Doing Business 2020 Kyrgyz Republic Economy Profile Kyrgyz Republic Page 1 Doing Business 2020 Kyrgyz Republic Economy Profile of Kyrgyz Republic Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Kyrgyz Republic About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Kyrgyz Republic Ease of Doing Business in DB RANK DB SCORE Region Europe & Central Asia Kyrgyz Republic Income Category Lower middle income 80 67.8 Population 6,315,800 City Covered Bishkek Rankings on Doing Business topics - Kyrgyz Republic 7 15 42 78 90 89 117 128 134 143 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 93.0 69.0 58.6 90.3 85.0 40.0 67.2 74.7 50.4 50.0 Starting a Business (rank) 42 Getting Credit (rank) 15 Trading across Borders (rank) 89 Score of starting a business (0-100) 93.0 Score of getting credit (0-100) 85.0 Score of trading across borders (0-100) 74.7 Procedures (number) 4 Strength of legal rights index (0-12) 9 Time to export Time (days) 10 Depth of credit information index (0-8) 8 Documentary compliance (hours) 72 Cost (number) 1.4 Credit registry coverage (% of adults) 0.0 Border compliance (hours) 5 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 39.2 Cost to export Documentary compliance (USD) 110 Dealing with Construction Permits (rank) 90 Protecting Minority Investors (rank) 128 Border compliance (USD) 10 Score of dealing with construction permits (0-100) 69.0 Score of protecting minority investors (0-100) 40.0 Time to export Procedures (number) 17 Extent of disclosure index (0-10) 7.0 Documentary compliance (hours) 84 Time (days) 167 Extent of director liability index (0-10) 5.0 Border compliance (hours) 69 Cost (% of warehouse value) 1.7 Ease of shareholder suits index (0-10) 8.0 Cost to export Building quality control index (0-15) 11.0 Extent of shareholder rights index (0-6) 0.0 Documentary compliance (USD) 200 Extent of ownership and control index (0-7) 0.0 Border compliance (USD) 499 Getting Electricity (rank) 143 Extent of corporate transparency index (0-7) 0.0 Score of getting electricity (0-100) 58.6 Enforcing Contracts (rank) 134 Procedures (number) 7 Paying Taxes (rank) 117 Score of enforcing contracts (0-100) 50.4 Time (days) 111 Score of paying taxes (0-100) 67.2 Time (days) 410 Cost (% of income per capita) 683.9 Payments (number per year) 26 Cost (% of claim value) 47.0 Reliability of supply and transparency of tariff index (0-8) 4 Time (hours per year) 220 Quality of judicial processes index (0-18) 5.0 Total tax and contribution rate (% of profit) 29.0 Registering Property (rank) 7 Postfiling index (0-100) 37.4 Resolving Insolvency (rank) 78 Score of registering property (0-100) 90.3 Score of resolving insolvency (0-100) 50.0 Procedures (number) 3 Recovery rate (cents on the dollar) 40.6 Time (days) 3.5 Time (years) 1.5 Cost (% of property value) 0.2 Cost (% of estate) 9.5 Quality of the land administration index (0-30) 24.0 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 9.0 Page 4 Doing Business 2020 Kyrgyz Republic Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Kyrgyz Republic Starting a Business - Kyrgyz Republic Standardized Company Legal form Private Limited Liability Company Paid-in minimum capital requirement No minimum City Covered Bishkek Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Procedure – Men (number) 4 5.2 4.9 1 (2 Economies) Time – Men (days) 10 11.9 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 1.4 4.0 3.0 0.0 (2 Economies) Procedure – Women (number) 4 5.2 4.9 1 (2 Economies) Time – Women (days) 10 11.9 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 1.4 4.0 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 0.7 7.6 0.0 (120 Economies) Figure – Starting a Business in Kyrgyz Republic – Score 82.4 90.5 99.3 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 95.7: Moldova (Rank: 13) 94.4: Kazakhstan (Rank: 22) 93.2: Tajikistan (Rank: 36) 93.1: Russian Federation (Rank: 40) 93.0: Kyrgyz Republic (Rank: 42) 90.5: Regional Average (Europe & Central Asia) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Kyrgyz Republic Figure – Starting a Business in Kyrgyz Republic – Procedure, Time and Cost Time (days) Cost (% of income per capita) 10 1.4 1.2 Cost (% of income per capita) 8 1 Time (days) 6 0.8 0.6 4 0.4 2 0.2 0 0 1 2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Kyrgyz Republic Details – Starting a Business in Kyrgyz Republic – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Register at the One-stop shop 5 days KGS 100 (registration fee) Agency : One-stop shop (local registration office) at the Ministry of Justice + KGS 20 (bank Companies with merely Kyrgyz ownership should be registered at the local office of registration (in processing fee) Bishkek, there are several offices for registering a local company). Companies with foreign investments should be registered in the Ministry of Justice itself. The following documents need to be submitted at the time of registration: 1. Application (can be purchased for KGS 6 at the register or downloaded at http://minjust.gov.kg/ru/content/87); 2. Decision on Company Formation (signatures must be notarized if documents are not submitted by the founders); 3. Copy of passport (one for each owner); 4. Power of Attorney for submission of registration documents; 5. Paper-folder. Once the application documents are received, the Ministry of Justice provides information on the newly formed company to the Tax Service, Statistical Committee and the Social Fund. The notifications happen as follows: 1. Within 2 hours the basic information is provided to Statistical Committee; 2. Ministry of Justice determines the company’s code according to the General Classifier of Enterprises and Organizations (код ОКПО) 3. Once classification number is determined, it is provided to the Tax Service together will other relevant information. 4. Tax Service assigns TIN for the newly registered company. 5. Once TIN is assigned, it is provided to the Ministry of Justice, Statistical Committee, and Social Fund. 6. Copy of passport general directors 2 Apply for “parameters” at the State Tax Service 3 days no charge Agency : State Tax Service Entrepreneurs have to go to the tax authority in order to apply for a set of customized characteristics (Parameters). The Parameters are issued in about 3 days. Documents that have to be submitted to the STS: 1. Registration Certificate (received from the Ministry of Justice); 2. Registration Application; 3. Tax Registration Application; 4. Registration Form of the taxpayer; 5. Decision on Company Formation (notarized); 6. Copy of passport (for each owner and for director); 7. Power of Attorney for submitting the documents for registering the company; 8. Paper-folder; 9. Articles of Association. 3 Obtain notification from the Social Fund 1 day no charge Agency : Social Fund Entrepreneurs need to visit the Social Fund in person in order to obtain the Notification (извещение), which includes relevant for the Social Fund information (e.g., number of employees). This is required to pay future monthly social contributions. 4 Obtain permission to make company seal and make a seal 1 day KGS 125 (permission cost) Agency : Sealmaker + KGS 450 to 1,500 The seal-making company requests permission to make its client’s company seal. The cost of the (service fee) seal depends on the delivery time (e.g., 2 hours versus 1 day). The faster the delivery, the higher the cost. The Presidential decree No. 182 makes the use of the seal optional, however in practice, companies still use it. Takes place simultaneously with previous procedure. Page 8 Doing Business 2020 Kyrgyz Republic Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2020 Kyrgyz Republic Dealing with Construction Permits - Kyrgyz Republic Standardized Warehouse Estimated value of warehouse KGS 4,299,897.30 City Covered Bishkek Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 17 16.2 12.7 None in 2018/19 Time (days) 167 170.1 152.3 None in 2018/19 Cost (% of warehouse value) 1.7 4.0 1.5 None in 2018/19 Building quality control index (0-15) 11.0 12.1 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Kyrgyz Republic – Score 52.0 59.4 91.4 73.3 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 78.9: Russian Federation (Rank: 26) 76.5: Kazakhstan (Rank: 37) 69.0: Regional Average (Europe & Central Asia) 69.0: Kyrgyz Republic (Rank: 90) 60.8: Tajikistan (Rank: 137) 56.2: Moldova (Rank: 156) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 10 Doing Business 2020 Kyrgyz Republic Figure – Dealing with Construction Permits in Kyrgyz Republic – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 0.7 160 140 0.6 Cost (% of warehouse value) 120 0.5 Time (days) 100 0.4 80 0.3 60 0.2 40 0.1 20 0 0 1 *2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2020 Kyrgyz Republic Figure – Dealing with Construction Permits in Kyrgyz Republic and comparator economies – Measure of Quality 16 14.0 14 13.0 12.0 12.0 12.1 11.0 Index score 12 10 8 6 4 2 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Details – Dealing with Construction Permits in Kyrgyz Republic – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 File application of intention and obtain city planning regulation of architectural planning 28 days KGS 18,500 conditions (AПЗ) from the unit of State Department for Architecture and Construction Supervision Agency : State Department for Architecture and Construction Supervision of Bishkek City In accordance with the Regulation “On Order for Issuing Permits for Project Designs, Construction and Real Estate Modification and Order for Commissioning Completed Building the Kyrgyz Republic” approved by Government of KR on May 30, 2008, by Resolution # 252, the issuance of Architectural Planning Conditions (APU) shall be conducted according to One-Stop-Shop principle. The list of documents required for issuance of APU was reduced. In particular, a business is only expected to complete an established application form which contains information on the type of upcoming construction and submit it along with the following documents: copy of the land title that verifies that a land plot was purchased or leased, letter of attorney, and invoice on advanced payment (advance payment is required while obtaining an APU, the remainder is paid after a business receives the APU). A territorial architecture and construction body, within 3 business days, performs the check for compliance of an application form with requirements set by urban planning documentation. In case of non-compliance, the territorial architecture and construction body issues a Report on Non- compliance of Construction and returns the application without approval. In each case the body is obliged to indicate the established types of permitted land use pursuant to the urban planning documentation. In case the territorial architecture and construction body approves the application, it submits the application for further approval to the sanitary and epidemiology body, fire authority, and environmental authority. After that, the application is forwarded to the utilities companies by the main coordinating agency - State Construction Department - for obtaining technical terms to install utility systems using One-Stop-Shop principle without participation of the applicant. As of February 12, 2009, Government Resolution #121 introduced amendments to the Regulation “On Order for Issuing Permits for Project Designs, Construction and Real Estate Modification and Order for Commissioning Completed Building the Kyrgyz Republic” approved by Government of KR on May 30, 2008, by Resolution #252. There are now only two technical conditions that must be obtained in a compulsory manner -- water/ sewage and electricity. The remaining communications can be obtained on a voluntary basis by applicants and are not linked to obtaining the architectural planning conditions. Meanwhile, if the applicant suggests alternative solutions to connecting to engineering facilities, then requests for technical conditions are not filed at all. Based on the functional purpose of the building, approvals from sanitary and fire authorities are applied using a risk-based system. Simple objects would not require approvals from these authorities. Additionally, requirements for documents to be submitted along with the application have been clarified. These administrative simplifications made the process of issuance of architectural planning conditions faster and possible to comply within the time-limit of 20 working days (28 calendar days). Despite reforms in disclosing the information on fee schedules, the process of cost calculation for this procedure remains nontransparent. The payment can be made at the counter of State Architecture Department of Bishkek City. Then the shares of each respective utility provider are transferred without BuildCo visiting each separately. APU is executed in two copies - one is issued to the applicant and the other is filed with the architecture and construction body. Page 12 Doing Business 2020 Kyrgyz Republic 2 Request and obtain topographic and geological survey conclusions of land from Kyrgyz 14 days KGS 7,500 GIIZ Agency : Kyrgyz GIIZ Although there are several licensed companies that provide these services, Kyrgyz GIIZ has the biggest database of maps that date back the longest and is the only licensed institution in the country with the proper equipment and capacity. Engineering–geological studies have not been done since the collapse of the Soviet Union, therefore, any new land developed would require BuildCo to request the full study. However, there are certain parts of the city that can be considered to have the proper geological study. In that case BuildCo would have to request a certificate on geological survey, assuming that the actual geological survey which is very costly (up to USD 3,000.00) or the survey of adjacent plot has been done. The cost for this certificate can be anywhere between KGS 5.00 to KGS 10,000.00. Page 13 Doing Business 2020 Kyrgyz Republic 3 Request approval of project, expertise of project documents and obtain building permit 56 days KGS 25,000 Agency : State Expertise Authority / State Department for Architecture and Construction Supervision This procedure consists of three stages: approval of project documents, expertise of documents and issuance of building permit. All three stages are done under the one-stop shop principle. A single application is filed by the applicant to obtain all these approvals. The approval of project documents consists of two stages: initial review of drawings and plans and other relevant chapters of the projects is done by the territorial branch of State Architecture Department. BuildCo submits at this stage its application along with the following documents: • Project documents (drawings, plans); private projects are not required to submit any financial segment of the project (abolished by the Resolution #252) • Engineer-geological study (for expertise) • Copies of letters authorizing persons responsible for construction works: technical supervision, author supervision; and for contractor (for construction permit) • Copies of licenses for construction works (for construction permit) BuildCo must obtain an approval from the respective Institute of State Agency of Architecture and Construction and other licensed agencies which have the right to provide an engineering assessment of objects no lower than two stories, stating the possibility of reconstructing, re- profiling or re-planning of objects (for construction permit). Any other documents are considered illegal. The authority must issue its approval within 10 working days. Following that it will send two copies of all documents for review by the State Expertise Authority. According to Resolution #252 (30.05.2008), and Government Resolution #75 as of February 4, 2009, the expertise can be conducted by private companies, but until now there has not been a single license issued for expertise works. The nature of the expert assessment has been changed as well. In the past, the expert assessment was focused on the cost estimate of the project, which is prohibited by the above- mentioned regulation. The expert assessment of the project design documents is conducted by the State Expertise Authority and its territorial bodies or privately licensed companies to check the following aspects: • Compliance of the object with requirements set by the architectural planning conditions, project design terms and city planning documentation • Justification of space-planning and construction decisions, construction materials and equipment, solidity and durability of the bearing structure of buildings • Checking the results of the geotechnical survey Based on the results of the conducted expert assessment, the State Expertise Authority prepares a report on compliance of the project design documents with normative requirements. In case of any irregularities, the State Expertise Authority prepares another report on bringing the project design documentation in compliance which identifies the irregularities or a report on refusal of approving the project design. Under current legislation there are categories of objects that do not require state expert assessment. There are notions of mandatory and voluntary expert assessment and possibility for expert assessment of project documentation by private experts or organizations. BuildCo’s case would qualify for the expert assessment. No later than one day following the approval date, which is 20 working days for projects higher than 1000 sq. m., the report with the positive expert assessment is submitted to State Architecture and Construction Supervision for issuing a construction permit. The State Architecture and Construction Supervision has to issue the building permit within 10 working days. Otherwise, the silence-is-consent principle applies. However, in practice the State Architecture and Construction Supervision does not accept silence as consent rule. Amendments regarding construction supervision process were made to Law “On Changes to Law of the Kyrgyz Republic” #101 as of March 30, 2009, “On City Construction and Architecture of the Kyrgyz Republic” Article 40, and Government Resolution #95 “On approving the Order on Classification of Construction Object Characteristics and Order of Conducting State Architecture-Construction Supervision, Reconstruction and Other Real Estate Objects in the Kyrgyz Republic.” According to these reforms the building supervision process is now based on a risk-based approach. Compulsory state control over the building process is applied for buildings that fall into high-risk category. Low-risk categories (i.e., buildings less than 1,350 sq. m.) are now subject to author and technical supervision and do not require state supervision. Thus, it removes the need for signing a special contract with State Architecture and Construction Supervision and paying the respective fees. Both author and technical supervision can be done by BuildCo staff. 4 Register the project at GETI before starting construction works 9 days no charge Agency : State Ecological and Technical Safety Inspection (GETI) BuildCo must register the building at GETI before starting the construction process. With the registration application, copies of technical conditions and approvals should be submitted. Upon registration, a technical supervisor is assigned from the public agency is assigned to conduct phased inspections. Page 14 Doing Business 2020 Kyrgyz Republic 5 Request and obtain authorization to conduct earthwork in the road section 11 days no charge Agency : City Road Department of Municipality of Bishkek According to Decision of Bishkek City Council as of February 4, 2009 which eliminated Resolution of Bishkek City Council #194 as of 9 June 2003, applicants now need to obtain only a warrant (naryad) for conducting works in public road area. The previous requirement has been eliminated under the general administrative simplification process. The authority responsible for issuing this document is now the City Road Department under Municipality of Bishkek, formed in August 2008, and replaced the Authority of District Administrations. Under the new provision there is no fee related to this procedure. 6 Request and obtain equipment operating authorization 15 days no charge Agency : State Inspection for Supervision of Industry Safety and Mountain Supervision under the Ministry of Natural Resources of Kyrgyz Republic Under the existing regulation, this authorization is required to allow the use of cranes, excavators and elevators. Five days before using the equipment, BuildCo will file a request, followed by a visit by the inspector from the Inspection by Gostechnadzor. The inspector, having reviewed the equipment to be used, stamps and signs the technical passport of the new projects. Regulatory simplification reform process also eliminated duplicating legislation concerning the fees for equipment operation authorization. This eliminated the grounds for officers by the State Technical Supervision to levy fees. 7 Receive an inspection after foundation works 1 day no charge Agency : State Ecological and Technical Safety Inspection (GETI) Once the construction company obtains a permit and the building is registered, GETI prepares the plan of inspections needed during construction and assigns a supervisor. All types of inspections are carried out in practice, including phased and random. Inspections related to compliance of the building with the plans and building regulations are conducted at different stages of the construction process. 8 Receive a laboratory examination of construction materials 6 days KGS 12,500 Agency : State Ecological and Technical Safety Inspection (GETI) This inspection is conducted to check the quality of the concrete, fittings, and welding. The representatives of GETI take the samples of construction materials to the laboratory. At the end of the examination, they give an approval of the laboratory examination. 9 Receive an inspection after finishing the first floor 1 day no charge Agency : State Ecological and Technical Safety Inspection (GETI) Once the construction company obtains a permit and the building is registered, GETI prepares the plan of inspections needed during construction and assigns a supervisor. All types of inspections are carried out in practice, including phased and random. Inspections related to compliance of the building with the plans and building regulations are conducted at different stages of the construction process. 10 Receive a random inspection 1 day no charge Agency : State Ecological and Technical Safety Inspection (GETI) In addition to phased inspections by GETI, BuildCo may receive a random unscheduled inspection at any point during construction. 11 Receive an inspection after finishing the second floor 1 day no charge Agency : State Ecological and Technical Safety Inspection (GETI) Once the construction company obtains a permit and the building is registered, GETI prepares the plan of inspections needed during construction and assigns a supervisor. All types of inspections are carried out in practice, including phased and random. Inspections related to compliance of the building with the plans and building regulations are conducted at different stages of the construction process. 12 Receive connection to water and sewage services 10 days KGS 4,253 Agency : Bishkekvodokanal Connection can be done without prior inspection if the location has existing utility infrastructure. According to the tariff approved by the City Council of Bishkek (Decree of 30.04.2009. № 68), water connection costs 2,074.4 soms per cubic meter and sewerage connection costs 2,178.1 soms per cubic meter, plus 12% VAT and 2% sales tax. The website with tariffs is: http://www.water.elcat.kg/page3.html 13 Request act of acceptance of object for use 1 day no charge Agency : State Inspection on Environmental and Technical Safety Within 10 days after completion of construction, BuildCo files a request to the State Inspection on Environmental and Technical Safety of Act of Acceptance of Object for Use. This approval must be issued within 10 working days. If the Act is not issued within the established time limit, the silence- is-consent rule applies. The Act must be signed by the applicant, author of project, general contractor, and a representative of State Architecture and Construction Supervision’s regional branch who performed the technical supervision during construction. Government Resolution #121 as of February 12, 2009 removed the requirement for participation of fire and sanitary authorities in the final inspection. Page 15 Doing Business 2020 Kyrgyz Republic 14 Receive inspection and obtain the act of acceptance of object for use 13 days no charge Agency : State Inspection on Environmental and Technical Safety The inspection may take place depending on the case. Sometimes if the supervising technical inspector provides sound feedback to the regional head office, the inspection may not be required. However, a separate visit is paid to obtain the actual copy of the Act. The Act is a legal document that allows the immediate use of the building. 15 Receive inspection from the State Registration Service for the technical inventory of the 1 day no charge building Agency : State Registration Service After obtaining the act of Acceptance, BuildCo has to obtain the technical passport. State Registration Service conducts an inspection of the completed building in order to issue the technical inventory of the building (technical passport). 16 Obtain a technical inventory of the building 6 days KGS 5,100 Agency : State Registration Service Before registering the building with the real property registry, BuildCo must obtain a “technical passport.” This describes the structure of building, units, dimensions, building layout, and the like. The technical inventory costs KGS 2,600.00 if obtained in 10 days, and KGS 5,100.00 if obtained in 4 working days. 17 Register the building with the real estate registry 7 days KGS 833 Agency : State Registration Service Registration of buildings is a mandatory procedure. BuildCo must provide the following documents to the State Registration Service: • Application • Documents confirming the ownership title (the plot plan, the local plan, and the “technical passport”* of the warehouse) • Receipt of payment for registration • State certificate on land ownership • Occupancy permit • Power of attorney After examining the submitted documents, a registrar issues a report for registration of the building, makes a log entry, and issues a registration card, a copy of which is provided to BuildCo. The registration costs KGS 832,79 according to the official fee schedule published on the website of the State Registration Service: http://grs.gov.kg/ru/subord/dkrpni/dkrpni_price/ Takes place simultaneously with previous procedure. Page 16 Doing Business 2020 Kyrgyz Republic Details – Dealing with Construction Permits in Kyrgyz Republic – Measure of Quality Answer Score Building quality control index (0-15) 11.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge; In official gazette. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer; Unscheduled inspections; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use No party is held liable 0.0 (Latent Defect Liability or Decennial Liability)? (0-1) under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 3.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- University degree in 1.0 2) engineering, construction or construction management; Passing a certification exam. Page 17 Doing Business 2020 Kyrgyz Republic Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final supply - Is a new construction and is being connected to electricity for the first time. - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts • Tools to monitor power outages (0–1) (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 18 Doing Business 2020 Kyrgyz Republic Getting Electricity - Kyrgyz Republic Standardized Connection Name of utility Severelectro Price of electricity (US cents per kWh) 3.6 City Covered Bishkek Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 7 5.1 4.4 3 (28 Economies) Time (days) 111 99.6 74.8 18 (3 Economies) Cost (% of income per capita) 683.9 271.9 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 4 6.2 7.4 8 (26 Economies) Figure – Getting Electricity in Kyrgyz Republic – Score 33.3 59.6 91.6 50.0 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 97.5: Russian Federation (Rank: 7) 81.6: Kazakhstan (Rank: 67) 75.6: Regional Average (Europe & Central Asia) 75.3: Moldova (Rank: 84) 58.6: Kyrgyz Republic (Rank: 143) 51.1: Tajikistan (Rank: 163) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Kyrgyz Republic – Procedure, Time and Cost Time (days) Cost (% of income per capita) 700 100 600 Cost (% of income per capita) 80 500 Time (days) 400 60 300 40 200 20 100 0 0 1 2 3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 19 Doing Business 2020 Kyrgyz Republic reflected here, see the summary below. Figure – Getting Electricity in Kyrgyz Republic and comparator economies – Measure of Quality 9 8 8 8 7 7 6.2 Index score 6 5 4 4 4 3 2 1 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Page 20 Doing Business 2020 Kyrgyz Republic Details – Getting Electricity in Kyrgyz Republic – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application and await technical conditions from Severelektro 20 calendar days KGS 2,365.8 Agency : Department of Architecture and Construction The applicant submits an application for connection to the Department of Architecture and Construction which forwards the application to the utility. The Architecture Department has all the construction documents and hence the only required document is the application for connection. However, the applicant will most of the time visit Severelektro directly to ensure that the application has been delivered and considered. The payment for technical conditions is also made at Severelektro. 2 Await completion and approval of project design for external works 19 calendar days KGS 19,402 Agency : Private project design firm After the technical conditions are issued the customer hires a private electrical design firm to prepare a design of the external part of the connection. The internal wiring plan can be prepared together with the external design. On behalf of the customer the electrical design firm receives approvals of the plan at the Department of Architecture and Construction. 3 Obtain excavation permit from municipality 18 calendar days KGS 1,200 Agency : Office of Capital Construction of the Bishkek City Municipality Electrical contractor obtains an excavation permit (ордер на раскопки). 4 Obtain external connection works from private electrical contractor 26 calendar days KGS 563,894.5 Agency : Private electrical contractor After the electrical plan of the external connection is approve the customer hires a private electrical contractor to carry out all the external connection works. The meter is installed together with the rest of the electrical equipment by the hired private electrical contractor. 5 Await and receive inspection of completed works by Severelektro 11 calendar days KGS 121 Agency : Severelektro After the external connection works are completed the electrical installation is checked by various departments of Severelektro during one inspection. After the inspection an operation permit is issued. Both the internal wiring and the external works are inspected. The electrical contractor is required to submit documents specifying measurements and tests of the wiring. Someone from the applicant’s party is required to be present during the inspection. 6 Await and receive inspection and authorization from State Energy Inspectorate 3 calendar days KGS 0 Agency : Gosekotehinspektsiya (State Inspectorate for environmental and technical safety) After the inspection by Gosekotehinspektsiya (State Inspectorate for environmental and technical safety), it will give an authorization for connection. 7 Sign supply contract with Severelektro and receive electricity flow 14 calendar days KGS 1,174.06 Agency : Severelektro After the inspections are completed and an operation permit is issued, a supply contract can be concluded in the contract department of Severelektro. After the conclusion of the supply contract the representative of Severelektro visits the site to turn on the electricity. Takes place simultaneously with previous procedure. Page 21 Doing Business 2020 Kyrgyz Republic Details – Getting Electricity in Kyrgyz Republic – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 4 Total duration and frequency of outages per customer a year (0-3) 1 System average interruption duration index (SAIDI) 11.9 System average interruption frequency index (SAIFI) 3.8 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI N/A Mechanisms for monitoring outages (0-1) 0 Does the distribution utility use automated tools to monitor outages? No Mechanisms for restoring service (0-1) 0 Does the distribution utility use automated tools to restore service? No Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online www.reglatortek.kg https://www.severelectro.k g/calc#feedform Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 22 Doing Business 2020 Kyrgyz Republic Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 23 Doing Business 2020 Kyrgyz Republic Registering Property - Kyrgyz Republic Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Procedures (number) 3 5.5 4.7 1 (5 Economies) Time (days) 3.5 20.8 23.6 1 (2 Economies) Cost (% of property value) 0.2 2.7 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 24.0 20.4 23.2 None in 2018/19 Figure – Registering Property in Kyrgyz Republic – Score 83.3 98.8 99.0 80.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 90.3: Kyrgyz Republic (Rank: 7) 88.6: Russian Federation (Rank: 12) 82.8: Moldova (Rank: 22) 82.4: Kazakhstan (Rank: 24) 75.8: Regional Average (Europe & Central Asia) 66.4: Tajikistan (Rank: 77) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 24 Doing Business 2020 Kyrgyz Republic Figure – Registering Property in Kyrgyz Republic – Procedure, Time and Cost Time (days) Cost (% of property value) 3.5 0.14 3 0.12 Cost (% of property value) 2.5 0.1 Time (days) 2 0.08 1.5 0.06 1 0.04 0.5 0.02 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 25 Doing Business 2020 Kyrgyz Republic Figure – Registering Property in Kyrgyz Republic and comparator economies – Measure of Quality 30 26.0 25 24.0 22.0 20.4 Index score 20 17.0 15 10 7.5 5 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Details – Registering Property in Kyrgyz Republic – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 The seller obtains the Extract from the Gosregister (Land Registry) Less than one day, KGS 152; (online fees) Agency : State Registration Service under the Government of the Kyrgyz Republic online The buyer requests the seller to provide them with the Registration Certificate evidencing their rights to the property. This Certificate indicates the owner of the property and provides information on the existence or absence of encumbrances over the property. The documentation shall include: • Application (in the established form); • Identification documents. 2 A public notary or a lawyer prepares the sale-purchase agreement 1 day KGS 5,350; (KGS 5,000 Agency : Public Notary or lawyer fixed fee (state duty) + The Law of the Kyrgyz Republic on Amendments to the Civil Code of the Kyrgyz Republic #104 of KGS 300-500 30.03.2009 introduced voluntary notary certification of property disposal (sale and acquisition) (notarization, depending contract. Previously, it was mandatory to notarize the sale-purchase agreement with a public on the notary)) notary. Now, parties have a choice to have notaries register such contracts or make a transaction and register it directly with the State Register. According to the Resolution of the Government of the Kyrgyz Republic #44 dated 20 January 2012 a state duty for verification of transactions on alienation of immovable property is set in the amount of 5,000 KGS. The cost for notarization of documents depends on the form of a notary public. In case of state notaries, the cost is 10 KGS per one document, in case of private notaries, the cost may vary from 50 to 70 KGS per one document. The parties must also notarize copies of their respective charters and/or foundation agreements and corporate registration certificates (to be later presented to the registrar). If the agreement is notarized, the parties will be required to submit copies of the parties’ respective charters and foundation agreements, corporate registration certificates, resolutions of the management bodies on the purchase/sale of the property, powers of attorney, a certificate evidencing the balance sheet value of the property, and certain other corporate documents. The seller shall also present the registration certificate evidencing the seller’s title to the property 3 The buyer applies to Gosregister for registration of the title transfer 2 days KGS 1,040; (KGS 1040 for Agency : State Registration Service under the Government of the Kyrgyz Republic legal entities, when -The buyer goes to the local office of Gosregister and presents all the required documents. transaction has been -The buyer (the seller may pay it upon agreement between the parties) pays the registration fee at notarized by notary public the same office and presents to the registrar the receipt evidencing the payment and a formal KGS 3150 if not notarized) application for the registration of the title transfer. - The notarized sale purchase agreement is presented to the local office of Gosregister no later than 30 days from the moment of its signing (otherwise a penalty fee is charged). -The Gosregister issues the receipt about the acceptance of the documents for the registration and conduct the registration within 2 days or 1 day. The buyer receives his own copy of the agreement where the Registry certified the registration, as well as the technical documents (technical passport and state act on land property right) where Registry made correspondent alterations. In case when buyer and seller chose to register transaction without notary certification, directly at the State Register, the Procedures 1 and 2 are not needed. The documentation shall include: • Application (in the established form) • State act on land property right; • Technical original passport; • The signed and notarized sale and purchase agreement (Obtained in Procedure 2); • Powers of attorney (if needed), notarized copies of the buyer charter and/or foundation agreement, corporate registration certificate, resolution of the management body on the purchase of the property. Takes place simultaneously with previous procedure. Page 26 Doing Business 2020 Kyrgyz Republic Details – Registering Property in Kyrgyz Republic – Measure of Quality Answer Score Quality of the land administration index (0-30) 24.0 Reliability of infrastructure index (0-8) 6.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Bishkek Registration Office of the Department of cadastre and registration under the State Registry In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Bishkek Registration Office of the Department of cadastre and registration under the State Registry In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Scanned 1.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Single database 1.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 4.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Anyone who pays the 1.0 in the largest business city? official fee Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: http://www.gosreg.kg/ 2017-06-05-06-10-32 https://grs.gov.kg/ru/s ubord/dkrpni/dkrpni_p rice/ Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, online 0.5 registration in the largest business city made publicly available–and if so, how? Link for online access: https://grs.gov.kg/ru/s ubord/dkrpni/dkrpni_p rice/ http://www.gosreg.kg/ 2017-06-05-06-10-32 Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: http://www.gosreg.kg/ 2017-06-05-06-10-32 Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Page 27 Doing Business 2020 Kyrgyz Republic Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 19,947 property transfers in Bishkek for 2018 Who is able to consult maps of land plots in the largest business city? Anyone who pays the 0.5 official fee Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: http://gosreg.kg/2017- 06-05-06-10-47 Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 8.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? Yes 2.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? Yes 2.0 Land dispute resolution index (0–8) 6.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Chapter 7 ("Rights and limitations which are subject to compulsory registration") of the Law Kyrgyz Republic "On State Registration of real property rights and transactions with it"; Article 180 ("State registration of rights resulting from transactions" of the Civil Code of the Kyrgyz Republic Part I Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Article 9 ("Authorized state body in the matter of registration of real property rights") of the Law Kyrgyz Republic "On State Registration of real property rights and transactions with it" Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Page 28 Doing Business 2020 Kyrgyz Republic Legal basis: Articles 33, 36 and 37 ("Responsibility for damage") of the Law Kyrgyz Republic "On State Registration of real property rights and transactions with it"; Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? No 0.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Bishkek Interdistrict businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Court on Economic in the largest business city? Disputes How long does it take on average to obtain a decision from the first-instance court for such a case (without Less than a year 3.0 appeal)? Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 29 Doing Business 2020 Kyrgyz Republic Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of Credit registry coverage (% of adults) movable collateral. • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 30 Doing Business 2020 Kyrgyz Republic Getting Credit - Kyrgyz Republic Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Strength of legal rights index (0-12) 9 7.8 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.7 6.8 8 (53 Economies) Credit registry coverage (% of adults) 0.0 24.0 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 39.2 41.7 66.7 100.0 (14 Economies) Figure – Getting Credit in Kyrgyz Republic – Score 85.0 Score - Getting Credit Figure – Getting Credit in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 90.0: Tajikistan (Rank: 11) 85.0: Kyrgyz Republic (Rank: 15) 80.0: Kazakhstan (Rank: 25) 80.0: Russian Federation (Rank: 25) 72.2: Regional Average (Europe & Central Asia) 70.0: Moldova (Rank: 48) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 31 Doing Business 2020 Kyrgyz Republic Figure – Legal Rights in Kyrgyz Republic and comparator economies 12 11 10 9 9 Index Score 8 8 7.8 8 6 4 2 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Page 32 Doing Business 2020 Kyrgyz Republic Details – Legal Rights in Kyrgyz Republic Strength of legal rights index (0-12) 9 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Kyrgyz Republic and comparator economies 9 8 8 8 7 7 7 6.7 Index Score 6 6 5 4 3 2 1 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Page 33 Doing Business 2020 Kyrgyz Republic Details – Credit Information in Kyrgyz Republic Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 1,562,870 0 Number of firms 4,632 0 Total 1,567,502 0 Percentage of adult population 39.2 0.0 Page 34 Doing Business 2020 Kyrgyz Republic Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 35 Doing Business 2020 Kyrgyz Republic Protecting Minority Investors - Kyrgyz Republic Stock exchange information Stock exchange Kyrgyz Stock Exchange Stock exchange URL http://www.kse.kg Listed firms with equity securities 5 City Covered Bishkek Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Extent of disclosure index (0-10) 7.0 7.5 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 5.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 8.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 0.0 3.4 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 0.0 3.7 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 0.0 4.1 5.7 7 (13 Economies) Figure – Protecting Minority in Kyrgyz Republic – Score 40.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 84.0: Kazakhstan (Rank: 7) 68.0: Moldova (Rank: 45) 61.0: Regional Average (Europe & Central Asia) 60.0: Russian Federation (Rank: 72) 40.0: Kyrgyz Republic (Rank: 128) 40.0: Tajikistan (Rank: 128) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 36 Doing Business 2020 Kyrgyz Republic Figure – Protecting Minority Investors in Kyrgyz Republic and comparator economies – Measure of Quality the Kyrgyz Republic 0 5 7 0 8 Kazakhstan 6 6 9 6 6 9 Moldova 6 4 7 4 5 8 Russian Federation 6 2 6 4 5 7 Tajikistan 0 6 8 0 6 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Europe & Central Asia 4.1 4.8 7.2 3.6 3.4 6.8 0 5 10 15 20 25 30 35 40 45 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 37 Doing Business 2020 Kyrgyz Republic Details – Protecting Minority Investors in Kyrgyz Republic – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 7.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of all 2.0 material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Not liable 0.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if negligently 1.0 concluded Ease of shareholder suits index (0-10) 8.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 0.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0 Do shareholders elect and dismiss the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 0.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0 Page 38 Doing Business 2020 Kyrgyz Republic Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 0.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 39 Doing Business 2020 Kyrgyz Republic Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 40 Doing Business 2020 Kyrgyz Republic Paying Taxes - Kyrgyz Republic Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Payments (number per year) 26 14.4 10.3 3 (2 Economies) Time (hours per year) 220 213.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 29.0 31.7 39.9 26.1 (33 Economies) Postfiling index (0-100) 37.4 68.2 86.7 None in 2018/19 Figure – Paying Taxes in Kyrgyz Republic – Score 61.7 73.6 96.0 37.4 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 85.2: Moldova (Rank: 33) 80.5: Russian Federation (Rank: 58) 78.2: Kazakhstan (Rank: 64) 77.9: Regional Average (Europe & Central Asia) 67.2: Kyrgyz Republic (Rank: 117) 60.9: Tajikistan (Rank: 139) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 41 Doing Business 2020 Kyrgyz Republic Figure – Paying Taxes in Kyrgyz Republic and comparator economies – Measure of Quality 100 90.8 90 77.8 80 68.2 Index score 70 60 48.9 50 40.4 37.4 40 30 20 10 0 Kyrgyz Kazakhstan Moldova Russian Tajikistan Europe Republic Federation & Central Asia Page 42 Doing Business 2020 Kyrgyz Republic Details – Paying Taxes in Kyrgyz Republic Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Pension fund 1.0 online 71.0 15% gross salaries 16.92 contributions Corporate 1.0 online 54.0 10% taxable profit 6.68 income tax Tax on property 4.0 KGS 14,000 taxable value of 2.74 (immovable) building Medical 0.0 online & jointly 2.25% gross salaries 2.54 insurance and rehabilitation fund contributions Land tax 4.0 KGS 2.9 per land area 0.05 square meter Tax on property 1.0 0.5% book value of 0.04 (movable) vehicles Value added tax 1.0 online 95.0 12% value added 0.00 not included (VAT) Sales tax 12.0 From 0% to 2%, turnover 0.00 not included dependent on (i) the type of payment (in cash or not), and the good is subject to VAT. Employee paid - 0.0 online & jointly 8% gross salaries 0.00 withheld Social security contributions Fuel tax 1.0 KGS 2.21 per number of liters 0.00 liter Employee paid - 1.0 online 2.0% gross salaries withheld Pension contribution to State cumulative pension fund Totals 26 220 29.0 Page 43 Doing Business 2020 Kyrgyz Republic Details – Paying Taxes in Kyrgyz Republic – Tax by Type Taxes by type Answer Profit tax (% of profit) 6.7 Labor tax and contributions (% of profit) 19.5 Other taxes (% of profit) 2.8 Page 44 Doing Business 2020 Kyrgyz Republic Details – Paying Taxes in Kyrgyz Republic – Measure of Quality Answer Score Postfiling index (0-100) 37.4 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund per 0.0 case study scenario Time to obtain VAT refund (weeks) No VAT refund per 0.0 case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 75% - 100% Time to comply with a corporate income tax correction (hours) 20.0 66.1 Time to complete a corporate income tax correction (weeks) 5.3 83.5 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 45 Doing Business 2020 Kyrgyz Republic Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 46 Doing Business 2020 Kyrgyz Republic Trading across Borders - Kyrgyz Republic Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Time to export: Border compliance (hours) 5 16.1 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 10 150.0 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 72 25.1 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 110 87.6 33.4 0 (20 Economies) Time to import: Border compliance (hours) 69 20.4 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 499 158.8 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 84 23.4 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 200 85.9 23.5 0 (30 Economies) Figure – Trading across Borders in Kyrgyz Republic – Score 97.5 99.1 58.0 72.5 75.7 58.4 65.3 71.4 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 92.3: Moldova (Rank: 38) 87.3: Regional Average (Europe & Central Asia) 74.7: Kyrgyz Republic (Rank: 89) 71.8: Russian Federation (Rank: 99) 70.4: Kazakhstan (Rank: 105) 60.9: Tajikistan (Rank: 141) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 47 Doing Business 2020 Kyrgyz Republic Figure – Trading across Borders in Kyrgyz Republic – Time and Cost Time (hours) Cost (USD) 90 84 600 80 72 499 69 500 70 Time (hours) Cost (USD) 60 400 50 300 40 200 30 200 20 110 100 10 5 10 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 48 Doing Business 2020 Kyrgyz Republic Details – Trading across Borders in Kyrgyz Republic Characteristics Export Import Product HS 62 : Articles of apparel and clothing accessories, HS 8708: Parts and accessories of motor vehicles not knitted or crocheted Trade partner Russian Federation China Border Sypatai Batyr (Chaldybar) border crossing Lugovaya (Kazakhstan) and Kara Balta (Kyrgyzstan) check points; Chaldybar border crossing Distance (km) 90 90 Domestic transport time (hours) 5 5 Domestic transport cost (USD) 110 110 Details – Trading across Borders in Kyrgyz Republic – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 0.0 0.0 customs authorities Export: Clearance and inspections required by 2.0 10.0 agencies other than customs Export: Port or border handling 3.0 0.0 Import: Clearance and inspections required by 32.9 299.1 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 36.0 200.0 Page 49 Doing Business 2020 Kyrgyz Republic Details – Trading across Borders in Kyrgyz Republic – Trade Documents Export Import Declaration of conformity Declaration of conformity Certificate of origin Certificate of origin CMR Customs import declaration Commercial invoice DKD-delivery control document Contract for transportation Document certifying cost of transportation Packing list Document certifying payment of customs fees Sale-purchase agreement Invoice Invoice for transportation of the shipment Packing list Sales and purchase contract Cargo handling receipts Transit declaration Page 50 Doing Business 2020 Kyrgyz Republic Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 51 Doing Business 2020 Kyrgyz Republic Enforcing Contracts - Kyrgyz Republic Standardized Case Claim value KGS 361,645 Court name Bishkek Inter-District Court City Covered Bishkek Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Time (days) 410 496.4 589.6 120 (Singapore) Cost (% of claim value) 47.0 26.6 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 5.0 10.3 11.7 None in 2018/19 Figure – Enforcing Contracts in Kyrgyz Republic – Score 76.2 47.2 27.8 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 81.3: Kazakhstan (Rank: 4) 72.2: Russian Federation (Rank: 21) 65.5: Regional Average (Europe & Central Asia) 63.6: Moldova (Rank: 62) 60.7: Tajikistan (Rank: 76) 50.4: Kyrgyz Republic (Rank: 134) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 52 Doing Business 2020 Kyrgyz Republic Figure – Enforcing Contracts in Kyrgyz Republic – Time and Cost Time (days) Cost (% of claim value) 700 47.0 50 Cost (% of claim value) 585 589.6 600 496.4 40 Time (days) 500 430 410 28.6 400 26.6 370 25.5 30 337 22.0 21.5 300 16.5 20 200 10 100 0 0 Europe Kazakhstan Kyrgyz Moldova OECD Russian Tajikistan & Republic high Federation Central income Asia Page 53 Doing Business 2020 Kyrgyz Republic Figure – Enforcing Contracts in Kyrgyz Republic and comparator economies – Measure of Quality the Kyrgyz Republic 1.5 1 0 2.5 Kazakhstan 3 5 3 5 Moldova 2.5 3 2 3.5 Russian Federation 2.5 4 0 3 Tajikistan 2 2 0 2.5 OECD high income 2.5 3.2 2.4 3.6 Europe & Central Asia 2.3 2.8 1.3 3.6 0 2 4 6 8 10 12 14 16 18 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Kyrgyz Republic Indicator Time (days) 410 Filing and service 20 Trial and judgment 240 Enforcement of judgment 150 Cost (% of claim value) 47.0 Attorney fees 22 Court fees 15 Enforcement fees 10 Quality of judicial processes index (0-18) 5.0 Court structure and proceedings (-1-5) 2.5 Case management (0-6) 1.0 Court automation (0-4) 0.0 Alternative dispute resolution (0-3) 1.5 Page 54 Doing Business 2020 Kyrgyz Republic Details – Enforcing Contracts in Kyrgyz Republic – Measure of Quality Answer Score Quality of judicial processes index (0-18) 5.0 Court structure and proceedings (-1-5) 2.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? No 0.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 1.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made No available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 1.5 1. Arbitration 0.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? No Page 55 Doing Business 2020 Kyrgyz Republic 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 56 Doing Business 2020 Kyrgyz Republic Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 57 Doing Business 2020 Kyrgyz Republic Resolving Insolvency - Kyrgyz Republic Indicator Kyrgyz Republic Europe & Central OECD high Best Regulatory Asia income Performance Recovery rate (cents on the dollar) 40.6 38.5 70.2 92.9 (Norway) Time (years) 1.5 2.3 1.7 0.4 (Ireland) Cost (% of estate) 9.5 13.3 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 9.0 11.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Kyrgyz Republic – Score 43.7 56.3 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Kyrgyz Republic and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 66.7: Kazakhstan (Rank: 42) 59.1: Russian Federation (Rank: 57) 55.7: Regional Average (Europe & Central Asia) 54.8: Moldova (Rank: 67) 50.0: Kyrgyz Republic (Rank: 78) 28.4: Tajikistan (Rank: 153) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 58 Doing Business 2020 Kyrgyz Republic Figure – Resolving Insolvency in Kyrgyz Republic – Time and Cost Time (years) Cost (% of estate) 3 2.8 17.0 18 15.0 15.0 16 Cost (% of estate) 2.5 2.3 13.3 14 Time (years) 2.0 2 1.7 1.7 12 1.5 1.5 9.5 9.3 9.0 10 1.5 8 1 6 4 0.5 2 0 0 Europe Kazakhstan Kyrgyz Moldova OECD Russian Tajikistan & Republic high Federation Central income Asia Page 59 Doing Business 2020 Kyrgyz Republic Figure – Resolving Insolvency in Kyrgyz Republic and comparator economies – Measure of Quality the Kyrgyz Republic 3 3 1 2 Kazakhstan 6 3 4 1.5 Moldova 4 2.5 3 2.5 Russian Federation 5 2.5 3 1 Tajikistan 1 1.5 1 0.5 OECD high income 5.3 2.8 2.1 1.9 Europe & Central Asia 4.5 2.5 2.3 1.7 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Kyrgyz Republic and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 45 43.0 40.6 39.8 40 38.5 35 32.1 29.6 30 25 20 15 10 5 0 Kyrgyz Republic Kazakhstan Moldova Russian Federation Tajikistan Europe & Central Asia Page 60 Doing Business 2020 Kyrgyz Republic Details – Resolving Insolvency in Kyrgyz Republic Indicator Answer Score Proceeding foreclosure Foreclosure (direct enforcement of security interest in court without commencement of collective insolvency proceedings) is the cheapest and most effective option for the Bank. In accordance with Article 334 of the Civil Code of the Kyrgyz Republic, the enforcement of security interest to satisfy demands of the creditor may be carried out in case of non-performance or insufficient performance of the secured obligation by the debtor. A similar provision contains in the Law on Pledge (Article 55). There is no mechanism that would prevent the bank from foreclosing the pledged property. The main reason for this is that the pledged property is not included in the amount of assets in liquidation. Outcome piecemeal sale Only companies undergoing reorganization procedure continue operating. In all other cases, the company stops operating, so the only option is to sell the assets piecemeal. Time (in years) 1.5 It will take between 1 and 3 months to decide the case at the court of first instance. Then the losing party will have 1 month to file an appeal. It takes around 2 months to solve the case at the appellate court. Then the losing party will have 2 months to lodge a cassation complaint. It will be considered within around 2 months.After the final judgement, it will take 2 weeks to get an execution order. Then the process of voluntary execution will start. If it turns to be unsuccessful, it will be converted into involuntary execution. It may take several months to locate and seize the property. Two auctions will likely be necessary to complete the sale. Each of them will take at least 1 month. Then the money will transferred to the bank. Given some extra delays at different stages, the whole process should be completed in 18 months. Cost (% of estate) 9.5 The total cost of the proceedings will amount to approximately 9.5% of the value of the hotel. Major expenses will include court fees (1%), attorneys' fees (3%), auctioneer's fee (3%), remuneration of other professionals involved in foreclosure proceedings (around 2%) and other fees (0.5%). Recovery rate 40.6 (cents on the dollar) Page 61 Doing Business 2020 Kyrgyz Republic Details – Resolving Insolvency in Kyrgyz Republic – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 9.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (c) Both (a) and (b) 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value options are available, of its assets but only one of them needs to be complied with Management of debtor's assets index (0-6) 3.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 2.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are affected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency Yes 1.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting No 0.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 62 Doing Business 2020 Kyrgyz Republic Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 63 Doing Business 2020 Kyrgyz Republic Employing Workers - Kyrgyz Republic Details – Employing Workers in Kyrgyz Republic Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 60.0 Maximum length of fixed-term contracts, including renewals (months) 60.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 24.8 Ratio of minimum wage to value added per worker 0.2 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 50.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 20.0 Paid annual leave for a worker with 5 years of tenure (working days) 20.0 Paid annual leave for a worker with 10 years of tenure (working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 20.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 13.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 13.0 Page 64 Doing Business 2020 Kyrgyz Republic Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 13.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 13.0 Unemployment protection after one year of employment? Yes Page 65 Doing Business 2020 Kyrgyz Republic Business Reforms in Kyrgyz Republic From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Getting Electricity: The Kyrgyz Republic improved the reliability of power supply by enhancing the monitoring of outages and modernizing its infrastructure to reduce power outages. Getting Credit: The Kyrgyz Republic improved access to credit information by providing credit scores to banks, financial institutions and borrowers. Paying Taxes: The Kyrgyz Republic made paying taxes easier by consolidating the tax on interest income into the corporate income tax and by introducing an online platform for filing and paying taxes. DB2019 Protecting Minority Investors: The Kyrgyz Republic strengthened minority investor protections by increasing shareholders’ rights and role in major corporate decisions, strengthening the independence of boards of directors and barring subsidiaries from acquiring shares issued by their parent companies. Trading across Borders: The Kyrgyz Republic made trading across borders easier by streamlining exports within the Eurasian Economic Union. Enforcing Contracts: The Kyrgyz Republic made enforcing contracts easier by introducing a pre-trial conference as part of the case management techniques in court and adopting a consolidated law on voluntary mediation. Resolving Insolvency: The Kyrgyz Republic made resolving insolvency easier by facilitating the continuation of the debtor’s business during insolvency proceedings and granting creditors greater access to information on the debtor’s financial situation during the proceedings. DB2018 Registering Property: The Kyrgyz Republic made property registration less transparent by no longer making official statistics on property transfers available to the public. Getting Credit: The Kyrgyz Republic strengthened access to credit by adopting two new decrees that establish a unified and modern collateral registry. The Kyrgyz Republic also improved its credit information system by adopting a new law on exchanging credit information. DB2017 Trading across Borders: The Kyrgyz Republic decreased time and cost for exporting by becoming a member of the Euroasian Economic Union. DB2016 Getting Electricity: Kyrgyz Republic made getting electricity faster by implementing a single window at the utility. Registering Property: The Kyrgyz Republic made transferring property easier by introducing an online procedure for obtaining the nonencumbrance certificates. Getting Credit: In the Kyrgyz Republic the credit bureau improved access to credit information by beginning to distribute both positive and negative credit information. DB2012 Paying Taxes: The Kyrgyz Republic made paying taxes costlier for firms by introducing a real estate tax, though it also reduced the sales tax rate. DB2011 Starting a Business: The Kyrgyz Republic eased business start-up by eliminating the requirement to have the signatures of company founders notarized. Resolving Insolvency: The Kyrgyz Republic streamlined insolvency proceedings and updated requirements for administrators, but new formalities added to prevent abuse of proceedings made closing a business more difficult. Page 66 Doing Business 2020 Kyrgyz Republic DB2010 Starting a Business: The Kyrgyz Republic made starting a business easier by eliminating the minimum capital requirement, reducing the registration time and abolishing certain postregistration fees as well as the need to open a bank account before registration. Dealing with Construction Permits: The Kyrgyz Republic made dealing with construction permits easier by streamlining the fee structure, introducing a risk-based system of approval and construction supervision, allowing low-risk projects to take responsibility for construction supervision and simplifying the process of obtaining utility connections. Registering Property: The Kyrgyz Republic made registering property easier by simplifying documentation requirements and making notarization optional. Getting Credit: The Kyrgyz Republic strengthened its secured transactions system through amendments to its civil code and pledge law making secured lending more flexible, allowing a general description of encumbered assets and of debts and obligations and providing for the automatic extension of a security right to proceeds of the original asset. Paying Taxes: The Kyrgyz Republic made paying taxes less costly for companies by reducing the rates of several taxes, including the corporate income tax. Trading across Borders: The Kyrgyz Republic made trading across borders easier and less time consuming by eliminating some previously required documents and simplifying inspection procedures. Employing Workers: The Kyrgyz Republic eliminated the requirement for third-party notification for redundancy dismissals. In addition, it repealed the retraining or reassignment obligations and priority rules for reemployment that apply in cases of redundancy dismissals. DB2009 Starting a Business: The Kyrgyz Republic made starting a business easier by creating a one-stop shop that streamlined and simplified business registration processes and by eliminating other formalities. Dealing with Construction Permits: The Kyrgyz Republic made dealing with construction permits easier by introducing a one-stop shop for procedures relating to building permits, more strictly defining time limits for issuance of approvals and clarifying the responsibilities of construction authorities and local municipalities. Protecting Minority Investors: The Kyrgyz Republic strengthened investor protections by granting minority investors standing to undertake legal actions to protect their rights as shareholders, by requiring an independent assessment of related-party transactions before approval and by increasing remedies in cases of director negligence. DB2008 Registering Property: The Kyrgyz Republic made registering property more costly by increasing the registration fees. Paying Taxes: The Kyrgyz Republic made paying taxes less costly for companies by reducing the corporate income tax rate and abolishing social security contributions. Page 67 Doing Business 2020 Kyrgyz Republic Page 68