Doing Business 2010
Montenegro
© 2009 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington, D.C. 20433
...
Current features
News on the Doing Business project
www.doingbusiness.org
Rankings
How economies rank-from 1 to 183
www.do...
1
Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating
regula...
Economy Rankings - Ease of Doing Business
Montenegro's ranking in Doing Business 2010
Montenegro - Compared to global good...
Summary of Indicators - Montenegro
Starting a Business Procedures (number) 12
Time (days) 13
Cost (% of income per capita)...
Trading Across Borders Documents to export (number) 7
Time to export (days) 14
Cost to export (US$ per container) 775
Docu...
Whenentrepreneursdraw upa businessplanandtry to get under way,the firsthurdlesthey face are the procedures
required toinco...
Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 107 85
Procedures (number) 15...
3. Steps to Starting a Business in Montenegro
It requires 12 procedures, takes 13 days, and costs 2.58 % GNI per capita to...
More detail is included in the appendix.
4. Benchmarking Starting a Business Regulations:
Montenegro is ranked 85 overall ...
Procedures
(number)
Time (days) Cost (% of
income per
capita)
Min. capital
(% of income
per capita)
Denmark* 0.0
New Zeala...
Once entrepreneurshave registered a business, whatregulationsdo they face in operatingit? Tomeasure such
regulation,Doing ...
Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 166 160
Procedu...
3. Steps to Building a Warehouse in Montenegro
It requires 19 procedures, takes 230 days, and costs 1,085.97 % GNI per cap...
More detail is included in the appendix.
4. Benchmarking Dealing with Construction Permits Regulations:
Montenegro is rank...
Procedures
(number)
Time (days) Cost (% of
income per
capita)
Denmark 6
Qatar 0.6
Singapore 25
Good Practice
Economies
Mon...
Economies worldwide haveestablisheda system oflawsandinstitutionsintendedtoprotect workersandguarantee
a minimumstandard o...
Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 93 46
Redundancy costs (weeks o...
3. Benchmarking Employing Workers Regulations:
Montenegro is ranked 46 overall for Employing Workers.
Ranking of Montenegr...
Rigidity of
employment
index (0-100)
Redundancy
costs (weeks
of salary)
Hong Kong, China* 0
New Zealand* 0
Good Practice
E...
Formalproperty titles helppromote the transfer of land,encourage investmentand give entrepreneursaccessto
formalcreditmark...
Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 125 131
Procedures (number) ...
3. Steps to Registering Property in Montenegro
It requires 8 procedures, takes 86 days, and costs 3.25 % of property value...
4. Benchmarking Registering Property Regulations:
Montenegro is ranked 131 overall for Registering Property.
Ranking of Mo...
Procedures
(number)
Time (days) Cost (% of
property
value)
New Zealand* 2
Norway* 1
Saudi Arabia 0.0
Good Practice
Economi...
Firms consistentlyrate access to creditasamong the greatestbarrierstotheir operationandgrowth. DoingBusiness
constructstwo...
Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 41 43
Strength of legal rights ind...
3. Benchmarking Getting Credit Regulations:
Montenegro is ranked 43 overall for Getting Credit.
Ranking of Montenegro in G...
Strength of
legal rights
index (0-10)
Depth of
credit
information
index (0-6)
Public
registry
coverage (%
of adults)
Priva...
Companiesgrowbyraising capital,either througha bankloan or byattractingequity investors.Selling shares
allows companies to...
Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 25 27
Strength of investor p...
3. Benchmarking Protecting Investors Regulations:
Montenegro is ranked 27 overall for Protecting Investors.
Ranking of Mon...
Strength of
investor
protection
index (0-10)
New Zealand 9.7
Good Practice
Economies
Montenegro 6.3
Selected Economy
Bosni...
Taxesare essential.Without themthere wouldbe no moneyto provide public amenities,infrastructure and services
which are cru...
Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 139 145
Total tax rate (% profit) 31...
3. Benchmarking Paying Taxes Regulations:
Montenegro is ranked 145 overall for Paying Taxes.
Ranking of Montenegro in Payi...
Payments
(number per
year)
Time (hours
per year)
Total tax rate
(% profit)
Maldives* 1 0
Timor-Leste 0.2
Good Practice
Eco...
The benefitsof trade are welldocumented;as are the obstaclesto trade.Tariffs,quotasanddistance from large
marketsgreatlyin...
Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 46 47
Cost to export (US$ ...
3. Benchmarking Trading Across Borders Regulations:
Montenegro is ranked 47 overall for Trading Across Borders.
Ranking of...
Documents to
export
(number)
Time to
export (days)
Cost to
export (US$
per
container)
Documents to
import
(number)
Time to...
Where contractenforcementisefficient,businessesare more likelyto engage with new borrowersor customers.
DoingBusinesstrack...
Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 133 133
Procedures (number) 4...
3. Benchmarking Enforcing Contracts Regulations:
Montenegro is ranked 133 overall for Enforcing Contracts.
Ranking of Mont...
Procedures
(number)
Time (days) Cost (% of
claim)
Bhutan 0.1
Ireland 20
Singapore 150
Good Practice
Economies
Montenegro 4...
The economic crises ofthe 1990s in emergingmarkets,from EastAsia toLatin America, fromRussiato Mexico,
raisedconcernsabout...
Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 44 44
Time (years) 2.0 2.0 2.0...
3. Benchmarking Closing Business Regulations:
Montenegro is ranked 44 overall for Closing a Business.
Ranking of Montenegr...
Recovery rate
(cents on the
dollar)
Time (years) Cost (% of
estate)
Ireland 0.4
Japan 92.5
Singapore* 1
Good Practice
Econ...
Number of reforms in Doing Business 2010
Negative Reform
Positive Reform
Total
number
of
reforms
Economy
ClosingaBusiness
...
Belarus Belarus eased the process for getting construction permits by simplifying approval processes.
Restrictions relatin...
Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of
obtaining a powe...
Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of
proceedings. Cha...
Registration Requirements:
STANDARDIZED COMPANY
Legal Form: Društvo sa ograni?enom odgovornoš?u (DOO)
- Limited Liability ...
Procedure Certify the company’s founding agreements1
Time to complete: 1
Cost to complete: 21
Comment: The Republic of Mon...
Cost to complete: 35
Comment: The company seal or stamp is a core instrument in company in company legal
transactions. The...
-name of the requesting party
-address of the seat of the company and the telephone
-name of the account
Beside the form Z...
Registration Requirements:
BUILDING A WAREHOUSE
Date as of: January 2009
Estimated Warehouse Value:
City: Podgorica
The ta...
16 Obtain water and sewerage connection 10 days EUR 200*
17 Obtain phone connection 7 days EUR 80*
18 Request and receive ...
Procedure Obtain proof of ownership1
Time to complete: 1 day
Cost to complete: EUR 5
Comment:
Procedure Obtain copy of sit...
Procedure Obtain approval of geotechnical examination from Municipality5
Time to complete: 10 days
Cost to complete: EUR 1...
Comment:
According to municipal tariffs and fees the cost is calculated based on the total area of
warehouse. Anything bet...
Procedure Obtain fire prevention consent13
Time to complete: 15 days
Cost to complete: EUR 500
Comment:
Under the Construc...
Comment:
Procedure Obtain water and sewerage connection16
Time to complete: 10 days
Cost to complete: EUR 200
Comment:
Pro...
Employing Workers in Montenegro
Employing workers indices are based on responses to survey questions. The table below show...
What is the maximum number of working days per week? 6 0
Are there restrictions on night work and do these apply when cont...
STANDARDIZED PROPERTY
Property Value: 263,841.22
City: Podgorica
This topic examines the steps, time, and cost involved in...
Procedure Obtain property excerpt from Agency for Real Estate1
Time to complete: 1 day (simultaneous with procedure 2)
Cos...
Cost to complete: no cost
Comment: During this period the tax authorities will compare their valuation of the property wit...
The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit
re...
During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? Yes
Does the law author...
Protecting Investors in Montenegro
The table below provides a full breakdown of how the disclosure, director liability, an...
Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes)
0
Shareholders owning 10% or l...
The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in
a given...
Notes:
a) data not collected
b) VAT is not included in the total tax rate because it is a tax levied on consumers
c) very ...
These tables list the procedures necessary to import and exports a standardized cargo of goods in Montenegro. The
document...
Doing Business in Montenegro 2010
Doing Business in Montenegro 2010
Doing Business in Montenegro 2010
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  1. 1. Doing Business 2010 Montenegro
  2. 2. © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org ISBN: 978-0-8213-7961-5 E-ISBN: 978-0-8213-7965-3 DOI: 10.1596/978-0-8213-7961-5 ISSN: 1729-2638 Library of Congress Cataloging-in-Publishing Data has been applied for. Printed in the United States.
  3. 3. Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 183 www.doingbusiness.org/economyrankings Reformers Short summaries of DB2010 reforms, lists of reformers since DB2004 and a ranking simulation tool www.doingbusiness.org/reformers Historical data Customized data sets since DB2004 www.doingbusiness.org/customquery Methodology and research The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Download reports Access to Doing Business reports as well as subnational and regional reports, reform case studies and customized country and regional profiles www.doingbusiness.org/downloads Subnational and regional projects Differences in business regulations at the subnational and regional level www.doingbusiness.org/subnational Law Library Online collection of business laws and regulations relating to business and gender issues www.doingbusiness.org/lawlibrary www.doingbusiness.org/genderlawlibrary Local partners More than 8,000 specialists in 183 economies who participate in Doing Business www.doingbusiness.org/LocalPartners Reformers’ Club Celebrating the top 10 Doing Business reformers www.doingbusiness.org/Reformers/ReformersClub.aspx Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Contents Introduction 1 and Aggregate Rankings Starting a Business 5 Dealing with Construction Permits 10 Employing Workers 15 Registering Property 19 Getting Credit 24 Protecting Investors 28 Paying Taxes 32 Trading Across Borders 36 Enforcing Contracts 40 Closing a Business 44 Doing Business 2010 48 Reforms
  4. 4. 1 Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 10 stages of a business’s life are measured: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times are current as of June 1, 2009*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy’s proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 27 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for Montenegro. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the “good practice” economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2010: Reforming Through Difficult Times presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2008. Note: Doing Business 2008 and Doing Business 2009 data and rankings have been recalculated to reflect changes to the methodology and the addition of new countries (in the case of the rankings).
  5. 5. Economy Rankings - Ease of Doing Business Montenegro's ranking in Doing Business 2010 Montenegro - Compared to global good practice economy as well as selected economies: Montenegro is ranked 71 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Doing Business 2010 Ease of Doing Business 71 Starting a Business 85 Dealing with Construction Permits 160 Employing Workers 46 Registering Property 131 Getting Credit 43 Protecting Investors 27 Paying Taxes 145 Trading Across Borders 47 Enforcing Contracts 133 Closing a Business 44 Rank 2
  6. 6. Summary of Indicators - Montenegro Starting a Business Procedures (number) 12 Time (days) 13 Cost (% of income per capita) 2.6 Min. capital (% of income per capita) 0.0 Dealing with Construction Permits Procedures (number) 19 Time (days) 230 Cost (% of income per capita) 1086.0 Employing Workers Difficulty of hiring index (0-100) 0 Rigidity of hours index (0-100) 20 Difficulty of redundancy index (0-10) 20 Rigidity of employment index (0-100) 13 Redundancy costs (weeks of salary) 28 Registering Property Procedures (number) 8 Time (days) 86 Cost (% of property value) 3.3 Getting Credit Strength of legal rights index (0-10) 9 Depth of credit information index (0-6) 2 Public registry coverage (% of adults) 27.6 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 5 Extent of director liability index (0-10) 8 Ease of shareholder suits index (0-10) 6 Strength of investor protection index (0-10) 6.3 Paying Taxes Payments (number per year) 89 Time (hours per year) 372 Profit tax (%) 8.3 Labor tax and contributions (%) 18.8 Other taxes (%) 1.8 Total tax rate (% profit) 28.9
  7. 7. Trading Across Borders Documents to export (number) 7 Time to export (days) 14 Cost to export (US$ per container) 775 Documents to import (number) 7 Time to import (days) 14 Cost to import (US$ per container) 890 Enforcing Contracts Procedures (number) 49 Time (days) 545 Cost (% of claim) 25.7 Closing a Business Recovery rate (cents on the dollar) 43.7 Time (years) 2.0 Cost (% of estate) 8 4
  8. 8. Whenentrepreneursdraw upa businessplanandtry to get under way,the firsthurdlesthey face are the procedures required toincorporate andregister the newfirmbefore they canlegally operate.Economiesdiffer greatlyinhow they regulate the entryof new businesses.Insome the processisstraightforwardandaffordable.Inothersthe proceduresare so burdensome thatentrepreneursmay have to bribe officials tospeedup the processor may decide toruntheir businessinformally. Analysisshowsthat burdensome entry regulations donot increase the quality ofproducts,make worksafer or reduce pollution.Instead,they constrain private investment;push more people into the informal economy;increase consumer prices and fuel corruption. Methodology The data on startinga businessis based ona surveyandresearch investigatingthe proceduresthat a standardsmallto medium -size companyneedsto complete to startoperationslegally.Thisincludes obtainingall necessarypermits andlicenses and completingall required inscriptions,verificationsand notificationswith authorities toenable thecompany to formallyoperate.Proceduresare recorded onlywhere interactionisrequiredwithanexternalparty.Itis assumed thatthe founders complete allprocedures themselvesunless professionalservices(suchasbya notaryor lawyer) are required by law.Voluntaryprocedures are notcounted,nor are industry–specific requirements and utility hook-ups.Lawfulshortcutsare counted. It is assumed thatall in formationisreadily available to the entrepreneur,thatthere hasbeen noprior contact with officialsand thatallgovernmentand nongovernmententities involvedinthe process functionwithoutcorruption. Survey Case Study The business:  isa limited liabilitycompany conducting generalcommercialactivities  islocated in the largest businesscity  is 100% domesticallyowned  has a start-up capitalof 10timesincome per capita  has a turnover of at least100 timesincome percapita  has between 10and50 employees  doesnotqualify for anyspecialbenefits  doesnotown realestate 5
  9. 9. Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 107 85 Procedures (number) 15 15 12 Time (days) 24 21 13 Cost (% of income per capita) 6.2 4.4 2.6 Min. capital (% of income per capita) 0.0 0.0 0.0 1. Historical data: Starting a Business in Montenegro 2. The following graphs illustrates the Starting a Business indicators in Montenegro over the past 3 years: 6
  10. 10. 3. Steps to Starting a Business in Montenegro It requires 12 procedures, takes 13 days, and costs 2.58 % GNI per capita to start a business in Montenegro. List of Procedures: 1. Certify the company’s founding agreements 2. Register company name and company documents with the Company Registry 3. Make a company seal 4. Obtain statistical number of the company 5. Obtain general Tax registration number 6. obtain VAT number 7. Open a bank account 8. municipal license 9. Register with the Employment Bureau 10. Register with health fund 11. Registr with the Pension fund 12. Register company with Chamber of Commerce 7
  11. 11. More detail is included in the appendix. 4. Benchmarking Starting a Business Regulations: Montenegro is ranked 85 overall for Starting a Business. Ranking of Montenegro in Starting a Business - Compared to good practice and selected economies: 8
  12. 12. Procedures (number) Time (days) Cost (% of income per capita) Min. capital (% of income per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Good Practice Economies Montenegro 12 13 2.6 0.0 Selected Economy Bosnia and Herzegovina 12 60 15.8 29.8 Bulgaria 4 18 1.7 20.7 Croatia 7 22 8.4 13.4 Hungary 4 4 8.0 10.2 Macedonia, FYR 4 4 2.5 0.0 Serbia 7 13 7.1 6.1 Comparator Economies The following table shows Starting a Business data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 9
  13. 13. Once entrepreneurshave registered a business, whatregulationsdo they face in operatingit? Tomeasure such regulation,Doing Businessfocusesonthe construction sector.Construction companiesare under constant pressure fromgovernmenttocomply withi nspections,withlicensing and safetyregulations,from customers to be quick and cost-effective.These conflictingpressurespointto the tradeoffin buildingregulation;the tradeoff between protectingpeople (construction workers,tenants,passersby) and keeping the costof building affordable. In manyeconomies,especially poor ones,complyingwithbuildingregulationsisso costlyintime and moneythat many buildersopt out.Builders may paybribesto passinspections or simplybuildillegally,leadi ngtohazardous construction.Wherethe regulatory burden islarge,entrepreneursmay tendto move their activity into the informal economy. There theyoperate withless concernfor safety,leaving everyone worse off.In other economies complianceis simple,straightforward andinexpensive,yieldingbetter results. Methodology The indicatorsondealingwith constructionpermitsrecordall proceduresofficiallyrequiredforanentrepreneur in the construction industrytobuilda warehouse.These includesu bmitting project documents (building plans,site maps)to the authorities,obtaining all necessarylicensesandpermits, completing allrequirednotifications and receivingallnecessaryinspections.Theyalso include procedures for obtainingutility conne ctions, suchaselectricity,telephone,water and sewerage.The time andcosttocomplete eachprocedure under normal circumstances are calculated.Allofficial feesassociated with legally completingthe proceduresare included.Time isrecorded in calendar days.The survey assumes thatthe entrepreneur isaware of allexisting regulationsanddoesnot use anintermediarytocomplete the proceduresunlessrequiredto doso bylaw. Survey Case Study The business:  is a smallto medium-size limited liabilit ycompany  is located in the largest businesscity  is domestically owned and operated,in the constructionbusiness  has 20qualifiedemployees The warehouse to be built :  isa newconstruction(there wasnopreviousconstructionon the land)  has complete architecturalandtechnicalplanspreparedbya licensed architect  willbe connected toelectricity,water,sewerage (sewage system,septic tank or their equivalent) and one land phone line.The connectionto eachutility networkwillbe 32 feet, 10inches( 10 meters) long.  willbe used for generalstorage,suchasof booksorstationery.The warehouse willnotbe usedfor anygoods requiringspecialconditions,such as food,chemicalsor pharmaceuticals.  willtake 30 weekstoconstruct (excluding alldelays due toadministrative andregulatory requirements). 10
  14. 14. Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 166 160 Procedures (number) 20 20 19 Time (days) 197 248 230 Cost (% of income per capita) 1614.0 1323.2 1086.0 1. Historical data: Dealing with Construction Permits in Montenegro 2. The following graphs illustrates the Dealing with Construction Permits indicators in Montenegro over the past 3 years: 11
  15. 15. 3. Steps to Building a Warehouse in Montenegro It requires 19 procedures, takes 230 days, and costs 1,085.97 % GNI per capita to build a warehouse in Montenegro. List of Procedures: 1. Obtain proof of ownership 2. Obtain copy of site map 3. Obtain urban development and technical requirements 4. Geotechnical Examination 5. Obtain approval of geotechnical examination from Municipality 6. Revision of technical control of the report of geotechnical condition 7. Obtain clearance to connect to the electricity network 8. Obtain clearance to connect to water and sewerage network 9. Obtain clearance to connect to telecommunications network 10. Pay compensation for utilities provision on construction land 11. Obtain ecological consent from Ministry for Tourism and Environmental Protection 12. Obtain traffic consent 13. Obtain fire prevention consent 14. Obtain building permit 15. Obtain power connection 16. Obtain water and sewerage connection 17. Obtain phone connection 18. Request and receive technical control of building 19. Obtain use permit 12
  16. 16. More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Montenegro is ranked 160 overall for Dealing with Construction Permits. Ranking of Montenegro in Dealing with Construction Permits - Compared to good practice and selected economies: 13
  17. 17. Procedures (number) Time (days) Cost (% of income per capita) Denmark 6 Qatar 0.6 Singapore 25 Good Practice Economies Montenegro 19 230 1086.0 Selected Economy Bosnia and Herzegovina 16 255 564.7 Bulgaria 24 139 436.5 Croatia 14 420 895.2 Hungary 31 204 9.8 Macedonia, FYR 21 146 1604.8 Serbia 20 279 1907.5 Comparator Economies The following table shows Dealing with Construction Permits data for Montenegro compared to good practice and comparator economies: 14
  18. 18. Economies worldwide haveestablisheda system oflawsandinstitutionsintendedtoprotect workersandguarantee a minimumstandard oflivingfor itspopulation.Thissystem generallyencompassesfour bodiesof law: employment,industrialrelations,social security andoccupationalhealthand safetylaws. Employmentregulationsare needed to allowefficientcontracting betweenemployers and workersandto protect workers fromdiscriminatoryor unfair treatmentbyemployers.DoingBusiness measuresflexibilityinthe regulation of hiring,workinghoursanddismissalina mannerconsistentwiththe conventions of the InternationalLabour Organization (ILO).An economy canhave the mostflexible laborregulationsasmeasured byDoing Businesswhile ratifying and complyingwithallconventions directly relevantto the factorsmeasured byDoing Businessand with the ILO corelabor standards.Noeconomycan achieve abetter score by failingto complywiththese conventions. Governmentsall over the world face the challenge of finding the rightbalancebetweenworker protectionandlabor marketflexibility.But in developing countries especially,regulatorsoftenerr toone extreme,pushingemployers and workers into the informalsector.Analysisacrosseconomies shows thatwhile employmentregulationgenerally increasesthe tenure andwages of incumbentworkers,overly rigid regulations may have undesirableside effects. These include less jobcreation,smaller companysize,lessinvestment in research and development,andlonger spellsof unemploymentandthus the obsolescence ofskills, allof which mayreduce productivitygrowth. Methodology Two measuresare presented: a rigidityofemploymentindex anda redundancycost measure.The rigidityof employmentin dexisthe averageofthree sub-indices: difficultyof hiring,rigidityof hours and difficultyofredundancy.Each indextakesvaluesbetween0 and 100,withhigher valuesindicating more rigidregulation.The difficulty of hiring index measuresthe flexi bility of contractsand the ratio ofthe minimumwage tothe value added per worker.The rigidity of hours indexcovers restrictions onweekendandnight work,requirementsrelatingto workingtime andthe workweek takingintoaccountlegalprovisionsthat refer specificallyto small tomedium-size companies in the manufacturingindustry in which continuousoperation is economicallynecessary,as wellas mandateddaysof annualleave with pay.The difficultyof redundancyindex coversworkers’legalprotectionsagainst dismissal,includingthe groundspermitted for dismissaland proceduresfor dismissal(individualandcollective):notification and approvalrequirements,retraining or reassignmentobligations and priorityrulesfor dismissalsand reemployme nt. The Redundancycostindicator measures the costof advance notice requirements,severance paymentsand penalties due whenterminating a redundantworker,expressedin weeksof salary. Survey Case Study The business:  isa limited liabilitycompany o perating inthe manufacturing sector  is located in the largest businesscity  is 100% domesticallyowned  has 60employees  The companyisalso assumed tobe subjecttocollectivebargaining agreements ineconomieswhere such agreements cover more thanhalfthe manufacturing sector andapplyevento firmsnotpartyto them. 15
  19. 19. Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 93 46 Redundancy costs (weeks of salary) 39 39 28 Rigidity of employment index (0-100) 28 28 13 1. Historical data: Employing Workers in Montenegro 2. The following graphs illustrates the Employing Workers indicators in Montenegro over the past 3 years: 16
  20. 20. 3. Benchmarking Employing Workers Regulations: Montenegro is ranked 46 overall for Employing Workers. Ranking of Montenegro in Employing Workers - Compared to good practice and selected economies: 17
  21. 21. Rigidity of employment index (0-100) Redundancy costs (weeks of salary) Hong Kong, China* 0 New Zealand* 0 Good Practice Economies Montenegro 13 28 Selected Economy Bosnia and Herzegovina 33 31 Bulgaria 19 9 Croatia 50 39 Hungary 22 35 Macedonia, FYR 14 26 Serbia 35 25 Comparator Economies The following table shows Employing Workers data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Rigidity of employment index (0-100): Australia, Brunei Darussalam, Kuwait, Marshall Islands, Singapore, St. Lucia, Uganda, United States Redundancy costs (weeks of salary): Denmark, Iraq, Marshall Islands, Micronesia, Fed. Sts., Palau, Puerto Rico, Tonga, United States 18
  22. 22. Formalproperty titles helppromote the transfer of land,encourage investmentand give entrepreneursaccessto formalcreditmarkets.Buta large share of propertyindevelopingeconomiesis notformallyregistered.Informal titles cannotbe used as security in obtainingloans,whichlimits financing opportunitiesfor businesses.Many governmentshave recognized this and started extensive property titling programs.But bringing assets into the formalsector is only partof the story.The more difficultand costly it is to formallytransfer property,the greater the chancesthat formalizedtitleswillquickly become informalagain.Eliminating unnecessaryobstaclestoregistering and transferringpropertyistherefore importantfor economic development. Efficientproperty registration reducestransactioncosts and helpstoformalize property titles.Simple proceduresto registerproperty arealsoassociated with greater perceived security ofpropertyrightsandless corruption.That benefitsall entrepreneurs,especially women,the youngand the poor.The richhave few problems protecting their propertyrights.Theycanafford to investinsecuritysystems and other measuresto defendtheir property.Butsmall entrepreneurs cannot. Reform canchange this. Methodology DoingBusinessrecords the full sequence ofproceduresnecessary for a business(buyer) to purchase a propertyfromanother business(seller) andtotransfer the propertytitleto the buyer’s name. The propertyof land and buildingwillbe tran sferredinits entirety.Thetransaction isconsidered complete whenthe buyer canuse the propertyascollateralfor a bank loan. Localproperty lawyersand officialsinpropertyregistriesprovide information onrequired proceduresaswell as the time and costto complete each one.For most economies the data arebased on responsesfromboth.Based onthe responses,three indicators are constructed:  number of proceduresto register property  time toregister property(in calendar days)  officialcosts to register property(asa percentage of the propertyvalue) Survey Case Study The buyer andseller:  are limitedliabilitycompanies  are private nationals(noforeign ownership)  are locatedinperiurbanarea of the largestbusinesscity  conductgeneralcommercial activities The property:  consistsof land and a 2 -storybuilding(warehouse)  islocated in the periurbancommercialzone of the largestbusinesscity  The land area is557.4m2 (6,000 square feet).  The warehouse hasa totalareaof929 m2 (10,000 square feet).  has a value equalto50 timesincome per capita  The seller companyownedthe property for the last 10years.  isregisteredinthe land registry and/or cadastre and isfree of alldisputes. 19
  23. 23. Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 125 131 Procedures (number) 8 8 8 Time (days) 86 86 86 Cost (% of property value) 2.4 3.3 3.3 1. Historical data: Registering Property in Montenegro 2. The following graphs illustrates the Registering Property indicators in Montenegro over the past 3 years: 20
  24. 24. 3. Steps to Registering Property in Montenegro It requires 8 procedures, takes 86 days, and costs 3.25 % of property value to register the property in Montenegro. List of Procedures: 1. Obtain property excerpt from Agency for Real Estate 2. Check boundaries and limitations of the property against the excerpt 3. Lawyer drafts sale-purchase agreement 4. Sign and notarize the sale-purchase agreement at the Municipal Court 5. Obtain tax clearance from tax authorities 6. Tax Authorities assess the amount of transfer tax to be paid by the buyer 7. Buyer pays transfer tax at a commercial bank 8. Request inscription of the new owner at the Agency for Real Estate More detail is included in the appendix. 21
  25. 25. 4. Benchmarking Registering Property Regulations: Montenegro is ranked 131 overall for Registering Property. Ranking of Montenegro in Registering Property - Compared to good practice and selected economies: 22
  26. 26. Procedures (number) Time (days) Cost (% of property value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Good Practice Economies Montenegro 8 86 3.3 Selected Economy Bosnia and Herzegovina 7 84 5.2 Bulgaria 8 15 2.3 Croatia 5 104 5.0 Hungary 4 17 11.0 Macedonia, FYR 5 58 3.2 Serbia 6 111 2.8 Comparator Economies The following table shows Registering Property data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 23
  27. 27. Firms consistentlyrate access to creditasamong the greatestbarrierstotheir operationandgrowth. DoingBusiness constructstwosetsof indicators of howwellcreditmarketsfunction:one oncredit registries and the other onlegal rightsof borrowersand lenders.Creditregistries,institutionsthatcollect anddistribute creditinformation on borrowers,can greatlyexpand access to credit.By sharing creditinformation,they help lendersassess riskand allocate creditmore efficiently.Theyalsofreeentrepreneursfromhavingtorelyon personalconnections alone whentryingto obtaincredit. Methodology Creditinformation: three indicatorsare constructed:  depth ofcreditinformationindex,which measuresthe extentto which therulesof a credit informationsystem facilitate lending basedon the scope of informationdistributed,the ease of accesstoinformation and the quality of information  publicregistrycoverage, whichreports the numberof individuals and firmscovered bya public credit re gistry as a percentage ofthe adult population  private bureau coverage,which reportsthe number of individuals and firms,covered by aprivate creditbureau as a percentage ofthe adult population LegalRights: the strength of legalrightsindex measures the degree towhichcollateral and bankruptcylawsprotectthe rightsof borrowersand lenders.Ten points are analyzed:  Cana business use movable assetsascollateralwhile keeping possessionof the assets,and cananyfinancial institution acceptsuch assets ascollateral?  Doesthe law allowa business to granta non -possessorysecurityrightin a single categoryof revolving movable assets,withoutrequiringa specific description of the secured assets?  Doesthe law allowa business to granta nonpos sessorysecurityright insubstantiallyallof itsassets,without requiringa specific description ofthe securedassets?  Cana security rightextendtofuture or after -acquiredassetsand extend automatically tothe products,proceeds or replacementsof the originalassets?  Is generaldescriptionofdebtsand obligations permitted in collateral agreementsandin registration documents, sothatalltypesof obligations and debtscan be secured bystatinga maximumrather than a specific amount between the parties?  Is a collateralregistryin operation thatisunifiedgeographicallyandby asset type aswellas beingindexed by the name of the grantor of asecurity right?  Are securedcreditorspaid firstwhena debtor defaults outside an insolvency procedureor whena businessis liquidated?  Are securedcreditorssubjecttoanautomatic stay or moratoriumon enforcementprocedures when adebtor entersa court-supervisedreorganization procedure?  Are parties allowed to agree ina collateralagreementthat the lender mayenforce its securityrightout of court? LegalRights SurveyCase Study The Debtor:  isa Private Limited Liability Company  has its headquartersandonly base of operations in the largestbusinesscity  obtainsa loan froma localbank (the Cred itor) for anamountup to10 timesincome (GNI) per capita  Bothdebtor and creditor are 100% domesticallyowned. 24
  28. 28. Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 41 43 Strength of legal rights index (0-10) 9 9 9 Depth of credit information index (0-6) 0 2 2 Private bureau coverage (% of adults) 0.0 0.0 0.0 Public registry coverage (% of adults) 0.0 26.3 27.6 1. Historical data: Getting Credit in Montenegro 2. The following graphs illustrates the Getting Credit indicators in Montenegro over the past 3 years: 25
  29. 29. 3. Benchmarking Getting Credit Regulations: Montenegro is ranked 43 overall for Getting Credit. Ranking of Montenegro in Getting Credit - Compared to good practice and selected economies: 26
  30. 30. Strength of legal rights index (0-10) Depth of credit information index (0-6) Public registry coverage (% of adults) Private bureau coverage (% of adults) New Zealand* 100.0 Portugal 81.3 Singapore* 10 United Kingdom 6 Good Practice Economies Montenegro 9 2 27.6 0.0 Selected Economy Bosnia and Herzegovina 5 5 23.2 64.3 Bulgaria 8 6 34.8 6.2 Croatia 6 4 0.0 77.0 Hungary 7 5 0.0 10.3 Macedonia, FYR 7 4 28.1 0.0 Serbia 8 6 0.0 94.2 Comparator Economies The following table shows Getting Credit data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 27
  31. 31. Companiesgrowbyraising capital,either througha bankloan or byattractingequity investors.Selling shares allows companies toexpand withoutthe need to provide collateral and repaybankloans.However,investors worry about their money,and look for laws thatprotect them. Astudy findsthatthe presence of legalandregulatory protectionsfor investors explainsup to73% of the decisionto invest.Incontrast,companycharacteristics explain onlybetween4% and 22%*.Good protections for minority sh areholdersare associatedwithlarger andmore active stock markets.Thus both governmentsand businesses have aninterestinreforms strengthening investorprotections. Methodology To documentsome of the protections investorshave,Doing Businessmeasures howeconomies regulate a standard case of self- dealing,use of corporate assetsfor personal gain.Three indicesof investor protection areconstructedbasedon theanswerstothese and other questions.Allindices range from0 to10,with higher valuesindicating more protectionsor greaterdisclosure. The three indices are:  The extentof disclosure index coversapproval procedures, requirements for immediatedisclosure to the public and shareholdersof proposedtransactions,requirementsfor disclosure inperiodic filingsand reports and the availability of external reviewof transactionsbefore theytake place.  The extentof director liabilityindex coversthe ability of investorsto holdMr.Jamesandthe boardof directors liable for damages,the ability torescind the transaction,the availabilityof finesand jailtime associatedwithself -dealing, the availabilityof director derivativesuitsandthe abilityto require Mr.James topayback his personalprofits from the transaction.  The ease of shareholder suitsindexcovers the availability of documents thatcanbe usedduring trial,the ability of the investor to examine the defendantandother witnesses,shareholders’ accesstointernaldocumentsof the company,the appointment of an inspector toinvestigate the transaction and the standard of proof applicable to a civilsuitagainstthe directors. These three indices are averaged tocreate the strength of investor protection index. Survey case study Mr.James,adirector andthe majority shareholder of a public company,proposesthat the companypurchase used trucksfromanother companyhe owns.The price ishigher than thegoing price for usedtrucks.The transactiongoes forward.Allrequired approvalsare obtained,andall required disclosuresmade,thoughthe transactionisprejudicial tothe purchasingcompany.Shareholders sue the interested parties and the membersofthe boardof directors. Severalquestions arise:  Who approves the transaction?  Whatinformation must be disclosed?  Whatcompanydocumentscaninvestorsaccess?  Whatdo minority shareholders have toprove to getthe transaction stoppedor toreceive compensation from Mr.James? *Doidge,Kardyi and Stulz (2007) 28
  32. 32. Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 25 27 Strength of investor protection index (0-10) 6.3 6.3 6.3 1. Historical data: Protecting Investors in Montenegro 2. The following graph illustrates the Protecting Investors index in Montenegro compared to best practice and selected Economies: 9.7 6.7 6.3 6.0 5.3 5.0 4.3 4.0 N ew Zealand M acedonia, FY R M ontenegro Bulgaria Serbia Bosnia and H erzegovina H ungary C roatia Note: The higher the score, the greater the investor protection. 29
  33. 33. 3. Benchmarking Protecting Investors Regulations: Montenegro is ranked 27 overall for Protecting Investors. Ranking of Montenegro in Protecting Investors - Compared to good practice and selected economies: 30
  34. 34. Strength of investor protection index (0-10) New Zealand 9.7 Good Practice Economies Montenegro 6.3 Selected Economy Bosnia and Herzegovina 5.0 Bulgaria 6.0 Croatia 4.0 Hungary 4.3 Macedonia, FYR 6.7 Serbia 5.3 Comparator Economies The following table shows Protecting Investors data for Montenegro compared to good practice and comparator economies: 31
  35. 35. Taxesare essential.Without themthere wouldbe no moneyto provide public amenities,infrastructure and services which are crucialfora properly functioningeconomy.Butparticularly for smalland mediumsize companies,they may optoutandchoose to op erate in the informalsector.One way to enhance tax compliance isto easeandsimplify the processof paying taxes for such businesses. Methodology The DoingBusinesstaxsurveyrecordsthe effectivetaxthat a small and mediumcompanymustpayandthe administrative costsof doingso. Three indicators are constructed:  number of taxpayments,which takes into accountthe method of payment,the frequencyof paymentsand the number of agencies involvedin ourstandardized case study.  time,which measures the number of hours per year necessary toprepare and file taxreturnsandto paythe corporate income tax,value added tax,sales tax or goodsand service taxand labor taxesand mandatorycontributions.  totaltax rate,which measures the amount of taxes and mandatorycontributionspayable bythe companyduring the secondyear of operation. This amount,expressed asa percentage ofcommercialprofit,isthe sumof all thedifferent taxespayableafter accounting for various deductions and exemptions. Survey case study  TaxpayerCo isa medium-size businessthatstartedoperationslast year.DoingBusinessaskstax practitionersin 183 economies to review TaxpayerCo’s financialstatementsand a standardlistof transactionsthatthe company completed during the year.Respondentsare askedhow much in taxes and mandatorycontributionsthe business mustpay and what the processisfor doingso.  The businessstartsfromthe same financialposition ineach economy. Allthetaxes and mandatory contributionspaid during the secondyear of operationare recorded.  Taxesandmandatorycontributions are measuredatalllevelsof governmentandinclude corporate income tax, turnover tax,alllabor taxesandcontributionspaid by the company(including mandatorycontrib utionspaidto private pension or insurance funds),propertytax,propertytransfer tax,dividend tax,capitalgains tax,financial transactionstax,vehicle tax,salestax and other small taxes (suchas fueltax,stampduty and local taxes). A range ofstandard deductions and exemptionsare alsorecorded. 32
  36. 36. Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 139 145 Total tax rate (% profit) 31.6 31.8 28.9 Payments (number per year) 89 89 89 Time (hours per year) 372 372 372 1. Historical data: Paying Taxes in Montenegro 2. The following graphs illustrates the Paying Taxes indicators in Montenegro over the past 3 years: 33
  37. 37. 3. Benchmarking Paying Taxes Regulations: Montenegro is ranked 145 overall for Paying Taxes. Ranking of Montenegro in Paying Taxes - Compared to good practice and selected economies: 34
  38. 38. Payments (number per year) Time (hours per year) Total tax rate (% profit) Maldives* 1 0 Timor-Leste 0.2 Good Practice Economies Montenegro 89 372 28.9 Selected Economy Bosnia and Herzegovina 51 422 27.1 Bulgaria 17 616 31.4 Croatia 17 196 32.5 Hungary 14 330 57.5 Macedonia, FYR 40 75 16.4 Serbia 66 279 34.0 Comparator Economies The following table shows Paying Taxes data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Payments (number per year): Qatar 35
  39. 39. The benefitsof trade are welldocumented;as are the obstaclesto trade.Tariffs,quotasanddistance from large marketsgreatlyincrease the costof goodsor preventtradingaltogether.Butwithbiggershipsand faster planes,the world isshrinking.Glo balandregional trade agreementshave reduced trade barriers.Yet Africa’s share of global trade is smallertodaythan itwas25 yearsago. So is the Middle East’s,excludingoilexports.Manyentrepreneurs face numeroushurdles toexportingor importing goods,includingdelaysat the border.They often give up.Others never try.In fact,the potential gainsfromtrade facilitation maybe greaterthanthose arising fromonly tariff reductions. Methodology DoingBusinesscompilesproceduralrequirementsfor trading a standardshipmentof goods byoceantransport.Everyprocedure and the associateddocuments, time and cost,for importing and exporting the goodsisrecorded,startingwith the contractual agreementbetween the two partiesandending withdelivery ofthe goods.For importingthe goods,the procedures measured range fromthe vessel’s arrivalatthe port ofentrytothe shipment’s deliveryatthe importer’s warehouse.For exporting the goods,the proceduresmeasuredrange fromthe packing ofthegoods atthe factory to their departure fromthe portofexit.Payment isbyletter of creditand the time and cost for issuingor securing a letter of creditistakeninto account. Documentsrecorded include portfilingdocuments,customs declaration and clearance documents,aswellas officialdocuments exchangedbetweenthe parties tothe transaction.Time isrecorded incalendar days,fromthe beginningtothe end of each procedure. Cost includesthe fees levied ona 20 -footcontainer inU.S.dollars . Allthe feesassociatedwithcompleting the procedurestoexportor importthe goodsare included, suchascosts for documents,administrative fees for customs clearance andtechnical control,terminalhandlingchargesandinland transport.The costmeasure doesnotinclude tariffsor duties. Economies thathave efficient customs,good transportnetworksand fewer documentrequirements,making compliance with exportand importproceduresfaster and cheaper,are more competitive globally.Thatcanlead to more exports; and exports are associated withfaster growth and more jobs.Conversely,a needtofile many documents is associated with more corruption incustoms.Faced with longdelaysand frequent demands for bribes, many tradersmayavoid customsaltogether.Instead,they smuggle goodsacross the border.Thisdefeats the very purpose inhavingborder control oftrade tolevy taxes and ensure high quality of goods. Survey case study To make the data comparable acrosscountries,several assumptions aboutthe businessand the traded goodsare used:  The businessisofmedium size .  The business employs 60people .  The business islocated inthe peri-urbanarea of the economy’slargestbusiness city.  The business isa private,limitedliability company,dom estically owned,formallyregisteredandoperating under commerciallaws and regulations ofthe economy.  The traded goodsare ordinary,legallymanufactured productstransported ina dry-cargo,20-footFCL (full container load) container. 36
  40. 40. Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 46 47 Cost to export (US$ per container) 645 775 775 Cost to import (US$ per container) 760 890 890 Documents to export (number) 7 7 7 Documents to import (number) 7 7 7 Time to export (days) 14 14 14 Time to import (days) 14 14 14 1. Historical data: Trading Across Borders in Montenegro 2. The following graphs illustrates the Trading Across Borders indicators in Montenegro over the past 3 years: 37
  41. 41. 3. Benchmarking Trading Across Borders Regulations: Montenegro is ranked 47 overall for Trading Across Borders. Ranking of Montenegro in Trading Across Borders - Compared to good practice and selected economies: 38
  42. 42. Documents to export (number) Time to export (days) Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) Denmark* 5 France 2 2 Malaysia 450 Singapore 3 439 Good Practice Economies Montenegro 7 14 775 7 14 890 Selected Economy Bosnia and Herzegovina 6 16 1125 7 16 1090 Bulgaria 5 23 1551 7 21 1666 Croatia 7 20 1281 8 16 1141 Hungary 5 18 1225 7 17 1215 Macedonia, FYR 6 12 1436 6 11 1420 Serbia 6 12 1398 6 14 1559 Comparator Economies The following table shows Trading Across Borders data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Time to export (days): Estonia 39
  43. 43. Where contractenforcementisefficient,businessesare more likelyto engage with new borrowersor customers. DoingBusinesstracks the efficiencyof the judicialsystemin resolvinga commercialdispute,followingthe step -by- step evolution of a commercialsale dispute before local courts.The data is collectedthrough study of the codes of civilprocedure and other court regulationsas wellasthrough surveys completed bylocallitigation lawyers(and,in a quarter of the countries,byjudgesas well). Justice delayedisoftenjustice denied.Andin manyeconomies only the rich canafford togo to court.For the rest, justice is outof reach.Inthe absence of efficient courts,firms undertake fewer investmentsor businesstransactions. And theyprefer to involve only a smallgroup ofpeople whoknow each other fromprevious dealings. Methodology Rankingson enforcingcontractsare basedon 3sub-indicators:  number of procedures,which are defined as anyinteraction between the parties orbetweenthem and the judge or court officer.This includes stepstofile the case,steps for trialand judgmentandsteps necessarytoenforce the judgment.  time,which countsthe number of calendar daysfromthe momentthe Seller filesthe lawsuit in court until payme nt is received.Thisincludesboththe days onwhichactionstake place and the waiting periods in between.  cost,whichisrecorded as a percentage of the claim(assumed tobe equivalentto 200%of income per capita).Three types of costsare recorded:courtcosts (includingexpertfees), enforcementcosts (including costsfor a public sale of Buyer’sassets) andattorney fees. Survey case Study  The dispute concernsa contractfor the sale of goodsbetween twobusinesses(the Seller and the Buyer).  Both are locatedinthe economy’slargestbusiness city.  The Seller sellsand deliversgoods,worth 200% of the economy’sincome per capita,to the Buyer.The Buyer refuses to payonthe grounds thattheywere notof adequate quality.  The Seller suesthe Buyer to recover the amountunderthe salesagreement(200%of the economy’sincome per capita).  The claimis filed before a court inthe economy’slargestbusinesscitywithjurisdictionover commercialcases worth 200% ofthe income percapita and is disputed on the merits.  Judgmentis100%in favor of the Sellerandis notappealed.  The Seller enforcesthe judgmentand the moneyis successfully collected througha public sale ofBuyer’s assets. 40
  44. 44. Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 133 133 Procedures (number) 49 49 49 Time (days) 545 545 545 Cost (% of claim) 25.7 25.7 25.7 1. Historical data: Enforcing Contracts in Montenegro 2. The following graphs illustrates the Enforcing Contracts indicators in Montenegro over the past 3 years: 41
  45. 45. 3. Benchmarking Enforcing Contracts Regulations: Montenegro is ranked 133 overall for Enforcing Contracts. Ranking of Montenegro in Enforcing Contracts - Compared to good practice and selected economies: 42
  46. 46. Procedures (number) Time (days) Cost (% of claim) Bhutan 0.1 Ireland 20 Singapore 150 Good Practice Economies Montenegro 49 545 25.7 Selected Economy Bosnia and Herzegovina 38 595 38.4 Bulgaria 39 564 23.8 Croatia 38 561 13.8 Hungary 33 395 13.0 Macedonia, FYR 37 370 33.1 Serbia 36 635 28.9 Comparator Economies The following table shows Enforcing Contracts data for Montenegro compared to good practice and comparator economies: 43
  47. 47. The economic crises ofthe 1990s in emergingmarkets,from EastAsia toLatin America, fromRussiato Mexico, raisedconcernsaboutthe designof bankruptcy systems and theabilityofsuchsystemsto helpreorganize viable companiesandclose down unviable ones.In countrieswhere bankruptcyis inefficient,unviable businesseslinger for years,keepingassetsandhuman capitalfrombeing reallocatedtomore productive uses. Bottlenecks in bankruptcycutintothe amountclaimantscan recover.Incountries w here bankruptcy laws are inefficient,thisisa strong deterrent to investment.Access to creditshrinks,and nonperformingloansand financial risk growbecause creditorscannotrecover overdue loans. Conversely,efficient bankruptcylawscanencourage entrepreneurs.The freedomto fail,and to do so throughanefficientprocess,putspeople andcapital to their most effective use.The resultis more productive businesses and more jobs. The DoingBusinessindicatorsidentifyweaknessesinthe bankruptcy lawas wellasthe mainprocedural and administrative bottlenecks in the bankruptcyprocess.In many developing countries bankruptcyisso inefficientthat creditors hardlyever use it.Incountries suchasthese,reform would best focus onimprovingcontra ctenforcement outside bankruptcy. Methodology Three measuresare constructed fromthe surveyresponses: the time togo through the insolvencyprocess,the costto gothrough the processand the recoveryrate,how much ofthe insolvency estate isrecoveredby stakeholders,takingintoaccount the time, cost,depreciationof assets and the outcome of the insolvency proceeding. Survey case study The data on closinga businessare developed using a standards et of caseassumptionsto tracka companygoingthroughthe step -by- step proceduresof the bankruptcyprocess.Itis assumed that:  the company isa domestically owned  the company isa limited liabilitycorporation operatinga hotel inthe country’slargest business city  the company has 201employees,1main secured creditor and 50 unsecured creditors  Assumptions are also made aboutthe future cashflows.  The case isdesigned sothat the company hasa highervalue asa going concern,that is,the efficient outcome is either reorganizationor sale asa goingconcern,notpiecemealliquidation.  The data are derivedfromquestionnairesanswered byattorneysatprivate lawfirms. 44
  48. 48. Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 44 44 Time (years) 2.0 2.0 2.0 Cost (% of estate) 8 8 8 Recovery rate (cents on the dollar) 42.8 43.7 43.7 1. Historical data: Closing Business in Montenegro 2. The following graphs illustrates the Closing Business indicators in Montenegro over the past 3 years: 45
  49. 49. 3. Benchmarking Closing Business Regulations: Montenegro is ranked 44 overall for Closing a Business. Ranking of Montenegro in Closing Business - Compared to good practice and selected economies: 46
  50. 50. Recovery rate (cents on the dollar) Time (years) Cost (% of estate) Ireland 0.4 Japan 92.5 Singapore* 1 Good Practice Economies Montenegro 43.7 2.0 8 Selected Economy Bosnia and Herzegovina 35.9 3.3 9 Bulgaria 32.1 3.3 9 Croatia 30.5 3.1 15 Hungary 38.4 2.0 15 Macedonia, FYR 20.9 2.9 28 Serbia 25.4 2.7 23 Comparator Economies The following table shows Closing Business data for Montenegro compared to good practice and comparator economies: * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47
  51. 51. Number of reforms in Doing Business 2010 Negative Reform Positive Reform Total number of reforms Economy ClosingaBusiness EnforcingContracts TradingAcrossBorders PayingTaxes ProtectingInvestors GettingCredit RegisteringProperty EmployingWorkers DealingwithConstruction Permits StartingaBusiness Rank Rwanda1 7 Kyrgyz Republic2 7 Macedonia, FYR3 7 Belarus4 6 United Arab Emirates5 3 Moldova6 3 Colombia7 8 Tajikistan8 5 Egypt, Arab Rep.9 4 Liberia10 3 Montenegro 4 Bosnia and Herzegovina 1 Croatia 1 Hungary 1 Bulgaria 2 Serbia 2 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48
  52. 52. Belarus Belarus eased the process for getting construction permits by simplifying approval processes. Restrictions relating to redundancy dismissals were eased by raising the threshold for prior notification requirements. Tax payments were made more convenient through increased use of electronic systems—reducing tax compliance times—while lower ecological and turnover tax rates and a reduction in the number of payments for property tax reduced the tax burden on businesses. Property registration continues to improve, with faster processing and elimination of the requirement for notarization. Business start-up was eased by simplifying registration formalities, abolishing the minimum capital requirement, limiting the role of notaries, and removing the need for a company seal approval. Implementation of a risk-based management system and improvement of border crossing operations reduced transit times for trade. Bosnia and Herzegovina Bosnia and Herzegovina improved its building permit system by reducing the time to register a new building at the courts and land cadastre. Bulgaria Bulgaria eased business start-up by reducing the paid-in minimum capital requirement to about 24 percent of gross national income per capita and making the company registry more efficient. An integrated Web-based property register providing online access to the ownership and cadastre status of properties shortened the time required to register property. Colombia Colombia passed several decrees continuing its efforts to regulate the profession of insolvency administrators. The government eased the construction permit process with a new construction decree that categorizes building projects based on risk and allows electronic verification for certain documents. Access to credit improved thanks to a new credit information law that guarantees the right of borrowers to inspect their own data and new rules that make it mandatory for credit providers to consult and share information with credit bureaus. The tax burden on businesses was eased with the introduction of electronic tax filing and payment, and some payments were reduced. An amendment to the Company Law strengthened investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was made easier by making it possible to obtain required certificates online and by making standard preliminary sale agreements available free of charge. Business start-up was made easier by creating a public-private health provider that enables faster affiliation of employees and through a tool that allows online pre-enrollment with the social security office. Implementation of an electronic declaration system has expedited customs clearance. Croatia Croatia eased the process for getting construction permits by opening a one-stop shop and through enforcement of the building code. Egypt, Arab Rep. The Arab Republic of Egypt, a former global leading reformer and a regional leading reformer in 2008/09, continued to make it easier to deal with construction permits by issuing executive articles for the 2008 construction law and eliminating most preapprovals for construction permits. Contract enforcement was expedited with the creation of commercial courts. Access to credit information has expanded with the addition of retailers to the database of the private credit bureau. Finally, company start-up was eased by the removal of the minimum capital requirement. Hungary Hungary further simplified business start-up by implementing online registration and requiring confirmation of registration one hour after receipt of an application. Kyrgyz Republic The Kyrgyz Republic eased the process for getting construction permits by streamlining the fee structure, introducing a risk-based system of approval and building control, allowing low-risk projects to conduct an internal building control process, and simplifying the process for obtaining utility connections. Requirements relating to redundancy dismissals and worker reassignment were eased. Access to credit was enhanced by making secured lending more flexible and allowing general descriptions of encumbered assets and of debts and obligations. In addition, amendments to the Civil Code provide for automatic extension of security rights to proceeds of the original assets. The tax burden on businesses was eased by reducing the rates for several taxes and the number of payments for several. Surveying and notarization requirements were made optional for property registration, and business start-up was eased by eliminating the minimum capital requirement, reducing the registration time, and abolishing various post-registration fees and the need to open a bank account before registration. The elimination of six previously required documents and the simplification of inspection procedures has sped up trading across borders. 49
  53. 53. Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of obtaining a power generator, abolishing the requirement to obtain a tax waiver certificate before submitting documents to obtain a building permit, and making fixed telephone connections more readily available for public use with the reopening of the national phone company. Business start-up was eased by removing the need to obtain an environmental impact assessment when forming a general trading company. The trade process was expedited by creating a one-stop shop bringing together various ministries and agencies, and streamlining the inspection regime. Macedonia, FYR The Former Yugoslav Republic of Macedonia has been reforming the construction permit process, shortening waiting times but raising fees. Worker hiring was made more flexible by allowing greater use of fixed-term contracts, easing restrictions on working hours, and making redundancy dismissals more flexible. The public credit bureau increased its coverage by introducing a better database that includes more information and by lowering the minimum loan threshold. Social security payments were classified in five groups, and social security contribution rates reduced. Investor protections were increased by regulating the approval of transactions between interested parties, increasing disclosure requirements in annual reports, and making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was eased with the introduction of new time limits at the real estate cadastre—reducing the average time to register a title deed by eight days—and a non-encumbrance certificate can now be obtained from the real estate registry instead of through the court. Business start-up was simplified by integrating procedures at a one-stop shop. Moldova Moldova lowered the rates for social security contributions paid by employers. Property registration was simplified by eliminating the requirement for a cadastral sketch, reducing procedures from six to five and days from 48 to 5. Business start-up was eased by implementing an expedited company registration service. Montenegro Montenegro improved the process for construction permits with a new construction law that eliminated procedures, provided new mechanisms for permit approval and building control processes in general, and introduced a risk-based approval system that assigns control for small projects to municipalities. Labor laws were brought more in line with EU requirements: employment was made more flexible by allowing fixed-term contracts to be used for permanent tasks, restrictions on redundancy dismissals were eased by eliminating the requirement for prior notification for a single redundancy dismissal, and the notice period for redundancy dismissals was shortened. The corporate income tax rate was cut by almost half, to 9 percent, and social security tax rates to 12 percent for 2009 and 9 percent for 2010. Business start-up was eased by simplifying post-registration, including registration for taxes, social security, and employment, as well as the process of obtaining a municipal license. Rwanda Rwanda improved the process for dealing with distressed companies with a new law aimed at streamlining reorganization. Employing workers was made easier by abolishing the maximum duration for fixed-term contracts and allowing unlimited renewals of such contracts, as well as by allowing redundancy procedures to be more flexible, with consultation and notification of third parties no longer required. Getting credit was made easier with a new secured transactions act and insolvency act to make secured lending more flexible, allowing a wider range of assets to be used as collateral and a general description of debts and obligations. In addition, out of court enforcement of collateral has become available to secured creditors, who also now have top priority within bankruptcy. A new company law has strengthened investor protections by requiring greater corporate disclosure, director liability, and shareholder access to information. Property registration was simplified by decreasing the number of days required to transfer a property. Business start-up was eased by eliminating a notarization requirement; introducing standardized memorandums of association; enabling online publication; consolidating name checking, registration fee payment, tax registration, and company registration procedures; and shortening the time required to process completed applications. By implementing administrative changes—such as increased operating hours and enhanced cooperation at the border, along with the removal of some documentation requirements for importers and exporters—Rwanda has improved trading times. Serbia Serbia’s new law on personal data protection guarantees that borrowers can inspect their own data, thus improving access to credit information. Business start-up was eased by creating a one-stop shop for company registration. 50
  54. 54. Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of proceedings. Changes were introduced that simplified the construction permit process, reducing procedures and time. A new law on credit histories improves access to credit information by creating a private credit bureau. Investor protections were strengthened with amendments to the joint stock company law, increasing disclosure requirements for transactions involving conflicts of interest, allowing for greater director liability, and giving shareholders the chance to request that harmful related-party transactions be rescinded. The state duty for property transfer has quadrupled, raising the cost of registering property by 2.8 percent of a property’s value. Business start-up was eased by reducing the minimum capital requirement and shortening the time to obtain a tax identification number. United Arab Emirates The United Arab Emirates shortened the time for delivering building permits by improving its online system for processing applications. Business start-up was eased by simplifying the documents needed for registration, abolishing the minimum capital requirement, and removing the requirement that proof of deposit of capital be shown for registration. Greater capacity at the container terminal, elimination of the terminal handling receipt as a required document, and an increase in trade finance products, have improved trade processes. 51
  55. 55. Registration Requirements: STANDARDIZED COMPANY Legal Form: Društvo sa ograni?enom odgovornoš?u (DOO) - Limited Liability Company Minimum Capital Requirement: City: Podgorica This table summarizes the procedures and costs associated with setting up a business in Montenegro. Starting a Business in Montenegro No: Procedure Time to complete Cost to complete Certify the company’s founding agreements1 1 21 Register company name and company documents with the Company Registry 2 2 25 Make a company seal3 1 35 Obtain statistical number of the company4 1 5 Obtain general Tax registration number5 1 0 obtain VAT number6 1 0 Open a bank account7 1 0 municipal license8 1 50 Register with the Employment Bureau9 1 0 Register with health fund10 * 1 0 Registr with the Pension fund11 * 1 0 Register company with Chamber of Commerce12 1 0 * Takes place simultaneously with another procedure. APPENDICES 52
  56. 56. Procedure Certify the company’s founding agreements1 Time to complete: 1 Cost to complete: 21 Comment: The Republic of Montenegro still has no public notaries, but the profession is expected to develop soon. According to the new changes of the Law on Companies (Official Gazette of Montenegro nos. 6/02, 17/07 & 80/08) lawyers are no longer authorised to do the certification of corporate documents. the applicant certify company documents at the basic court and certify copies at municipalities . Certification fees vary depending on the number of pages, documents, and so forth. the total cost is: 21 Euro (13 Euro for the court + copies of documents such as passport ((each copy 2 Euros)). Procedure Register company name and company documents with the Company Registry2 Time to complete: 2 Cost to complete: 25 Comment: The only registry in Montenegro is Podgorica (in the Commercial Court Building). The registry is computerized. The legal time limit for registration is 4 days, but in practice, the registry completes the registration in 2 days. The applicant checks the company name online and then comes to the registry located at the commercial court with completed documents and register the name and company. At the registry one counter exist for LLC registration and payment of relevant fees can be done at the same place. (Name can be checked online at no charge at (www.crps.cg.yu) and name reservation can be done online but payment is done in person. Company Forms can be obtained online. The Company Registry prepares text for the announcement of company formation. The Registry also estimates the publication fee (based on notice length) and sends all notices to the Official Gazette, which are published in the upcoming issue. Publication lead time is 10–15 days. Even so, subsequent procedures do not depend on the announcement, so the client can continue to form the company regardless of the publication date. Required documents for registration are: 1. act on foundation; 2. the Statute; 3. list of founders, members of a company, managers and members of the board of directors, if they are appointed; 4. name of an executive director; 5. name of the company, address of the seat of the company and address for receiving official correspondence, if they are different; 6. persons authorized to represent the company and information if the representation is collective or individual; 7. written consent of the members of board of director for their appointment, if they have been appointed; 8. a document which would confirm payment of registration fee Procedure Make a company seal3 Time to complete: 1 53
  57. 57. Cost to complete: 35 Comment: The company seal or stamp is a core instrument in company in company legal transactions. The company must order a seal or stamp upon registering with the Company Registry because it is essential for subsequent company transactions. The seal is made on the day it is ordered. Procedure Obtain statistical number of the company4 Time to complete: 1 Cost to complete: 5 Comment: Upon registering, the company must apply for the statistical identification number with the Statistical Office of the Republic of Montenegro. Documents needed for the statistical registration of a legal entity are: 1. Copy of a Document on registration of a legal entity (or on eventual changes); 2. Application RJR clearly filled in, signed and validated with a stamp; 3. For business and other units application form RJR-1a; 4. Bank account payment of 5,00 euros. Procedure Obtain general Tax registration number5 Time to complete: 1 Cost to complete: 0 Comment: The following documents are required to register for income taxes: an application form, duly completed with the company’s information and signed by the company representative; copies of the registration documents; copy of the certificate on the company identification number; certificate of the bank account setup; and the executive director’s passport or identity card. If the application form is completed correctly, the company tax number and VAT number certificate are issued in 2–3 days. The tax number always matches the company number and is issued after obtaining the municipal business license. A tax inspection is not required before issuing the number. Procedure obtain VAT number6 Time to complete: 1 Cost to complete: 0 Comment: Once the company is registered for income tax, the only required document is an application form, duly completed, signed, and stamped. Procedure Open a bank account7 Time to complete: 1 Cost to complete: 0 Comment: The certificate of bank account set-up is required to register for taxes. The bank account is opened once the company is registered with the Company Registry and tax office and the Statistical Office. Request for opening of the bank account is submitted on the form ZZOUR of the bank, by post or personally, and it has to have the following information: 54
  58. 58. -name of the requesting party -address of the seat of the company and the telephone -name of the account Beside the form ZZOUR a company has to submit the following as well: A confirmation of the Central Registry of the Commercial Court in Podgorica on registration, 2 (validated copy), 3 a contract on opening of the account and keeping the account (is closed in a bank), 4 notification of MONSTAT on classification of the activities (original document), 5 a card of the deposited signatures (is received in the bank), 6 OP (validation of the signature) a form validated in the Basic Court, 7 a document on tax identification number (PIB) by the Tax Authority of Montenegro, 8 act of foundation (a copy). Procedure municipal license8 Time to complete: 1 Cost to complete: 50 Comment: New reforms abolished the license and made it sufficient to have a notification Procedure Register with the Employment Bureau9 Time to complete: 1 Cost to complete: 0 Comment: Procedure Register with health fund10 Time to complete: 1 Cost to complete: 0 Comment: Procedure Registr with the Pension fund11 Time to complete: 1 Cost to complete: 0 Comment: Procedure Register company with Chamber of Commerce12 Time to complete: 1 Cost to complete: 0 Comment: Chamber of Commerce membership is obligatory and requires submission of an application form. 55
  59. 59. Registration Requirements: BUILDING A WAREHOUSE Date as of: January 2009 Estimated Warehouse Value: City: Podgorica The table below summarizes the procedures, time, and costs to build a warehouse in Montenegro. Dealing with Construction Permits in Montenegro No: Procedure Time to complete Cost to complete 1 Obtain proof of ownership 1 day EUR 5 2 Obtain copy of site map 2 days EUR 10 3 Obtain urban development and technical requirements 60 days EUR 150 4 Geotechnical Examination 7 days no charge 5 Obtain approval of geotechnical examination from Municipality 10 days EUR 150 6 Revision of technical control of the report of geotechnical condition 10 days no charge 7 Obtain clearance to connect to the electricity network 20 days EUR 200* 8 Obtain clearance to connect to water and sewerage network 16 days EUR 274* 9 Obtain clearance to connect to telecommunications network 15 days EUR 340* 10 Pay compensation for utilities provision on construction land 1 day EUR 42,452* 11 Obtain ecological consent from Ministry for Tourism and Environmental Protection 30 days EUR 7,150* 12 Obtain traffic consent 10 days EUR 3* 13 Obtain fire prevention consent 15 days EUR 500 14 Obtain building permit 30 days EUR 715 15 Obtain power connection 20 days EUR 300 56
  60. 60. 16 Obtain water and sewerage connection 10 days EUR 200* 17 Obtain phone connection 7 days EUR 80* 18 Request and receive technical control of building 1 day EUR 3,346 19 Obtain use permit 49 days EUR 1,430 * Takes place simultaneously with another procedure. 57
  61. 61. Procedure Obtain proof of ownership1 Time to complete: 1 day Cost to complete: EUR 5 Comment: Procedure Obtain copy of site map2 Time to complete: 2 days Cost to complete: EUR 10 Comment: It takes 2 days, as graphical database is not digital and analogue plans needs drafting for each separate project. Procedure Obtain urban development and technical requirements3 Time to complete: 60 days Cost to complete: EUR 150 Comment: New Construction Law (2008) provides for companies not to enter into time-consuming procedure of obtaining the decision on location as a precondition for entering the design phase. This process is done at the stage of issuance of building permit. At the pre-design stage it is sufficient to follow the urban-technical conditions for that particular area contained in the general or local spatial plan. However, Podgorica does not have a completely updated set of technical conditions, detailed spatial plans and maps yet. According to the implementation regulations there is a one year period for each local government to adopt its local detailed maps and plans. Thereafter, spatial plans, urban technical conditions, requests for issuance of construction permits, construction permits and commencement of construction works notices are to be published on the governmental web sites. The implementation period for all local authorities to introduce web-based platforms is also one year and has not expired yet. The responsible authority for projects less than 3,000 sq.m is local government- Municipality of Podgorica. It takes overage 60 days. According to the new Construction Law (2008) Article 88, the process of review of conceptual project and main project may be conducted by a business organization which is licensed and which meets the conditions referred to in Articles 83, 84 and 85 of this Law. The review of the conceptual project and the main project must not be performed by a person who participated in producing such projects. Previously this function was performed by the Ministry of Economic Development. Procedure Geotechnical Examination4 Time to complete: 7 days Cost to complete: no charge Comment: Agency on Geological and Geotechnical Survey can develop the geotechnical study. 58
  62. 62. Procedure Obtain approval of geotechnical examination from Municipality5 Time to complete: 10 days Cost to complete: EUR 150 Comment: After the Ministry of Economy reviews the study it must be reviewed and approved by the Commission of Experts. Agency on Geological and Geomechanical Survey can convene this Commission. Procedure Revision of technical control of the report of geotechnical condition6 Time to complete: 10 days Cost to complete: no charge Comment: The Commission experts must be all licensed. Procedure Obtain clearance to connect to the electricity network7 Time to complete: 20 days Cost to complete: EUR 200 Comment: In Podgorica BuildCo would have to pay for the initial clearance from utility companies. In the case of electricity the cost would be EUR 200 (EUR 50- taxes, and EUR 150 for the service). Under the new Construction Law (2008) Article 62, the utilities are not to issue any preliminary consent to connect to their services before the design stage. It is assumed that the urban development plans and technical requirement plans should bear all relevant information and be publicly available. However, in practice due to early stages of reform and lack of clear picture on the existing capacity on the side of utilities, companies have to still visit each authority separately. Procedure Obtain clearance to connect to water and sewerage network8 Time to complete: 16 days Cost to complete: EUR 274 Comment: The cost is calculated as follows: (0,18x 1300,6 sq.m)+17% PDV(tax)=EUR 274 Under the new Construction Law (2008) Article 62, the utilities are not to issue any preliminary consent to connect to their services before the design stage. It is assumed that the urban development plans and technical requirement plans should bear all relevant information and be publicly available. However, in practice due to early stages of reform and lack of clear picture on the existing capacity on the side of utilities, companies have to still visit each authority separately. Procedure Obtain clearance to connect to telecommunications network9 Time to complete: 15 days Cost to complete: EUR 340 59
  63. 63. Comment: According to municipal tariffs and fees the cost is calculated based on the total area of warehouse. Anything between 1,000- 3,000 sq.m is EUR 340. Under the new Construction Law (2008) Article 62, the utilities are not to issue any preliminary consent to connect to their services before the design stage. It is assumed that the urban development plans and technical requirement plans should bear all relevant information and be publicly available. However, in practice due to early stages of reform and lack of clear picture on the existing capacity on the side of utilities, companies have to still visit each authority separately. Procedure Pay compensation for utilities provision on construction land10 Time to complete: 1 day Cost to complete: EUR 42,452 Comment: The fees are determined according to the following schedule (in EUR): In Zone I, the fees are: - In Zone A 152/m2 - In Zone B 132/m2 and - In Zone C 112/m2. In Zone II 82/m2 In Zone III 50/m2 In Zone IV 25/m2. In Zone V 50/m2 (where most likely the warehouse would be located). Cost is calculated based on following formula: (1,300.6 the size * 65.28 per m/2 (Zone V average) * 50% warehouse applicability fee)= EUR 42,451.5 For warehouses, only 50% of the fee is applied. As of March 25, 2009 Municipality of Podgorica issued Decision on Compensation for utilities provision on construction land. The Agency to which the amount (65,28eur/m2) is paid is Agency for building and development of Podgorica. The amount is paid in total amount before submitting the request for occupancy permit. If paid 15 days from the day of issue of building permit the amount is decreased for 10%, and if investor pays it in total amount just after signing the agreement with the Agency, the amount is decreased by another 10%. There is also possibility to defer payments for the period of 5 years but accrue interest rate payment at market rate. Procedure Obtain ecological consent from Ministry for Tourism and Environmental Protection11 Time to complete: 30 days Cost to complete: EUR 7,150 Comment: Procedure Obtain traffic consent12 Time to complete: 10 days Cost to complete: EUR 3 Comment: 60
  64. 64. Procedure Obtain fire prevention consent13 Time to complete: 15 days Cost to complete: EUR 500 Comment: Under the Construction Law (2008) the Fire Authority must issue the approval in 6 days. However, in practice it still takes two weeks. Procedure Obtain building permit14 Time to complete: 30 days Cost to complete: EUR 715 Comment: Building permit is obtained from Ministry of Economic Development at the cost of 0.1% of warehouse value. After obtaining the building permit from Ministry, BuildCo needs to visit the Agency for Real Estate under the Municipality of Podgorica and Request and register the construction documents for "red" line. The procedure costs EUR 115. Under the new Construction Law (2008) the deadline for issuance of construction (building) permit is now set at 15 days. However, in practice due to lack of adequate manpower and technology it still takes 30 days, as before. Ministry of Economic Development is conducting a constant monitoring of the progress and helps applicants whose requests are not replied within time-limit. Applicants can only file a complaint with the local government first, and then if no reaction appeal to the local courts. In practice most companies prefer to wait rather than challenge the authorities. The procedure for issuance of construction permit is simplified. Various approvals and opinions from ministries and utilities companies that were, under the former law, required to be submitted before the issuance of the construction permit are now no longer required. Moreover, the construction permit may be issued based on the preliminary design, whereas the main design and its audit are required before the commencement of construction. This part also includes the review of location permit aspects. However, in practice most of the approvals and opinions are still required before the final decision on construction permit. Building control process during construction has been amended as well. Under the Article 105, companies following the issuance of the building permit must notify the Construction Inspection within 7 days before the actual works begin. The notification can be done via email, provided there is a scanned copy of the building permit. Thereafter the Construction Inspection, which is a national entity, must publish the information on its website, including the schedule of inspections. It is most likely the inspections will take place at the foundation, structural and final stages of construction works. Inspections will not be requested and happen on risk-based approach. Each time the inspector will register the construction site ledger. The Construction Inspection consists of only lawyers which made the process of supervision purely a legal matter. Procedure Obtain power connection15 Time to complete: 20 days Cost to complete: EUR 300 61
  65. 65. Comment: Procedure Obtain water and sewerage connection16 Time to complete: 10 days Cost to complete: EUR 200 Comment: Procedure Obtain phone connection17 Time to complete: 7 days Cost to complete: EUR 80 Comment: Procedure Request and receive technical control of building18 Time to complete: 1 day Cost to complete: EUR 3,346 Comment: Two member of Ministry of Economy were integrated into the membership of Technical Control Inspection. Ministry of Economy nominates the entire Inspection given the size of project. The most likely members are from architecture, sewage/water, technical standards, electricity etc. The cost is calculated based on following formula: 2.20x1300+17%=EUR 3,346. This money is paid for services of the Inspection, and not the Ministry of Economy. Only fraction goes for the services of Ministry's two people. Building use permit must be issued within 7 days following the final report by technical inspection performer. However, prior to that the competent authority has 7 days to decide on the performer of technical inspection. Thereafter, the inspector has another 7 days to submit the final report. In practice, it still takes on average 45 days due to various implementation issues. The requirements for this procedure are controlled by the Ministry of Economic Development. Additionally, architects which designed the project documents must be part of the technical inspection. This came as a result of multiple copyright violations by various builders. Procedure Obtain use permit19 Time to complete: 49 days Cost to complete: EUR 1,430 Comment: The cost of this procedure is calculated as follows: 0.2% of warehouse value 715,000= EUR 1,430. it is paid to the Ministry of Economy. All buildings must have a building use permit in order to be able to register with respective agency. Before, however, buildings could be registered with just a building permit and sometimes without use permit. 62
  66. 66. Employing Workers in Montenegro Employing workers indices are based on responses to survey questions. The table below shows these responses in Montenegro. Employing Workers Indicators (2009) Answer Score 0.0 Difficulty of hiring index (0-100) Are fixed-term contracts prohibited for permanent tasks? No 0 What is the maximum duration of fixed-term contracts (including renewals)? (in months) No limit 0.0 What is the ratio of mandated minimum wage to the average value added per worker? 0.08 0.00 20.0 Difficulty of redundancy index (0-10) Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? No 0 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 9 redundant workers? No 0 Does the employer need the approval of a third party to terminate a group of 9 redundant workers? No 0 Is there a retraining or reassignment obligation before an employer can make a worker redundant? Yes 1 Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? No 0 28.1 Redundancy costs (weeks of salary) What is the notice period for redundancy dismissal after 20 years of continuous employment? (weeks of salary) 2.1 What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of salary) 26.0 What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 13.3 Rigidity of employment index (0-100) 20.0 Rigidity of hours index (0-100) Can the workweek extend to 50 hours (including overtime) for 2 months per year to respond to a seasonal increase in production? Yes 0 63
  67. 67. What is the maximum number of working days per week? 6 0 Are there restrictions on night work and do these apply when continuous operations are economically necessary? Yes 1.00 Are there restrictions on "weekly holiday" work and do these apply when continuous operations are economically necessary? No 0.00 What is the paid annual vacation (in working days) for an employee with 20 years of service? 21 0 Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 64
  68. 68. STANDARDIZED PROPERTY Property Value: 263,841.22 City: Podgorica This topic examines the steps, time, and cost involved in registering property in Montenegro. Registering Property in Montenegro No: Procedure Time to complete Cost to complete 1 Obtain property excerpt from Agency for Real Estate 1 day (simultaneous with procedure 2) EUR 5 (Republic Administrative Tax) + EUR 3 (to Agency for Real Estate) * 2 Check boundaries and limitations of the property against the excerpt 1 day (simultaneous with procedure 1) included in procedure 3* 3 Lawyer drafts sale-purchase agreement 1 day EUR 200-300 4 Sign and notarize the sale-purchase agreement at the Municipal Court 1 day EUR 30 for any agreement over EUR 5000 + 0.25% of the amount exceeding EUR 5000, not to exceed EUR 300. The total in this case is EUR 300. 5 Obtain tax clearance from tax authorities 15 days EUR 15 6 Tax Authorities assess the amount of transfer tax to be paid by the buyer 10 - 30 days no cost 7 Buyer pays transfer tax at a commercial bank 1 day 3% property value 8 Request inscription of the new owner at the Agency for Real Estate 1 day (request) + 30-60 days (inscription) EUR 5 (request) + EUR 13 (inscription) * Takes place simultaneously with another procedure. Registration Requirements: 65
  69. 69. Procedure Obtain property excerpt from Agency for Real Estate1 Time to complete: 1 day (simultaneous with procedure 2) Cost to complete: EUR 5 (Republic Administrative Tax) + EUR 3 (to Agency for Real Estate) Comment: The buyer goes to the local branch of the Agency for Real Estate to obtain an excerpt on the property, proving the seller’s ownership. Procedure Check boundaries and limitations of the property against the excerpt2 Time to complete: 1 day (simultaneous with procedure 1) Cost to complete: included in procedure 3 Comment: It is standard practice for the buyer to check the boundaries and limitations of the property against the excerpt obtained at the local branch of the Agency for Real Estate. If it is the buyer’s lawyer that does this, which is normally the case, he may include this in his fees. Procedure Lawyer drafts sale-purchase agreement3 Time to complete: 1 day Cost to complete: EUR 200-300 Comment: It is standard practice for parties to hire a lawyer to draft the sale-purchase agreement. Procedure Sign and notarize the sale-purchase agreement at the Municipal Court4 Time to complete: 1 day Cost to complete: EUR 30 for any agreement over EUR 5000 + 0.25% of the amount exceeding EUR 5000, not to exceed EUR 300. The total in this case is EUR 300. Comment: It is mandatory that the sale-purchase agreement be notarized. Procedure Obtain tax clearance from tax authorities5 Time to complete: 15 days Cost to complete: EUR 15 Comment: Even though not mandated by law, the seller should obtain a document from the tax authorities saying that he has paid any taxes related to the property. Procedure Tax Authorities assess the amount of transfer tax to be paid by the buyer6 Time to complete: 10 - 30 days 66
  70. 70. Cost to complete: no cost Comment: During this period the tax authorities will compare their valuation of the property with the sale-purchase agreement price. They will assess how much the buyer should pay as transfer tax (3% of the property value) and assign a bank at which to pay. Procedure Buyer pays transfer tax at a commercial bank7 Time to complete: 1 day Cost to complete: 3% property value Comment: The buyer will take the amount assessed by the tax authorities to pay as transfer tax, to deposit at a bank assigned by the tax authorities in their account. Procedure Request inscription of the new owner at the Agency for Real Estate8 Time to complete: 1 day (request) + 30-60 days (inscription) Cost to complete: EUR 5 (request) + EUR 13 (inscription) Comment: Parties fill in a standard form or make a simple written request at the local branch of the Agency for Real Estate in order for the name on the property to be changed to the buyer’s. It will take between one and two months for the Agency to inscribe the name, at which point the transfer is considered final. The parties are notified in writing after the inscription has taken place. There is no mandatory document to pick up at the end of this period, though the buyer can request a copy of the inscription if he wishes. 67
  71. 71. The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Montenegro. Getting Credit in Montenegro Getting Credit Indicators (2009) Indicator score Private credit bureau Public credit registry 2Private bureau coverage (% of adults) No YesAre data on both firms and individuals distributed? 1 No NoAre both positive and negative data distributed? 0 No NoDoes the registry distribute credit information from retailers, trade creditors or utility companies as well as financial institutions? 0 No NoAre more than 2 years of historical credit information distributed? 0 No YesIs data on all loans below 1% of income per capita distributed? 1 No NoIs it guaranteed by law that borrowers can inspect their data in the largest credit registry? 0 Coverage 27.60.0 9Strength of legal rights index (0-10) Can any business use movable assets as collateral while keeping possession of the assets; and any financial institution accept such assets as collateral ? Yes Does the law allow businesses to grant a non possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets ? Yes Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of the secured assets ? Yes May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the original assets ? Yes Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Yes Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the grantor's name of a security right ? Yes Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes Number of individuals 0 132,903 Number of firms 0 5,507 68
  72. 72. During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? Yes Does the law authorize parties to agree on out of court enforcement? No 69
  73. 73. Protecting Investors in Montenegro The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Montenegro. Protecting Investors Data (2009) Indicator Extent of disclosure index (0-10) 5 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 2 Immediate disclosure to the public and/or shareholders (0-2; see notes) 1 Disclosures in published periodic filings (0-2; see notes) 1 Disclosures by Mr. James to board of directors (0-2; see notes) 1 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) 0 Extent of director liability index (0-10) 8 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company. (0-2; see notes) 2 Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for damage to the company. (0-2; see notes) 2 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff (0-2; see notes) 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 1 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 1 Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 0 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction causes to the company (0-1; see notes) 1 Ease of shareholder suits index (0-10) 6 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see notes) 3 Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see notes) 1 Plaintiff can request categories of documents from the defendant without identifying specific ones (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the transaction (0=no, 1=yes) 1 70
  74. 74. Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit (0=no, 1=yes) 1 Strength of investor protection index (0-10) 6.3 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff’s ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff’s ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs’ ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff’s claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 71
  75. 75. The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Montenegro, as well as measures of administrative burden in paying taxes. Paying Taxes in Montenegro Tax or mandatory contribution Payments (number) Notes on Payments Time (hours) Statutory tax rate Tax base Totaltax rate (% profit) Notes on TTR value added17%19312VAT 0.05land areaEUR 0.08/ sq meter 12Construction land charge 0.16EUR 2801Name disclosure tax 0.27ton of wasteEUR 2271Environmental tax 0.40net book value of property 0%2Property tax 0.53gross salaries1%12Unemployment insurance 0.91per literEUR 0.2701Fuel tax 1.88personal income tax 15%12Payroll tax 6.31gross salaries6%12Health insurance 8.28taxable profits 9%4312Corporate income tax 10.09gross salaries10%13612Social security contributions Totals 89 372 28.9 72
  76. 76. Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name 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. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. 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. 73
  77. 77. These tables list the procedures necessary to import and exports a standardized cargo of goods in Montenegro. The documents required to export and import the goods are also shown. Trading Across Borders in Montenegro Nature of Export Procedures (2009) Duration (days) US$ Cost Documents preparation 4 140 Customs clearance and technical control 3 55 Ports and terminal handling 5 300 Inland transportation and handling 2 280 Totals 14 775 Nature of Import Procedures (2009) Duration (days) US$ Cost Documents preparation 6 250 Customs clearance and technical control 3 60 Ports and terminal handling 3 300 Inland transportation and handling 2 280 Totals 14 890 Export Bill of lading Certificate of origin Commercial invoice Customs export declaration Packing list Technical standard/health certificate Terminal handling receipts Import Bill of lading Certificate of origin Commercial invoice Customs import declaration 74

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