500. The number of bankruptcy cases was expected to exceed 20,000 by the end of 2010. See Tuleaşcă (2009). 3. See Uttamchandani (2010). 4. See Hawkamah and others (2009). 5. The term recovery rate in this chapter refers to cents on the dollar recouped by creditors through insolvency proceedings, as measured by the Doing Business case study for resolving insolvency. See the data notes for further details. 6. See Djankov, Hart and others (2008). 7. See Djankov, Hart and others (2008). 8. See Claessens and Klapper (2003). 9. Funchal 2008. 10. See Djankov (2009a). 11. See Claessens and Klapper (2003). 12. See Cirmizi, Klapper and Uttamchandani (2010). 13. See Claessens and Klapper (2003). 14. See UNCITRAL (2004). References Aghion, Philippe, Robin Burgess, Stephen Arvis, Jean-François, Jean-François Marteau National Bureau of Economic Research, Redding and Fabrizio Zilibotti. 2008. “The and Gaël Raballand. 2010. The Cost of Being Cambridge, MA. Unequal Effects of Liberalization: Evidence Landlocked: Logistics Costs and Supply Chain Brown, Martin, and Christian Zehnder. 2007. from Dismantling the License Raj in India.� Reliability. Washington, DC: World Bank. “Credit Registries, Relationship Banking, and American Economic Review 98 (4): 1397–412. Audretsch, David, Max Keilbach and Erik Loan Repayment.� Journal of Money, Credit Ahdieh, Robert. 2003. “Making Markets: Lehmann. 2006. Entrepreneurship and and Banking 39 (8): 1883–918. Network Effects and the Role of the Law in Economic Growth. New York: Oxford Brown, Martin, Tullio Jappelli and Marco the Creation of Strong Securities Markets.� University Press. Pagano. 2009. “Information Sharing and Southern California Law Review 76 (2): Ayyagari, Meghana, Asli Demirgüç-Kunt and Credit: Firm-Level Evidence from Transition 277–350. Vojislav Maksimovic. 2011. “Small vs. Young Countries.� Journal of Financial Intermediation Ahlquist, John S., and Aseem Prakash. 2010. Firms across the World: Contribution to 18: 151–72. “FDI and the Costs of Contract Enforcement Employment, Job Creation, and Growth.� Bruhn, Miriam. 2011. “License to Sell: The in Developing Countries.� Policy Sciences 43 Policy Research Working Paper 5631, World Effect of Business Registration Reform on (2): 181–200. Bank, Washington, DC. Entrepreneurial Activity in Mexico.� Review Alesina, Alberto, Silvia Ardagna, Giuseppe Bae, Kee-Hong, and Vidhan K. Goyal. 2009. of Economics and Statistics 93 (1): 382–86. Nicoletti and Fabio Schiantarelli. 2005. “Creditor Rights, Enforcement, and Bank Calderon, César, and Luis Servén. 2003. “Regulation and Investment.� Journal of Loans.� Journal of Finance 64 (2): 823–60. “The Output Cost of Latin America’s the European Economic Association 3 (4): Barseghyan, Levon. 2008. “Entry Costs and Infrastructure Gap.� In The Limits of 791–825. Cross-Country Differences in Productivity Stabilization: Infrastructure, Public De�cits, Alvarez de la Campa, Alejandro, Everett T. and Output.� Journal of Economic Growth 13 and Growth in Latin America, ed. William R. Wohlers, Yair Baranes and Sevi Simavi. 2010. (2): 145–67. Easterly and Luis Servén. Washington, DC: Secured Transactions Systems and Collateral Behr, Patrick, Annekathrin Entzian and World Bank. Registries. Washington, DC: International Andre Guettler. 2011. “How Do Lending Calderon, César, Alberto Chong and Gianmarco Finance Corporation. Relationships Affect Access to Credit and Leon. 2007. “Institutional Enforcement, Amin, Mohammad. 2011. “Labor Productivity, Loan Conditions in Microlending?� Journal of Labor-Market Rigidities, and Economic Firm-Size and Gender: The Case of Informal Banking and Finance 35: 2169–78. Performance.� Emerging Markets Review 8 Firms in Argentina and Peru.� Enterprise Bentham, Jeremy. 1843. The Works of Jeremy (1): 38–49. Note 22, Enterprise Analysis Unit, World Bentham, Published under the Superintendence Cardenas, Mauricio, and Sandra Rozo. 2009. Bank Group, Washington, DC. http://www of His Executive, John Bowring. Facsimile “Firm Informality in Colombia: Problems .enterprisesurveys.org/. edition. Boston, MA: Adamant Media and Solutions.� Desarrollo y Sociedad, no. 63: Andres, Luis, Jose Luis Guasch and Sebastian Corporation, 2001. 211–43. Lopez Azumendi. 2008. “Regulatory Bird, Richard. 2010. “Smart Tax Administration.� Chang, Roberto, Linda Kaltani and Norman Governance and Sector Performance: Economic Premise (World Bank) 36: 1–5. Loayza. 2009. “Openness Can Be Methodology and Evaluation for Electricity Good for Growth: The Role of Policy Black, Bernard. 2001. “The Legal and Distribution in Latin America.� Policy Complementarities.� Journal of Development Institutional Preconditions for Strong Research Working Paper 4494, World Bank, Economics 90: 33–49. Securities Markets.� UCLA Law Review 48: Washington, DC. 781–855. Chari, Anusha. 2011. “Identifying the Aggregate Antunes, Antonio, and Tiago Cavalcanti. 2007. Productivity Effects of Entry and Size Bolaky, Bineswaree, and Caroline L. Freund. “Start Up Costs, Limited Enforcement, and Restrictions: An Empirical Analysis of 2008. “Trade, Regulations, and Income.� the Hidden Economy.� European Economic License Reform in India.� American Economic Journal of Development Economics 87: 309–21. Review 51 (1): 203–24. Journal: Economic Policy 3: 66–96. Botero, Juan Carlos, Rafael La Porta, Florencio Anzoategui, Diego, María Soledad Martinez Che Azmi, Anna, and Yusniza Kamarulzaman. López-de-Silanes, Andrei Shleifer and Pería and Roberto Rocha. 2010. “Bank 2010. “Adoption of Tax E-�ling: A Alexander Volokh. 2003. “Judicial Reform.� Competition in the Middle East and Conceptual Paper.� African Journal of Business World Bank Research Observer 18 (1): 67–88. Northern Africa Region.� Policy Research Management 4 (5): 599–603. Working Paper 5363, World Bank, Branstetter, Lee G., Francisco Lima, Lowell J. Taylor and Ana Venâncio. 2010. “Do Entry Ciccone, Antonio, and Elias Papaioannou. 2007. Washington, DC. Regulations Deter Entrepreneurship and Job “Red Tape and Delayed Entry.� Journal of APEC (Asia-Paci�c Economic Cooperation). the European Economic Association 5 (2–3): Creation? Evidence from Recent Reforms 2010. “APEC Ease of Doing Business Action 444–58. in Portugal.� NBER Working Paper 16473, Plan (2010–2015).� http://aimp.apec.org/. REFERENCES 77 Cirmizi, Elena, Leora Klapper and Mahesh Djankov, Simeon, Oliver Hart, Caralee the Middle East and North Africa Region— Uttamchandani. 2010. “The Challenges McLiesh and Andrei Shleifer. 2008. “Debt Overview. Washington, DC: World Bank. of Bankruptcy Reform.� Policy Research Enforcement around the World.� Journal of Geginat, Carolin, and Rita Ramalho. 2010. Working Paper 5448, World Bank, Political Economy 116 (6): 1105–49. “Connecting Businesses to the Electrical Washington, DC. Djankov, Simeon, Rafael La Porta, Florencio Grid in 140 Economies.� Paper pre- Claessens, Stijn, and Leora Klapper. 2003. López-de-Silanes and Andrei Shleifer. 2002. sented at the International Conference on “Bankruptcy around the World: Explanations “The Regulation of Entry.� Quarterly Journal of Infrastructure Economics and Development, of Its Relative Use.� Policy Research Working Economics 117 (1): 1–37. Toulouse, France, January 14–15. Paper 2865, World Bank, Washington, DC. ___. 2003. “Courts.� Quarterly Journal of Giné, Xavier, and Inessa Love. 2010. “Do Cooley, Thomas, Ramon Marimon and Economics 118 (2): 453–517. Reorganization Costs Matter for Efficiency? Vincenzo Quadrini. 2004. “Aggregate ___. 2008. “The Law and Economics of Self- Evidence from a Bankruptcy Reform in Consequences of Limited Contract Dealing.� Journal of Financial Economics 88 Colombia.� Journal of Law and Economics 53 Enforceability.� Journal of Political Economy (3): 430–65. (4): 833–64. 112 (4): 817–47. Gramatikov, Martin, and Reinout Vriesendorp. Djankov, Simeon, Darshini Manraj, Caralee Cubbin, John, and Jon Stern. 2006. “The Impact McLiesh and Rita Ramalho. 2005. “Doing 2010. “Impact of the Financial Crisis.� Legal of Regulatory Governance and Privatization Business Indicators: Why Aggregate, and Studies Working Paper 004/2010, Tilburg on Electricity Industry Generation Capacity How to Do It.� World Bank, Washington, DC. University, Netherlands. in Developing Economies.� World Bank Hallward-Driemeier, Mary, Gita Khun-Jush and Djankov, Simeon, Tim Ganser, Caralee McLeish, Economic Review 20 (1): 115–41. Lant Pritchett. 2010. “Deals versus Rules: Rita Ramalho and Andrei Shleifer. 2010. “The Cuñat, Alejandro, and Marc J. Melitz. 2007. Effect of Corporate Taxes on Investment Policy Implementation Uncertainty and Why “Volatility, Labor Market Flexibility, and the and Entrepreneurship.� American Economic Firms Hate It.� NBER Working Paper 16001, Pattern of Comparative Advantage.� NBER Journal: Macroeconomics 2 (3): 31–64. National Bureau of Economic Research, Working Paper 13062, National Bureau of Cambridge, MA. Dollar, David, Mary Hallward-Driemeier and Economic Research, Cambridge, MA. Haselmann, Rainer, Katharina Pistor and Vikrant Taye Mengistae. 2005. “Investment Climate Dahya, Jay, Orlin Dimitrov and John McConnell. and International Integration.� Policy Vig. 2010. “How Law Affects Lending.� 2008. “Dominant Shareholders, Corporate Research Working Paper 3323, World Bank, Review of Financial Studies 23 (2): 549–80. Boards, and Corporate Value: A Cross- Washington, DC. Hawkamah, World Bank, OECD (Organisation Country Analysis.� Journal of Financial for Economic Co-operation and Dulleck, Uwe, Paul Frijters and Rudolf Winter- Economics 87 (1): 73–100. Development) and INSOL International. Ebmer. 2006. “Reducing Start-up Costs Deininger, Klaus. 2003. Land Policies for for New Firms: The Double Dividend on 2009. “Study on Insolvency Systems in the Growth and Poverty Reduction. World Bank the Labor Market.� Scandinavian Journal of Middle East and North Africa.� Available at Policy Research Report. New York: Oxford Economics 108: 317–37. http://www.oecd.org/. University Press. Hibbs, Douglas A., and Violeta Piculescu. 2010. Eifert, Benjamin. 2007. “Infrastructure and de Soto, Hernando. 2000. The Mystery of Market Structure in Least-Developed “Tax Toleration and Tax Compliance: How Capital: Why Capitalism Triumphs in the West Countries.� Department of Economics, Government Affects the Propensity of Firms and Fails Everywhere Else. New York: Basic University of California, Berkeley. to Enter the Unofficial Economy.� American Books. Journal of Political Science 54 (1): 18–33. ___. 2009. “Do Regulatory Reforms Stimulate Dewaelheyns, Nico, and Cynthia Van Hulle. Investment and Growth? Evidence from the Hoekman, Bernard, and Alessandro Nicita. 2008. “Legal Reform and Aggregate Small Doing Business Data, 2003–07.� Working 2009. “Trade Policy, Trade Cost and and Micro Business Bankruptcy Rates: Paper 159, Center for Global Development, Developing Country Trade.� Policy Evidence from the 1997 Belgian Bankruptcy Washington, DC. Research Working Paper 4797, World Bank, Code.� Small Business Economics 31 (4): Washington, DC. FIAS. 2009. “Taxation as State Building: 409–24. Houston, Joel, Chen Lin, Ping Lin and Yue Ma. Reforming Tax Systems for Political Stability De Wulf, Luc, and Jose B. Sokol. 2004. Customs and Sustainable Economic Growth.� World 2010. “Creditor Rights, Information Sharing, Modernization Initiatives: Case Studies. Bank Group, Washington, DC. and Bank Risk Taking.� Journal of Financial Washington, DC: World Bank. Economics 96 (3): 485–512. Fisman, Raymond, and Virginia Sarria-Allende. Diamond, Douglas. 2004. “Presidential 2010. “Regulation of Entry and the IFC (International Finance Corporation). 2010a. Address, Committing to Commit: Short- Distortion of Industrial Organization.� Journal “Corporate Governance Success Stories.� Term Debt When Enforcement Is Costly.� of Applied Economics 13 (1): 91–120. IFC Advisory Services in the Middle East and Journal of Finance 59 (4): 1447–79. North Africa. http://www.ifc.org/. Ford, Cristie. 2005. “Toward a New Model for Djankov, Simeon. 2009a. “Bankruptcy Regimes Securities Law Enforcement.� Administrative ___. 2010b. “Improving Corporate Governance during Financial Distress.� World Bank, Law Review 57 (3): 757–828. Raises Company Performance in Middle East Washington, DC. and North Africa, IFC Report Finds.� Press Freund, Caroline L., and Nadia Rocha. 2010. ___. 2009b. “The Regulation of Entry: A release, April 26. http://www.ifc.org/. “What Constrains Africa’s Exports?� Policy Survey.� World Bank Research Observer 24 Research Working Paper 5184, World Bank, Iimi, Atsushi. 2008. “Effects of Improving (2): 183–203. Washington, DC. Infrastructure Quality on Business Costs: Djankov, Simeon, Caroline Freund and Cong S. Evidence from Firm-Level Data.� Policy Funchal, Bruno. 2008. “The Effects of the 2005 Pham. 2010. “Trading on Time.� Review of Research Working Paper 4581, World Bank, Bankruptcy Reform in Brazil.� Economics Economics and Statistics 92 (1): 166–73. Washington, DC. Letters 101: 84–86. Djankov, Simeon, Caralee McLiesh and Andrei Imam, Patrick A., and Davina F. Jacobs. 2007. Gatti, Roberta, Diego F. Angel-Urdinola, Joana Shleifer. 2007. “Private Credit in 129 “Effect of Corruption on Tax Revenues Silva and Andras Bodor. 2011. Striving for Countries.� Journal of Financial Economics 84 in the Middle East.� IMF Working Paper Better Jobs: The Challenge of Informatlity in (2): 299–329. 78 DOING BUSINESS IN THE ARAB WORLD 2012 WP/07/270, International Monetary Fund, Firm Ownership, and Firm Size.� Review of Perotti, Enrico, and Paolo Volpin. 2005. “The Washington, DC. Economics and Statistics 89 (4): 601–14. Political Economy of Entry: Lobbying and International Tax Dialogue. 2007. “Taxation of La Porta, Rafael, and Andrei Shleifer. 2008. Financial Development.� Paper presented Small and Medium Enterprises.� Background “The Unofficial Economy and Economic at the American Finance Association 2005 paper for the International Tax Dialogue Development.� Tuck School of Business Philadelphia Meetings. Conference, Buenos Aires, October 17–19. Working Paper 2009-57. Available at http:// Powell, Andrew, Nataliya Mylenko, Margaret Iwanow, Thomasz, and Colin Kirkpatrick. 2009. ssrn.com/abstract=1304760. Miller and Giovanni Majnoni. 2004. “Trade Facilitation and Manufacturing La Porta, Rafael, Florencio López-de-Silanes, “Improving Credit Information, Bank Exports: Is Africa Different?� World Andrei Shleifer and Robert Vishny. 2002. Regulation and Supervision: On the Role and Development 37 (6): 1039–50. “Investor Protection and Corporate Design of Public Credit Registries.� Policy Valuation.� Journal of Finance 57 (3): 1147–70. Research Working Paper 3443, World Bank, James, Sebastian. 2009. A Handbook for Tax Washington, DC. Simpli�cation. Washington, DC: International Li, Yue, and John Wilson. 2009. “Trade Finance Corporation. Available at http://ssrn Facilitation and Expanding the Bene�ts of PricewaterhouseCoopers. 2005. “Economic .com/abstract=1535499. Trade: Evidence from the Firm-Level Data.� Impact of Accelerating Permit Processes ARTNet Working Paper Series, no. 71, Asia on Local Development and Government Jappelli, Tullio, and Marco Pagano. 1993. Paci�c Research and Training Network on Revenues.� Report prepared for the “Information Sharing in Credit Markets.� Trade, Bangkok. American Institute of Architects, Journal of Finance 48 (5): 1693–718. Washington, DC. ___. 2002. “Information Sharing, Lending and Loayza, Norman, Ana Maria Oviedo and Luis Servén. 2005. “Regulation and Rauch, James. 2010. “Development through Defaults: Cross-Country Evidence.� Journal Macroeconomic Performance.� Policy Synergistic Reforms.� Journal of Development of Banking and Finance 26: 2017–45. Research Working Paper 3469, World Bank, Economics 93 (2): 153–61. Jappelli, Tullio, Marco Pagano and Magda Washington, DC. Reinikka, Ritva, and Jakob Svensson. 1999. Bianco. 2005. “Courts and Banks: Effects Mahoney, Paul. 1997. “The Exchange as “Confronting Competition: Investment of Judicial Enforcement on Credit Markets.� Regulator.� Virginia Law Review 83 (7): Response and Constraints in Uganda.� Policy Journal of Money, Credit, and Banking 37 (2): 1453–500. Research Working Paper 2242, World Bank, 223–44. Washington, DC. John, Kose, Lubomir Litov and Bernard Yeung. Masatlioglu, Yusufcan, and Jamele Rigolini. 2008. “Informality Traps.� B.E. Journal of Rocha, Roberto, Subika Farazi, Rania Khouri and 2008. “Corporate Governance and Risk- Economic Analysis & Policy 8 (1). Douglas Pearce. 2010. “The Status of Bank Taking.� Journal of Finance 63 (4): 1679–728. Lending to SMEs in the Middle East and Kaplan, David, Eduardo Piedra and Enrique McKinsey Global Institute. 2011. Urban World: North Africa Region: The Results of a Joint Seira. 2007. “Entry Regulation and Business Mapping the Economic Power of Cities. http:// Survey of the Union of Arab Banks and the Start-Ups: Evidence from Mexico.� Policy www.mckinsey.com/. World Bank.� World Bank, Washington, DC; Research Working Paper 4322, World Bank, Micco, Alejandro, and Carmen Pagés. 2006. and Union of Arab Banks, Beirut. Washington, DC. “The Economic Effects of Employment Saggi, Kamal. 2002. “Trade, Foreign Direct Klapper, Leora, and Inessa Love. 2011. “The Protection: Evidence from International Investment, and International Technology Impact of Business Environment Reforms Industry-Level Data.� IZA Discussion Paper Transfer: A Survey.� World Bank Research on New Firm Registration.� Policy Research 2433, Institute for the Study of Labor (IZA), Observer 17 (2): 191–235. Working Paper 5493, World Bank, Bonn, Germany. Schneider, Friedrich. 2005. “The Informal Washington, DC. Moullier, Thomas. 2009. “Reforming Building Sector in 145 Countries.� Department of Klapper, Leora, Raphael Amit and Mauro Permits: Why Is It Important and What Economics, University Linz, Austria. Guillen. 2010. “Entrepreneurship and Firm Can IFC Really Do?� International Finance Corporation, Washington, DC. Seker, Murat. 2011. “Trade Policies, Investment Formation across Countries.� In International Climate, and Exports.� MPRA Paper 29905, Differences in Entrepreneurship, ed. Joshua Narayan, Deepa, Robert Chambers, Meer Kaul University Library of Munich, Germany. Lerner and Antoinette Shoar. Chicago: Shah and Patti Petesh. 2000. Voices of the University of Chicago Press. Poor: Crying Out for Change. Washington, DC: Sharma, Siddharth. 2009. “Entry Regulation, World Bank. Labor Laws and Informality: Evidence from Klapper, Leora, Luc Laeven and Raghuram India.� Enterprise Survey Working Paper, Rajan. 2006. “Entry Regulation as a Barrier Nunn, Nathan. 2007. “Relationship-Speci�city, Enterprise Analysis Unit, World Bank Group, to Entrepreneurship.� Journal of Financial Incomplete Contracts, and the Pattern of Washington, DC. Economics 82 (3): 591–629. Trade.� Quarterly Journal of Economics 122 (2): 569–600. Singapore Business Federation. 2009. “Key Klapper, Leora, Anat Lewin and Juan Manuel Findings from ABAC ‘Ease of Dong Business’ Quesada Delgado. 2009. “The Impact of OECD (Organisation for Economic Co- (EoDB) Survey.� Presentation at Singapore the Business Environment on the Business operation and Development). 2010. Business Federation “Removing Barriers for Creation Process.� Policy Research Working “Construction Industry.� OECD Journal: Business Growth in APEC� dialogue session, Paper 4937, World Bank, Washington, DC. Competition Law and Policy 10 (1): 156–57. Singapore, July 9. KPMG. 2009. Competitive Alternatives: KPMG’s OECD Forum on Tax Administration. 2011. Smith, Adam. 1776. An Inquiry into the Nature Guide to International Business Location. Tax Administration in OECD and Selected and Causes of the Wealth of Nations. Facsimile http://competitivealternatives.com. Non-OECD Countries: Comparative Information of the 1st ed. Amherst, NY: Prometheus Kraay, Aart, and Norikazu Tawara. 2011. Series (2010). Paris: OECD. Books, 1991. “Can Disaggregated Indicators Identify Padilla, Jorge, and Marco Pagano. 2000. Tuleaşcă, Luminiţa. 2009. “Insolvency in the Governance Reform Priorities?� Policy “Sharing Default Information as a Borrower Context of the Present Financial Crisis: A Research Working Paper 5254, World Bank, Discipline Device.� European Economic Review Comparative Analysis.� Romanian Economic Washington, DC. 44 (10): 1951–80. and Business Review 4 (2): 33–44. Laeven, Luc, and Christopher Woodruff. 2007. “The Quality of the Legal System, REFERENCES 79 Turner, Michael, Robin Varghese, Patrick Walker ___. 2009a. Doing Business 2010: Reforming and Katrina Dusek. 2009. Credit Reporting through Difficult Times. Washington, DC: Customer Payment Data: Impact on Customer World Bank Group. Payment Behavior and Furnisher Costs and ___. 2009b. From Privilege to Competition: Bene�ts. Chapel Hill, NC: PERC Press. Unlocking Private-Led Growth in the Middle UNCITRAL (United Nations Commission on East and North Africa. Washington, DC: International Trade Law). 2004. Legislative World Bank. Guide on Insolvency Law. New York: United ___. 2010a. Doing Business 2011: Making a Nations. Difference for Entrepreneurs. Washington, DC: ___. 2007. Legislative Guide on Secured World Bank Group. Transactions. New York: United Nations. ___. 2010b. Women, Business and the Law Uttamchandani, Mahesh. 2010. “‘No Way 2010: Measuring Legal Gender Parity for Out’: The Lack of Efficient Insolvency Entrepreneurs and Workers in 128 Economies. Regimes in the MENA Region.� World Bank, Washington, DC: World Bank Group. Washington, DC. ___. 2011a. “Principles for Effective Creditor Van Stel, Andre, David Storey and Roy Rights and Insolvency Systems.� Revised Thurik. 2007. “The Effect of Business draft, January 20. http://siteresources Regulations on Nascent and Young Business .worldbank.org/INTGILD/Resources/ Entrepreneurship.� Small Business Economics ICRPrinciples_Jan2011.pdf. 28 (2–3): 171–86. ___. 2011b. World Development Indicators 2011. Visaria, Sujata. 2009. “Legal Reform and Loan Washington, DC: World Bank. Repayment: The Microeconomic Impact of World Bank Independent Evaluation Group. Debt Recovery Tribunals in India.� American 2008. Doing Business: An Independent Economic Journal: Applied Economics 1 (3): Evaluation—Taking the Measure of the 59–81. World Bank–IFC Doing Business Indicators. WEF (World Economic Forum). 2010. The Washington, DC: World Bank. Global Competitiveness Report 2010–11. World Bank Middle East and North Africa Geneva: WEF. Region. 2011. Economic Developments and WHO (World Health Organization). 2010. Prospects: Investing for Growth and Jobs. Media notice on Global Forum on Washington, DC: World Bank. Urbanization and Health. http://www.who .int/mediacentre/. Wille, John, Karim Ouled Belayachi, Numa de Magalhaes and Frederic Meunier. 2011. “Leveraging Technology to Support Business Registration Reform.� Investment Climate in Practice Note 17, Investment Climate Advisory Services, World Bank Group, Washington, DC. Wilson, John S., Catherine L. Mann and Tsunehiro Otsuki. 2004. “Assessing the Potential Bene�t of Trade Facilitation: A Global Perspective.� Policy Research Working Paper 3224, World Bank, Washington, DC. World Bank. 1989. World Development Report 1989. New York: Oxford University Press. ___. 2003. Doing Business in 2004: Understanding Regulation. Washington, DC: World Bank Group. ___. 2008a. Celebrating Reform 2008: Doing Business Case Studies. Washington, DC: World Bank Group. ___. 2008b. Doing Business 2009. Washington, DC: World Bank Group. Data notes The indicators presented and analyzed in conference calls, written correspondence Doing Business measure business regulation and visits by the team. For Doing Business ECONOMY CHARACTERISTICS and the protection of property rights—and 2012 team members visited 40 economies Gross national income (GNI) per capita Doing Business 2012 reports 2010 their effect on businesses, especially small to verify data and recruit respondents. The income per capita as published in and medium-size domestic �rms. First, the data from questionnaires are subjected to the World Bank’s World Development indicators document the complexity of regu- numerous rounds of veri�cation, leading to Indicators 2011. Income is calculated us- lation, such as the number of procedures to revisions or expansions of the information ing the Atlas method (current US$). For start a business or to register and transfer cost indicators expressed as a percent- collected. age of income per capita, 2010 GNI in commercial property. Second, they gauge U.S. dollars is used as the denominator. the time and cost of achieving a regulatory The Doing Business methodology offers Data were not available from the World goal or complying with regulation, such as several advantages. It is transparent, us- Bank for Afghanistan; Australia; The the time and cost to enforce a contract, go ing factual information about what laws Bahamas; Bahrain; Brunei Darussalam; through bankruptcy or trade across borders. and regulations say and allowing multiple Canada; Cyprus; Djibouti; the Islamic Republic of Iran; Kuwait; New Zealand; Third, they measure the extent of legal interactions with local respondents to clarify Oman; Puerto Rico (territory of the protections of property, for example, the potential misinterpretations of questions. United States); Qatar; Saudi Arabia; protections of investors against looting by Having representative samples of respon- Suriname; Taiwan, China; the United company directors or the range of assets dents is not an issue; Doing Business is not Arab Emirates; West Bank and Gaza; and that can be used as collateral according to the Republic of Yemen. In these cases a statistical survey, and the texts of the rel- GDP or GNP per capita data and growth secured transactions laws. Fourth, a set of evant laws and regulations are collected and rates from the International Monetary indicators documents the tax burden on answers checked for accuracy. The method- Fund’s World Economic Outlook data- businesses. Finally, a set of data covers dif- ology is inexpensive and easily replicable, so base and the Economist Intelligence Unit ferent aspects of employment regulation. data can be collected in a large sample of were used. economies. Because standard assumptions Region and income group The data for all sets of indicators in Doing Doing Business uses the World Bank are used in the data collection, comparisons Business 2012 are for June 2011.1 regional and income group classi�ca- and benchmarks are valid across economies. tions, available at http:/ /www.world Finally, the data not only highlight the extent bank.org/data/countryclass. The World METHODOLOGY of speci�c regulatory obstacles to business Bank does not assign regional classi�- The Doing Business data are collected in but also identify their source and point to cations to high-income economies. For a standardized way. To start, the Doing the purpose of the Doing Business report, what might be reformed. high-income OECD economies are as- Business team, with academic advisers, signed the “regional� classi�cation OECD designs a questionnaire. The questionnaire TABLE 13.1 How many experts does Doing high income. Figures and tables present- Business consult? uses a simple business case to ensure ing regional averages include economies Indicator set Contributors from all income groups (low, lower mid- comparability across economies and over Starting a business 1,755 dle, upper middle and high income). time—with assumptions about the legal Dealing with construction permits 837 Population form of the business, its size, its location and Getting electricity 782 Doing Business 2012 reports midyear the nature of its operations. Questionnaires Registering property 1,257 2010 population statistics as published are administered through more than 9,028 Getting credit 1,277 in World Development Indicators 2011. local experts, including lawyers, business Protecting investors 1,139 consultants, accountants, freight forwarders, government officials and other professionals Paying taxes 1,276 routinely administering or advising on legal Trading across borders 868 and regulatory requirements (table 13.1). Enforcing contracts 1,088 These experts have several rounds of interac- Resolving insolvency 1,044 tion with the Doing Business team, involving Employing workers 1,092 DATA NOTES 81 LIMITS TO WHAT IS MEASURED the expert respondents. When sources indi- same ranking on the total tax rate indicator. The Doing Business methodology has 5 cate different estimates, the time indicators The threshold is not based on any underly- limitations that should be considered when reported in Doing Business represent the me- ing theory. Instead, it is meant to emphasize interpreting the data. First, the collected data dian values of several responses given under the purpose of the indicator: to highlight refer to businesses in the economy’s largest the assumptions of the standardized case. economies where the tax burden on busi- business city and may not be representative ness is high relative to the tax burden in Finally, the methodology assumes that a other economies. Giving the same ranking to of regulation in other parts of the economy. business has full information on what is all economies whose total tax rate is below To address this limitation, subnational Doing required and does not waste time when the threshold avoids awarding economies Business indicators were created (box 13.1). completing procedures. In practice, complet- in the scoring for having an unusually low Second, the data often focus on a speci�c ing a procedure may take longer if the busi- total tax rate, often for reasons unrelated to business form—generally a limited liability ness lacks information or is unable to follow government policies toward enterprises. For company (or its legal equivalent) of a speci- up promptly. Alternatively, the business example, economies that are very small or �ed size—and may not be representative may choose to disregard some burdensome that are rich in natural resources do not need of the regulation on other businesses, for procedures. For both reasons the time delays to levy broad-based taxes. example, sole proprietorships. Third, trans- reported in Doing Business 2012 would differ actions described in a standardized case from the recollection of entrepreneurs re- scenario refer to a speci�c set of issues and DATA CHALLENGES AND ported in the World Bank Enterprise Surveys may not represent the full set of issues a REVISIONS business encounters. Fourth, the measures or other perception surveys. Most laws and regulations underlying the of time involve an element of judgment by Doing Business data are available on the CHANGES IN WHAT IS MEASURED Doing Business website at http://www.doing The methodology for 3 of the Doing Business business.org. All the sample questionnaires BOX 13.1 Subnational Doing Business topics was updated this year—getting credit, indicators and the details underlying the indicators are dealing with construction permits and pay- also published on the website. Questions This year Doing Business published ing taxes. on the methodology and challenges to data a subnational study for the Philippines and a regional report for Southeast can be submitted through the website’s Europe covering 7 economies (Albania, First, for getting credit, the scoring of one of “Ask a Question� function at http://www Bosnia and Herzegovina, Kosovo, FYR the 10 components of the strength of legal .doingbusiness.org. Macedonia, Moldova, Montenegro and rights index was amended to recognize ad- Serbia) and 22 cities. It also published ditional protections of secured creditors and a city pro�le for Juba, in the Republic of Doing Business publishes 8,967 indicators borrowers. Previously the highest score of 1 each year. To create these indicators, the South Sudan. was assigned if secured creditors were not team measures more than 52,000 data The subnational studies point to dif- ferences in business regulation and its subject to an automatic stay or moratorium points, each of which is made available on implementation—as well as in the pace on enforcement procedures when a debtor the Doing Business website. Historical data of regulatory reform—across cities in the entered a court-supervised reorganization for each indicator and economy are available same economy. For several economies procedure. Now the highest score of 1 is on the website, beginning with the �rst year subnational studies are now periodi- cally updated to measure change over also assigned if the law provides secured the indicator or economy was included in the time or to expand geographic cover- creditors with grounds for relief from an report. To provide a comparable time series age to additional cities. This year that automatic stay or moratorium (for example, for research, the data set is back-calculated is the case for the subnational studies if the movable property is in danger) or sets in the Philippines; the regional report to adjust for changes in methodology and a time limit for the automatic stay. any revisions in data due to corrections. The in Southeast Europe; the ongoing stud- ies in Italy, Kenya and the United Arab website also makes available all original data Emirates; and the projects implemented Second, because the ease of doing business sets used for background papers. The cor- jointly with local think tanks in Indonesia, index now includes the getting electricity rection rate between Doing Business 2011 and Mexico and the Russian Federation. indicators, procedures, time and cost related Doing Business 2012 is 7%. Besides the subnational Doing to obtaining an electricity connection were Business indicators, Doing Business con- removed from the dealing with construction ducted a pilot study this year on the permits indicators. second largest city in 3 large economies STARTING A BUSINESS to assess within-country variations. The study collected data for Rio de Janeiro in Third, a threshold has been introduced for Doing Business records all procedures that addition to São Paulo in Brazil, for Beijing the total tax rate for the purpose of calculat- are officially required for an entrepreneur to in addition to Shanghai in China and for ing the ranking on the ease of paying taxes. start up and formally operate an industrial St. Petersburg in addition to Moscow in All economies with a total tax rate below the or commercial business. These include ob- Russia. threshold (which will be calculated and ad- taining all necessary licenses and permits justed on a yearly basis) will now receive the and completing any required noti�cations, 82 DOING BUSINESS IN THE ARAB WORLD 2012 economy, the limited liability form most require separate �lings, they are counted as FIGURE 13.1 Starting a business: getting a local popular among domestic �rms is chosen. 2 procedures. limited liability company up and running Information on the most popular form is Rankings are based on 4 indicators obtained from incorporation lawyers or Both pre- and postincorporation procedures the statistical office. that are officially required for an entrepreneur Preregistration, As % of income Ė Operates in the economy’s largest busi- to formally operate a business are recorded registration and per capita, no (table 13.2). postregistration bribes included ness city. (in calendar days) Ė Is 100% domestically owned and has 5 Procedures required for official correspon- owners, none of whom is a legal entity. dence or transactions with public agencies 25% 25% Ė Has start-up capital of 10 times income are also included. For example, if a company Time Cost per capita at the end of 2010, paid in cash. seal or stamp is required on official docu- 25% 25% Ė Performs general industrial or commercial ments, such as tax declarations, obtaining Procedures Paid-in minimum activities, such as the production or sale the seal or stamp is counted. Similarly, if a capital to the public of products or services. The company must open a bank account before business does not perform foreign trade Procedure is Funds deposited in a registering for sales tax or value added tax, completed when bank or with a notary activities and does not handle products final document before registration (or this transaction is included as a procedure. subject to a special tax regime, for ex- is received within 3 months), as % Shortcuts are counted only if they ful�ll 4 of income per capita ample, liquor or tobacco. It is not using heavily polluting production processes. criteria: they are legal, they are available to the general public, they are used by the veri�cations or inscriptions for the company Ė Leases the commercial plant and offices majority of companies, and avoiding them and employees with relevant authorities. The and is not a proprietor of real estate. causes substantial delays. ranking on the ease of starting a business is Ė Does not qualify for investment incentives the simple average of the percentile rankings or any special bene�ts. Only procedures required of all businesses on its component indicators (�gure 13.1). Ė Has at least 10 and up to 50 employees 1 are covered. Industry-speci�c procedures month after the commencement of opera- are excluded. For example, procedures to After a study of laws, regulations and pub- tions, all of them nationals. comply with environmental regulations are licly available information on business entry, Ė Has a turnover of at least 100 times in- included only when they apply to all busi- a detailed list of procedures is developed, come per capita. nesses conducting general commercial or along with the time and cost of complying with each procedure under normal circum- Ė Has a company deed 10 pages long. industrial activities. Procedures that the stances and the paid-in minimum capital company undergoes to connect to electric- Procedures ity, water, gas and waste disposal services requirements. Subsequently, local incorpo- ration lawyers, notaries and government A procedure is de�ned as any interaction of are not included. officials complete and verify the data. the company founders with external parties (for example, government agencies, lawyers, TABLE 13.2 What do the starting a business indicators measure? Information is also collected on the sequence auditors or notaries). Interactions between Procedures to legally start and operate a company in which procedures are to be completed company founders or company officers and (number) and whether procedures may be carried employees are not counted as procedures. Preregistration (for example, name veri�cation or out simultaneously. It is assumed that any Procedures that must be completed in the reservation, notarization) required information is readily available and same building but in different offices are Registration in the economy’s largest business city that all agencies involved in the start-up pro- counted as separate procedures. If found- Postregistration (for example, social security registra- tion, company seal) cess function without corruption. If answers ers have to visit the same office several Time required to complete each procedure by local experts differ, inquiries continue times for different sequential procedures, (calendar days) until the data are reconciled. each is counted separately. The founders Does not include time spent gathering information are assumed to complete all procedures Each procedure starts on a separate day To make the data comparable across econo- themselves, without middlemen, facilita- Procedure completed once �nal document is received mies, several assumptions about the busi- tors, accountants or lawyers, unless the use No prior contact with of�cials ness and the procedures are used. of such a third party is mandated by law. If Cost required to complete each procedure the services of professionals are required, (% of income per capita) Assumptions about the business procedures conducted by such profession- Of�cial costs only, no bribes The business: als on behalf of the company are counted No professional fees unless services required by law Ė Is a limited liability company (or its legal separately. Each electronic procedure is Paid-in minimum capital (% of income per capita) equivalent). If there is more than one counted separately. If 2 procedures can be Funds deposited in a bank or with a notary before type of limited liability company in the completed through the same website but registration (or within 3 months) DATA NOTES 83 Time the commercial code or the company law. FIGURE 13.2 Dealing with construction permits: Time is recorded in calendar days. The Many economies require minimum capital building a warehouse measure captures the median duration that but allow businesses to pay only a part of it Rankings are based on 3 indicators incorporation lawyers indicate is necessary before registration, with the rest to be paid in practice to complete a procedure with after the �rst year of operation. In Italy in Days to build a As % of income minimum follow-up with government agen- June 2011 the minimum capital requirement warehouse in per capita, no main city bribes included cies and no extra payments. It is assumed for limited liability companies was €10,000, that the minimum time required for each of which at least €2,500 was payable before 33.3% 33.3% procedure is 1 day. Although procedures may registration. The paid-in minimum capital Time Cost take place simultaneously, they cannot start recorded for Italy is therefore €2,500, or on the same day (that is, simultaneous pro- 9.9% of income per capita. In Mexico the 33.3% cedures start on consecutive days). A proce- minimum capital requirement was 50,000 Procedures pesos, of which one-�fth needed to be paid dure is considered completed once the com- before registration. The paid-in minimum pany has received the �nal document, such Procedure is completed when final document is capital recorded for Mexico is therefore received; construction permits, inspections and as the company registration certi�cate or tax 10,000 pesos, or 8.4% of income per capita. utility connections included number. If a procedure can be accelerated for an additional cost, the fastest procedure is The data details on starting a business can chosen. It is assumed that the entrepreneur who deal with building regulations, includ- be found for each economy at http://www does not waste time and commits to com- ing approvals and inspections. To make the .doingbusiness.org by selecting the economy pleting each remaining procedure without data comparable across economies, several in the drop-down list. This methodology was delay. The time that the entrepreneur spends assumptions about the business, the ware- developed in Djankov and others (2002) and is on gathering information is ignored. It is as- house project and the utility connections are adopted here with minor changes. sumed that the entrepreneur is aware of all used. entry requirements and their sequence from Assumptions about the the beginning but has had no prior contact DEALING WITH CONSTRUCTION construction company with any of the officials. PERMITS The business (BuildCo): Cost Doing Business records all procedures Ė Is a limited liability company. required for a business in the construction Cost is recorded as a percentage of the Ė Operates in the economy’s largest busi- industry to build a standardized warehouse. economy’s income per capita. It includes all ness city. These procedures include submitting all official fees and fees for legal or professional Ė Is 100% domestically and privately owned. relevant project-speci�c documents (for services if such services are required by law. example, building plans and site maps) Ė Has 5 owners, none of whom is a legal Fees for purchasing and legalizing company to the authorities; obtaining all necessary entity. books are included if these transactions are clearances, licenses, permits and certi�- Ė Is fully licensed and insured to carry out required by law. The company law, the com- cates; completing all required noti�cations; construction projects, such as building mercial code and speci�c regulations and fee and receiving all necessary inspections. warehouses. schedules are used as sources for calculating Doing Business also records procedures for Ė Has 60 builders and other employees, costs. In the absence of fee schedules, a gov- obtaining connections for water, sewerage all of them nationals with the technical ernment officer’s estimate is taken as an of- and a �xed telephone landline.2 Procedures expertise and professional experience �cial source. In the absence of a government necessary to register the property so that it necessary to obtain construction permits officer’s estimate, estimates of incorporation can be used as collateral or transferred to and approvals. lawyers are used. If several incorporation another entity are also counted. The survey lawyers provide different estimates, the Ė Has at least 1 employee who is a licensed divides the process of building a warehouse median reported value is applied. In all cases architect and registered with the local as- into distinct procedures and calculates the the cost excludes bribes. sociation of architects. time and cost of completing each procedure. The ranking on the ease of dealing with Ė Has paid all taxes and taken out all neces- Paid-in minimum capital sary insurance applicable to its general construction permits is the simple average The paid-in minimum capital requirement of the percentile rankings on its component business activity (for example, accidental reflects the amount that the entrepreneur indicators (�gure 13.2). insurance for construction workers and needs to deposit in a bank or with a notary third-person liability). before registration and up to 3 months fol- Information is collected from experts in Ė Owns the land on which the warehouse is lowing incorporation and is recorded as a construction licensing, including architects, built. percentage of the economy’s income per construction lawyers, construction �rms, capita. The amount is typically speci�ed in utility service providers and public officials 84 DOING BUSINESS IN THE ARAB WORLD 2012 Assumptions about the warehouse Ė Will have a constant level of water de- minimum time required for each procedure The warehouse: mand and wastewater flow throughout is 1 day. Although procedures may take place the year. simultaneously, they cannot start on the Ė Will be used for general storage activities, same day (that is, simultaneous procedures such as storage of books or stationery. The The telephone connection: start on consecutive days). If a procedure warehouse will not be used for any goods Ė Is 10 meters (32 feet, 10 inches) from the can be accelerated legally for an additional requiring special conditions, such as food, main telephone network. cost, the fastest procedure is chosen. It is as- chemicals or pharmaceuticals. Ė Is a �xed telephone landline. sumed that BuildCo does not waste time and Ė Has 2 stories, both above ground, with commits to completing each remaining pro- a total surface of approximately 1,300.6 Procedures cedure without delay. The time that BuildCo square meters (14,000 square feet). Each spends on gathering information is ignored. A procedure is any interaction of the com- floor is 3 meters (9 feet, 10 inches) high. It is assumed that BuildCo is aware of all pany’s employees or managers with external Ė Has road access and is located in the parties, including government agencies, building requirements and their sequence periurban area of the economy’s largest notaries, the land registry, the cadastre, util- from the beginning. business city (that is, on the fringes of the ity companies, public and private inspectors city but still within its official limits). and technical experts apart from in-house Cost Ė Is not located in a special economic or in- architects and engineers. Interactions Cost is recorded as a percentage of the dustrial zone. The zoning requirements for between company employees, such as economy’s income per capita. Only official warehouses are met by building in an area development of the warehouse plans and costs are recorded. All the fees associated where similar warehouses can be found. inspections conducted by employees, are with completing the procedures to legally Ė Is located on a land plot of 929 square not counted as procedures. Procedures build a warehouse are recorded, includ- meters (10,000 square feet) that is 100% that the company undergoes to connect to ing those associated with obtaining land owned by BuildCo and is accurately regis- water, sewerage and telephone services are use approvals and preconstruction design tered in the cadastre and land registry. included. All procedures that are legally or clearances; receiving inspections before, in practice required for building a warehouse during and after construction; getting utility Ė Is a new construction (there was no previ- are counted, even if they may be avoided in connections; and registering the warehouse ous construction on the land). exceptional cases (table 13.3). property. Nonrecurring taxes required for the Ė Has complete architectural and technical completion of the warehouse project are also plans prepared by a licensed architect. recorded. The building code, information Time Ė Will include all technical equipment from local experts and speci�c regulations Time is recorded in calendar days. The mea- required to make the warehouse fully and fee schedules are used as sources for sure captures the median duration that local operational. costs. If several local partners provide differ- experts indicate is necessary to complete a Ė Will take 30 weeks to construct (exclud- procedure in practice. It is assumed that the ent estimates, the median reported value is ing all delays due to administrative and used. regulatory requirements). TABLE 13.3 What do the dealing with construction permits indicators The data details on dealing with construction measure? permits can be found for each economy at Assumptions about the utility connections Procedures to legally build a warehouse (number) http://www.doingbusiness.org by selecting the Submitting all relevant documents and obtain- economy in the drop-down list. The water and sewerage connection: ing all necessary clearances, licenses, permits and Ė Is 10 meters (32 feet, 10 inches) from the certi�cates existing water source and sewer tap. Completing all required noti�cations and receiving all necessary inspections GETTING ELECTRICITY Ė Does not require water for �re protection Obtaining utility connections for water, sewerage Doing Business records all procedures re- reasons; a �re extinguishing system (dry and a �xed telephone landline quired for a business to obtain a permanent system) will be used instead. If a wet �re Registering the warehouse after its completion (if required for use as collateral or for transfer of the electricity connection and supply for a protection system is required by law, it is warehouse) standardized warehouse. These procedures assumed that the water demand speci�ed Time required to complete each procedure include applications and contracts with below also covers the water needed for (calendar days) electricity utilities, all necessary inspections �re protection. Does not include time spent gathering information and clearances from the utility and other Ė Has an average water use of 662 liters (175 Each procedure starts on a separate day agencies and the external and �nal connec- gallons) a day and an average wastewater Procedure completed once �nal document is received tion works. The survey divides the process of flow of 568 liters (150 gallons) a day. No prior contact with of�cials getting an electricity connection into distinct Ė Has a peak water use of 1,325 liters (350 Cost required to complete each procedure procedures and calculates the time and cost (% of income per capita) gallons) a day and a peak wastewater flow of completing each procedure. The rank- Of�cial costs only, no bribes of 1,136 liters (300 gallons) a day. ing on the ease of getting electricity is the DATA NOTES 85 simple average of the percentile rankings on feet). The plot of land on which it is built is FIGURE 13.3 Getting electricity: obtaining an its component indicators (�gure 13.3). 929 square meters (10,000 square feet). electricity connection Rankings are based on 3 indicators Data are collected from the electricity dis- Assumptions about the electricity tribution utility, then completed and veri�ed connection Days to obtain As % of income by electricity regulatory agencies and inde- an electricity per capita, no The electricity connection: connection in bribes included pendent professionals such as electrical en- main city Ė Is a permanent one. gineers, electrical contractors and construc- Ė Is a 3-phase, 4-wire Y, 140-kilovolt- 33.3% 33.3% tion companies. The electricity distribution Time Cost ampere (kVA) (subscribed capacity) utility surveyed is the one serving the area connection. (or areas) where warehouses are located. If Ė Is 150 meters long. The connection is to 33.3% there is a choice of distribution utilities, the Procedures one serving the largest number of customers either the low-voltage or the medium- is selected. voltage distribution network and either overhead or underground, whichever is Steps to file an application, prepare a design, complete works, obtain approvals, go To make the data comparable across more common in the economy and in the through inspections, install a meter and sign a supply contract economies, several assumptions about the area where the warehouse is located. The warehouse and the electricity connection are length of any connection in the customer’s utility has the material) and those followed used. private domain is negligible. in practice for connecting a warehouse to Ė Involves the installation of only one electricity are counted. Assumptions about the warehouse electricity meter. The monthly electricity The warehouse: consumption will be 0.07 gigawatt-hour Time Ė Is owned by a local entrepreneur. (GWh). The internal electrical wiring has Time is recorded in calendar days. The Ė Is located in the economy’s largest busi- already been completed. measure captures the median duration that ness city. the electricity utility and experts indicate is Procedures Ė Is located within the city’s official limits necessary in practice, rather than required by A procedure is de�ned as any interaction law, to complete a procedure with minimum and in an area where other warehouses of the company’s employees or its main follow-up and no extra payments. It is also are located (a nonresidential area). electrician or electrical engineer (that is, assumed that the minimum time required for Ė Is not located in a special economic or the one who may have done the internal each procedure is 1 day. Although procedures investment zone; that is, the electricity wiring) with external parties such as the may take place simultaneously, they cannot connection is not eligible for subsidization electricity distribution utility, electric- start on the same day (that is, simultane- or faster service under a special invest- ity supply utilities, government agencies, ous procedures start on consecutive days). ment promotion regime. If several options electrical contractors and electrical �rms. It is assumed that the company does not for location are available, the warehouse Interactions between company employees is located where electricity is most easily and steps related to the internal electrical TABLE 13.4 What do the getting electricity available. wiring, such as the design and execution of indicators measure? Ė Has road access. The connection works the internal electrical installation plans, are Procedures to obtain an electricity connection (number) involve the crossing of a road (for excava- not counted as procedures. Procedures that Submitting all relevant documents and obtaining all necessary clearances and permits tion, overhead lines and the like), but they must be completed with the same utility Completing all required noti�cations and receiving are all carried out on public land; that is, but with different departments are counted all necessary inspections there is no crossing onto another owner’s as separate procedures (table 13.4). Obtaining external installation works and possibly private property. purchasing material for these works The company’s employees are assumed to Concluding any necessary supply contract and Ė Is located in an area with no physical con- obtaining �nal supply complete all procedures themselves unless straints. For example, the property is not Time required to complete each procedure the use of a third party is mandated (for near a railway. (calendar days) example, if only an electrician registered with Is at least 1 calendar day Ė Is used for storage of refrigerated goods. the utility is allowed to submit an applica- Each procedure starts on a separate day Ė Is a new construction (that is, there was tion). If the company can, but is not required Does not include time spent gathering information no previous construction on the land to, request the services of professionals Reflects the time spent in practice, with little follow- where it is located). It is being connected (such as a private �rm rather than the utility up and no prior contact with of�cials to electricity for the �rst time. for the external works), these procedures are Cost required to complete each procedure Ė Has 2 stories, both above ground, with (% of income per capita) recorded if they are commonly done. For all Of�cial costs only, no bribes a total surface area of approximately procedures, only the most likely cases (for 1,300.6 square meters (14,000 square example, more than 50% of the time the Value added tax excluded 86 DOING BUSINESS IN THE ARAB WORLD 2012 waste time and commits to completing each and the interest paid by the utility is used to FIGURE 13.4 Registering property: transfer of remaining procedure without delay. The calculate the present value. property between 2 local companies time that the company spends on gathering Rankings are based on 3 indicators information is ignored. It is assumed that the In some economies the security deposit can company is aware of all electricity connec- be put up in the form of a bond: the com- pany can obtain from a bank or an insurance Days to transfer As % of property tion requirements and their sequence from property in value, no bribes the beginning. company a guarantee issued on the assets main city included it holds with that �nancial institution. In Cost contrast to the scenario in which the cus- 33.3% 33.3% Time Cost Cost is recorded as a percentage of the tomer pays the deposit in cash to the utility, economy’s income per capita. Costs are in this scenario the company does not lose recorded exclusive of value added tax. All ownership control over the full amount and 33.3% Procedures the fees and costs associated with complet- can continue using it. In return the company ing the procedures to connect a warehouse will pay the bank a commission for obtain- to electricity are recorded, including those ing the bond. The commission charged may Steps to check encumbrances, obtain clearance certificates, prepare deed and transfer title so related to obtaining clearances from govern- vary depending on the credit standing of the that the property can be occupied, company. The best possible credit standing sold or used as collateral ment agencies, applying for the connection, receiving inspections of both the site and the and thus the lowest possible commission are internal wiring, purchasing material, getting assumed. Where a bond can be put up, the business. The process starts with obtaining the actual connection works and paying value recorded for the deposit is the annual the necessary documents, such as a copy of a security deposit. Information from local commission times the 5 years assumed to the seller’s title if necessary, and conducting experts and speci�c regulations and fee be the length of the contract. If both options due diligence if required. The transaction is schedules are used as sources for costs. If exist, the cheaper alternative is recorded. considered complete when it is opposable several local partners provide different esti- to third parties and when the buyer can use In Honduras in June 2011 a customer re- mates, the median reported value is used. In the property, use it as collateral for a bank questing a 140-kVA electricity connection all cases the cost excludes bribes. loan or resell it. The ranking on the ease of would have had to put up a security deposit registering property is the simple average Security deposit of 126,894 Honduran lempiras (L) in cash of the percentile rankings on its component or check, and the deposit would have been Utilities require security deposits as a guar- indicators (�gure 13.4). returned only at the end of the contract. antee against the possible failure of custom- ers to pay their consumption bills. For this The customer could instead have invested Every procedure required by law or neces- reason the security deposit for a new cus- this money at the prevailing lending rate of sary in practice is included, whether it is the tomer is most often calculated as a function 18.87%. Over the 5 years of the contract this responsibility of the seller or the buyer or of the customer’s estimated consumption. would imply a present value of lost inter- must be completed by a third party on their est earnings of L 73,423. In contrast, if the behalf. Local property lawyers, notaries and Doing Business does not record the full customer chose to settle the deposit with a property registries provide information on amount of the security deposit. If the deposit bank guarantee at an annual rate of 2.5%, procedures as well as the time and cost to is based on the customer’s actual consump- the amount lost over the 5 years would be complete each of them. tion, this basis is the one assumed in the just L 15,862. case study. Rather than the full amount of To make the data comparable across econo- the security deposit, Doing Business records The data details on getting electricity can be mies, several assumptions about the parties the present value of the losses in interest found for each economy at http://www.doing to the transaction, the property and the earnings experienced by the customer be- business.org by selecting the economy in the procedures are used. cause the utility holds the security deposit drop-down list. over a prolonged period, in most cases until Assumptions about the parties the end of the contract (assumed to be after The parties (buyer and seller): REGISTERING PROPERTY 5 years). In cases where the security deposit Ė Are limited liability companies. is used to cover the �rst monthly consump- Doing Business records the full sequence of Ė Are located in the periurban area of the tion bills, it is not recorded. To calculate procedures necessary for a business (buyer) economy’s largest business city. the present value of the lost interest earn- to purchase a property from another busi- ness (seller) and to transfer the property title Ė Are 100% domestically and privately ings, the end-2010 lending rates from the to the buyer’s name so that the buyer can use owned. International Monetary Fund’s International Financial Statistics are used. In cases where the property for expanding its business, use Ė Have 50 employees each, all of whom are the security deposit is returned with inter- the property as collateral in taking new loans nationals. est, the difference between the lending rate or, if necessary, sell the property to another Ė Perform general commercial activities. DATA NOTES 87 Assumptions about the property outside facilitator in the registration process borne by the buyer and those borne by the The property: unless legally or in practice required to do so. seller are included. If cost estimates differ among sources, the median reported value Ė Has a value of 50 times income per capita. Time is used. The sale price equals the value. Time is recorded in calendar days. The Ė Is fully owned by the seller. The data details on registering property can measure captures the median duration Ė Has no mortgages attached and has been that property lawyers, notaries or registry be found for each economy at http://www under the same ownership for the past 10 officials indicate is necessary to complete a .doingbusiness.org by selecting the economy in years. procedure. It is assumed that the minimum the drop-down list. Ė Is registered in the land registry or cadas- time required for each procedure is 1 day. tre, or both, and is free of title disputes. Although procedures may take place simul- Ė Is located in a periurban commercial zone, taneously, they cannot start on the same GETTING CREDIT and no rezoning is required. day. It is assumed that the buyer does not Doing Business measures the legal rights Ė Consists of land and a building. The land waste time and commits to completing each of borrowers and lenders with respect to area is 557.4 square meters (6,000 square remaining procedure without delay. If a pro- secured transactions through one set of indi- feet). A 2-story warehouse of 929 square cedure can be accelerated for an additional cators and the sharing of credit information meters (10,000 square feet) is located on cost, the fastest legal procedure available through another. The �rst set of indicators the land. The warehouse is 10 years old, and used by the majority of property owners describes how well collateral and bankruptcy is chosen. If procedures can be undertaken laws facilitate lending. The second set mea- is in good condition and complies with simultaneously, it is assumed that they are. sures the coverage, scope and accessibility all safety standards, building codes and It is assumed that the parties involved are of credit information available through public other legal requirements. The property of aware of all requirements and their sequence credit registries and private credit bureaus. land and building will be transferred in its from the beginning. Time spent on gathering The ranking on the ease of getting credit entirety. information is not considered. is based on the percentile rankings on its Ė Will not be subject to renovations or ad- ditional building following the purchase. component indicators: the depth of credit Cost Ė Has no trees, natural water sources, natu- information index (weighted at 37.5%) and Cost is recorded as a percentage of the prop- ral reserves or historical monuments of the strength of legal rights index (weighted erty value, assumed to be equivalent to 50 any kind. at 62.5%) (�gure 13.5).3 times income per capita. Only official costs Ė Will not be used for special purposes, and required by law are recorded, including fees, no special permits, such as for residential LEGAL RIGHTS transfer taxes, stamp duties and any other use, industrial plants, waste storage or payment to the property registry, notaries, The data on the legal rights of borrowers certain types of agricultural activities, are public agencies or lawyers. Other taxes, such and lenders are gathered through a survey required. as capital gains tax or value added tax, are of �nancial lawyers and veri�ed through Ė Has no occupants (legal or illegal), and no excluded from the cost measure. Both costs analysis of laws and regulations as well as other party holds a legal interest in it. public sources of information on collateral TABLE 13.5 What do the registering property and bankruptcy laws. Survey responses are indicators measure? Procedures veri�ed through several rounds of follow-up Procedures to legally transfer title on immovable A procedure is de�ned as any interaction property (number) communication with respondents as well of the buyer or the seller, their agents (if Preregistration procedures (for example, checking for as by contacting third parties and consult- liens, notarizing sales agreement, paying property ing public sources. The survey data are an agent is legally or in practice required) transfer taxes) or the property with external parties, in- con�rmed through teleconference calls or Registration procedures in the economy’s largest cluding government agencies, inspectors, business city on-site visits in all economies. notaries and lawyers. Interactions between Postregistration procedures (for example, �ling title company officers and employees are not with municipality) Strength of legal rights index Time required to complete each procedure The strength of legal rights index measures considered. All procedures that are legally or (calendar days) in practice required for registering property the degree to which collateral and bankruptcy Does not include time spent gathering information are recorded, even if they may be avoided in laws protect the rights of borrowers and lend- Each procedure starts on a separate day exceptional cases (table 13.5). It is assumed ers and thus facilitate lending (table 13.6). Procedure completed once �nal document is received that the buyer follows the fastest legal op- Two case scenarios, case A and case B, are No prior contact with of�cials used to determine the scope of the secured tion available and used by the majority of property owners. Although the buyer may Cost required to complete each procedure transactions system. The case scenarios in- (% of property value) use lawyers or other professionals where volve a secured borrower, the company ABC, Of�cial costs only, no bribes necessary in the registration process, it is and a secured lender, BizBank. In certain No value added or capital gains taxes included assumed that the buyer does not employ an economies the legal framework for secured 88 DOING BUSINESS IN THE ARAB WORLD 2012 ABC grants BizBank a nonpossessory Ė A collateral registry or registration institu- FIGURE 13.5 Getting credit: collateral rules and security interest in one category of movable tion for security interests over movable credit information Rankings are based on 2 indicators assets, for example, its accounts receivable property is in operation, uni�ed geograph- or its inventory. ABC wants to keep both ically and by asset type, with an electronic possession and ownership of the collateral. database indexed by debtors’ names. Scope, quality and accessibility of credit In economies where the law does not allow Ė Secured creditors are paid �rst (for ex- information through public and private credit registries nonpossessory security interests in movable ample, before general tax claims and property, ABC and BizBank use a �duciary employee claims) when a debtor defaults 37.5% 62.5% transfer-of-title arrangement (or a similar outside an insolvency procedure. Depth Strength of credit of legal substitute for nonpossessory security inter- Ė Secured creditors are paid �rst (for ex- information rights index (0–6) index (0–10) ests). The strength of legal rights index does ample, before general tax claims and not cover functional equivalents to security employee claims) when a business is over movable assets (for example, leasing or liquidated. reservation of title). Ė Secured creditors either are not subject In case B, ABC grants BizBank a business to an automatic stay or moratorium on Regulations on nonpossessory security charge, enterprise charge, floating charge or enforcement procedures when a debtor interests in movable property any charge that gives BizBank a security in- enters a court-supervised reorganization Note: Private bureau coverage and public registry coverage procedure, or the law provides secured are measured but do not count for the rankings. terest over ABC’s combined movable assets (or as much of ABC’s movable assets as pos- creditors with grounds for relief from an sible). ABC keeps ownership and possession automatic stay or moratorium (for exam- transactions means that only case A or case of the assets. ple, if the movable property is in danger) B can apply (not both). Both cases examine or sets a time limit for the automatic stay.4 the same set of legal provisions relating to The strength of legal rights index includes Ė The law allows parties to agree in a col- the use of movable collateral. 8 aspects related to legal rights in collateral lateral agreement that the lender may Several assumptions about the secured bor- law and 2 aspects in bankruptcy law. A score enforce its security right out of court. rower and lender are used: of 1 is assigned for each of the following features of the laws: The index ranges from 0 to 10, with higher Ė ABC is a domestic, limited liability scores indicating that collateral and bank- company. Ė Any business may use movable assets as ruptcy laws are better designed to expand collateral while keeping possession of the Ė The company has 100 employees. access to credit. assets, and any �nancial institution may Ė ABC has its headquarters and only base of accept such assets as collateral. operations in the economy’s largest busi- CREDIT INFORMATION Ė The law allows a business to grant a ness city. The data on credit information sharing are nonpossessory security right in a single Ė Both ABC and BizBank are 100% domesti- category of movable assets (such as ac- built in 2 stages. First, banking supervision cally owned. counts receivable or inventory), without authorities and public information sources requiring a speci�c description of the are surveyed to con�rm the presence of a The case scenarios also involve assump- public credit registry or private credit bureau. collateral. tions. In case A, as collateral for the loan, Second, when applicable, a detailed survey Ė The law allows a business to grant a non- on the public credit registry’s or private credit TABLE 13.6 What do the getting credit possessory security right in substantially bureau’s structure, laws and associated rules indicators measure? all its movable assets, without requiring a is administered to the entity itself. Survey re- Strength of legal rights index (0–10) speci�c description of the collateral. sponses are veri�ed through several rounds Protection of rights of borrowers and lenders Ė A security right may extend to future or through collateral laws of follow-up communication with respon- after-acquired assets and may extend dents as well as by contacting third parties Protection of secured creditors’ rights through bankruptcy laws automatically to the products, proceeds or and consulting public sources. The survey Depth of credit information index (0–6) replacements of the original assets. data are con�rmed through teleconference Scope and accessibility of credit information dis- Ė A general description of debts and ob- calls or on-site visits in all economies. tributed by public credit registries and private credit bureaus ligations is permitted in the collateral agreement and in registration documents; Depth of credit information index Public credit registry coverage (% of adults) Number of individuals and �rms listed in a public all types of debts and obligations can be The depth of credit information index credit registry as percentage of adult population secured between the parties, and the measures rules and practices affecting the Private credit bureau coverage (% of adults) collateral agreement can include a maxi- coverage, scope and accessibility of credit Number of individuals and �rms listed in largest pri- mum amount for which the assets are information available through either a public vate credit bureau as percentage of adult population encumbered. credit registry or a private credit bureau. A DATA NOTES 89 score of 1 is assigned for each of the follow- public credit registry and the private credit PROTECTING INVESTORS ing 6 features of the public credit registry or bureau (a score of 1). Summing across the Doing Business measures the strength of private credit bureau (or both): indicators gives Lithuania a total score of 6. minority shareholder protections against Ė Both positive credit information (for ex- directors’ misuse of corporate assets for ample, outstanding loan amounts and Public credit registry coverage personal gain. The indicators distinguish 3 pattern of on-time repayments) and The public credit registry coverage indica- dimensions of investor protections: trans- negative information (for example, late tor reports the number of individuals and parency of related-party transactions (extent payments, and number and amount of �rms listed in a public credit registry with of disclosure index), liability for self-dealing defaults and bankruptcies) are distributed. information on their borrowing history from (extent of director liability index) and share- Ė Data on both �rms and individuals are the past 5 years. The number is expressed holders’ ability to sue officers and directors distributed. as a percentage of the adult population (the for misconduct (ease of shareholder suits Ė Data from retailers and utility compa- population age 15 and above in 2010 accord- index). The data come from a survey of cor- nies as well as �nancial institutions are ing to the World Bank’s World Development porate and securities lawyers and are based distributed. Indicators). A public credit registry is de�ned on securities regulations, company laws, civil Ė More than 2 years of historical data are as a database managed by the public sector, procedure codes and court rules of evidence. distributed. Credit registries and bureaus usually by the central bank or the superin- The ranking on the strength of investor that erase data on defaults as soon as tendent of banks, that collects information protection index is the simple average of the they are repaid obtain a score of 0 for this percentile rankings on its component indica- on the creditworthiness of borrowers (indi- indicator. tors (�gure 13.6). viduals or �rms) in the �nancial system and Ė Data on loan amounts below 1% of in- facilitates the exchange of credit information To make the data comparable across econo- come per capita are distributed. Note among banks and other regulated �nancial mies, several assumptions about the busi- that a credit registry or bureau must have institutions. If no public registry operates, ness and the transaction are used. a minimum coverage of 1% of the adult the coverage value is 0. population to score a 1 on this indicator. Assumptions about the business Ė By law, borrowers have the right to access Private credit bureau coverage The business (Buyer): their data in the largest credit registry or The private credit bureau coverage indica- Ė Is a publicly traded corporation listed on bureau in the economy. tor reports the number of individuals and the economy’s most important stock ex- The index ranges from 0 to 6, with higher �rms listed by a private credit bureau with change. If the number of publicly traded values indicating the availability of more information on their borrowing history from companies listed on that exchange is less credit information, from either a public credit the past 5 years. The number is expressed than 10, or if there is no stock exchange registry or a private credit bureau, to facili- as a percentage of the adult population (the in the economy, it is assumed that Buyer tate lending decisions. If the credit registry or population age 15 and above in 2010 accord- is a large private company with multiple bureau is not operational or has a coverage ing to the World Bank’s World Development shareholders. of less than 0.1% of the adult population, Indicators). A private credit bureau is de�ned Ė Has a board of directors and a chief execu- the score on the depth of credit information as a private �rm or nonpro�t organization tive officer (CEO) who may legally act on index is 0. that maintains a database on the creditwor- behalf of Buyer where permitted, even if thiness of borrowers (individuals or �rms) this is not speci�cally required by law. In Lithuania, for example, both a public credit in the �nancial system and facilitates the Ė Is a manufacturing company. registry and a private credit bureau oper- exchange of credit information among credi- Ė Has its own distribution network. ate. Both distribute positive and negative tors. Credit investigative bureaus and credit information (a score of 1). Both distribute reporting �rms that do not directly facilitate Assumptions about the transaction data on �rms and individuals (a score of 1). information exchange among banks and oth- Ė Mr. James is Buyer’s controlling share- Although the public credit registry does not er �nancial institutions are not considered. holder and a member of Buyer’s board distribute data from retailers or utilities, the If no private bureau operates, the coverage of directors. He owns 60% of Buyer and private credit bureau does do so (a score of value is 0. elected 2 directors to Buyer’s 5-member 1). Although the private credit bureau does board. not distribute more than 2 years of historical data, the public credit registry does do so The data details on getting credit can be found Ė Mr. James also owns 90% of Seller, a (a score of 1). Although the public credit for each economy at http://www.doingbusiness company that operates a chain of retail registry has a threshold of 50,000 litai, the .org by selecting the economy in the drop- hardware stores. Seller recently closed a private credit bureau distributes data on down list. This methodology was developed in large number of its stores. loans of any value (a score of 1). Borrowers Djankov, McLiesh and Shleifer (2007) and is Ė Mr. James proposes that Buyer purchase have the right to access their data in both the adopted here with minor changes. Seller’s unused fleet of trucks to expand 90 DOING BUSINESS IN THE ARAB WORLD 2012 terms and Mr. James’s conflict of interest 2). Before the transaction Mr. James must FIGURE 13.6 Protecting investors: minority is required. disclose his conflict of interest to the other shareholder rights in related-party transactions Ė Whether disclosure in the annual report is directors, but he is not required to provide Rankings are based on 3 indicators required. A score of 0 is assigned if no dis- speci�c information about it (a score of 1). closure on the transaction is required; 1 if Poland does not require an external body to Requirements on Liability of CEO and disclosure on the terms of the transaction review the transaction (a score of 0). Adding approval and disclosure board of directors in a is required but not on Mr. James’s conflict these numbers gives Poland a score of 7 on of related-party related-party transactions transaction of interest; 2 if disclosure on both the the extent of disclosure index. 33.3% 33.3% terms and Mr. James’s conflict of interest Extent of Extent of Extent of director liability index disclosure director is required. index liability index The extent of director liability index has 7 Ė Whether disclosure by Mr. James to the 33.3% board of directors is required. A score of 0 components:6 Ease of shareholder suits index is assigned if no disclosure is required; 1 if Ė Whether a shareholder plaintiff is able to a general disclosure of the existence of a hold Mr. James liable for the damage the conflict of interest is required without any Buyer-Seller transaction causes to the Type of evidence that can be collected before and during the trial speci�cs; 2 if full disclosure of all material company. A score of 0 is assigned if Mr. facts relating to Mr. James’s interest in the James cannot be held liable or can be held Buyer-Seller transaction is required. Buyer’s distribution of its products, a pro- liable only for fraud or bad faith; 1 if Mr. Ė Whether it is required that an external James can be held liable only if he influ- posal to which Buyer agrees. The price body, for example, an external auditor, re- enced the approval of the transaction or is equal to 10% of Buyer’s assets and is view the transaction before it takes place. was negligent; 2 if Mr. James can be held higher than the market value. A score of 0 is assigned if no; 1 if yes. liable when the transaction is unfair or Ė The proposed transaction is part of the company’s ordinary course of business prejudicial to the other shareholders. The index ranges from 0 to 10, with higher and is not outside the authority of the values indicating greater disclosure. In Ė Whether a shareholder plaintiff is able to company. Poland, for example, the board of directors hold the approving body (the CEO or the Ė Buyer enters into the transaction. All must approve the transaction and Mr. James members of the board of directors) liable required approvals are obtained, and all is not allowed to vote (a score of 2). Buyer for the damage the transaction causes to required disclosures made (that is, the is required to disclose immediately all infor- the company. A score of 0 is assigned if the transaction is not fraudulent). mation affecting the stock price, including approving body cannot be held liable or can Ė The transaction causes damages to Buyer. the conflict of interest (a score of 2). In its be held liable only for fraud or bad faith; 1 if Shareholders sue Mr. James and the other annual report Buyer must also disclose the the approving body can be held liable for parties that approved the transaction. terms of the transaction and Mr. James’s negligence; 2 if the approving body can be ownership in Buyer and Seller (a score of held liable when the transaction is unfair or Extent of disclosure index prejudicial to the other shareholders. TABLE 13.7 What do the protecting investors The extent of disclosure index has 5 compo- indicators measure? Ė Whether a court can void the transaction nents (table 13.7): upon a successful claim by a shareholder Extent of disclosure index (0–10) Ė Which corporate body can provide legally Who can approve related-party transactions plaintiff. A score of 0 is assigned if rescis- sufficient approval for the transaction. sion is unavailable or is available only Disclosure requirements in case of related-party A score of 0 is assigned if it is the CEO transactions in case of fraud or bad faith; 1 if rescis- or the managing director alone; 1 if the Extent of director liability index (0–10) sion is available when the transaction board of directors or shareholders must Ability of shareholders to hold interested parties and is oppressive or prejudicial to the other vote and Mr. James is permitted to vote; members of the approving body liable in case of related-party transactions shareholders; 2 if rescission is available 2 if the board of directors must vote and Available legal remedies (damages, repayment of when the transaction is unfair or entails a Mr. James is not permitted to vote; 3 if pro�ts, �nes and imprisonment) conflict of interest. shareholders must vote and Mr. James is Ability of shareholders to sue directly or derivatively not permitted to vote. Ė Whether Mr. James pays damages for the Ease of shareholder suits index (0–10) harm caused to the company upon a suc- Ė Whether immediate disclosure of the Direct access to internal documents of the company cessful claim by the shareholder plaintiff. transaction to the public, the regulator or and use of a government inspector without �ling the shareholders is required.5 A score of 0 suit in court A score of 0 is assigned if no; 1 if yes. is assigned if no disclosure is required; 1 if Documents and information available during trial Ė Whether Mr. James repays pro�ts made disclosure on the terms of the transaction Strength of investor protection index (0–10) from the transaction upon a successful is required but not on Mr. James’s conflict Simple average of the extent of disclosure, extent of claim by the shareholder plaintiff. A score director liability and ease of shareholder suits indices of interest; 2 if disclosure on both the of 0 is assigned if no; 1 if yes. DATA NOTES 91 Ė Whether both �nes and imprisonment Ė Whether the plaintiff can obtain cat- ranges from 0 to 10, with higher values indi- can be applied against Mr. James. A score egories of relevant documents from the cating more investor protection. of 0 is assigned if no; 1 if yes. defendant without identifying each docu- ment speci�cally. A score of 0 is assigned The data details on protecting investors can Ė Whether shareholder plaintiffs are able to if no; 1 if yes. be found for each economy at http://www sue directly or derivatively for the damage .doingbusiness.org by selecting the economy in the transaction causes to the company. A Ė Whether shareholders owning 10% or less the drop-down list. This methodology was de- score of 0 is assigned if suits are unavail- of the company’s share capital can request veloped in Djankov, La Porta and others (2008). able or are available only for shareholders that a government inspector investigate holding more than 10% of the company’s the Buyer-Seller transaction without �ling share capital; 1 if direct or derivative suits suit in court. A score of 0 is assigned if no; PAYING TAXES are available for shareholders holding 10% 1 if yes. or less of share capital. Doing Business records the taxes and man- Ė Whether shareholders owning 10% or datory contributions that a medium-size less of the company’s share capital have The index ranges from 0 to 10, with higher company must pay in a given year as well the right to inspect the transaction docu- values indicating greater liability of directors. as measures of the administrative burden of ments before �ling suit. A score of 0 is Assuming that the prejudicial transaction paying taxes and contributions. The project assigned if no; 1 if yes. was duly approved and disclosed, in order was developed and implemented in coop- Ė Whether the standard of proof for civil to hold Mr. James liable in Panama, for eration with PwC.7 Taxes and contributions suits is lower than that for a criminal case. example, a plaintiff must prove that Mr. measured include the pro�t or corporate A score of 0 is assigned if no; 1 if yes. James influenced the approving body or income tax, social contributions and labor acted negligently (a score of 1). To hold the The index ranges from 0 to 10, with higher taxes paid by the employer, property taxes, other directors liable, a plaintiff must prove values indicating greater powers of share- property transfer taxes, dividend tax, capital that they acted negligently (a score of 1). The holders to challenge the transaction. In gains tax, �nancial transactions tax, waste prejudicial transaction cannot be voided (a Greece, for example, the plaintiff can access collection taxes, vehicle and road taxes, and score of 0). If Mr. James is found liable, he documents that the defendant intends to any other small taxes or fees. must pay damages (a score of 1) but he is not rely on for his defense and that directly required to disgorge his pro�ts (a score of 0). The ranking on the ease of paying taxes is prove facts in the plaintiff’s claim (a score of Mr. James cannot be �ned and imprisoned the simple average of the percentile rankings 2). The plaintiff can examine the defendant (a score of 0). Direct or derivative suits are on its component indicators, with a thresh- and witnesses during trial, though only with available for shareholders holding 10% or old being applied to one of the component prior approval of the questions by the court less of share capital (a score of 1). Adding indicators, the total tax rate (�gure 13.7). The (a score of 1). The plaintiff must speci�cally these numbers gives Panama a score of 4 on threshold is de�ned as the highest total tax identify the documents being sought (for ex- the extent of director liability index. rate among the top 30% of economies in the ample, the Buyer-Seller purchase agreement ranking on the total tax rate. It will be cal- of July 15, 2006) and cannot just request Ease of shareholder suits index culated and adjusted on a yearly basis. This categories (for example, all documents The ease of shareholder suits index has 6 year’s threshold is 32.5%. For all economies related to the transaction) (a score of 0). A components: with a total tax rate below this threshold, the shareholder holding 5% of Buyer’s shares total tax rate is set at 32.5% this year. The Ė What range of documents is available to can request that a government inspector threshold is not based on any underlying the shareholder plaintiff from the defen- review suspected mismanagement by Mr. theory. Instead, it is intended to mitigate the dant and witnesses during trial. A score James and the CEO without �ling suit in effect of very low tax rates on the ranking on of 1 is assigned for each of the following court (a score of 1). Any shareholder can the ease of paying taxes. types of documents available: informa- inspect the transaction documents before tion that the defendant has indicated he deciding whether to sue (a score of 1). The Doing Business measures all taxes and con- intends to rely on for his defense; infor- standard of proof for civil suits is the same as tributions that are government mandated mation that directly proves speci�c facts that for a criminal case (a score of 0). Adding (at any level—federal, state or local) and in the plaintiff’s claim; any information these numbers gives Greece a score of 5 on that apply to the standardized business and relevant to the subject matter of the claim; the ease of shareholder suits index. have an impact in its �nancial statements. In and any information that may lead to the doing so, Doing Business goes beyond the tra- discovery of relevant information. Strength of investor protection ditional de�nition of a tax. As de�ned for the Ė Whether the plaintiff can directly examine index purposes of government national accounts, the defendant and witnesses during trial. The strength of investor protection index is taxes include only compulsory, unrequited A score of 0 is assigned if no; 1 if yes, with the average of the extent of disclosure index, payments to general government. Doing prior approval of the questions by the the extent of director liability index and the Business departs from this de�nition because judge; 2 if yes, without prior approval. ease of shareholder suits index. The index it measures imposed charges that affect 92 DOING BUSINESS IN THE ARAB WORLD 2012 about the business and the taxes and contri- as an additional bene�t. In addition, in FIGURE 13.7 Paying taxes: tax compliance for a butions are used. some economies reimbursable business local manufacturing company Rankings are based on 3 indicators travel and client entertainment expenses The methodology for the paying taxes indi- are considered fringe bene�ts. When ap- cators has bene�ted from discussion with plicable, it is assumed that the company Number of hours per year Firm tax liability as % members of the International Tax Dialogue to prepare, file returns of profits before all pays the fringe bene�t tax on this expense and pay taxes taxes borne and other stakeholders, which led to a re�ne- or that the bene�t becomes taxable in- ment of the survey questions on the time to come for the employee. The case study 33.3% 33.3% pay taxes, the collection of additional data on Time Total assumes no additional salary additions for tax rate the labor tax wedge for further research and meals, transportation, education or oth- the introduction of a threshold applied to the ers. Therefore, even when such bene�ts 33.3% total tax rate for the purpose of calculating Payments are frequent, they are not added to or the ranking on the ease of paying taxes (see removed from the taxable gross salaries discussion at the beginning of this section). to arrive at the labor tax or contribution Number of tax payments per year Assumptions about the business calculation. The business: Ė Has a turnover of 1,050 times income per business accounts, not government ac- capita. Ė Is a limited liability, taxable company. counts. One main difference relates to labor Ė Makes a loss in the �rst year of operation. If there is more than one type of limited contributions. The Doing Business measure Ė Has a gross margin (pretax) of 20% (that liability company in the economy, the lim- includes government-mandated contribu- ited liability form most common among is, sales are 120% of the cost of goods tions paid by the employer to a requited domestic �rms is chosen. The most com- sold). private pension fund or workers’ insurance mon form is reported by incorporation Ė Distributes 50% of its net pro�ts as fund. The indicator includes, for example, lawyers or the statistical office. dividends to the owners at the end of the Australia’s compulsory superannuation Ė Started operations on January 1, 2009. second year. guarantee and workers’ compensation insur- At that time the company purchased all Ė Sells one of its plots of land at a pro�t at ance. For the purpose of calculating the total the assets shown in its balance sheet and the beginning of the second year. tax rate (de�ned below), only taxes borne hired all its workers. are included. For example, value added taxes Ė Has annual fuel costs for its trucks equal are generally excluded (provided they are not Ė Operates in the economy’s largest busi- to twice income per capita. irrecoverable) because they do not affect the ness city. Ė Is subject to a series of detailed assump- accounting pro�ts of the business—that is, Ė Is 100% domestically owned and has 5 tions on expenses and transactions to they are not reflected in the income state- owners, all of whom are natural persons. further standardize the case. All �nancial ment. They are, however, included for the Ė At the end of 2009, has a start-up capital statement variables are proportional to purpose of the compliance measures (time of 102 times income per capita. 2005 income per capita. For example, and payments), as they add to the burden of Ė Performs general industrial or commercial the owner who is also a manager spends complying with the tax system. activities. Speci�cally, it produces ceramic 10% of income per capita on traveling flowerpots and sells them at retail. It does for the company (20% of this owner’s Doing Business uses a case scenario to not participate in foreign trade (no import expenses are purely private, 20% are for measure the taxes and contributions paid by or export) and does not handle products entertaining customers and 60% for busi- a standardized business and the complex- subject to a special tax regime, for ex- ness travel). ity of an economy’s tax compliance system. ample, liquor or tobacco. This case scenario uses a set of �nancial Ė At the beginning of 2010, owns 2 plots of Assumptions about the taxes and statements and assumptions about transac- tions made over the course of the year. In land, 1 building, machinery, office equip- contributions each economy tax experts from a number ment, computers and 1 truck and leases 1 Ė All the taxes and contributions recorded of different �rms (in many economies truck. are those paid in the second year of op- these include PwC) compute the taxes Ė Does not qualify for investment incentives eration (calendar year 2010). A tax or and mandatory contributions due in their or any bene�ts apart from those related to contribution is considered distinct if it has jurisdiction based on the standardized case the age or size of the company. a different name or is collected by a differ- study facts. Information is also compiled Ė Has 60 employees—4 managers, 8 as- ent agency. Taxes and contributions with on the frequency of �ling and payments as sistants and 48 workers. All are nationals, the same name and agency, but charged well as time taken to comply with tax laws in and 1 manager is also an owner. The com- at different rates depending on the busi- an economy. To make the data comparable pany pays for additional medical insurance ness, are counted as the same tax or across economies, several assumptions for employees (not mandated by any law) contribution. DATA NOTES 93 Ė The number of times the company pays payments made through third parties, such Total tax rate taxes and contributions in a year is the as tax on interest paid by a �nancial institu- The total tax rate measures the amount of number of different taxes or contributions tion or fuel tax paid by a fuel distributor, only taxes and mandatory contributions borne multiplied by the frequency of payment (or one payment is included even if payments by the business in the second year of op- withholding) for each tax. The frequency are more frequent. eration, expressed as a share of commercial of payment includes advance payments pro�t. Doing Business 2012 reports the total (or withholding) as well as regular pay- Where 2 or more taxes or contributions are tax rate for calendar year 2010. The total ments (or withholding). �led for and paid jointly using the same form, amount of taxes borne is the sum of all the each of these joint payments is counted different taxes and contributions payable Tax payments once. For example, if mandatory health insur- after accounting for allowable deductions The tax payments indicator reflects the total and exemptions. The taxes withheld (such ance contributions and mandatory pension number of taxes and contributions paid, the as personal income tax) or collected by the contributions are �led for and paid together, method of payment, the frequency of pay- company and remitted to the tax authori- ment, the frequency of �ling and the number only one of these contributions would be ties (such as value added tax, sales tax or of agencies involved for this standardized included in the number of payments. goods and service tax) but not borne by the case study company during the second year company are excluded. The taxes included of operation (table 13.8). It includes con- Time can be divided into 5 categories: pro�t or sumption taxes paid by the company, such Time is recorded in hours per year. The in- corporate income tax, social contributions as sales tax or value added tax. These taxes dicator measures the time taken to prepare, and labor taxes paid by the employer (in are traditionally collected from the consumer �le and pay 3 major types of taxes and respect of which all mandatory contributions on behalf of the tax agencies. Although they contributions: the corporate income tax, are included, even if paid to a private entity do not affect the income statements of the value added or sales tax, and labor taxes, such as a requited pension fund), property company, they add to the administrative taxes, turnover taxes and other taxes (such including payroll taxes and social contribu- burden of complying with the tax system and as municipal fees and vehicle and fuel taxes). tions. Preparation time includes the time to so are included in the tax payments measure. collect all information necessary to compute The total tax rate is designed to provide a The number of payments takes into account the tax payable and to calculate the amount comprehensive measure of the cost of all electronic �ling. Where full electronic �ling payable. If separate accounting books must the taxes a business bears. It differs from and payment is allowed and it is used by be kept for tax purposes—or separate cal- the statutory tax rate, which merely provides the majority of medium-size businesses, the culations made—the time associated with the factor to be applied to the tax base. In tax is counted as paid once a year even if these processes is included. This extra time computing the total tax rate, the actual tax �lings and payments are more frequent. For is included only if the regular accounting payable is divided by commercial pro�t. Data TABLE 13.8 What do the paying taxes work is not enough to ful�ll the tax account- for Norway illustrate (table 13.9). indicators measure? ing requirements. Filing time includes the Tax payments for a manufacturing company in 2010 Commercial pro�t is essentially net pro�t time to complete all necessary tax return (number per year adjusted for electronic and joint �ling before all taxes borne. It differs from the and payment) forms and �le the relevant returns at the tax conventional pro�t before tax, reported in Total number of taxes and contributions paid, includ- authority. Payment time considers the hours ing consumption taxes (value added tax, sales tax or �nancial statements. In computing pro�t be- goods and service tax) needed to make the payment online or at the fore tax, many of the taxes borne by a �rm are Method and frequency of �ling and payment tax authorities. Where taxes and contribu- deductible. In computing commercial pro�t, Time required to comply with 3 major taxes tions are paid in person, the time includes these taxes are not deductible. Commercial (hours per year) Collecting information and computing the tax payable delays while waiting. pro�t therefore presents a clear picture of the Completing tax return forms, �ling with proper TABLE 13.9 Computing the total tax rate for Norway agencies Statutory rate Statutory tax Actual tax Commercial Total tax rate Arranging payment or withholding base payable pro�t* Preparing separate mandatory tax accounting books, r b a=rxb c t = a/c if required Type of tax (tax base) NKr NKr NKr Total tax rate (% of pro�t before all taxes) Corporate income tax (taxable 28.1% 20,612,719 5,771,561 23,651,183 24.4% income) Pro�t or corporate income tax Social security contributions 14.1% 26,684,645 3,762,535 23,651,183 15.9% Social contributions and labor taxes paid by the (taxable wages) employer Fuel tax (fuel price) NKr 4 per liter 74,247 liters 297,707 23,651,183 1.3% Property and property transfer taxes Total 9,831,803 41.6% Dividend, capital gains and �nancial transactions taxes * Pro�t before all taxes borne. Note: NKr is Norwegian kroner. Commercial pro�t is assumed to be 59.4 times income per capita. Waste collection, vehicle, road and other taxes Source: Doing Business database. 94 DOING BUSINESS IN THE ARAB WORLD 2012 actual pro�t of a business before any of the included. Payment is made by letter of credit, FIGURE 13.8 Trading across borders: exporting taxes it bears in the course of the �scal year. and the time, cost and documents required and importing by ocean transport for the issuance or advising of a letter of Rankings are based on 3 indicators Commercial pro�t is computed as sales mi- credit are taken into account. The ranking nus cost of goods sold, minus gross salaries, on the ease of trading across borders is the Document preparation, minus administrative expenses, minus other simple average of the percentile rankings on customs clearance and technical control, port expenses, minus provisions, plus capital its component indicators (�gure 13.8). All documents required by and terminal handling, gains (from the property sale) minus inter- customs and other inland transport and agencies handling est expense, plus interest income and minus Local freight forwarders, shipping lines, cus- 33.3% 33.3% commercial depreciation. To compute the toms brokers, port officials and banks provide Documents Time to to export export and commercial depreciation, a straight-line information on required documents and cost and import import depreciation method is applied, with the as well as the time to complete each proce- 33.3% following rates: 0% for the land, 5% for the dure. To make the data comparable across Cost to export building, 10% for the machinery, 33% for the economies, several assumptions about the and import computers, 20% for the office equipment, business and the traded goods are used. 20% for the truck and 10% for business US$ per 20-foot container, development expenses. Commercial pro�t Assumptions about the business no bribes or tariffs included amounts to 59.4 times income per capita. The business: Ė Has at least 60 employees. agencies, and banks are taken into account. The methodology for calculating the total tax Since payment is by letter of credit, all docu- Ė Is located in the economy’s largest busi- rate is broadly consistent with the Total Tax ments required by banks for the issuance or ness city. Contribution framework developed by PwC securing of a letter of credit are also taken and the calculation within this framework for Ė Is a private, limited liability company. It into account. Documents that are renewed taxes borne. But while the work undertaken does not operate in an export processing annually and that do not require renewal per by PwC is usually based on data received zone or an industrial estate with special shipment (for example, an annual tax clear- from the largest companies in the economy, export or import privileges. ance certi�cate) are not included. Doing Business focuses on a case study for a Ė Is domestically owned with no foreign standardized medium-size company. ownership. Time Ė Exports more than 10% of its sales. The time for exporting and importing is The data details on paying taxes can be found for each economy at http://www.doingbusiness recorded in calendar days. The time calcula- Assumptions about the traded .org by selecting the economy in the drop- tion for a procedure starts from the moment goods down list. This methodology was developed in it is initiated and runs until it is completed. The traded product travels in a dry-cargo, If a procedure can be accelerated for an Djankov, Ganser and others (2010). 20-foot, full container load. It weighs 10 tons additional cost and is available to all trading and is valued at $20,000. The product: Ė Is not hazardous nor does it include mili- TABLE 13.10 What do the trading across TRADING ACROSS BORDERS borders indicators measure? tary items. Doing Business measures the time and cost Documents required to export and import (number) Ė Does not require refrigeration or any other (excluding tariffs) associated with exporting Bank documents and importing a standardized cargo of goods special environment. Customs clearance documents by ocean transport. The time and cost neces- Ė Does not require any special phytosanitary Port and terminal handling documents sary to complete every official procedure for or environmental safety standards other Transport documents exporting and importing the goods—from than accepted international standards. Time required to export and import (days) the contractual agreement between the Ė Is one of the economy’s leading export or Obtaining all the documents 2 parties to the delivery of goods—are import products. Inland transport and handling recorded. All documents needed by the Customs clearance and inspections trader to export or import the goods across Documents Port and terminal handling the border are also recorded. For exporting All documents required per shipment to Does not include ocean transport time goods, procedures range from packing the export and import the goods are recorded Cost required to export and import (US$ per container) goods into the container at the warehouse (table 13.10). It is assumed that the contract All documentation to their departure from the port of exit. For has already been agreed upon and signed by Inland transport and handling importing goods, procedures range from both parties. Documents required for clear- Customs clearance and inspections the vessel’s arrival at the port of entry to ance by government ministries, customs the cargo’s delivery at the warehouse. The authorities, port and container terminal Port and terminal handling time and cost for ocean transport are not authorities, health and technical control Of�cial costs only, no bribes DATA NOTES 95 companies, the fastest legal procedure is published at http://www.doingbusiness.org/ FIGURE 13.9 Enforcing contracts: resolving a chosen. Fast-track procedures applying to ExploreTopics/EnforcingContracts/. commercial dispute through the �rms located in an export processing zone courts are not taken into account because they are Assumptions about the case Rankings are based on 3 indicators not available to all trading companies. Ocean Ė The value of the claim equals 200% of the economy’s income per capita. Days to resolve Attorney, court and transport time is not included. It is assumed commercial sale dispute enforcement costs as that neither the exporter nor the importer Ė The dispute concerns a lawful transaction through the courts % of claim value wastes time and that each commits to com- between 2 businesses (Seller and Buyer), pleting each remaining procedure without 33.3% 33.3% located in the economy’s largest business Time Cost delay. Procedures that can be completed city. Seller sells goods worth 200% of the in parallel are measured as simultaneous. economy’s income per capita to Buyer. The waiting time between procedures—for After Seller delivers the goods to Buyer, 33.3% Procedures example, during unloading of the cargo—is Buyer refuses to pay for the goods on the included in the measure. grounds that the delivered goods were not of adequate quality. Steps to file claim, obtain judgment and enforce it Cost Ė Seller (the plaintiff) sues Buyer (the de- Cost measures the fees levied on a 20-foot fendant) to recover the amount under container in U.S. dollars. All the fees associ- the sales agreement (that is, 200% of sale of Buyer’s movable assets (for ex- ated with completing the procedures to ex- the economy’s income per capita). Buyer ample, office equipment and vehicles). port or import the goods are included. These opposes Seller’s claim, saying that the include costs for documents, administrative Procedures quality of the goods is not adequate. The fees for customs clearance and technical claim is disputed on the merits. The court The list of procedural steps compiled for each control, customs broker fees, terminal han- cannot decide the case on the basis of economy traces the chronology of a com- dling charges and inland transport. The cost documentary evidence or legal title alone. mercial dispute before the relevant court. A does not include customs tariffs and duties Ė A court in the economy’s largest business procedure is de�ned as any interaction, re- or costs related to ocean transport. Only of- city with jurisdiction over commercial quired by law or commonly used in practice, �cial costs are recorded. cases worth 200% of income per capita between the parties or between them and decides the dispute. the judge or court officer. This includes steps The data details on trading across borders can Ė Seller attaches Buyer’s movable as- to �le and serve the case, steps for trial and be found for each economy at http://www sets (for example, office equipment and judgment and steps necessary to enforce the .doingbusiness.org by selecting the economy vehicles) before obtaining a judgment be- judgment (table 13.11). in the drop-down list. This methodology was cause Seller fears that Buyer may become developed in Djankov, Freund and Pham (2010) The survey allows respondents to record insolvent. and is adopted here with minor changes. procedures that exist in civil law but not Ė An expert opinion is given on the quality of the delivered goods. If it is standard TABLE 13.11 What do the enforcing contracts ENFORCING CONTRACTS practice in the economy for each party indicators measure? to call its own expert witness, the parties Procedures to enforce a contract through the courts Indicators on enforcing contracts measure (number) each call one expert witness. If it is stan- the efficiency of the judicial system in resolv- Any interaction between the parties in a commercial dard practice for the judge to appoint an dispute, or between them and the judge or court ing a commercial dispute. The data are built of�cer independent expert, the judge does so. In by following the step-by-step evolution of a Steps to �le and serve the case this case the judge does not allow oppos- commercial sale dispute before local courts. ing expert testimony. Steps for trial and judgment The data are collected through study of the Ė The judgment is 100% in favor of Seller: Steps to enforce the judgment codes of civil procedure and other court the judge decides that the goods are of Time required to complete procedures (calendar days) regulations as well as surveys completed by adequate quality and that Buyer must pay Time to �le and serve the case local litigation lawyers and by judges. The the agreed price. Time for trial and obtaining judgment ranking on the ease of enforcing contracts is the simple average of the percentile rankings Ė Buyer does not appeal the judgment. Time to enforce the judgment Seller decides to start enforcing the judg- on its component indicators (�gure 13.9). Cost required to complete procedures (% of claim) ment as soon as the time allocated by law No bribes The name of the relevant court in each for appeal expires. Average attorney fees economy—the court in the largest busi- Ė Seller takes all required steps for prompt Court costs, including expert fees ness city with jurisdiction over commercial enforcement of the judgment. The money Enforcement costs cases worth 200% of income per capita—is is successfully collected through a public 96 DOING BUSINESS IN THE ARAB WORLD 2012 common law jurisdictions and vice versa. For RESOLVING INSOLVENCY FIGURE 13.10 Resolving insolvency: time, cost example, in civil law jurisdictions the judge (FORMERLY CLOSING A BUSINESS) and outcome of bankruptcy of a can appoint an independent expert, while in local company Doing Business studies the time, cost and common law jurisdictions each party sub- Rankings are based on 1 indicator outcome of insolvency proceedings involving mits a list of expert witnesses to the court. To domestic entities. The name of this indicator set indicate overall efficiency, 1 procedure is sub- Recovery rate is a function of time, cost and other was changed from closing a business to resolving factors such as lending rate and the likelihood of the tracted from the total number for economies insolvency to more accurately reflect the content company continuing to operate that have specialized commercial courts, of the indicators. The indicators did not change and 1 procedure for economies that allow in content or scope. The data are derived from electronic �ling of the initial complaint in questionnaire responses by local insolvency court cases. Some procedural steps that take 100% practitioners and veri�ed through a study of place simultaneously with or are included in Recovery laws and regulations as well as public infor- rate other procedural steps are not counted in the mation on bankruptcy systems. The ranking total number of procedures. on the ease of resolving insolvency is based Time on the recovery rate (�gure 13.10). Note: Time and cost do not count separately for the rankings. Time is recorded in calendar days, counted To make the data comparable across econo- from the moment the plaintiff decides to mies, several assumptions about the busi- Assumptions about the case �le the lawsuit in court until payment. This ness and the case are used. The business is experiencing liquidity prob- includes both the days when actions take place and the waiting periods between. The lems. The company’s loss in 2010 reduced Assumptions about the business average duration of different stages of dis- its net worth to a negative �gure. It is January The business: 1, 2011. There is no cash to pay the bank pute resolution is recorded: the completion of service of process (time to �le and serve Ė Is a limited liability company. interest or principal in full, due the next day, the case), the issuance of judgment (time for Ė Operates in the economy’s largest busi- January 2. The business will therefore default the trial and obtaining the judgment) and the ness city. on its loan. Management believes that losses moment of payment (time for enforcement Ė Is 100% domestically owned, with the will be incurred in 2011 and 2012 as well. of the judgment). founder, who is also the chairman of The amount outstanding under the loan the supervisory board, owning 51% (no Cost agreement is exactly equal to the market other shareholder holds more than 5% of value of the hotel business and represents Cost is recorded as a percentage of the claim, shares). 74% of the company’s total debt. The other assumed to be equivalent to 200% of income Ė Has downtown real estate, where it runs 26% of its debt is held by unsecured credi- per capita. No bribes are recorded. Three a hotel, as its major asset. The hotel is tors (suppliers, employees, tax authorities). types of costs are recorded: court costs, valued at 100 times income per capita or enforcement costs and average attorney fees. $200,000, whichever is larger. The company has too many creditors to Ė Has a professional general manager. negotiate an informal out-of-court workout. Court costs include all court costs and expert The following options are available: a judicial fees that Seller (plaintiff) must advance to Ė Has 201 employees and 50 suppliers, each procedure aimed at the rehabilitation or the court, regardless of the �nal cost to Seller. of which is owed money for the last delivery. reorganization of the company to permit its Expert fees, if required by law or commonly Ė Has a 10-year loan agreement with a continued operation; a judicial procedure used in practice, are included in court costs. domestic bank secured by a universal aimed at the liquidation or winding-up of Enforcement costs are all costs that Seller business charge (for example, a floating the company; or a debt enforcement or (plaintiff) must advance to enforce the judg- charge) in economies where such collat- ment through a public sale of Buyer’s movable foreclosure procedure against the company, eral is recognized or by the hotel property. assets, regardless of the �nal cost to Seller. enforced either in court (or through another If the laws of the economy do not spe- Average attorney fees are the fees that Seller government authority) or out of court (for ci�cally provide for a universal business (plaintiff) must advance to a local attorney to example, by appointing a receiver). charge but contracts commonly use some represent Seller in the standardized case. other provision to that effect, this provi- Assumptions about the parties sion is speci�ed in the loan agreement. The data details on enforcing contracts can The bank wants to recover as much as pos- be found for each economy at http://www Ė Has observed the payment schedule and sible of its loan, as quickly and cheaply as .doingbusiness.org by selecting the economy all other conditions of the loan up to now. possible. The unsecured creditors will do in the drop-down list. This methodology was Ė Has a mortgage, with the value of the everything permitted under the applicable developed in Djankov and others (2003) and is mortgage principal being exactly equal to laws to avoid a piecemeal sale of the assets. adopted here with minor changes. the market value of the hotel. The majority shareholder wants to keep the DATA NOTES 97 company operating and under its control. are sold piecemeal, the maximum amount NOTES Management wants to keep the company that can be recovered will not exceed 70% 1. The data for paying taxes refer to January– operating and preserve its employees’ jobs. of the bank’s claim, which translates into 70 December 2010. All the parties are local entities or citizens; cents on the dollar. 2. Because the ease of doing business index no foreign parties are involved. now includes the getting electricity indicators, Recovery rate procedures, time and cost related to obtain- ing an electricity connection were removed Time The recovery rate is recorded as cents on the from the dealing with construction permits Time for creditors to recover their credit is dollar recouped by creditors through reor- indicators. recorded in calendar years (table 13.12). The ganization, liquidation or debt enforcement 3. The ranking is based on a straight average of period of time measured by Doing Business is (foreclosure) proceedings. The calculation points from the strength of legal rights index from the company’s default until the payment takes into account the outcome: whether the and depth of credit information index. of some or all of the money owed to the bank. business emerges from the proceedings as a 4. The scoring on this aspect was revised this year to bring it into line with UNCITRAL Potential delay tactics by the parties, such as going concern or the assets are sold piece- (2004, 2007) and World Bank (2011a). the �ling of dilatory appeals or requests for meal. Then the costs of the proceedings 5. This question is usually regulated by stock ex- extension, are taken into consideration. are deducted (1 cent for each percentage change or securities laws. Points are awarded point of the value of the debtor’s estate). only to economies with more than 10 listed Cost Finally, the value lost as a result of the time �rms in their most important stock exchange. The cost of the proceedings is recorded as the money remains tied up in insolvency 6. When evaluating the regime of liability for a percentage of the value of the debtor’s proceedings is taken into account, including company directors for a prejudicial related- party transaction, Doing Business assumes estate. The cost is calculated on the basis of the loss of value due to depreciation of the that the transaction was duly disclosed and questionnaire responses and includes court hotel furniture. Consistent with international approved. Doing Business does not measure fees and government levies; fees of insol- accounting practice, the annual depreciation director liability in the event of fraud. vency administrators, auctioneers, assessors rate for furniture is taken to be 20%. The fur- 7. PwC refers to the network of member �rms and lawyers; and all other fees and costs. niture is assumed to account for a quarter of of PricewaterhouseCoopers International the total value of assets. The recovery rate is Limited (PwCIL), or, as the context requires, Outcome individual member �rms of the PwC network. the present value of the remaining proceeds, Each member �rm is a separate legal Recovery by creditors depends on whether based on end-2010 lending rates from the entity and does not act as agent of PwCIL the hotel business emerges from the International Monetary Fund’s International or any other member �rm. PwCIL does not proceedings as a going concern or the Financial Statistics, supplemented with provide any services to clients. PwCIL is not company’s assets are sold piecemeal. If the data from central banks and the Economist responsible or liable for the acts or omissions of any of its member �rms nor can it control business keeps operating, no value is lost Intelligence Unit. the exercise of their professional judgment and the bank can satisfy its claim in full, or or bind them in any way. No member �rm is recover 100 cents on the dollar. If the assets No practice responsible or liable for the acts or omissions If an economy had zero cases a year over the of any other member �rm nor can it control past 5 years involving a judicial reorganiza- the exercise of another member �rm’s profes- TABLE 13.12 What do the resolving insolvency sional judgment or bind another member �rm indicators measure? tion, judicial liquidation or debt enforcement or PwCIL in any way. Time required to recover debt (years) procedure (foreclosure), the economy Measured in calendar years receives a “no practice� ranking. This means Appeals and requests for extension are included that creditors are unlikely to recover their Cost required to recover debt (% of debtor’s estate) money through a formal legal process (in Measured as percentage of estate value or out of court). The recovery rate for “no Court fees practice� economies is zero. Fees of insolvency administrators This methodology was developed in Djankov, Lawyers’ fees Hart and others (2008) and is adopted here Assessors’ and auctioneers’ fees with minor changes. Other related fees Recovery rate for creditors (cents on the dollar) Measures the cents on the dollar recovered by creditors Present value of debt recovered Of�cial costs of the insolvency proceedings are deducted Depreciation of furniture is taken into account Outcome for the business (survival or not) affects the maximum value that can be recovered Ease of doing business and distance to frontier This year’s report presents results for 2 ag- changes in methodology as well as additions components—yield a ranking nearly identi- gregate measures: the aggregate ranking of economies or topics.1 cal to the simple average used by Doing on the ease of doing business and a new Business.2 Thus Doing Business uses the sim- measure, the “distance to frontier.� While Construction of the ease of doing plest method: weighting all topics equally the ease of doing business ranking compares business index and, within each topic, giving equal weight to economies with one another at a point in Here is one example of how the ease of do- each of the topic components.3 time, the distance to frontier measure shows ing business index is constructed. In Korea how much the regulatory environment for it takes 5 procedures, 7 days and 14.6% of If an economy has no laws or regulations local entrepreneurs in each economy has annual income per capita in fees to open covering a speci�c area—for example, changed over time. a business. There is no minimum capital insolvency—it receives a “no practice� required. On these 4 indicators Korea ranks mark. Similarly, an economy receives a “no EASE OF DOING BUSINESS in the 18th, 14th, 53rd and 0 percentiles. So practice� or “not possible� mark if regulation The ease of doing business index ranks on average Korea ranks in the 21st percentile exists but is never used in practice or if a economies from 1 to 183. For each economy on the ease of starting a business. It ranks competing regulation prohibits such prac- the ranking is calculated as the simple aver- in the 12th percentile on getting credit, 25th tice. Either way, a “no practice� mark puts the age of the percentile rankings on each of percentile on paying taxes, 8th percentile economy at the bottom of the ranking on the the 10 topics included in the index in Doing on enforcing contracts, 7th percentile on relevant indicator. Business 2012: starting a business, deal- resolving insolvency and so on. Higher rank- ing with construction permits, registering ings indicate simpler regulation and stronger The ease of doing business index is limited in property, getting credit, protecting investors, protection of property rights. The simple scope. It does not account for an economy’s paying taxes, trading across borders, enforc- average of Korea’s percentile rankings on proximity to large markets, the quality of its ing contracts, resolving insolvency and, new all topics is 21st. When all economies are infrastructure services (other than services this year, getting electricity. The employing ordered by their average percentile rankings, workers indicators are not included in this related to trading across borders and get- Korea stands at 8 in the aggregate ranking on year’s aggregate ease of doing business ting electricity), the strength of its �nancial the ease of doing business. ranking. In addition to this year’s ranking, system, the security of property from theft Doing Business presents a comparable rank- More complex aggregation methods—such and looting, macroeconomic conditions or ing for the previous year, adjusted for any as principal components and unobserved the strength of underlying institutions. TABLE 14.1 Correlations between economy rankings on Doing Business topics Dealing with construction Registering Protecting Trading across Enforcing Resolving Getting permits property Getting credit investors Paying taxes borders contracts insolvency electricity Starting a business 0.39 0.32 0.45 0.59 0.37 0.45 0.42 0.45 0.28 Dealing with 0.22 0.19 0.25 0.36 0.45 0.20 0.33 0.40 construction permits Registering property 0.39 0.29 0.31 0.27 0.49 0.33 0.24 Getting credit 0.47 0.20 0.41 0.42 0.52 0.24 Protecting investors 0.37 0.39 0.29 0.37 0.20 Paying taxes 0.40 0.27 0.33 0.40 Trading across 0.35 0.50 0.56 borders Enforcing contracts 0.42 0.21 Resolving insolvency 0.32 Source: Doing Business database. EASE OF DOING BUSINESS AND DISTANCE TO FRONTIER 99 Variability of economies’ rankings Economies that improved the most Calculating the distance to frontier for across topics across 3 or more Doing Business each economy involves 2 main steps. First, topics in 2010/11 individual indicator scores are normalized Each indicator set measures a different as- to a common unit. To do so, each of the pect of the business regulatory environment. Doing Business 2012 uses a simple method 32 component indicators y is rescaled to The rankings of an economy can vary, some- to calculate which economies improved the (y − min)/(max − min), with the minimum most in the ease of doing business. First, it times signi�cantly, across indicator sets. The value (min) representing the frontier—the selects the economies that in 2010/11 imple- average correlation coefficient between the highest performance on that indicator across mented regulatory reforms making it easier 10 indicator sets included in the aggregate all economies since 2005. Second, for each to do business in 3 or more of the 10 topics ranking is 0.36, and the coefficients between economy the scores obtained for individual included in this year’s ease of doing busi- indicators are aggregated through simple any 2 sets of indicators range from 0.19 ness ranking.4 Thirty economies meet this averaging into one distance to frontier score. (between dealing with construction permits criterion: Armenia, Burkina Faso, Burundi, An economy’s distance to the frontier is and getting credit) to 0.59 (between starting Cape Verde, the Central African Republic, indicated on a scale from 0 to 100, where 0 a business and protecting investors). These Chile, Colombia, the Democratic Republic of represents the frontier and 100 the lowest correlations suggest that economies rarely Congo, Côte d’Ivoire, The Gambia, Georgia, performance. Korea, Latvia, Liberia, FYR Macedonia, score universally well or universally badly on Mexico, Moldova, Montenegro, Morocco, The difference between an economy’s dis- the indicators (table 14.1). Nicaragua, Oman, Peru, Russia, São Tomé tance to frontier score in 2005 and its score Consider the example of Canada. It stands and Príncipe, Senegal, Sierra Leone, Slovenia, in 2011 illustrates the extent to which the the Solomon Islands, South Africa and economy has closed the gap to the frontier at 12 in the aggregate ranking on the ease of Ukraine. Second, Doing Business ranks these over time. doing business. Its ranking is 3 on both start- economies on the increase in their ranking ing a business and resolving insolvency, and on the ease of doing business from the previ- The maximum (max) and minimum (min) 5 on protecting investors. But its ranking is ous year using comparable rankings. observed values are computed for the 174 only 59 on enforcing contracts, 42 on trading economies included in the Doing Business across borders and 156 on getting electricity. Selecting the economies that implemented sample since 2005 and for all years (from regulatory reforms in at least 3 topics and 2005 to 2011). The year 2005 was chosen Figure 1.5 in the executive summary illustrates improved the most in the aggregate rank- as the baseline for the economy sample the degree of variability in each economy’s ing is intended to highlight economies with because it was the �rst year in which data ongoing, broad-based reform programs. were available for the majority of economies performance across the different areas of (a total of 174) and for all 9 indicator sets business regulation covered by Doing Business. DISTANCE TO FRONTIER included in the measure. To mitigate the ef- The �gure draws attention to economies with MEASURE fects of extreme outliers in the distributions a particularly uneven performance by show- of the rescaled data (very few economies This year’s report introduces a new measure ing the distance between the average of the need 694 days to complete the procedures to illustrate how the regulatory environment highest 3 topic rankings and the average of to start a business, but many need 9 days), for local businesses in each economy has the lowest 3 for each of 183 economies across the maximum (max) is de�ned as the 95th changed over time. The distance to frontier the 10 topics included in this year’s aggregate percentile of the pooled data for all econo- measure illustrates the distance of an econo- ranking. While a relatively small distance mies and all years for each indicator. my to the “frontier� and shows the extent to between these 2 averages suggests a broadly which the economy has closed this gap over Take Colombia, which has a score of 0.30 consistent approach across the areas of busi- time. The frontier is a score derived from on the distance to frontier measure for 2011. ness regulation measured by Doing Business, a the most efficient practice or highest score This score indicates that the economy is 30 relatively large distance suggests a more nar- achieved on each of the component indica- percentage points away from the frontier tors in 9 Doing Business indicator sets (ex- constructed from the best performances rowly focused approach, with greater room cluding the employing workers and getting across all economies and all years. Colombia for improvement in some areas than in others. electricity indicators) by any economy since was further from the frontier in 2005, with Variation in performance across the indi- 2005. In starting a business, for example, a score of 0.46. The difference between the New Zealand has achieved the highest per- scores shows an improvement over time. cator sets is not at all unusual. It reflects formance on the time (1 day), Canada and differences in the degree of priority that gov- New Zealand on the number of procedures ernment authorities give to particular areas required (1), Denmark and Slovenia on the of business regulation reform and the ability cost (0% of income per capita) and Australia of different government agencies to deliver on the paid-in minimum capital requirement tangible results in their area of responsibility. (0% of income per capita). 100 DOING BUSINESS IN THE ARAB WORLD 2012 NOTES to that from the simple average method 1. In case of revisions to the methodology or cor- because both these methods assign roughly rections to the underlying data, the data are equal weights to the topics, since the back-calculated to provide a comparable time pairwise correlations among indicators do series since the year the relevant economy or not differ much. An alternative to the simple topic was �rst included in the data set. The average method is to give different weights time series is available on the Doing Business to the topics, depending on which are website (http://www.doingbusiness.org). considered of more or less importance in the The Doing Business report publishes yearly context of a speci�c economy. rankings for the year of publication as well as 3. A technical note on the different aggregation the previous year to shed light on year-to-year and weighting methods is available on the developments. Six topics and more than Doing Business website (http://www 50 economies have been added since the .doingbusiness.org). inception of the project. Earlier rankings on 4. Doing Business reforms making it more the ease of doing business are therefore not difficult to do business are subtracted from comparable. the total number of those making it easier to 2. See Djankov and others (2005). Principal do business. components and unobserved components methods yield a ranking nearly identical 101 Summaries of Doing Business reforms in 2010/11 20 reforms in the Arab world in 2010/11 made it easier to do business Starting a business Dealing with Getting credit Protecting investors Trading across borders construction permits 6 5 1 2 2 Jordan Algeria Morocco Djibouti Oman Mauritania Comoros Jordan Morocco Paying taxes Qatar Oman Saudi Arabia Qatar 3 Getting electricity Syrian Arab Republic United Arab Emirates Morocco United Arab Emirates 1 Oman Lebanon Yemen, Rep. Source: Doing Business database. Doing Business reforms affecting all sets of DJIBOUTI LEBANON indicators included in this year’s ranking on  Dealing with construction permits Getting electricity the ease of doing business, implemented Djibouti made dealing with construction per- Lebanon made getting electricity less costly between June 2010 and May 2011. mits costlier by increasing the fees for inspec- by reducing the application fees and security tions and the building permit and adding a deposit for a new connection.  Doing Business reform making it easier to do new inspection in the preconstruction phase. business Trading across borders MAURITANIA  Doing Business reform making it more difficult Djibouti made trading across borders faster by to do business Dealingwith construction permits developing a new container terminal. Mauritania made dealing with construction permits easier by opening a one-stop shop. ALGERIA IRAQ Getting credit Algeria improved its credit information system  Starting a business MOROCCO by guaranteeing by law the right of borrowers In Iraq starting a business became more Dealingwith construction permits to inspect their personal data. expensive because of an increase in the cost Morocco made dealing with construction to obtain a name reservation certi�cate and permits easier by opening a one-stop shop. in the cost for lawyers to draft articles of COMOROS association. Protectinginvestors Getting credit Morocco strengthened investor protections Access to credit in the Comoros was improved by allowing minority shareholders to obtain JORDAN through amendments to the OHADA Uniform any noncon�dential corporate document dur- Starting a business ing trial. Act on Secured Transactions that broaden the range of assets that can be used as collateral Jordan made starting a business easier by re- Payingtaxes (including future assets), extend the security ducing the minimum capital requirement from Morocco eased the administrative burden of interest to the proceeds of the original asset 1,000 Jordanian dinars to 1 dinar, of which paying taxes for �rms by enhancing electronic and introduce the possibility of out-of-court only half must be deposited before company �ling and payment of the corporate income enforcement. registration. tax and value added tax. Tradingacross borders Jordan made trading across borders faster by introducing X-ray scanners for risk manage- ment systems. 102 DOING BUSINESS IN THE ARAB WORLD 2012 OMAN SAUDI ARABIA YEMEN, REP. Startinga business Startinga business Paying taxes Oman introduced online company registra- Saudi Arabia made starting a business easier The Republic of Yemen enacted a new tax tion, reducing the time it takes to register a by bringing together representatives from the law that reduced the general corporate tax business. Department of Zakat and Income Tax and the rate from 35% to 20% and abolished all tax General Organization of Social Insurance at exemptions except those granted under the Getting credit the Uni�ed Center to register new companies investment law for investment projects. Oman improved its credit information system with their agencies. by launching the Bank Credit and Statistical Bureau System, which collects historical in- formation on performing and nonperforming SYRIAN ARAB REPUBLIC loans for both �rms and individuals. Starting a business Paying taxes Syria made starting a business less costly by Oman enacted a new income tax law that reducing both the minimum capital require- rede�ned the scope of taxation. ment and the cost of publication for the registration notice. QATAR UNITED ARAB EMIRATES Starting a business Qatar made starting a business easier by Startinga business combining commercial registration and reg- The United Arab Emirates made starting istration with the Chamber of Commerce and a business easier by merging the require- Industry at the one-stop shop. ments to �le company documents with the Department for Economic Development, to  Dealing with construction permits obtain a trade license and to register with the Qatar made dealing with construction permits Dubai Chamber of Commerce and Industry. more difficult by increasing the time and cost to process building permits. Gettingcredit The United Arab Emirates improved its credit Getting credit information system through a new law allow- Qatar improved its credit information system ing the establishment of a federal credit bu- by starting to distribute historical data and reau under the supervision of the central bank. eliminating the minimum threshold for loans included in the database. 103 Country tables  Reform making it easier to do business  Reform making it more dif�cult to do business ALGERIA Middle East & North Africa GNI per capita (US$) 4,460 Ease of doing business (rank) 148 (AW 16) Upper middle income Population (m) 35.4 Starting a business (rank) 153 (AW 15) Registering property (rank) 167 (AW 20) Trading across borders (rank) 127 (AW 16) Procedures (number) 14 Procedures (number) 10 Documents to export (number) 8 Time (days) 25 Time (days) 48 Time to export (days) 17 Cost (% of income per capita) 12.1 Cost (% of property value) 7.1 Cost to export (US$ per container) 1,248 Minimum capital (% of income per capita) 30.6 Documents to import (number) 9  Getting credit (rank) 150 (AW 11) Time to import (days) 27 Dealing with construction permits (rank) 118 (AW 12) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 1,318 Procedures (number) 19 Depth of credit information index (0-6) 3 Time (days) 281 Public registry coverage (% of adults) 0.3 Enforcing contracts (rank) 122 (AW 11) Cost (% of income per capita) 23.1 Private bureau coverage (% of adults) 0.0 Procedures (number) 45 Time (days) 630 Getting electricity (rank) 164 (AW 20) Protecting investors (rank) 79 (AW 5) Cost (% of claim) 21.9 Procedures (number) 6 Extent of disclosure index (0-10) 6 Time (days) 159 Extent of director liability index (0-10) 6 Resolving insolvency (rank) 59 (AW 5) Cost (% of income per capita) 1,579.0 Ease of shareholder suits index (0-10) 4 Time (years) 2.5 Strength of investor protection index (0-10) 5.3 Cost (% of estate) 7 Recovery rate (cents on the dollar) 41.7 Paying taxes (rank) 164 (AW 19) Payments (number per year) 29 Time (hours per year) 451 Total tax rate (% of pro�t) 72.0 BAHRAIN Middle East & North Africa GNI per capita (US$) 20,475 Ease of doing business (rank) 38 (AW 4) High income Population (m) 0.8 Starting a business (rank) 82 (AW 7) Registering property (rank) 30 (AW 4) Trading across borders (rank) 49 (AW 7) Procedures (number) 7 Procedures (number) 2 Documents to export (number) 6 Time (days) 9 Time (days) 31 Time to export (days) 11 Cost (% of income per capita) 0.7 Cost (% of property value) 2.7 Cost to export (US$ per container) 955 Minimum capital (% of income per capita) 259.8 Documents to import (number) 7 Getting credit (rank) 126 (AW 10) Time to import (days) 15 Dealing with construction permits (rank) 7 (AW 2) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 995 Procedures (number) 12 Depth of credit information index (0-6) 3 Time (days) 43 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 114 (AW 8) Cost (% of income per capita) 10.7 Private bureau coverage (% of adults) 40.0 Procedures (number) 48 Time (days) 635 Getting electricity (rank) 49 (AW 8) Protecting investors (rank) 79 (AW 5) Cost (% of claim) 14.7 Procedures (number) 5 Extent of disclosure index (0-10) 8 Time (days) 90 Extent of director liability index (0-10) 4 Resolving insolvency (rank) 25 (AW 1) Cost (% of income per capita) 63.6 Ease of shareholder suits index (0-10) 4 Time (years) 2.5 Strength of investor protection index (0-10) 5.3 Cost (% of estate) 10 Recovery rate (cents on the dollar) 66.0 Paying taxes (rank) 18 (AW 6) Payments (number per year) 25 Time (hours per year) 36 Total tax rate (% of pro�t) 15.0 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. 104 DOING BUSINESS IN THE ARAB WORLD 2012  Reform making it easier to do business  Reform making it more dif�cult to do business COMOROS Sub-Saharan Africa GNI per capita (US$) 820 Ease of doing business (rank) 157 (AW 17) Low income Population (m) 0.7 Starting a business (rank) 172 (AW 17) Registering property (rank) 74 (AW 10) Trading across borders (rank) 139 (AW 17) Procedures (number) 11 Procedures (number) 4 Documents to export (number) 10 Time (days) 24 Time (days) 30 Time to export (days) 30 Cost (% of income per capita) 176.2 Cost (% of property value) 10.5 Cost to export (US$ per container) 1,207 Minimum capital (% of income per capita) 252.9 Documents to import (number) 10  Getting credit (rank) 150 (AW 11) Time to import (days) 21 Dealing with construction permits (rank) 74 (AW 8) Strength of legal rights index (0-10) 6 Cost to import (US$ per container) 1,191 Procedures (number) 15 Depth of credit information index (0-6) 0 Time (days) 155 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 153 (AW 18) Cost (% of income per capita) 62.8 Private bureau coverage (% of adults) 0.0 Procedures (number) 43 Time (days) 506 Getting electricity (rank) 100 (AW 14) Protecting investors (rank) 133 (AW 16) Cost (% of claim) 89.4 Procedures (number) 3 Extent of disclosure index (0-10) 6 Time (days) 120 Extent of director liability index (0-10) 1 Resolving insolvency (rank) 183 (AW 20) Cost (% of income per capita) 2,685.1 Ease of shareholder suits index (0-10) 5 Time (years) NO PRACTICE Strength of investor protection index (0-10) 4.0 Cost (% of estate) NO PRACTICE Recovery rate (cents on the dollar) 0.0 Paying taxes (rank) 99 (AW 13) Payments (number per year) 20 Time (hours per year) 100 Total tax rate (% of pro�t) 217.9 DJIBOUTI Middle East & North Africa GNI per capita (US$) 1,383 Ease of doing business (rank) 170 (AW 20) Lower middle income Population (m) 0.9 Starting a business (rank) 179 (AW 20) Registering property (rank) 148 (AW 19)  Trading across borders (rank) 37 (AW 4) Procedures (number) 11 Procedures (number) 7 Documents to export (number) 5 Time (days) 37 Time (days) 40 Time to export (days) 18 Cost (% of income per capita) 169.8 Cost (% of property value) 13.0 Cost to export (US$ per container) 836 Minimum capital (% of income per capita) 434.0 Documents to import (number) 5 Getting credit (rank) 177 (AW 20) Time to import (days) 18  Dealing with construction permits (rank) 142 (AW 18) Strength of legal rights index (0-10) 1 Cost to import (US$ per container) 911 Procedures (number) 15 Depth of credit information index (0-6) 1 Time (days) 172 Public registry coverage (% of adults) 0.2 Enforcing contracts (rank) 160 (AW 19) Cost (% of income per capita) 2,285.7 Private bureau coverage (% of adults) 0.0 Procedures (number) 40 Time (days) 1,225 Getting electricity (rank) 143 (AW 19) Protecting investors (rank) 179 (AW 20) Cost (% of claim) 34.0 Procedures (number) 4 Extent of disclosure index (0-10) 5 Time (days) 180 Extent of director liability index (0-10) 2 Resolving insolvency (rank) 141 (AW 15) Cost (% of income per capita) 8,799.1 Ease of shareholder suits index (0-10) 0 Time (years) 5.0 Strength of investor protection index (0-10) 2.3 Cost (% of estate) 18 Recovery rate (cents on the dollar) 16.5 Paying taxes (rank) 70 (AW 12) Payments (number per year) 35 Time (hours per year) 82 Total tax rate (% of pro�t) 38.7 EGYPT, ARAB REP. Middle East & North Africa GNI per capita (US$) 2,340 Ease of doing business (rank) 110 (AW 12) Lower middle income Population (m) 84.5 Starting a business (rank) 21 (AW 2) Registering property (rank) 93 (AW 14) Trading across borders (rank) 64 (AW 10) Procedures (number) 6 Procedures (number) 7 Documents to export (number) 8 Time (days) 7 Time (days) 72 Time to export (days) 12 Cost (% of income per capita) 5.6 Cost (% of property value) 0.8 Cost to export (US$ per container) 613 Minimum capital (% of income per capita) 0.0 Documents to import (number) 9 Getting credit (rank) 78 (AW 2) Time to import (days) 12 Dealing with construction permits (rank) 154 (AW 19) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 755 Procedures (number) 22 Depth of credit information index (0-6) 6 Time (days) 218 Public registry coverage (% of adults) 3.5 Enforcing contracts (rank) 147 (AW 16) Cost (% of income per capita) 155.3 Private bureau coverage (% of adults) 13.7 Procedures (number) 41 Time (days) 1,010 Getting electricity (rank) 101 (AW 15) Protecting investors (rank) 79 (AW 5) Cost (% of claim) 26.2 Procedures (number) 7 Extent of disclosure index (0-10) 8 Time (days) 54 Extent of director liability index (0-10) 3 Resolving insolvency (rank) 137 (AW 14) Cost (% of income per capita) 455.5 Ease of shareholder suits index (0-10) 5 Time (years) 4.2 Strength of investor protection index (0-10) 5.3 Cost (% of estate) 22 Recovery rate (cents on the dollar) 17.7 Paying taxes (rank) 145 (AW 18) Payments (number per year) 29 Time (hours per year) 433 Total tax rate (% of pro�t) 43.6 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. COUNTRY TABLES 105  Reform making it easier to do business  Reform making it more dif�cult to do business IRAQ Middle East & North Africa GNI per capita (US$) 2,320 Ease of doing business (rank) 164 (AW 19) Lower middle income Population (m) 32.3  Starting a business (rank) 176 (AW 18) Registering property (rank) 98 (AW 15) Trading across borders (rank) 180 (AW 20) Procedures (number) 11 Procedures (number) 5 Documents to export (number) 10 Time (days) 77 Time (days) 51 Time to export (days) 80 Cost (% of income per capita) 115.7 Cost (% of property value) 6.9 Cost to export (US$ per container) 3,550 Minimum capital (% of income per capita) 35.5 Documents to import (number) 10 Getting credit (rank) 174 (AW 18) Time to import (days) 83 Dealing with construction permits (rank) 120 (AW 13) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 3,650 Procedures (number) 13 Depth of credit information index (0-6) 0 Time (days) 187 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 140 (AW 15) Cost (% of income per capita) 469.8 Private bureau coverage (% of adults) 0.0 Procedures (number) 51 Time (days) 520 Getting electricity (rank) 46 (AW 6) Protecting investors (rank) 122 (AW 13) Cost (% of claim) 28.1 Procedures (number) 5 Extent of disclosure index (0-10) 4 Time (days) 47 Extent of director liability index (0-10) 5 Resolving insolvency (rank) 183 (AW 20) Cost (% of income per capita) 609.9 Ease of shareholder suits index (0-10) 4 Time (years) NO PRACTICE Strength of investor protection index (0-10) 4.3 Cost (% of estate) NO PRACTICE Recovery rate (cents on the dollar) 0.0 Paying taxes (rank) 49 (AW 10) Payments (number per year) 13 Time (hours per year) 312 Total tax rate (% of pro�t) 28.4 JORDAN Middle East & North Africa GNI per capita (US$) 4,350 Ease of doing business (rank) 96 (AW 9) Upper middle income Population (m) 6.1  Starting a business (rank) 95 (AW 9) Registering property (rank) 101 (AW 16)  Trading across borders (rank) 58 (AW 9) Procedures (number) 7 Procedures (number) 7 Documents to export (number) 6 Time (days) 12 Time (days) 21 Time to export (days) 13 Cost (% of income per capita) 13.9 Cost (% of property value) 7.5 Cost to export (US$ per container) 825 Minimum capital (% of income per capita) 0.0 Documents to import (number) 7 Getting credit (rank) 150 (AW 11) Time to import (days) 15 Dealing with construction permits (rank) 93 (AW 11) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 1,335 Procedures (number) 17 Depth of credit information index (0-6) 2 Time (days) 70 Public registry coverage (% of adults) 1.6 Enforcing contracts (rank) 130 (AW 12) Cost (% of income per capita) 534.2 Private bureau coverage (% of adults) 0.0 Procedures (number) 38 Time (days) 689 Getting electricity (rank) 36 (AW 4) Protecting investors (rank) 122 (AW 13) Cost (% of claim) 31.2 Procedures (number) 5 Extent of disclosure index (0-10) 5 Time (days) 43 Extent of director liability index (0-10) 4 Resolving insolvency (rank) 104 (AW 11) Cost (% of income per capita) 274.2 Ease of shareholder suits index (0-10) 4 Time (years) 4.3 Strength of investor protection index (0-10) 4.3 Cost (% of estate) 9 Recovery rate (cents on the dollar) 27.2 Paying taxes (rank) 21 (AW 7) Payments (number per year) 25 Time (hours per year) 116 Total tax rate (% of pro�t) 27.7 KUWAIT Middle East & North Africa GNI per capita (US$) 36,412 Ease of doing business (rank) 67 (AW 7) High income Population (m) 2.9 Starting a business (rank) 142 (AW 14) Registering property (rank) 88 (AW 13) Trading across borders (rank) 112 (AW 12) Procedures (number) 12 Procedures (number) 8 Documents to export (number) 7 Time (days) 32 Time (days) 47 Time to export (days) 16 Cost (% of income per capita) 1.2 Cost (% of property value) 0.5 Cost to export (US$ per container) 1,085 Minimum capital (% of income per capita) 71.8 Documents to import (number) 10 Getting credit (rank) 98 (AW 5) Time to import (days) 19 Dealing with construction permits (rank) 121 (AW 14) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 1,242 Procedures (number) 24 Depth of credit information index (0-6) 4 Time (days) 130 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 117 (AW 9) Cost (% of income per capita) 121.8 Private bureau coverage (% of adults) 29.0 Procedures (number) 50 Time (days) 566 Getting electricity (rank) 57 (AW 10) Protecting investors (rank) 29 (AW 2) Cost (% of claim) 18.8 Procedures (number) 7 Extent of disclosure index (0-10) 7 Time (days) 42 Extent of director liability index (0-10) 7 Resolving insolvency (rank) 48 (AW 4) Cost (% of income per capita) 48.2 Ease of shareholder suits index (0-10) 5 Time (years) 4.2 Strength of investor protection index (0-10) 6.3 Cost (% of estate) 1 Recovery rate (cents on the dollar) 43.9 Paying taxes (rank) 15 (AW 5) Payments (number per year) 15 Time (hours per year) 118 Total tax rate (% of pro�t) 15.5 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. 106 DOING BUSINESS IN THE ARAB WORLD 2012  Reform making it easier to do business  Reform making it more dif�cult to do business LEBANON Middle East & North Africa GNI per capita (US$) 9,020 Ease of doing business (rank) 104 (AW 11) Upper middle income Population (m) 4.3 Starting a business (rank) 109 (AW 10) Registering property (rank) 105 (AW 17) Trading across borders (rank) 93 (AW 11) Procedures (number) 5 Procedures (number) 8 Documents to export (number) 5 Time (days) 9 Time (days) 25 Time to export (days) 22 Cost (% of income per capita) 67.1 Cost (% of property value) 5.8 Cost to export (US$ per container) 1,050 Minimum capital (% of income per capita) 35.3 Documents to import (number) 7 Getting credit (rank) 78 (AW 2) Time to import (days) 32 Dealing with construction permits (rank) 161 (AW 20) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 1,250 Procedures (number) 19 Depth of credit information index (0-6) 5 Time (days) 219 Public registry coverage (% of adults) 16.6 Enforcing contracts (rank) 120 (AW 10) Cost (% of income per capita) 234.9 Private bureau coverage (% of adults) 0.0 Procedures (number) 37 Time (days) 721  Getting electricity (rank) 47 (AW 7) Protecting investors (rank) 97 (AW 8) Cost (% of claim) 30.8 Procedures (number) 5 Extent of disclosure index (0-10) 9 Time (days) 75 Extent of director liability index (0-10) 1 Resolving insolvency (rank) 125 (AW 13) Cost (% of income per capita) 99.9 Ease of shareholder suits index (0-10) 5 Time (years) 4.0 Strength of investor protection index (0-10) 5.0 Cost (% of estate) 22 Recovery rate (cents on the dollar) 20.6 Paying taxes (rank) 30 (AW 8) Payments (number per year) 19 Time (hours per year) 180 Total tax rate (% of pro�t) 30.2 MAURITANIA Sub-Saharan Africa GNI per capita (US$) 1,060 Ease of doing business (rank) 159 (AW 18) Lower middle income Population (m) 3.4 Starting a business (rank) 159 (AW 16) Registering property (rank) 59 (AW 8) Trading across borders (rank) 143 (AW 18) Procedures (number) 9 Procedures (number) 4 Documents to export (number) 8 Time (days) 19 Time (days) 49 Time to export (days) 34 Cost (% of income per capita) 48.3 Cost (% of property value) 4.7 Cost to export (US$ per container) 1,520 Minimum capital (% of income per capita) 334.9 Documents to import (number) 8 Getting credit (rank) 166 (AW 15) Time to import (days) 38  Dealing with construction permits (rank) 64 (AW 6) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 1,523 Procedures (number) 18 Depth of credit information index (0-6) 1 Time (days) 119 Public registry coverage (% of adults) 0.2 Enforcing contracts (rank) 79 (AW 3) Cost (% of income per capita) 49.9 Private bureau coverage (% of adults) 0.0 Procedures (number) 46 Time (days) 370 Getting electricity (rank) 122 (AW 18) Protecting investors (rank) 147 (AW 18) Cost (% of claim) 23.2 Procedures (number) 5 Extent of disclosure index (0-10) 5 Time (days) 75 Extent of director liability index (0-10) 3 Resolving insolvency (rank) 152 (AW 17) Cost (% of income per capita) 7,310.9 Ease of shareholder suits index (0-10) 3 Time (years) 8.0 Strength of investor protection index (0-10) 3.7 Cost (% of estate) 9 Recovery rate (cents on the dollar) 10.3 Paying taxes (rank) 175 (AW 20) Payments (number per year) 37 Time (hours per year) 696 Total tax rate (% of pro�t) 68.3 MOROCCO Middle East & North Africa GNI per capita (US$) 2,850 Ease of doing business (rank) 94 (AW 8) Lower middle income Population (m) 32.4 Starting a business (rank) 93 (AW 8) Registering property (rank) 144 (AW 18) Trading across borders (rank) 43 (AW 5) Procedures (number) 6 Procedures (number) 8 Documents to export (number) 6 Time (days) 12 Time (days) 75 Time to export (days) 11 Cost (% of income per capita) 15.7 Cost (% of property value) 4.9 Cost to export (US$ per container) 577 Minimum capital (% of income per capita) 10.7 Documents to import (number) 8 Getting credit (rank) 98 (AW 5) Time to import (days) 16  Dealing with construction permits (rank) 75 (AW 9) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 950 Procedures (number) 15 Depth of credit information index (0-6) 5 Time (days) 97 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 89 (AW 4) Cost (% of income per capita) 234.6 Private bureau coverage (% of adults) 14.6 Procedures (number) 40 Time (days) 510 Getting electricity (rank) 107 (AW 16)  Protecting investors (rank) 97 (AW 8) Cost (% of claim) 25.2 Procedures (number) 5 Extent of disclosure index (0-10) 7 Time (days) 71 Extent of director liability index (0-10) 2 Resolving insolvency (rank) 67 (AW 6) Cost (% of income per capita) 2,588.6 Ease of shareholder suits index (0-10) 6 Time (years) 1.8 Strength of investor protection index (0-10) 5.0 Cost (% of estate) 18 Recovery rate (cents on the dollar) 38.3  Paying taxes (rank) 112 (AW 16) Payments (number per year) 17 Time (hours per year) 238 Total tax rate (% of pro�t) 49.6 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. COUNTRY TABLES 107  Reform making it easier to do business  Reform making it more dif�cult to do business OMAN Middle East & North Africa GNI per capita (US$) 18,657 Ease of doing business (rank) 49 (AW 6) High income Population (m) 2.9  Starting a business (rank) 68 (AW 6) Registering property (rank) 21 (AW 3) Trading across borders (rank) 47 (AW 6) Procedures (number) 5 Procedures (number) 2 Documents to export (number) 8 Time (days) 8 Time (days) 16 Time to export (days) 10 Cost (% of income per capita) 3.1 Cost (% of property value) 3.0 Cost to export (US$ per container) 745 Minimum capital (% of income per capita) 271.7 Documents to import (number) 8  Getting credit (rank) 98 (AW 5) Time to import (days) 9 Dealing with construction permits (rank) 64 (AW 6) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 680 Procedures (number) 14 Depth of credit information index (0-6) 4 Time (days) 174 Public registry coverage (% of adults) 18.9 Enforcing contracts (rank) 107 (AW 7) Cost (% of income per capita) 45.7 Private bureau coverage (% of adults) 0.0 Procedures (number) 51 Time (days) 598 Getting electricity (rank) 61 (AW 11) Protecting investors (rank) 97 (AW 8) Cost (% of claim) 13.5 Procedures (number) 6 Extent of disclosure index (0-10) 8 Time (days) 62 Extent of director liability index (0-10) 5 Resolving insolvency (rank) 76 (AW 8) Cost (% of income per capita) 62.5 Ease of shareholder suits index (0-10) 2 Time (years) 4.0 Strength of investor protection index (0-10) 5.0 Cost (% of estate) 4 Recovery rate (cents on the dollar) 35.7  Paying taxes (rank) 9 (AW 3) Payments (number per year) 14 Time (hours per year) 62 Total tax rate (% of pro�t) 22.0 QATAR Middle East & North Africa GNI per capita (US$) 76,168 Ease of doing business (rank) 36 (AW 3) High income Population (m) 1.5  Starting a business (rank) 116 (AW 11) Registering property (rank) 37 (AW 5) Trading across borders (rank) 57 (AW 8) Procedures (number) 8 Procedures (number) 7 Documents to export (number) 5 Time (days) 12 Time (days) 13 Time to export (days) 21 Cost (% of income per capita) 8.3 Cost (% of property value) 0.3 Cost to export (US$ per container) 860 Minimum capital (% of income per capita) 64.0 Documents to import (number) 7  Getting credit (rank) 98 (AW 5) Time to import (days) 20  Dealing with construction permits (rank) 24 (AW 4) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 730 Procedures (number) 17 Depth of credit information index (0-6) 4 Time (days) 70 Public registry coverage (% of adults) 32.2 Enforcing contracts (rank) 95 (AW 6) Cost (% of income per capita) 1.1 Private bureau coverage (% of adults) 0.0 Procedures (number) 43 Time (days) 570 Getting electricity (rank) 18 (AW 2) Protecting investors (rank) 97 (AW 8) Cost (% of claim) 21.6 Procedures (number) 3 Extent of disclosure index (0-10) 5 Time (days) 90 Extent of director liability index (0-10) 6 Resolving insolvency (rank) 37 (AW 2) Cost (% of income per capita) 4.1 Ease of shareholder suits index (0-10) 4 Time (years) 2.8 Strength of investor protection index (0-10) 5.0 Cost (% of estate) 22 Recovery rate (cents on the dollar) 53.1 Paying taxes (rank) 2 (AW 1) Payments (number per year) 3 Time (hours per year) 36 Total tax rate (% of pro�t) 11.3 SAUDI ARABIA Middle East & North Africa GNI per capita (US$) 16,996 Ease of doing business (rank) 12 (AW 1) High income Population (m) 26.0  Starting a business (rank) 10 (AW 1) Registering property (rank) 1 (AW 1) Trading across borders (rank) 18 (AW 2) Procedures (number) 3 Procedures (number) 2 Documents to export (number) 5 Time (days) 5 Time (days) 2 Time to export (days) 13 Cost (% of income per capita) 5.9 Cost (% of property value) 0.0 Cost to export (US$ per container) 615 Minimum capital (% of income per capita) 0.0 Documents to import (number) 5 Getting credit (rank) 48 (AW 1) Time to import (days) 17 Dealing with construction permits (rank) 4 (AW 1) Strength of legal rights index (0-10) 5 Cost to import (US$ per container) 686 Procedures (number) 9 Depth of credit information index (0-6) 6 Time (days) 75 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 138 (AW 14) Cost (% of income per capita) 19.4 Private bureau coverage (% of adults) 16.0 Procedures (number) 43 Time (days) 635 Getting electricity (rank) 18 (AW 2) Protecting investors (rank) 17 (AW 1) Cost (% of claim) 27.5 Procedures (number) 4 Extent of disclosure index (0-10) 9 Time (days) 71 Extent of director liability index (0-10) 8 Resolving insolvency (rank) 73 (AW 7) Cost (% of income per capita) 18.1 Ease of shareholder suits index (0-10) 4 Time (years) 1.5 Strength of investor protection index (0-10) 7.0 Cost (% of estate) 22 Recovery rate (cents on the dollar) 36.8 Paying taxes (rank) 10 (AW 4) Payments (number per year) 14 Time (hours per year) 79 Total tax rate (% of pro�t) 14.5 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. 108 DOING BUSINESS IN THE ARAB WORLD 2012  Reform making it easier to do business  Reform making it more dif�cult to do business SUDAN Sub-Saharan Africa GNI per capita (US$) 1,270 Ease of doing business (rank) 135 (AW 15) Lower middle income Population (m) 43.6 Starting a business (rank) 126 (AW 12) Registering property (rank) 41 (AW 6) Trading across borders (rank) 151 (AW 19) Procedures (number) 10 Procedures (number) 6 Documents to export (number) 7 Time (days) 36 Time (days) 9 Time to export (days) 32 Cost (% of income per capita) 31.4 Cost (% of property value) 3.0 Cost to export (US$ per container) 2,050 Minimum capital (% of income per capita) 0.0 Documents to import (number) 7 Getting credit (rank) 166 (AW 15) Time to import (days) 46 Dealing with construction permits (rank) 130 (AW 16) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 2,900 Procedures (number) 16 Depth of credit information index (0-6) 0 Time (days) 270 Public registry coverage (% of adults) 0.0 Enforcing contracts (rank) 148 (AW 17) Cost (% of income per capita) 88.0 Private bureau coverage (% of adults) 0.0 Procedures (number) 53 Time (days) 810 Getting electricity (rank) 107 (AW 16) Protecting investors (rank) 155 (AW 19) Cost (% of claim) 19.8 Procedures (number) 5 Extent of disclosure index (0-10) 0 Time (days) 70 Extent of director liability index (0-10) 6 Resolving insolvency (rank) 84 (AW 9) Cost (% of income per capita) 3,949.3 Ease of shareholder suits index (0-10) 4 Time (years) 2.0 Strength of investor protection index (0-10) 3.3 Cost (% of estate) 20 Recovery rate (cents on the dollar) 33.2 Paying taxes (rank) 103 (AW 14) Payments (number per year) 42 Time (hours per year) 180 Total tax rate (% of pro�t) 36.1 SYRIAN ARAB REPUBLIC Middle East & North Africa GNI per capita (US$) 2,640 Ease of doing business (rank) 134 (AW 14) Lower middle income Population (m) 21.6  Starting a business (rank) 129 (AW 13) Registering property (rank) 82 (AW 12) Trading across borders (rank) 122 (AW 15) Procedures (number) 7 Procedures (number) 4 Documents to export (number) 8 Time (days) 13 Time (days) 19 Time to export (days) 15 Cost (% of income per capita) 17.1 Cost (% of property value) 27.9 Cost to export (US$ per container) 1,190 Minimum capital (% of income per capita) 127.7 Documents to import (number) 9 Getting credit (rank) 174 (AW 18) Time to import (days) 21 Dealing with construction permits (rank) 133 (AW 17) Strength of legal rights index (0-10) 1 Cost to import (US$ per container) 1,625 Procedures (number) 23 Depth of credit information index (0-6) 2 Time (days) 104 Public registry coverage (% of adults) 3.7 Enforcing contracts (rank) 175 (AW 20) Cost (% of income per capita) 504.1 Private bureau coverage (% of adults) 0.0 Procedures (number) 55 Time (days) 872 Getting electricity (rank) 83 (AW 12) Protecting investors (rank) 111 (AW 12) Cost (% of claim) 29.3 Procedures (number) 5 Extent of disclosure index (0-10) 7 Time (days) 71 Extent of director liability index (0-10) 5 Resolving insolvency (rank) 102 (AW 10) Cost (% of income per capita) 940.4 Ease of shareholder suits index (0-10) 2 Time (years) 4.1 Strength of investor protection index (0-10) 4.7 Cost (% of estate) 9 Recovery rate (cents on the dollar) 27.5 Paying taxes (rank) 111 (AW 15) Payments (number per year) 19 Time (hours per year) 336 Total tax rate (% of pro�t) 39.7 TUNISIA Middle East & North Africa GNI per capita (US$) 4,070 Ease of doing business (rank) 46 (AW 5) Upper middle income Population (m) 10.5 Starting a business (rank) 56 (AW 4) Registering property (rank) 65 (AW 9) Trading across borders (rank) 32 (AW 3) Procedures (number) 10 Procedures (number) 4 Documents to export (number) 4 Time (days) 11 Time (days) 39 Time to export (days) 13 Cost (% of income per capita) 4.2 Cost (% of property value) 6.1 Cost to export (US$ per container) 773 Minimum capital (% of income per capita) 0.0 Documents to import (number) 7 Getting credit (rank) 98 (AW 5) Time to import (days) 17 Dealing with construction permits (rank) 86 (AW 10) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 858 Procedures (number) 17 Depth of credit information index (0-6) 5 Time (days) 88 Public registry coverage (% of adults) 27.3 Enforcing contracts (rank) 76 (AW 2) Cost (% of income per capita) 260.6 Private bureau coverage (% of adults) 0.0 Procedures (number) 39 Time (days) 565 Getting electricity (rank) 45 (AW 5) Protecting investors (rank) 46 (AW 3) Cost (% of claim) 21.8 Procedures (number) 4 Extent of disclosure index (0-10) 5 Time (days) 65 Extent of director liability index (0-10) 7 Resolving insolvency (rank) 38 (AW 3) Cost (% of income per capita) 894.1 Ease of shareholder suits index (0-10) 6 Time (years) 1.3 Strength of investor protection index (0-10) 6.0 Cost (% of estate) 7 Recovery rate (cents on the dollar) 52.2 Paying taxes (rank) 64 (AW 11) Payments (number per year) 8 Time (hours per year) 144 Total tax rate (% of pro�t) 62.9 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. COUNTRY TABLES 109  Reform making it easier to do business  Reform making it more dif�cult to do business UNITED ARAB EMIRATES Middle East & North Africa GNI per capita (US$) 59,717 Ease of doing business (rank) 33 (AW 2) High income Population (m) 4.7  Starting a business (rank) 42 (AW 3) Registering property (rank) 6 (AW 2) Trading across borders (rank) 5 (AW 1) Procedures (number) 7 Procedures (number) 1 Documents to export (number) 4 Time (days) 13 Time (days) 2 Time to export (days) 7 Cost (% of income per capita) 5.6 Cost (% of property value) 2.0 Cost to export (US$ per container) 630 Minimum capital (% of income per capita) 0.0 Documents to import (number) 5  Getting credit (rank) 78 (AW 2) Time to import (days) 7 Dealing with construction permits (rank) 12 (AW 3) Strength of legal rights index (0-10) 4 Cost to import (US$ per container) 635 Procedures (number) 14 Depth of credit information index (0-6) 5 Time (days) 46 Public registry coverage (% of adults) 9.0 Enforcing contracts (rank) 134 (AW 13) Cost (% of income per capita) 5.2 Private bureau coverage (% of adults) 29.2 Procedures (number) 49 Time (days) 537 Getting electricity (rank) 10 (AW 1) Protecting investors (rank) 122 (AW 13) Cost (% of claim) 26.2 Procedures (number) 4 Extent of disclosure index (0-10) 4 Time (days) 55 Extent of director liability index (0-10) 7 Resolving insolvency (rank) 151 (AW 16) Cost (% of income per capita) 14.6 Ease of shareholder suits index (0-10) 2 Time (years) 5.1 Strength of investor protection index (0-10) 4.3 Cost (% of estate) 30 Recovery rate (cents on the dollar) 11.0 Paying taxes (rank) 7 (AW 2) Payments (number per year) 14 Time (hours per year) 12 Total tax rate (% of pro�t) 14.1 WEST BANK AND GAZA Middle East & North Africa GNI per capita (US$) 1,523 Ease of doing business (rank) 131 (AW 13) Lower middle income Population (m) 4.2 Starting a business (rank) 177 (AW 19) Registering property (rank) 78 (AW 11) Trading across borders (rank) 114 (AW 13) Procedures (number) 11 Procedures (number) 7 Documents to export (number) 6 Time (days) 49 Time (days) 47 Time to export (days) 23 Cost (% of income per capita) 96.0 Cost (% of property value) 0.8 Cost to export (US$ per container) 1,310 Minimum capital (% of income per capita) 218.8 Documents to import (number) 6 Getting credit (rank) 166 (AW 15) Time to import (days) 40 Dealing with construction permits (rank) 129 (AW 15) Strength of legal rights index (0-10) 1 Cost to import (US$ per container) 1,295 Procedures (number) 18 Depth of credit information index (0-6) 3 Time (days) 119 Public registry coverage (% of adults) 5.5 Enforcing contracts (rank) 93 (AW 5) Cost (% of income per capita) 1,000.5 Private bureau coverage (% of adults) 0.0 Procedures (number) 44 Time (days) 540 Getting electricity (rank) 85 (AW 13) Protecting investors (rank) 46 (AW 3) Cost (% of claim) 21.2 Procedures (number) 5 Extent of disclosure index (0-10) 6 Time (days) 63 Extent of director liability index (0-10) 5 Resolving insolvency (rank) 183 (AW 20) Cost (% of income per capita) 1,627.8 Ease of shareholder suits index (0-10) 7 Time (years) NO PRACTICE Strength of investor protection index (0-10) 6.0 Cost (% of estate) NO PRACTICE Recovery rate (cents on the dollar) 0.0 Paying taxes (rank) 39 (AW 9) Payments (number per year) 27 Time (hours per year) 154 Total tax rate (% of pro�t) 16.8 YEMEN, REP. Middle East & North Africa GNI per capita (US$) 1,060 Ease of doing business (rank) 99 (AW 10) Lower middle income Population (m) 24.3 Starting a business (rank) 66 (AW 5) Registering property (rank) 55 (AW 7) Trading across borders (rank) 118 (AW 14) Procedures (number) 6 Procedures (number) 6 Documents to export (number) 6 Time (days) 12 Time (days) 19 Time to export (days) 27 Cost (% of income per capita) 83.8 Cost (% of property value) 3.8 Cost to export (US$ per container) 890 Minimum capital (% of income per capita) 0.0 Documents to import (number) 9 Getting credit (rank) 159 (AW 14) Time to import (days) 25 Dealing with construction permits (rank) 35 (AW 5) Strength of legal rights index (0-10) 3 Cost to import (US$ per container) 1,475 Procedures (number) 12 Depth of credit information index (0-6) 2 Time (days) 116 Public registry coverage (% of adults) 0.7 Enforcing contracts (rank) 38 (AW 1) Cost (% of income per capita) 61.1 Private bureau coverage (% of adults) 0.0 Procedures (number) 36 Time (days) 520 Getting electricity (rank) 52 (AW 9) Protecting investors (rank) 133 (AW 16) Cost (% of claim) 16.5 Procedures (number) 4 Extent of disclosure index (0-10) 6 Time (days) 35 Extent of director liability index (0-10) 4 Resolving insolvency (rank) 114 (AW 12) Cost (% of income per capita) 4,569.8 Ease of shareholder suits index (0-10) 2 Time (years) 3.0 Strength of investor protection index (0-10) 4.0 Cost (% of estate) 8 Recovery rate (cents on the dollar) 24.1  Paying taxes (rank) 116 (AW 17) Payments (number per year) 44 Time (hours per year) 248 Total tax rate (% of pro�t) 32.9 Note: Most indicator sets refer to a case scenario in the largest business city of each economy. For more details, see the data notes. Acknowledgments Contact details for local partners are available on the Doing Business website at http://www.doingbusiness.org Doing Business would not be possible without the ex- The team is grateful for valuable comments provided pertise and generous input of a network of more than by colleagues across the World Bank Group and for the 9,000 local partners, including legal experts, business guidance of World Bank Group Executive Directors. It consultants, accountants, freight forwarders, govern- would especially like to acknowledge the comments ment officials and other professionals routinely admin- and guidance of Aart C. Kraay. Comments for Doing istering or advising on the relevant legal and regulatory Business 2012 were also received from Alejandro requirements in the 183 economies covered. Contact Alvarez de la Campa, Sudeshna Ghosh Banerjee, details for local partners are available on the Doing Alexander Berg, Lada Busevac, Dobromir Christow, Business website at http://www.doingbusiness.org. Fabrizio Fraboni, Jose Maria Garrido, Heike Gramkow, Akvile Gropper, Olivier Hartmann, Neville Howlett, Doing Business in the Arab World 2012 was prepared by Dahlia Khalifa, Arvo Kuddo, Charles Kunaka, Oscar a team led by Dahlia Khalifa (through November 2011) Madeddu, Andres Federico Martinez, Tadatsugu and Sylvia Solf. The report was authored by Hussam Matsudaira, Gerard McLinden, Andrei Mikhnev, Nina Hussein and Joyce Antone Ibrahim. Doing Business Mocheva, Riz Mokal, Fredesvinda Fatima Montes 2012 was prepared by a team led by Sylvia Solf, Neil Herraiz, Thomas Moullier, Monica Alina Mustra, Jean Gregory (through March 2011) and Augusto Lopez Denis Pesme, Maria Teresa Goodman Pincetich, Colin Claros (from April 2011) under the general direction of Ewell Wesley Raymond, Francesca Recanatini, Shalini Janamitra Devan. The team comprised Beatriz Mejia Sankaranarayanan, Raha Shahidsaless, Peter Douglas Asserias, Andres Baquero Franco, Karim O. Belayachi, Sheerin, Victoria Stanley, Susan Symons, Ignacio Jose Iryna Bilotserkivska, Mariana Carvalho, Maya Choueiri, Tirado, Mahesh Uttamchandani, Barry Raymond Walsh Santiago Croci, Fernando Dancausa Diaz, Marie-Lily and Ulrich Matthias Zeisluft. Comments for Doing Delion, Raian Divanbeigi, Alejandro Espinosa-Wang, Business in the Arab World 2012 were received from Ali Margherita Fabbri, Caroline Frontigny, Carolin Geginat, Al-Abdulrazzaq, Magdi Amin, Simon Bell, Hooman Cemile Hacibeyoglu, Jamal Haidar, Betina Hennig, Dabidian, Jana Malinska, Philippe De Meneval, Youssef Sabine Hertveldt, Hussam Hussein, Joyce Antone Saadani Hassani and Andrew H. W. Stone. Ibrahim, Fakhriyar Jabbarov, Ludmila Jantuan, Nan Jiang, Hervé Kaddoura, Nadezhda Lissogor, Jean Michel Lobet, Oliver Hart and Andrei Shleifer provided academic Jean-Philippe Lodugnon-Harding, Valerie Erica Marechal, advice on the project. The paying taxes project was Frédéric Meunier, Robert Murillo, Joanna Nasr, Nuria de conducted in collaboration with PwC, led by Robert Oca, Mikiko Imai Ollison, Pilar Salgado-Otónel, Valentina Morris. The development of the getting electricity Saltane, Lucas Seabra, Paula Garcia Serna, Anastasia indicators was �nanced by the Norwegian Trust Fund. Shegay, Jayashree Srinivasan, Susanne Szymanski, Tea The governments of Korea, FYR Macedonia, Mexico Trumbic, Marina Turlakova, Julien Vilquin and Yasmin and the United Kingdom commented on the economy Zand. Donny Eryastha, Rong Li, Justin Liang, Chang case studies presented in Doing Business 2012. Liu, Yukihiro Nakamura, Alexandre Revia, Fang Xia and Beijing Zhu assisted in the months before publication. Alison Strong copyedited the manuscript. Corporate Vision, Inc. designed the report and the graphs. The following experts wrote the boxes in the chapters The World Bank’s General Services Department, speci�ed: Sherif Hamdy (starting a business); Paul Translation and Interpretation Unit’s Arabic team Prettitore (registering property); Alejandro Alvarez de handled the translation into Arabic and the typeset- la Campa and Elsa Rodriguez Felipe (getting credit— ting of the Arabic language report. legal rights); Oscar Madeddu and Mohamed Refaat (getting credit—credit information); Maha El Moaz Quotations in this report are from Doing Business local and Djordjija B. Petkoski (protecting investors); and partners unless otherwise indicated. The names of Uma Subramanian (trading across borders). those wishing to be acknowledged individually are listed below. The global and regional contributors The online service of the Doing Business database is listed are �rms that have completed multiple surveys managed by Preeti Endlaw, Graeme Littler, Kunal H. in their various offices around the world. Patel, Vinod Thottikkatu and Hashim Zia. The Doing Business 2012 report media and marketing strategy is managed by Nadine Ghannam. The events and road- show strategy is managed by Jamile Ramadan. ACKNOWLEDGMENTS 111 GLOBAL CONTRIBUTORS Qays H. Zu’bi Abdoulabastoi Moudjahid Ibrahim Mustafa Ibrahim Abdel ERNST & YOUNG QAYS H. ZU’BI ATTORNEYS & LEGAL CLUB OHADA COMORES Khalek CONSULTANTS GENERAL AUTHORITY FOR INVESTMENT KPMG Said Mohamed Nassur GAFI Hessa Hussain ENERGIE COMOROS LAW SOCIETY OF ENGLAND AND WALES THE BENEFIT COMPANY Sayed Abuelkomsan Siti-Kalathoumi Soidri LEX MUNDI, ASSOCIATION OF INDEPENDENT LAW FIRMS MINISTRY OF INDUSTRY AND FOREIGN Seema Isa Al-Thawadi AVOCAT À LA COUR TRADE PANALPINA MINISTRY OF MUNICIPALITIES & Daoud Saidali Toihiri AGRICULTURE AFFAIRS. MUNICIPAL ONE Nermine Abulata PWC MINISTRY OF PROMOTION AND STOP SHOP MINISTRY OF INDUSTRY AND FOREIGN EMPLOYMENT RUSSELL BEDFORD INTERNATIONAL TRADE Jawad Habib Jawad Mohamed Youssouf BDO JAWAD HABIB Ghada Adel ETUDE MAÎTRE ABDOURAZAK PWC EGYPT Ebrahim Karolia REGIONAL CONTRIBUTORS PWC BAHRAIN DJIBOUTI Shaimaa Ali A.P. MOLLER-MAERSK GROUP MINISTRY OF INDUSTRY AND FOREIGN Ming Huey Lim ELECTRICITÉ DE DJIBOUTI TRADE TALAL ABU-GHAZALEH LEGAL (TAG-LEGAL) PWC BAHRAIN Souleiman Idriss Abdi Osama Abd Al-Monem Saifuddin Mahmood MSC DJIBOUTI MINISTRY OF INDUSTRY AND FOREIGN HASSAN RADHI & ASSOCIATES Fatouma Ahmed TRADE ALGERIA Karine Lasne Mohammed Mirza Abdul Hussain SERVICE DES DOMAINES, DJIBOUTI LANDWELL & ASSOCIÉS Abdoul Karim Alpha Gado MINISTRY OF MUNICIPALITIES & Cha�ka Abdat Houmed Abdallah Bourhan GEREC-AFRIKIYA CABINET D’AVOCATS SAMIR HAMOUDA AGRICULTURE AFFAIRS. MUNICIPAL ONE Vincent Lunel CONSERVATION FONCIERE, DJIBOUTI LEFÈVRE PELLETIER & ASSOCIÉS STOP SHOP Abd El Wahab Aly Ibrahim Branka Achari-Djokic Wabat Daoud ABD EL WAHAB SONS BANQUE D’ALGÉRIE Eman Omar Ahmed Mekerba AVOCAT À LA COUR GHELLAL & MEKERBA QAYS H. ZU’BI ATTORNEYS & LEGAL Sarah Ammar Samina Allam CONSULTANTS Bruno Detroyat AL KAMEL LAW OFFICE NOTARY BOUCHALI Tahar Melakhessou SOCIÉTÉ MARITIME L. SAVON & RIES NOTAIRE MELAKHESSOU Hassan Ali Radhi Sayed Ammar Mohamed Atbi HASSAN RADHI & ASSOCIATES Daniel Dubois AL KAMEL LAW OFFICE ETUDE NOTARIALE MOHAMED ATBI Narimane Naas ATELIER D’ARCHITECTURE GIDE LOYRETTE NOUEL, MEMBER OF LEX Najib Saade Tim Armsby Djamila Azzouz MUNDI ASAR – AL RUWAYEH & PARTNERS Hassam Mohamed Egaeh NOUR LAW OFFICE, MANAGED BY TROWERS CABINET D’AUDIT AZZOUZ, DIRECTION LEGISLATION & CONTENTIEUX DE & HAMLINS CORRESPONDENT OF RUSSELL BEDFORD Mohamed Salahuddin Hassane Nait Ibrahim LA DIRECTIONS DES IMPOTS INTERNATIONAL UNIVERSAL TRANSIT MOHAMED SALAHUDDIN CONSULTING Khaled Balbaa ENGINEERING BUREAU Félix Emok N’Dolo KPMG Mohammed Salim Azzouz Fares Ouzegdouh CHD GROUP CABINET D’AUDIT AZZOUZ, BÉJAIA MEDITERRANEAN TERMINAL Thamer Salahuddin Karim Dabbous CORRESPONDENT OF RUSSELL BEDFORD MOHAMED SALAHUDDIN CONSULTING Mourad Farah SHERIF DABBOUS, AUDITORS & FINANCIAL INTERNATIONAL Aloui Salima ENGINEERING BUREAU CONSULTANCIES, MEMBER OF RUSSELL LAW FIRM GOUSSANEM & ALOUI Malik Garad BEDFORD INTERNATIONAL Khodja Bachir Hamza Saleem BANQUE CENTRALE DE DJIBOUTI SNC KHODJA & CO. Mourad Seghir QAYS H. ZU’BI ATTORNEYS & LEGAL Sherif Dabbous GHELLAL & MEKERBA CONSULTANTS Habib Ibrahim Mohamed SHERIF DABBOUS, AUDITORS & FINANCIAL Hassan Djamel Belloula DIRECTION DE L’HABITAT ET DE CONSULTANCIES, MEMBER OF RUSSELL CABINET BELLOULA Benabid Mohammed Tahar Ali Asghar Sheikh L’URBANISME CABINET MOHAMMED TAHAR BENABID BEDFORD INTERNATIONAL ASAR – AL RUWAYEH & PARTNERS Nabil Belloula Ismael Mahamoud Sameh Dahroug CABINET BELLOULA Nabiha Zerigui Judith Tosh UNIVERSITE DE DJIBOUTI CABINET D’AVOCATS SAMIR HAMOUDA IBRACHY & DERMARKAR LAW FIRM NORTON ROSE Tayeb Belloula Fatouma Mahamoud Hassan Abdallah El Adly CABINET BELLOULA Hatim S. Zu’bi BAHRAIN PWC EGYPT HATIM S. ZU’BI & PARTNERS Alain Martinet Adnane Bouchaib AGILITY LOGISTICS CABINET D’AVOCATS MARTINET & Amany El Bagoury BOUCHAIB LAW FIRM COMOROS MARTINET AL KAMEL LAW OFFICE ELECTRICITY & WATER AUTHORITY Bouchali Chabani Abdallah Halifa Marie-Paule Martinet Cherine El Dib NOTARY BOUCHALI ERNST & YOUNG GROUPE HASSANATI SOILIHI - GROUPE CABINET D’AVOCATS MARTINET & SHALAKANY LAW OFFICE, MEMBER OF Amine Bouhaddi Noora Abdulla HASOIL MARTINET LEX MUNDI ENTREPRISE BOUHADDI QAYS H. ZU’BI ATTORNEYS & LEGAL Mohamed Abdallah Halifa Mayank Metha Ahmed El Gammal CONSULTANTS Said Dib GROUPE HASSANATI SOILIHI - GROUPE SOCIÉTÉ MARITIME L. SAVON & RIES SHALAKANY LAW OFFICE, MEMBER OF BANQUE D’ALGÉRIE Najma AbdulRedha Hassan HASOIL LEX MUNDI MINISTRY OF MUNICIPALITIES & Ibrahim Mohamed Omar Arezki Djadour AGRICULTURE AFFAIRS. MUNICIPAL ONE Issiaka Abdourazak CABINET CECA Mohamed Refaat El Houshy GIDE LOYRETTE NOUEL, MEMBER OF LEX STOP SHOP ETUDE MAÎTRE ABDOURAZAK THE EGYPTIAN CREDIT BUREAU I-SCORE Abdallah Mohammed Kamil MUNDI Hilmy Aboudsaid ETUDE NOTARIALE Hassan El Maraashly Amel Al Aseeri Brahim Embouazza ZEENAT AL MANSOORI & ASSOCIATES COMORES CARGO INTERNATIONAL AAW CONSULTING ENGINEERS MCDCONSULTING Mohamed Omar Mohamed Yassian Ahamed Zienab El Oraby Faten Al Haddad Halim Faidi TALAL ABU-GHAZALEH LEGAL DIRECTION DE L’ENERGIE Ahmed Osman SHALAKANY LAW OFFICE, MEMBER OF STUDIO A BANQUE CENTRALE DE DJIBOUTI LEX MUNDI (TAG-LEGAL) Mouzaoui Amroine Nicolas Granier Zeenat Al Mansoori ORGANISATION PATRONALE DES COMORES Lantosoa Hur�n Ralaiarinosy Emad El Shalakany LANDWELL & ASSOCIÉS GROUPEMENT COSMEZZ DJIBOUTI S.A. SHALAKANY LAW OFFICE, MEMBER OF ZEENAT AL MANSOORI & ASSOCIATES Said Ali Said Athouman LEX MUNDI Mohamed El-Amine Haddad Reem Al Rayes UNION OF THE CHAMBER OF COMMERCE Harilalao Ravalison CABINET AVOCAT AMINE HADDAD CABINET D’AVOCATS MARTINET Khaled El Shalakany ZEENAT AL MANSOORI & ASSOCIATES Mohamed Ahamada Baco & MARTINET SHALAKANY LAW OFFICE, MEMBER OF LAWYER Sakina Haddad Raju Alagarsamy LEX MUNDI CRÉDIT POPULAIRE D’ALGERIE Aicha Youssouf Abdi HASSAN RADHI & ASSOCIATES Ali Mohamed Choibou CABINET CECA Sally El Shalakany ETUDE MAÎTRE CHOIBOU Samir Hamouda Ebtihal Al-Hashimi SHALAKANY LAW OFFICE, MEMBER OF CABINET D’AVOCATS SAMIR HAMOUDA MINISTRY OF MUNICIPALITIES & Ali Abdou Elaniou EGYPT, ARAB REP. LEX MUNDI AGRICULTURE AFFAIRS. MUNICIPAL ONE CABINET ELANIOU Imendassen TALAL ABU GHAZALEH LEGAL Passant El Tabei STOP SHOP NOTARY IMENDASSEN Remy Grondin (TAG-LEGAL) PWC EGYPT Nabila Kerri Haider Alnoaimi VITOGAZ COMORES Abdel Aal Aly MOHAMED SALAHUDDIN CONSULTING Soheir Elbanna PALATINE INTERNATIONAL SERVICES Adili Hassani AFIFI WORLD TRANSPORT ALEXANDRIA IBRACHY LAW FIRM ENGINEERING BUREAU Goussanem Khaled ELECTRICITÉ ET EAU DES COMORES Naguib Abadir Shaji Alukkal Samir El-Gammal LAW FIRM GOUSSANEM & ALOUI Youssouf Ismael NACITA CORPORATION MINISTRY OF INDUSTRY AND FOREIGN PANALPINA WORLD TRANSPORT LLP Samy Laghouati DIRECTION GÉNÉRALE DES IMPÔTS Ghada Abdel Aziz TRADE Michael Durgavich GIDE LOYRETTE NOUEL, MEMBER OF LEX Madiane Mohamed Issa IBRACHY & DERMARKAR LAW FIRM Ashraf Elibrachy ASAR – AL RUWAYEH & PARTNERS MUNDI LAWYER IBRACHY LAW FIRM Sara Abdel Gabbar Simon Green Mohamed Lanouar Faouzi Mohamed Lakj NOUR LAW OFFICE, MANAGED BY TROWERS Sara Elmatbouly NORTON ROSE LEFÈVRE PELLETIER & ASSOCIÉS TRIBUNAL DE COMMERCE COMOROS & HAMLINS NOUR LAW OFFICE, MANAGED BY TROWERS & HAMLINS 112 DOING BUSINESS IN THE ARAB WORLD 2012 Rana Elnahal Mostafa Mostafa Ninos Hozaya Reem Hazboun Hossam Abdullah IBRACHY LAW FIRM AL KAMEL LAW OFFICE BCC LOGISTICS HAZBOUN & CO. FOR INTERNATIONAL ASAR – AL RUWAYEH & PARTNERS LEGAL BUSINESS CONSULTATIONS Mostafa Elshafei Mostafa Mohamed Mostafa Stephan Jäger Waleed Abdulrahim IBRACHY LAW FIRM AL KAMEL LAW OFFICE AMERELLER RECHTSANWÄLTE Tayseer Ismail ABDULLAH KH. AL-AYOUB & ASSOCIATES, EAST ECHO CO. MEMBER OF LEX MUNDI Amany Elwessal Marwa Omara Jamal Mehdi Shalal MINISTRY OF INDUSTRY AND FOREIGN TELELAWS AL ATTAR REAL ESTATE OFFICE Emad Karkar Lina A.K. Adlouni TRADE PWC JORDAN KIPCO ASSET MANAGEMENT COMPANY Alya Rady Mohammad Murad K.S.C Hassan Fahmy MINISTRY OF INDUSTRY AND FOREIGN AL RAFIDAIN BROKERS Ahmed Khalifeh MINISTRY OF INVESTMENT TRADE HAMMOURI & PARTNERS Abdullah Mus�r Al Hayyan Ibrahim Musa Qadori Ahmed KUWAIT UNIVERSITY Mariam Fahmy Mohamed Ramadan AL RAWDHA REAL-ESTATE OFFICE Youssef S. Khalilieh SHALAKANY LAW OFFICE, MEMBER OF DLA MATOUK BASSIOUNY (PART OF DLA RAJAI DAJANI & ASSOCIATES LAW OFFICE Faten Al Naqeeb Ammar Naji LEX MUNDI PIPER GROUP) ALI & PARTNERS AL-FURAT FOR LEGAL AND BUSINESS Hussein Kofahy Ghada Farouk Ingy Rasekh CONSULTANCY LLC CENTRAL BANK OF JORDAN Fahad Al Zumai SHALAKANY LAW OFFICE, MEMBER OF MENA ASSOCIATES, MEMBER OF AMERELLER GUST UNIVERSITY Auday Najim Ali Rasha Laswi LEX MUNDI RECHTSANWÄLTE ASHUR INTERNATIONAL BANK ZALLOUM & LASWI LAW FIRM Aiman Alaraj Tarek Gadallah Menha Samy KEO INTERNATIONAL CONSULTANTS Oday Najim Ali Emad Majid IBRACHY LAW FIRM IBRACHY & DERMARKAR LAW FIRM ASHUR INTERNATIONAL BANK PWC JORDAN Abdullah Al-Ayoub Ashraf Gamal El-Din Mohamed Serry ABDULLAH KH. AL-AYOUB & ASSOCIATES, Arin Pinto Firas Malhas EGYPTIAN INSTITUTE OF DIRECTORS SERRY LAW OFFICE MEMBER OF LEX MUNDI KHUDAIRI GROUP INTERNATIONAL BUSINESS LEGAL Mahmoud Gamal El-Din Mohamed Sha�k ASSOCIATES Omar Hamad Yousuf Al-Essa Ahmed Salih Al-Janabi MINISTRY OF INDUSTRY AND FOREIGN MINISTRY OF INDUSTRY AND FOREIGN THE LAW OFFICE OF AL-ESSA & PARTNERS MENA ASSOCIATES, MEMBER OF AMERELLER Nizar Musleh TRADE TRADE RECHTSANWÄLTE HAZBOUN & CO. FOR INTERNATIONAL Nada F. A. Al-Fahad Dena Ghobashy Abdallah Shalash LEGAL BUSINESS CONSULTATIONS GEC DAR David Salman DLA MATOUK BASSIOUNY (PART OF DLA ABDALLAH SHALASH & CO. (CHARTERED ASHUR INTERNATIONAL BANK Amer Nabulsi PIPER GROUP) ACCOUNTANTS - TAX CONSULTANTS - Ammar Al-Fouzan (NEN) AL WAGAYAN, AL AWADHI, AL THE LAW OFFICES OF MISHARI BUSINESS ADVISORS) Abdelrahman Sherif Zeinab Saieed Gohar SAIF, MEMBER OF DLA PIPER GROUP AL-GHAZALI MENA ASSOCIATES, MEMBER OF AMERELLER CENTRAL BANK OF EGYPT Ramy Shalash RECHTSANWÄLTE Ahmed Naiemat ABDALLAH SHALASH & CO. (CHARTERED Mishari M. Al-Ghazali Mohamed Gomaa Ali LAW & ARBITRATION CENTRE THE LAW OFFICES OF MISHARI ACCOUNTANTS - TAX CONSULTANTS - Khaled Yaseen MINISTRY OF INDUSTRY AND FOREIGN AL-GHAZALI BUSINESS ADVISORS) IRAQI NATIONAL INVESTMENT COMMISSION Omar B. Naim TRADE NATIONAL CONSTRUCTION COMPANY Reema Ali Abdelrahman Sherif Farah Ahmed Haggag JORDAN ALI & PARTNERS MENA ASSOCIATES, MEMBER OF AMERELLER Ridha Nasair MINISTRY OF INDUSTRY AND FOREIGN RECHTSANWÄLTE ERNST & YOUNG LAW GATE ATTORNEYS ORG TRADE Akusa Batwala Omar Sherif Tamara Abbadi Laith Nasrawin ASAR – AL RUWAYEH & PARTNERS Mohamed Hashish SHALAKANY LAW OFFICE, MEMBER OF HAZBOUN & CO. FOR INTERNATIONAL ALJAZY & CO. ADVOCATES & LEGAL TELELAWS Christoph Birk LEX MUNDI LEGAL BUSINESS CONSULTATIONS CONSULTANTS PANALPINA WORLD TRANSPORT (KUWAIT) Maha Hassan WLL Adham Shetehy Hassan Abdullah Khaldoun Nazer AFIFI WORLD TRANSPORT ALEXANDRIA AASTMT THE JORDANIAN ELECTRIC POWER CO. LTD. KHALIFEH & PARTNERS Nada Bourahmah Emad Hassan (JEPCO) THE LAW OFFICES OF MISHARI Sharif Shihata Mutasem Nsair MINISTRY OF STATE FOR ADMINISTRATIVE AL-GHAZALI SHALAKANY LAW OFFICE, MEMBER OF Hayja’a Abu AlHayja’a KHALIFEH & PARTNERS DEVELOPMENT LEX MUNDI TALAL ABU GHAZALEH LEGAL Luis Nene Cunha Akram Obeidat Tarek Hassib (TAG-LEGAL) ASAR – AL RUWAYEH & PARTNERS Frédéric Soliman KHALIFEH & PARTNERS AL KAMEL LAW OFFICE TELELAWS Nayef Abu Alim Paul Day Osama Y. Sabbagh Omneia Helmy PREMIER LAW FIRM LLP ASAR – AL RUWAYEH & PARTNERS Emile Tadros THE JORDANIAN ELECTRIC POWER CO. LTD. EGYPTIAN CENTER FOR ECONOMIC STUDIES TADROS & KHATCHADOURIAN LAW FIRM Osama Abu Rub (JEPCO) Mahmoud Ezzat Mohamed Hisham Hassan LAW & ARBITRATION CENTRE BURGAN BANK Amira Thabet Mohammad Sawafeen MINISTRY OF INVESTMENT SHERIF DABBOUS, AUDITORS & FINANCIAL Ibrahim Abunameh LAND AND SURVEY DIRECTORATE Yaser Farook Mohamed Ibrahim CONSULTANCIES, MEMBER OF RUSSELL LAW & ARBITRATION CENTRE GEC DAR Ali Shishani DLA MATOUK BASSIOUNY (PART OF DLA BEDFORD INTERNATIONAL Maha Al Abdallat CROWN LOGISTICS PIPER GROUP) Sam Habbas Randa Tharwat CENTRAL BANK OF JORDAN ASAR – AL RUWAYEH & PARTNERS Stephan Stephan Badawi Ibrahim NACITA CORPORATION Arwa Al-Azzeh PWC JORDAN MINISTRY OF INDUSTRY AND FOREIGN Chirine Krayem Moujaes Tarek Zahran RAJAI DAJANI & ASSOCIATES LAW OFFICE THE LAW OFFICES OF MISHARI TRADE Bassil Swaiss AL KAMEL LAW OFFICE AL-GHAZALI Tamara Al-Banna INTERNATIONAL BUSINESS LEGAL Ahmed Ibrahim Mona Zobaa KHALIFEH & PARTNERS ASSOCIATES NOUR LAW OFFICE, MANAGED BY TROWERS Dany Labaki MINISTRY OF INVESTMENT THE LAW OFFICE OF AL-ESSA & PARTNERS & HAMLINS Eman M. Al-Dabbas Mohammed Tarawneh INTERNATIONAL BUSINESS LEGAL Dany Labaky Stephan Jäger IRAQ ASSOCIATES Mahmoud Wafa THE LAW OFFICE OF AL-ESSA & PARTNERS AMERELLER RECHTSANWÄLTE CUSTOMS DEPARTMENT ERNST & YOUNG Omar Aljazy Amer Nabulsi Mohamed Kamal IRAQI ASSOCIATION OF SECURITIES DEALERS ALJAZY & CO. ADVOCATES & LEGAL Azzam Zalloum (NEN) AL WAGAYAN, AL AWADHI, AL SHALAKANY LAW OFFICE, MEMBER OF ZALLOUM & LASWI LAW FIRM CONSULTANTS SAIF, MEMBER OF DLA PIPER GROUP LEX MUNDI TALAL ABU GHAZALEH LEGAL (TAG-LEGAL) Sabri S. Al-Khassib Faris Zaru Anupama Nair Mohamed Kamel FARIS AND FARIS AMMAN CHAMBER OF COMMERCE ABDULLAH KH. AL-AYOUB & ASSOCIATES, AL KAMEL LAW OFFICE Hadeel Salih Abboud Al-Janabi MENA ASSOCIATES, MEMBER OF AMERELLER Mohamed Al-Kurdi Malek Zreiqat MEMBER OF LEX MUNDI Shahira Khaled ALI SHARIF ZU’BI, ADVOCATES & LEGAL RECHTSANWÄLTE GARDENIA CLEARANCE AL KAMEL LAW OFFICE CONSULTANTS, MEMBER OF LEX MUNDI Mohammed Ramadan Ahmed Al-Jannabi AL MARKAZ LAW FIRM Mohanad Khaled Mohammad Al-Said MENA ASSOCIATES, MEMBER OF AMERELLER Kareem Zureikat BDO, KHALED & CO. Shafeek Rhaman RECHTSANWÄLTE Khaled Asfour MAY INTERNATIONAL A-Z FREIGHT Taha Khaled ALI SHARIF ZU’BI, ADVOCATES & LEGAL Florian Amereller KUWAIT SOLUTIONS BDO, KHALED & CO. CONSULTANTS, MEMBER OF LEX MUNDI AMERELLER RECHTSANWÄLTE CREDIT INFORMATION NETWORK Abdul Qayyum Saeed Minas Khatchadourian Micheal T. Dabit Munther B. Hamoudi ERNST & YOUNG GHF LAWYERS EGYPT LEGAL DESK MICHAEL T. DABIT & ASSOCIATES AL ATTAR REAL ESTATE OFFICE David Walker Adel Kheir Anwar Elliyan FREIGHT EXCEL LOGISTICS Ali Baker ASAR – AL RUWAYEH & PARTNERS ADEL KHEIR LAW OFFICE THE JORDANIAN ELECTRIC POWER CO. LTD. Labeed Abdal AL-FURAT FOR LEGAL AND BUSINESS (JEPCO) Mustafa Makram CONSULTANCY LLC THE LAW FIRM OF LABEED ABDAL LEBANON BDO, KHALED & CO. Tariq Hammouri Hossam Abduel Fetouh ELECTRICITÉ DU LIBAN Majed Butrous HAMMOURI & PARTNERS John Matouk Mahmoud Abdulfattah ERNST & YOUNG DLA MATOUK BASSIOUNY (PART OF DLA Ahmed Dawood George Hazboun THE LAW OFFICES OF MISHARI PIPER GROUP) BAET AL HIKMA FOR LEGAL SERVICES AND HAZBOUN & CO. FOR INTERNATIONAL KORDAHI EST. COMPANY CONSULTANCY LLC LEGAL BUSINESS CONSULTATIONS AL-GHAZALI ACKNOWLEDGMENTS 113 Nadim Abboud Nabil Mallat Abdallahi Ould Abdel Vettah Meredith Allen-Belghiti Ahmad Hussein LAW OFFICE OF A. ABBOUD & ASSOCIATES HYAM G. MALLAT LAW FIRM DIRECTION DES DOMAINES KETTANI LAW FIRM TALAL ABU GHAZALEH LEGAL (TAG-LEGAL) Hanan Abboud Fares Moawad Bekaye Ould Abdelkader Karim Amroune PWC LEBANON MINISTÈRE DE LA FONCTION PUBLIQUE, PWC ADVISORY MAROC Bahya Ibn Khaldoun Fadi Moghaizel DU TRAVAIL ET DE LA MODERNISATION DE UNIVERSITÉ MOHAMED V Nada Abdelsater-Abusamra MOGHAIZEL LAW FIRM, MEMBER OF LEX Younes Anibar L’ADMINISTRATION RAPHAËL & ASSOCIÉS MUNDI CABINET YOUNES ANIBAR Ghiyta Iraqi Mine Ould Abdoullah AUGUST & DEBOUZY AVOCATS Wassim Abou Nader Redouane Assakhen Mario Mohanna PRIVATE PRACTICE MENA CITY LAWYERS PATRIMOINE CONSEIL SARL CENTRE RÉGIONALE D’INVESTISSEMENT Naoual Jellouli Abdellah Ould Ahmed Baba MINISTÈRE DE L’ÉCONOMIE ET DES FINANCES Wadih Abou Nasr Adnane Bahija Rita Moukarzel ATELIER ARCHITECTURE ET DESIGN PWC LEBANON BADRI AND SALIM EL MEOUCHI LAW FIRM, DAR ALKHIBRA Mehdi Kettani MEMBER OF INTERLEGES Ishagh Ould Ahmed Miské KETTANI & ASSOCIÉS Karen Baroud Fassi-Fihri Bassamat CABINET ISHAGH MISKE PWC LEBANON Andre Nader BASSAMAT & ASSOCIÉE Rita Kettani NADER LAW OFFICE Mustafa Ould Bilal KETTANI & ASSOCIÉS Jean Baroudi Linda Oumama Benali TRIBUNAL DE COMMERCE DE NOUAKCHOTT BAROUDI & ASSOCIATES Rana Nader CABINET NOTAIRE Nadia Kettani NADER LAW OFFICE Moustapha Ould Bilal KETTANI LAW FIRM Tarek Baz Azel-arab Benjelloun TRIBUNAL DU COMMERCE HYAM G. MALLAT LAW FIRM Tou�c Nehme AGENCE D’ARCHITECTURE D’URBANISME ET Abdelmajid Khachai LAW OFFICE OF ALBERT LAHAM Mohamed Ould Bouddida DE DECORATION BAKER & MCKENZIE Katia Bou Assi ETUDE MAÎTRE MOHAMED OULD MOGHAIZEL LAW FIRM, MEMBER OF LEX Mohamed Benkhalid Nabyl Lakhdar Hala Raphael-Abillama BOUDDIDA MUNDI RAPHAËL & ASSOCIÉS CAISSE NATIONALE DE SÉCURITÉ SOCIALE ADMINISTRATION DES DOUANES ET IMPOTS Ahmed Salem Ould Bouhoubeyni INDIRECTS Melynda BouAoun Mohamed Benkirane Mireille Richa CABINET BOUHOUBEYNI BADRI AND SALIM EL MEOUCHI LAW FIRM, TYAN & ZGHEIB LAW FIRM ESPACE TRANSIT Adil Said Lamtiri MEMBER OF INTERLEGES Salimou Ould Bouhoubeyni AVOCAT AU BARREAU Jihane Rizk Khattar Myriam Emmanuelle Bennani Najib Choucair KHATTAR ASSOCIATES Abdellahi Ould Charrouck AMIN HAJJI & ASSOCIÉS ASSOCIATION Beatrice Larregle CENTRAL BANK OF LEBANON ATELIER ARCHITECTURE ET DESIGN D’AVOCATS EXPERIAN Jihad Rizkallah Sanna Daakour BADRI AND SALIM EL MEOUCHI LAW FIRM, Ahmed Ould Cheikh Sidya Saad Beygrine Wilfried Le Bihan MENA CITY LAWYERS MEMBER OF INTERLEGES PRIVATE PRACTICE AHMED OULD CHEIKH CABINET DE NOTAIRE ALAMI CMS BUREAU FRANCIS LEFEBVRE Aline Dantziguian SIDYA Rachid Boubakry Anis Mahfoud Samir Safa CHAMBER OF COMMERCE, INDUSTRY & BAROUDI & ASSOCIATES Brahim Ould Daddah AUDIT CONCEPT ABOUAKIL, BENJELLOUN & MAHFOUD AGRICULTURE OF BEIRUT CABINET DADDAH CONSEILS AVOCATS - AB AVOCATS & Khalid Boumichi Joseph Safar ASSOCIES Michel Doueihy HAYEK GROUP Brahim Ould Ebetty TECNOMAR BADRI AND SALIM EL MEOUCHI LAW FIRM, LAWYER Amine Mahfoud Johan Bruneau MEMBER OF INTERLEGES Rached Sarkis AMINE MAHFOUD NOTAIRE RACHED SARKIS - CONSULTANT Abdallahi Ould Gah CMS BUREAU FRANCIS LEFEBVRE Chadia El Meouchi CABINET D’AVOCAT GAH Abdelkhalek Merzouki Richard Cantin BADRI AND SALIM EL MEOUCHI LAW FIRM, Antoine Sfeir ADMINISTRATION DES DOUANES ET IMPOTS BADRI AND SALIM EL MEOUCHI LAW FIRM, JURISTRUCTURES - PROJECT MANAGEMENT MEMBER OF INTERLEGES Mohamed Mahmoud Ould INDIRECTS MEMBER OF INTERLEGES Mohamedou & LEGAL ADVISORY SERVICES LLP Sarah Fakhry GENISERVICES Abdelaziz Messaoudi Mahat Chraibi BADRI AND SALIM EL MEOUCHI LAW FIRM, George Tannous MINISTÈRE DE L’ÉCONOMIE ET DES FINANCES BEIRUT INTERNATIONAL MOVERS PWC ADVISORY MAROC MEMBER OF INTERLEGES Moulaye El Ghali Ould Moulaye Ely AVOCAT Mahboub Mohamed Sylvain Da Fonseca Dania George Bassel Tohme ETUDE DE ME MAHBOUB MENA CITY LAWYERS PWC ADVISORY MAROC PWC LEBANON Ahmed Ould Radhi BANQUE CENTRALE DE MAURITANIE Alaoui Ismaili Mohammed Merieme Diouri Abdallah Hayek Nady Tyan ADATRA TYAN & ZGHEIB LAW FIRM ETUDE DE NOTARIAT MODERNE HAYEK GROUP Abdel Fettah Ould Sidi Mohamed SOCIÉTÉ MAURITANIENNE D’ELECTRICITÉ Anthony Mopty Michael Duhamel Antoine Hayek Rania Yazbeck (SOMELEC) YASSIR KHALIL STUDIO TYAN & ZGHEIB LAW FIRM COMANAV RAPHAËL & ASSOCIÉS Salah Said Mouhcine Sarah El Couhen Alexa Hechaime COMMISSAIRE AUX COMPTES IMPACT ARCHITECTURE, MOROCCO MAURITANIA ETUDE DE NOTARIAT MODERNE HECHAIME LAW FIRM Mohamed Salem Abdy Aly Ould Salihi Tayeb Mohamed Omar Youssef El Falah Wajih Hechaime LAWYER TRANSIT LOGISTIQUES TRANSPORT AVOCAT AU BARREAU DE CASABLANCA ABA RULE OF LAW INITIATIVE-MOROCCO HECHAIME LAW FIRM Sid’Ahmed Abeidna Aliou Sall Hicham Oughza Mohssin El Makoudi Walid Honein SOGECO MAURITANIA ASSURIM CONSULTING DAR ALKHIBRA DAR ALKHIBRA BADRI AND SALIM EL MEOUCHI LAW FIRM, Nesrine Roudane MEMBER OF INTERLEGES Esteit Mohamedou Amane Cheikh Sall Hamid Elafdil ETUDES RECHERCHES ET MAINTENANCE ETUDE HADY MAOULOUDVALL NERO BOUTIQUE LAW FIRM CENTRE RÉGIONALE D’INVESTISSEMENT Maher Hoteit Mehdi Salmouni-Zerhouni MENA CITY LAWYERS Tidiane Bal Ndeye Khar Sarr Driss Ettaki BSD & ASSOCIÉS BSD & ASSOCIÉS SALMOUNI-ZERHOUNI LAW FIRM ADMINISTRATION DES DOUANES ET IMPOTS Dany Issa INDIRECTS Ghalia Sebti MOGHAIZEL LAW FIRM, MEMBER OF LEX Ibrahim Camara Abdellahi Seyidi AIT MANOS MUNDI Nadia Fajr Mohamed Cheikh Abdallahi Becaye Toure Houcine Sefrioui Marie-Anne Jabbour A.F.A.C.OR SARL BSD & ASSOCIÉS Adil Fasshii ETUDE DE NOTARIAT MODERNE BADRI AND SALIM EL MEOUCHI LAW FIRM, LYDEC MEMBER OF INTERLEGES Maroufa Diabira Khalidou Traoré Marc Veuillot LAWYER COMMUNAUTÉ URBAINE DE NOUAKCHOTT Youssef Fassi Fihri CMS BUREAU FRANCIS LEFEBVRE Fady Jamaleddine FYBA LAWYERS MENA CITY LAWYERS Youssoupha Diallo BSD & ASSOCIÉS MOROCCO OMAN Mustapha Fekkar Edgard Joujou AGENCE URBAINE DE CASABLANCA AGENCE NATIONALE DE LA CONSERVATION AL BUSAIDY, MANSOOR JAMAL & CO. KPMG PCC Fatoumata Diarra BSD & ASSOCIÉS BANK AL-MAGHRIB FONCIÈRE DU CADASTRE ET DE LA CARTOGRAPHIE (ANCFCC) ERNST & YOUNG Elie Kachouh ELC TRANSPORT SERVICES SAL Maouloud Vall El Hady Seyid DIRECTION GÉNÉRALE DES IMPÔTS Hamad Al Abri ETUDE HADY MAOULOUDVALL Nasser Filali ERNST & YOUNG ZIMAG MUSCAT ELECTRICITY DISTRIBUTION Georges Kadige Hamoud Ismail COMPANY KADIGE & KADIGE LAW FIRM Benali Abdelmajid Fatima Zahrae Gouttaya SMPN Michel Kadige EXPERIAN ETUDE DE NOTARIAT MODERNE Zahir Abdulla Al Abri Cheikany Jules MUSCAT ELECTRICITY DISTRIBUTION KADIGE & KADIGE LAW FIRM Sidimohamed Abouchikhi CHEIKHANY JULES LAW OFFICE Karima Hadrya COMPANY Najib Khattar EXPERIAN CAISSE NATIONALE DE SÉCURITÉ SOCIALE Mohamed Lemine Salem Ould Zubaida Fakir Mohamed Al Balushi KHATTAR ASSOCIATES Samir Agoumi Béchir Amin Hajji CENTRAL BANK OF OMAN DAR ALKHIBRA AMIN HAJJI & ASSOCIÉS ASSOCIATION Josephine Khoury EXACO Ahmed Al Barwani TALAL ABU GHAZALEH LEGAL Hanane Ait Addi D’AVOCATS Abdou M’Bodj SNR DENTON & CO. (TAG-LEGAL) BASSAMAT & ASSOCIÉE Zohra Hasnaoui COMMUNAUTÉ URBAINE DE NOUAKCHOTT Salman Ali Al Hattali Lamya Alami HASNAOUI LAW FIRM Albert Laham Fatimetou Mint Abdel Malick MUSCAT ELECTRICITY DISTRIBUTION CABINET DE NOTAIRE ALAMI COMPANY Georges Mallat COMMUNE DE TEVRAGH-ZEINA HYAM G. MALLAT LAW FIRM 114 DOING BUSINESS IN THE ARAB WORLD 2012 Zaid Al Khattab Rachael Oxby Antonio Ghaleb Abdulaziz Abdullatif Fadi Obiedat TALAL ABU GHAZALEH LEGAL SNR DENTON & CO. AHMED TAWFIK & CO. CERTIFIED PUBLIC AL-SOAIB LAW FIRM TALAL ABU GHAZALEH LEGAL (TAG-LEGAL) ACCOUNTANT (TAG-LEGAL) Bruce Palmer Asad Abedi Hanaan Al Marhuby CURTIS MALLET - PREVOST, COLT & Kamal Hafez THE ALLIANCE OF ABBAS F. GHAZZAWI & K. Joseph Rajan PWC OMAN MOSLE LLP AL TAMIMI & COMPANY ADVOCATES & CO. AND HAMMAD, AL-MEHDAR & CO. GLOBE MARINE SERVICES CO. LEGAL CONSULTANTS Amer Al Rawas Raghavendra Pangala Omar Al Saab Mustafa Saleh OMANTEL SEMAC & PARTNERS LLC Robert Hager LAW OFFICE OF MOHANNED BIN SAUD EMDAD ARRIYADH PATTON BOGGS LLP AL-RASHEED IN ASSOCIATION WITH BAKER Eman Al Shahry Khalid Al Riyami Dy. Abdul Shakoor BOTTS LLP SASLO (FORMERLY SAID AL SHAHRY AMJAAD ENGINEERING CONSULTANCY Walid Honein GLOBE MARINE SERVICES CO. LAW OFFICE) BADRI AND SALIM EL MEOUCHI LAW FIRM, Ibrahim Al-Ajaji Hussain Salman Peter Stans�eld MEMBER OF INTERLEGES THE LAW FIRM OF DR. KHALID Said bin Saad Al Shahry OMAN CABLES INDUSTRY (SAOG) AL-JADAAN & PARTNERS LAW FIRM ALNOWAISER SASLO (FORMERLY SAID AL SHAHRY Tajedin Idris Babekir George Sandars Sameh M. Toban LAW OFFICE) MEEZA QSTP-LLC Fayez Aldebs SNR DENTON & CO. TOBAN, ATTORNEYS AT LAW & LEGAL PWC SAUDI ARABIA Majid Al Toky Abdulla Omar Ismail Al-Dafaa ADVISORS Charles Scho�eld TROWERS & HAMLINS QATAR PETROLEUM Ali. R. Al-Edrees TROWERS & HAMLINS Natasha Zahid AL-BASSAM Azzan Al Yahmadi Daoud Adel Issa BAKER BOTTS LLP Paul Sheridan SASLO (FORMERLY SAID AL SHAHRY QATAR PETROLEUM Mohammed Al-Ghamdi SNR DENTON & CO. Soudki Zawaydeh LAW OFFICE) FULBRIGHT & JAWORSKI LLP Ahmed Jaa�r PWC SAUDI ARABIA Rajshekhar Singh Ibrahim Albri AL TAMIMI & COMPANY ADVOCATES & Nader Alharbi BANK MUSCAT Jean Benoit Zegers MUSCAT MUNICIPALITY LEGAL CONSULTANTS AL-JADAAN & PARTNERS LAW FIRM THE LAW FIRM OF SALAH AL-HEJAILAN Ganesan Sridhar Khalid Khamis Al-Hashmi Marie-Anne Jabbour Abdullah Al-Hashim BANK MUSCAT MUSCAT MUNICIPALITY BADRI AND SALIM EL MEOUCHI LAW FIRM, AL-JADAAN & PARTNERS LAW FIRM SUDAN Taw�q Ahmed Sultan MEMBER OF INTERLEGES Leyan Al-Mawali Hesham Al-Homoud ABU-GHAZALEH INTELLECTUAL PROPERTY W J TOWELL & CO. LLC TROWERS & HAMLINS Marc Jreidini THE LAW FIRM OF DR. HESHAM (AGIP) TMP AGENTS CO. LTD. Danielle Town BADRI AND SALIM EL MEOUCHI LAW FIRM, AL-HOMOUD Hilal Almayahi DESIGN 2000 LTD. SASLO (FORMERLY SAID AL SHAHRY MEMBER OF INTERLEGES MUSCAT MUNICIPALITY Abdulrahman Al-Ibrahim LAW OFFICE) Omer Abdel Ati Maryline Kalaydjian ELECTRICITY & CO-GENERATION Ahmed al-Mukhaini OMER ABDEL ATI SOLICITORS Alessandra Zingales BADRI AND SALIM EL MEOUCHI LAW FIRM, REGULATORY AUTHORITY SASLO (FORMERLY SAID AL SHAHRY SASLO (FORMERLY SAID AL SHAHRY MEMBER OF INTERLEGES Abdalla Abuzeid LAW OFFICE) Mohammed Al-Jadaan LAW OFFICE) ABDALLA A. ABUZEID & ASSOCIATES Upuli Kasturiarachchi AL-JADAAN & PARTNERS LAW FIRM Mohamed Alrashdi PWC QATAR Mohamed Ibrahim Adam MUSCAT MUNICIPALITY QATAR Nabil Abdullah Al-Mubarak DR. ADAM & ASSOCIATES Sajid Khan SAUDI CREDIT BUREAU - SIMAH Mohammed Alshahri DIAMOND SHIPPING SERVICES PWC QATAR Al Fadel Ahmed Al Mahdi MOHAMMED AISHAHRI & ASSOCIATES Fayez Al-Nemer ERNST & YOUNG AL MAHDI LAW OFFICE Frank Lucente TALAL BIN NAIF AL-HARBI LAW FIRM Mona Taha Amer NATIONAL SHIPPING AND MARINE SERVICES AL TAMIMI & COMPANY ADVOCATES & Eihab Babiker QAIS AL-QASMI AND MONA AMER Lamia Abdulaziz Al-Ogailee COMPANY WLL LEGAL CONSULTANTS EIHAB BABIKER & ASSOCIATES LAWYERS FULBRIGHT & JAWORSKI LLP - ADVOCATES QATAR CREDIT BUREAU Elias Matni Mohammed Ahmet Atieh Ayedh Al-Otaibi BADRI AND SALIM EL MEOUCHI LAW FIRM, Elmugtaba Bannaga AMJAAD ENGINEERING CONSULTANCY SHARAF SHIPPING AGENCY SAUDI ARABIAN GENERAL INVESTMENT MEMBER OF INTERLEGES BIN SUWAIDAN ADVOCATES & LEGAL AUTHORITY Russell Aycock SUPREME JUDICIARY COUNCIL, QATAR CONSULTANTS Arnaud Montouché PWC OMAN Musaed Al-Otaibi Abdelmoniem Abutiffa SCP D’AVOCATS UGGC & ASSOCIÉS Amani Ejami THE LAW FIRM OF SALAH AL-HEJAILAN David Ball QATAR INTERNATIONAL LAW FIRM EL KARIB & MEDANI ADVOCATES Rita Moukarzel SASLO (FORMERLY SAID AL SHAHRY Mohammed Al-Soaib Hani Al Naddaf BADRI AND SALIM EL MEOUCHI LAW FIRM, Asma Homad Abdellatif Ali LAW OFFICE) AL-SOAIB LAW FIRM AL TAMIMI & COMPANY ADVOCATES & MEMBER OF INTERLEGES MAHMOUD ELSHEIKH OMER & ASSOCIATES Mahmoud Bilal LEGAL CONSULTANTS Wicki Andersen ADVOCATES Ahmed Taw�k Nassim SASLO (FORMERLY SAID AL SHAHRY BAKER BOTTS LLP Rashed Albuflasa AHMED TAWFIK & CO. CERTIFIED PUBLIC Mohamed Ibrahim LAW OFFICE) PANALPINA QATAR WLL ACCOUNTANT Abdul Moeen Arnous SOMARAIN OREINTAL CO. Sadaf Buchanan LAW OFFICE OF HASSAN MAHASSNI Monita Barghachieh Charbel Neaman Ahmed Mahdi SNR DENTON & CO. PATTON BOGGS LLP CLYDE & CO. Wael Bafakih MAHMOUD ELSHEIKH OMER & ASSOCIATES M.K. Das BAFAKIH & NASSIEF ADVOCATES Solymar Castillo-Morales Sujani Nisansala BANK MUSCAT GOLDMAN ANTONETTI & CÓRDOVA P.S.C PWC QATAR John Beaumont Tarig Mahmoud El Sheikh Omer Francis D’Souza AL-JADAAN & PARTNERS LAW FIRM MAHMOUD ELSHEIKH OMER & ASSOCIATES Ian Clay Ziad Raheb BDO JAWAD HABIB ADVOCATES PWC QATAR BADRI AND SALIM EL MEOUCHI LAW FIRM, Salah Deeb Kobus Havemann MEMBER OF INTERLEGES AL TAMIMI & COMPANY ADVOCATES & Amel M. Sharif Sleiman Dagher DRIVER CONSULT OMAN LLC LEGAL CONSULTANTS MAHMOUD ELSHEIKH OMER & ASSOCIATES BADRI AND SALIM EL MEOUCHI LAW FIRM, Lyka Rom ADVOCATES Hussein MEMBER OF INTERLEGES AHMED TAWFIK & CO. CERTIFIED PUBLIC Abou Bakr Gadour MUSCAT ELECTRICITY DISTRIBUTION ACCOUNTANT TOBAN, ATTORNEYS AT LAW & LEGAL AbdelGadir Warsama Ghalib Arnaud Depierrefeu COMPANY ADVISORS DR. ABDEL GADIR WARSAMA GHALIB & SCP D’AVOCATS UGGC & ASSOCIÉS Sadek Sadek ASSOCIATES LEGAL FIRM Robert Kenedy AHMED TAWFIK & CO. CERTIFIED PUBLIC Imad El-Dine Ghazi Francisco Dox ACCOUNTANT CURTIS MALLET - PREVOST, COLT & LAW OFFICE OF HASSAN MAHASSNI Tag Eldin Yamani Sadig GOLDMAN ANTONETTI & CÓRDOVA P.S.C MONTAG TRADING & ENGINEERING CO. MOSLE LLP David Salt Rahul Goswami Fouad El Haddad LTD. Philip Keun CLYDE & CO. LAW OFFICE OF HASSAN MAHASSNI CLYDE & CO. SNR DENTON & CO. Mohammad Sami Shadi Haroon SYRIAN ARAB REPUBLIC Chadia El Meouchi AL SULAITI, ATTORNEYS, LEGAL Andrew Kincaid LAW OFFICE OF MOHANNED BIN SAUD ERNST & YOUNG BADRI AND SALIM EL MEOUCHI LAW FIRM, CONSULTANTS & ARBITRATORS SASLO (FORMERLY SAID AL SHAHRY AL-RASHEED IN ASSOCIATION WITH BAKER MEMBER OF INTERLEGES LAW OFFICE) BOTTS LLP SARKIS & ASSOCIATES Zain Al Abdin Sharar Neyla El-Khazen QATAR UNIVERSITY TALAL ABU GHAZALEH LEGAL Kenneth Macfarlane Kenny Hawsey BADRI AND SALIM EL MEOUCHI LAW FIRM, (TAG-LEGAL) PWC OMAN PWC SAUDI ARABIA MEMBER OF INTERLEGES Abdul Aziz Mohammed Sorour Jose Madukakuzhy MINISTRY OF JUSTICE Hazim Karam Maysa Abu Baker Sami Fakhoury CENTRAL BANK OF SYRIA KHIMJI RAMDAS BAFAKIH & NASSIEF AL TAMIMI & COMPANY ADVOCATES & Terence G.C. Witzmann Pushpa Malani LEGAL CONSULTANTS HSBC Glenn Lovell Boulos Al Ashhab PWC OMAN AL TAMIMI & COMPANY ADVOCATES & AUDITING CONSULTING ACCOUNTING Sarah Fakhry Yuenping Wong LEGAL CONSULTANTS CENTER Yashpal Mehta BADRI AND SALIM EL MEOUCHI LAW FIRM, AL TAMIMI & COMPANY ADVOCATES & BDO JAWAD HABIB MEMBER OF INTERLEGES LEGAL CONSULTANTS Zaid Mahayni Mouazza Al Ashhab LAW OFFICE OF HASSAN MAHASSNI AUDITING CONSULTING ACCOUNTING Subha Mohan Dalal K. Farhat Harb CENTER CURTIS MALLET - PREVOST, COLT & ARAB ENGINEERING BUREAU SAUDI ARABIA Abdulrahman M. Al Mohizai MOSLE LLP ERNST & YOUNG ELECTRICITY & CO-GENERATION Rawaa Al Midani Mohamed Fouad MINISTRY OF ECONOMY & TRADE REGULATORY AUTHORITY Ahmed Naveed Farooqui SULTAN AL-ABDULLA & PARTNERS Emad Fareed Abdul Jawad OMAN CABLES INDUSTRY (SAOG) GLOBE MARINE SERVICES CO. ACKNOWLEDGMENTS 115 Kanaan Al-Ahmar Abdelmalek Dahmani Rachid Tmar Ibrahim Elsadig Jaya Prakash AL-AHMAR & PARTNERS DAHMANI TRANSIT INTERNATIONAL CAF JURIDIQUE ET FISCAL SARL SNR DENTON & CO. AL FUTTAIM LOGISTICS Bisher Al-Houssami Mohamed Derbel Wassim Turki Ashfat Farhan V. Prakash AL-ISRAA INT’L FREIGHT FORWARDER BDO AWT AUDIT & CONSEIL AIR SOLUTIONS FZE AL TAJIR GLASS INDUSTRIES Serene Almaleh Mohamed Lot� El Ajeri Ben A�a Zied Anthea Fernandes Lal Premarathne KARAWANI LAW OFFICE EL AJERI LAWYERS, PARTENAIRE DE DS ORGA AUDIT, MEMBER OF RUSSELL SHALAKANY LAW OFFICE, MEMBER OF DHL GLOBAL FORWARDING AVOCATS BEDFORD INTERNATIONAL LEX MUNDI Anas Ghazi Samer Qudah MEETHAK - LAWYERS & CONSULTANTS Yassine El Ha� Senil George AL TAMIMI & COMPANY ADVOCATES & ADLY BELLAGHA & ASSOCIATES UNITED ARAB EMIRATES NATIONAL TRADING AND DEVELOPMENT LEGAL CONSULTANTS Abdul Raouf Hamwi ERNST & YOUNG EST. CIVIL ENGINEERING OFFICE Myriam Escheikh Yusuf Ra�udeen LEGALYS INTUIT MANAGEMENT CONSULTANCY Michael Hamway DUBAI ELECTRICITY AND WATER Joumana Jabbour PWC UNITED ARAB EMIRATES AUTHORITY ATTORNEY-AT-LAW Cheiakh Faouzi Karim Abaza BANQUE CENTRALE DE TUNISIE SHALAKANY LAW OFFICE, MEMBER OF Samer Hamzeh Sujaya Rao Azzam Kaddour LEX MUNDI TROWERS & HAMLINS LLP DHL GLOBAL FORWARDING INTERNATIONAL LEGAL BUREAU Abderrahmen Fendri PWC TUNISIA Moutaz Abddullat Jayaram Hariharan Basheer Hameed Rasheed Osama Karawani TALAL ABU GHAZALEH LEGAL VASCO GLOBAL MARITIME PROFESSIONAL STAR ENGINEERING KARAWANI LAW OFFICE Yessine Ferah (TAG-LEGAL) CONSULTANTS F&A LAW FIRM Mohamed Hassan Ali Al Sherif Mazen N. Khaddour Saeed Abdulla Al Hamiz FARZANA TRADING Dean Rolfe INTERNATIONAL LEGAL BUREAU Noureddine Ferchiou CENTRAL BANK OF THE UAE PWC UNITED ARAB EMIRATES FERCHIOU & ASSOCIÉS Sydene Helwick Loubna Khoury Simon Adams AL TAMIMI & COMPANY ADVOCATES & Luke Sajan AUDITING CONSULTING ACCOUNTING Slim Gargouri CLYDE & CO. LEGAL CONSULTANTS DAMCO CENTER CPA Farid Ahmadi Raina Jain Herbert Schroder Moussa Mitry Imene Hana� NATIONAL TRADING AND DEVELOPMENT AMERINDE CONSOLIDATED, INC. EMCREDIT UNIVERSITY OF DAMASCUS / LOUKA & LEGALYS EST. MITRY LAW OFFICE Zaid Kamhawi Kannan Senthilkumar Anis Jabnoun Yakud Ahmed EMCREDIT GLG SHIPPING Gabriel Oussi GIDE LOYRETTE NOUEL, MEMBER OF LEX ORCHID GULF OUSSI LAW FIRM MUNDI Mohammad Z. Kawasmi Mustafa Sharqawi Abdulla Al Kaabi AL TAMIMI & COMPANY ADVOCATES & DUBAI COURTS Housam Safadi Atf Jebali Nasri DEPARTMENT OF ECONOMIC DEVELOPMENT LEGAL CONSULTANTS SAFADI BUREAU LEGALYS N.K. Sidharthan – DUBAI Jamal Khan NATIONAL TRADING AND DEVELOPMENT Samer Sultan Najla Jezi Essam Al Tamimi AMERINDE CONSOLIDATED, INC. EST. SULTANS LAW ACR AL TAMIMI & COMPANY ADVOCATES & Naeem Khan Sreekumar Sivasankaran Sami Kallel LEGAL CONSULTANTS TUNISIA MOHAMMED ESHAQ TRADING COMPANY GLOBELINK WEST STAR SHIPPING L.L.C. KALLEL & ASSOCIATES Saeed Al-Hamiz ERNST & YOUNG Khaled Kilani Wayne Smith Larbi Kedira CENTRAL BANK OF THE UAE ARAMEX EMIRATES LLC AL FUTTAIM LOGISTICS Fakhfakh Abdellatif CHAFTER RAOUADI LAW FIRM Yousef Al-Suwaidi BANQUE CENTRALE DE TUNISIE Vipul Kothari Suresh Mabrouk Maalaoui DUBAI COURTS KOTHARI AUDITORS & ACCOUNTANTS X-ARCHITECTS Samir Abdelly PWC TUNISIA Joseph Altendorff ABDELLY & ASSOCIES Solafa Kouta Pervez Tatary Dina Magroun SNR DENTON & CO. SHARAF SHIPPING AGENCY GREEN PORT SHIPPING AGENCY Mourad Abdelmoula EL AJERI LAWYERS, PARTENAIRE DE DS Deepak Amin AFINCO, A MEMBER OF NEXIA AVOCATS B.S. Krishna Moorthy Mohammed Thani INCHCAPE SHIPPING SERVICES INTERNATIONAL LANDMARK GROUP DUBAI LAND DEPARTMENT Jomaa Mahmoud Wicki Andersen Ilhem Abderrahim CAF JURIDIQUE ET FISCAL SARL Suresh Krishnamurthy Hamad Thani Mutar BAKER BOTTS LLP SOCIÉTÉ TUNISIENNE DE L’ELECRICITÉ ET DU AL KHALEEJ SUGAR DUBAI COURTS Mohamed Ali Masmoudi GAZ (STEG) Sara Apostolides CAF JURIDIQUE ET FISCAL SARL Rajiv Krishnan Raju V. Varghese SNR DENTON & CO. Mohamed Ammar FARZANA TRADING AL YOUSUF L.L.C Emna Mazouni SOCIÉTÉ TUNISIENNE DE L’ELECRICITÉ ET DU Manavalan Arumugam CAF JURIDIQUE ET FISCAL SARL John Kunjappan Suresh Vallu GAZ (STEG) EROS GROUP MAERSK KANOO LLC DIAMOND SHIPPING SERVICES Sarah Mebazaa Leila Aouichri Mohammed Ather COMETE ENGINEERING Ehab Lamie Justin Varghese AIT SARL FARZANA TRADING SHALAKANY LAW OFFICE, MEMBER OF AL FUTTAIM LOGISTICS Radhi Meddeb Mohamed Moncef Barouni Ali Awais LEX MUNDI COMETE ENGINEERING Gary Watts ACR BAKER BOTTS LLP Charles S. Laubach AL TAMIMI & COMPANY ADVOCATES & Faouzi Mili Adly Bellagha T Suresh Babu AFRIDI & ANGELL, MEMBER OF LEX MUNDI LEGAL CONSULTANTS MILI AND ASSOCIATES ADLY BELLAGHA & ASSOCIATES LANDMARK GROUP P.S. Liaquath Natasha Zahid Mohamed Taieb Mrabet Hend Ben Achour Srinivas Balla SHARAF SHIPPING AGENCY BAKER BOTTS LLP BANQUE CENTRALE DE TUNISIE ADLY BELLAGHA & ASSOCIATES GREEN PORT SHIPPING AGENCY Sohail Maklai Amel Mrabet WEST BANK AND GAZA Mohamed Salah Ben A�a Prakash Bhanushali MOHAMMED ESHAQ TRADING COMPANY EL AJERI LAWYERS, PARTENAIRE DE DS ORGA AUDIT, MEMBER OF RUSSELL ALSAHM AL SAREE TRANSPORT & ERNST & YOUNG AVOCATS Premanand Maroly BEDFORD INTERNATIONAL CLEARING VASCO GLOBAL MARITIME Hani Abdel Jaldeh Atf Nasri Ismail Ben Farhat Hiten Bhatia FERCHIOU & ASSOCIÉS Sharnooz Mohammed ADLY BELLAGHA & ASSOCIATES SILVER LINE TRANSPORTATION Murad Abu Mwis DHL GLOBAL FORWARDING Imen Nouira MINISTRY OF NATIONAL ECONOMY Leila Ben Mbarek Jennifer Bibbings CONSERVATION FONCIÈRE TUNISIA Praveen Narikutty LEGALYS TROWERS & HAMLINS LLP FREIGHTWORKS Ata Al Biary Othmane Olfa Miriam Ben Rejeb Maryam Bin Lahej BANQUE CENTRALE DE TUNISIE Edward Nisbet Sharhabeel Al-Zaeem CAF JURIDIQUE ET FISCAL SARL DUBAI COURTS SHARHABEEL AL-ZAEEM AND ASSOCIATES SNR DENTON & CO. Habiba Raouadi Abdelfetah Benahji Mazen Boustany CHAFTER RAOUADI LAW FIRM Yasser Omar Haytham L. Al-Zubi FERCHIOU & ASSOCIÉS HABIB AL MULLA & CO. AL-ZUBI LAW OFFICE, ADVOCATES & SHALAKANY LAW OFFICE, MEMBER OF Lot� Rebai LEGAL CONSULTANTS Manel Bondi R. Chandran LEX MUNDI CABINET REBAI PWC TUNISIA SEA BRIDGE SHIPPING CO. LLC Moayad Amouri Ravi Parambott Hédi Rezgui SA’ADI ORFALY & DAHER CERTIFIED Elyes Chafter Sudesh Chaturvedi IAL LOGISTICS EMIRATES LLC SOCIÉTÉ TUNISIENNE DE L’ELECRICITÉ ET DU PUBLIC ACCOUNTANTS CHAFTER RAOUADI LAW FIRM GULF AGENCY COMPANY LLC GAZ (STEG) Vijendra Vikram Singh Paul Zine el Abidine Chafter Sarah Dahabiyeh TALAL ABU GHAZALEH LEGAL Khalil Ansara Koubaa Rym CATHOLIC RELIEF SERVICES CHAFTER RAOUADI LAW FIRM SNR DENTON & CO. (TAG-LEGAL) CRK Kmar Chaïbi Lisa Dale Marjan Payan Tabari Nada Atrash Nizar Sdiri ARCHITECTURE & DESIGN BANQUE CENTRALE DE TUNISIE AL TAMIMI & COMPANY ADVOCATES & TALAL ABU GHAZALEH LEGAL NIZAR SDIRI LAW FIRM LEGAL CONSULTANTS (TAG-LEGAL) Nizam Ayoob Afef Challouf Imed Tanazefti MINISTRY OF NATIONAL ECONOMY SOCIÉTÉ TUNISIENNE DE L’ELECRICITÉ ET DU Shirish Deshpande Biju Pillai GIDE LOYRETTE NOUEL, MEMBER OF LEX GAZ (STEG) ARABIAN AUTOMOBILES DHL GLOBAL FORWARDING MUNDI Ali Faroun PALESTINIAN MONETARY AUTHORITY 116 DOING BUSINESS IN THE ARAB WORLD 2012 George Handal YEMEN, REP. Randall Cameron BETHLEHEM FREIGHT Abdulalah A. Al karraz KPMG Hiba I. Husseini LANDS & SURVEYING AUTHORITY Abdulla Farouk Luqman HUSSEINI & HUSSEINI Tariq Abdullah LUQMAN LEGAL ADVOCATES & LEGAL LAW OFFICES OF SHEIKH TARIQ ABDULLAH CONSULTANTS Mohamed Khader LAUSANNE TRADING CONSULTANTS Khalid Abdullah Zayed Mohammed Budier SHEIKH MOHAMMED ABDULLAH SONS LANDS & SURVEYING AUTHORITY Absal Nusseibeh HUSSEINI & HUSSEINI Khaled Al Buraihi Esam Nadeesh KHALED AL BURAIHI FOR ADVOCACY & ALCO - ADVOCACY AND LIGAL Michael F. Orfaly LEGAL SERVICES CONSULTATIANS OFFICE SA’ADI ORFALY & DAHER CERTIFIED PUBLIC ACCOUNTANTS Yaser Al-Adimi Zuhair Abdul Rasheed ABDUL GABAR A. AL-ADIMI FOR LAW OFFICES OF SHEIKH TARIQ ABDULLAH Maysa Quod PALESTINIAN MONETARY AUTHORITY CONSTRUCTION & TRADE Yousra Salem Fahdl M. Al-Akwa LUQMAN LEGAL ADVOCATES & LEGAL Wael Sa’adi COURT OF APPEAL FOR TORY OF SANA’A CONSULTANTS SA’ADI ORFALY & DAHER CERTIFIED PUBLIC ACCOUNTANTS & AL-GOUF Khaled Mohammed Salem Ali Mohamed Taha Hamood LUQMAN LEGAL ADVOCATES & LEGAL Samir Sahhar CONSULTANTS OFFICE OF SAMIR SAHHAR Al-Hashimi MOHAMED TAHA HAMOOD & CO. Saeed Sohbi Husein Sholi SAEED HASSAN SOHBI JUSTICE SECTOR ASSISTANCE PROJECT Abdulkadir AL-Hebshi - JSAPII ALCO - ADVOCACY AND LIGAL Taha Tawawala CONSULTATIANS OFFICE AL SUWAIDI & COMPANY Ali AL-Hebshi Nigel Truscott ALCO - ADVOCACY AND LIGAL AL SUWAIDI & COMPANY CONSULTATIANS OFFICE Khaled Hassan Zaid Rashad Khalid Al-Howiadi YEMEN CHAMBER OF SHIPPING Ismail Ahmed Alwazir ALWAZIR CONSULTANTS, ADVOCATES & LEGAL RESEARCH