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3. ContentsDoing Business in the Arab World 2011 is Regulations affecting 11 areas of the life Preface va regional report drawing on the global of a business are measured: starting a Executive summary 1Doing Business project and its database business, dealing with construction per- About Doing Business 9as well as the findings of Doing Business mits, registering property, getting credit, Doing Business topics2011, the eighth in a series of annual protecting investors, paying taxes, trad- Starting a business 16reports investigating regulations that en- ing across borders, enforcing contracts,hance business activity and those that closing a business, getting electricity and Dealing with construction permits 20constrain it. employing workers. The getting electric- Registering property 23 ity and employing workers data are not Getting credit 27Doing Business presents quantitative in- included in the ranking on the ease of Protecting investors 30dicators on business regulations and the doing business in Doing Business 2011. Paying taxes 34protection of property rights that can be Data in Doing Business 2011 are cur-compared across 183 economies—from rent as of June 1, 2010. The indicators Trading across borders 38Afghanistan to Zimbabwe—and over are used to analyze economic outcomes Enforcing contracts 42time. This report presents a summary of and identify what reforms have worked, Closing a business 45the Doing Business indicators for 20 Arab where and why. Ease of doing businesseconomies: Algeria, Bahrain, Comoros, Data notes 50Djibouti, the Arab Republic of Egypt, The methodology for the employingIraq, Jordan, Kuwait, Lebanon, Mau- workers indicators changed for Doing Doing Business indicatorsritania, Morocco, Oman, Qatar, Saudi Business 2011. See Data notes for details. Country tablesArabia, Sudan, the Syrian Arab Repub- Acknowledgmentslic, Tunisia, the United Arab Emirates,West Bank and Gaza and the Republicof Yemen.THE DOING BUSINESS WEBSITE Download reports Access to Doing Business reports as well asCurrent features subnational and regional reports, reform caseNews on the Doing Business project studies and customized country and regionalhttp://www.doingbusiness.org profilesRankings http://www.doingbusiness.org/ReportsHow economies rank—from 1 to 183 Subnational and regional projectshttp://www.doingbusiness.org/Rankings Differences in business regulations at theDoing Business reforms subnational and regional levelShort summaries of DB2011 reforms, lists of http://www.doingbusiness.org/reformers since DB2004 Subnational-Reportshttp://www.doingbusiness.org/Reforms Law libraryHistorical data Online collection of laws and regulationsCustomized data sets since DB2004 relating to business and gender issueshttp://www.doingbusiness.org/Custom-Query http://www.doingbusiness.org/Law-library http://wbl.worldbank.orgMethodology and researchThe methodology and research papers Local partnersunderlying Doing Business More than 8,200 specialists in 183 economieshttp://www.doingbusiness.org/Methodology who participate in Doing Businesshttp://www.doingbusiness.org/Research http://www.doingbusiness.org/Local-Partners/ Doing-Business Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet
4. PREFACE vPreface A vibrant, competitive private sector—with firms making investments, creating jobs and improving productivity—promotes growth and expands opportunities for the poor. In the words of an 18-year-old Ecuadoran in Voices of the Poor, a World Bank survey capturing the perspectives of poor people around the world, “First, I would like to have work of any kind.” Enabling the growth of a competitive, transparent private sector —and ensuring that poor people can participate in its benefits—requires a regulatory environment where new entrants with drive and good ideas, regardless of their position in society, can get started in business and where firms can invest and grow without government interference, generating more jobs. Beginning in early 2011, the Arab world and the broader Middle East and North Af- rica region has witnessed a series of sweeping political changes. Although driven by a variety of factors, one key driver of these changes has been a sense of frustration, par- ticularly by young people, that they have not been able to find jobs. Hence, renewed at- tention is focused on the need to create more competitive private sectors wherein more innovative industries can grow and thrive – generating more employment opportuni- ties for all, especially young people. Their quest for more transparency, accountability and participation in the political and economic sphere also reflects their desire for a level playing field, which underpins a truly competitive business environment. Doing Business in the Arab World 2011 is the third in a series of annual reports bench- marking the regulations that enhance business activity and those that constrain it in 20 economies in the Arab world. The report presents quantitative indicators on business regulation and the protection of property rights in those 20 economies, and it is based wholly on the data and analysis of the Doing Business 2011 report that was published in November 2010. The data are current as of June 2010. A fundamental premise of Doing Business is that economic activity requires good rules—rules that establish and clarify property rights and reduce the cost of resolving disputes; rules that increase the predictability of economic interactions and provide contractual partners with certainty and protection against abuse. The objective is regulations designed to be efficient, accessible to all and simple in their implementa- tion. Doing Business gives higher scores in some areas for stronger property rights and investor protections, such as stricter disclosure requirements in related-party transactions. Doing Business is limited in scope. It takes the perspective of domestic, primarily smaller companies and measures the regulations applying to them through their life cycle. Economies are ranked on the basis of 9 areas of regulation—for starting a busi- ness, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a busi- ness. In addition, data are presented for regulations on employing workers and for a set of pilot indicators on getting electricity. It does not consider the costs and benefits of regulation from the perspective of society as a whole. Nor does it measure all aspects of the business environment that matter to firms and investors or affect the competitiveness of an economy. For example, it does not measure security, political risk, or macroeconomic variables. Its aim is simply to supply business leaders and policy makers with a fact base for informing policy mak- ing and to provide open data for research on how business regulations and institutions affect such economic outcomes as productivity, investment, informality, corruption, unemployment and poverty.
5. vi DOING BUSINESS IN THE ARAB WORLD 2011Through its indicators, the global Doing Business report has tracked changes to busi-ness regulation around the world, recording more than 1,500 important improvementssince 2004. Since its launch in 2003, the global Doing Business report has stimulateddebate about policy through its data and benchmarks, both by exposing potential chal-lenges and by identifying where policy makers might look for lessons and good prac-tices. Governments have reported more than 280 business regulation reforms inspiredor informed by Doing Business since 2005, including 40 among the 20 economies ofthe Arab world. Most were nested in broader programs of investment climate reformaimed at enhancing economic competitiveness, as in Colombia, Kenya and Liberia.Well designed and streamlined business regulations will have a stronger impact ongrowth and employment in an environment where rules of the game are the same foreveryone. This is best achieved with reforms that extend beyond the regulatory issuesmeasured by the Doing Business indicators. In structuring their reform programs forthe private sector, governments should recognize the need to use multiple informationsources, and reach out to many stakeholders and interest groups, all of whom bringimportant issues and concerns to the debate. World Bank Group dialogue with gov-ernments on the investment climate is designed to encourage critical use of the data,sharpening judgment, avoiding a narrow focus on improving Doing Business rankingswithin a framework which encourages broad-based reforms that enhance the invest-ment climate.This volume is a product of the staff of the World Bank Group. The team would like tothank all World Bank Group colleagues from the regional departments and networksfor their contributions to this effort.Augusto Lopez-Claros Simon C. BellDirector Sector ManagerGlobal Indicators & Analysis Financial and Private Sector DevelopmentFinancial and Private Sector Development Network Middle East and North AfricaWorld Bank Group World Bank Group
6. STARTING A BUSINESS 1Executive FIGURE 1.1 Strengthening credit information systems and easing cross-border trade,summary most popular reforms in the Arab world last year Share of Arab economies with at least 1 Doing Business reform making it easier to do business, by topic (%) 0 10 20 30 40 Starting a business Dealing with Doing Business reform by report year construction permits Registering DB2011 only property DB2005–DB2011 Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a businessEconomies in the Arab world continue Note: Not all indicators are covered for the full period. Paying taxes, trading across borders, dealing with construction permits andin 2009/10 to make it easier for small- to protecting investors were introduced in Doing Business 2006.medium-size enterprises to do business. Source: Doing Business database. In the past year, firms around theworld felt the repercussions of what spections. Similarly, Tunisia upgraded other custom posts around the country.began as a financial crisis in mostly its electronic data interchange system The United Arab Emirates streamlinedhigh-income economies and then spread for imports and exports, speeding up document preparation and reduced theas an economic crisis to many more. the assembly of import documents. In time to trade with the launch of DubaiWhile some economies were hit harder Egypt, modern customs centers are being Customs’ comprehensive new customsthan others, policy makers around the established at major ports and new in- system, “Mirsal 2.” Saudi Arabia reducedworld took steps in the past year to make formation technology systems are being the time to import by launching a newit easier for firms to start up and operate. implemented. In particular, electronic container terminal at the Jeddah IslamicThis is important. How easy or difficult it submission of export and import docu- Port. In West Bank and Gaza, more ef-is to start and run a business—and how ments was introduced at Alexandria Port. ficient processes at Palestinian customsefficient courts and insolvency proceed- These new systems are being rolled out to made trading easier.ings are—can influence how firms copewith crises. Business conditions also af- BOX 1.1fect how quickly new opportunities can Measuring regulation throughout the life cycle of a businessbe seized against the backdrop of finan- This year’s aggregate ranking on the ease of doing business is based on indicator sets thatcial and economic crises. measure and benchmark regulations affecting 9 areas in the life cycle of a business: starting Between June 2009 and May 2010, a business, dealing with construction permits, registering property, getting credit, protectinggovernments in 117 economies—includ- investors, paying taxes, trading across borders, enforcing contracts and closing a business. Doing Business also looks at regulations on employing workers and, as a new initiative, getting electric-ing 10 economies from the Arab world— ity (neither of which is included in this year’s aggregate ranking).1implemented 216 business regulation Doing Business encompasses 2 types of data and indicators. “Legal scoring indicators,” such asreforms. These reforms made it easier to those on investor protections and legal rights for borrowers and lenders, provide a measure ofstart and operate a business, improved legal provisions in the laws and regulations on the books. Doing Business gives higher scorestransparency, strengthened property for stronger investor and property rights protections in some areas, such as stricter disclosurerights, and helped streamline commer- requirements in related-party transactions. “Time and motion indicators,” such as those oncial dispute resolution and bankruptcy starting a business, registering property and dealing with construction permits, measure the efficiency and complexity in achieving a regulatory goal by recording the procedures, time andprocedures. In the Arab world, last year’s cost to complete a transaction in accordance with all relevant regulations from the point of viewmost popular reforms—strengthening of the entrepreneur. Any interaction of the company with external parties such as governmentcredit information systems and easing agencies counts as one procedure. Cost estimates are recorded from official fee schedules wherecross-border trade—together, accounted these apply. For a detailed explanation of the Doing Business methodology, see Data notes.for half the region’s total (figure 1.1). 1. The methodology underlying the employing workers indicators is being refined in consultation with relevant experts and stakehold- ers. The getting electricity indicators are a pilot data set. (For more detail, see the annexes on these indicator sets.) Aggregate rankings Bahrain built a modern new port, published in Doing Business 2010 were based on 10 indicator sets and are therefore not comparable. Comparable rankings based on 9improved its electronic data interchange topics for last year along with this year are presented in table 1.1 and on the Doing Business website (http://www.doingbusiness.org).system, and introduced risk-based in-
8. EXECUTIVE SUMMARY 3FIGURE 1.2 understanding some of the underlyingFifty percent of economies in the Arab world reformed business regulation in 2009/10 causes of the financial crisis. But whereShare of economies with at least 1 Doing Business reform making it easier to do business (%) business regulation is transparent and ef-Eastern Europe ficient, opportunities are less likely to be & Central Asia 84 East Asia based on personal connections or special & Pacific 75 privileges. Moreover, when more eco- OECD high income 67 nomic activity takes place in the formal South economy, it can be subject to beneficial Asia 63 regulations and taxation. Since 2003, Middle East & North Africa 61 when the Doing Business project started, Sub-Saharan 59 policy makers in more than 75% of the Africa world’s economies have made it easier Arab world 4750 to start a business in the formal sector. Latin America & Caribbean 47 A recent study using data collected fromNote: Sub-Saharan Africa includes 3 Arab economies: Comoros, Mauritania and Sudan. company registries in 100 economiesSource: Doing Business database. over 8 years found that economies with efficient business registration systems have a higher firm entry rate and greater In 2005, only 2 economies in the eliminated the minimum threshold for business density on average.2region—Kuwait and Saudi Arabia—had loans included in the credit bureau data- Ultimately this is about people. Theprivate credit bureaus; today 6 do. Arab base. This move expanded the database’s economic crisis has made it more im-economies continue to improve their coverage of individuals and firms to 2.8% portant than ever to create new jobs andcredit information systems in 2009/10. of the adult population. The United Arab preserve existing ones. As the number ofJordan has set up a regulatory framework Emirates enhanced access to credit by unemployed people reached 212 millionfor establishing a private credit bureau as setting up a legal framework for the in 2009—34 million more than at thewell as lowering the threshold for loans to operation of a private credit bureau and onset of the crisis in 20073—job creationbe reported to the public credit registry. requiring that financial institutions share became a top priority for policy makersLebanon allowed banks online access to credit information. around the world. With public budgetsthe public credit registry’s reports. Syria Through indicators benchmarking tighter as a result of stimulus packages 183 economies, Doing Business sheds and contracting fiscal revenues, govern-FIGURE 1.3 light on how easy or difficult it is for ments must now do more with less. Un-Where do Arab economies rank on a local entrepreneur to open and run leashing the job creation potential of smallbusiness-friendly regulations?DB2011 ranking on ease of doing business (1–183) a small to medium-size business while private enterprises is therefore vital. #1 complying with relevant regulations. Small and medium-size businesses economy It measures and tracks changes in the indeed have great potential to create OECD high income regulations applying to these compa- jobs. They account for an estimated 95% 30 nies throughout their life cycle—from of firms and 60–70% of employment start-up to closing (box 1.1). The results in OECD high-income economies and have stimulated policy debates in more 60–80% of employment in such econ- Eastern Europe & Central Asia 72 than 80 economies and enabled a grow- omies as Chile, China, South Africa, East Asia & Pacific 87 ing body of research on how firm-level and Thailand.4 It makes sense for policyLatin America & Caribbean 96 regulation relates to economic outcomes makers to help such businesses grow.Middle East & North Africa 103 Arab world South Asia 117 across economies.1 A fundamental prem- Improving their regulatory environment ise of Doing Business is that economic ac- is one way to support them. Sub-Saharan Africa 137 tivity requires good rules that are trans- parent and accessible to all. WHAT WERE THE TRENDS IN Doing Business does not cover all 2009/10? factors relevant for business. For exam- 183 Average ranking on ple, it does not evaluate macroeconomic For policy makers seeking to improve the ease of doing business conditions, infrastructure, workforce the regulatory environment for business, (1–183) skills, or security. Nor does it assess priorities varied across regions this pastNote: Sub-Saharan Africa includes 3 Arab economies: Comoros,Mauritania and Sudan. market regulation or the strength of fi- year.Source: Doing Business database. nancial systems—both key factors in
9. 4 DOING BUSINESS IN THE ARAB WORLD 2011 FIGURE 1.4 DB change score In the past 5 years about 85% of economies made it easier to do business 0.5 Five-year measure of cumulative change in Doing Business indicators between DB2006 and DB2011 0.4 0.3 Doing business became easier 0.2 0.1 GEORGIA RWANDA BELARUS BURKINA FASO ZAMBIA SAUDI ARABIA MALI KYRGYZ REPUBLIC GHANA CROATIA KAZAKHSTAN MACEDONIA, FYR MOZAMBIQUE EGYPT, ARAB REP. UKRAINE CHINA ALBANIA TAJIKISTAN NIGERIA CZECH REPUBLIC SYRIAN ARAB REPUBLIC SIERRA LEONE UZBEKISTAN COLOMBIA AZERBAIJAN SENEGAL MADAGASCAR ARMENIA PERU MAURITIUS MALAWI VIETNAM TIMOR-LESTEBOSNIA AND HERZEGOVINA FRANCE POLAND GUATEMALA MEXICO HAITI INDIA DOMINICAN REPUBLIC YEMEN, REP. RUSSIAN FEDERATION CONGO, DEM. REP. TOGO TUNISIA DENMARK CAMBODIA INDONESIA CÔTE DIVOIRE MAURITANIA IRAN, ISLAMIC REP. NIGER ANGOLA MOROCCO SLOVENIA THAILAND LAO PDR SLOVAK REPUBLIC HONG KONG, CHINA ETHIOPIA CAMEROON TANZANIA TURKEY UNITED ARAB EMIRATES PORTUGAL UNITED KINGDOM SERBIA BENIN GUINEA-BISSAU GAMBIA, THE SWAZILAND ROMANIA SUDAN PARAGUAY BULGARIA BANGLADESH MALDIVES UGANDA SWEDEN ALGERIA BOTSWANA VANUATU AUSTRALIA JORDAN BRAZIL PAPUA NEW GUINEANote: The DB change score illustrates the level of change in the regulatory environment for local entrepreneurs as measured by 9 Doing Business indicator sets over a period of 5 years.This year’s DB change score ranges from –0.1 to 0.54. More details on how the DB change score is constructed can be found in the Data notes.Source: Doing Business database.QUICK RESPONSE TO CRISIS revised nor modernized for decades, and integration efforts. Some of these effortsThe global crisis triggered major legal these outdated laws fall far short of inter- built on existing initiatives—such as theand institutional reforms in 2009/10. Fac- national best practice standards. There Southern African Customs Union. Ining rising numbers of insolvencies and is, therefore, a need to revise the laws, to East Africa, single border controls ex-debt disputes, 16 economies—mostly in focus on the reorganization of debtors in pedited crossings between Rwanda andEastern Europe and Central Asia and the financial distress, and to decriminalize Uganda. Although customs authoritiesOECD high-income group—reformed bankruptcy6. In 2008/09, Kuwait imple- in Kenya, Tanzania, and Uganda still usetheir insolvency regimes—including mented rescue statutes enabling compa- different electronic data systems, effortsBelgium, the Czech Republic, Hungary, nies in financial difficulties on the verge are under way to create a single interfaceJapan, the Republic of Korea, Romania, of insolvency to reorganize themselves, between these systems. Overall, 27 of 46Spain, the United Kingdom, and the restructure their debt, and apply other Sub-Saharan African economies imple-Baltic states.5 Particularly in times of measures to regain financial health and mented Doing Business reforms—49 re-economic distress, efficient court and restore profitability. The plan aims to forms in all.bankruptcy procedures are needed to protect companies from creditors if theyensure that assets can be reallocated file a viable business plan. ELECTRONIC SYSTEMS ON THE RISE AROUND THE GLOBEquickly and do not get stuck in court.Most of the reforms in this area focused TRADE FACILITATION POPULAR IN In economies around the world, regard- THE ARAB WORLDon improving or introducing reorganiza- less of location and income level, policytion procedures to ensure that viable About half of all trade facilitation re- makers are adopting technology to makefirms can continue operating. forms in 2009/10 took place in the Arab it easier to do business, lower transac- There are few reorganizations pro- world (with 6) and Sub-Saharan Africa tions costs, and increase transparency. Incedures in the Arab world despite the (with 9). Bahrain, the Arab Republic of Latin America and the Caribbean, wherefact that many of the countries have Egypt, the United Arab Emirates, and 3 47% of economies implemented businessreorganization provisions in their laws. other Arab economies modernized cus- regulation reforms in the past year, 23 ofSuch reorganization provisions tend to toms procedures and port infrastructure the 25 reforms simplified administrativebe heavily creditor-driven, providing to facilitate trade and align with inter- processes. Many did so by introducinglittle flexibility for debtors to negotiate. national standards. In Sub-Saharan Af- online procedures or synchronizing theMany of the region’s laws have not been rica, several were motivated by regional operations of different agencies through
10. DB change score 0.5 0.4 0.3 0.2 0.1 VENEZUELA, R.B. CONGO, REP. ARGENTINA SINGAPORE ZIMBABWE LITHUANIA SURINAME COMOROS PAKISTAN FINLAND NORWAY NAMIBIA ICELAND ESTONIA GUINEA GABON PALAU CHAD ITALY FIJI SOLOMON ISLANDS UNITED STATES KOREA, REP. COSTA RICA AFGHANISTAN BHUTAN HONDURAS WEST BANK AND GAZA CAPE VERDE MONGOLIA GUYANA MICRONESIA, FED. STS. LESOTHO TAIWAN, CHINA ISRAEL EL SALVADOR MOLDOVA IRELAND HUNGARY MARSHALL ISLANDS SAMOA MALAYSIA URUGUAY IRAQ BELGIUM BURUNDI OMAN NICARAGUA SPAIN DJIBOUTI TONGA PUERTO RICO LEBANON ECUADOR GREECE LATVIA KENYA PHILIPPINES KUWAIT SOUTH AFRICA ERITREA CANADA SWITZERLAND ST. VINCENT AND THE GRENADINES ANTIGUA AND BARBUDA GRENADA TRINIDAD AND TOBAGO SRI LANKA KIRIBATI BELIZE JAMAICA EQUATORIAL GUINEA AUSTRIA CENTRAL AFRICAN REPUBLIC DOMINICA SEYCHELLES BOLIVIA NEW ZEALAND PANAMA ST. KITTS AND NEVIS ST. LUCIA NEPAL SÃO TOMÉ AND PRINCIPE NETHERLANDS JAPAN CHILE GERMANY –0.1 Doing business became more difficultelectronic systems. Through technology, WHERE IS IT EASIEST TO DO prove them. Hong Kong SAR (China) andBrazil, Chile, Ecuador, and Mexico sim- BUSINESS? Singapore turned their one-stop shopsplified start-up, Colombia eased con- for building permits into online systemsstruction permitting, and Nicaragua Globally, doing business remains easi- in 2008. Denmark just introduced a newmade it easier to trade across borders. est in OECD high-income economies. computerized land registration system. In South Asia, where 5 of 8 econo- In Sub-Saharan Africa and South Asia, The United Kingdom recently introducedmies introduced changes (7 in all), India entrepreneurs have it hardest and prop- online filing at commercial courts.continued improvements to its electronic erty protections are weakest across the 9 Top-ranking economies also oftenregistration system for new firms by areas of business regulation included in use risk-based systems to focus theirallowing online payment of stamp fees. this year’s ranking on the ease of doing resources where they matter most, suchAcross Eastern Europe, the implemen- business (figure 1.3). as the supervision of complex buildingtation of European Union regulations Singapore retains the top ranking projects. Germany and Singapore areencouraging electronic systems triggered on the ease of doing business this year, among the 85 economies that have fast-the implementation of electronic cus- followed by Hong Kong SAR (China), track permit application processes fortoms systems in Latvia and Lithuania, New Zealand, the United Kingdom, the small commercial buildings.among other changes. In the Arab world, United States, Denmark, Canada, Nor- Finally, these economies holdSaudi Arabia allows registration with the way, Ireland, and Australia. Change con- public servants accountable throughGeneral Organization of Social Insur- tinued at the top. Among the top 25 performance-based systems. Australia,ance (GOSI) to be done online. Egypt economies, 18 made it even easier to do Singapore, and the United States haverecently launched a new system to estab- business this past year. The top ranked used performance measures in the ju-lish companies electronically. The first Arab economy, Saudi Arabia, climbed diciary since the late 1990s. Malaysiaphase of the system, allowing online one position to 11 after initiated 4 re- introduced a performance index forsubmission of the registration applica- forms last year. judges in 2009. Case disposal rates aretion, is in place. Economies where it is easy to do already improving. business often have advanced e-govern- ment initiatives. E-government kicked off in the 1980s, and economies with well-developed systems continue to im-
11. 6 DOING BUSINESS IN THE ARAB WORLD 2011MORE WAYS OF TRACKING CHANGE IN time, this year’s report introduces a new just 7.0% of income per capita. In 2007,BUSINESS REGULATION measure. The DB change score provides Saudi Arabia was among the top 10Every year Doing Business recognizes the a 5-year measure of how business regula- economies that improved the most. It10 economies that improved the most in tions have changed in 174 economies.7 streamlined the document requirementsthe ease of doing business in the previous It reflects all changes in an economy’s for importing. It carried this out by abol-year and introduced policy changes in 3 business regulation as measured by the ishing a consular certificate requirementor more areas. This past year Kazakhstan Doing Business indicators—such as a and allowing the electronic transfer oftook the lead. Kazakhstan amended its reduction in the time to start a business data instead of requiring hard copies ofcompany law and introduced regulations thanks to a one-stop shop or an increase documents to be submitted. Saudi Ara-to streamline business start-up and re- in the strength of investor protection bia also improved the capacity of its portduce the minimum capital requirement index thanks to new stock exchange rules facilities, thus allowing the port of Jeddahto 100 tenge ($0.70). It made dealing that tighten disclosure requirements for to clear more containers per day. It alsowith construction permits less cumber- related-party transactions. The findings eliminated its paid-in minimum capitalsome by introducing several new build- are encouraging: in about 85% of the 174 requirement, which used to amount toing regulations in 2009, a new one-stop economies, doing business is now easier 1,057% of income per capita—previouslyshop for construction-related formalities for local firms (figure 1.4). one of the highest in the region. Reformsand a risk-based approach for permit The 10 economies that made the continued. In 2007/08, Saudi Arabia re-approvals. Traders benefit from improve- largest strides in making their regulatory formed in 4 areas covered by Doingments to the automated customs infor- environment more favorable to business Business. In 2008/09, it further enhancedmation system and risk-based systems. are Georgia, Rwanda, Belarus, Burkina its business start-up process and madeSeveral trade-related documents, such as Faso, Saudi Arabia, Mali, the Kyrgyz Re- dealing with construction permits easier.the bill of lading, can now be submitted public, Croatia, Kazakhstan, and Ghana. In 2009/10, it implemented changes in 4online, and customs declarations can be All implemented more than a dozen regulatory areas: Getting Credit - Legalsent in before the cargo arrives. Mod- Doing Business reforms over the 5 years. Rights, Trading across Borders, Dealingernization efforts, already under way Several—including Georgia, Rwanda, with Construction Permits, and Closingfor several years, also include a risk Belarus, Burkina Faso, the Kyrgyz Re- a Business.management system to control goods public, Croatia, and Kazakhstan—have According to Doing Business 2005,crossing the national border and a mod- also been recognized as top 10 Doing starting a limited liability company inern inspection system (TC-SCAN) at the Business reformers in previous years. Egypt wasn’t easy: It took 13 procedures,border crossing point shared with China. Between 2005 and 2010, almost all more than a month, and required paid-inAs a result, the time to export fell by 8 economies in the Arab world have made minimum capital of 8 times the averagedays, the time to import by 9 days and it easier to do business by implementing income per capita. Today it takes just athe number of documents required for reforms that have had a positive impact week, with no minimum capital require-trade by 1. Kazakhstan also increased on Doing Business indicators. Out of the ment. Egypt implemented measures inthe requirements for legal disclosure in 174 economies, Saudi Arabia is among 8 areas. For example, it created its firstrelated-party transactions. Thanks to the the top 5 reformers, according to the private credit bureau, established a one-amendments to its company law, compa- new measure. Egypt and the Syrian Arab stop shop for company registration, andnies must describe transactions involv- Republic are 2 more of the 20 economies introduced low, fixed transfer fees foring conflicts of interest in their annual that made the largest efforts to improve property registration—costing EGP 2000report. their business regulatory environment, (USD 331), rather than 3% of the value of Yearly movements in rankings can according to the 5-year measure of cu- the property. As a result, property regis-provide some indication of changes in mulative change. tration costs were reduced from an aver-an economy’s regulatory environment Saudi Arabia’s DB change score age of 5.9% of the property value to justfor firms, but they are always relative. shows that its regulatory reforms have 1% in 2006. New property registrationsAn economy’s ranking might change be- been cumulative and substantial. Since jumped by 39% in the following year.cause of developments in other econo- 2006, Saudi Arabia has implemented 17 Syria was one of the first economiesmies. Moreover, year-to-year changes in business regulation reforms in the areas in the Arab world to revamp its businessrankings do not reflect how the business measured by Doing Business. The impact regulatory environment, as recorded byregulatory environment in an economy has been positive. In 2005, starting a the DB change score. Key achievementshas changed over time. business in Saudi Arabia took 13 pro- include gradually reducing minimum To illustrate how the regulatory en- cedures and cost 68.5% of income per capital requirement from SYP 10 millionvironment as measured by Doing Busi- capita. Today, entrepreneurs can register to just 1 million and including all loanness has changed within economies over a new business in 4 procedures and pay information in the public credit registry,
12. EXECUTIVE SUMMARY 7 BOX 1.2 within a country over time, as when Encouraging women in business Colombia implemented a bankruptcy Women make up more than 50% of the world’s population but less than 30% of the labor force reform that streamlined reorganization in some economies. This represents untapped potential. For policy makers seeking to increase procedures. Following the reform, viable women’s participation in the economy, a good place to start is to ensure that institutions and firms were more likely to be reorganized laws are accessible to the types of businesses and jobs women currently hold. than liquidated, and firms’ recoveries Take credit bureaus. With the advent of microfinance institutions in the 1970s, poor improved.9 Other studies investigated women in some parts of the world were able to access credit for the first time. By 2006 more policy changes that affected only certain than 3,330 microfinance institutions had reached 133 million clients. Among these clients, 93 million had been in the poorest groups when they took their first loans, and 85% of the firms or groups. Using the unaffected poorest were women. But only 42 of 128 credit bureaus in the world cover microfinance in- group as a control, they found that re- stitutions, limiting the ability of their borrowers to build a credit history. A new World Bank forms easing formal business entry in Group project, Women, Business and the Law, looks into discrepancies such as these as well as Colombia, India, and Mexico led to an regulations that explicitly differentiate on the basis of gender.1 increase in new firm entry and compe- A recent analysis of existing literature concludes that aspects of the business regulatory tition.10 Thanks to simplified municipal environment are estimated to disproportionately affect women in their decision to become an registration formalities for firms in Mex- entrepreneur and their performance in running a formal business. Barriers to women’s access to finance might drive their concentration in low-capital-intensive industries, which require ico, the number of registered businesses less funding but also have less potential for growth and development. One possible barrier is increased by 5%, and employment by that women may have less physical and “reputational” collateral than men.2 2.8%, in affected industries. Women can benefit from laws facilitating the use of movable assets such as equipment or Other promising results are emerg- accounts receivable as security for loans. While women often lack legal title to land or build- ing. Using panel data from enterprise ings that could serve as collateral, they are more likely to have movable assets. In Sri Lanka surveys, new research associates busi- women commonly hold wealth in the form of gold jewelry. Thankfully, this is accepted by ness regulation reforms in Eastern Eu- banks as security for loans.3 Women often resort to informal credit, which involves high transactions costs. A recent rope and Central Asia with improved study in Ghana reports that women, to ensure access to credit, invest considerable time in firm performance.11 While such factors maintaining complex networks of informal credit providers.4 as macroeconomic reforms, technologi- Improving firms’ access to formal finance has been shown to pay off, by promoting entre- cal improvements and firm character- preneurship, innovation, better asset allocation and firm growth.5 Everyone should be able to istics may also influence productivity, benefit, regardless of gender. the results are promising. The region’s 1. http://wbl.worldbank.org/. 2. Klapper and Parker (2010). economies have been the most active in 3. Pal (1997). improving business regulation over the 4. Schindler (2010). 5. World Bank (2008). past 7 years, often in response to new circumstances such as the prospect of joining the European Union or, morewithout a minimum loan threshold. larly for small and medium-size busi- recently, the financial crisis. Some 93% In absolute terms, change depends nesses. But how do business regulation of its economies eased business start-up,not only on the pace of reform but also reforms affect the performance of firms and 20 economies established one-stopon the starting point. For example, Sin- and contribute to jobs and growth? A shops. Starting a business in the region isgapore, with efficient e-government sys- growing body of empirical research has now almost as easy as it is in OECD high-tems in place and strong property rights established a link between the regula- income economies. Immediate benefitsprotections by law, now has less room tory environment for firms and such for firms are often cost and time savings.for improvement. Others, such as Italy, outcomes as the level of informality, em- In Georgia a 2009 survey found thatimplemented several regulatory reforms ployment and growth across economies.8 the new start-up service center helpedin areas where results might be seen only The broader economic impact of lower- businesses save an average of 3.25% ofin the longer term, such as judiciary or ing barriers to entry has been especially profits—and this is just for registrationinsolvency reforms. well researched. But correlation does not services. For all businesses served, the mean causality. Other country-specific direct and indirect savings amounted toWHAT IS THE EFFECT ON FIRMS, factors or other changes taking place si- $7.2 million.12JOBS, AND GROWTH? multaneously—such as macroeconomic reforms—may also have played a part.Rankings and the 5-year measure of How do we know whether thingscumulative change are still only indica- would have been any different withouttive. Few would doubt the benefit of the reform? Some studies have been ablereducing red tape for business, particu- to test this by investigating variations
13. 8 DOING BUSINESS IN THE ARAB WORLD 2011 China, State Administration for Industry BOX 1.3 Other World Bank indicator sets on business regulations and Commerce, http://www.saic.gov.cn/ english/; and Ayyagari, Beck and Demir- güç-Kunt (2007). Women, Business and the Law (http://wbl.worldbank.org/) Data on legal differentiations on the basis of gender in 128 economies, covering 6 areas 5 In the United Kingdom, for example, 19,077 companies were liquidated in Investing Across Borders (http://iab.worldbank.org/) 2009, 22.8% more than in the previous Data on laws and regulations affecting foreign direct investment in 87 economies, covering 4 areas year. Subnational Doing Business (http://www.doingbusiness.org/Subnational/) 6 See Uttamchandani (2010). Doing Business data comparing states and cities within economies (41 studies covering 299 cities) 7 Doing Business has tracked business regulation reforms affecting businesses World Bank Enterprise Surveys (http://www.enterprisesurveys.org/) throughout their life cycle—from start-up Business data on more than 100,000 firms in 125 economies, covering a broad range of business to closing—in 174 or more economies environment topics since 2005. Between 2003 and 2005 Doing Business added 5 topics and increased the number of economies covered fromWHERE ARE THE OPPORTUNITIES While overly complicated proce- 133 to 174. For more information onIN DEVELOPING ECONOMIES? dures can hinder business activity, so the motivation for the 5-year measure can the lack of institutions or regulations of cumulative change, see About DoingMore than 1,500 improvements to busi- that protect property rights, increase Business. For more on how the measure is constructed, see Data notes.ness regulations have been recorded by transparency and enable entrepreneursDoing Business in 183 economies since to make effective use of their assets. 8 For a comprehensive literature review on business start-up regulation as it relates2004. Increasingly, firms in developing When institutions such as courts, col- to such economic outcomes as productiv-economies are benefiting. In the past lateral registries and credit information ity and employment, see Djankov (2009)year about 66% of these economies made bureaus are inefficient or missing, the and Motta, Oviedo and Santini (2010).it easier to do business, up from only 34% talented poor and entrepreneurs who See also Djankov, McLiesh and Ramalho (2006). More research can be found onof this group 6 years before. Compelling lack connections, collateral and credit the Doing Business website (http://www.results are starting to show, as illustrated histories are most at risk of losing out.14 doingbusiness.org/).by Rwanda and Ghana, and these results So are women, because institutions and 9 Giné and Love (2006).have inspired others. regulations such as credit bureaus and 10 Aghion and others (2008), Bruhn (2008), This is good news, because oppor- laws on movable collateral support the Kaplan, Piedra and Seira (2007) andtunities for regulatory reform remain. types of businesses that women typically Cardenas and Rozo (2009).Entrepreneurs and investors in low- and run—small firms in low-capital-inten- 11 Amin and Ramalho (forthcoming). Using data on a panel of about 2,100 firms in 28lower-middle-income economies con- sive industries in both the formal and the economies in Eastern Europe and Centraltinue to face more bureaucratic formali- informal sector (box 1.2).15 Asia, the authors compare changes inties and weaker protections of prop- labor productivity over time in reformingerty rights than their counterparts in and nonreforming economies. The differ- ence in the change in labor productivityhigh-income economies. Exporting, for between the 2 groups of economies isexample, requires 11 documents in the 1 Some 656 articles have been published statistically significant at less than the 5% in peer-reviewed academic journals, andRepublic of Congo but only 2 in France. level. Differences in time-invariant fac- about 2,060 working papers are availableStarting a business still costs 18 times as tors such as firm composition or GDP per through Google Scholar (http://scholar. capita do not affect the results.much in Sub-Saharan Africa as in OECD google.com). 12 International Finance Corporation, “IFChigh-income economies (relative to in- 2 Klapper, Lewin and Quesada Delgado Helps Simplify Procedures for Georgiancome per capita). Many businesses in (2009). Entry rate refers to newly regis- Businesses to Save Time and Resources,” tered firms as a percentage of total regis-developing economies might simply opt accessed September 20, 2010, http://www. tered firms. Business density is defined asout and remain in the informal sector. ifc.org/. the number of businesses as a percentageThere they lack access to formal business of the working-age population (ages 13 ILO data.credit and markets, and their employees 18–65). 14 World Bank (2008a).receive fewer benefits and no protec- 3 International Labour Organization (ILO) 15 Chhabra (2003) and Amin (2010).tions. Globally, 1.8 billion people are data.estimated to be employed in the informal 4 OECD (2004b); ILO and SERCOTEC (2010, p. 12); South Africa, Departmentsector, more than the 1.2 billion in the of Trade and Industry (2004, p. 18);formal economy.13
14. 9About DoingBusiness:measuringfor impactGovernments committed to the economic applying to them through their life cycle. establish and clarify property rights andhealth of their country and opportuni- Doing Business and the standard cost reduce the cost of resolving disputes,ties for its citizens focus on more than model initially developed and applied in rules that increase the predictability ofmacroeconomic conditions. They also the Netherlands are, for the present, the economic interactions and rules thatpay attention to the laws, regulations and only standard tools used across a broad provide contractual partners with coreinstitutional arrangements that shape range of jurisdictions to measure the protections against abuse. The objective:daily economic activity. impact of government rule-making on regulations designed to be efficient in The global financial crisis has business activity.1 their implementation, to be accessiblerenewed interest in good rules and regu- The first Doing Business report, pub- to all who need to use them and to belation. In times of recession, effective lished in 2003, covered 5 indicator sets simple in their implementation. Accord-business regulation and institutions can and 133 economies. This year’s report ingly, some Doing Business indicatorssupport economic adjustment. Easy covers 11 indicator sets and 183 econo- give a higher score for more regulation,entry and exit of firms, and flexibility mies. Nine topics are included in the such as stricter disclosure requirementsin redeploying resources, make it easier aggregate ranking on the ease of doing in related-party transactions. Some giveto stop doing things for which demand business. The project has benefited from a higher score for a simplified way ofhas weakened and to start doing new feedback from governments, academics, implementing existing regulation, suchthings. Clarification of property rights practitioners and reviewers.2 The initial as completing business start-up formali-and strengthening of market infrastruc- goal remains: to provide an objective ties in a one-stop shop.ture (such as credit information and basis for understanding and improving The Doing Business project encom-collateral systems) can contribute to con- the regulatory environment for business. passes 2 types of data. The first come fromfidence as investors and entrepreneurs readings of laws and regulations. The sec-look to rebuild. WHAT DOING BUSINESS COVERS ond are time and motion indicators that Until recently, however, there were measure the efficiency and complexityno globally available indicator sets for Doing Business provides a quantitative in achieving a regulatory goal (such asmonitoring such microeconomic factors measure of regulations for starting a granting the legal identity of a business).and analyzing their relevance. The first business, dealing with construction per- Within the time and motion indicators,efforts, in the 1980s, drew on percep- mits, registering property, getting credit, cost estimates are recorded from officialtions data from expert or business sur- protecting investors, paying taxes, trad- fee schedules where applicable.3 Here,veys. Such surveys are useful gauges ing across borders, enforcing contracts Doing Business builds on Hernando deof economic and policy conditions. But and closing a business—as they apply to Soto’s pioneering work in applying thetheir reliance on perceptions and their domestic small and medium-size enter- time and motion approach first used byincomplete coverage of poor countries prises. It also looks at regulations on em- Frederick Taylor to revolutionize the pro-constrain their usefulness for analysis. ploying workers as well as a new measure duction of the Model T Ford. De Soto The Doing Business project, initi- on getting electricity. used the approach in the 1980s to showated 9 years ago, goes one step further. It A fundamental premise of Doing the obstacles to setting up a garment fac-looks at domestic small and medium-size Business is that economic activity requires tory on the outskirts of Lima.4companies and measures the regulations good rules. These include rules that
15. 10 DOING BUSINESS IN THE ARAB WORLD 2011WHAT DOING BUSINESS DOES BASED ON STANDARDIZED entrepreneurs may spend considerable CASE SCENARIOSNOT COVER time finding out where to go and what Doing Business indicators are built on the documents to submit. Or they may avoidJust as important as knowing what Doing basis of standardized case scenarios with legally required procedures altogeth-Business does is to know what it does specific assumptions, such as the busi- er—by not registering for social security,not do—to understand what limitations ness being located in the largest business for example.must be kept in mind in interpreting city of the economy. Economic indicators Where regulation is particularly onerous,the data. commonly make limiting assumptions levels of informality are higher. Informal- of this kind. Inflation statistics, for ex- ity comes at a cost: firms in the informalLIMITED IN SCOPE ample, are often based on prices of con- sector typically grow more slowly, haveDoing Business focuses on 11 topics, with sumer goods in a few urban areas. poorer access to credit and employ fewerthe specific aim of measuring the regula- Such assumptions allow global workers—and their workers remain out-tion and red tape relevant to the life cycle coverage and enhance comparability. But side the protections of labor law.7 Doingof a domestic small to medium-size firm. they come at the expense of generality. Business measures one set of factors thatAccordingly: Doing Business recognizes the limitations help explain the occurrence of infor- Doing Business does not measure all of including data on only the largest busi- mality and give policy makers insights aspects of the business environment ness city. Business regulation and its en- into potential areas of reform. Gaining a that matter to firms or investors—or all forcement, particularly in federal states fuller understanding of the broader busi- factors that affect competitiveness. It and large economies, differ across the ness environment, and a broader per- does not, for example, measure security, country. And of course the challenges spective on policy challenges, requires macroeconomic stability, corruption, and opportunities of the largest business combining insights from Doing Business the labor skills of the population, the city—whether Mumbai or São Paulo, with data from other sources, such as underlying strength of institutions Nuku’alofa or Nassau—vary greatly across the World Bank Enterprise Surveys.8 or the quality of infrastructure.5 Nor countries. Recognizing governments’ in- does it focus on regulations specific to terest in such variation, Doing Business WHY THIS FOCUS foreign investment. has complemented its global indicators Doing Business does not assess the with subnational studies in such countries Doing Business functions as a kind of strength of the financial system or market as Brazil, China, Colombia, the Arab Re- cholesterol test for the regulatory envi- regulations, both important factors in public of Egypt, India, Indonesia, Kenya, ronment for domestic businesses. A cho- understanding some of the underlying Mexico, Morocco, Nigeria, Pakistan and lesterol test does not tell us everything causes of the global financial crisis. the Philippines.6 about the state of our health. But it does Doing Business does not cover all In areas where regulation is complex measure something important for our regulations, or all regulatory goals, and highly differentiated, the standard- health. And it puts us on watch to change in any economy. As economies and ized case used to construct the Doing behaviors in ways that will improve not technology advance, more areas of Business indicator needs to be carefully only our cholesterol rating but also our economic activity are being regulated. defined. Where relevant, the standard- overall health. For example, the European Union’s ized case assumes a limited liability One way to test whether Doing Busi- body of laws (acquis) has now grown to company. This choice is in part empiri- ness serves as a proxy for the broader no fewer than 14,500 rule sets. Doing cal: private, limited liability companies business environment and for com- Business covers 11 areas of a company’s are the most prevalent business form in petitiveness is to look at correlations life cycle, through 11 specific sets of most economies around the world. The between the Doing Business rankings and indicators. These indicator sets do choice also reflects one focus of Doing other major economic benchmarks. The not cover all aspects of regulation in Business: expanding opportunities for indicator set closest to Doing Business in the area of focus. For example, the entrepreneurship. Investors are encour- what it measures is the OECD indicators indicators on starting a business or aged to venture into business when po- of product market regulation;9 the corre- protecting investors do not cover all tential losses are limited to their capital lation here is 0.72. The World Economic aspects of commercial legislation. The participation. Forum’s Global Competitiveness Index employing workers indicators do not and IMD’s World Competitiveness Year- cover all areas of labor regulation. The FOCUSED ON THE FORMAL SECTOR book are broader in scope, but these too current indicator set does not include, In constructing the indicators, Doing are strongly correlated with Doing Busi- for example, measures of regulations Business assumes that entrepreneurs are ness (0.79 and 0.64, respectively).10 addressing safety at work or the knowledgeable about all regulations in A bigger question is whether the right of collective bargaining. place and comply with them. In practice, issues on which Doing Business focuses
16. ABOUT DOING BUSINESS 11matter for development and poverty portunities. But many have limited fiscal local entrepreuneurs improves mattersreduction. The World Bank study Voices space for publicly funded activities such more than their relative ranking. To aid inof the Poor asked 60,000 poor people as infrastructure investment or for the assessing such improvements, this year’saround the world how they thought they provision of publicly funded safety nets report presents a new metric (DB changemight escape poverty.11 The answers and social services. Reforms aimed at score) that allows economies to comparewere unequivocal: women and men alike creating a better investment climate, in- where they are today with where theypin their hopes above all on income cluding reforms of business regulation, were 5 years ago. The 5-year measurefrom their own business or wages earned can be beneficial for several reasons. of cumulative change shows how muchin employment. Enabling growth—and Flexible regulation and effective institu- economies have reformed business regu-ensuring that poor people can participate tions, including efficient processes for lations over time (for more details, seein its benefits—requires an environment starting a business and efficient insol- Data notes). This complements the yearlywhere new entrants with drive and good vency or bankruptcy systems, can facili- ease of doing business rankings thatideas, regardless of their gender or ethnic tate reallocation of labor and capital. As compare economies with one another atorigin, can get started in business and businesses rebuild and start to create new a point in time.where good firms can invest and grow, jobs, this helps to lay the groundwork for As economies develop, theygenerating more jobs. countries’ economic recovery. And regu- strengthen and add to regulations to Small and medium-size enterprises latory institutions and processes that are protect investor and property rights.are key drivers of competition, growth streamlined and accessible can help en- Meanwhile, they find more efficient waysand job creation, particularly in develop- sure that as businesses rebuild, barriers to implement existing regulations anding countries. But in these economies up between the informal and formal sectors cut outdated ones. One finding of Doingto 80% of economic activity takes place are lowered, creating more opportunities Business: dynamic and growing econo-in the informal sector. Firms may be pre- for the poor. mies continually reform and update theirvented from entering the formal sector DOING BUSINESS AS A regulations and their way of implement-by excessive bureaucracy and regulation. BENCHMARKING EXERCISE ing them, while many poor economies Where regulation is burdensome still work with regulatory systems datingand competition limited, success tends Doing Business, in capturing some key to the late 1800s.to depend more on whom you know dimensions of regulatory regimes, hasthan on what you can do. But where been found useful for benchmarking. DOING BUSINESS—regulation is transparent, efficient and Any benchmarking—for individuals, A USER’S GUIDEimplemented in a simple way, it becomes firms or economies—is necessarily par-easier for any aspiring entrepreneurs, tial: it is valid and useful if it helps Quantitative data and benchmarkingregardless of their connections, to oper- sharpen judgment, less so if it substitutes can be useful in stimulating debateate within the rule of law and to benefit for judgment. about policy, both by exposing poten-from the opportunities and protections Doing Business provides 2 takes on tial challenges and by identifying wherethat the law provides. the data it collects: it presents “absolute” policy makers might look for lessons In this sense Doing Business values indicators for each economy for each of and good practices. These data also pro-good rules as a key to social inclusion. It the 11 regulatory topics it addresses, and vide a basis for analyzing how differentalso provides a basis for studying effects it provides rankings of economies for 9 policy approaches—and different policyof regulations and their application. For topics, both by indicator and in aggre- reforms—contribute to desired out-example, Doing Business 2004 found that gate.13 Judgment is required in interpret- comes such as competitiveness, growthfaster contract enforcement was associ- ing these measures for any economy and and greater employment and incomes.ated with perceptions of greater judicial in determining a sensible and politically Eight years of Doing Business datafairness—suggesting that justice delayed feasible path for reform. have enabled a growing body of researchis justice denied.12 Reviewing the Doing Business rank- on how performance on Doing Busi- In the context of the global crisis ings in isolation may show unexpected ness indicators—and reforms relevantpolicy makers continue to face particular results. Some economies may rank un- to those indicators—relate to desiredchallenges. Both developed and devel- expectedly high on some indicators. And social and economic outcomes. Someoping economies have been seeing the some economies that have had rapid 656 articles have been published inimpact of the financial crisis flowing growth or attracted a great deal of invest- peer-reviewed academic journals, andthrough to the real economy, with rising ment may rank lower than others that about 2,060 working papers are availableunemployment and income loss. The fore- appear to be less dynamic. through Google Scholar.14 Among themost challenge for many governments is For reform-minded governments, findings:to create new jobs and economic op- how much the regulatory environment for
17. 12 DOING BUSINESS IN THE ARAB WORLD 2011 Lower barriers to start-up are at enhancing economic competitiveness, INFORMATION SOURCES FOR THE DATA associated with a smaller informal as in Colombia, Kenya and Liberia, for sector.15 example. In structuring their reform Most of the indicators are based on laws Lower costs of entry encourage programs for the business environment, and regulations. In addition, most of the entrepreneurship, enhance firm governments use multiple data sources cost indicators are backed by official fee productivity and reduce corruption.16 and indicators. And reformers respond to schedules. Doing Business respondents Simpler start-up translates into greater many stakeholders and interest groups, both fill out written surveys and provide employment opportunities.17 all of whom bring important issues and references to the relevant laws, regu- The quality of a country’s contracting concerns to the reform debate. World lations and fee schedules, aiding data environment is a source of comparative Bank Group dialogue with governments checking and quality assurance. advantage in trade patterns. Countries on the investment climate is designed to For some indicators—for example, with good contract enforcement encourage critical use of the data, sharp- the indicators on dealing with construc- specialize in industries where ening judgment, avoiding a narrow focus tion permits, enforcing contracts and relationship-specific investments are on improving Doing Business rankings closing a business—part of the cost most important.18 and encouraging broad-based reforms component (where fee schedules are Greater information sharing through that enhance the investment climate. lacking) and the time component are credit bureaus is associated with based on actual practice rather than the higher bank profitability and lower METHODOLOGY AND DATA law on the books. This introduces a de- bank risk.19 gree of subjectivity. The Doing Business How do governments use Doing Doing Business covers 183 economies— approach has therefore been to workBusiness? A common first reaction is to including small economies and some of with legal practitioners or professionalsask questions about the quality and rel- the poorest countries, for which little or who regularly undertake the transac-evance of the Doing Business data and no data are available in other data sets. tions involved. Following the standardon how the results are calculated. Yet The Doing Business data are based on methodological approach for time andthe debate typically proceeds to a deeper domestic laws and regulations as well as motion studies, Doing Business breaksdiscussion exploring the relevance of administrative requirements. (For a de- down each process or transaction,the data to the economy and areas tailed explanation of the Doing Business such as starting and legally operating awhere business regulation reform might methodology, see Data notes.) business, into separate steps to ensure amake sense. Most reformers start out by seek-ing examples, and Doing Business helps BOX 2.1 How economies have used Doing Business in regulatory reform programsin this (box 2.1). For example, SaudiArabia used the company law of France To ensure coordination of efforts across agencies, such economies as Colombia, Rwandaas a model for revising its own. Many and Sierra Leone have formed regulatory reform committees reporting directly to the president that use the Doing Business indicators as one input to inform their programscountries in Africa look to Mauritius— for improving the business environment. More than 20 other economies have formedthe region’s strongest performer on such committees at the interministerial level. These include India, Malaysia, TaiwanDoing Business indicators—as a source (China) and Vietnam in East and South Asia; the Arab Republic of Egypt, Morocco, Saudiof good practices for reform. In the words Arabia, the Syrian Arab Republic, the United Arab Emirates and the Republic of Yemen inof Luis Guillermo Plata, the former the Middle East and North Africa; Georgia, Kazakhstan, the Kyrgyz Republic, Moldova andminister of commerce, industry and Tajikistan in Eastern Europe and Central Asia; Kenya, Liberia, Malawi and Zambia in Sub-tourism of Colombia, Saharan Africa; and Guatemala, Mexico and Peru in Latin America. Beyond the level of the economy, the Asia-Pacific Economic Cooperation (APEC) organiza-It’s not like baking a cake where you follow tion uses Doing Business to identify potential areas of regulatory reform, to champion econo-the recipe. No. We are all different. But we mies that can help others improve and to set measurable targets. In 2009 APEC launchedcan take certain things, certain key les- the Ease of Doing Business Action Plan with the goal of making it 25% cheaper, faster andsons, and apply those lessons and see how easier to do business in the region by 2015. Drawing on a firm survey, planners identi-they work in our environment. fied 5 priority areas: starting a business, getting credit, enforcing contracts, trading across borders and dealing with permits. The next 2 steps: the APEC economies setting targets toOver the past 8 years there has been measure results, and the champion economies selected, such as Japan, New Zealand andmuch activity by governments in re- the United States, developing programs to build capacity to carry out regulatory reform informing the regulatory environment for these areas.1domestic businesses. Most reforms relat- 1. Muhamad Noor (executive director of APEC), speech delivered at ASEAN-NZ Combined Business Council breakfast meeting, Auck-ing to Doing Business topics were nested land, New Zealand, March 25, 2010, http://www.apec.org.in broader programs of reform aimed
18. ABOUT DOING BUSINESS 13better estimate of time. The time estimate Doing Business uses a simple aver- tors as a basis for providing policy advicefor each step is given by practitioners aging approach for weighting compo- or evaluating country development pro-with significant and routine experience nent indicators and calculating rankings. grams or assistance strategies. A note toin the transaction. Other approaches were explored, includ- staff issued in October 2009 outlines the Over the past 8 years more than ing using principal components and un- guidelines for using the indicators.2011,000 professionals in 183 economies observed components. They turn out to In addition, the World Bank Grouphave assisted in providing the data that yield results nearly identical to those of has been working with a consultativeinform the Doing Business indicators. simple averaging. The 9 sets of indicators group—including labor lawyers, em-This year’s report draws on the inputs included in this year’s aggregate ranking ployer and employee representatives andof more than 8,200 professionals. Table on the ease of doing business provide experts from the International Labour14.1 lists the number of respondents sufficiently broad coverage across topics. Organization (ILO), the Organisation forfor each indicator set. The Doing Busi- Therefore, the simple averaging approach Economic Co-operation and Develop-ness website indicates the number of is used. ment (OECD), civil society and the pri-respondents for each economy and each vate sector—to review the methodologyindicator. Respondents are professionals IMPROVEMENTS TO THE and explore future areas of research.21 METHODOLOGY AND DATA REVISIONSor government officials who routinely The consultative group has met severaladminister or advise on the legal and The methodology has undergone contin- times over the past year, and its guidanceregulatory requirements covered in each ual improvement over the years. Changes has provided the basis for several changesDoing Business topic. Because of the focus have been made mainly in response to in methodology, some of which haveon legal and regulatory arrangements, country suggestions. For enforcing con- been implemented in this year’s report.most of the respondents are lawyers. The tracts, for example, the amount of the Because the consultative process andcredit information survey is answered by disputed claim in the case study was consequent changes to the methodologyofficials of the credit registry or bureau. increased from 50% to 200% of income are not yet complete, this year’s reportFreight forwarders, accountants, archi- per capita after the first year of data col- does not present rankings of economiestects and other professionals answer the lection, as it became clear that smaller on the employing workers indicators orsurveys related to trading across borders, claims were unlikely to go to court. include the topic in the aggregate rankingtaxes and construction permits. Another change relates to starting a on the ease of doing business. But it does The Doing Business approach to business. The minimum capital require- present the data collected for the indica-data collection contrasts with that of ment can be an obstacle for potential tors. Additional data collected on laborenterprise or firm surveys, which capture entrepreneurs. Initially Doing Business regulations are available on the Doingoften one-time perceptions and experi- measured the required minimum capital Business website.22ences of businesses. A corporate lawyer regardless of whether it had to be paid The changes so far in the methodol-registering 100–150 businesses a year up front or not. In many economies only ogy for the employing workers indicatorswill be more familiar with the process part of the minimum capital has to be recognize minimum levels of protectionthan an entrepreneur, who will register paid up front. To reflect the actual po- in line with relevant ILO conventions asa business only once or maybe twice. A tential barrier to entry, the paid-in mini- well as excessive levels of regulation thatbankruptcy judge deciding dozens of mum capital has been used since 2004. may stifle job creation. Floors and ceil-cases a year will have more insight into This year’s report includes changes ings in such areas as paid annual leave,bankruptcy than a company that may in the core methodology for one set of working days per week and the minimumundergo the process. indicators, those on employing workers. wage provide a framework for balancing With the aim of measuring the balance worker protection against excessive re-DEVELOPMENT OF between worker protection and efficient strictiveness in employment regulationsTHE METHODOLOGY employment regulation that favors job (see Data notes).The methodology for calculating each creation, Doing Business has made a se- Doing Business also continues toindicator is transparent, objective and ries of amendments to the methodology benefit from discussions with externaleasily replicable. Leading academics col- for the employing workers indicators stakeholders, including participants inlaborate in the development of the indi- over the past 3 years, including in this the International Tax Dialogue, on thecators, ensuring academic rigor. Eight of year’s report. While this process has been survey instrument and methodology.the background papers underlying the under way, the World Bank has removed All changes in methodology are ex-indicators have been published in lead- the employing workers indicators as a plained in the Data notes as well as oning economic journals. guidepost from its Country Policy and the Doing Business website. In addition, Institutional Assessment questionnaire data time series for each indicator and and instructed staff not to use the indica- economy are available on the website, be-
19. 14 DOING BUSINESS IN THE ARAB WORLD 2011ginning with the first year the indicator 6. http://www.doingbusiness.org/or economy was included in the report. Subnational/.To provide a comparable time series for 7. Schneider (2005).research, the data set is back-calculated 8. http://www.enterprisesurveys.org.to adjust for changes in methodology 9. OECD, “Indicators of Product Market Regulation Homepage,” http://wwwand any revisions in data due to correc- .oecd.org/.tions. The website also makes available 10. The World Economic Forum’s Globalall original data sets used for background Competitiveness Report uses part of thepapers. Doing Business data sets on starting a Information on data corrections is business, employing workers, protect-provided in the Data notes and on the web- ing investors and getting credit (legal rights).site. A transparent complaint procedure 11. Narayan and others (2000).allows anyone to challenge the data. If 12. World Bank (2003).errors are confirmed after a data veri- 13. This year’s report does not present rank-fication process, they are expeditiously ings of economies on the pilot gettingcorrected. electricity indicators or the employing workers indicators. Nor does it include these topics in the aggregate ranking on the ease of doing business.1. The standard cost model is a quantita- 14. http://scholar.google.com. tive methodology for determining the 15. For example, Masatlioglu and Rigo- administrative burdens that regulation lini (2008), Kaplan, Piedra and Seira imposes on businesses. The method can (2007), Ardagna and Lusardi (2009) and be used to measure the effect of a single Djankov (2009). law or of selected areas of legislation or 16. For example, Alesina and others (2005), to perform a baseline measurement of Perotti and Volpin (2004), Klapper, all legislation in a country. Laeven and Rajan (2006), Fisman and2. This has included a review by the World Sarria-Allende (2004), Antunes and Bank Independent Evaluation Group Cavalcanti (2007), Barseghyan (2008), (2008) as well as ongoing input from the Djankov and others (2010) and Klapper, International Tax Dialogue. Lewin and Quesada Delgado (2009).3. Local experts in 183 economies are sur- 17. For example, Freund and Bolaky (2008), veyed annually to collect and update the Chang, Kaltani and Loayza (2009) and data. The local experts for each economy Helpman, Melitz and Rubinstein (2008). are listed on the Doing Business website 18. Nunn (2007). (http://www.doingbusiness.org). 19. Houston and others (2010).4. De Soto (2000). 20. World Bank (2009a).5. The indicators related to trading across borders and dealing with construction 21. For the terms of reference and composi- permits and the pilot indicators on get- tion of the consultative group, see World ting electricity take into account limited Bank, “Doing Business Employing Work- aspects of an economy’s infrastructure, ers Indicator Consultative Group,” http:// including the inland transport of goods www.doingbusiness.org. and utility connections for businesses. 22. http://www.doingbusiness.org.
21. Starting a FIGURE 3.1 What are the time, cost, paid-in minimum capital and number of proceduresbusiness to get a local, limited liability company up and running? COST (% of income per capita) Formal operation $ NUMBER OF PROCEDURES Paid-in minimum capital Entrepreneur TIME (days) Preincorporation Registration, incorporation PostincorporationStarting a business always takes a leap where it takes 17 days. Yet there is great teractions an entrepreneur is required toof faith. And governments are increas- variation within the Arab world. Starting have with government agencies. Businessingly encouraging the daring. Since a business takes as many as 49 days in entry requirements go beyond simple in-2004, policy makers in more than 75% West Bank and Gaza and as few as 5 days corporation to include the registration ofof the world’s economies have made it in Saudi Arabia. The average cost in the a business name; tax registration; regis-easier for entrepreneurs to start a busi- region remains fairly high—46.2% of in- tration with statistical, social security andness in the formal sector. The formal come per capita. But in Bahrain the cost pension administrations; and registrationincorporation of businesses has many is less than 1% of income per capita. In with local authorities.benefits for governments. Legal entities 3 other economies, start-up costs exceedcan outlive their founders. Resources can 100% of income per capita—including Four indicators are constructed:be pooled as shareholders join together. Comoros, most expensive in the region, Number of procedures to start a busi-And companies have access to services where costs come to 177% of income per nessand institutions—from courts and banks capita. Fourteen out of 20 Arab econo- Time to start a business (in calendarto new markets. mies require entrepreneurs to put up days) Rich or poor, many men and women a set amount of capital before start- Official costs to start a business (as aaround the world seek to run and profit ing registration formalities (the paid-in percentage of income per capita)from their own businesses. A 2007 sur- minimum capital requirement). Paid-in minimum capital require-vey among young people in the United The region has picked up the pace ment (as a percentage of income perStates showed that 4 in 10 have started a of reforms over the past 6 years. Local capita).business or would like to someday.1 With entrepreneurs in the Arab world ben-some 550,000 small businesses created efited the most from big cuts in paid- Economies differ greatly in how theyacross the U.S. every month,2 entrepre- in minimum capital requirements. The regulate the entry of new businesses. Inneurs are a powerful economic force. In average paid-in minimum capital re- some the process is straightforward andfact, entrepreneurs contributed half of quirement in the region dropped from a affordable. In others the procedures arethe U.S.’s GDP and 64% of net new jobs prohibitive 815.9% of income per capita so burdensome that entrepreneurs mayover the past 15 years.3 Such impacts are in 2005 to 126.5% of income per capita have to bribe officials to speed up thepossible where business registration is in 2010. Economies in the region also process or may decide to run their busi-efficient and affordable. streamlined processes by introducing ness informally. In the Arab world, entrepreneurs new technologies—particularly sincego through 9 procedures, on average, to 2008/09. Compared with other regions, WHO REFORMED IN 2009/10?start a business. This process takes an however, the use of electronic servicesaverage time of 22 days—making the is still low. In 2009/10, only 2 Arab economies re-Arab world the third fastest place to start Doing Business measures the proce- formed their business registration pro-a business among regions. The fastest is dures, time, and cost for a small to me- cesses—the Arab Republic of Egypt andOECD high-income economies, where it dium-size enterprise to start up and oper- the Syrian Arab Republic—compared totakes just 14 days, on average, and sec- ate formally (figure 3.1). The number of 8 reforming countries in 2008/09.ond is Eastern Europe and Central Asia, procedures shows how many separate in- Syria reduced the minimum capital
22. DOING BUSINESS TOPICS 17FIGURE 3.2 in one place. In 2009, Jordan then fur-Arab economies slash paid-in minimum capital the mostNumber of Doing Business reforms making it easier to start a business by Doing Business report year ther streamlined the start-up process by offering a single reception service at its DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 Companies Control Department where all registration documents are filed and 3 4 4 10 8 2 31 certificates obtained. While some one-stop shops are vir-Arab world averages in starting a business tual, enabled by the Internet, others areProcedures (number) DB 2011 DB 2006 physical, with one or more windows to 9 11 visit. And while some one-stop shops are solely for business registration, oth-Time (days) ers carry out additional functions, inte- 22 41 grating post-registration formalities and other services. For example, in Tbilisi,Cost (% of income per capita) Georgia, a public service center assists 46.2 82.4 entrepreneurs not only with businessPaid-in Minimum capital (% of income per capita) licenses and permits but also with invest- 126.5 815.9 ment, privatization procedures, tourism- related issues, and state-owned prop-Note: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes erty management. Worldwide, in the 7318 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies.Source: Doing Business database. economies that have one-stop shops with at least one service besides business reg-requirement for limited liability compa- 150 years ago, when Paris’s first depart- istration, start-up is more than twice asnies from SYP 3 million to 1 million. Also, ment store, Le Bon Marché, opened its fast as in those without such services.in January 2010, approvals on the com- doors. The public loved the conveniencepany memorandum have been delegated of one-stop shopping. Achieving this kind REDUCING OR ELIMINATING MINIMUM CAPITALto various directors nationwide and min- of convenience has been among the mainisterial duties have been delegated to the motivations for governments adopting The paid-in minimum capital require-undersecretary of the Ministry of Econ- this concept for business start-ups. ment dates to the 18th century. Today,omy and Trade and the company registrar. Today, 6 out of 20 economies in the 103 of the 183 economies covered byWith these reorganizations, entrepreneurs Arab world have some kind of one-stop Doing Business require entrepreneurs tosaved an average of 2 days. shop for business registration — Egypt, put up a set amount of capital before Egypt lowered the cost to start a Jordan, Morocco, Oman, Qatar, and starting registration formalities. Whilebusiness. A service charge of 0.1% of Saudi Arabia. This type of reform does such requirements are intended to pro-capital (with a minimum of EGP 1,000) not necessarily require legal changes, tect investors and creditors, they havefor services rendered by the Companies just administrative ones. Furthermore, not proved to be effective over time. InDepartment has been eliminated, reduc- entrepreneurs and governments alike 71% of the economies requiring paid-ining overall costs by 55%. often see immediate benefits. Coor- capital, the money can be withdrawn im- dination among government agencies mediately after incorporation. So entre-WHAT HAS WORKED? eliminates the need for entrepreneurs preneurs often simply borrow to pay in. to visit agencies separately, often to file “It even created a new market,” explainsPolicy makers can encourage entrepre- similar or even identical information, an official from the United Arab Emir-neurs to “take the plunge” by making yet maintains regulatory checks. A single ates. “Entrepreneurs would pay $20 justbusiness start-up fast, easy, and inexpen- interface not only save time and money, to borrow the required money for onesive. Among the most common measures it also increases transparency. In 2005, day—a much higher interest rate thanhave been creating a single interface at Egypt established a one-stop shop to anyone would ever receive from a bank.”registration, reducing or abolishing min- organize tax registration, chamber of Moreover, fixed requirements do not ac-imum capital requirements, and adopt- commerce affiliation, notarization, and count for differences in firms’ credit anding time-saving technology. immediate publication under one roof. investment risk profiles. In 2007, Jordan established a one-stop Some economies have found otherMAKING IT SIMPLE: ONE INTERFACE shop at its Company Registry allowing ways to protect investors and creditors,Businesses created what might have been entrepreneurs to complete company, tax, particularly in the case of limited liabilityone of the world’s first one-stop shops and Chamber of Commerce registration companies. Hong Kong SAR (China) out-
23. 18 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 3.3 declare their actual capital. TABLE 3.1How do Arab economies rank on Who makes starting a business easy—the ease of starting a business? and who does not? USING TECHNOLOGY TO BOOSTGlobal ranking (1–183) EFFICIENCY Procedures (number) NEW Governments around the world are in- Fewest Most ZEALAND EASIEST (1) creasingly using technology to improve Saudi Arabia 4 Djibouti 11 — Saudi Arabia Lebanon 5 Iraq 11 — the efficiency of services and increase 20 Egypt, Arab Rep. Oman 5 West Bank 11 United Arab Emirates the accountability of public officials. E- and Gaza Egypt, Arab Rep. 6 Tunisia government initatives range from data Kuwait 40 Yemen, Rep. 6 13 — — Yemen, Rep. centers and shared networks to govern- Algeria 14 — Oman ment-wide information infrastructure 60 Time (days) Bahrain and unified service centers for the public. — — Morocco Singapore’s online registration system Fastest Slowest 80 — Lebanon saves businesses an estimated $42 million Saudi Arabia 5 Kuwait 35 Qatar Sudan annually.4 Because electronic services are Egypt, Arab Rep. 7 Sudan 36100 — Bahrain 9 Djibouti 37 — Jordan more accessible, entrepreneurs save time Lebanon 9 West Bank 49 — Syrian Arab Republic and the cost of traveling to government and Gaza Tunisia 11120 — Kuwait agencies and waiting in line.5 Iraq 77 — Algeria — Today, 105 economies worldwide140 Mauritania Cost (% of income per capita) — — use information and communication Comoros Least Most technology for services ranging from West Bank and Gaza160 — simple name searches to complete busi- Bahrain 0.8 Yemen, Rep. 82.1 — — — Iraq Djibouti ness registration. New Zealand—the Kuwait 1.3 West Bank 93.7 Oman 3.3 and Gaza183 world’s easiest place to start a business—Source: Doing Business database. was the first to launch an online com- Tunisia 5.0 Iraq 107.8 Egypt, Arab Rep. 6.3 Djibouti 169.9 pany registration system back in 1996. Comoros 176.5lines provisions on solvency safeguards This online system has been mandatoryin its company act. Mauritius conducts since July 1, 2008. Paid-in minimum capitalsolvency tests. Taiwan (China) requires In 2008, Saudi Arabia enabled online % of incomean audit report showing that the amount registration with the General Organiza- Least per capita US$a company has invested is enough to tion of Social Insurance (GOSI), reducing Bahrain 273.4 53,191cover its establishment cost. the time to complete this procedure from Oman 288.4 51,948 In the Arab world, 6 economies cur- 3 days to 1 day. Egypt recently launched Syrian Arab 355.1 8,557 Republicrently do not require paid-in minimum a new system to establish companies Mauritania 412.1 3,956capital—Egypt, Saudi Arabia, Sudan, electronically. The first phase of the sys- Djibouti 434.1 5,556Tunisia, the United Arab Emirates, and tem—allowing online submission of the Note: Six Arab economies have no paid-in minimum capitalthe Republic of Yemen. The reduction registration application—is in place. requirementor elimination of minimum capital re- To encourage use, some economies Source: Doing Business database.quirements in several economies was set lower fees for online registrations.followed by a jump in initial registra- In Belgium, online registration costs regulatory reform program. Among thetions. For example, the year after Jordan 140 Euros while paper registration costs benefits have been greater firm satisfac-reduced its requirement from 30,000 to 2,004 Euros. In Canada, the costs are tion, savings, more registered businesses,1,000 Jordanian dinars, the number of 200 Canadian dollars and 350 Canadian economic growth, and new job oppor-newly registered companies increased dollars, respectively. In Estonia, docu- tunities. Since 2005, 12 economies inby 18% in the country. In Morocco, a ments filed online no longer have to be the Arab world—Algeria, Egypt, Jordan,reduction from 30,000 to 1,000 dirham notarized. Lebanon, Mauritania, Morocco, Oman,led to a 40% increase in registrations the Saudi Arabia, Syrian Arab Republic, Tu-following year. Morocco is now consid- WHAT ARE SOME RESULTS? nisia, Yemen, and West Bank and Gaza—ering abolishing the paid-in minimum have made it easier to start a business byrequirement altogether. In many of the Making business entry easier has been a implementing a total of 31 reforms. As aeconomies that eliminated the require- popular reform around the world. Many result of these reforms, the time to startment—such as in Egypt and the Republic economies have undertaken reforms inof Yemen—companies are more likely to stages—and often as part of a larger
24. DOING BUSINESS TOPICS 19a business in the region was reduced— larger informal sectors and smaller for-from 41 days in 2005 to just 22 days in mal sectors.7 Informal firms are typically2010. Over the same period, start-up less productive or efficient, adversely af-costs were lowered—from an average of fecting overall productivity and growth.882.4% of income per capita to 46.2% of The same study also finds that variationsincome per capita (figure 3.2). in regulatory costs across countries lead to differences in total productivity andBIG JUMPS IN REGISTRATIONS output. When regulation is too heavyEgypt introduced a one-stop shop in handed, compliance and start-up costs2005. Further reforms included incor- increase, cutting into firms’ profits. Thisporating more agencies into its one-stop discourages entrepreneurs and increasesshop, introducing a flat fee structure, the share of the population choosing toand reducing—and then abolishing in become employees instead. Job creation2009—the paid-in minimum capital re- suffers.9 High costs also deter entrepre-quirement. As a result of these reforms, neurship driven by opportunity (insteadthe time and cost of business registra- of necessity).10 Lower entry costs—tions in Egypt were reduced in both 2005 combined with better credit informa-and 2006—and by 2007, the number of tion sharing—are also associated with aregistered companies had increased by larger small and medium-size enterprisemore than 60%. In addition, reducing (SME) sector.11the minimum capital requirement in2007 and 2008 led to an increase of morethan 30% in the number of formallyregistered, limited liability companies. 1. Kauffman Foundation (n.d.).Like Egypt, Portugal also saw results 2. “The United States of Entrepreneurs: America Still Leads the World,” Thefrom a series of reforms. It eased busi- Economist, March 12, 2009.ness start-up requirements in 2006 and 3. U.S. Small Business Administration, “Fre-2007, and cut the time it took to start quently Asked Questions: Advocacy Smalla business from 54 days to just 5. In Business Statistics and Research,” ac-2007/08, new business registrations were cessed July 28, 2010, http://web.sba.gov/.60% higher than the year before. 4. World Bank conference, “The Singapore Experience: Ingredients for Successful Nation-Wide eTransformation,” Singa-BETTER ECONOMIC AND SOCIALOUTCOMES pore, September 30, 2009. 5. World Bank (2009b).The immediate results of making start- 6. Ciccone and Papaioannou (2007).ing a business easier include cost savings 7. Barseghyan and DiCecio (2009).and increased registrations. Meanwhile, 8. Dabla-Norris and Inchauste (2008).empirical research is increasingly focus- 9. Fonseca, Lopez-Garcia and Pissaridesing on longer term economic and social (2001).outcomes—such as the encouragement 10. Ho and Wong (2006).of entrepreneurship, competition, trans- 11. Ayyagari, Beck and Demirgüç-Kuntparency, and productivity. One study (2007).shows that economies where it takes lesstime to register new businesses have seenhigher rates of entry in industries with apotential for expansion.6 Another recent study finds thathigher entry costs are associated with
25. Dealing with FIGURE 4.1 What are the time, cost and number of procedures to comply with formalitiesconstruction to build a warehouse?permits COST (% of income per capita) Completed warehouse NUMBER OF PROCEDURES A business in the construction industry TIME (days) Preconstruction Construction Postconstruction and utilities In the regulation of construction around process is too complex or oversight too WHAT HAS WORKED? the world, the challenge for many gov- lax.2 In many economies, especially poor ernments has been to strike the right bal- ones, complying with building regula- Smart regulation ensures that standards ance between protecting the public while tions is so onerous and expensive that are met while making compliance easy remaining transparent, efficient, and af- many builders opt out. Builders may and accessible to all. Coherent and fordable to the private sector. Some have pay bribes to pass inspections or simply transparent rules, efficient processes, succeeded. For example, Georgia offers build illegally, leading to hazardous con- and adequate allocation of resources are one of the world’s simplest construction struction. Where the regulatory burden especially important in sectors where permitting processes. Obtaining all con- is large, entrepreneurs may move their safety is at stake. Construction is one struction permits and utility connections activity into the informal economy. of them. Since 2005, 12 Doing Business in the Eastern European economy now Reforms that make the regulation reforms have been recorded that stream- requires 7 steps, takes 67 days, and costs of construction more efficient and trans- lined construction permitting proce- just 19.4% of Georgia’s average income parent can help reduce corruption and dures in the Arab world, implemented per capita. This is thanks to a series of formalize the sector. By encouraging by 9 economies—Algeria, Bahrain, the improvements introduced between 2005 construction companies to comply with Arab Republic of Egypt, Jordan, Kuwait, and 2009. Among other things, Georgia’s regulations, governments can reap the Mauritania, Morocco, Saudi Arabia, and government created a one-stop shop and returns on their investments made in the United Arab Emirates (figure 4.2). gradually consolidated 25 procedures reforming the sector. Good regulations Worldwide, governments that regulate into 10, reducing the time to comply with ensure safety standards that protect the construction efficiently often take a sys- construction formalities from 195 to 98 public. Good regulations are also ef- tematic approach to the improvements days. Today, construction is among the ficient, transparent, and affordable for they introduce. They adopt uniform most dynamic and rapidly growing sec- both building authorities and the private building codes, streamline their proce- tors of the economy: between 2004 and professionals who use it. dures by creating one-stop shops, and 2007, the construction sector expanded opt for risk-based approval systems. from 6.3% of GDP to 11%.1 WHO REFORMED IN 2009/10? Doing Business indicators measure ADOPTING A UNIFORM BUILDING CODE the procedures, time, and cost required In 2009/10, Saudi Arabia was the only for a small to medium-size enterprise economy in the region to make dealing Efficient regulation starts with a uni- to obtain all the necessary approvals to with construction permits easier. In fact, form building code—and its uniform build a commercial structure and con- Saudi Arabia improved its regulatory implementation. Forty-three economies nect it to electricity, water, sewerage, environment for the second year in a row globally have adopted uniform construc- and telecommunications services (figure by introducing a new, streamlined con- tion rules. Most commonly, a central 4.1). struction-permit process that reduced authority outlines the rules and local By some estimates, roughly 60% to the time and number of procedures re- authorities implement them. When regu- 80% of construction projects in develop- quired of entrepreneurs. lations are not organized and applied ing economies are undertaken without coherently, builders and authorities can permits because the building approval become confused about how to proceed.
26. DOING BUSINESS TOPICS 21FIGURE 4.2 DIFFERENTIATING PROJECTS BY RISKArab economies have biggest time reductions in the worldNumber of Doing Business reforms making it easier to deal with construction permits by Doing Business report year Not all buildings involve the same social, cultural, economic, or environmental DB2008 DB2009 DB2010 DB2011 impacts. A hospital or skyscraper cannot be compared with a 2-story commercial 3 2 6 1 12 warehouse. Efficient governments have implemented rigorous yet differentiatedArab world averages in dealing with construction permits construction permitting processes to DB DBProcedures (number) 2011 2006 treat buildings according to their risk 19 20 level and location. Simple or low-risk buildings shouldTime (days) require less documentation than more 152 170 complex structures and should be ap- proved faster. This saves time and allowsCost (% of income per capita) both entrepreneurs and authorities to 385.8 654.0 direct their efforts and resources moreNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes efficiently. Kazakhstan recently imple-18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies. mented differentiated approval proce-Source: Doing Business database. dures for simple and complex projects, al-This often leads to delays, uncertainty, Five Arab economies—Bahrain, lowing a fast-track procedure for projectsand disputes. Jordan, Morocco, Qatar, and Saudi Ara- involving less than 1,000 square meters. In Nigeria, a new national building bia—have introduced single windows to After Bavaria implemented differentiatedcode was drafted in 2006, but it has yet streamline their procedures. In March, permitting approaches for low- and high-to be enforced. Some Nigerian states the Saudi Arabian General Investmenthave started implementing provisions of Authority (SAGIA) established, in col- TABLE 4.1the code by amending local urban and laboration with various public agen- Who makes dealing with constructionregional planning laws to require new cies and utilities, the Unified Center for permits easy—and who does not?inspections and certificates. Others have Real Estate Projects Services which is to Procedures (number)not. The result is wide variation across act as a one-stop shop for construction Fewest Moststates—especially confusing for builders permitting purposes. The new center is Saudi Arabia 12 Algeria 22with projects in more than one state.3 expected to reduce the time, cost, and Bahrain 13 Egypt, Arab Rep. 25 Among the Arab economies, 5 have steps for an entrepreneur dealing with Iraq 14 Kuwait 25national building codes: Kuwait, Mauri- construction permits. The Chamber of Oman 15 Mauritania 25tania, Qatar, Tunisia, and the Republic Commerce stamp is to be eliminated Yemen, Rep. 15 Syrian Arab 26 Republicof Yemen. when applying for a fixed telephone line with the Saudi Telecom agent at the new Time (days)USING ONE-STOP SHOPS TO IMPROVE center. In addition, separate inspections Fastest SlowestCOORDINATION and activations of water and sewage con- Bahrain 43 Iraq 215Before a building plan is approved, ap- nections are to be merged into a single United Arab 64 Egypt, Arab Rep. 218propriate clearances are needed to ensure inspection and activation. Emirates Lebanon 218quality and safety. Often several agencies There have been different ways to set Qatar 76 Algeria 240are involved. To prevent overlap and en- up successful one-stop shops around the Jordan 87 Sudan 271 Saudi Arabia 89sure efficiency, 22 economies have opted world. In Paraguay, authorities movedto put the agencies in one location. These professionals from 7 municipal depart- Cost (% of income per capita)one-stop shops improve the organization ments into 1. Since early 2010, Burkina Least Mostof the review process—not by reducing Faso has held periodic meetings of all Qatar 0.8 Syrian Arab 568.4the number of checks needed but by bet- approving bodies to speed up clearances. United Arab 35.8 Republicter coordinating the efforts of different The number of building permits issued Emirates Jordan 634.1agencies. That way, more resources can after implementation of the one-stop Saudi Arabia 43.8 Tunisia 858.7be devoted to safety checks and fewer to shop in Ouagadougou almost tripled Algeria 44.0 West Bank 1,113.0paperwork. over a 2-year period. Comoros 68.1 and Gaza Djibouti 1,862.8 Source: Doing Business database.
27. 22 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 4.3 gion: Bahrain, Djibouti, Kuwait, Sudan,How do Arab economies rank on the Syrian Arab Republic, Tunisia, Unitedease of dealing with construction Arab Emirates, West Bank and Gaza, andpermits? the Republic of Yemen.Global ranking (1–183) HONG KONG SAR, CHINA EASIEST (1) WHAT ARE SOME RESULTS? Saudi Arabia — — Bahrain The Arab world is the fastest region in 20 — the world for dealing with construction — United Arab Emirates Qatar permits. Cumulative improvements over 40 Yemen, Rep. the past 5 years by 6 Arab economies — Comoros have decreased the region’s average time 60 Oman by 18 days—from 170 in 2005 to 152 in — — Kuwait 2010.5 The 6 Arab economies that have 80 Jordan — Morocco seen their time to deal with construction — — Iraq permits drop are: the Arab Republic of 100 — — Tunisia Egypt, Jordan, Kuwait, Morocco, Saudi — Algeria Arabia, and the United Arab Emirates. 120 — Djibouti The United Arab Emirates, an econ- — Syrian Arab Republic — — omy that offers one of the best environ- 140 Sudan ments for dealing with construction per- — — Lebanon — Mauritania mits in the region (figure 4.3), saved the 160 Egypt, Arab Rep. most time with recent improvements: West Bank and Gaza dealing with construction permits in the 183 UAE now takes a third less time than itSource: Doing Business database. did in 2005—from 97 days in 2005 to just 64 days, on average, last year. Over therisk projects, builders saved an estimated same time period, Saudi Arabia saved€154 million in building permit fees in a 36 days—its average time spent fell fromyear, while building authorities needed 125 days in 2005 to 89 days last year—270 fewer employees on their payroll. while Jordan saved 20 days—its averages Of the 64 economies that have ad- fell from 107 days to 87 days.opted a risk-based system in their con-struction regulations, 9 are from the re- More efficient systems can prepare govern- 1. IFC (2008a). ments to take advantage of a pickup in 2. Moullier (2009). construction activity. Colombia offers a good 3. World Bank (2010a). example. In 1995, obtaining building autho- 4. Espinosa-Wang (forthcoming). rizations in Bogotá took 3 years, on average. 5. Bahrain and Qatar are not included in Today it takes about a month. This is thanks the sample for 2005 (Doing Business 2006) to a broad program of reforms targeting the because they were added to the Doing construction permitting process. The govern- Business series in 2008 and thus, no data ment transferred the administration of build- for them is available for 2005. ing permits to the private sector, created a risk-based approval process and introduced electronic verification of the ownership sta- tus of buildings and land. The changes were timely, because construction activity took off. In 1996, approved building construction area amounted to 11.3 million square meters. In 2007, it was 19.2 million—70% more. During this time, Colombia’s construction sector grew from 6% of GDP to 7%.4
28. 23Registering FIGURE 5.1 What are the time, cost and number of procedures required to transfer a propertyproperty between 2 local companies? COST Buyer can use (% of property value) the property, resell it or use PROCEDURES it as collateral Land & 2-story warehouse Seller with property registered and no title disputes TIME (days) Preregistration Registration PostregistrationEnsuring property rights is fundamental. high at 6.1% of the underlying property istration fees, online registries, and statu-With formal titles, entrepreneurs have value. But in 5 economies, including tory time limits for administrative proce-added incentive to invest in and improve Kuwait and Qatar, the cost is less than dures characterize those economies withtheir lands. In addition, entrepreneurs can 1% of property value. In 9 other Arab simple and efficient property registrationuse their property to obtain credit and ex- economies, the cost exceeds 5%. The systems. Such systems benefit all entre-pand their activity; since property is often most expensive place to register property preneurs. The rich have few problemsrequested by banks as collateral for loans. is the Syrian Arab Republic, where the protecting their property rights: they canBut a large share of property in developing costs run to 28% of property value due to afford to invest in security systems andeconomies is still not formally registered. the world’s highest transfer taxes. other measures to defend their property.Informal titles cannot be used as security Doing Business records the full se- But small entrepreneurs often cannot.in obtaining loans, which limits financing quence of procedures necessary for a Property registration reform can helpopportunities for businesses. The result of business to purchase a property from an- change this.limited access to finance can be limited other business and transfer the propertyeconomic growth1. title to the buyer’s name. The property WHO REFORMED IN 2009/10? Many governments have recognized consists of land and a building to bethe importance of titles and started ex- transferred in its entirety. The transac- Of the 21 economies that made it easiertensive property titling programs. But tion is considered complete when it is to register property in 2009/10, nonebringing assets into the formal sector opposable to third parties and the pur- were in the Arab world. Seven posi-is only part of the story. Effective ad- chasing company can occupy the prop- tive reformers were in the OECD high-ministration of land is also important. erty, use it as collateral in taking new income group and 4 were from LatinIf formal property transfer is too costly loans, or, if necessary, sell it to another America and the Caribbean.or complicated, formal titles might go business (figure 5.1). Bahrain made it more difficult toinformal again. Eliminating unnecessary Local property lawyers and property register property in 2009/10 by raisingobstacles to registering and transferring registry officials provide information on the cost. As of December 2009, Bahrainproperty is, therefore, important for eco- required procedures as well as the time established a sliding fee schedule fornomic development. and cost to complete each one. Three property transfers. Previously, the fee to Transferring property in the Arab indicators are constructed: transfer a property was set at 1% of theworld is as fast as in OECD high-income Number of procedures to register property value. Now, if the property iseconomies: it takes just 32 days, on aver- property valued at BD 70,000 or less, the percent-age. In the United Arab Emirates and Time to register property (in calendar age of fees payable to Bahrain’s SurveySaudi Arabia, registering property takes days) and Land Registration Bureau is 1.5%just 2 days. Eleven of 20 Arab econo- Official costs to register property (as a of the property value. If the propertymies have electronic databases for both percentage of the property value). is valued between BD 70,001 and BDencumbrances and ownership verifica- Efficient property registration re- 120,000, the fee is equal to 2% of thetion, though Bahrain alone offers online duces transactions costs and helps for- property value is charged for transfer ofregistration in the region. The average malize more property titles. Simple property. If the property is valued overcost in the Arab world remains fairly procedures, low transfer taxes, fixed reg- BD 120,000, is the fee is equal to 3% of
29. 24 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 5.2 registry now takes just 1 day (down fromTransferring property in the Arab world is as fast as in OECD high-income economies 7-10 days in 2006).Number of Doing Business reforms making it easier to register property by Doing Business report year DB DB DB DB DB COMPLYING WITH TIME LIMITS 2006 2007 2008 2009 2010 Worldwide, 49 economies have legal time 2 3 3 2 3 13 limits for registration procedures and 13 of them have expedited procedures.Arab world averages in registering property DB 2006 Registries in Eastern Europe and Cen- DB 2011 tral Asia, OECD high-income economies,Procedures (number) 6 and Latin America and the Caribbean stand out for the highest compliance toTime (days) DB 2011 DB 2006 time limits. Spain has an innovative way 32 43 to ensure compliance: the registry’s fees are cut by 30% if registration takes moreCost (% of income per capita) than 15 days. 6.1 7.6 Introducing time limits can help improve administrative efficiency at reg-Note: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies. istries. Time limits serve to benchmarkSource: Doing Business database. registries’ performances while they speed up processes for entrepreneurs. None ofthe property value. A 10% discount is In economies with computerized reg- the economies in the Arab world haveapplied if property title applications are istries, transferring property is about legal time limits.submitted within 60 days of the date of twice as fast as it is in economies with Over the past 6 years, 14 economiesexecution of the sale agreement. paper-based systems. Properly backed out of the 183 covered by Doing Busi- up, electronic databases also help ensure ness introduced time limits. Of these 14,WHAT HAS WORKED? property security. Electronic interactions 12—including Belarus, FYR Macedonia, are more transparent. A survey in India Mauritius, and Rwanda—did so as partGovernments worldwide have been mak- found that fewer users paid bribes to ac- of broader reforms that included merg-ing it easier for entrepreneurs to register celerate e-government services2. ing procedures through computeriza-and transfer property. Some global good Twenty-four economies computer- tion, reorganizing the land registry, orpractices have helped in achieving that ized their registries over the past 6 years. creating one-stop shops.goal. In the past 6 years, 10 economies Because gradual implementation or afrom the Arab world—Algeria, Djibouti, pilot approach facilitates the process, full OFFERING FAST-TRACK PROCEDURESEgypt, Jordan, Kuwait, Mauritania, Mo- implementation can take time—ranging Sixteen economies offer expedited reg-rocco, Saudi Arabia, Tunisia and West from 3 to 10 years. The cost can reach $2 istration procedures at a premium of 2Bank and Gaza—implemented a total million or more if surveying and cadas- to 5 times the basic fee (or, $14 to $450).of 13 reforms streamlining the property tre work is involved. But the impact is Time savings range from 1 to 32 days.registration process. As a result of these substantial. These 24 economies cut their Expedited procedures are most popu-reforms, the average time to register average time to transfer a property in lar in Eastern Europe and Central Asia,dropped by 26% and the average cost fell half—by about 3 months, on average. where 9 economies offer them. None ofby 6% since 2005 (figure 5.2). In 2008, the land registry in Ramal- the economies in the Arab world offer lah computerized its records with the expedited procedures.GOING ELECTRONIC help of a World Bank project. The time to Fast-track procedures help peopleWorldwide, 61% of economies have an transfer property was reduced by 25% in who need speedier registration and areelectronic database for encumbrances— West Bank and Gaza. In 2007, Saudi Ara- willing to pay for it —and allow a reg-including almost all OECD high-income bia implemented a comprehensive elec- istry to prioritize its work. In the mostand Eastern European and Central tronic system for registering title deeds. common case, the registry charges aAsian economies. In the Arab world, The property transfer process is now very higher fee for speedier property regis-12 economies out of 20 have an elec- simple and efficient: it can be completed tration or expedition of certificates. Fortronic encumbrances—Bahrain, Egypt, in only 2 days. In 2006, Tunisia comput- example, expedited procedures save 6Iraq, Jordan, Kuwait, Lebanon, Morocco, erized its land registry. As a result of this days for non-encumbrance certificates inOman, Saudi Arabia, Tunisia, the United computerization, consultation of pend- Argentina and 4 days for tax clearancesArab Emirates, and West Bank and Gaza. ing encumbrances on the property at the by the Asmara municipality in Eritrea.
30. DOING BUSINESS TOPICS 25FIGURE 5.3 Over the past 6 years, 52 economies TABLE 5.1How do Arab economies rank on Who makes registering property easy— around the world reduced the cost to and who does not?the ease of registering property? transfer property. For example, in MayGlobal ranking (1–183) Procedures (number) 2009, Jordan reduced property transfer SAUDI fees from 10% to 7.5% of property value. Fewest Most ARABIA — EASIEST (1) — Only 4 economies out of the 52 have United Arab 1 Kuwait 8 Saudi Arabia Emirates switched to fixed registration fees over Lebanon 8 — United Arab Emirates Bahrain 20 the past 6 years—including Egypt in 2 Morocco 8 — Oman Oman 2 Qatar 10 Bahrain the Arab world. 55 economies still have — Saudi Arabia 2 Algeria 11 40 Sudan taxes and fees that cost 6% or more of the Tunisia 4 — Yemen, Rep. property value. In Syria, taxes and fees — Time (days) 60 — Qatar exceed 20% of the property value. — Tunisia Fastest Slowest — In 2005, 90% of properties in the 80 — Mauritania Arab Republic of Egypt were either un- Saudi Arabia 2 West Bank 47 — West Bank and Gaza — — registered or registered at underesti- United Arab 2 and Gaza — Syrian Arab Republic Emirates 100 mated values3. Transferring a property Mauritania 49 — Kuwait — Sudan 9 Iraq 51 Egypt, Arab Rep. between domestic companies cost 5.9% 120 — Oman 16 Kuwait 55 Iraq of property value. Compare that with Qatar 16 Egypt, Arab Rep. 72 Comoros less than 0.5% of property value in New — Cost (% of property value) 140 Jordan York. Basing the registration fee on a Lebanon Least Most percentage of the property value (3%) 160 — Morocco Djibouti encouraged undervaluation in Egypt. It Saudi Arabia 0.00 Algeria 7.1 also complicated property registrations, Qatar 0.25 Jordan 7.5 Algeria 183 required more regulation to secure tax Kuwait 0.54 Djibouti 13.0 West Bank 0.74 Comoros 20.8Source: Doing Business database. revenues for the government, and cre- and Gaza Syrian Arab 27.9 ated opportunities for corruption. In Au- Egypt, Arab Rep. 0.82 RepublicSETTING LOW FIXED FEES gust 2006, Egypt lowered the total cost Source: Doing Business database.Globally, 17 economies have low, fixed of registration by charging the buyer ataxes and fees for property transfer— flat fee of EGP 2000 (USD 331), rather sector loans. When titles were requestedranging from around $20 to $300, re- than 3% of the value of the property. by lenders, approval rates were as muchgardless of the property value. Only 2 The notarization and registration fees as 12% higher. And regardless of whethereconomies in the Arab world apply fixed were also capped at EGP 30 (USD 4.97) collateral is requested, interest rates tendtransfer taxes and fees: Egypt and Saudi and 14 other registration fees were re- to be significantly lower for applicantsArabia. Twelve others—including Fin- duced to less than $6 a piece. Such low with property titles4.land, the Republic of Korea, and Mala- costs encouraged formal registration of In surveys of firms in 99 econo-wi—have fixed fees for registration but property. As Osamah Saleh, Chairman of mies, 21% of respondents consideredcharge other taxes and stamp duties in Egypt’s Mortgage Finance Authority, said access to land a “major constraint” toproportion to the property value. at the time: “We were aiming to reduce business5. For some entrepreneurs, for- The administrative costs of registra- property registration fees so that every malizing property titles might simplytions are independent of property values, property holder will have the chance to be too costly. When Egypt reduced theso registration fees can be fixed and low receive a formal title. The poor especially cost of registration from 5.9% to 1% ofif a government chooses. Combined with would benefit because they would have the property value in 2006, new registra-low transfer taxes, this may encourage the chance to use their properties as col- tions jumped 39% the following year.formal registration and prevent under- lateral, start doing business, and achieve Increasing the efficiency of property-reg-reporting of property values. It can also their dreams.” istration systems benefits users as wellease the burden on governments trying as administrators. FYR Macedonia cutto detect cheaters. Switching to fixed fees WHAT ARE SOME RESULTS? the time to register property by 40 days.or lower fees can also help ensure more For the 177,000 people buying propertyrealistic property values for capital gains Formal titles can help facilitate access in 2009, that meant being able to use orand property taxes collected later on. Re- to credit. A study in Peru, where a large mortgage their property 40 days earlier.ducing taxes does not necessarily mean land-titling program was implemented, Many benefited: twice as many proper-reducing revenues. suggests that property titles are associ- ties were sold in 2009 as in 2007, despite ated with higher approval rates on public the financial crisis.
31. 26 DOING BUSINESS IN THE ARAB WORLD 2011 Electronic access to property registration services also helps. Guatemala’s land registry, digitized over the past 5 years, now offers ca- dastral certificates as well as electronic access to data on encumbrances and ownership. Peo- ple choose to use electronic services: in 2005, 66% of certificates were requested electroni- cally, now 80% are. Buyers save the time and cost of going to the registry, standing in line, and waiting 3 days for the paper certificate. And they can get instant information about encumbrances just before closing a property sale, increasing security. Efficient systems also prepare econ-omies for the development of vibrantproperty markets. Belarus’s unified andcomputerized registry was able to copewith the addition of 1.2 million newunits over 3 years. The registry issued 1million electronic property certificatesin 2009. Georgia’s new electronic registrymanaged 68,000 sales in 2007, twice asmany as in 2003. FYR Macedonia’s elec-tronic registry now covers almost all thecountry, twice as much as in 2006.1. World Bank (2008a).2. Bhatia, Bhatnagar and Tominaga (2009).3. World Bank (2008b)4. Field and Torero (2006).5. World Bank Enterprise Surveys, 2006-09 (http://www.enterprisesurveys.org).
32. 27Getting FIGURE 6.1 Do lenders have credit information on entrepreneurs seeking credit? Is the law favorable to borrowers and lenders using movable assets as collateral?credit Credit information Potential Can movable assets be borrower used as collateral? MOVABLE Collateral Credit registries and Lender ASSET registry credit bureaus Can lenders access credit information What types can be on borrowers? used as collateral? Where collateral laws are effective search, the volume of loans around the An amendment to Saudi Arabia’sand credit registries are present, banks world declined from 74% of global GDP commercial lien law enhanced access toare more likely to extend loans.1 Further- to 65%, while the volume at the national credit by making secured lending moremore, access to credit information helps level declined as a share of GDP in more flexible and allowing out-of-court en-lenders assess the creditworthiness of than 80% of countries.5 Supporting the forcement in case of default.potential clients. Although a credit his- use of collateral to lower the risks associ- Syria enhanced access to credit bytory is not a substitute for sophisticated ated with lending therefore matters in eliminating the minimum thresholdrisk analysis, when banks share credit the current economic context. for loans included in the database. Thisinformation, loan officers can assess bor- Doing Business measures the legal move expanded the database’s coveragerowers’ creditworthiness using objective rights of borrowers and lenders and the TABLE 6.1measures. And if lenders are also reas- scope and quality of credit informa- Who has the most credit informationsured by strong creditors’ rights, it al- tion systems. The first set of indica- and the most legal rights for borrowers and lenders—and who has the least?lows them to take greater, well-informed tors describes how well collateral and Legal rights for borrowers and lendersrisks.2 This in turn can make financing bankruptcy laws facilitate lending. The (strength of legal righst index, 0-10)more accessible, particularly for small second set measures the scope, quality Most Leastand medium-size entrepreneurs. and accessibility of credit information Around the world, movable assets, available through public credit registries Saudi Arabia 5 Egypt, Arab Rep. 3not land or buildings, tend to account and private credit bureaus and provides Sudan 5 Yemen, Rep. 2for most of the capital stock of private information on coverage (figure 6.1). Bahrain 4 Djibouti 1firms—especially for micro-, small, and Jordan 4 Syrian Arab 1 Republicmedium-size enterprises. For example, WHO REFORMED IN 2009/10? Kuwait 4* West Bank 0in the United States, movable property and Gazamakes up about 60% of the capital stock With 5 Arab economies improving their Borrowers covered by credit registriesof enterprises.3 Unlike in Bolivia and credit information system and their leg- (% of adults)other economies that do not allow a islation governing legal rights last year, Most Leastgeneral description of assets granted as getting credit was the second most popu-collateral, the United States allows most lar regulatory reform in the region, after Bahrain 36 Yemen, Rep. 0.34of this movable property to serve as col- trade. Kuwait 30 Algeria 0.23lateral for loans. Research shows that Jordan improved its credit infor- Tunisia 23 Djibouti 0.20in developed economies borrowers with mation system by setting up a regula- Oman 20 Qatar 0.11collateral get 9 times as much credit as tory framework for establishing a private Saudi Arabia 18 Mauritania 0.10those without it. They also benefit from credit bureau as well as lowering the *Oman and the United Arab Emirates also score 4 on therepayment periods 11 times as long and threshold for loans to be reported to the strength of legal rights index.interest rates up to 50% lower.4 public credit registry. Note: The rankings on borrower coverage reflected in the table In 2009, however, the global finan- Lebanon improved its credit informa- include only Arab economies with public or private credit registries (17 in total). Another 3 Arab economies have no creditcial crisis adversely affected access to tion system by allowing banks online ac- registry and therefore no coverage.credit globally. According to recent re- cess to the public credit registry’s reports. Source: Doing Business database.
33. 28 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 6.2 economies—most of them in the EasternSteady pace of credit information reforms in the Arab world Europe and Central Asia region and theNumber of Doing Business reforms making it easier to get credit by Doing Business report year East Asia and the Pacific region—have DB DB DB2008 DB2009 DB2010 DB2011 effective collateral registries, following 2006 2007 global good practices. Features of these 2 1 5 5 3 5 21 registries include (1) online access for registration and searches, (2) the abil-Arab world averages in getting credit indicators ity to register almost all types of assets DB DBStrength of legal rights index (0–10) 2006 2011 as collateral (regardless of the nature of the parties involved), (3) clear prior- 2.9 3.1 ity parameters, and (4) a central data-Depth of credit information index (0–6) base searchable by a debtor’s name or 1.4 2.9 a “unique identifier.” Once registered, security interests take immediate effectNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes for third parties.18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies.Source: Doing Business database. Electronic systems can increase ef- ficiency, but they are not a magic cure-of individuals and firms to 2.8% of the 12 economies from the region have re- all: an effective regulatory framework isadult population. formed their credit information systems needed as well. Spain created an elec- The United Arab Emirates enhanced since 2005. In 2005, only 2 economies in tronic registration system in 2002. Butaccess to credit by setting up a legal the region—Kuwait and Saudi Arabia— since Spanish law still required regis-framework for the operation of a private had private credit bureaus; today 6 do. trants to notarize deeds before com-credit bureau and requiring that financial However, the credit bureaus differ greatly pleting registration, most people contin-institutions share credit information. in scope. Nearly half the economies in ued to submit paper-based registration the region scored 3 points or less on the forms. As a result, there have been fewerWHAT HAS WORKED IN depth of credit information index, while online registrations than expected.SECURED TRANSACTIONS? half scored 4 points or more (on a scale In 2007, there were 10,472 online of 0 to 6). Among the best performers areIn the past 5 years, Doing Business has Egypt, Lebanon, Morocco, Saudi Arabia, FIGURE 6.3recorded 23 reforms strengthening credit Tunisia, and the United Arab Emirates. How do Arab economies rank on the ease of getting credit?information systems and the legal rights In secured transactions, popular Global ranking (1–183)of borrowers and lenders in the 20 econ- regulatory reforms clarify what kind ofomies of the Arab world (figure 6.2). movable property can be used as collat- MALAYSIA EASIEST (1) In the Arab world, banks cite lack of eral and how a secured interest can help Saudi Arabiatransparency among small and medium- protect creditors. Publicizing a security Egypt, Arab Rep. 20size enterprises and the weak financial interest, usually through registration, United Arab Emiratesinfrastructure (a lack of credit infor- and establishing priority and enforce- Bahrain 40mation, creditor rights, and collateral ment rules are also popular reforms that — Kuwaitinfrastructure) as the main obstacles to help creditors in the region recover their Lebanon 60 Moroccolending more to such enterprises. Eleven investments if a debtor defaults. — — Tunisialegal frameworks do little to encourage 80 Jordanthe use of movable collateral. Only 11% UNIFYING REGISTRIES — — — — — Omanof economies in the region allow a gen- A centralized collateral registry protects Algeria 100eral description of encumbered assets. secured creditors’ rights by providing QatarAnd, until recently, few governments had objective information on whether assets Sudan 120attempted to modify their legal struc- are subject to the security right of other — Mauritaniature. Saudi Arabia amended its commer- creditors. It then also clarifies priority — Yemen, Rep. 140 Comoroscial lien law in 2010 to expand the range among creditors. — Iraqof assets that can be used as collateral. Sixty-seven of the 183 economies Syrian Arab Republic 160It also plans to implement an electronic covered by Doing Business 2011 have — West Bank and Gazacollateral registry. West Bank and Gaza an efficient institution for registering — Djiboutiis in the process of adopting a new se- security interests in business assets over 183cured transactions law. At the same time, their entire geographic area.6 Thirteen Source: Doing Business database.
34. DOING BUSINESS TOPICS 29registrations and 24,941 paper-based Securities Act, it includes all types of col- WHAT HAS WORKED INones in Spain. And in 2009, while 20,586 lateral. Along with this legal framework, CREDIT INFORMATION?online registrations were recorded, there New Zealand also has a modern, onlinewere 32,739 paper-based submissions.7 collateral registry for all types of movable Forty-four economies around the world Cost matters in the use of collat- assets. Not surprisingly, collateral regis- still lack any kind of credit informationeral registries. A survey of 31 regis- trations in New Zealand far outnumber system. 17 economies from the Arabtries suggests that higher fees result in those in similar economies. At the same world have a credit information system.lower transaction volumes for registering time, searches in New Zealand’s registry Specific practices, described below, helpor amending a security interest or for have risen from 661,944 in 2002 to nearly increase coverage, encourage use, andsearching the registry. 2.5 million in 2009.8 protect borrowers. Although movable property isUNIFYING THE LAWS widely used as collateral, many economies CASTING A WIDE NETTo function properly, collateral registries still have fragmented collateral laws, with According to a recent survey of 70 utilitymust be supported by an adequate legal separate laws dealing with different sub- companies in the United States, 72% re-framework. Some economies, such as New sets of lenders or types of collateral.9 Hong ported that the benefits of credit report-Zealand and Romania, have a secured Kong SAR (China), Ireland, Malaysia, and ing amounted to between 2 and 5 timestransactions law that treats all security Singapore are all examples of economies the costs. Half of all customers indicatedinterests in movable property equally with with fragmented collateral laws. Fragmen- that they would be more likely to payrespect to publicity, priority, and enforce- tation increases the risk of conflict be- their bills on time if those payments werement—regardless of the form in which tween laws—e.g., when determining the fully reported to credit bureaus and couldthe security interest is given (whether a priority rules for secured creditors. It also affect their credit score10. Including suchpledge, a financial lease, or a loan and increases the risk that the same security data in credit bureaus also benefits thetrust agreement, for example). Such laws could be registered in different places, and utility companies. In emerging markets,are in line with internationally accepted that means greater risk for lenders. Such where the working poor make up morepractices. New Zealand adopted its law systems are not only less transparent but than 60% of the labor force11, allowingin 1999. Called the Personal Property also more costly to operate. the distribution of payment information from sources other than banks could BOX 6.1 The Arab world is picking up the pace of reform in secured transactions make a big difference. China has close to 750 million mobile phone subscribers. Sustainable economic growth depends significantly on an active private sector and vibrant Small and Only a fraction of these subscribers have Medium-Sized Enterprises (SMEs). These enterprises struggle, however, with obtaining the financ- taken out commercial loans in the past. ing they need to grow and create jobs. According to the World Bank’s Enterprise Survey, more than For all others, the ability to unlock credit 70% of firms in the Middle East and North Africa (MENA) do not have access to credit with lending through reliably paying mobile phone being heavily reliant on collateral and firms not being able to utilize most of their movable assets (such as equipment, inventory, accounts receivable) as collateral due to weak secured lending legal bills over time could open new oppor- frameworks and ineffective/non-existent collateral registries that effectively support property rights tunities. In the Arab world, 3 economies of lenders. have bureaus that collect information At present, there are no countries in the Arab world that introduced legal reforms in this area. How- from sources other than banks—Egypt, ever, a number of governments are currently working on implementing these reforms. Kuwait, and Saudi Arabia. For example, the new Law on Secured Transactions in West Bank and Gaza was recently adopted by the Ministerial Council. This Law, which is fully in line with international best practice and addresses REPORTING THE GOOD AS WELL AS the secured transactions reform comprehensively, should become effective when signed by the Presi- THE BAD dent of the Palestinian Authority. Further, Governments of Jordan and Egypt have prepared draft laws on secured transactions which are currently being discussed with local stakeholders and it is expected A credit information system that reports that these laws will be enacted soon. A number of other Arab countries such as Lebanon, United Arab only negative information fails to reward Emirates and Saudi Arabia expressed their readiness to implement secured transaction reforms. diligent borrowers who pay on time. Shar- There is no Arab country that has so far managed to create a modern movable collateral registry, yet ing information on reliable repayment the work in this area is under way in a number of jurisdictions. For instance, in West Bank and Gaza allows customers to establish a positive and Jordan, the work has started to develop registries for notices of secured interests that are fully credit history—useful information for electronic and web based. In Yemen, the work to launch the on-line registry for leased assets nearing financial institutions in search of good its completion. A reform of secured transactions systems in the Arab region can have an immediate, positive and far- customers. A study of Latin American reaching impact on increasing levels of domestic investment flows and thus improve access to private economies suggests that private credit credit for Micro, Small and Medium-Sized enterprises (MSMEs). Countries with modern collateral laws bureaus that distribute both positive and and registries have greater access to credit, lower rates of non-performing loans, and a lower cost of negative information—and have 100% credit.
35. 30 DOING BUSINESS IN THE ARAB WORLD 2011participation from banks—help increase for the developing world. Over the past 6lending to the private sector12. In the Arab years, 71 economies implemented moreworld, 12 economies out of 20 distribute than 121 regulatory reforms to improveboth positive and negative information— credit information systems. Low-incomeAlgeria, Bahrain, Egypt, Jordan, Kuwait, economies increased the coverage of pri-Lebanon, Morocco, Qatar, Saudi Arabia, vate or public credit registries from 0.6%Tunisia, United Arab Emirates, and West of the adult population to 2.3%.17 And 20Bank and Gaza. more economies gained a private credit In 2006, the United Arab Emirates – bureau.ranked 3rd in the Arab world on the ease Of course, institutions are of no ben-of getting credit (figure 6.3) - established efit if they go unused. But a recent surveya private credit bureau, Emcredit, which of collateral registries is encouraging:started issuing reports in February 2007. 20 of 27 registries that provided infor-Initially, the private credit bureau col- mation on the volume of registrationslected information only from Dubai’s showed a substantial increase since 2000Department of Economic Development, (or since the year they were created).but now it is also collecting data from In 4 economies that improved their se-financial institutions, public prosecution cured transactions system in the pastdepartments, and the Ministry of Labor. 10 years—Albania, Bosnia and Herze-Emcredit collects positive and negative govina, New Zealand, and Serbia—reg-information from individuals and firms. istrations of movable collateral increasedThere is no minimum loan amount re- sharply. Serbia’s volume of registrationsquired. Borrowers have the right to con- jumped from 4,346 in 2005 to 24,059 insult their data, according to the Dubai In- 2009, while Albania’s rose from 1,874 international Finance Corporation (DIFC) 2001 to 4,105 in 2009—peaking at 9,860Data Protection Law. in 2007. Romania improved its secured transactions system in 1999. Over the next 4 years, 600,000 new security interests were registered— 1. Djankov, McLiesh and Shleifer (2007). generating at least $60 million in sustainable 2. Houston and others (2008). credit.13 Vietnam is another good example. It passed Decree 163 in 2006. Although its regis- 3. Fleisig, Safavian and de la Peña (2006). try is still being computerized, the number of 4. Alvarez de la Campa and others (2010). registrations increased from 43,000 in 2005 to 5. CGAP and World Bank (2010). 120,000 by the end of 2008.14 6. These may include company registries, deed registries, filing offices and any other institution with a central electronic database that records security interestsWHAT ARE SOME RESULTS? over companies’ assets. 7. Data provided by the Spanish registry,One study found that an increase of 10% Colegio de Registradores de la Propiedad,in the share of the population covered Mercantiles y Bienes Muebles de España.by a private credit bureau is associated 8. Doing Business database.with a 6% increase in private sector 9. Fleisig and de la Peña (2003).lending.15 10. Turner and others (2009) Access to credit remains particularly 11. Stein (2010)sparse in developing economies. In those 12. Turner and Varghese (2007)economies, adults have an estimated 0.9 13. Fleisig, Safavian and de la Peña (2006).accounts, on average, and only 28% have 14. Alvarez de la Campa and others (2010).accounts at all. To compare, in developed 15. Turner, Varghese and Walker (2007).economies, adults have about 3.2 bank 16. Kendall, Mylenko and Ponce (2010).accounts, on average, while 81% have 17. Doing Business database.accounts.16 But the outlook is improving
36. 31Protecting FIGURE 7.1 How well are minority shareholders protected against self-dealinginvestors in related-party transactions? Lawsuit Mr. James Extent of disclosure Disclosure and approval requirements 60% ownership, 90% ownership, Extent of director liability sits on board of directors sits on board of directors Ability to sue directors for damages Company A Company B Minority (buyer) (seller) Transaction shareholders involving conflict of interest Ease of shareholder suits Access by shareholders to documents plus other evidence for trialMinority investors in a company should To measure investors’ protection, WHAT HAS WORKED?be protected by legal provisions that re- Doing Business considers the case of aquire material disclosures and access to company listed on the main business In the Arab world, 6 investor protec-relevant information. These provisions city’s stock exchange, and takes into ac- tion reforms in 4 of the 20 economiesallow investors to monitor the activities count 3 aspects of minority shareholders’ have been recorded since 2005. Whenof a company and help preserve the firm’s protection: transparency of related-party corporate governance reforms started invalue. They can also help companies raise transactions (extent of disclosure index), 2001, the first challenge was to find ancapital in order to grow, innovate, diver- liability for self-dealing (extent of direc- Arabic equivalent for the term “corpo-sify, and compete in the marketplace. tor liability index), and shareholders’ rate governance.” The reforms would notOne common way to raise capital is to ability to sue officers and directors for have been possible without an agreementobtain credit from banks—but with the misconduct (ease of shareholder suits about the meaning of the phrase in theglobal financial crisis, this has become index) (figure 7.1). local language and context. Thanks to aincreasingly challenging. Another way is These 3 indices are averaged to cre- committee of linguists from across theto issue or sell company shares to equity ate the strength of investor protection region, “hawkamat al-sharikat,” mean-investors. In return, investors should ask index. All indices range from 0 to 10, ing “the governance of companies,” wasfor transparency and accountability from with higher values indicating more pro- agreed on after about a year.2the company’s directors and the ability tections or greater disclosure. Despite recent improvements, legalto take part in major decisions of the protections in the region are often weak.company. If the laws do not provide such WHO REFORMED IN 2009/10? Access to corporate information duringprotections, investors may be reluctant to a trial to establish director liability isinvest unless they become the controlling Compared with other regions, the Arab often limited. Such access helps minorityshareholders.1 world has registered a slow pace of in- investors who suspect that a company Strong shareholder rights are asso- vestor protection reforms over the last 5 has been run improperly to gather theciated with larger and more active stock years. In 2009/10 Morocco was the only evidence needed to prove their case.markets. Doing Business uses a standard economy to have improved its regulatory Four economies—Egypt, Morocco, Saudicase of self-dealing—that is, the use of environment to make it more attractive Arabia, and Tunisia—have started tocorporate assets by company insiders for to minority shareholders (figure 7.2). regulate corporate disclosure and relat-personal gain—to measure how well in- Morocco strengthened investor pro- ed-party transactions more closely. Thevestors are protected. Self-dealing is only tections by requiring greater disclosure United Arab Emirates’ rules are clear asone of many corporate governance fail- in companies’ annual reports. A decree to the directors’ liabilities.ures, but it is also one of the most impor- was issued clarifying the interpretationtant. Other investor protections—such as of the company law with respect to the SETTING STRICT RULES OF DISCLO- SUREsafeguarding board-of-director elections, type of information in the report ofrequiring remuneration disclosures, and the independent auditor who reviews Thirty-seven of the 183 economies cov-setting rules for takeovers—are not cov- related-party transactions. ered by Doing Business 2011 stand outered by this study. for the strictest rules on disclosure of related-party transactions. These include
37. 32 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 7.2 In Cameroon and Lebanon, shareholdersTunisia leads the region in investor protection reforms can only vote on the transaction at theNumber of Doing Business reforms strengthening investor protections by Doing Business report year annual meeting, after the transaction has DB DB DB DB occurred. 2007 2009 2010 2011 Overall, 9 economies in the region 1 3 1 1 6 require shareholders’ approval and pre- vent directors with conflicting interestsArab world averages in protecting investors indicators from voting: Algeria, Bahrain, Comoros,Strength of investor protection index (0–10) DB 2006 DB 2011 Lebanon, Morocco, Oman, Qatar, Saudi Arabia, and Tunisia. The other 11 econo- 4.4 4.7 mies in the region would help protectEase of shareholder suits index (0–10) investors with similar requirements. 3.7 3.6 MAKING DIRECTORS LIABLEExtent of disclosure index (0–10) Economies with the strongest investor 6.0 5.4 protections regulate not only disclosureExtent of director liability index (0–10) and approval of related-party transac- tions but also the liability of directors 4.5 4.3 when such transactions turn out to beNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes prejudicial. This can be done by adopting18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies.Source: Doing Business database. a clear catalog of the rights and duties of directors or a special regime of liabilityNew Zealand, Singapore, Albania and, lator, or the stock exchange, and similar for directors in the event of an abusivethanks to investor protection reforms information must also be included in the related-party transaction. The board ofin 2009, Rwanda. The global financial annual report. directors is responsible for monitoringcrisis as well as earlier corporate scan- managerial performance and achiev-dals prompted governments around the REGULATING APPROVAL OF RELATED- ing an adequate return for shareholders PARTY TRANSACTIONSworld to strengthen disclosure require- while preventing conflicts of interest andments. This has been the most popular The more participation by shareholders— balancing competing demands on thefeature in investor protection reforms and the less by interested directors—in corporation.3 To fulfill their responsibili-since 2005, accounting for 33 of the 37 the approval of related-party transac- ties effectively, directors need clear ruleslegislative reforms. tions, the greater the investor protec- and independent judgment. Around the world, 8 economies— tions. Around the globe, 57 economies Forty-three economies have clearincluding Croatia, Maldives, and Pan- studied by Doing Business require share- rules on the liability of company directorsama—do not require disclosure of re- holder approval of large related-party in case of abusive related-party transac-lated-party transactions. On the other transactions. Albania and Tajikistan ad- tions. These include Canada, Mexico, andhand, Belgium and France have strict opted such rules in the past 5 years. the United Arab Emirates, which all havedisclosure provisions for transactions Such approval mechanisms only rules encouraging directors to be pru-that are not carried out “in the ordi- work well if the law does not grant too dent in the company’s day-to-day man-nary course of business.”In Belgian and many exceptions and if the approval is agement. Within the Arab world, Kuwait,French law, the “ordinary course of busi- required at the time of the transaction. that currently ranks 2nd in the region onness” excludes transactions that repre-sent 10% or more of a company’s assets. Brazil’s experience shows the value that investors place on strong corporate governance rules. ForAs a result, Belgium and France score firms seeking equity funding in Brazil, 2002 and 2003 were tough years. The São Paulo Stock Exchangehigh on the extent of disclosure index: 8 (BOVESPA) Index had fallen by 14% in U.S. dollar terms. But the market showed that it could recognizeand 10 respectively. value in solid businesses that offered good governance.4 In 2001, a special segment of the exchange, called the Novo Mercado, had been created for trading shares in companies that voluntarily adopted Within the Arab world, Kuwait has corporate governance practices that went beyond what was required under Brazilian law.5 The as-the strictest disclosure rules: directors sumption was that an investor perception of better corporate governance could boost share values.must reveal any conflicts of interest to Initially people showed little faith in this possibility. But by 2004, for the first time in more than a de-their board of directors. The company cade, several companies decided to go public at once. By the end of 2004, Novo Mercado had 7 newmust also immediately disclose detailed listings. By the end of 2007, it had 156 companies listed, representing 57% of BOVESPA’s market capi-information on the transaction and the talization, 66% of its trading value, and 74% of the number of trades in the cash market.6conflict of interest to the public, the regu-
38. DOING BUSINESS TOPICS 33FIGURE 7.3 Law to make corporate dealings more TABLE 7.1How do Arab economies rank on transparent and set internal controls to Who provides strong minority investorprotecting investors? protections—and who does not? help prevent directors from misusingGlobal ranking (1–183) Extent of disclosure index (0–10) corporate assets. Although the changes NEW did not have a direct impact on the Doing Most Least ZEALAND EASIEST (1) Business indicators measured here, they Lebanon 9 Djibouti 5 Saudi Arabia — did yield benefits: they provided a base- Saudi Arabia 9 Mauritania 5 Kuwait 20 line for operational transparency (for Bahrain 8 Iraq 4 — West Bank and Gaza Egypt, Arab Rep. 8 United Arab 4 Bahrain example, regarding the opening of the Emirates 40 — Oman 8 Algeria company books to shareholders), set ex- Sudan 0 Egypt, Arab Rep. ternal checks on managerial actions (thus — Extent of director liability index (0–10) 60 Tunisia strengthening auditor responsibility), — — — Lebanon Most Least and prohibited certain abusive actions 80 Oman Qatar (by prohibiting company loans to direc- Saudi Arabia 8 Mauritania 3 — — — tors, managers, and their families). Ac- Kuwait 7 Djibouti 2 Syrian Arab Republic100 United Arab 7 Morocco 2 — Iraq cording to the new Tunisian law, a group Emirates Comoros 1 — Jordan of shareholders together representing120 Algeria 6 Lebanon 1 United Arab Emirates 10% of the capital of the company were — — Qatar 6 Comoros entitled to inspect financial statements,140 Yemen, Rep. Ease of shareholder suits index (0–10) — annual reports, lists of guaranties, back- — — Mauritania Easiest Most difficult Morocco ings, securities, and sureties granted by160 Sudan the company, as well as the minutes of West Bank 7 Syrian Arab 2 and Gaza Republic — Djibouti the shareholder meetings over the previ-183 ous 3 years. Tunisia 6 United Arab 2 Bahrain 5 EmiratesSource: Doing Business database. Two years later, the amending of Egypt, Arab Rep. 5 Yemen, Rep. 2 Tunisia’s Corporate Law was followed Kuwait 5* Morocco 1the topic (figure 7.3), protects minority by Parliament adopting another law on Djibouti 0investors particularly well by holding di- “economic initiative” on December 27, * Lebanon and Comoros also score 5 on the ease ofrectors liable for having conflicting inter- 2007. The 2007 legislation directly ad- shareholder suits index.ests. Liability is established on the simple dressed prejudicial related-party trans- Source: Doing Business database.basis that the transaction was prejudicial actions and granted shareholders accessto minority shareholders. to internal documents. Accordingly, Tu- tion of ownership.9 This is in line with nisia’s score on the director liability index the view that stronger legal protections WHAT ARE SOME RESULTS? moved up from 4 to 5 points. make minority investors more confident In March 2009, another amendment about their investments, reducing theMost research suggests a positive re- to Tunisia’s Corporate Law targeted the need for concentrated ownership to miti-lationship between sound corporate approval and disclosure requirements gate weaknesses in corporate governance.governance systems and firms’ perfor- of transactions between interested par- Both ex ante protections (extensive dis-mances—as measured by valuation, op- ties: it required both the board of di- closure and approval requirements) anderating performance, or stock returns.7 rectors’ and shareholders’ approval for ex post measures against self-dealingA Deutsche Bank study of the Standard related-party transactions. In addition, (the rights of action for minority share-& Poor’s 500 found that companies with interested parties could no longer par- holders) seem to be important. The 2strong or improved corporate governance ticipate in the approval process and the combined are associated with larger andstructures outperformed those with poor transaction was to be reviewed by an more active stock markets, lower blockor deteriorating governance practices by independent auditor. Finally, the law re- premiums, more listed firms, higherabout 19% over a 2-year period.8 quired interested directors to disclose market capitalization, and higher rates Tunisia is a good example of an their conflict of interest to the board. As of initial public offerings.Arab economy that enhanced its cor- a result, Tunisia’s score on the disclosureporate governance legislation. Investors index soared from 0 to 5 points.in Tunisia have more protections today This is a good thing. Empirical re-due to a series of regulatory improve- search shows that stricter regulation ofments introduced over the past 5 years. self-dealing is associated with greaterIn 2005, Tunisia amended its Corporate equity investment and lower concentra-
39. 34 DOING BUSINESS IN THE ARAB WORLD 20111. Dahya, Dimitrov and McConnell (2008).2. Anna Nadgrodkiewicz and Aleksandr Sckolnikov, “What’s in a Word? Corporate Governance, Language and Institutional Change,” Development Blog, March 2, 2010, http://www.cipe.org.3. OECD (2004a).4. IFC (2006).5. Doing Business does not take into account the rules that apply in Novo Mercado be- cause they are voluntary.6. IFC (2008b).7. Cross-country studies include Klapper and Love (2004), Durnev and Kim (2005), Bauer, Guenster and Otten (2004) and Baker and others (2007).8. Grandmont, Grant and Silva (2004).9. Djankov, La Porta, López-de-Silanes and Shleifer (2008).
40. 35Paying taxes FIGURE 8.1 What are the time, total tax rate and number of payments necessary for a local medium-sized company to pay all taxes? Total tax rate Time To prepare, file and pay % of profit Hours value added or sales tax, before all taxes per year profit tax and labor taxes and contributions Number of payments (per year)Taxes are essential. In many economies, payments a year—the second lowest Three indicators are constructed:the tax system is the primary source of number of payments of any region. Yet Number of payments, which mea-funding for a wide range of social and there is great variation within the Arab sures the frequency with which theeconomic programs. Besides paying for world: the Republic of Yemen requires company has to file and pay differ-public goods and services, taxes also 44 payments a year while Qatar requires ent types of taxes and contributions,provide a means of redistributing income just 3. The Arab world is also the second adjusted for the way in which thoseto children, the aged, and the unem- fastest region in which to pay taxes: payments are made.ployed, for example. But when taxes are compliance requires, on average, 206 Time, which measures the numbertoo burdensome, and the correspond- hours a year. of hours per year required to prepareing benefits appear to be few, compa- Some Arab economies, especially and file tax returns and to pay thenies—especially small and medium-size the resource-rich ones, rely on 1 or 2 corporate income tax, value added taxones—may choose to operate in the in- sectors to generate most government (VAT, or sales tax), and social securityformal sector. Along with larger informal revenues through means other than taxa- contributions.sectors, higher tax compliance costs are tion. Examples include Qatar, the United Total tax rate, which measures theassociated with increased corruption and Arab Emirates, Saudi Arabia, and Oman. amount of taxes and mandatory con-decreased rates of investment. There is, however, great variation among tributions payable by the company Economies with well-designed tax these resource-rich economies on the during its second year of operation.systems are able to encourage the growth ease of paying taxes. That is to say, ob- This amount, expressed as a percent-of businesses and, ultimately, investment taining government funding from other age of commercial profit, is the sumand employment.1 Colombia, for exam- resources does not always make pay- of all the different taxes payable afterple, introduced a new electronic pay- ing taxes easy. Differences in tax rates accounting for various deductionsment system called “PILA” in 2007. PILA and administrative burdens account for and exemptions (figure 8.1).unified contributions to social security, much of the variation. The total tax ratewelfare security, and labor risk insurance in these types of economies ranges from With these indicators, Doing Busi-into one payment. In 2007, the same year just 11% in Qatar to 72% in Algeria. ness compares tax systems and tracksPILA was introduced, its use became Doing Business paying-taxes indica- tax reforms around the world from themandatory for all companies. By 2008, tors record the effective tax that a small perspective of local businesses, cover-the number of companies registered to to medium-size company must pay and ing both the direct cost of taxes andpay contributions through PILA had in- the administrative costs of doing so. The the administrative burden of complyingcreased by 55%. Social security contribu- survey case study centers on TaxpayerCo, with them. It does not measure the fiscaltions collected that year from small and a medium-size business that started op- health of economies, the macroeconomicmedium-size companies rose by 42%, to erations last year. Doing Business asks conditions under which governments550 billion pesos (45 billion dollars). tax practitioners to identify how much in collect revenue, or the provision of public The Arab world makes paying taxes taxes and mandatory contributions the services supported by taxation.easier than most regions around the business must pay and what the processglobe. In the region, businesses must is for doing so.comply with only an average of 23 tax
41. 36 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 8.2 data protection, privacy concerns, andThe Arab world makes paying taxes easier than most regions around the globe electronic signatures are also required.Number of Doing Business reforms making it easier to pay taxes by Doing Business report year Electronic filing is offered by only DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 2 economies in the Arab world: Tunisia and Qatar. In Tunisia, effective January 1 5 3 2 6 2 19 1, 2009, all companies with a turnover at least TND 2 million are obligated to useArab world averages in paying taxes Tunisia’s “télédeclaration” online system.Payments (number per year) DB 2011 DB 2006 Paper declarations are not accepted for 23 26 these companies anymore. Thanks to this fully implemented online filing andTime (hours per year) payment system, businesses in Tunisia 206 234 now spend 37% less time complying with corporate income tax and VAT thanNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2004) includes18 economies. The sample for DB2011 (2009) also includes Bahrain and Qatar, for a total of 20 economies. they used to. When the system was firstSource: Doing Business database. introduced, taxpayers were reluctant to make online payments. The government WHO REFORMED IN 2009/10 choose to keep their books and records of Tunisia addressed this concern by in English. In addition, Jordan now al- introducing in 2008 a new option forIn the past 6 years more than 60% of the lows the electronic filing of income and paying taxes: “téleliquidation”–onlineeconomies covered by Doing Business sales tax returns. declaration and physical payment. Thismade paying taxes easier or lowered the enabled taxpayers to declare online andtax burden for local enterprises. The size WHAT HAS WORKED? determine the exact amount of their pay-of the tax burden on businesses matters ment before physically going to the taxfor investment and growth. In 2009/10, Creating a business environment that administration for payment. Taxpayersonly 2 tax reforms were recorded: those enables firms to grow, invest, create jobs, could also use any tax administrationin Jordan and Tunisia. and increase productivity requires sound bureau in Tunis to make the payment as Last year, Tunisia improved the economic policies and effective public opposed to filing and paying in the taxmost in terms of the ease of paying sector institutions. Tax system reforms bureau where the company is registered.taxes—compared to all 183 economies are one way to improve business condi- This was seen as a good intermediatestudied around the globe. Tunisia fully tions. Economies that make paying taxes step to gradually move to a full onlineimplemented electronic payment sys- easier for domestic firms typically offer filing and payment system.tems for its VAT and corporate income electronic systems for tax filing and pay-taxes and extended e-payment systems’ ments. They also have just one tax per KEEPING IT SIMPLE: ONE TAX BASE, ONE TAXuse to include most firms. Tunisia’s tax tax base and use a filing system based onreforms eliminated the need for 14 pay- self-assessment. Finally, they also focus Subjecting the same tax base to morements a year. Specifically, Tunisia now on lower tax rates accompanied by wider than one tax treatment is not efficient. Itrequires just 1 corporate income tax tax bases. increases firms’ cost of doing business aspayment and 1 VAT payment—down well as the government’s cost of revenuefrom 4 and 12 payments, respectively. OFFERING AN ELECTRONIC OPTION administration. On top of that, it alsoCompanies saved an average of 84 hours Electronic filing and payment of taxes risks damaging investor confidence.a year in tax compliance time. eliminates excessive paperwork and in- Globally, 50 economies have just In Jordan, a new temporary income teraction with tax officers. Offered by one tax per tax base. Of those, 8 hail fromtax law was issued and a sales tax law 61 economies globally, this option can the Arab world—Djibouti, Egypt, Iraq,was amended—both effective as of Janu- reduce the time businesses spend in Morocco, Oman, Qatar, Saudi Arabia, andary 2010. The new temporary income complying with tax laws, increase tax the United Arab Emirates. Having moretax law lowered corporate income taxes compliance, and reduce the cost of rev- types of taxes requires additional interac-and abolished certain other taxes. The enue administration—and error rates. tion between businesses and tax agencies.amended sales tax law dealt with admin- But this is possible only with effective For example, in Tunisia, social securityistrative matters, collection mechanisms, implementation. Most critically, taxpay- contributions, work accident insuranceas well as the appeal process. There were ers need to trust the payment system. contributions, professional training taxalso some changes to Jordan’s tax admin- Simple processes and high-quality secu- and social lodging tax are each separatelyistration processes. Taxpayers can now rity systems are needed. Laws addressing based on the gross salaries. In New York
42. DOING BUSINESS TOPICS 37FIGURE 8.3 returns. These include 11 economies TABLE 8.1How do Arab economies rank on Who makes paying taxes easy and who from the Arab world—Algeria, Egypt, does not—and where is the total tax ratethe ease of paying taxes? Jordan, Lebanon, Mauritania, Morocco, highest and lowest?Global ranking (1–183) Oman, Qatar, Saudi Arabia, Tunisia, and Payments (number per year) MALDIVES EASIEST (1) West Bank and Gaza. Both taxpayers and — Fewest Most — — — — Qatar revenue authorities can benefit from self- — assessments. Businesses in Morocco, for Qatar 3 Algeria 34 United Arab Emirates Tunisia 8 Djibouti 35 20 example, don’t need to supply informa- — — Saudi Arabia Iraq 13 Mauritania 38 — Oman tion to the tax authority for the authority Oman 14 Sudan 42 40 Kuwait to calculate the tax payment. The com- Saudi Arabia 14 Yemen, Rep. 44 — — Bahrain pany has to calculate its own tax bill and 60 — West Bank and Gaza file returns appropriately. Time (hours per year) Jordan Lebanon Fastest Slowest 80 Iraq WHAT ARE SOME RESULTS? — — United Arab 12 Syrian Arab 336 Tunisia Emirates Republic 100 — Djibouti There is no doubt about the need for— Bahrain 36 Morocco 358 Sudan and benefits of—taxation. But how econo- Qatar 36 Egypt, Arab Rep. 433 120 — Comoros mies approach the taxation of small and Oman 62 Algeria 451 — Syrian Arab Republic medium-size businesses varies substan- Saudi Arabia 79 Mauritania 696 140 — Morocco tially around the world. More than 119 Total tax rate (% of profit) Egypt, Arab Rep. Yemen, Rep. economies made their business tax sys- 160 Lowest Highest — — Algeria tems more efficient and effective in the past 6 years—and have seen concrete re- Qatar 11.3 Yemen, Rep. 47.8 Mauritania 183 United Arab 14.1 Tunisia 62.8 sults. In the past 6 years, 13 economies in Emirates Mauritania 68.4Source: Doing Business database. the Arab world have implemented a total Saudi Arabia 14.5 Algeria 72.0 of 19 reforms making taxes less burden- Bahrain 15.0 Comoros 217.9City taxes are levied at the municipal, some—Algeria, Bahrain, Egypt, Jordan, Kuwait 15.5state, and federal levels. Because each is Kuwait, Lebanon, Mauritania, Morocco, Note: The indicator on payments is adjusted for the possibility ofcalculated differently, businesses must do Oman, Saudi Arabia, Sudan, Tunisia, and electronic or joint filing and payment when used by the majority of firms in an economy. See Data notes for more details.3 different calculations, slowing down tax the United Arab Emirates. As a result, Source: Doing Business database.compliance time. there were an average of 3 fewer payments required and it took 28 fewer hours a yearTRUSTING THE TAXPAYER its corporate income tax only on distrib-Voluntary compliance and self-assess- Sensitivity to tax reforms is affected by firm uted profits. Despite the global downturn,ment have become popular ways to effi- size. Large firms are usually more directly the number of companies registered as affected by changes. But small firms have aciently administer a country’s tax system. taxpayers in FYR Macedonia increased by higher tendency to be unregistered if tax ratesTaxpayers are expected to—and trusted are high, and tend to underreport income and 16% between 2008 and 2009.to—determine their own liability under size if higher incomes and bigger firms are Recent research has found that inthe law and pay the correct amount. taxed at a higher rate4. In Côte d’Ivoire, where developing economies, where firms areWith high rates of voluntary compliance, firms must pay 44% of profit and make more likely to be smaller and more involvedadministrative costs are much lower and than 64 payments a year to comply with 14 in informal activity, reducing profit taxso is the burden of compliance actions.2 different taxes, a recent study finds that firms rates helped raise tax compliance and avoid growing in order to pay less tax5.Self-assessment systems also reduce the reduce informality—increasing growthdiscretionary powers of tax officials and and revenue.6 The structure of the taxopportunities for corruption.3 To be ef- to comply (figure 8.2). system and the perception of the qual-fective, however, self-assessment needs FYR Macedonia has implemented ity of government services affect theto be properly introduced and imple- major tax reforms for several years in a size of the informal sector in a country.mented, with transparent rules, penalties row. In 2007, it introduced a new elec- Larger informal sectors—and more cor-for noncompliance, and established audit tronic tax service. In 2008, it amended ruption—are found where the majorityprocesses. the tax law to cut its profit tax rate from of firms perceive taxes as “not worth pay- Of the 183 economies covered by 15% to 10%. In 2009, it implemented a ing” because of low-quality public goodsDoing Business, 74% allow firms to cal- new, clearer “Law on Contributions for and poor infrastructure.culate their own tax bills and file the Mandatory Social Security” and imposed
43. 38 DOING BUSINESS IN THE ARAB WORLD 20111. Djankov and others (2010).2. Ricard (2008).3. Imam and Davina (2007).4. OECD (2008).5. Klapper and Richmond (2010).6. Hibbs and Piculescu (2010).
44. 39Trading across FIGURE 9.1 How much time, how many documents and what cost to export and importborders across borders by ocean transport? TIME TIME COST COST To export To import DOCUMENTS DOCUMENTS Full, 20-foot container Import Export Port and terminal Customs and Inland handling border agencies transportAmid the global financial crisis, the for traders. A poor performance in just and introducing risk-based inspections.World Trade Organization estimated that 1 or 2 of these areas can have serious Egypt introduced an electronic sys-trade volumes would drop by 10% in repercussions for an economy’s over- tem for submitting export and import2009, the first fall after 27 years of un- all trade competitiveness, as shown by documents.interrupted expansion. And indeed, in the World Bank’s Logistics Performance Saudi Arabia reduced the time to2009 world trade recorded its largest Index.4 By removing these obstacles, import by launching a new containerdecline in more than 70 years. No re- governments can create an environment terminal at the Jeddah Islamic Port.gion could escape.1 But one study shows that encourages entrepreneurs to look Tunisia upgraded its electronic datathat during the recent slump in global beyond their own borders for business interchange system for imports and ex-demand, making trade easier promoted opportunities. ports, speeding up the assembly of im-stronger links between suppliers and Doing Business measures the pro- port documents.buyers and thus mitigated the drop in an cedural requirements—including the The United Arab Emirates stream-economy’s exports. number of necessary documents and lined document preparation and reduced Trade activity can be negatively the associated time and cost (excluding the time to trade with the launch ofaffected by burdensome regulation as tariffs)—for exporting and importing by Dubai Customs’ comprehensive new cus-much as by tariffs. A study shows that ocean transport. The indicators cover toms system, “Mirsal 2.”trade is reduced by more than 1% with documentation requirements, proce- In West Bank and Gaza, more ef-each additional day a product is delayed dures at customs and the port, as well as ficient processes at Palestinian customsbefore being shipped—3.5% for perish- inland transport to the largest business made trading easier.able agricultural goods. This is equiva- city (figure 9.1). The more time consum-lent to distancing a business by about ing and costly it is to export or import, WHAT HAS WORKED?70 kilometers from its trade partners.2 the more difficult it is for traders to beAnother study found that each additional competitive and to reach international Compared with the rest of the globe,signature an exporter is required to col- markets. the Arab world has made the biggestlect reduces trade by 4.2%.3 improvements in its time and documen- Where international trade is en- WHO REFORMED IN 2009/10? tation to import and export in recentcouraged and facilitated, businesses are years. Its average time to export hasbetter positioned to take advantage of Trade facilitation was a high priority in fallen from 28 days in 2007 to 22 daysnew opportunities, to grow, and to create the region this past year. Six Arab econo- in 2010 and time for imports has beenjobs when the global economy picks up. mies modernized customs procedures reduced from 34 days to 26 days. TheWhile trade recovered in 2010, and fears and port infrastructure—Bahrain, the region also cut down the number ofof a surge in protectionism have largely Arab Republic of Egypt, Saudi Arabia, documents required: while 8 documentssubsided, burdensome documentation Tunisia, the United Arab Emirates, and were needed, on average, to export inrequirements, time-consuming customs West Bank and Gaza. 2007, that number is now less than 7.procedures, inefficient port operations, Bahrain made trading easier by And while 9 documents were needed toand inadequate transport infrastructure building a modern new port, improving import a cargo in 2007, only fewer than 8still lead to unnecessary costs and delays its electronic data interchange system, are currently needed (figure 9.2).
45. 40 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 9.2 tems require basic infrastructure such asArab economies lead the world in time and documentation savings adequate electricity supply and reliableNumber of Doing Business reforms making it easier to trade across borders by Doing Business report year internet connections—a challenge for DB2007 DB2008 DB2009 DB2010 DB2011 many low-income economies. Electronic signature and transaction laws must be 2 4 4 6 6 22 in place to ensure legal validity and avoid disputes. In addition, traders benefit onlyArab world averages in trading across borders if they have received adequate trainingDocuments to export (number) DB 2011 DB 2006 and if systems are user-friendly and easy 6.8 8.1 to install. In many economies that have electronic systems—such as Botswana,Time to export (days) the Gambia, and St. Vincent and the 22 28 Grenadines—customs authorities still require traders to submit hard copies.Documents to import (number) This neutralizes the potential benefits of 7.7 9.1 electronic systems and may even gener-Time to import (days) ate extra work for users. 26 34 IMPLEMENTING SINGLE WINDOWSNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes Some economies go a step further by18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies.Source: Doing Business database. linking not only traders and customs agents but linking traders to all relevant Most economies that improved allowing traders to submit their docu- authorities. An electronic single-windowtheir trade regulations in the region fo- ments from anywhere and at any time. system allows users to submit their ex-cused on introducing new or improving This saves precious time and money (not port or import information in a virtualexisting electronic systems to facilitate to mention paper). And fewer interac- location that communicates with all thetrade. Others adopted the concept of a tions with officials mean fewer opportu- relevant agencies for obtaining docu-single customs window to streamline nities for corruption. While most econo- ments and approvals. Traders no longerprocedures. mies in the Arab region have electronic need to visit different physical locations. data interchange systems, last year Egypt The most advanced systems—such as theINTRODUCING INFORMATION TECH- and Tunisia introduced new or updated electronic trade portal in Korea— alsoNOLOGY versions of their electronic systems to connect private sector participants—Electronic data interchange systems have better facilitate trade. In Egypt, in 2010, such as banks, customs brokers, insur-become common around the world: 78% several measures were carried out as ance companies, and freight forwarders.of the 149 economies surveyed allow part of the government’s comprehensive In Tunisia, the expansion of its elec-traders to submit at least some of their review of its customs administration and tronic single window, called TradeNet,export and import declarations, mani- plan to reorganize the sector to meet in- has allowed traders to quickly file allfests, and other trade-related documents ternational standards. Modern customs documents required to clear their cargoto customs authorities electronically. centers are being established at Egypt’s online—decreasing processing delays byTraders can submit all trade documents major ports and new information tech- 2 days. Yet, the requirement to physi-electronically in half of OECD high-in- nology systems, known as data ware- cally provide original documents limitscome economies but in less than 5% of house, are being implemented. These the impact this technological innovationthe economies of Sub-Saharan Africa systems facilitate communication and could have.and Eastern Europe and Central Asia streamline procedures between customs, Single-window systems are mostregions. In Central America, the Inter- inspection agencies, port authorities, prevalent among OECD high-incomenational Goods in Transit (TIM) system shipping lines, and freight forwarders. economies. This could be explained byharmonizes previously cumbersome pro- So far, Egypt’s trade reforms have cut the cost and complexity of setting upcedures in a single electronic document document preparation time by 2 days for such systems. But Colombia and Senegalfor managing the movement of goods exports and 3 days for imports. have also successfully implemented sin-across 9 economies. At some border lo- But simply having an electronic sys- gle-window systems. In the Arab world,cations, this has reduced clearance times tem in place is not enough. Other fac- however, the introduction of single win-for goods in transit by up to 90%.5 tors have to be considered. To function dows for trading is still a slow process. The newest systems are web-based, properly, electronic data interchange sys-
46. DOING BUSINESS TOPICS 41ADOPTING RISK-BASED SYSTEMS would be to use risk management tools Reducing the number of cargo inspec-Requiring imports and exports to un- to select just the riskier consignments tions to 30% at the Port of Aqaba wasdergo several types of inspections—for for scanning. a result of a risk-management programtax, security, environmental, border con- Risk-based inspections are the norm initiated in 2006 by the Customs of Jor-trol, and health and safety reasons—is in OECD high-income economies. They dan, implemented as of May 2009.standard practice. But how these inspec- are also becoming increasingly commontions are carried out is critical. Done with elsewhere. In Eastern Europe and Cen- In Georgia, improvements in customs clear-a heavy hand, they can get in the way of tral Asia, 86% of surveyed economies ance procedures, coupled with greater trade,efficient and transparent trade. have adopted risk-based inspections. contributed to a 92% increase in value-added- Over the years customs administra- In the Arab world, about two-thirds tax revenue (60 to 65% of which is collected at the border) between 2005 and 2009. Ghanations around the world have developed of the economies studied by Doing Busi- saw customs revenue grow by 49% in the firstsystems for establishing risk profiles that ness have adopted a risk-based system— 18 months after implementing “GCNet,” itsallow them to limit physical inspections like Bahrain, in the inspections of mer- electronic data interchange system for cus-to only the riskiest consignments. The chandise. In Jordan, the implementation toms procedures.6use of scanners in conjunction with risk- of a risk-based inspection regime has re-based profiling eliminates the need to duced the clearance time at the customsopen cargo, contributing to the efficiency by 2 days for exporters and 3 days for WHAT ARE SOME RESULTS?of inspections and shorter customs importers. This regime consists of post-clearance delays, like in landlocked Ka- destination clearance for pre-approved Economies around the world would ben-zakhstan. But in some cases, such as in traders, combined with a reduction in efit from cutting the cost and time toZambia, the use of scanners has caused the number of containers physically in- trade. As a study in Sub-Saharan Af-additional delays because customs au- spected to 30%, and the full implemen- rica shows, a 10% reduction in exportthorities scan all consignments that pass tation of “ASYCUDA WORLD” (allowing costs increases export activity by 4.7%—through the border. A better practice online customs declaration submission). which is a greater impact than would come from further reductions in tariffsTABLE 9.1Who makes exporting easy—and who Who makes importing easy—and who by richer economies.7does not? does not? Another study focusing on Asia-Documents (number) Documents (number) Pacific Economic Cooperation (APEC) Fewest Most economies finds that cutting the daysFewest Most to clear exports in half could enable aTunisia 4 Syrian Arab 8 Djibouti 5 Comoros 10 Republic small to medium-size enterprise to in-United Arab 4 Saudi Arabia 5 Iraq 10Emirates Oman 9 United Arab 5 Kuwait 10 crease its share of exports in total salesQatar 5 Comoros 10 Emirates Morocco 10 from 1.6% to 4.5%.8 A third study, ofDjibouti 5 Iraq 10 Egypt, Arab Rep. 6 Mauritania 11 APEC economies as well, shows thatSaudi Arabia 5 Mauritania 11 West Bank 6 eliminating layers of trade regulation and GazaTime (days) and improving institutions would cut Time (days) costs for businesses—and lead to anFastest Slowest Fastest Slowest estimated 7.5% increase in intraregionalUnited Arab 7 Yemen, Rep. 27Emirates trade and $406 billion in global welfare Comoros 30 United Arab 7 Lebanon 35Bahrain 11 Sudan 32 Emirates West Bank 40 gains.9 Transport constraints can play anEgypt, Arab Rep. 12 Mauritania 39 Egypt, Arab Rep. 12 and Gaza important role in trade competitiveness,Tunisia 13 Iraq 80 Bahrain 15 Mauritania 42 according to another recent study. In theSaudi Arabia 13 Morocco 17 Sudan 46 Middle East and North Africa, reducingCost (US$ per container) Saudi Arabia 17 Iraq 83 transport constraints so that they wereLeast Most Cost (US$ per container) in line with the world average could in- Least Most crease exports by about 10% and importsUnited Arab 521 Algeria 1,248Emirates by more than 11%.10 West Bank 1,310 United Arab 542 Yemen, Rep. 1,475Saudi Arabia 580 and Gaza Emirates Mauritania 1,523 That is what the United Arab Emir-Egypt, Arab Rep. 613 Mauritania 1,520 Qatar 657 Syrian Arab 1,625 ates did. Over the past 5 years, the GulfMorocco 700 Sudan 2,050 Saudi Arabia 686 Republic economy that currently leads the regionQatar 735 Iraq 3,550 Egypt, Arab Rep. 698 Sudan 2,900 in trade (figure 9.3), has introduced a Tunisia 858 Iraq 3,650 series of improvements to its regula- Source: Doing Business database. tions regarding cross-border trade. These
47. 42 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 9.3 to improved information and radio-fre-How do Arab economies rank on quency identification (RFID) technolo-the ease of trading across borders? 1. WTO (2010). gies at the terminal gates of Dubai’s JebelGlobal ranking (1–183) Ali port, a terminal handling receipt was 2. http://www.thenational. ae/article/20090219/ SINGAPORE EASIEST (1) no longer required—reducing the num- — BUSINESS/71116402/1005/SPORTCOL- United Arab Emirates ber of documents required. UMNISTS — — Saudi Arabia Finally, in March 2010, Dubai Cus- 3. Djankov, Simeon, Caroline Freund and 20 — Egypt, Arab Rep. toms launched “Mirsal 2”—a comprehen- Cong Pham. 20010. “Trading on Time.” — Tunisia sive customs declaration system seeking Review of Economics and Statistics (forth- — 40 — Bahrain to facilitate legitimate trade movement. coming). Djibouti The new system was developed as part 4. World Bank, Logistics Performance Index, 60 Qatar 2007 and 2010 (http://www.worldbank. of the UAE’s vision to establish an elec- org/lpi). Jordan — — Morocco tronic government, adopting best inter- 5. Sarmiento, Lucenti and Garcia (2010). 80 — Oman national business practices in every field. 6. De Wulf and Sokol (2004). — Lebanon The new system was developed in-house 100 7. Hoekman and Nicita (2009). West Bank and Gaza over a 2-year period—considerably up- — — 8. Li and Wilson (2009). — Kuwait grading the previous “Mirsal 1” system, 120 — — Syrian Arab Republic 9. Helble, Shepherd and Wilson (2009). which had been in use since 1995. Mirsal — Yemen, Rep. 10. Bhattacharya and Wolde (2010). 2 now allows clients to complete clear- 140 — Algeria 11. Cuñat and Melitz (2007), Depken and ance procedures electronically around Sonora (2005), Levchenko (2007) and Comoros — Sudan the clock, eliminating the need to visit Ranjan and Lee (2007). 160 Mauritania documentation counters. In addition, the — Iraq new system now enables the use of digi- 183 tal certificates for signing transactionsSource: Doing Business database. electronically, and it features a “Risk As- sessment Engine” linking Dubai Customschanges have reduced the number of with local, regional, and internationaldocuments needed for export and im- organizations to help ensure the securityport and sped up both activities: a trader of the global trading process.in the UAE now needs just 4 documents All this is good, but trade facilita-to export cargo and 5 to import it—com- tion alone is not enough. Other factorspared with 7 and 8, respectively, 5 years in the business environment, some ofago. The same trader now needs only 7 which are considered elsewhere in thisdays to export or import—down from 12 report, play complementary parts to helpand 7 days, respectively, in 2005. boost trade. Recent studies point to the The improvements started in 2005 importance of the depth of credit infor-with an upgrade of the infrastructure mation, enforcement of contracts, theat Jebel Ali port and a full computeriza- flexibility of labor markets, among othertion of the custom declaration system factors.11(although cargo clearance still requiredpaper copy). In 2009, Dubai expandedthe capacity of its port’s Container Ter-minal 2 through rail-mounted gantrycranes and tandem lift cranes that havetwice the capacity of traditional cranes.By expanding capacity, Dubai signifi-cantly reduced the time it took to loadvessels. In the same year, improved pro-cessing and lowered administrative costat several banks, including Dubai Bank,helped reduce the cost of trade financeproducts—a growing product line in thebanking sector. At the same time, thanks
48. Enforcing FIGURE 10.1 What are the time, cost and number of procedures to resolve a commercialcontracts dispute through the courts? Court Time Cost Number of procedures Company A Company B COMMERCIAL DISPUTE (seller & plaintiff) (buyer & defendant) Filing of Trial & court case judgment EnforcementEnforcing contracts effectively can pro- the courts in 2009/10, according to Doing management systems. Jordan and Westvide an economy with a competitive ad- Business 2011. Malawi improved contract Bank and Gaza introduced software fea-vantage in the global marketplace: among enforcement the most by raising the turing online access to court records andcomparable economies, those with strong ceiling for commercial claims that small automated notification and case track-contract enforcement tend to produce and magistrates’ courts can hear. ing. Algeria and Saudi Arabia are alsoexport more customized products than Doing Business measures the time, developing automated case managementthose with weak contract enforcement.1 In cost, and procedural complexity of re- systems. Saudi Arabia will allow elec-fact, improving court functions to better solving a commercial lawsuit between 2 tronic filing and automatic assignmentenforce contracts is essential to sustain- domestic businesses (figure 10.1). The of court dates as well as keep a log of alling a healthy, stable economy—especially dispute involves the breach of a sales proceedings.during a credit crunch. A recent study also contract worth twice the income per However, no Doing Business reformsfound that efficient contract enforcement capita of the economy. The case study as- were recorded in the region in 2009/10is associated with greater access to credit sumes that the court hears an expert on (figure 10.2).for firms.2 the quality of the goods in dispute. This Businesses worldwide continue to distinguishes the case from simple debt WHAT HAS WORKED?face challenges as a result of the global enforcement.financial crisis—and are more concerned Doing Business has recorded 103 reformsthan ever about recovering losses fast. WHO REFORMED IN 2009/10? to improve court efficiency over the pastOver the past 2 years, more disputes in- 7 years. Few have been successful, andvolving property, supply contracts, and Over the past 7 years, regulatory and many have been slow to show any tangi-banking transactions ended up in court, legislative reforms to improve contract ble results. Court reform generally takesincreasing caseloads and backlogs. Ire- enforcement have tended to look differ- time to show its impact. As the courtsland’s commercial court had a record ent, depending on an economy’s income and users become accustomed to a newnumber of cases listed in 2009.3 In the first level. Higher-income economies are system, efficiency can continue to im-6 months of the year, it had 192 cases en- more likely to seek ways to enhance ef- prove for years after a change was imple-tered, compared with 76 in the same pe- ficiency by introducing new technology. mented. In the past year, thanks to previ-riod of 2007.4 In Denmark, enforcement Lower-income economies often work on ous years’ reforms to improve efficiency,courts’ caseloads increased by 38% in reducing backlogs by introducing peri- Botswana, Mali, Rwanda, and West Bank2009 compared with 2007.5 In the United odic reviews to clear inactive cases from and Gaza reduced the time to file and tryStates, New York State courts finished the the docket and by making procedures a case by 40 days, on average.year with the highest ever annual tally faster. Both approaches can help improve Improvements mainly focused onof cases. In the past 5 years foreclosure a judiciary. introducing a specialized court or judi-cases in the state doubled while contract Efforts to reduce delays in the ju- cial system, relying more on technology,disputes increased by 23%.6 dicial system in the Arab world have and implementing active case manage- Thirteen economies around the been slow to get off the ground, but ment.world made it faster, cheaper, or less cum- some solutions have been proposed thatbersome to enforce a contract through involve introducing computer-aided case
49. 44 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 10.2 INTRODUCING TECHNOLOGYLegislative reforms introduced to increase efficiency of the courts Using technology to track court pro-Number of Doing Business reforms making it easier to enforce contracts by Doing Business report year DB DB cesses can make managing cases easier 2008 2010 while increasing transparency and limit- ing opportunities for corruption in the 1 4 5 judiciary. Automated court processes can also prevent the loss, destruction, or con-Arab economies averages in enforcing contracts DB 2006 cealment of court records.7 And allow- DB 2011Procedures (number) ing litigants to file complaints electroni- 45 cally in commercial cases, as the United Kingdom recently did, speeds up theTime (days) initiation of a lawsuit. In Armenia, the 657 673 introduction of electronic case manage- ment has increased transparency. PublicCost (% of claim) kiosks with touch screens located in 27.0 28.3 court buildings make case informationNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes available to the public.18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies. The Doing Business indicators forSource: Doing Business database. enforcing contracts focus on the avail- In Saudi Arabia, as of March 8, ability of electronic filing for case man-INTRODUCING SPECIALIZED COURTS 2007, dedicated commercial courts have agement. Among the Arab economies,Introducing specialized courts has been replaced specialized chambers within only the United Arab Emirates has in-a popular improvement. A specialized the civil courts of first instance. Saudi troduced electronic filing into their courtcommercial procedure can be estab- Arabia’s new commercial courts have 3 systems. In the United Arab Emirates,lished by setting up a dedicated stand- sitting judges. Prior to this, specialized the Dubai courts’ website enables partiesalone commercial court, setting up a chambers had just 1 sitting judge. With to use the internet to file several typesspecialized commercial section within increased capacity, each judge is now of case petitions, deposit money for theexisting courts, or training and dedicat- supposed to hold 2 audiences per month cases, view the details of their cases, anding specialized judges within a general and review approximately 15 cases per follow their progress. The website alsocivil court. In some economies, the spe- hearing (or, 30 cases per month). provides valuable and comprehensivecialized commercial courts decide only In Egypt, new standalone commer- information regarding laws and regula-cases relating to bankruptcy, securities, cial courts were established in 2008. tions in the UAE.maritime transport, and intellectual These “special economic courts,” as they Although they do not allow e-filingproperty—while general commercial are known, began operating in Octo- yet, other economies in the region havecases remain within the ordinary courts. ber 2008 within the jurisdiction of each applied information technology to theirThis is the case in Algeria for example. circuit court or court of first instance. judicial systems. In 2008/2009, JordanSpecialized courts, besides offering the Based on Egypt’s draft law of 2006, the introduced a computerized case man-benefits of specialization, also generally new courts are to handle all bankruptcy agement system called “Mizan II,” whichresolve commercial disputes faster. cases and commercial cases exceeding is an improved version of the original Several Arab economies have re- 10,000,000 Egyptian pounds. To assign system used in neighboring West Bankcently introduced regulatory reforms 3 judges per commercial court, 25 to 35 and Gaza. Mizan II enables text-messageincreasing court specialization. In 2008, judges were trained for the new posi- notifications of attorneys, online accessJordan set up commercial divisions in tions. to court records for authorized users, andits courts of first instance and its con- In addition to Jordan, Saudi Arabia, other features.ciliation courts, assigning judges to hear and Egypt, described above, Comoros, Meanwhile, West Bank and Gazasolely commercial cases. The specialized Kuwait, Lebanon, Mauritania, Morocco, is piloting its version of Mizan II. It iscommercial divisions have been opera- Oman, Sudan, Tunisia, United Arab also implementing wide-ranging courttional since June 2008. In the conciliation Emirates, and the Republic of Yemen reforms.courts, 6 to 7 specialized commercial also have specialized commercial courts Electronic systems also improvejudges initially adjudicated. In the courts in the region. efficiency within the courts, makingof first instance, 12 specialized commer- the work of judges and staff easier. Incial judges were assigned. Egypt, employees in the Alexandria and El Mansûra courts of first instance used
50. DOING BUSINESS TOPICS 45FIGURE 10.3 MANAGING CASES TABLE 10.1How do Arab economies rank on Judicial case management has proved Who makes enforcing contracts easy—the ease of enforcing contracts? and who does not? to be effective in reducing proceduralGlobal ranking (1–183) delays. It also helps to monitor judges’ Procedures (number of steps) LUXEMBOURG EASIEST (1) performance. Croatia is adopting an au- Fewest Most Yemen, Rep. tomated case management system that it Yemen, Rep. 36 Kuwait 50 Tunisia expects will not only improve efficiency Lebanon 37 Iraq 51 20 Mauritania but also produce better statistical data for Jordan 38 Oman 51 — West Bank and Gaza monitoring the performance of judges.11 Tunisia 39 Sudan 53 40 Qatar Morocco 40 Syrian Arab 55 Botswana introduced case manage- Oman Republic ment to its high court rules in 2008. The 60 Morocco Time (days) average duration of trials has since fallen Kuwait — Bahrain from 912 days to 550 days. In 2006, Fiji Fastest Slowest 80 — Lebanon appointed and trained designated staff Mauritania 370 Lebanon 721 — — Algeria to improve case management in its high Comoros 506 Sudan 810 100 — — Jordan court. Fiji’s magistrates’ courts case man- Iraq 520 Syrian Arab 872 — United Arab Emirates Republic — — agement reportedly reduced the backlog Yemen, Rep. 520 120 Egypt, Arab Rep. 1,010 — — Saudi Arabia of cases from 5 months to 2.5 months.12 United Arab 537 — Iraq Emirates Djibouti 1,225 — — Case management includes the possibil- 140 — — Egypt, Arab Rep. ity for a judge to conduct preparatory Cost (% of claim) — Sudan 160 — Comoros hearings to help the parties home in on Least Most Djibouti the issues in dispute, to encourage them Oman 13.5 Syrian Arab 29.3 — to settle, and to set procedural timelines Republic Syrian Arab Republic Bahrain 14.7 183 and monitor their compliance. In Nor- Yemen, Rep. 16.5 Lebanon 30.8Source: Doing Business database. way, preparatory meetings held in civil Kuwait 18.8 Jordan 31.2 cases at the Midhordland district court Sudan 19.8 Djibouti 34.0 Comoros 89.4to transcribe judges’ handwritten de- led to settlements in more than 80% ofcisions on typewriters. But thanks to cases.13 In the Slovak Republic, the Brat- Source: Doing Business database.court modernization efforts, now they islava district court keeps cases movingcan transcribe decisions directly into by allowing adjournments only when Successful court reforms increase efficiencyan electronic system, to be archived and there is a compelling reason.14 and save time. That’s the case in Rwanda. Thepromptly produced for docketing and Jordan and West Bank and Gaza - an commercial courts inaugurated in Kigali indistribution.8 In 2008, Moldova comput- economy ranked 4th in the Arab world May 2008 have completed more than 81.5%erized its courts and introduced websites in contract enforcement (figure 10.3) of the cases they received. Because half ofand audio recording equipment. Court - are exchanging information regard- the 6,806 cases that the Kigali commercialadministrators reported that the changes ing Jordan’s case management system, courts received and resolved in 2008 and 2009made the courts’ work faster, easier and in coordination with DPK Consulting had been transferred from other courts, case backlog has been reduced throughout themore efficient.9 Bulgaria’s supreme courts (the firm that implemented Jordan’s case judiciary.16 The improved infrastructure of thecomputerized their court records system management system) and USAID. As a new commercial courts also sped up disputein 2006, enabling litigants to access court result, a number of West Bank and Gaza’s resolution. The registry, having mastered thedocuments and track a case to its com- Palestinian Supreme Court administra- courts’ new case registration system, now en-pletion.10 All judgments of the supreme tors have been admitted to the Judicial ters cases into the system swiftly. And bailiffs’courts have been online and accessible Institute of Jordan (JIJ) for training by time in service has decreased. Since 2008, thesince October 2008. “highly qualified Jordanian judgers and average time to resolve a commercial dispute in Rwanda has declined by nearly 3 months— But simply introducing informa- trainers.” The Palestinian Authority Ju- from 310 days to 230 days.tion technology may not solve underly- dicial Training Institute, based in Westing procedural inefficiency. A thorough Bank and Gaza, has also benefited fromoverhaul of court processes may also be the case management expertise of itsnecessary. Jordanian counterparts.15
51. 46 DOING BUSINESS IN THE ARAB WORLD 2011WHAT ARE SOME RESULTS? trative Court of the Republic of Bulgaria, http://www.sac.government.bg/.For the second year in a row, there have 11. Botero and others (2003).been a number of judiciary improve- 12. AusAID (2005, p. 51).ments. For example, thanks to the intro- 13. CEPEJ (2006).duction of the electronic case manage- 14. CEPEJ (2006).ment system called Mizan, West Bank 15. “DPK Knowledge Management: Applyingand Gaza reduced the amount of time Best Practices,” DPK Consulting newslet- ter, September 2008, http://www.dpkcon-entrepreneurs spent in its courts by more sulting.com/core/uploaded//dpk_newslet-than 22%—from 700 days in 2008 to 540 ter.pdfdays in 2010. 16. Interview by the Business Times (Kigali) Dubai on the other hand, responded with the vice president of the commercialto pressures on its legal system by creat- high court, Benoit Gatete, January 12, 2010, http://allafrica.com/.ing specialized courts. While the vol- 17. Awad Mustafa, “Specialised Courtsume of cases has grown, the courts in Tackle 51% Increase in Cases,” The Na-Dubai can now handle a greater number tional (Dubai), April 18, 2010, http://of cases per year—resolving 58% more www.thenational.ae/.cases in 2009 than in 2008.171. Nunn (2007).2. Bae and Goyal (2009, p. 823) show that “banks respond to poor enforceability of contracts by reducing loan amounts, shortening loan maturities, and increas- ing loan spreads.”3. Dearbhail McDonald, “Disputes before the Commercial Court Soar to Record Level,” Irish Independent, July 6, 2009, http://www.independent.ie/.4. Dearbhail McDonald, “Business and Debt Lawsuits Double in Wake of Downturn,” Irish Independent, July 24, 2009, http:// www.independent.ie/.5. Courts of Denmark, “Statistics,” http:// www.domstol.dk/.6. Lippman (2010) and William Glaberson “The Recession Begins Flooding into the Courts,” New York Times, December 28, 2009.7. See Pepys (2003).8. U.S. Agency for International Develop- ment, “Egypt—Before & After: Modern- ization Raises Court’s Efficiency,” http:// www.usaid.gov/stories/.9. Millennium Partners, “The Moldova Governance Threshold Country Program (MCC)/USAID,” http://www.millenni- umpartners.org. See also USAID (2010).10. See Pepys (2003) and Supreme Adminis-
52. 47Closing a FIGURE 11.1 What are the time, cost and outcome of the insolvency proceedings against a local company?business Court Outcome Time Cost Recovery rate Secured INSOLVENCY creditor Insolvent Unsecured (bank) company creditors SECURED OTHER LOAN CLAIMSKeeping viable businesses operating is the region rely heavily on criminal law, lar for the Arab world, compared to 69one of the important goals of a bank- for enforcement—some even penalize cents on the dollar for OECD countries.ruptcy system1. A firm suffering from debtors with imprisonment. The chance The time it takes to close a business inbad management choices or a temporary to reorganize a company with delinquent the Arab world is 3.6 years, comparedeconomic downturn may still be capable debts is rare. There are few corporate to just 1.7 years in OECD economies. Itof being turned around. In most cases, reorganizations in the region, despite costs an average of 13.6% of the estate’skeeping a struggling business alive is the the fact that many of the economies have value to close a business in the Arabmost efficient outcome. Creditors get a reorganization provisions in their laws. world, compared to 9.9% of the estate’schance to recover a larger part of their That is because existing reorganization value in OECD states. The numbers re-credit, employees have a better chance provisions tend to be heavily creditor- veal that insolvency reforms need to be aof keeping their jobs, and the network of driven, providing little flexibility for higher priority in the region.suppliers and customers is preserved. But, debtors to negotiate. Many of the region’s Doing Business studies the time,of course, not all insolvent businesses are laws have not been revised nor modern- cost, and outcome of insolvency pro-viable. A good bankruptcy system weeds ized for decades, and these outdated laws ceedings involving domestic entities (fig-out the bad from the good. Where bank- fall far short of international best prac- ure 11.1). Speedy resolutions, low costs,ruptcy is inefficient, nonviable businesses tice standards. There is, therefore, a need and the continuation of viable businessesmay linger for years, preventing assets to revise the laws, to focus on the reorga- characterize the top-performing econo-and human capital from being reallocated nization of debtors in financial distress, mies. Note that Doing Business does notto more productive uses. and to decriminalize bankruptcy2. And measure insolvency proceedings for in- Saving viable businesses becomes governments realize that. dividuals or financial institutions.especially important in times of reces- In May 2009, 10 governments in the The Doing Business indicators iden-sion. In fact, the recent global financial Middle East and North Africa (MENA) re- tify weaknesses in the bankruptcy lawcrisis has been used as opportunities to gion signed a joint declaration on intended as well as the main procedural and ad-improve insolvency laws. In 2009, Ku- reforms and agreed to set up public-private ministrative bottlenecks in the bank-wait introduced and promoted pre-insol- partnerships to strengthen their outdated ruptcy process. Three measures are con-vency procedures in its rescue statutes. regimes3. On February 24, 2010, the second structed:That same year, Latvia introduced new Forum on Insolvency Reforms in Middle Time to go through the insolvencyout-of-court negotiation procedures. East and North Africa region (FIRM) was process (in calendar years).In 2010, Romania established special held in Dubai. The forum was attended by Cost to go through the insolvencypre-insolvency procedures for distressed several regulators. The focus was on the process (% of estate value)companies trying to avoid bankruptcy. development of an agenda for and com- Recovery rate for creditors—how In general, insolvency systems in mitment towards insolvency reforms in the much of the insolvency estate is re-the Arab world remain underdeveloped region. Priority areas for reforms and joint covered by stakeholders, taking intoand in need of revision. Bankruptcy laws learning were identified4. account the time, the cost, the depre-may still perceive debtors as wrongdoers, According to Doing Business 2011, ciation of assets and the outcome ofeven criminals, rather than as economic the recovery rate on debt when closing a the insolvency proceeding (cents onagents in distress. Several economies in business is less than 26 cents on the dol- the dollar).
53. 48 DOING BUSINESS IN THE ARAB WORLD 2011FIGURE 11.2 WHAT HAS WORKED?The Arab economies have been slow to reform in closing a businessNumber of Doing Business reforms making it easier to close a business by Doing Business report year Many features can enhance a bankruptcy DB DB DB 2009 2010 2011 system. It is important to establish mecha- nisms for creditor coordination, provide 1 1 1 3 qualified insolvency administrators, and enable parties to negotiate out of court. AnArab world averages in closing a business efficient judicial process is also critical. InRecovery rate (cents on the dollar) DB 2006 DB 2011 the Arab world, court systems tend to be 21.4 25.8 very formalistic, slow, and bureaucratic.Time (years) DB 2011 DB 2006 EMPOWERING CREDITORS 3.6 3.9 Creditors’ committees can help creditors control bankruptcy proceedings. TheyCost (% of estate) DB 2006 DB 2011 supervise the operation of a business 13.3 13.6 by a debtor-in-possession and some- times participate in the preparation ofNote: A Doing Business reform is counted as 1 reform per reforming economy per year. The data sample for DB2006 (2005) includes18 economies. The sample for DB2011 (2010) also includes Bahrain and Qatar, for a total of 20 economies. a reorganization plan. More than halfSource: Doing Business database. of the 183 economies covered by Doing Business recognize creditors’ commit- Bottlenecks in bankruptcy cut into However, efficient bankruptcy laws can tees. Within the Arab world, however,the amount claimants can recover. In and do encourage entrepreneurs. The creditors’ committees are not popular.many developing economies, bankruptcy freedom to fail, and to do so through an Egypt regulations clearly define the pow-is so inefficient that creditors hardly ever efficient process, puts people and capital ers of the general creditors’ assembly. Theuse it. In economies such as these, reform to their most effective use. The result is creditors’ committee has defined powers,may effectively focus on improving con- more productive businesses and more membership and voting rights, includ-tract enforcement outside of bankruptcy. jobs. ing the ability to change and appoint a liquidator. Almost all insolvency laws inFIGURE 11.3 WHO REFORMED IN 2009/10? Eastern Europe and Central Asia, OECDHow do Arab economies rank on high-income economies and South Asiathe ease of closing a business?Global ranking (1–183) Bankruptcy regulation continues to vary acknowledge a creditors’ committee as a across regions and so does the pace of participant in bankruptcy proceedings. JAPAN EASIEST (1) bankruptcy reforms. The Arab world has been slow to pick up the pace of reform INSISTING ON QUALIFICATIONS Bahrain Qatar in this area. Over the past 6 years, only Professional insolvency administrators 20 — Tunisia 2 Arab economies reformed their bank- assist and sometimes replace the man- — Algeria ruptcy regimes: Kuwait and Saudi Arabia agement of an insolvent company. It is es- 40 Morocco — (figure 11.2). sential that insolvency administrators be Kuwait — — Last year, in 2009/10, Saudi Arabia skilled, efficient, and trustworthy. Man- 60 — Saudi Arabia — was the only economy in the region to datory qualification requirements help Oman Yemen, Rep. improve its bankruptcy system. Saudi viable businesses have higher chances 80 — Syrian Arab Republic Arabia amended its “Executive Regula- of survival. Qualified administrators can — — tions of the Bankruptcy Preventive Set- also help nonviable business generate Jordan 100 Lebanon tlement Law” to provide earlier access to higher proceeds from liquidation. Egypt, Arab Rep. amicable settlements—as supervised by Only 42% of the economies sur- 120 — Djibouti a duly appointed committee. The amend- veyed by Doing Business have established — — United Arab Emirates 140 — — ment also imposed time and cost limits specific professional or academic re- Mauritania Comoros on the amicable settlements, to encour- quirements to ensure that bankruptcy 160 Iraq age creditors to participate in the process administrators are sufficiently qualified Sudan without fear of protracted, expensive ne- for their important role. Among this — West Bank and Gaza gotiations. minority, approaches to determining 183 qualifications vary. Germany has a gen-Source: Doing Business database. eral requirement that an administrator
54. DOING BUSINESS TOPICS 49 TABLE 11.1 BOX 11.1 Out of court solutions for resolving debt – a potential trend in the Arab world Where is closing a business easy—and where not? Time (years) Traditionally, the areas measured by the ‘Closing a Business’ indicator (restructuring and insolvency) have not been high priority policy areas in the Arab world. Indeed, between 2006 and 2011, only Fastest Slowest 17% of economies in the Middle East and North Africa (MENA) reformed their insolvency frameworks, Tunisia 1.3 Egypt Arab, Rep. 4.2 making it one of the least-reforming regions in this area in the world1. Since 2009, however, coun- Saudi Arabia 1.5 Jordan 4.3 tries in the region have begun to take insolvency reform more seriously2. One potential trend is the Morocco 1.8 Djibouti 5.0 movement towards resolution of debt – non-performing loans of distressed companies in particular Algeria 2.5 United Arab 5.1 – outside of the court system. As the average time to resolve an insolvency in MENA continues to be Bahrain 2.5 Emirates amongst the longest in the world (3.4 years, roughly on par with Sub-Saharan Africa)3, countries will Mauritania 8.0 increasingly begin to explore out of court solutions for resolving debt. Cost (% of estate) One such country is Kuwait, which has begun to specifically encourage out of court restructurings Least Most using the so-called ‘London Approach’ (a consensual approach where the debtor and its creditors ne- Kuwait 1 Egypt, Arab Rep. 22 gotiate a loan workout without court involvement). In 2009 the Kuwaiti government passed a stimu- Oman 4 Lebanon 22 lus package in response to the global financial crisis which, among other things, had the intention of Algeria 7 Qatar 22 facilitating restructurings between borrowers and lenders. The plan aims to protect companies from Tunisia 7 Saudi Arabia 22 creditors if they file a viable business plan, and the central bank approves the advisers for any foreign Yemen, Rep. 8 United Arab 30 financial restructuring.4 The government support appears to have worked; Kuwait had more than Emirates one high-profile restructuring in 2009-2010. Global Investment House K.S.C (c), a Kuwaiti investment Note: The rankings reflected in the table include only Arab house listed on both the Kuwaiti and London stock exchanges finalized its restructuring in early 2010, economies with a practice of bankruptcy (16 in total). Another 4 which included three year amortizing facilities with each of its 53 lending banks.5 Kuwait’s Investment have no practice. Source: Doing Business database. Dar (TID.KW), the Islamic firm that co-owns British luxury carmaker Aston Martin, received approval from almost 80% of creditors for a five-year plan to restructure about one billion dinars ($3.5 billion) of debt.6 Although it is too early to determine exactly how successfully the Kuwaiti approach will be in land and Wales, the number of company the long term, this reform represents a potential step in the right direction, empowering private-sec- liquidations rose by 22.8% in 2009, com- tor participants to resolve cases of business distress in a consensual, fast and relatively low-cost way. pared with the previous year6. One way to ease the burden on courts is to limit 1. World Bank (2010b). their involvement to cases where parties 2. See, for example, the ‘Abu Dhabi Declaration’ of 2008 (http://www.oecd.org/dataoecd/31/6/43136158.pdf ). cannot agree on their own. The restruc- 3. World Bank (2010b). turing framework that the Bank of Eng- 4. “White & Case Advises on U.S. $1.7 Billion Global Investment House Debt Restructuring: First Restructuring of a Kuwait Investment land began to develop after the United House”, December 14, 2009, http://wwww.whitecase.com/press_12142009/; “Kuwait’s Dar Gets Nod From 80% Of Creditors For Debt Plan” January 10, 2010, http://www.zawya.com/printstory.cfm?storyid=ZW20100109000086&l=044646100110; “Stimulus Package Kingdom’s recession of the mid-1970s, Finally Gets Go Ahead in Kuwait” http://www.arabianbusiness.com/552557-stimulus-package-finally-gets-go-ahead-in-kuwait- known as “the London approach,” en- 5. http://www.arabtimesonline.com/NewsDetails/tabid/96/smid/414/ArticleID/148694/reftab/36/Default.aspx sured the survival of many companies in 6. “Kuwait’s Dar gets nod from 80% of creditors for restructuring plan”, Dania Saadi, Dow Jones Newswire, January 10, 2010, http://www. later crises. And “the London approach” zawya.com/printstory.cfm?storyid=ZW20100109000086&l=044646. has inspired similar sets of rules in otherbe qualified for the insolvency case and have law degrees or are accountants. In economies—including Indonesia, Korea,experienced in business. Meanwhile, Morocco, they tend to be court employ- Malaysia, Thailand, and Turkey7.Canada licenses trustees in bankruptcy ees or civil servants, and in Egypt, they Only about 45 economies out of 149through its Office of the Superintendent are generally members of the legal com- covered by Doing Business allow creditorsof Bankruptcy. Most of the OECD high- munity.5 In Yemen, United Arab Emir- and debtors to bring a pre-negotiated re-income economies as well as those in the ates, Qatar, Jordan, Lebanon, Oman, and organization plan to court. These out-of-Eastern Europe and Central Asia region Saudi Arabia, there is no regulation of court workouts are still most common inhave set specific requirements. insolvency administrators at all. Jordan OECD high-income economies. By and large, insolvency admin- is currently analyzing its regime of in- The use of out-of-court restructur-istrators in the Arab world are not yet solvency administrators to come up with ing is not widespread in the Arab world.viewed as competent or skilled. None amendments that can improve it. There does not seem to be a culturalof the Arab economies studied by Doing practice of initiating negotiations withBusiness provide training for insolvency PROMOTING OUT-OF-COURT creditors to reach amicable settlements. WORKOUTSadministrators. Nor are there insolven- Kuwait has recently worked to changecy-specific qualifications necessary to The global financial crisis provoked a that cultural norm and is specifically en-become an administrator. In Morocco surge in insolvency filings—especially couraging “London approach”-style, out-and Egypt, it is sufficient that insolvency in Eastern Europe and Central Asia and of-court restructurings. In 2009, Kuwaitadministrators appointed by the court OECD high-income economies. In Eng- implemented rescue statutes enabling
55. 50 DOING BUSINESS IN THE ARAB WORLD 2011companies on the verge of insolvency to By giving efficient companies a chancereorganize themselves, restructure their at a fresh start, bankruptcy law helpsdebt, and apply other measures to regain maintain a higher overall level of entre-financial health and restore profitability. preneurship in an economy13. And byThe Central Bank of Kuwait can also file a letting inefficient companies go, a goodpetition to initiate a financial restructur- system fosters the efficient reallocationing and the Central Bank also approves of resources.advisors to oversee it. Kuwait’s rescue stat-utes aim to protect companies from credi-tors if they file a viable business plan. 1. See Djankov, Hart, McLiesh and Shleifer (2008).WHAT ARE SOME RESULTS? 2. See Uttamchandani (2010).Well-functioning insolvency regimes can 3. The symposium was organized by Hawkamah, the Institute for Corporatefacilitate access to finance—especially Governance, in association with the Orga-for small and medium-size enterprises— nization for Economic Co-operation andand, thereby, help stimulate growth in the Development, the World Bank, INSOLeconomy overall8. That is because better International, the Abu Dhabi Chamber of Commerce and Industry and theprotections for creditors in insolvency Abu Dhabi Chamber of Commerce andcan help mitigate their lending risks. A Industry and the Abu Dhabi Centre forstudy of the 2005 bankruptcy reform Corporate Governance, and supportedin Brazil found that it led to an average by Latham & Watkins. The 10 economies that participated are: Egypt, Jordan, Leba-reduction of 22% in the cost of debt for non, Libya, Oman, Qatar, Saudi Arabia,Brazilian companies—a 39% increase in Sudan, the United Arab Emirates, andoverall credit and a 79% increase in long- West Bank and Gaza.term credit in the economy9. 4. The FIRM founding members include the An effective reform of bankruptcy Hawkamah Institute for Corporate Gov- ernance, the World Bank, INSOL Interna-laws can also lead to important time and tional, International Finance Corporationcost savings. In 1999, Colombia limited (IFC) and the Organisation for Economicthe duration of reorganization proce- Co-operation and Development (OECD).dures by setting a maximum of 8 months FIRM will expand the membership base by inviting Institutions interested infor negotiations. If no agreement is moving the Insolvency Reform agendareached within 8 months, liquidation be- forward in the region.comes mandatory. According to a study 5. Insolvency Service of the United King-of Colombian firms that filed for insol- dom, http://www.insolvency.gov.uk.vency between 1995/96 and 2003/04, the 6. See Lieberman and others (2005) andduration and cost of the reorganization Mako (2005).process fell significantly. Moreover, the 7. See Uttamchandani (2010).selection of viable firms for reorganiza- 8. See Uttamchandani and Menezes (2010).tion improved10. 9. See Funchal (2008). A well-balanced bankruptcy system 10. See Giné and Love (2006).functions as a filter, separating compa- 11. See Dewaelheyns and Van Hulle (2009b).nies that are financially distressed but 12. See Gamboa-Cavazos and Schneidereconomically viable from inefficient (2007).companies that should be liquidated11. 13. See Armour and Cumming (2008). A study of the 2000 bankruptcy reform in Mexico also shows clear gains. Looking at a sample of 78 bankruptcy cases in 1991–2005, the study finds that the average time to go through bankruptcy fell from 7.8 years to 2.3 years, thus increasing the amounts recovered by creditors12.
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60. DATA NOTES 55Data notes burden on businesses. Finally, a set of indicators measures different aspects of LIMITS TO WHAT IS MEASURED employment regulation. The Doing Business methodology has 5 The data for all sets of indicators in limitations that should be considered Doing Business 2011 are for June 2010.1 when interpreting the data. First, the collected data refer to businesses in the METHODOLOGY economy’s largest business city and may not be representative of regulation in The Doing Business data are collected in other parts of the economy. To address a standardized way. To start, the Doing this limitation, subnational Doing Busi- Business team, with academic advisers, ness indicators were created for 6 econo- designs a survey. The survey uses a simple mies in 2009/10: Colombia, Indonesia, business case to ensure comparability Kenya, Nigeria, Pakistan and Russia.2 A across economies and over time—with city profile on Zanzibar, Tanzania, was assumptions about the legal form of the also published in 2009/10. A subnational business, its size, its location and the study is under way in the Philippines. InThe indicators presented and analyzed in nature of its operations. Surveys are ad- addition, a city profile is under way forDoing Business measure business regu- ministered through more than 8,200 local Juba, Southern Sudan, and a regionallation and the protection of property experts, including lawyers, business con- report has been started in Southeasternrights—and their effect on businesses, sultants, accountants, freight forwarders, Europe, covering 7 economies—Albania,especially small and medium-size do- government officials and other profession- Bosnia and Herzegovina, Kosovo, FYRmestic firms. First, the indicators docu- als routinely administering or advising on Macedonia, Moldova, Montenegro andment the degree of regulation, such as the legal and regulatory requirements (table Serbia—and 16 cities. Increasingly, suchnumber of procedures to start a business 14.1). These experts have several rounds studies are being periodically updated toor to register and transfer commercial of interaction with the Doing Business measure progress over time or to expandproperty. Second, they gauge regulatory team, involving conference calls, written geographic coverage to additional cities.outcomes, such as the time and cost to correspondence and visits by the team. This year that is the case for the sub-enforce a contract, go through bank- For Doing Business 2011 team members national studies in Colombia, Nigeria,ruptcy or trade across borders. Third, visited 33 economies to verify data and Pakistan and the Philippines and for thethey measure the extent of legal protec- recruit respondents. The data from sur- regional study in Southeast Europe. Thetions of property, for example, the pro- veys are subjected to numerous tests for subnational studies point to significanttections of investors against looting by robustness, which lead to revisions or differences in the speed of reform andcompany directors or the range of assets expansions of the information collected. the ease of doing business across cities inthat can be used as collateral according The Doing Business methodology of- the same economy.to secured transactions laws. Fourth, fers several advantages. It is transparent, Second, the data often focus ona set of indicators documents the tax using factual information about what a specific business form—generally aTABLE 14.1 laws and regulations say and allowing limited liability company (or its legalHow many experts does Doing Business multiple interactions with local respon- equivalent) of a specified size—and mayconsult? dents to clarify potential misinterpreta- not be representative of the regulationIndicator set Contributors tions of questions. Having representative on other businesses, for example, sole Starting a business 1,406 samples of respondents is not an issue, as proprietorships. Third, transactions de- Dealing with 605 the texts of the relevant laws and regula- scribed in a standardized case scenario construction permits tions are collected and answers checked refer to a specific set of issues and may Registering property 1,128 for accuracy. The methodology is inex- not represent the full set of issues a busi- Getting credit 1,127 pensive and easily replicable, so data can ness encounters. Fourth, the measures of Protecting investors 874 be collected in a large sample of econo- time involve an element of judgment by Paying taxes 891 mies. Because standard assumptions are the expert respondents. When sources Trading across borders 1,279 used in the data collection, comparisons indicate different estimates, the time Enforcing contracts 984 and benchmarks are valid across econo- indicators reported in Doing Business Closing a business 852 mies. Finally, the data not only highlight represent the median values of several the extent of specific regulatory obstacles responses given under the assumptions Getting electricity 602 to business but also identify their source of the standardized case. Employing workers 862 and point to what might be reformed.
61. 56 DOING BUSINESS IN THE ARAB WORLD 2011 Finally, the methodology assumes Economy characteristicsthat a business has full information onwhat is required and does not waste GROSS NATIONAL INCOME (GNI) and the Economist Intelligence Unit PER CAPITA were used.time when completing procedures. In Doing Business 2011 reports 2009practice, completing a procedure may income per capita as published REGION AND INCOME GROUPtake longer if the business lacks informa- in the World Bank’s World Devel- Doing Business uses the World Banktion or is unable to follow up promptly. opment Indicators 2010. Income is regional and income group clas-Alternatively, the business may choose calculated using the Atlas method sifications, available at http://www.to disregard some burdensome proce- (current US$). For cost indicators worldbank.org/data/countryclass. Thedures. For both reasons the time delays expressed as a percentage of income World Bank does not assign regionalreported in Doing Business 2011 would per capita, 2009 GNI in U.S. dollars classifications to high-income econo-differ from the recollection of entre- is used as the denominator. GNI data mies. For the purpose of the Doingpreneurs reported in the World Bank were not available from the World Business report, high-income OECDEnterprise Surveys or other perception Bank for Afghanistan, The Bahamas, economies are assigned the “regional”surveys. Bahrain, Belize, Cyprus, Eritrea, Guy- classification OECD high income. Fig- ana, Haiti, Hong Kong SAR (China), ures and tables presenting regionalCHANGES IN WHAT IS MEASURED Madagascar, New Zealand, Oman, averages include economies from all Puerto Rico, Qatar, Saudi Arabia, Su- income groups (low, lower middle,The methodology for the employing riname, Switzerland, Taiwan (China), upper middle and high income).workers indicators was updated this Timor-Leste, the United Arab Emir-year, with guidance from a consultative ates, West Bank and Gaza and Zim- POPULATIONgroup of relevant experts and stakehold- babwe. In these cases GDP or GNP Doing Business 2011 reports midyearers.3 The employing workers indicators per capita data and growth rates from 2009 population statistics as pub-are not included in this year’s aggregate the International Monetary Fund’s lished in World Development Indica-ranking on the ease of doing business. World Economic Outlook database tors 2010. Changes agreed as of the date of pub-lication are the following: the calculationof the minimum wage ratio was changed DATA CHALLENGES AND any revisions in data due to corrections.to ensure that no economy can receive REVISIONS The website also makes available all orig-the highest score if it has no minimum inal data sets used for background pa-wage at all, if the law provides a regula- Most laws and regulations underlying the pers. The correction rate between Doingtory mechanism for the minimum wage Doing Business data are available on the Business 2010 and Doing Business 2011that is not enforced in practice, if there Doing Business website at http://www.do- is 5.7%.is only a customary minimum wage or ingbusiness.org. All the sample surveysif the minimum wage applies only to and the details underlying the indicators FIVE-YEAR MEASURE OFthe public sector. A minimum threshold are also published on the website. Ques- CUMULATIVE CHANGE:was set for paid annual leave and a ceil- tions on the methodology and challenges DB CHANGE SCOREing for working days allowed per week to data can be submitted through theto ensure that no economy benefits in website’s “Ask a Question” function at Doing Business 2011 is introducing a newthe scoring from excessive flexibility in http://www.doingbusiness.org. measure to illustrate how the regulatorythese areas. Finally, the calculation of the Doing Business publishes 8,967 in- environment for business has changedredundancy cost and of the annual leave dicators each year. To create these in- in absolute terms in each economy overperiod for the rigidity of hours index was dicators, the team measures more than the 5 years since Doing Business 2006changed to refer to the average value for 52,000 data points, each of which is was published. This measure is called thea worker with 1 year of tenure, a worker made available on the Doing Business DB change score. In the 9 areas of busi-with 5 years and a worker with 10 years website. Historical data for each indica- ness regulation included in the aggregaterather than the value for a worker with tor and economy are available on the ranking on the ease of doing business in20 years of tenure. website, beginning with the first year Doing Business 2011, the new measure the indicator or economy was included assigns a neutral score if there were no in the report. To provide a comparable changes in the underlying data, a positive time series for research, the Doing Busi- score for changes leading to improve- ness website provides historical data sets ments in the indicators and a negative adjusted for changes in methodology and score for changes having an adverse im-
62. DATA NOTES 57pact on the indicators. change of 150 would be recorded for EASE OF DOING BUSINESS This measure complements the ag- the economy. If instead the time had RANKINGgregate ease of doing business rank- increased to 350 days, a change ofing, which benchmarks each economy’s −150 would be recorded. The ease of doing business index rankscurrent performance on the indicators economies from 1 to 183. For eachagainst that of all other economies in 2. To allow aggregation across all indi- economy the index is calculated as thethe Doing Business sample. By showing cators, the results for each indicator ranking on the simple average of its per-absolute change over time, the measure are made comparable by normalizing centile rankings on each of the 9 topicsillustrates for each economy how much the change values on a scale of 0–1, included in the index in Doing Businessits regulatory environment for business where a higher value indicates that 2011: starting a business, dealing withas measured through the Doing Business an economy made a larger absolute construction permits, registering prop-indicators has changed compared with 5 improvement on a particular indicator erty, getting credit, protecting investors,years ago. Economies that achieved the than other economies. As a second paying taxes, trading across borders, en-biggest cumulative change in the past 5 step, the values are rescaled once more forcing contracts and closing a business.years are assigned the highest DB change so that any lowering of an indicator is The ranking on each topic is the simplescore. reflected by a negative score and any average of the percentile rankings on its improvement by a positive score. A component indicators (table 14.2).The DB change score is constructed in score of 0 indicates that no change oc- If an economy has no laws or reg-4 steps. curred.4 ulations covering a specific area—for1. As a first step, the absolute differ- example, bankruptcy—it receives a “no ence in scores is calculated for each 3. To illustrate the change across all 9 practice” mark. Similarly, an economy of the component indicators of the areas of business regulation, a simple receives a “no practice” or “not possible” 9 Doing Business topics, 28 in all. average of all scores obtained for the mark if regulation exists but is never For example, for starting a business different indicators is taken to calcu- used in practice or if a competing regula- there are 4 indicators: procedures, late a total annual measure of change tion prohibits such practice. Either way, a time, cost (as a percentage of GNI per for each economy. By using a simple “no practice” mark puts the economy at capita) and paid-in minimum capital average, the new measure follows the the bottom of the ranking on the relevant requirement (as a percentage of GNI approach used in the ease of doing indicator. per capita). Annual absolute changes business ranking. Here is one example of how the are calculated economy by economy ranking is constructed. In Iceland it takes for each of these indicators. For ex- 4. Finally, the annual measures of change 5 procedures, 5 days and 2.3% of an- ample, if starting a business in an for each economy are added to il- nual income per capita in fees to open a economy took 200 days as measured lustrate the cumulative change in its business. The minimum capital required in Doing Business 2006 and only 50 as business regulatory environment over amounts to 11.97% of income per capita. measured in Doing Business 2007, a the past 5 years. On these 4 indicators Iceland ranks inTABLE 14.2Which indicators make up the ranking?Starting a business Paying taxes Procedures, time, cost and paid-in minimum capital to open Number of tax payments, time to prepare and file tax returns and to pay taxes, a new business total taxes as a share of profit before all taxes borneDealing with construction permits Trading across borders Procedures, time and cost to obtain construction permits, inspections Documents, time and cost to export and import and utility connectionsRegistering property Enforcing contracts Procedures, time and cost to transfer commercial real estate Procedures, time and cost to resolve a commercial disputeGetting credit Closing a business Strength of legal rights index, depth of credit information index Recovery rate in bankruptcyProtecting investors Strength of investor protection index: extent of disclosure index, extent of director liability index and ease of shareholder suits index
63. 58 DOING BUSINESS IN THE ARAB WORLD 2011the 13th, 4th, 15th and 63th percentiles. stan, Lithuania, Mali, Montenegro, Peru, FIGURE 14.1So on average Iceland ranks in the 24th Rwanda, Saudi Arabia, Sierra Leone, Starting a business: getting a local limited liability company up and runningpercentile on the ease of starting a busi- Slovenia, Sweden, Tajikistan, Ukraine, Rankings are based on 4 subindicatorsness. It ranks in the 50th percentile on Vietnam and Zambia. Second, Doing Preregistration, As % of income perprotecting investors, 40th percentile on Business ranks these economies on the registration and capita, no bribes included postregistrationtrading across borders, 10th percentile increase in their ranking on the ease of (in calendar days)on enforcing contracts, 9th percentile doing business from the previous year 25% 25%on closing a business and so on. Higher using comparable rankings. INDICA- Time Costrankings indicate simpler regulation and TORS INCLUDED 25% 25%stronger protection of property rights. IN THE EASE OF DOING Procedures Paid-inThe simple average of Iceland’s percentile BUSINESS RANKING minimum capital Procedure isrankings on all topics is 25%. When all completed when final documenteconomies are ordered by their average This year’s aggregate ranking on the ease is received Funds deposited in a bank or withpercentile rank, Iceland is in 15th place. of doing business is based on 9 indicator a notary before registration, as % of income per capita More complex aggregation meth- sets: starting a business, dealing withods—such as principal components and construction permits, registering prop-unobserved components—yield a nearly erty, getting credit, protecting investors, experts differ, inquiries continue untilidentical ranking.5 The choice of ag- paying taxes, trading across borders, en- the data are reconciled.gregation method has little influence on forcing contracts and closing a business. To make the data comparable acrossthe rankings because the 9 sets of indica- economies, several assumptions abouttors provide sufficiently broad coverage STARTING A BUSINESS the business and the procedures areacross topics. So Doing Business uses the used.simplest method. Doing Business records all procedures The ease of doing business index is that are officially required for an entre- ASSUMPTIONS ABOUT THE BUSINESSlimited in scope. It does not account for preneur to start up and formally operate The business:an economy’s proximity to large markets, an industrial or commercial business. Is a limited liability company. If therethe quality of its infrastructure services These include obtaining all necessary is more than one type of limited(other than services related to trading licenses and permits and completing any liability company in the economy, theacross borders), the strength of its finan- required notifications, verifications or limited liability form most popularcial system, the security of property from inscriptions for the company and em- among domestic firms is chosen.theft and looting, its macroeconomic ployees with relevant authorities. The Information on the most popularconditions or the strength of underlying ranking on the ease of starting a business form is obtained from incorporationinstitutions. There remains a large unfin- is the simple average of the percentile lawyers or the statistical office.ished agenda for research into what regu- rankings on its component indicators Operates in the economy’s largestlation constitutes binding constraints, (figure 14.1). business city.what package of reforms is most effective After a study of laws, regulations Is 100% domestically owned and hasand how these issues are shaped by the and publicly available information on 5 owners, none of whom is a legalcontext in an economy. The Doing Busi- business entry, a detailed list of proce- entity.ness indicators provide a new empirical dures is developed, along with the time Has start-up capital of 10 timesdata set that may improve understanding and cost of complying with each proce- income per capita at the end of 2009,of these issues. dure under normal circumstances and paid in cash. Doing Business 2011 also uses a sim- the paid-in minimum capital require- Performs general industrial orple method to calculate which economies ments. Subsequently, local incorpora- commercial activities, such as theimprove the most on the ease of doing tion lawyers and government officials production or sale to the public ofbusiness. First, it selects the economies complete and verify the data. products or services. The businessthat reformed in 3 or more of the 9 top- Information is also collected on the does not perform foreign tradeics included in this year’s ease of doing sequence in which procedures are to activities and does not handlebusiness ranking. Twenty-five econo- be completed and whether procedures products subject to a special taxmies met this criterion: Belarus, Brunei may be carried out simultaneously. It is regime, for example, liquor orDarussalam, Burkina Faso, Cape Verde, assumed that any required information tobacco. It is not using heavilythe Democratic Republic of Congo, Geor- is readily available and that all agencies polluting production processes.gia, Grenada, Guyana, Hungary, Indone- involved in the start-up process functionsia, the Islamic Republic of Iran, Kazakh- without corruption. If answers by local
64. DATA NOTES 59 Leases the commercial plant and professionals on behalf of the company dergoes to connect to electricity, water, offices and is not a proprietor of real are counted separately. Each electronic gas and waste disposal services are not estate. procedure is counted separately. If 2 pro- included. Does not qualify for investment cedures can be completed through the incentives or any special benefits. same website but require separate filings, TIME Has at least 10 and up to 50 they are counted as 2 procedures. Time is recorded in calendar days. The employees 1 month after the Both pre- and postincorporation measure captures the median duration commencement of operations, all of procedures that are officially required that incorporation lawyers indicate is them nationals. for an entrepreneur to formally operate a necessary to complete a procedure with Has a turnover of at least 100 times business are recorded (table 14.3). minimum follow-up with government income per capita. Procedures required for official cor- agencies and no extra payments. It is as- Has a company deed 10 pages long. respondence or transactions with public sumed that the minimum time required agencies are also included. For example, for each procedure is 1 day. AlthoughPROCEDURES if a company seal or stamp is required procedures may take place simultane-A procedure is defined as any interaction on official documents, such as tax dec- ously, they cannot start on the same dayof the company founders with external larations, obtaining the seal or stamp is (that is, simultaneous procedures startparties (for example, government agen- counted. Similarly, if a company must on consecutive days). A procedure iscies, lawyers, auditors or notaries). In- open a bank account before registering considered completed once the companyteractions between company founders or for sales tax or value added tax, this has received the final document, such ascompany officers and employees are not transaction is included as a procedure. the company registration certificate orcounted as procedures. Procedures that Shortcuts are counted only if they fulfill 4 tax number. If a procedure can be accel-must be completed in the same build- criteria: they are legal, they are available erated for an additional cost, the fastesting but in different offices are counted to the general public, they are used by procedure is chosen. It is assumed thatas separate procedures. If founders have the majority of companies, and avoiding the entrepreneur does not waste timeto visit the same office several times for them causes substantial delays. and commits to completing each remain-different sequential procedures, each is Only procedures required of all ing procedure without delay. The timecounted separately. The founders are as- businesses are covered. Industry-specific that the entrepreneur spends on gather-sumed to complete all procedures them- procedures are excluded. For example, ing information is ignored. It is assumedselves, without middlemen, facilitators, procedures to comply with environmen- that the entrepreneur is aware of all entryaccountants or lawyers, unless the use tal regulations are included only when regulations and their sequence from theof such a third party is mandated by they apply to all businesses conducting beginning but has had no prior contactlaw. If the services of professionals are general commercial or industrial activi- with any of the officials.required, procedures conducted by such ties. Procedures that the company un- COSTTABLE 14.3 Cost is recorded as a percentage of theWhat do the starting a business indicators measure? economy’s income per capita. It includes Procedures to legally start and operate a company (number) all official fees and fees for legal or pro- Preregistration (for example, name verification or reservation, notarization) fessional services if such services are Registration in the economy’s largest business city required by law. Fees for purchasing and Postregistration (for example, social security registration, company seal) legalizing company books are included if these transactions are required by law. Time required to complete each procedure (calendar days) The company law, the commercial code Does not include time spent gathering information and specific regulations and fee sched- Each procedure starts on a separate day ules are used as sources for calculating Procedure completed once final document is received costs. In the absence of fee schedules, a No prior contact with officials government officer’s estimate is taken Cost required to complete each procedure (% of income per capita) as an official source. In the absence of a Official costs only, no bribes government officer’s estimate, estimates No professional fees unless services required by law of incorporation lawyers are used. If several incorporation lawyers provide Paid-in minimum capital (% of income per capita) different estimates, the median reported Deposited in a bank or with a notary before registration begins value is applied. In all cases the cost ex-Source: Doing Business database. cludes bribes.
65. 60 DOING BUSINESS IN THE ARAB WORLD 2011PAID-IN MINIMUM CAPITAL FIGURE 14.2 Is fully licensed and insured to carryThe paid-in minimum capital require- Dealing with construction permits: out construction projects, such as building a warehousement reflects the amount that the en- building warehouses. Rankings are based on 3 subindicatorstrepreneur needs to deposit in a bank Has 60 builders and other employees, Days to build As % of income per capita,or with a notary before registration and a warehouse no bribes included all of them nationals with theup to 3 months following incorpora- in main city technical expertise and professionaltion and is recorded as a percentage of 33.3% 33.3% experience necessary to obtainthe economy’s income per capita. The Time Cost construction permits and approvals.amount is typically specified in the com- Has at least 1 employee who is amercial code or the company law. Many 33.3% licensed architect and registered with Procedureseconomies have a minimum capital re- the local association of architects.quirement but allow businesses to pay Has paid all taxes and taken out allonly a part of it before registration, with Procedure is completed when final document necessary insurance applicable to its is received; construction permits, inspectionsthe rest to be paid after the first year and utility connections included general business activity (for example,of operation. In Italy in June 2009 the accidental insurance for constructionminimum capital requirement for lim- workers and third-person liability).ited liability companies was €10,000, of erage and a fixed land line. Procedures Owns the land on which thewhich at least €2,500 was payable before necessary to register the property so that warehouse is built.registration. The paid-in minimum capi- it can be used as collateral or transferredtal recorded for Italy is therefore €2,500, to another entity are also counted. The ASSUMPTIONS ABOUT THE WAREHOUSEor 10.1% of income per capita. In Mex- survey divides the process of building a The warehouse:ico the minimum capital requirement warehouse into distinct procedures and Will be used for general storagewas 50,000 pesos, of which one-fifth calculates the time and cost of complet- activities, such as storage of books orneeded to be paid before registration. ing each procedure in practice under stationery. The warehouse will not beThe paid-in minimum capital recorded normal circumstances. The ranking on used for any goods requiring specialfor Mexico is therefore 10,000 pesos, or the ease of dealing with construction conditions, such as food, chemicals9.2% of income per capita. permits is the simple average of the or pharmaceuticals. percentile rankings on its component Has 2 stories, both above ground,The data details on starting a business indicators (figure 14.2). with a total surface of approximatelycan be found for each economy at http:// Information is collected from ex- 1,300.6 square meters (14,000 squarewww.doingbusiness.org by selecting the perts in construction licensing, includ- feet). Each floor is 3 meters (9 feet,economy in the drop-down list. This meth- ing architects, construction lawyers, 10 inches) high.odology was developed in Djankov and construction firms, utility service pro- Has road access and is located inothers (2002) and is adopted here with viders and public officials who deal with the periurban area of the economy’sminor changes. building regulations, including approvals largest business city (that is, on the and inspections. To make the data com- fringes of the city but still within itsDEALING WITH CONSTRUCTION parable across economies, several as- official limits).PERMITS sumptions about the business, the ware- Is not located in a special economic house project and the utility connections or industrial zone. The zoningDoing Business records all procedures are used. requirements for warehouses are metrequired for a business in the construc- by building in an area where similartion industry to build a standardized ASSUMPTIONS ABOUT THE warehouses can be found. CONSTRUCTION COMPANYwarehouse. These procedures include Is located on a land plot of 929 squaresubmitting all relevant project-specific The business (BuildCo): meters (10,000 square feet) thatdocuments (for example, building plans Is a limited liability company. is 100% owned by BuildCo and isand site maps) to the authorities; obtain- Operates in the economy’s largest accurately registered in the cadastreing all necessary clearances, licenses, business city. and land registry.permits and certificates; completing all Is 100% domestically and privately Is a new construction (there was norequired notifications; and receiving all owned. previous construction on the land).necessary inspections. Doing Business Has 5 owners, none of whom is a Has complete architectural andalso records procedures for obtaining legal entity. technical plans prepared by a licensedconnections for electricity, water, sew- architect.
66. DATA NOTES 61 Will include all technical equipment Is 10 meters (32 feet, 10 inches) from (that is, simultaneous procedures start required to make the warehouse fully the main telephone network. on consecutive days). If a procedure can operational. Is a fixed land line. be accelerated legally for an additional Will take 30 weeks to construct cost, the fastest procedure is chosen. It (excluding all delays due to PROCEDURES is assumed that BuildCo does not waste administrative and regulatory A procedure is any interaction of the time and commits to completing each requirements). company’s employees or managers with remaining procedure without delay. The external parties, including government time that BuildCo spends on gatheringASSUMPTIONS ABOUT THE agencies, notaries, the land registry, the information is ignored. It is assumedUTILITY CONNECTIONS cadastre, utility companies, public and that BuildCo is aware of all buildingThe electricity connection: private inspectors and technical experts requirements and their sequence from Is 10 meters (32 feet, 10 inches) from apart from in-house architects and en- the beginning. the main electricity network. gineers. Interactions between company Is a medium-tension, 3-phase, employees, such as development of the COST 4-wire Y, 140-kilovolt-ampere (kVA) warehouse plans and inspections con- Cost is recorded as a percentage of the connection. Three-phase service is ducted by employees, are not counted economy’s income per capita. Only of- available in the construction area. as procedures. Procedures that the com- ficial costs are recorded. All the fees Will be delivered by an overhead pany undergoes to connect to electricity, associated with completing the proce- service, unless overhead service is not water, sewerage and telephone services dures to legally build a warehouse are available in the periurban area. are included. All procedures that are recorded, including those associated Consists of a simple hookup unless legally or in practice required for build- with obtaining land use approvals and installation of a private substation ing a warehouse are counted, even if preconstruction design clearances; re- (transformer) or extension of network they may be avoided in exceptional cases ceiving inspections before, during and is required. (table 14.4). after construction; getting utility con- Requires the installation of only one nections; and registering the warehouse electricity meter. TIME property. Nonrecurring taxes required BuildCo is assumed to have a li- Time is recorded in calendar days. The for the completion of the warehousecensed electrician on its team to complete measure captures the median duration project also are recorded. The buildingthe internal wiring for the warehouse. that local experts indicate is necessary to code, information from local experts andThe water and sewerage connection: complete a procedure in practice. It is as- specific regulations and fee schedules are Is 10 meters (32 feet, 10 inches) from sumed that the minimum time required used as sources for costs. If several local the existing water source and sewer for each procedure is 1 day. Although partners provide different estimates, the tap. procedures may take place simultane- median reported value is used. Does not require water for ously, they cannot start on the same day fire protection reasons; a fire extinguishing system (dry system) TABLE 14.4 will be used instead. If a wet fire What do the dealing with construction permits indicators measure? protection system is required by law, Procedures to legally build a warehouse (number) it is assumed that the water demand Submitting all relevant documents and obtaining all necessary clearances, licenses, permits specified below also covers the water and certificates needed for fire protection. Completing all required notifications and receiving all necessary inspections Has an average water use of 662 liters Obtaining utility connections for electricity, water, sewerage and a land telephone line (175 gallons) a day and an average Registering the warehouse after its completion (if required for use as collateral or for transfer wastewater flow of 568 liters (150 of warehouse) gallons) a day. Time required to complete each procedure (calendar days) Has a peak water use of 1,325 liters Does not include time spent gathering information (350 gallons) a day and a peak Each procedure starts on a separate day wastewater flow of 1,136 liters (300 Procedure completed once final document is received gallons) a day. No prior contact with officials Will have a constant level of water Cost required to complete each procedure (% of income per capita) demand and wastewater flow throughout the year. Official costs only, no bribesThe telephone connection: Source: Doing Business database.
67. 62 DOING BUSINESS IN THE ARAB WORLD 2011The data details on dealing with con- cedures as well as the time and cost to FIGURE 14.3struction permits can be found for each complete each of them. Registering property: transfer of propertyeconomy at http://www.doingbusiness.org To make the data comparable across between 2 local companies Rankings are based on 3 subindicatorsby selecting the economy in the drop- economies, several assumptions about Days to transfer property As % of property value,down list. the parties to the transaction, the prop- in main city no bribes included erty and the procedures are used. REGISTERING PROPERTY 33.3% 33.3%REGISTERING PROPERTY ASSUMPTIONS ABOUT THE PARTIES Time CostDoing Business records the full sequence The parties (buyer and seller):of procedures necessary for a business Are limited liability companies. 33.3%(buyer) to purchase a property from Are located in the periurban area of Proceduresanother business (seller) and to transfer the economy’s largest business city.the property title to the buyer’s name so Are 100% domestically and privately Steps to check encumbrances, obtain clearancethat the buyer can use the property for owned. certificates, prepare deed and transfer title so that the property can be occupied, sold or usedexpanding its business, use the property Have 50 employees each, all of whom as collateralas collateral in taking new loans or, if are nationals.necessary, sell the property to another Perform general commercial (10,000 square feet) is located on thebusiness. The process starts with obtain- activities. land. The warehouse is 10 years old, ising the necessary documents, such as a in good condition and complies withcopy of the seller’s title if necessary, and ASSUMPTIONS ABOUT THE PROPERTY all safety standards, building codesconducting due diligence if required. The The property: and other legal requirements. Thetransaction is considered complete when Has a value of 50 times income per property of land and building will beit is opposable to third parties and when capita. The sale price equals the value. transferred in its entirety.the buyer can use the property, use it as Is fully owned by the seller. Will not be subject to renovationscollateral for a bank loan or resell it. The Has no mortgages attached and has or additional building following theranking on the ease of registering prop- been under the same ownership for purchase.erty is the simple average of the percen- the past 10 years. Has no trees, natural water sources,tile rankings on its component indicators Is registered in the land registry or natural reserves or historical(figure 14.3). cadastre, or both, and is free of title monuments of any kind. Every procedure required by law disputes. Will not be used for special purposes,or necessary in practice is included, Is located in a periurban commercial and no special permits, such as forwhether it is the responsibility of the zone, and no rezoning is required. residential use, industrial plants,seller or the buyer or must be completed Consists of land and a building. The waste storage or certain types ofby a third party on their behalf. Local land area is 557.4 square meters agricultural activities, are required.property lawyers, notaries and property (6,000 square feet). A 2-story Has no occupants (legal or illegal),registries provide information on pro- warehouse of 929 square meters and no other party holds a legal interest in it.TABLE 14.5What do the registering property indicators measure? PROCEDURES Procedures to legally transfer title on immovable property (number) A procedure is defined as any interaction Preregistration (for example, checking for liens, notarizing sales agreement, paying property transfer taxes) of the buyer or the seller, their agents Registration in the economy’s largest business city (if an agent is legally or in practice Postregistration (for example, transactions with the local authority, tax authority or cadastre) required) or the property with exter- Time required to complete each procedure (calendar days) nal parties, including government agen- cies, inspectors, notaries and lawyers. Does not include time spent gathering information Interactions between company officers Each procedure starts on a separate day and employees are not considered. All Procedure completed once final document is received procedures that are legally or in prac- No prior contact with officials tice required for registering property Cost required to complete each procedure (% of property value) are recorded, even if they may be Official costs only, no bribes avoided in exceptional cases (table 14.5). No value added or capital gains taxes included It is assumed that the buyer follows theSource: Doing Business database. fastest legal option available and used
68. DATA NOTES 63by the majority of property owners. Al- FIGURE 14.4 ing third parties and consulting publicthough the buyer may use lawyers or Getting credit: collateral rules and credit sources. The survey data are confirmedother professionals where necessary in information through teleconference calls or on-site Rankings are based on 2 subindicatorsthe registration process, it is assumed visits in all economies.that it does not employ an outside fa- Regulations on 62.5% nonpossessory Strength 33% of STRENGTH OF LEGAL RIGHTS INDEXcilitator in the registration process unless security interests 33% legal rights indexlegally or in practice required to do so. in movable (0–10) The strength of legal rights index mea- property sures the degree to which collateral and 37.5%TIME 33% bankruptcy laws protect the rights of Depth of creditTime is recorded in calendar days. The information index borrowers and lenders and thus facilitate (0–6)measure captures the median duration lending (table 14.6). Two case scenarios, Scope, quality and accessibilitythat property lawyers, notaries or reg- of credit information through public case A and case B, are used to determineistry officials indicate is necessary to and private credit registries the scope of the secured transactionscomplete a procedure. It is assumed that Note: Private bureau coverage and public registry coverage system, involving a secured borrower, are measured but do not count for the rankings.the minimum time required for each the company ABC, and a secured lender,procedure is 1 day. Although procedures BizBank. In certain economies the legalmay take place simultaneously, they can- framework on secured transactionsnot start on the same day. It is assumed GETTING CREDIT means that only case A or case B canthat the buyer does not waste time and apply (not both). Both cases examine thecommits to completing each remaining Doing Business measures the legal rights same set of legal restrictions on the use ofprocedure without delay. If a procedure of borrowers and lenders with respect to movable collateral.can be accelerated for an additional cost, secured transactions through one set of Several assumptions about the securedthe fastest legal procedure available and indicators and the sharing of credit infor- borrower and lender are used:used by the majority of property owners mation through another. The first set of ABC is a domestic, limited liabilityis chosen. If procedures can be under- indicators describes how well collateral company.taken simultaneously, it is assumed that and bankruptcy laws facilitate lending. ABC has its headquarters and onlythey are. It is assumed that the parties The second set measures the coverage, base of operations in the economy’sinvolved are aware of all regulations and scope and accessibility of credit infor- largest business city.their sequence from the beginning. Time mation available through public credit To fund its business expansion plans,spent on gathering information is not registries and private credit bureaus. The ABC obtains a loan from BizBank forconsidered. ranking on the ease of getting credit an amount up to 10 times income per is the simple average of the percentile capita in local currency.COST rankings on its component indicatorsCost is recorded as a percentage of the (figure 14.4). TABLE 14.6property value, assumed to be equiva- The data on the legal rights of bor- What do the getting credit indicators measure?lent to 50 times income per capita. Only rowers and lenders are gathered throughofficial costs required by law are re- a survey of financial lawyers and verified Strength of legal rights index (0–10)corded, including fees, transfer taxes, through analysis of laws and regulations Protection of rights of borrowers and lendersstamp duties and any other payment to as well as public sources of information through collateral lawsthe property registry, notaries, public on collateral and bankruptcy laws. The Protection of secured creditors’ rights through bankruptcy lawsagencies or lawyers. Other taxes, such as data on credit information sharing arecapital gains tax or value added tax, are built in 2 stages. First, banking super- Depth of credit information index (0–6)excluded from the cost measure. Both vision authorities and public informa- Scope and accessibility of credit informationcosts borne by the buyer and those borne tion sources are surveyed to confirm the distributed by public credit registries and privateby the seller are included. If cost esti- presence of a public credit registry or credit bureausmates differ among sources, the median private credit bureau. Second, when ap- Public credit registry coverage (% of adults)reported value is used. plicable, a detailed survey on the public Number of individuals and firms listed in public credit registry’s or private credit bureau’s credit registry as percentage of adult populationThe data details on registering property structure, laws and associated rules is Private credit bureau coverage (% of adults)can be found for each economy at http:// administered to the entity itself. Survey Number of individuals and firms listed in larg-www.doingbusiness.org by selecting the responses are verified through several est private credit bureau as percentage of adulteconomy in the drop-down list. rounds of follow-up communication population with respondents as well as by contact- Source: Doing Business database.
69. 64 DOING BUSINESS IN THE ARAB WORLD 2011 Both ABC and BizBank are 100% A general description of debts amount of defaults and bankruptcies) domestically owned. and obligations is permitted in are distributed. The case scenarios also involve the collateral agreements and in Data on both firms and individualsassumptions. In case A, as collateral for registration documents: all types of are distributed.the loan, ABC grants BizBank a non- debts and obligations can be secured Data from retailers and utilitypossessory security interest in one cat- between the parties, and the collateral companies as well as financialegory of movable assets, for example, agreement can include a maximum institutions are distributed.its accounts receivable or its inventory. amount for which the assets are More than 2 years of historical dataABC wants to keep both possession and encumbered. are distributed. Credit registries andownership of the collateral. In economies A collateral registry or registration bureaus that erase data on defaults asin which the law does not allow non- institution is in operation, unified soon as they are repaid obtain a scorepossessory security interests in movable geographically and by asset type, with of 0 for this indicator.property, ABC and BizBank use a fidu- an electronic database indexed by Data on loan amounts below 1% ofciary transfer-of-title arrangement (or a debtors’ names. income per capita are distributed.similar substitute for nonpossessory se- Secured creditors are paid first (for Note that a credit registry or bureaucurity interests). example, before general tax claims must have a minimum coverage of 1% In case B, ABC grants BizBank a and employee claims) when a debtor of the adult population to score a 1 onbusiness charge, enterprise charge, float- defaults outside an insolvency this indicator.ing charge or any charge that gives Bi- procedure. By law, borrowers have the right tozBank a security interest over ABC’s Secured creditors are paid first (for access their data in the largest creditcombined movable assets (or as much of example, before general tax claims registry or bureau in the economy.ABC’s movable assets as possible). ABC and employee claims) when a The index ranges from 0 to 6, withkeeps ownership and possession of the business is liquidated. higher values indicating the availabilityassets. Secured creditors are not subject to of more credit information, from either The strength of legal rights index an automatic stay or moratorium a public credit registry or a private creditincludes 8 aspects related to legal rights on enforcement procedures when bureau, to facilitate lending decisions. Ifin collateral law and 2 aspects in bank- a debtor enters a court-supervised the credit registry or bureau is not opera-ruptcy law. A score of 1 is assigned for reorganization procedure. tional or has a coverage of less than 0.1%each of the following features of the The law allows parties to agree in a of the adult population, the score on thelaws: collateral agreement that the lender depth of credit information index is 0. may enforce its security right out of In Lithuania, for example, both a Any business may use movable assets court. public credit registry and a private credit as collateral while keeping possession The index ranges from 0 to 10, with bureau operate. Both distribute posi- of the assets, and any financial higher scores indicating that collateral tive and negative information (a score institution may accept such assets as and bankruptcy laws are better designed of 1). Both distribute data on firms and collateral. to expand access to credit. individuals (a score of 1). Although the The law allows a business to grant public credit registry does not distrib- a nonpossessory security right in DEPTH OF CREDIT ute data from retailers or utilities, the INFORMATION INDEX a single category of movable assets private credit bureau does do so (a score (such as accounts receivable or The depth of credit information index of 1). Although the private credit bureau inventory), without requiring a measures rules and practices affecting does not distribute more than 2 years of specific description of the collateral. the coverage, scope and accessibility of historical data, the public credit registry The law allows a business to grant credit information available through ei- does do so (a score of 1). Although the a nonpossessory security right ther a public credit registry or a private public credit registry has a threshold of in substantially all its movable credit bureau. A score of 1 is assigned 50,000 litai, the private credit bureau assets, without requiring a specific for each of the following 6 features of the distributes data on loans of any value (a description of the collateral. public credit registry or private credit score of 1). Borrowers have the right to A security right may extend to future bureau (or both): access their data in both the public credit or after-acquired assets and may Both positive credit information (for registry and the private credit bureau (a extend automatically to the products, example, outstanding loan amounts score of 1). Summing across the indica- proceeds or replacements of the and pattern of on-time repayments) tors gives Lithuania a total score of 6. original assets. and negative information (for example, late payments, number and
70. DATA NOTES 65FIGURE 14.5 tates the exchange of credit information Has a board of directors and aProtecting investors: minority shareholder among banks and financial institutions. chief executive officer (CEO) whorights in related-party transactionsRankings are based on 3 subindicators Credit investigative bureaus and credit may legally act on behalf of BuyerRequirements on approval Liability of CEO reporting firms that do not directly facili- where permitted, even if this is notand disclosure of and board of directors tate information exchange among banks specifically required by law.related-party in a related-partytransactions 33.3% transaction and other financial institutions are not Is a food manufacturer. 33.3% Extent considered. If no private bureau operates, Has its own distribution network. Extent of of director disclosure liability the coverage value is 0. index index ASSUMPTIONS ABOUT The data details on getting credit can be THE TRANSACTION 33.3% Ease of shareholder found for each economy at http://www. Mr. James is Buyer’s controlling suits index doingbusiness.org by selecting the econ- shareholder and a member of Buyer’s Type of evidence that can be collected omy in the drop-down list. This method- board of directors. He owns 60% before and during the trial ology was developed in Djankov, McLiesh of Buyer and elected 2 directors to and Shleifer (2007) and is adopted here Buyer’s 5-member board. with minor changes. Mr. James also owns 90% of Seller,PUBLIC CREDIT REGISTRY COVERAGE a company that operates a chain ofThe public credit registry coverage indi- PROTECTING INVESTORS retail hardware stores. Seller recentlycator reports the number of individuals closed a large number of its stores.and firms listed in a public credit registry Doing Business measures the strength of Mr. James proposes that Buyerwith information on their borrowing his- minority shareholder protections against purchase Seller’s unused fleet oftory from the past 5 years. The number directors’ misuse of corporate assets for trucks to expand Buyer’s distributionis expressed as a percentage of the adult personal gain. The indicators distinguish of its food products, a proposal topopulation (the population age 15 and 3 dimensions of investor protections: which Buyer agrees. The price is equalabove in 2009 according to the World transparency of related-party transac- to 10% of Buyer’s assets and is higherBank’s World Development Indicators). tions (extent of disclosure index), liabil- than the market value.A public credit registry is defined as a ity for self-dealing (extent of director li- The proposed transaction is partdatabase managed by the public sec- ability index) and shareholders’ ability to of the company’s ordinary coursetor, usually by the central bank or the sue officers and directors for misconduct of business and is not outside thesuperintendent of banks, that collects (ease of shareholder suits index). The authority of the company.information on the creditworthiness data come from a survey of corporate Buyer enters into the transaction. Allof borrowers (individuals or firms) in and securities lawyers and are based on required approvals are obtained, andthe financial system and facilitates the securities regulations, company laws and all required disclosures made (that is,exchange of credit information among court rules of evidence. The ranking on the transaction is not fraudulent).banks and financial institutions. If no the strength of investor protection index The transaction causes damages topublic registry operates, the coverage is the simple average of the percentile Buyer. Shareholders sue Mr. Jamesvalue is 0. rankings on its component indicators and the other parties that approved (figure 14.5). the transaction.PRIVATE CREDIT BUREAU COVERAGE To make the data comparable acrossThe private credit bureau coverage indi- economies, several assumptions about the EXTENT OF DISCLOSURE INDEXcator reports the number of individuals business and the transaction are used. The extent of disclosure index has 5 com-and firms listed by a private credit bureau ponents (table 14.7):with information on their borrowing his- ASSUMPTIONS ABOUT THE BUSINESS What corporate body can providetory from the past 5 years. The number The business (Buyer): legally sufficient approval for theis expressed as a percentage of the adult Is a publicly traded corporation listed transaction. A score of 0 is assigned ifpopulation (the population age 15 and on the economy’s most important it is the CEO or the managing directorabove in 2009 according to the World stock exchange. If the number of alone; 1 if the board of directorsBank’s World Development Indicators). publicly traded companies listed or shareholders must vote and Mr.A private credit bureau is defined as a on that exchange is less than 10, or James is permitted to vote; 2 if theprivate firm or nonprofit organization if there is no stock exchange in the board of directors must vote and Mr.that maintains a database on the credit- economy, it is assumed that Buyer is James is not permitted to vote; 3 ifworthiness of borrowers (individuals or a large private company with multiplefirms) in the financial system and facili- shareholders.
71. 66 DOING BUSINESS IN THE ARAB WORLD 2011 shareholders must vote and Mr. James transaction before it takes place. A liable or can be held liable only for is not permitted to vote. score of 0 is assigned if no; 1 if yes. fraud or bad faith; 1 if Mr. James can Whether immediate disclosure of The index ranges from 0 to 10, with be held liable only if he influenced the transaction to the public, the higher values indicating greater disclo- the approval of the transaction or regulator or the shareholders is sure. In Poland, for example, the board was negligent; 2 if Mr. James can required.6 A score of 0 is assigned of directors must approve the transaction be held liable when the transaction if no disclosure is required; 1 if and Mr. James is not allowed to vote (a is unfair or prejudicial to the other disclosure on the terms of the score of 2). Buyer is required to disclose shareholders. transaction is required but not on immediately all information affecting the Whether a shareholder plaintiff is Mr. James’s conflict of interest; 2 if stock price, including the conflict of in- able to hold the approving body (the disclosure on both the terms and Mr. terest (a score of 2). In its annual report CEO or board of directors) liable for James’s conflict of interest is required. Buyer must also disclose the terms of the the damage the transaction causes to Whether disclosure in the annual transaction and Mr. James’s ownership the company. A score of 0 is assigned report is required. A score of 0 is in Buyer and Seller (a score of 2). Before if the approving body cannot be held assigned if no disclosure on the the transaction Mr. James must disclose liable or can be held liable only for transaction is required; 1 if disclosure his conflict of interest to the other direc- fraud or bad faith; 1 if the approving on the terms of the transaction is tors, but he is not required to provide body can be held liable for negligence; required but not on Mr. James’s specific information about it (a score of 2 if the approving body can be conflict of interest; 2 if disclosure 1). Poland does not require an external held liable when the transaction is on both the terms and Mr. James’s body to review the transaction (a score of unfair or prejudicial to the other conflict of interest is required. 0). Adding these numbers gives Poland shareholders. Whether disclosure by Mr. James to a score of 7 on the extent of disclosure Whether a court can void the the board of directors is required. A index. transaction upon a successful claim score of 0 is assigned if no disclosure by a shareholder plaintiff. A score of 0 is required; 1 if a general disclosure of EXTENT OF DIRECTOR is assigned if rescission is unavailable LIABILITY INDEX the existence of a conflict of interest or is available only in case of fraud or is required without any specifics; 2 The extent of director liability index has bad faith; 1 if rescission is available if full disclosure of all material facts 7 components:7 when the transaction is oppressive or relating to Mr. James’s interest in the Whether a shareholder plaintiff is prejudicial to the other shareholders; Buyer-Seller transaction is required. able to hold Mr. James liable for 2 if rescission is available when the Whether it is required that an damage the Buyer-Seller transaction transaction is unfair or entails a external body, for example, an causes to the company. A score of 0 is conflict of interest. external auditor, review the assigned if Mr. James cannot be held Whether Mr. James pays damages for the harm caused to the companyTABLE 14.7 upon a successful claim by theWhat do the protecting investorsindicators measure? shareholder plaintiff. A score of 0 is assigned if no; 1 if yes. Extent of disclosure index (0–10) Whether Mr. James repays profits Who can approve related-party transactions made from the transaction upon a Requirements for external and internal disclosure in case of related-party transactions successful claim by the shareholder Extent of director liability index (0–10) plaintiff. A score of 0 is assigned if no; Ability of shareholders to hold the interested party and the approving body liable in case of a prejudicial 1 if yes. related-party transaction Whether both fines and Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission of the trans- imprisonment can be applied against action) Mr. James. A score of 0 is assigned if Ability of shareholders to sue directly or derivatively no; 1 if yes. Ease of shareholder suits index (0–10) Whether shareholder plaintiffs are Documents and information available during trial able to sue directly or derivatively for Access to internal corporate documents (directly and/or through a government inspector) the damage the transaction causes to the company. A score of 0 is assigned Strength of investor protection index (0–10) if suits are unavailable or are available Simple average of the extent of disclosure, extent of director liability and ease of shareholder suits indices only for shareholders holding moreSource: Doing Business database. than 10% of the company’s share
72. DATA NOTES 67 capital; 1 if direct or derivative suits each document specifically. A score of STRENGTH OF INVESTOR PROTECTION INDEX are available for shareholders holding 0 is assigned if no; 1 if yes. 10% or less of share capital. Whether shareholders owning 10% The strength of investor protection index The index ranges from 0 to 10, with or less of the company’s share capital is the average of the extent of disclosurehigher values indicating greater liability can request that a government index, the extent of director liabilityof directors. Assuming that the prejudi- inspector investigate the Buyer-Seller index and the ease of shareholder suitscial transaction was duly approved and transaction without filing suit in index. The index ranges from 0 to 10,disclosed, in order to hold Mr. James court. A score of 0 is assigned if no; with higher values indicating more in-liable in Panama, for example, a plaintiff 1 if yes. vestor protection.must prove that Mr. James influenced Whether shareholders owningthe approving body or acted negligently 10% or less of the company’s share The data details on protecting investors(a score of 1). To hold the other direc- capital have the right to inspect the can be found for each economy at http://tors liable, a plaintiff must prove that transaction documents before filing www.doingbusiness.org by selecting thethey acted negligently (a score of 1). The suit. A score of 0 is assigned if no; 1 economy in the drop-down list. Thisprejudicial transaction cannot be voided if yes. methodology was developed in Djankov,(a score of 0). If Mr. James is found li- Whether the standard of proof for La Porta, López-de-Silanes and Shleiferable, he must pay damages (a score of civil suits is lower than that for a (2008).1) but he is not required to disgorge his criminal case. A score of 0 is assignedprofits (a score of 0). Mr. James cannot if no; 1 if yes. PAYING TAXESbe fined and imprisoned (a score of 0). The index ranges from 0 to 10, withDirect or derivative suits are available higher values indicating greater powers Doing Business records the taxes andfor shareholders holding 10% or less of of shareholders to challenge the transac- mandatory contributions that a medium-share capital (a score of 1). Adding these tion. In Greece, for example, the plaintiff size company must pay in a given year asnumbers gives Panama a score of 4 on can access documents that the defendant well as measures of the administrativethe extent of director liability index. intends to rely on for his defense and that burden of paying taxes and contribu- directly prove facts in the plaintiff ’s claim tions. The project was developed andEASE OF SHAREHOLDER SUITS INDEX (a score of 2). The plaintiff can examine implemented in cooperation with Price-The ease of shareholder suits index has 6 the defendant and witnesses during trial, waterhouseCoopers. Taxes and contribu-components: though only with prior approval of the tions measured include the profit or cor- What range of documents is available questions by the court (a score of 1). The porate income tax, social contributions to the shareholder plaintiff from the plaintiff must specifically identify the and labor taxes paid by the employer, defendant and witnesses during trial. documents being sought (for example, property taxes, property transfer taxes, A score of 1 is assigned for each of the Buyer-Seller purchase agreement of dividend tax, capital gains tax, financial the following types of documents July 15, 2006) and cannot just request transactions tax, waste collection taxes, available: information that the categories (for example, all documents vehicle and road taxes and any other defendant has indicated he intends to related to the transaction) (a score of small taxes or fees. The ranking on the rely on for his defense; information 0). A shareholder holding 5% of Buyer’s ease of paying taxes is the simple average that directly proves specific facts in shares can request that a government of the percentile rankings on its compo- the plaintiff ’s claim; any information inspector review suspected mismanage- FIGURE 14.6 relevant to the subject matter of ment by Mr. James and the CEO without Paying taxes: tax compliance for a local the claim; and any information that filing suit in court (a score of 1). Any manufacturing company may lead to the discovery of relevant shareholder can inspect the transaction Rankings are based on 3 subindicators information. documents before deciding whether to Number of hours Firm tax liability per year to prepare, as % of profits before Whether the plaintiff can directly sue (a score of 1). The standard of proof file returns all taxes borne examine the defendant and witnesses for civil suits is the same as that for a and pay taxes during trial. A score of 0 is assigned criminal case (a score of 0). Adding these 33.3% 33.3% if no; 1 if yes, with prior approval of numbers gives Greece a score of 5 on the Time Total the questions by the judge; 2 if yes, ease of shareholder suits index. tax rate without prior approval. 33.3% Whether the plaintiff can obtain Payments categories of relevant documents from the defendant without identifying Number of tax payments per year
73. 68 DOING BUSINESS IN THE ARAB WORLD 2011nent indicators (figure 14.6). as well as time taken to comply with tax expenses are considered fringe ben- Doing Business measures all taxes laws in an economy. To make the data efits. When applicable, it is assumedand contributions that are government comparable across economies, several that the company pays the fringemandated (at any level—federal, state or assumptions about the business and the benefit tax on this expense or that thelocal) and that apply to the standardized taxes and contributions are used. benefit becomes taxable income forbusiness and have an impact in its finan- the employee. The case study assumescial statements. In doing so, Doing Busi- ASSUMPTIONS ABOUT THE BUSINESS no additional salary additions forness goes beyond the traditional defini- The business: meals, transportation, education ortion of a tax. As defined for the purposes Is a limited liability, taxable company. others. Therefore, even when suchof government national accounts, taxes If there is more than one type of benefits are frequent, they are notinclude only compulsory, unrequited limited liability company in the added to or removed from the taxablepayments to general government. Doing economy, the limited liability form gross salaries to arrive at the labor taxBusiness departs from this definition be- most popular among domestic firms or contribution calculation.cause it measures imposed charges that is chosen. The most popular form is Has a turnover of 1,050 times incomeaffect business accounts, not government reported by incorporation lawyers or per capita.accounts. The main differences relate the statistical office. Makes a loss in the first year ofto labor contributions. The Doing Busi- Started operations on January 1, 2008. operation.ness measure includes government-man- At that time the company purchased Has a gross margin (pretax) of 20%dated contributions paid by the employer all the assets shown in its balance (that is, sales are 120% of the cost ofto a requited private pension fund or sheet and hired all its workers. goods sold).workers’ insurance fund. The indicator Operates in the economy’s largest Distributes 50% of its net profits asincludes, for example, Australia’s com- business city. dividends to the owners at the end ofpulsory superannuation guarantee and Is 100% domestically owned and has the second year.workers’ compensation insurance. For 5 owners, all of whom are natural Sells one of its plots of land at a profitthe purpose of calculating the total tax persons. at the beginning of the second year.rate (defined below), only taxes borne At the end of 2008, has a start-up Has annual fuel costs for its trucksare included. For example, value added capital of 102 times income per equal to twice income per capita.taxes are generally excluded (provided capita. Is subject to a series of detailedthey are not irrecoverable) because they Performs general industrial or assumptions on expenses anddo not affect the accounting profits of commercial activities. Specifically, it transactions to further standardizethe business—that is, they are not re- produces ceramic flowerpots and sells the case. All financial statementflected in the income statement. They them at retail. It does not participate variables are proportional to 2005are, however, included for the purpose in foreign trade (no import or export) income per capita. For example, theof the compliance measures (time and and does not handle products subject owner who is also a manager spendspayments), as they add to the burden of to a special tax regime, for example, 10% of income per capita on travelingcomplying with the tax system. liquor or tobacco. for the company (20% of this owner’s Doing Business uses a case scenario At the beginning of 2009, owns 2 expenses are purely private, 20% areto measure the taxes and contributions plots of land, 1 building, machinery, for entertaining customers and 60%paid by a standardized business and the office equipment, computers and 1 for business travel).complexity of an economy’s tax compli- truck and leases 1 truck.ance system. This case scenario uses a Does not qualify for investment ASSUMPTIONS ABOUT THE TAXES AND CONTRIBUTIONSset of financial statements and assump- incentives or any benefits apart fromtions about transactions made over the those related to the age or size of the All the taxes and contributionsyear. In each economy tax experts from company. recorded are those paid in thea number of different firms (in many Has 60 employees—4 managers, 8 second year of operation (calendareconomies these include Pricewater- assistants and 48 workers. All are year 2009). A tax or contribution ishouseCoopers) compute the taxes and nationals, and 1 manager is also an considered distinct if it has a differentmandatory contributions due in their ju- owner. The company pays for addi- name or is collected by a differentrisdiction based on the standardized case tional medical insurance for employ- agency. Taxes and contributionsstudy facts. Information is also compiled ees (not mandated by any law) as with the same name and agency, buton the frequency of filing and payments an additional benefit. In addition, in charged at different rates depending some economies reimbursable busi- on the business, are counted as the ness travel and client entertainment same tax or contribution.
74. DATA NOTES 69 The number of times the company once a year even if filings and payments work is not enough to fulfill the tax ac- pays taxes and contributions in are more frequent. For payments made counting requirements. Filing time in- a year is the number of different through third parties, such as tax on cludes the time to complete all necessary taxes or contributions multiplied interest paid by a financial institution or tax return forms and file the relevant by the frequency of payment (or fuel tax paid by a fuel distributor, only returns at the tax authority. Payment withholding) for each tax. The one payment is included even if pay- time considers the hours needed to make frequency of payment includes ments are more frequent. the payment online or at the tax authori- advance payments (or withholding) Where 2 or more taxes or contribu- ties. Where taxes and contributions are as well as regular payments (or tions are filed for and paid jointly using paid in person, the time includes delays withholding). the same form, each of these joint pay- while waiting. ments is counted once. For example, ifTAX PAYMENTS mandatory health insurance contribu- TOTAL TAX RATEThe tax payments indicator reflects the tions and mandatory pension contribu- The total tax rate measures the amounttotal number of taxes and contributions tions are filed for and paid together, of taxes and mandatory contributionspaid, the method of payment, the fre- only one of these contributions would be borne by the business in the second yearquency of payment, the frequency of fil- included in the number of payments. of operation, expressed as a share ofing and the number of agencies involved commercial profit. Doing Business 2011for this standardized case study company TIME reports the total tax rate for calendarduring the second year of operation (table Time is recorded in hours per year. The year 2009. The total amount of taxes14.8). It includes consumption taxes paid indicator measures the time taken to pre- borne is the sum of all the differentby the company, such as sales tax or value pare, file and pay 3 major types of taxes taxes and contributions payable afteradded tax. These taxes are traditionally col- and contributions: the corporate income accounting for allowable deductions andlected from the consumer on behalf of the tax, value added or sales tax and labor exemptions. The taxes withheld (such astax agencies. Although they do not affect taxes, including payroll taxes and social personal income tax) or collected by thethe income statements of the company, contributions. Preparation time includes company and remitted to the tax authori-they add to the administrative burden of the time to collect all information neces- ties (such as value added tax, sales taxcomplying with the tax system and so are sary to compute the tax payable and to or goods and service tax) but not borneincluded in the tax payments measure. calculate the amount payable. If sepa- by the company are excluded. The taxes The number of payments takes into rate accounting books must be kept for included can be divided into 5 categories:account electronic filing. Where full elec- tax purposes—or separate calculations profit or corporate income tax, socialtronic filing and payment is allowed and made—the time associated with these contributions and labor taxes paid by theit is used by the majority of medium-size processes is included. This extra time is employer (in respect of which all manda-businesses, the tax is counted as paid included only if the regular accounting tory contributions are included, even ifTABLE 14.8 paid to a private entity such as a requitedWhat do the paying taxes indicators measure? pension fund), property taxes, turnover Tax payments for a manufacturing company in 2009 (number per year adjusted for electronic or taxes and other taxes (such as municipal joint filing and payment) fees and vehicle and fuel taxes). Total number of taxes and contributions paid, including consumption taxes (value added tax, sales tax The total tax rate is designed to pro- or goods and service tax) vide a comprehensive measure of the cost Method and frequency of filing and payment of all the taxes a business bears. It differs Time required to comply with 3 major taxes (hours per year) from the statutory tax rate, which merely provides the factor to be applied to the Collecting information and computing the tax payable tax base. In computing the total tax rate, Completing tax return forms, filing with proper agencies the actual tax payable is divided by com- Arranging payment or withholding mercial profit. Data for Sweden illustrate Preparing separate tax accounting books, if required (table 14.9). Total tax rate (% of profit) Commercial profit is essentially net Profit or corporate income tax profit before all taxes borne. It differs Social contributions and labor taxes paid by the employer from the conventional profit before tax, Property and property transfer taxes reported in financial statements. In com- Dividend, capital gains and financial transactions taxes puting profit before tax, many of the Waste collection, vehicle, road and other taxes taxes borne by a firm are deductible.Source: Doing Business database. In computing commercial profit, these
75. 70 DOING BUSINESS IN THE ARAB WORLD 2011TABLE 14.9Computing the total tax rate for Sweden Statutory rate Statutory tax base Actual tax payable Commercial profit1 Total tax rate (r) (b) (a) (c) (t) a=rxb t = a/cType of tax (tax base) SKr SKr SKrCorporate income tax (taxable income) 28% 10,330,966 2,892,670 17,619,223 16.4%Real estate tax (land and buildings) 0.38% 26,103,545 97,888 17,619,223 0.6%Payroll tax (taxable wages) 32.42% 19,880,222 6,445,168 17,619,223 36.6%Fuel tax (fuel price) SKr 4.16 per liter 45,565 liters 189,550 17,619,223 1.1% TOTAL 9,625,276 54.6%1. Profit before all taxes borne.Note: SKr is Swedish kronor. Commercial profit is assumed to be 59.4 times income per capita.Source: Doing Business database.taxes are not deductible. Commercial instrument and the collection of pilot Local freight forwarders, shippingprofit therefore presents a clear picture data on the labor tax wedge for further lines, customs brokers, port officials andof the actual profit of a business before research. banks provide information on requiredany of the taxes it bears in the course of documents and cost as well as the timethe fiscal year. The data details on paying taxes can be to complete each procedure. To make Commercial profit is computed as found for each economy at http://www. the data comparable across economies,sales minus cost of goods sold, minus doingbusiness.org by selecting the econ- several assumptions about the businessgross salaries, minus administrative ex- omy in the drop-down list. This methodol- and the traded goods are used.penses, minus other expenses, minus ogy was developed in Djankov and othersprovisions, plus capital gains (from the (2010). ASSUMPTIONS ABOUT THE BUSINESSproperty sale) minus interest expense, The business:plus interest income and minus com- TRADING ACROSS BORDERS Has at least 60 employees.mercial depreciation. To compute the Is located in the economy’s largestcommercial depreciation, a straight-line Doing Business compiles procedural re- business city.depreciation method is applied, with the quirements for exporting and importing Is a private, limited liability company.following rates: 0% for the land, 5% for a standardized cargo of goods by ocean It does not operate in an exportthe building, 10% for the machinery, transport. Every official procedure for processing zone or an industrial33% for the computers, 20% for the of- exporting and importing the goods is re- estate with special export or importfice equipment, 20% for the truck and corded—from the contractual agreement privileges.10% for business development expenses. between the 2 parties to the delivery of Is domestically owned with no foreignCommercial profit amounts to 59.4 times goods—along with the time and cost ownership.income per capita. necessary for completion. All documents Exports more than 10% of its sales. The methodology for calculating the needed by the trader to export or importtotal tax rate is broadly consistent with the goods across the border are also re-the Total Tax Contribution framework corded. For exporting goods, procedures FIGURE 14.7developed by PricewaterhouseCoopers range from packing the goods at the Trading across borders: exporting andand the calculation within this frame- warehouse to their departure from the importing by ocean transportwork for taxes borne. But while the work port of exit. For importing goods, proce- Rankings are based on 3 subindicators All documents required Document preparation,undertaken by PricewaterhouseCoopers dures range from the vessel’s arrival at the by customs and customs clearance andis usually based on data received from port of entry to the cargo’s delivery at the other agencies technical control, port and terminal handling,the largest companies in the economy, warehouse. The time and cost for ocean inland transport 33.3% 33.3% and handlingDoing Business focuses on a case study transport are not included. Payment is Documents Time tofor standardized medium-size company. made by letter of credit, and the time, cost to export export and import and import The methodology for the paying and documents required for the issuancetaxes indicators has further benefited or advising of a letter of credit are taken 33.3% Cost to exportfrom discussion with members of the into account. The ranking on the ease and importInternational Tax Dialogue, which led of trading across borders is the simpleto a refinement of the questions on the average of the percentile rankings on its US$ per 20-foot container, no bribes or tariffs includedtime to pay taxes indicator in the survey component indicators (figure 14.7).
76. DATA NOTES 71ASSUMPTIONS ABOUT THE TRADED curing of a letter of credit are also taken ENFORCING CONTRACTSGOODS into account. Documents that are re-The traded product travels in a dry- newed annually and that do not require Indicators on enforcing contracts mea-cargo, 20-foot, full container load. It renewal per shipment (for example, an sure the efficiency of the judicial systemweighs 10 tons and is valued at $20,000. annual tax clearance certificate) are not in resolving a commercial dispute. TheThe product: included. data are built by following the step- Is not hazardous nor does it include by-step evolution of a commercial sale military items. TIME dispute before local courts. The data are Does not require refrigeration or any The time for exporting and importing collected through study of the codes of other special environment. is recorded in calendar days. The time civil procedure and other court regula- Does not require any special calculation for a procedure starts from tions as well as surveys completed by phytosanitary or environmental the moment it is initiated and runs until local litigation lawyers and by judges. safety standards other than accepted it is completed. If a procedure can be The ranking on the ease of enforcing international standards. accelerated for an additional cost and contracts is the simple average of the Is one of the economy’s leading export is available to all trading companies, percentile rankings on its component or import products. the fastest legal procedure is chosen. indicators (figure 14.8). Fast-track procedures applying to firms The name of the relevant court inDOCUMENTS located in an export processing zone are each economy—the court in the larg-All documents required per shipment not taken into account because they are est business city with jurisdiction overto export and import the goods are re- not available to all trading companies. commercial cases worth 200% of in-corded (table 14.10). It is assumed that Ocean transport time is not included. It come per capita—is published at http://the contract has already been agreed is assumed that neither the exporter nor www.doingbusiness.org/ExploreTopics/upon and signed by both parties. Docu- the importer wastes time and that each EnforcingContracts/.ments required for clearance by gov- commits to completing each remainingernment ministries, customs authorities, procedure without delay. Procedures that ASSUMPTIONS ABOUT THE CASEport and container terminal authorities, can be completed in parallel are mea- The value of the claim equals 200% ofhealth and technical control agencies and sured as simultaneous. The waiting time the economy’s income per capita.banks are taken into account. Since pay- between procedures—for example, dur- The dispute concerns a lawfulment is by letter of credit, all documents ing unloading of the cargo—is included transaction between 2 businessesrequired by banks for the issuance or se- in the measure. (Seller and Buyer), located in theTABLE 14.10 economy’s largest business city.What do the trading across borders COST Seller sells goods worth 200% of theindicators measure? Cost measures the fees levied on a 20- economy’s income per capita to Buyer. Documents required to export and import foot container in U.S. dollars. All the fees After Seller delivers the goods to Buyer, (number) associated with completing the proce- Buyer refuses to pay for the goods on Bank documents dures to export or import the goods are the grounds that the delivered goods Customs clearance documents included. These include costs for docu- were not of adequate quality. Port and terminal handling documents ments, administrative fees for customs Transport documents clearance and technical control, customs Time required to export and import (days) FIGURE 14.8 broker fees, terminal handling charges Enforcing contracts: resolving a Obtaining all the documents and inland transport. The cost does not commercial dispute through the courts Inland transport and handling include customs tariffs and duties or Rankings are based on 3 subindicators Customs clearance and inspections costs related to ocean transport. Only Days to resolve Attorney, court and commercial sale dispute enforcement costs Port and terminal handling official costs are recorded. before the court as % of claim value Does not include ocean transport time Cost required to export and import The data details on trading across bor- 33.3% 33.3% (US$ per container) ders can be found for each economy at Time Cost All documentation http://www.doingbusiness.org by selecting Inland transport and handling the economy in the drop-down list. This 33.3% Customs clearance and inspections methodology was developed in Djankov, Procedures Port and terminal handling Freund and Pham (2010) and is adopted Official costs only, no bribes here with minor changes. Steps to file claim, obtain judgment and enforce itSource: Doing Business database.
77. 72 DOING BUSINESS IN THE ARAB WORLD 2011 Seller (the plaintiff) sues Buyer (the record procedures that exist in civil law TABLE 14.11 What do the enforcing contracts defendant) to recover the amount but not common law jurisdictions and indicators measure? under the sales agreement (that is, vice versa. For example, in civil law Procedures to enforce a contract (number) 200% of the economy’s income per countries the judge can appoint an in- Any interaction between the parties in a capita). Buyer opposes Seller’s claim, dependent expert, while in common law commercial dispute, or between them and saying that the quality of the goods is countries each party submits a list of the judge or court officer not adequate. The claim is disputed expert witnesses to the court. To indicate Steps to file the case on the merits. overall efficiency, 1 procedure is sub- Steps for trial and judgment A court in the economy’s largest tracted from the total number for econo- Steps to enforce the judgment business city with jurisdiction over mies that have specialized commercial Time required to complete procedures commercial cases worth 200% of courts, and 1 procedure for economies (calendar days) income per capita decides the dispute. that allow electronic filing of court cases. Time to file and serve the case Seller attaches Buyer’s movable assets Some procedural steps that take place Time for trial and obtaining judgment (for example, office equipment and simultaneously with or are included in Time to enforce the judgment vehicles) before obtaining a judgment other procedural steps are not counted in Cost required to complete procedures because Seller fears that Buyer may the total number of procedures. (% of claim) become insolvent. No bribes An expert opinion is given on the TIME Average attorney fees quality of the delivered goods. If it Time is recorded in calendar days, Court costs, including expert fees is standard practice in the economy counted from the moment the plaintiff Enforcement costs for each party to call its own expert decides to file the lawsuit in court until Source: Doing Business database. witness, the parties each call one payment. This includes both the days expert witness. If it is standard when actions take place and the waiting practice for the judge to appoint an periods between. The average duration The data details on enforcing contracts independent expert, the judge does of different stages of dispute resolution can be found for each economy at http:// so. In this case the judge does not is recorded: the completion of service of www.doingbusiness.org by selecting the allow opposing expert testimony. process (time to file and serve the case), economy in the drop-down list. This meth- The judgment is 100% in favor of the issuance of judgment (time for the odology was developed in Djankov and Seller: the judge decides that the trial and obtaining the judgment) and others (2003) and is adopted here with goods are of adequate quality and that the moment of payment (time for en- minor changes. Buyer must pay the agreed price. forcement of judgment). Buyer does not appeal the judgment. CLOSING A BUSINESS The judgment becomes final. COST Seller takes all required steps for Cost is recorded as a percentage of the Doing Business studies the time, cost prompt enforcement of the judgment. claim, assumed to be equivalent to 200% and outcome of insolvency proceedings The money is successfully collected of income per capita. No bribes are re- involving domestic entities. The data are through a public sale of Buyer’s corded. Three types of costs are recorded: derived from survey responses by local movable assets (for example, office court costs, enforcement costs and aver- insolvency practitioners and verified equipment and vehicles). age attorney fees. through a study of laws and regula- Court costs include all court costs tions as well as public information onPROCEDURES and expert fees that Seller (plaintiff) bankruptcy systems. The ranking on theThe list of procedural steps compiled for must advance to the court, regardless ease of closing a business is based on theeach economy traces the chronology of a of the final cost to Seller. Expert fees, recovery rate (figure 14.9).commercial dispute before the relevant if required by law or commonly used To make the data comparable acrosscourt. A procedure is defined as any in- in practice, are included in court costs. economies, several assumptions aboutteraction, required by law or commonly Enforcement costs are all costs that Seller the business and the case are used.used in practice, between the parties or (plaintiff) must advance to enforce thebetween them and the judge or court of- judgment through a public sale of Buyer’s ASSUMPTIONS ABOUT THE BUSINESSficer. This includes steps to file and serve movable assets, regardless of the final The business:the case, steps for trial and judgment and cost to Seller. Average attorney fees are Is a limited liability company.steps necessary to enforce the judgment the fees that Seller (plaintiff) must ad- Operates in the economy’s largest(table 14.11). vance to a local attorney to represent business city. The survey allows respondents to Seller in the standardized case.
78. DATA NOTES 73 TABLE 14.12FIGURE 14.9Closing a business: time, cost and outcome the bank interest or principal in full, due What do the closing a business indicators measure?of bankruptcy of a local company the next day, January 2. The business willRankings are based on 1 subindicator Time required to recover debt (years) therefore default on its loan. Manage-Recovery rate is a function of time, cost and other factors Measured in calendar yearssuch as lending rate and the likelihood ment believes that losses will be incurredof the company in 2010 and 2011 as well. Appeals and requests for extension are includedcontinuingto operate The amount outstanding under the Cost required to recover debt (% of debtor’s estate) loan agreement is exactly equal to the 100% Measured as percentage of estate value market value of the hotel business and Recovery Court fees rate represents 74% of the company’s total Fees of insolvency administrators debt. The other 26% of its debt is held by Lawyers’ fees unsecured creditors (suppliers, employ- Assessors’ and auctioneers’ fees ees, tax authorities).Note: Time and cost do not count separately for the ranking. The company has too many credi- Recovery rate for creditors (cents on the dollar) tors to negotiate an informal out-of- Measures the cents on the dollar recovered Is 100% domestically owned, with the court workout. The following options by creditors founder, who is also the chairman of are available: a judicial procedure aimed Present value of debt recovered the supervisory board, owning 51% at the rehabilitation or reorganization Official costs of the insolvency proceedings are (no other shareholder holds more deducted of the company to permit its continued Depreciation of furniture is taken into account than 5% of shares). operation; a judicial procedure aimed Outcome for the business (survival or not) affects Has downtown real estate, where it at the liquidation or winding-up of the the maximum value that can be recovered runs a hotel, as its major asset. The company; or a debt enforcement or fore- Source: Doing Business database. hotel is valued at 100 times income closure procedure against the company, per capita or $200,000, whichever is enforced either in court (or through extension, are taken into consideration. larger. another government authority) or out Has a professional general manager. of court (for example, by appointing a COST Has 201 employees and 50 suppliers, receiver). The cost of the proceedings is recorded each of which is owed money for the as a percentage of the value of the debt- last delivery. ASSUMPTIONS ABOUT THE PARTIES or’s estate. The cost is calculated on the Has a 10-year loan agreement with a The bank wants to recover as much basis of survey responses and includes domestic bank secured by a universal as possible of its loan, as quickly and court fees and government levies; fees business charge (for example, a cheaply as possible. The unsecured credi- of insolvency administrators, auction- floating charge) in economies where tors will do everything permitted under eers, assessors and lawyers; and all other such collateral is recognized or by the applicable laws to avoid a piecemeal fees and costs. Respondents provide cost the hotel property. If the laws of the sale of the assets. The majority share- estimates from among the following op- economy do not specifically provide holder wants to keep the company oper- tions: less than 2%, 2–5%, 5–8%, 8–11%, for a universal business charge but ating and under its control. Management 11–18%, 18–25%, 25–33%, 33–50%, contracts commonly use some other wants to keep the company operating 50–75% and more than 75% of the value provision to that effect, this provision and preserve their jobs. All the parties of the estate. is specified in the loan agreement. are local entities or citizens; no foreign Has observed the payment schedule parties are involved. OUTCOME and all other conditions of the loan Recovery by creditors depends on up to now. TIME whether the hotel business emerges from Has a mortgage, with the value of Time for creditors to recover their credit the proceedings as a going concern or the mortgage principal being exactly is recorded in calendar years (table the company’s assets are sold piecemeal. equal to the market value of the hotel. 14.12). The period of time measured by If the business keeps operating, no value Doing Business is from the company’s is lost and the bank can satisfy its claimASSUMPTIONS ABOUT THE CASE default until the payment of some or all in full, or recover 100 cents on the dol-The business is experiencing liquidity of the money owed to the bank. Potential lar. If the assets are sold piecemeal, theproblems. The company’s loss in 2009 re- delay tactics by the parties, such as the maximum amount that can be recoveredduced its net worth to a negative figure. It filing of dilatory appeals or requests for will not exceed 70% of the bank’s claim,is January 1, 2010. There is no cash to pay which translates into 70 cents on the dollar.
79. 74 DOING BUSINESS IN THE ARAB WORLD 2011RECOVERY RATE NOT IN THE EASE OF DOING the warehouse and the electricity con-The recovery rate is recorded as cents on BUSINESS RANKING nection are used.the dollar recouped by creditors throughreorganization, liquidation or debt en- Two indicator sets are not included in ASSUMPTIONS ABOUT THE WAREHOUSEforcement (foreclosure) proceedings. this year’s aggregate ranking on the easeThe calculation takes into account the of doing business: the getting electricity The warehouse:outcome: whether the business emerges indicators, a pilot data set, and the em- Is owned by a local entrepreneur.from the proceedings as a going con- ploying workers indicators, for which the Is located in the economy’s largestcern or the assets are sold piecemeal. methodology is being refined. business city.Then the costs of the proceedings are Is located within the city’s officialdeducted (1 cent for each percentage GETTING ELECTRICITY limits and in an area in whichpoint of the value of the debtor’s estate). other warehouses are located (aFinally, the value lost as a result of the Doing Business records all procedures nonresidential area).time the money remains tied up in insol- required for a business to obtain a per- Is not located in a special economic orvency proceedings is taken into account, manent electricity connection and sup- investment zone; that is, the electricityincluding the loss of value due to depre- ply for a standardized warehouse. These connection is not eligible for subsidi-ciation of the hotel furniture. Consistent procedures include applications and con- zation or faster service under a specialwith international accounting practice, tracts with electricity utilities, all neces- investment promotion regime. If sev-the annual depreciation rate for furni- sary clearances from other agencies and eral options for location are available,ture is taken to be 20%. The furniture is the external and final connection works the warehouse is located where elec-assumed to account for a quarter of the (table 14.13). tricity is most easily available.total value of assets. The recovery rate is Data are collected from the electric- Has road access. The connectionthe present value of the remaining pro- ity distribution utility, then completed works involve the crossing of a roadceeds, based on end-2009 lending rates and verified by electricity regulatory or roads (for excavation, overheadfrom the International Monetary Fund’s agencies and independent professionals lines and the like), but they are allInternational Financial Statistics, sup- such as electrical engineers, electrical carried out on public land; that is,plemented with data from central banks contractors and construction companies. there is no crossing into other privateand the Economist Intelligence Unit. The electricity distribution utility sur- property. veyed is the one serving the area (or Is located in an area with no physicalNO PRACTICE areas) in which warehouses are located. constraints. For example, the propertyIf an economy has had fewer than 5 cases If there is a choice of distribution utili- is not near a railway.a year over the past 5 years involving ties, the one serving the largest number Is used for storage of refrigerateda judicial reorganization, judicial liqui- of customers is selected. goods.dation or debt enforcement procedure To make the data comparable across Is a new construction (that is, there(foreclosure), the economy receives a economies, several assumptions about was no previous construction on the“no practice” ranking. This means thatcreditors are unlikely to recover their TABLE 14.13money through a formal legal process (in What do the getting electricity indicators measure?or out of court). The recovery rate for “no Procedures to obtain an electricity connection (number)practice” economies is zero. Submitting all relevant documents and obtaining all necessary clearances and permits Completing all required notifications and receiving all necessary inspectionsThis methodology was developed in Obtaining external installation works and possibly purchasing any needed materialDjankov, Hart, McLiesh and Shleifer Concluding any necessary supply contract and obtaining final supply(2008) and is adopted here with minor Time required to complete each procedure (calendar days)changes. Is at least 1 calendar day Each procedure starts on a separate day Does not include time spent gathering information Reflects the time spent in practice, with little follow-up and no prior contact with officials Cost required to complete each procedure (% of income per capita) Official costs only, no bribes Excludes value added tax Source: Doing Business database.
80. DATA NOTES 75 land where it is located). It is being sumed to complete all procedures them- and specific regulations and fee schedules connected to electricity for the first selves unless the use of a third party are used as sources for costs. If several time. is mandated (for example, if only an local partners provide different estimates, Has 2 stories, both above ground, electrician registered with the utility is the median reported value is used. In all with a total surface of approximately allowed to submit an application). If the cases the cost excludes bribes. 1,300.6 square meters (14,000 square company can, but is not required to, re- feet). The plot of land on which it is quest the services of professionals (such SECURITY DEPOSIT built is 929 square meters (10,000 as a private firm rather than the utility Utilities require security deposits as a square feet). for the external works), these procedures guarantee against the possible failure are recorded if they are commonly done. of customers to pay their consumptionASSUMPTIONS ABOUT THE For all procedures, only the most likely bills. For this reason the security depositELECTRICITY CONNECTION cases (for example, more than 50% of for a new customer is most often cal-The electricity connection: the time the utility has the material) and culated as a function of the customer’s Is a permanent one. those followed in practice for connecting estimated consumption. Is a 3-phase, 4-wire Y, 140-kVA a warehouse to electricity are counted. Doing Business does not record the (subscribed capacity) connection. full amount of the security deposit. In- Is a low-voltage connection 150 TIME stead, it records the present value of the meters long (unless a distribution Time is recorded in calendar days. The losses in interest earnings experienced transformer is installed on the measure captures the median duration by the customer because the utility holds customer’s property, in which case the that the electricity utility and experts the security deposit over a prolonged length of the low-voltage connection indicate is necessary in practice, rather period, in most cases until the end of the is 0).8 The connection is overhead than required by law, to complete a pro- contract (assumed to be after 5 years). or underground, whichever is more cedure with minimum follow-up and no In cases in which the security deposit is common in the economy and in extra payments. It is also assumed that used to cover the first monthly consump- the area in which the warehouse is the minimum time required for each tion bills, it is not recorded. To calculate located. The length in the customer’s procedure is 1 day. Although procedures the present value of the lost interest earn- private domain is negligible. may take place simultaneously, they can- ings, the end-2009 lending rates from Involves the installation of only not start on the same day (that is, simul- the International Monetary Fund’s Inter- one electricity meter. The monthly taneous procedures start on consecutive national Financial Statistics are used. electricity consumption will be 0.07 days). It is assumed that the company In cases in which the security deposit gigawatt-hour (GWh). does not waste time and commits to is returned with interest, the differenceThe internal electrical wiring has already completing each remaining procedure between the lending rate and the interestbeen completed. without delay. The time that the com- paid by the utility is used to calculate the pany spends on gathering information is present value.PROCEDURES ignored. It is assumed that the company In some economies the security de-A procedure is defined as any interac- is aware of all electricity connection re- posit can be put up in the form of a bond:tion of the company’s employees or its quirements and their sequence from the the company can obtain from a bank ormain electrician or electrical engineer beginning. an insurance company a guarantee issued(that is, the one who may have done the on the assets it holds with that financialinternal wiring) with external parties COST institution. In contrast to the scenariosuch as the electricity distribution utility, Cost is recorded as a percentage of the in which the customer pays the depositelectricity supply utilities, government economy’s income per capita. Costs are in cash to the utility, in this scenario theagencies, electrical contractors and elec- recorded exclusive of value added tax. All company does not lose ownership con-trical firms. Interactions between com- the fees and costs associated with com- trol over the full amount and can con-pany employees and steps related to the pleting the procedures to connect a ware- tinue using it. In return the company willinternal electrical wiring, such as the house to electricity are recorded, includ- pay the bank a commission for obtainingdesign and execution of the internal elec- ing those related to obtaining clearances the bond. The commission charged maytrical installation plans, are not counted from government agencies, applying for vary depending on the credit standingas procedures. Procedures that must be the connection, receiving inspections of of the company. The best possible creditcompleted with the same utility but with both the site and the internal wiring, standing and thus the lowest possibledifferent departments are counted as purchasing material, getting the actual commission are assumed. Where a bondseparate procedures. connection works and paying a security can be put up, the value recorded for the The company’s employees are as- deposit. Information from local experts deposit is the annual commission times
81. 76 DOING BUSINESS IN THE ARAB WORLD 2011the 5 years assumed to be the length of child labor and equitable treatment in of tenure, a worker with 5 years and athe contract. If both options exist, the employment practices. worker with 10 years is used rather thancheaper alternative is recorded. In 2009 additional changes were the value for a worker with 20 years of In Belize in June 2010 a customer made to the methodology for the em- tenure.requesting a 140-kVA electricity connec- ploying workers indicators. The data on employing workers aretion would have had to put up a security First, the standardized case study based on a detailed survey of employ-deposit of 22,662 Belize dollars in cash or was changed to refer to a small to me- ment regulations that is completed bycheck, and the deposit would be returned dium-size company with 60 employees local lawyers and public officials. Em-only at the end of the contract. The cus- rather than 201. Second, restrictions on ployment laws and regulations as well astomer could instead have invested this night and weekly holiday work are taken secondary sources are reviewed to ensuremoney at the prevailing lending rate of into account if they apply to manufac- accuracy. To make the data comparable14.05%. Over the 5 years of the contract turing activities in which continuous across economies, several assumptionsthis would imply a present value of lost operation is economically necessary. about the worker and the business areinterest earnings of BZ$10,918. In con- Third, legally mandated wage premiums used.trast, if the customer had been allowed to for work performed on the designatedsettle the deposit with a bank guarantee weekly holiday or for night work are ASSUMPTIONS ABOUT THE WORKERat an annual rate of 1.75%, the amount scored on the basis of a 4-tiered scale. The worker:lost over the 5 years would have been Fourth, economies that mandate 8 or Is a 42-year-old, nonexecutive, full-just BZ$1,983. fewer weeks of severance pay and do time, male employee. not offer unemployment protection do Earns a salary plus benefits equal toThe data details on getting electric- not receive the highest score. Finally, the economy’s average wage duringity can be found for each economy at the calculation of the minimum wage the entire period of his employment.http://www.doingbusiness.org. ratio was modified to ensure that an Has a pay period that is the most economy would not benefit in the scor- common for workers in the economy.EMPLOYING WORKERS ing from lowering the minimum wage to Is a lawful citizen who belongs to the below $1.25 a day, adjusted for purchas- same race and religion as the majorityDoing Business measures the regulation ing power parity. This level is consistent of the economy’s population.of employment, specifically as it affects with recent adjustments to the absolute Resides in the economy’s largestthe hiring and redundancy of workers poverty line. business city.and the rigidity of working hours. In 2007 This year further modifications Is not a member of a labor union,improvements were made to align the were made to the methodology based on unless membership is mandatory.methodology for the employing workers consultations with a consultative groupindicators with the International Labour of relevant stakeholders. For more infor- ASSUMPTIONS ABOUT THE BUSINESSOrganization (ILO) conventions. Only 4 mation on the consultation process, see The business:of the 188 ILO conventions cover areas the Doing Business website (http://www. Is a limited liability company.measured by Doing Business: employee doingbusiness.org). Changes agreed as of Operates in the economy’s largesttermination, weekend work, holiday the date of publication are the following: business city.with pay and night work. The Doing Busi- For the scoring of the minimum wage, Is 100% domestically owned.ness methodology is fully consistent with no economy can receive the highest score Operates in the manufacturing sector.these 4 conventions. It is possible for an if it has no minimum wage at all, if the Has 60 employees.economy to receive the best score on the law provides a regulatory mechanism for Is subject to collective bargainingease of employing workers and comply the minimum wage that is not enforced agreements in economies where suchwith all relevant ILO conventions (spe- in practice, if there is only a custom- agreements cover more than half thecifically, the 4 covering areas measured ary minimum wage or if the minimum manufacturing sector and apply evenby Doing Business)—and no economy wage applies only to the public sector. A to firms not party to them.can achieve a better score by failing to threshold was set for excessive flexibility Abides by every law and regulationcomply with these conventions. in the paid annual leave period and the but does not grant workers more The ILO conventions covering areas maximum number of working days per benefits than mandated by law,related to the employing workers indica- week. In addition, for the scoring of the regulation or (if applicable) collectivetors do not include the ILO core labor annual leave period for the rigidity of bargaining agreement.standards—8 conventions covering the hours index and the notice period andright to collective bargaining, the elimi- severance pay for the redundancy cost,nation of forced labor, the abolition of the average value for a worker with 1 year
82. DATA NOTES 77TABLE 14.14 there are restrictions on weekly holidayWhat do the employing workers indicators measure? work; (iii) whether the workweek can Difficulty of hiring index (0–100) consist of 5.5 days or is more than 6 Applicability and maximum duration of fixed-term contracts days; (iv) whether the workweek can Minimum wage for trainee or first-time employee extend to 50 hours or more (including overtime) for 2 months a year to respond Rigidity of hours index (0–100) to a seasonal increase in production; Restrictions on night work and weekend work and (v) whether the average paid annual Allowed maximum length of the workweek in days and hours, including overtime leave for a worker with 1 year of tenure, Paid annual vacation days a worker with 5 years and a worker Difficulty of redundancy index (0–100) with 10 years is more than 26 working Notification and approval requirements for termination of a redundant worker or group of redundant days or fewer than 15 working days. workers For questions (i) and (ii), if restrictions Obligation to reassign or retrain and priority rules for redundancy and reemployment other than premiums apply, a score of 1 Rigidity of employment index (0–100) is given. If the only restriction is a pre- mium for night work or weekly holiday Simple average of the difficulty of hiring, rigidity of hours and difficulty of redundancy indices work, a score of 0, 0.33, 0.66 or 1 is given, Redundancy cost (weeks of salary) depending on the quartile in which the Notice requirements, severance payments and penalties due when terminating a redundant worker, ex- economy’s premium falls. If there are pressed in weeks of salary no restrictions, the economy receives aSource: Doing Business database. score of 0. For question (iii) a score of 1 is assigned if the legally permitted work-RIGIDITY OF EMPLOYMENT INDEX ratio of less than 0.25. A score of 0 is also week is less than 5.5 days or more than 6The rigidity of employment index is the assigned if the minimum wage is set by days; otherwise a score of 0 is assigned.average of 3 subindices: a difficulty of a collective bargaining agreement that For question (iv), if the answer is "no", ahiring index, a rigidity of hours index applies to less than half the manufactur- score of 1 is assigned; otherwise a scoreand a difficulty of redundancy index ing sector or does not apply to firms not of 0 is assigned. For question (v) a score(table 14.14). All the subindices have party to it, or if the minimum wage is of 0 is assigned if the average paid annualseveral components. And all take values set by law but does not apply to workers leave is between 15 and 21 working days,between 0 and 100, with higher values who are in their apprentice period. A a score of 0.5 if it is between 22 and 26indicating more rigid regulation. ratio of 0.251 (and therefore a score of working days and a score of 1 if it is less The difficulty of hiring index mea- 0.33) is automatically assigned in 4 cases: than 15 or more than 26 working days.sures (i) whether fixed-term contracts if there is no minimum wage, if the law For example, Honduras imposes re-are prohibited for permanent tasks; (ii) provides a regulatory mechanism for the strictions on night work (a score of 1)the maximum cumulative duration of minimum wage that is not enforced in but not on weekly holiday work (a scorefixed-term contracts; and (iii) the ratio practice, if there is no minimum wage set of 0), allows 6-day workweeks (a scoreof the minimum wage for a trainee or by law but there is a wage amount that of 0), permits 50-hour workweeks for 2first-time employee to the average value is customarily used as a minimum or if months (a score of 0) and requires aver-added per worker.9 An economy is as- there is no minimum wage set by law in age paid annual leave of 16.7 workingsigned a score of 1 if fixed-term contracts the private sector but there is one in the days (a score of 0). Averaging the scoresare prohibited for permanent tasks and public sector. and scaling the result to 100 gives a finala score of 0 if they can be used for any In Benin, for example, fixed-term index of 20 for Honduras.task. A score of 1 is assigned if the maxi- contracts are not prohibited for perma- The difficulty of redundancy indexmum cumulative duration of fixed-term nent tasks (a score of 0), and they can be has 8 components: (i) whether redun-contracts is less than 3 years; 0.5 if it is 3 used for a maximum of 4 years (a score dancy is disallowed as a basis for ter-years or more but less than 5 years; and of 0.5). The ratio of the mandated mini- minating workers; (ii) whether the em-0 if fixed-term contracts can last 5 years mum wage to the value added per worker ployer needs to notify a third party (suchor more. Finally, a score of 1 is assigned is 0.58 (a score of 0.67). Averaging the 3 as a government agency) to terminateif the ratio of the minimum wage to the values and scaling the index to 100 gives 1 redundant worker; (iii) whether theaverage value added per worker is 0.75 Benin a score of 39. employer needs to notify a third party toor more; 0.67 for a ratio of 0.50 or more The rigidity of hours index has 5 terminate a group of 9 redundant work-but less than 0.75; 0.33 for a ratio of 0.25 components: (i) whether there are re- ers; (iv) whether the employer needsor more but less than 0.50; and 0 for a strictions on night work; (ii) whether approval from a third party to terminate
83. 78 DOING BUSINESS IN THE ARAB WORLD 20111 redundant worker; (v) whether the em- unemployment protection, a score of 8.1 ence between the highest and lowestployer needs approval from a third party weeks is assigned, although the actual observations. An alternative approach is to subtract from each value the meanto terminate a group of 9 redundant number of weeks is published. If the cost value within each indicator’s distributionworkers; (vi) whether the law requires adds up to more than 8 weeks of salary, and divide the result by the standardthe employer to reassign or retrain a the score is the number of weeks. One deviation within that same distribution.worker before making the worker redun- month is recorded as 4 and 1/3 weeks. The resulting statistic is what is widely referred to as the Z-score. The main pointdant; (vii) whether priority rules apply In Mauritania, for example, an em- of divergence between the normalizationfor redundancies; and (viii) whether ployer is required to give an average of approach chosen for the new measure andpriority rules apply for reemployment. 1 month’s notice before a redundancy the Z-score method is the reference pointFor question (i) an answer of “yes” for termination, and the average severance to which an economy’s improvement is benchmarked. In the first approach anworkers of any income level gives a score pay for a worker with 1 year of service, economy’s measure of improvement onof 10 and means that the rest of the ques- a worker with 5 years and a worker with a particular indicator is benchmarkedtions do not apply. An answer of “yes” to 10 years equals 1.42 months of wages. to the best and worst performance onquestion (iv) gives a score of 2. For every No penalty is levied. Altogether, the em- that indicator. In the second approach the reference point for benchmarking another question, if the answer is “yes,” a ployer pays the equivalent of 10.5 weeks economy’s performance is the average forscore of 1 is assigned; otherwise a score of salary to dismiss a worker. the other 182 economies in the sample.of 0 is given. Questions (i) and (iv), as the This means that an economy’s reformmost restrictive regulations, have greater The data details on employing workers efforts again are ultimately scored rela- tive to all other economies. Because theweight in the construction of the index. can be found for each economy at http:// new measure is aimed at moving away In Tunisia, for example, redundancy www.doingbusiness.org by selecting the from the relativeness of the ease of doingis allowed as grounds for termination (a economy in the drop-down list. This meth- business ranking to focus on absolutescore of 0). An employer has to both no- odology was developed in Botero and improvements within economies, the first approach was chosen.tify a third party (a score of 1) and obtain others (2004) and is adopted here with Given the alternatives available, a sensi-its approval (a score of 2) to terminate a changes. tivity analysis was carried out to see howsingle redundant worker, and has to both much the results would differ if a Z-scorenotify a third party (a score of 1) and were adopted instead. Using data fromobtain its approval (a score of 1) to termi- Doing Business 2009 and Doing Business 1. The data for paying taxes refer to 2010, the correlation coefficient of resultsnate a group of 9 redundant workers. The between the main approach used and thelaw mandates retraining or alternative January–December 2009. Z-score approach was computed. The re-placement before termination (a score of 2. These are available at http://www. sults show a strong degree of correlation doingbusiness.org/Subnational/. between the 2 approaches (correlation1). There are priority rules for termina- 3. The Doing Business website (http://www. coefficient of 0.81).tion (a score of 1) and reemployment (a doingbusiness.org) provides a comparable 5. See Djankov and others (2005).score of 1). Adding the scores and scaling time series of historical data for research, with a data set back-calculated to adjust 6. This question is usually regulated by stockto 100 gives a final index of 80. for changes in methodology and data re- exchange or securities laws. Points are visions due to corrections. awarded only to economies with moreREDUNDANCY COST than 10 listed firms in their most impor- For the terms of reference and composi- tant stock exchange.The redundancy cost indicator measures tion of the consultative group, see Worldthe cost of advance notice requirements, Bank, “Doing Business Employing Work- 7. When evaluating the regime of liabilityseverance payments and penalties due ers Indicator Consultative Group,” http:// for company directors for a prejudicial www.doingbusiness.org. related-party transaction, Doing Businesswhen terminating a redundant worker, assumes that the transaction was dulyexpressed in weeks of salary. The average 4. Changes in Doing Business indicators disclosed and approved. Doing Business follow very different increments. For does not measure director liability in thevalue of notice requirements and sever- example, the possible scores an economyance payments applicable to a worker event of fraud. can obtain on the protecting investors in-with 1 year of tenure, a worker with 5 dicators can range from 0 to 10, while the 8. The distance of the assumed electricity procedures, time and cost for, say, starting connection was increased from 10 metersyears and a worker with 10 years is used to what respondents considered to be a a business can potentially range from 1 toto assign the score. If the redundancy infinity. more realistic 150 meters. This changecost adds up to 8 or fewer weeks of sal- translated in some cases into a higher Because normalizing the scores in- cost or longer time (or both) for the con-ary and the workers can benefit from troduces an element of relativeness, a nection.unemployment protection, a score of 0 is normalization approach has been chosen that minimizes this element: scores are 9. The average value added per worker is theassigned, but the actual number of weeks ratio of an economy’s GNI per capita to normalized on a scale of 0–1 by subtract-is published. If the redundancy cost adds the working-age population as a percent- ing from each value the smallest changeup to 8 or fewer weeks of salary and the and dividing the result by the differ- age of the total population.workers cannot benefit from any type of
84. SUMMARIES OF DOING BUSINESS REFORMS 79Summaries Paying taxes SYRIAN ARAB REPUBLICof Doing Jordan abolished certain taxes and made Starting a business it possible to file income and sales tax Syria eased business start-up by reducingBusiness returns electronically. the minimum capital requirement for lim- ited liability companies by two-thirds. It LEBANON also decentralized approval of the companyreforms in Starting a business memorandum.2009/10 Lebanon increased the cost of starting a business. Getting credit Syria enhanced access to credit by Getting credit eliminating the minimum threshold for loans included in the database, which Lebanon improved its credit information expanded the coverage of individuals system by allowing banks online access to and firms to 2.2% of the adult population. the public credit registry’s reports. TUNISIA MOROCCODoing Business reforms affecting all sets of in- Paying taxesdicators included in this year’s ranking on the Protecting investors Tunisia introduced the use of electronicease of doing business, implemented between Morocco strengthened investor protectionsJune 2009 and May 2010. systems for payment of corporate income by requiring greater disclosure in compa- tax and value added tax. Doing Business reform making it easier to nies’ annual reports.do business Trading across borders Doing Business reform making it more dif- QATAR Tunisia upgraded its electronic dataficult to do business Starting a business interchange system for imports and Qatar made starting a business more exports, speeding up the assembly of BAHRAIN difficult by adding a procedure to register import documents. Registering property for taxes and obtain a company seal. UNITED ARAB EMIRATESBahrain made registering property moreburdensome by increasing the fees at the SAUDI ARABIA Getting creditSurvey and Land Registration Bureau. Dealing with construction permits The United Arab Emirates enhanced access Saudi Arabia made dealing with construction to credit by setting up a legal framework for Trading across borders the operation of the private credit bureau permits easier for the second year in a row byBahrain made it easier to trade by building and requiring that financial institutions introducing a new, streamlined process.a modern new port, improving the elec- share credit information.tronic data interchange system and intro- Getting credit Trading across bordersducing risk-based inspections. An amendment to Saudi Arabia’s commercial The United Arab Emirates streamlined lien law enhanced access to credit by making EGYPT, ARAB REP. secured lending more flexible and allowing document preparation and reduced the time to trade with the launch of Dubai Cus- Starting a business out-of-court enforcement in case of default. toms’ comprehensive new customs system,Egypt reduced the cost to start a business. Trading across borders Mirsal 2. Trading across borders Saudi Arabia reduced the time to import by launching a new container terminal at the WEST BANK AND GAZAEgypt made trading easier by introducing Jeddah Islamic Port. Starting a businessan electronic system for submitting exportand import documents. Closing a business West Bank and Gaza made starting a busi- ness more difficult by increasing the law- Saudi Arabia speeded up the insolvency JORDAN yers’ fees that must be paid for incorpora- process by providing earlier access to ami- tion. Getting credit cable settlements and putting time limitsJordan improved its credit information on the settlements to encourage creditors Trading across borderssystem by setting up a regulatory frame- to participate. More efficient processes at Palestinianwork for establishing a private credit customs made trading easier in the Westbureau as well as lowering the threshold Bank.for loans to be reported to the public creditregistry.
85. 80 DOING BUSINESS 2011Countrytables
86. COUNTRY TABLES 81ALGERIA Middle East & North Africa GNI per capita (US$) 4,420Ease of doing business (rank) 136 (AW) Upper middle income Population (m) 34.9Starting a business (rank) 150 (AW 15) Getting credit (rank) 138 (AW 11) Trading across borders (rank) 124 (AW 16)Procedures (number) 14 Strength of legal rights index (0-10) 3 Documents to export (number) 8Time (days) 24 Depth of credit information index (0-6) 2 Time to export (days) 17Cost (% of income per capita) 12.9 Public registry coverage (% of adults) 0.2 Cost to export (US$ per container) 1,248Minimum capital (% of income per capita) 34.4 Private bureau coverage (% of adults) 0.0 Documents to import (number) 9 Time to import (days) 23Dealing with construction permits (rank) 113 (AW 13) Protecting investors (rank) 74 (AW 5) Cost to import (US$ per container) 1,428Procedures (number) 22 Extent of disclosure index (0-10) 6Time (days) 240 Extent of director liability index (0-10) 6 Enforcing contracts (rank) 127 (AW 11)Cost (% of income per capita) 44.0 Ease of shareholder suits index (0-10) 4 Procedures (number) 46 Strength of investor protection index (0-10) 5.3 Time (days) 630Registering property (rank) 165 (AW 20) Cost (% of claim) 21.9Procedures (number) 11 Paying taxes (rank) 168 (AW 19)Time (days) 47 Payments (number per year) 34 Closing a business (rank) 51 (AW 4)Cost (% of property value) 7.1 Time (hours per year) 451 Time (years) 2.5 Total tax rate (% of profit) 72.0 Cost (% of estate) 7.0 Recovery rate (cents on the dollar) 41.7BAHRAIN Middle East & North Africa GNI per capita (US$) 19,455Ease of doing business (rank) 28 (AW 2) High income Population (m) 0.8Starting a business (rank) 78 (AW 7) Getting credit (rank) 89 (AW 4) Trading across borders (rank) 33 (AW 5)Procedures (number) 7 Strength of legal rights index (0-10) 4 Documents to export (number) 5Time (days) 9 Depth of credit information index (0-6) 4 Time to export (days) 11Cost (% of income per capita) 0.8 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 955Minimum capital (% of income per capita) 273.4 Private bureau coverage (% of adults) 35.9 Documents to import (number) 6 Time to import (days) 15Dealing with construction permits (rank) 17 (AW 2) Protecting investors (rank) 59 (AW 4) Cost to import (US$ per container) 995Procedures (number) 13 Extent of disclosure index (0-10) 8Time (days) 43 Extent of director liability index (0-10) 4 Enforcing contracts (rank) 117 (AW 9)Cost (% of income per capita) 78.3 Ease of shareholder suits index (0-10) 5 Procedures (number) 48 Strength of investor protection index (0-10) 5.7 Time (days) 635 Registering property (rank) 29 (AW 4) Cost (% of claim) 14.7Procedures (number) 2 Paying taxes (rank) 14 (AW 6)Time (days) 31 Payments (number per year) 25 Closing a business (rank) 26 (AW 1)Cost (% of property value) 2.7 Time (hours per year) 36 Time (years) 2.5 Total tax rate (% of profit) 15.0 Cost (% of estate) 10 Recovery rate (cents on the dollar) 64.2COMOROS Sub-Saharan Africa GNI per capita (US$) 870Ease of doing business (rank) 159 (AW 18) Low income Population (m) 0.7Starting a business (rank) 168 (AW 17) Getting credit (rank) 168 (AW 16) Trading across borders (rank) 135 (AW 17)Procedures (number) 11 Strength of legal rights index (0-10) 3 Documents to export (number) 10Time (days) 24 Depth of credit information index (0-6) 0 Time to export (days) 30Cost (% of income per capita) 176.5 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 1,073Minimum capital (% of income per capita) 245.5 Private bureau coverage (% of adults) 0.0 Documents to import (number) 10 Time to import (days) 21Dealing with construction permits (rank) 68 (AW 6) Protecting investors (rank) 132 (AW 15) Cost to import (US$ per container) 1,057Procedures (number) 18 Extent of disclosure index (0-10) 6Time (days) 164 Extent of director liability index (0-10) 1 Enforcing contracts (rank) 152 (AW 18)Cost (% of income per capita) 68.1 Ease of shareholder suits index (0-10) 5 Procedures (number) 43 Strength of investor protection index (0-10) 4.0 Time (days) 506Registering property (rank) 99 (AW 15) Cost (% of claim) 89.4Procedures (number) 5 Paying taxes (rank) 96 (AW 14)Time (days) 24 Payments (number per year) 20 Closing a business (rank) 183 (AW 20)Cost (% of property value) 20.8 Time (hours per year) 100 Time (years) No practice Total tax rate (% of profit) 217.9 Cost (% of estate) No practice Recovery rate (cents on the dollar) 0.0
87. 82 DOING BUSINESS IN THE ARAB WORLD 2011 Reforms making it easier to do business Reforms making it more difficult to do businessDJIBOUTI Middle East & North Africa GNI per capita (US$) 1,280Ease of doing business (rank) 158 (AW 17) Lower middle income Population (m) 0.9Starting a business (rank) 175 (AW 20) Getting credit (rank) 176 (AW 20) Trading across borders (rank) 38 (AW 6)Procedures (number) 11 Strength of legal rights index (0-10) 1 Documents to export (number) 5Time (days) 37 Depth of credit information index (0-6) 1 Time to export (days) 19Cost (% of income per capita) 169.9 Public registry coverage (% of adults) 0.2 Cost to export (US$ per container) 836Minimum capital (% of income per capita) 434.1 Private bureau coverage (% of adults) 0.0 Documents to import (number) 5 Time to import (days) 18Dealing with construction permits (rank) 125 (AW 14) Protecting investors (rank) 179 (AW 20) Cost to import (US$ per container) 911Procedures (number) 16 Extent of disclosure index (0-10) 5Time (days) 179 Extent of director liability index (0-10) 2 Enforcing contracts (rank) 160 (AW 19)Cost (% of income per capita) 1,862.8 Ease of shareholder suits index (0-10) 0 Procedures (number) 40 Strength of investor protection index (0-10) 2.3 Time (days) 1,225Registering property (rank) 140 (AW 19) Cost (% of claim) 34.0Procedures (number) 7 Paying taxes (rank) 60 (AW 12)Time (days) 40 Payments (number per year) 35 Closing a business (rank) 137 (AW 14)Cost (% of property value) 13.0 Time (hours per year) 90 Time (years) 5.0 Total tax rate (% of profit) 38.7 Cost (% of estate) 18 Recovery rate (cents on the dollar) 15.6EGYPT, ARAB REP. Middle East & North Africa GNI per capita (US$) 2,070Ease of doing business (rank) 94 (AW 8) Lower middle income Population (m) 83.0 Starting a business (rank) 18 (AW 2) Getting credit (rank) 72 (AW 2) Trading across borders (rank) 21 (AW 3)Procedures (number) 6 Strength of legal rights index (0-10) 3 Documents to export (number) 6Time (days) 7 Depth of credit information index (0-6) 6 Time to export (days) 12Cost (% of income per capita) 6.3 Public registry coverage (% of adults) 2.9 Cost to export (US$ per container) 613Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 10.3 Documents to import (number) 6 Time to import (days) 12Dealing with construction permits (rank) 154 (AW 19) Protecting investors (rank) 74 (AW 6) Cost to import (US$ per container) 698Procedures (number) 25 Extent of disclosure index (0-10) 8Time (days) 218 Extent of director liability index (0-10) 3 Enforcing contracts (rank) 143 (AW 16)Cost (% of income per capita) 293.7 Ease of shareholder suits index (0-10) 5 Procedures (number) 41 Strength of investor protection index (0-10) 5.3 Time (days) 1,010Registering property (rank) 93 (AW 13) Cost (% of claim) 26.2Procedures (number) 7 Paying taxes (rank) 136 (AW 17)Time (days) 72 Payments (number per year) 29 Closing a business (rank) 131 (AW 13)Cost (% of property value) 0.8 Time (hours per year) 433 Time (years) 4.2 Total tax rate (% of profit) 42.6 Cost (% of estate) 22 Recovery rate (cents on the dollar) 17.4IRAQ Middle East & North Africa GNI per capita (US$) 2,210Ease of doing business (rank) 166 (AW 20) Lower middle income Population (m) 31.5Starting a business (rank) 174 (AW 19) Getting credit (rank) 168 (AW 17) Trading across borders (rank) 179 (AW 20)Procedures (number) 11 Strength of legal rights index (0-10) 3 Documents to export (number) 10Time (days) 77 Depth of credit information index (0-6) 0 Time to export (days) 80Cost (% of income per capita) 107.8 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 3,550Minimum capital (% of income per capita) 43.6 Private bureau coverage (% of adults) 0.0 Documents to import (number) 10 Time to import (days) 83Dealing with construction permits (rank) 102 (AW 11) Protecting investors (rank) 120 (AW 12) Cost to import (US$ per container) 3,650Procedures (number) 14 Extent of disclosure index (0-10) 4Time (days) 215 Extent of director liability index (0-10) 5 Enforcing contracts (rank) 141 (AW 15)Cost (% of income per capita) 506.8 Ease of shareholder suits index (0-10) 4 Procedures (number) 51 Strength of investor protection index (0-10) 4.3 Time (days) 520Registering property (rank) 96 (AW 14) Cost (% of claim) 28.1Procedures (number) 5 Paying taxes (rank) 54 (AW 10)Time (days) 51 Payments (number per year) 13 Closing a business (rank) 183 (AW 20)Cost (% of property value) 6.4 Time (hours per year) 312 Time (years) No practice Total tax rate (% of profit) 28.4 Cost (% of estate) No practice Recovery rate (cents on the dollar) 0.0
88. COUNTRY TABLES 83JORDAN Middle East & North Africa GNI per capita (US$) 3,740Ease of doing business (rank) 111 (AW 10) Lower middle income Population (m) 6.0Starting a business (rank) 127 (AW 12) Getting credit (rank) 128 (AW 9) Trading across borders (rank) 77 (AW 8)Procedures (number) 8 Strength of legal rights index (0-10) 4 Documents to export (number) 7Time (days) 13 Depth of credit information index (0-6) 2 Time to export (days) 14Cost (% of income per capita) 44.6 Public registry coverage (% of adults) 1.5 Cost to export (US$ per container) 825Minimum capital (% of income per capita) 17.9 Private bureau coverage (% of adults) 0.0 Documents to import (number) 7 Time to import (days) 18Dealing with construction permits (rank) 92 (AW 9) Protecting investors (rank) 120 (AW 13) Cost to import (US$ per container) 1,335Procedures (number) 19 Extent of disclosure index (0-10) 5Time (days) 87 Extent of director liability index (0-10) 4 Enforcing contracts (rank) 129 (AW 12)Cost (% of income per capita) 634.1 Ease of shareholder suits index (0-10) 4 Procedures (number) 38 Strength of investor protection index (0-10) 4.3 Time (days) 689Registering property (rank) 106 (AW 16) Cost (% of claim) 31.2Procedures (number) 7 Paying taxes (rank) 29 (AW 8)Time (days) 21 Payments (number per year) 26 Closing a business (rank) 98 (AW 11)Cost (% of property value) 7.5 Time (hours per year) 101 Time (years) 4.3 Total tax rate (% of profit) 31.2 Cost (% of estate) 9 Recovery rate (cents on the dollar) 26.9KUWAIT Middle East & North Africa GNI per capita (US$) 31,482Ease of doing business (rank) 74 (AW 7) High income Population (m) 2.8Starting a business (rank) 141 (AW 14) Getting credit (rank) 89 (AW 5) Trading across borders (rank) 113 (AW 13)Procedures (number) 13 Strength of legal rights index (0-10) 4 Documents to export (number) 8Time (days) 35 Depth of credit information index (0-6) 4 Time to export (days) 17Cost (% of income per capita) 1.3 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 1,060Minimum capital (% of income per capita) 82.7 Private bureau coverage (% of adults) 29.6 Documents to import (number) 10 Time to import (days) 19Dealing with construction permits (rank) 91 (AW 8) Protecting investors (rank) 28 (AW 2) Cost to import (US$ per container) 1,217Procedures (number) 25 Extent of disclosure index (0-10) 7Time (days) 104 Extent of director liability index (0-10) 7 Enforcing contracts (rank) 114 (AW 8)Cost (% of income per capita) 173.4 Ease of shareholder suits index (0-10) 5 Procedures (number) 50 Strength of investor protection index (0-10) 6.3 Time (days) 566Registering property (rank) 90 (AW 12) Cost (% of claim) 18.8Procedures (number) 8 Paying taxes (rank) 9 (AW 5)Time (days) 55 Payments (number per year) 15 Closing a business (rank) 61 (AW 6)Cost (% of property value) 0.5 Time (hours per year) 118 Time (years) 4.2 Total tax rate (% of profit) 15.5 Cost (% of estate) 1 Recovery rate (cents on the dollar) 37.9LEBANON Middle East & North Africa GNI per capita (US$) 7,970Ease of doing business (rank) 113 (AW 11) Upper middle income Population (m) 4.2 Starting a business (rank) 103 (AW 9) Getting credit (rank) 89 (AW 6) Trading across borders (rank) 95 (AW 11)Procedures (number) 5 Strength of legal rights index (0-10) 3 Documents to export (number) 5Time (days) 9 Depth of credit information index (0-6) 5 Time to export (days) 26Cost (% of income per capita) 75.0 Public registry coverage (% of adults) 8.7 Cost to export (US$ per container) 1,000Minimum capital (% of income per capita) 39.8 Private bureau coverage (% of adults) 0.0 Documents to import (number) 7 Time to import (days) 35Dealing with construction permits (rank) 142 (AW 17) Protecting investors (rank) 93 (AW 8) Cost to import (US$ per container) 1,200Procedures (number) 21 Extent of disclosure index (0-10) 9Time (days) 218 Extent of director liability index (0-10) 1 Enforcing contracts (rank) 122 (AW 10)Cost (% of income per capita) 284.7 Ease of shareholder suits index (0-10) 5 Procedures (number) 37 Strength of investor protection index (0-10) 5.0 Time (days) 721Registering property (rank) 111 (AW 17) Cost (% of claim) 30.8Procedures (number) 8 Paying taxes (rank) 36 (AW 9)Time (days) 25 Payments (number per year) 19 Closing a business (rank) 122 (AW 12)Cost (% of property value) 5.8 Time (hours per year) 180 Time (years) 4.0 Total tax rate (% of profit) 30.2 Cost (% of estate) 22 Recovery rate (cents on the dollar) 19.8
89. 84 DOING BUSINESS IN THE ARAB WORLD 2011 Reforms making it easier to do business Reforms making it more difficult to do businessMAURITANIA Sub-Saharan Africa GNI per capita (US$) 960Ease of doing business (rank) 165 (AW 19) Low income Population (m) 3.3Starting a business (rank) 152 (AW 16) Getting credit (rank) 152 (AW 14) Trading across borders (rank) 163 (AW 19)Procedures (number) 9 Strength of legal rights index (0-10) 3 Documents to export (number) 11Time (days) 19 Depth of credit information index (0-6) 1 Time to export (days) 39Cost (% of income per capita) 33.6 Public registry coverage (% of adults) 0.1 Cost to export (US$ per container) 1,520Minimum capital (% of income per capita) 412.1 Private bureau coverage (% of adults) 0.0 Documents to import (number) 11 Time to import (days) 42Dealing with construction permits (rank) 153 (AW 18) Protecting investors (rank) 147 (AW 17) Cost to import (US$ per container) 1,523Procedures (number) 25 Extent of disclosure index (0-10) 5Time (days) 201 Extent of director liability index (0-10) 3 Enforcing contracts (rank) 83 (AW 3)Cost (% of income per capita) 463.2 Ease of shareholder suits index (0-10) 3 Procedures (number) 46 Strength of investor protection index (0-10) 3.7 Time (days) 370Registering property (rank) 73 (AW 9) Cost (% of claim) 23.2Procedures (number) 4 Paying taxes (rank) 172 (AW 20)Time (days) 49 Payments (number per year) 38 Closing a business (rank) 144 (AW 16)Cost (% of property value) 5.2 Time (hours per year) 696 Time (years) 8.0 Total tax rate (% of profit) 68.4 Cost (% of estate) 9 Recovery rate (cents on the dollar) 10.3MOROCCO Middle East & North Africa GNI per capita (US$) 2,790Ease of doing business (rank) 114 (AW 12) Lower middle income Population (m) 32.0Starting a business (rank) 82 (AW 8) Getting credit (rank) 89 (AW 7) Trading across borders (rank) 80 (AW 9)Procedures (number) 6 Strength of legal rights index (0-10) 3 Documents to export (number) 7Time (days) 12 Depth of credit information index (0-6) 5 Time to export (days) 14Cost (% of income per capita) 15.8 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 700Minimum capital (% of income per capita) 11.2 Private bureau coverage (% of adults) 9.9 Documents to import (number) 10 Time to import (days) 17Dealing with construction permits (rank) 98 (AW 10) Protecting investors (rank) 154 (AW 18) Cost to import (US$ per container) 1,000Procedures (number) 19 Extent of disclosure index (0-10) 7Time (days) 163 Extent of director liability index (0-10) 2 Enforcing contracts (rank) 106 (AW 7)Cost (% of income per capita) 251.5 Ease of shareholder suits index (0-10) 1 Procedures (number) 40 Strength of investor protection index (0-10) 3.3 Time (days) 615Registering property (rank) 124 (AW 18) Cost (% of claim) 25.2Procedures (number) 8 Paying taxes (rank) 124 (AW 16)Time (days) 47 Payments (number per year) 28 Closing a business (rank) 59 (AW 5)Cost (% of property value) 4.9 Time (hours per year) 358 Time (years) 1.8 Total tax rate (% of profit) 41.7 Cost (% of estate) 18 Recovery rate (cents on the dollar) 38.4OMAN Middle East & North Africa GNI per capita (US$) 18,013Ease of doing business (rank) 57 (AW 6) High income Population (m) 2.8Starting a business (rank) 76 (AW 6) Getting credit (rank) 128 (AW 10) Trading across borders (rank) 88 (AW 10)Procedures (number) 5 Strength of legal rights index (0-10) 4 Documents to export (number) 9Time (days) 12 Depth of credit information index (0-6) 2 Time to export (days) 14Cost (% of income per capita) 3.3 Public registry coverage (% of adults) 19.6 Cost to export (US$ per container) 766Minimum capital (% of income per capita) 288.4 Private bureau coverage (% of adults) 0.0 Documents to import (number) 9 Time to import (days) 17Dealing with construction permits (rank) 70 (AW 7) Protecting investors (rank) 93 (AW 9) Cost to import (US$ per container) 890Procedures (number) 15 Extent of disclosure index (0-10) 8Time (days) 186 Extent of director liability index (0-10) 5 Enforcing contracts (rank) 104 (AW 6)Cost (% of income per capita) 106.2 Ease of shareholder suits index (0-10) 2 Procedures (number) 51 Strength of investor protection index (0-10) 5.0 Time (days) 598Registering property (rank) 21 (AW 3) Cost (% of claim) 13.5Procedures (number) 2 Paying taxes (rank) 8 (AW 4)Time (days) 16 Payments (number per year) 14 Closing a business (rank) 72 (AW 8)Cost (% of property value) 3.0 Time (hours per year) 62 Time (years) 4.0 Total tax rate (% of profit) 21.6 Cost (% of estate) 4 Recovery rate (cents on the dollar) 34.9
90. COUNTRY TABLES 85QATAR Middle East & North Africa GNI per capita (US$) 68,872Ease of doing business (rank) 50 (AW 4) High income Population (m) 1.4 Starting a business (rank) 111 (AW10) Getting credit (rank) 138 (AW 12) Trading across borders (rank) 46 (AW 7)Procedures (number) 8 Strength of legal rights index (0-10) 3 Documents to export (number) 5Time (days) 12 Depth of credit information index (0-6) 2 Time to export (days) 21Cost (% of income per capita) 9.7 Public registry coverage (% of adults) 0.1 Cost to export (US$ per container) 735Minimum capital (% of income per capita) 79.8 Private bureau coverage (% of adults) 0.0 Documents to import (number) 7 Time to import (days) 20Dealing with construction permits (rank) 30 (AW 4) Protecting investors (rank) 93 (AW 10) Cost to import (US$ per container) 657Procedures (number) 19 Extent of disclosure index (0-10) 5Time (days) 76 Extent of director liability index (0-10) 6 Enforcing contracts (rank) 95 (AW 5)Cost (% of income per capita) 0.8 Ease of shareholder suits index (0-10) 4 Procedures (number) 43 Strength of investor protection index (0-10) 5.0 Time (days) 570Registering property (rank) 58 (AW 7) Cost (% of claim) 21.6Procedures (number) 10 Paying taxes (rank) 2 (AW 1)Time (days) 16 Payments (number per year) 3 Closing a business (rank) 36 (AW 2)Cost (% of property value) 0.3 Time (hours per year) 36 Time (years) 2.8 Total tax rate (% of profit) 11.3 Cost (% of estate) 22 Recovery rate (cents on the dollar) 53.0SAUDI ARABIA Middle East & North Africa GNI per capita (US$) 14,486Ease of doing business (rank) 11 (AW 1) High income Population (m) 25.4Starting a business (rank) 13 (AW 1) Getting credit (rank) 46 (AW 1) Trading across borders (rank) 18 (AW 2)Procedures (number) 4 Strength of legal rights index (0-10) 5 Documents to export (number) 5Time (days) 5 Depth of credit information index (0-6) 6 Time to export (days) 13Cost (% of income per capita) 7.0 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 580Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 18.0 Documents to import (number) 5 Time to import (days) 17 Dealing with construction permits (rank) 14 (AW 1) Protecting investors (rank) 16 (AW 1) Cost to import (US$ per container) 686Procedures (number) 12 Extent of disclosure index (0-10) 9Time (days) 89 Extent of director liability index (0-10) 8 Enforcing contracts (rank) 140 (AW 14)Cost (% of income per capita) 43.8 Ease of shareholder suits index (0-10) 4 Procedures (number) 43 Strength of investor protection index (0-10) 7.0 Time (days) 635Registering property (rank) 1 (AW 1) Cost (% of claim) 27.5Procedures (number) 2 Paying taxes (rank) 6 (AW 3)Time (days) 2 Payments (number per year) 14 Closing a business (rank) 65 (AW 7)Cost (% of property value) 0.0 Time (hours per year) 79 Time (years) 1.5 Total tax rate (% of profit) 14.5 Cost (% of estate) 22 Recovery rate (cents on the dollar) 36.8SUDAN Sub-Saharan Africa GNI per capita (US$) 1,230Ease of doing business (rank) 154 (AW 16) Lower middle income Population (m) 42.3Starting a business (rank) 121 (AW 11) Getting credit (rank) 138 (AW 13) Trading across borders (rank) 143 (AW 18)Procedures (number) 10 Strength of legal rights index (0-10) 5 Documents to export (number) 6Time (days) 36 Depth of credit information index (0-6) 0 Time to export (days) 32Cost (% of income per capita) 33.6 Public registry coverage (% of adults) 0.0 Cost to export (US$ per container) 2,050Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 0.0 Documents to import (number) 6 Time to import (days) 46Dealing with construction permits (rank) 139 (AW 16) Protecting investors (rank) 154 (AW 19) Cost to import (US$ per container) 2,900Procedures (number) 19 Extent of disclosure index (0-10) 0Time (days) 271 Extent of director liability index (0-10) 6 Enforcing contracts (rank) 146 (AW 17)Cost (% of income per capita) 192.2 Ease of shareholder suits index (0-10) 4 Procedures (number) 53 Strength of investor protection index (0-10) 3.3 Time (days) 810Registering property (rank) 40 (AW 5) Cost (% of claim) 19.8Procedures (number) 6 Paying taxes (rank) 94 (AW 13)Time (days) 9 Payments (number per year) 42 Closing a business (rank) 183 (AW 20)Cost (% of property value) 3.0 Time (hours per year) 180 Time (years) No practice Total tax rate (% of profit) 36.1 Cost (% of estate) No practice Recovery rate (cents on the dollar) 0.0
91. 86 DOING BUSINESS IN THE ARAB WORLD 2011 Reforms making it easier to do business Reforms making it more difficult to do businessSYRIAN ARAB REPUBLIC Middle East & North Africa GNI per capita (US$) 2,410Ease of doing business (rank) 144 (AW 15) Lower middle income Population (m) 21.1 Starting a business (rank) 134 (AW 13) Getting credit (rank) 168 (AW 18) Trading across borders (rank) 120 (AW 14)Procedures (number) 7 Strength of legal rights index (0-10) 1 Documents to export (number) 8Time (days) 13 Depth of credit information index (0-6) 2 Time to export (days) 15Cost (% of income per capita) 38.1 Public registry coverage (% of adults) 2.2 Cost to export (US$ per container) 1,190Minimum capital (% of income per capita) 355.1 Private bureau coverage (% of adults) 0.0 Documents to import (number) 9 Time to import (days) 21Dealing with construction permits (rank) 134 (AW 15) Protecting investors (rank) 109 (AW 11) Cost to import (US$ per container) 1,625Procedures (number) 26 Extent of disclosure index (0-10) 7Time (days) 128 Extent of director liability index (0-10) 5 Enforcing contracts (rank) 176 (AW 20)Cost (% of income per capita) 568.4 Ease of shareholder suits index (0-10) 2 Procedures (number) 55 Strength of investor protection index (0-10) 4.7 Time (days) 872Registering property (rank) 80 (AW 11) Cost (% of claim) 29.3Procedures (number) 4 Paying taxes (rank) 110 (AW 15)Time (days) 19 Payments (number per year) 20 Closing a business (rank) 95 (AW 10)Cost (% of property value) 27.9 Time (hours per year) 336 Time (years) 4.1 Total tax rate (% of profit) 42.9 Cost (% of estate) 9 Recovery rate (cents on the dollar) 27.4TUNISIA Middle East & North Africa GNI per capita (US$) 3,720Ease of doing business (rank) 55 (AW 5) Lower middle income Population (m) 10.4Starting a business (rank) 48 (AW 4) Getting credit (rank) 89 (AW 8) Trading across borders (rank) 30 (AW 4)Procedures (number) 10 Strength of legal rights index (0-10) 3 Documents to export (number) 4Time (days) 11 Depth of credit information index (0-6) 5 Time to export (days) 13Cost (% of income per capita) 5.0 Public registry coverage (% of adults) 22.9 Cost to export (US$ per container) 773Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 0.0 Documents to import (number) 7 Time to import (days) 17Dealing with construction permits (rank) 106 (AW12) Protecting investors (rank) 74 (AW 7) Cost to import (US$ per container) 858Procedures (number) 20 Extent of disclosure index (0-10) 5Time (days) 97 Extent of director liability index (0-10) 5 Enforcing contracts (rank) 78 (AW 2)Cost (% of income per capita) 858.7 Ease of shareholder suits index (0-10) 6 Procedures (number) 39 Strength of investor protection index (0-10) 5.3 Time (days) 565Registering property (rank) 64 (AW 8) Cost (% of claim) 21.8Procedures (number) 4 Paying taxes (rank) 58 (AW 11)Time (days) 39 Payments (number per year) 8 Closing a business (rank) 37 (AW 3)Cost (% of property value) 6.1 Time (hours per year) 144 Time (years) 1.3 Total tax rate (% of profit) 62.8 Cost (% of estate) 7 Recovery rate (cents on the dollar) 51.7UNITED ARAB EMIRATES Middle East & North Africa GNI per capita (US$) 46,857Ease of doing business (rank) 40 (AW 3) High income Population (m) 4.6Starting a business (rank) 46 (AW 3) Getting credit (rank) 72 (AW 3) Trading across borders (rank) 3 (AW 1)Procedures (number) 8 Strength of legal rights index (0-10) 4 Documents to export (number) 4Time (days) 15 Depth of credit information index (0-6) 5 Time to export (days) 7Cost (% of income per capita) 6.4 Public registry coverage (% of adults) 8.4 Cost to export (US$ per container) 521Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 17.7 Documents to import (number) 5 Time to import (days) 7Dealing with construction permits (rank) 26 (AW 3) Protecting investors (rank) 120 (AW 14) Cost to import (US$ per container) 542Procedures (number) 17 Extent of disclosure index (0-10) 4Time (days) 64 Extent of director liability index (0-10) 7 Enforcing contracts (rank) 134 (AW 13)Cost (% of income per capita) 35.8 Ease of shareholder suits index (0-10) 2 Procedures (number) 49 Strength of investor protection index (0-10) 4.3 Time (days) 537Registering property (rank) 4 (AW 2) Cost (% of claim) 26.2Procedures (number) 1 Paying taxes (rank) 5 (AW 2)Time (days) 2 Payments (number per year) 14 Closing a business (rank) 143 (AW 15)Cost (% of property value) 2.0 Time (hours per year) 12 Time (years) 5.1 Total tax rate (% of profit) 14.1 Cost (% of estate) 30 Recovery rate (cents on the dollar) 11.2
92. COUNTRY TABLES 87WEST BANK AND GAZA Middle East & North Africa GNI per capita (US$) 1,554Ease of doing business (rank) 135 (AW 13) Lower middle income Population (m) 4.0 Starting a business (rank) 173 (AW 18) Getting credit (rank) 168 (AW 19) Trading across borders (rank) 111 (AW 12)Procedures (number) 11 Strength of legal rights index (0-10) 0 Documents to export (number) 6Time (days) 49 Depth of credit information index (0-6) 3 Time to export (days) 23Cost (% of income per capita) 93.7 Public registry coverage (% of adults) 5.6 Cost to export (US$ per container) 1,310Minimum capital (% of income per capita) 211.3 Private bureau coverage (% of adults) 0.0 Documents to import (number) 6 Time to import (days) 40Dealing with construction permits (rank) 157 (AW 20) Protecting investors (rank) 44 (AW 3) Cost to import (US$ per container) 1,225Procedures (number) 21 Extent of disclosure index (0-10) 6Time (days) 199 Extent of director liability index (0-10) 5 Enforcing contracts (rank) 93 (AW 4)Cost (% of income per capita) 1,113.0 Ease of shareholder suits index (0-10) 7 Procedures (number) 44 Strength of investor protection index (0-10) 6.0 Time (days) 540Registering property (rank) 76 (AW 10) Cost (% of claim) 21.2Procedures (number) 7 Paying taxes (rank) 28 (AW 7)Time (days) 47 Payments (number per year) 27 Closing a business (rank) 183 (AW 20)Cost (% of property value) 0.7 Time (hours per year) 154 Time (years) No practice Total tax rate (% of profit) 16.8 Cost (% of estate) No practice Recovery rate (cents on the dollar) 0.0YEMEN, REP. Middle East & North Africa GNI per capita (US$) 1,060Ease of doing business (rank) 105 (AW 9) Lower middle income Population (m) 23.6Starting a business (rank) 57 (AW 5) Getting credit (rank) 152 (AW 15) Trading across borders (rank) 123 (AW 15)Procedures (number) 6 Strength of legal rights index (0-10) 2 Documents to export (number) 6Time (days) 12 Depth of credit information index (0-6) 2 Time to export (days) 27Cost (% of income per capita) 82.1 Public registry coverage (% of adults) 0.3 Cost to export (US$ per container) 1,129Minimum capital (% of income per capita) 0.0 Private bureau coverage (% of adults) 0.0 Documents to import (number) 9 Time to import (days) 25Dealing with construction permits (rank) 50 (AW 5) Protecting investors (rank) 132 (AW 16) Cost to import (US$ per container) 1,475Procedures (number) 15 Extent of disclosure index (0-10) 6Time (days) 107 Extent of director liability index (0-10) 4 Enforcing contracts (rank) 34 (AW 1)Cost (% of income per capita) 136.6 Ease of shareholder suits index (0-10) 2 Procedures (number) 36 Strength of investor protection index (0-10) 4.0 Time (days) 520Registering property (rank) 53 (AW 6) Cost (% of claim) 16.5Procedures (number) 6 Paying taxes (rank) 146 (AW 18)Time (days) 19 Payments (number per year) 44 Closing a business (rank) 90 (AW 9)Cost (% of property value) 3.8 Time (hours per year) 248 Time (years) 3.0 Total tax rate (% of profit) 47.8 Cost (% of estate) 8 Recovery rate (cents on the dollar) 28.6
93. 88 DOING BUSINESS IN THE ARAB WORLD 2010Acknowledgments Doing Business in the Arab World 2011 Ghannam. The events and road-show was prepared by a team led by Dahlia strategy is managed by Jamile Ramadan. Khalifa. The report was authored by All knowledge management and out- Maya Choueiri and Joanna Nasr. Doing reach activities are under the direction Business 2011 was prepared by a team led and guidance of Suzanne Smith. by Sylvia Solf, Penelope Brook (through The Doing Business team is grate-Contact details for local partners May 2010) and Neil Gregory (from June ful for valuable comments provided by 2010) under the general direction of Jan- colleagues across the World Bank Group are available on the Doing amitra Devan. The team comprised Svet- and for the guidance of World BankBusiness website at http://www. lana Bagaudinova, Jose Becerra Marta, Group Executive Directors. doingbusiness.org Karim O. Belayachi, Frederic Bustelo, Oliver Hart and Andrei Shleifer César Chaparro Yedro, Maya Choueiri, provided academic advice on the proj- Santiago Croci Downes, Karen Sarah ect. The paying taxes project was con- Cuttaree, Marie Delion, Allen Dennis, ducted in collaboration with Pricewater- Jacqueline den Otter, Raian Divanbeigi, houseCoopers, led by Robert Morris. The Alejandro Espinosa-Wang, Antonio development of the getting electricity Garcia Cueto, Carolin Geginat, Cemile indicators was financed by the Norwe- Hacibeyoglu, Betina Hennig, Sabine gian Trust Fund. Hertveldt, Mikiko Imai Ollison, Lud- Cintra Scott copyedited the manu- mila Januan, Nan Jiang, Palarp Jumpa- script. Gerry Quinn designed the re- sut, Dahlia Khalifa, Eugenia Levine, Jean port and the graphs. Alexandra Quinn Michel Lobet, Valerie Marechal, Andres provided desktopping services. Transla- Martinez, Frederic Meunier, Alexandra tion into Arabic and typesetting of the Mincu, Robert Murillo, Joanna Nasr, Ti- Arabic report have been implemented tilayo Oke, Oleksandr Olshanskyy, Dana by the GSDTI Arabic team. The report Omran, Caroline Otonglo, Yara Salem, was made possible by the generous con- Pilar Salgado-Otónel,Jayashree Srini- tributions of more than 8,200 lawyers, vasan, Susanne Szymanski, Tea Trumbic, accountants, judges, businesspeople and Marina Turlakova and Lior Ziv. Koichi public officials in 183 economies. Global Ito, Lizhi Liu, Junko Miyazaki, Janet Mor- and regional contributors are firms that ris, Di Wang and Bryan Welsh assisted in have completed multiple surveys in their the months prior to publication. various offices around the world. The following experts wrote the Quotations in this report are from boxes in the chapters specified: Murat Doing Business local partners unless oth- Sultanov (Getting credit) and Mahesh erwise indicated. The names of those Uttamchandani (Closing a business). wishing to be acknowledged individu- The online service of the Doing ally are listed below. Contact details are Business database is managed by Ramin posted on the Doing Business website at Aliyev, Preeti Endlaw, Felipe Iturralde http://www.doingbusiness.org. Escudero, Graeme Littler, Kunal H. Patel, Vinod Thottikkatu and Hashim Zia. The Doing Business 2011 report media and marketing strategy is managed by Nadine
94. ACKNOWLEDGMENTS 89G L OBA L C ON T R I BU TOR S Ebrahim Karolia Lantosoa Hurfin Ralaiarinosy Amr El Monayer PricewaterhouseCoopers Groupement Cosmezz Ministry of FinanceBaker & McKenzie Djibouti S.A. Elie Kassis Amina El OteifyKPMG Agility Logistics Aicha Youssouf Abdi Egyptian FinancialLex Mundi, Association of Independent Law Firms Cabinet CECA Supervisory Authority Mohammed Abdul Khaliq Tameer Mai El- ShaarawyPanalpina E G Y P T, A R A B R E P. Trowers & HamlinsPricewaterhouseCoopers Ming Huey Lim PricewaterhouseCoopers Abdel Aal Aly Emad El ShalakanyPricewaterhouseCoopers Legal Services Afifi World Transport Shalakany Law Office, Mohammed Mirza Abdul member of Lex MundiRussell Bedford International Hussain Naguib AbadirSDV International Logistics Ministry of Municipalities Nacita Corporation Khaled El Shalakany & Agriculture Affairs. Amal Abd El Razek Shalakany Law Office,R E G I ONA L C ON T R I BU TOR S Municipal One Stop Shop Egyptian Tax Authority member of Lex MundiA.P. Moller-Maersk Group Abdul-Haq Mohammed Sara Abdel Gabbar Passant El Tabei Trowers & Hamlins Trowers & Hamlins PricewaterhouseCoopersTalal Abu-Ghazaleh Legal (TAG-Legal) Hassan Ali Radhi Ibrahim Mustafa Ibrahim Soheir Elbanna Hassan Radhi & Associates Abdel Khalek Ibrachy Law FirmA L G E R IA Benabid Mohammed Tahar Kavi Rajesh General Authority for Karim Elhelaly Cabinet Mohammed Tahar Investment GAFIBranka Achari-Djokic Benabid Electrotech Al-Ahl Firm Mohamed Salahuddin Said Abdel Moniem Ashraf ElibrachyBanque d’Algerie Hassan Yassine Mohamed Salahuddin AAW Consulting Engineers Ibrachy Law FirmMohammed Salim Azzouz Thompson & Knight LLP Consulting Engineering Ahmed Abou AliDeramchi & Azzouz - Russell Nabiha Zerigui Bureau Mostafa ElshafeiBedford International Hassouna & Abou Ali Ibrachy Law Firm Cabinet d’Avocats Samir Thamer SalahuddinKhodja Bachir Hamouda correspondent of Gamal Abou Ali Hassan Fahmy PricewaterhouseCoopers Mohamed SalahuddinSNC Khodja & Co. Consulting Engineering Hassouna & Abou Ali Ministry of Investment Bureau Ghada AdelNabil Belloula BA H R A I N Ghada FaroukCabinet Belloula Esmond Hugh Stokes PricewaterhouseCoopers Shalakany Law Office, Khalid Abdulla Hatim S. Zu’bi & Partners Hazem Ahmed Fathi member of Lex MundiTayeb Belloula TameerCabinet Belloula Baiju Thomas Hassouna & Abou Ali Tarek Gadllah Najma AbdulRedha Hassan Agility Logistics Abd El Wahab Aly Ibrahim Ibrachy Law FirmSamir Benslimane Ministry of MunicipalitiesCabinet Benslimane Robin Watson Abd El Wahab Sons Emad Hassan & Agriculture Affairs. Municipal One Stop Shop The Benefit Company Sara Ammar Ministry of State forAdnane Bouchaib Administrative DevelopmentBouchaib Law Firm Al Kamel Law Offices Khaled Hassan Ajaji C OM ORO S Tarek HassibAbdelkader Boussourdi Kingdom of Bahrain, Sayed Ammar Ministry of Justice & Islamic Al Kamel Law OfficesSociete Distribution de Hassoumani Assoumani Al Kamel Law Officesl’Electricité et du Gaz Affairs Tribunal de premiere Omneia Helmy Hanan Arafatd’Alger (SDA) Faten Al Haddad instance de Moroni Egyptian Center for Ministry of Housing, Economic StudiesAbdallah Deramchi Talal Abu-Ghazaleh Legal Remy Grondin Utilities & UrbanRussell Bedford (TAG-Legal) Vitogaz Comores Development Mohamed Hisham HassanInternational Raju Alagarsamy Tim Armsby Ministry of Investment Haroussi IdrissaMohamed Riad Deramchi Hassan Radhi & Associates Tribunal de premiere Trowers & Hamlins Stephan JagerDeramchi & Azzouz - Russell Mohamed Al-Ahmadi instance de Moroni Khaled Balbaa Amereller RechtsanwalteBedford International Bahrain Investors Center Ahamada Mahamoudou KPMG Mohamed KamelAsmaa El Ouazzani Samer Al-Ajjawi Cabinet Ledoux Seina Karim Dabbous Al Kamel Law OfficeLandwell & Associes - Ernst & Young Mohamed Maoulida Sherif Dabbous, Auditors Mohanad KhaledPricewaterhouseCoopers Basma AlAlawi Audit Conseil- International & Financial Consultancies, BDO, Khaled & CoLegal Services member of Russell Bedford Qays H. Zu’bi Shahira KhaledBrahim Embouazza DJ I B O U T I International Ebtihal Al-Hashimi Al Kamel Law OfficeMCDConsulting Sherif Dabbous Ministry of Municipalities Rahma Abdi Abdillahi Taha Khaled Sherif Dabbous, AuditorsMohamed El-Amine Haddad & Agriculture Affairs. Banque Centrale de Djibouti & Financial Consultancies, BDO, Khaled & CoCabinet Avocat Amine Municipal One Stop Shop member of Russell Bedford Abdillahi Aidid Farah Minas KhatchadourianHaddad Haider Alnoaimi Avocat a la Cour International Egypt Legal DeskSakina Haddad Mohamed Salahuddin Sameh Dahroug Consulting Engineering Wabat Daoud Ussama KhattabCredit Populaire d’Algerie Cabinet Ledoux Seina Ibrachy & Dermarkar Law Bureau Firm Bridges To BusinessGoussanem Khaled Felix Emok N’Dolo Shaji Alukkal Said Diab Adel KheirLaw Firm Goussanem & Aloui CHD Group Panalpina World Transport Sherif Dabbous, Auditors Adel Kheir Law OfficeKarine Lasne LLP Mourad Farah & Financial Consultancies, Mustafa MakramLandwell & Associes - Notary member of Russell BedfordPricewaterhouseCoopers Maaria Ashraf BDO, Khaled & Co Hatim S. Zu’bi & Partners InternationalLegal Services Fatouma Mahamoud Hassan Sherif Mansour Michael Durgavich Cabinet Mahamoud Amany El Bagoury PricewaterhouseCoopersAdnane Merad Al Kamel Law OfficeEtude de Me Kaddour Merad ASAR Al Ruwayeh & Partners Mayank Metha Mostafa Mostafa Elham Hassan Maersk Sealand Line Hanan el Dib Al Kamel Law OfficeMohamed Mokrane Djibouti Al-Ahl FirmMinistere des Finances, PricewaterhouseCoopers Mostafa Mohamed MostafaDirection Generale du Seema Isa Al-Thawadi Ibrahim Mohamed Omar Hussein El Gebaly Al Kamel Law OfficeDomaine National Ministry of Municipalities Cabinet CECA Ministry of Housing, & Agriculture Affairs. Utilities & Urban Ahmed RefatDib Said Abdallah Mohammed Kamil Development Egyptian Tax AuthorityBanque d’Algerie Municipal One Stop Shop Etude Notariale Noora Janahi Mohamed Refaat El Houshy Tarek Fouad RiadAloui Salima Mohamed Omar Mohamed The Egyptian Credit Bureau Kosheri, Rashed & RiadLaw Firm Goussanem & Aloui Hassan Radhi & Associates Cabinet Medomar I-Score David Jayaseelan Fatma Salah Hassan El Maraashly Ibrachy & Dermarkar Law PricewaterhouseCoopers AAW Consulting Engineers Firm
95. 90 DOING BUSINESS IN THE ARAB WORLD 2011Mohamed Serry Hassan Fouad Munam JOR DA N Osama Y. Sabbagh Shafeek RhamanSerry Law Office Court of First Instance in Al The Jordanian Electric AA May International for Karada District Saleh Abd El-Ati Power Co. Ltd. (JEPCO) Global ShippingRamy Shalash Ali Sharif Zu’bi, Advocates &Abdallah Shalash Jabar Hamza Lateef Legal Consultants, member Noreen Simonian Mini Shivadas Khalid Haseeb Khalil of Lex Mundi Crown Logistics The Law Firm of LabeedOmar Sherif AbdalShalakany Law Office, Khalid Haseeb Office for Hayja’a Abu AlHayja’a Stephan Stephanmember of Lex Mundi Book Keeping Talal Abu-Ghazaleh Legal PricewaterhouseCoopers Ahmed Zakaria Naem Hassan (TAG-Legal) Jordan Amman ASAR-Al Ruwayeh & PartnersRanda Tharwat Azzam ZalloumNacita Corporation Al -Wahda Municipality Zalloum & Laswi Law Firm Anas Abunameh L E BA N ONGreiss Youssef Yasir Husam Law & Arbitration Centre Kareem ZureikatAfifi World Transport Al -Wahda Municipality Ali Sharif Zu’bi, Advocates & Hanan Abboud Ibrahim Abunameh Legal Consultants, member PricewaterhouseCoopersEman Zakaria Ryadh Ibrahim Fadhil Law & Arbitration Centre of Lex Mundi Wassim Abou NaderMinistry of Manpower & Ministry of Labor & Social Bushra Abu-TayehMigration Affairs Abdelmajeed Zwairi Mena City Lawyers Ali Sharif Zu’bi, Advocates & Stephan Jager Legal Consultants, member Odat & Co Wadih Abou NasrShereen ZakyShalakany Law Office, Amereller Rechtsanwalte of Lex Mundi PricewaterhouseCoopers K U WA I Tmember of Lex Mundi Bilal Jasim Maha Al Abdallat Manal AssirMohsen Ziko Al Mi’amar Real Estate Central Bank of Jordan Ihab Abbas UNDPAl Kamel Law Office Office Eman M. Al-Dabbas Deloitte Antoine BaakliniMona Zobaa Kadhum Jawad Aljibori International Business Legal Labeed Abdal BAB InternationalMinistry of Investment Al Mansour Law Office Associates The Law Firm of Labeed Abdal Jean Baroudi Arafat AlfayoumiI R AQ Fakhri Kadhum Central Bank of Jordan Baroudi & Associates Al -Wahda Municipality Nazih Abdul HameedHadeel Salih Abboud Al-Janabi Al Markaz Law Firm Tarek Baz Dhia M. Hashim Omar Aljazy Hyam G. Mallat Law FirmMena Associates, member ofAmereller Rechtsanwalte Ali Mawlawi Aljazy & Co.Advocates & Mahmoud Abdulfattah Legal Consultants The Law Offices of Mishari Melynda BouAoun Iraq Center for Economic Badri and Salim El MeouchiFaik Abdul Rasool Reform Al-Ghazali Ali Almashaqba Law Firm, member ofIraqi Institute for EconomicReform Jamal Mehdi Shalal Electricity Regulatory Waleed Abdulrahim Interleges Al Attar Real- Estate Office Commission (ERC) Abdullah Kh. Al-Ayoub &Ghassan Abdul Sada Associates, member of Lex Najib Choucair Ali Mohamed Aboud Saied Zaina Al-Nabulsi Central Bank of LebanonMinistry of Labor & Social MundiAffairs Baghdad Bureau For Real- Ali Sharif Zu’bi, Advocates & Legal Consultants, member Lina A.K. Adlouni Alice Choueiri Estate Investment Mena City LawyersImad Abdul Satar Al Qassab of Lex Mundi KIPCO Asset ManagementImad Al Qassab Law Office Mudher Mohammed Salih Company K.S.C Sanaa Daakour Micheal T. Dabit Iraq Central Bank Mena City LawyersSaad Abdul Wahab A. Qader Michael T. Dabit & Abdullah Al-AyoubIraqi Engineers Union Mohammad Murad Associates Abdullah Kh. Al-Ayoub & Michel Doueihy Al Rafidain Brokers Tariq Hammouri Associates, member of Lex Badri and Salim El MeouchiEmad Abdullatif MundiIraqi Institute for Economic Ibrahim Musa Qadori Ahmed Hammouri & Partners Law Firm, member ofReform Al Rawdha Real-estate Mishari M. Al-Ghazali Interleges George Hazboun Office The Law Offices of Mishari Hanadi El HajjMohammad Al Jabouri HAZBOUN & Co. for Al-GhazaliTalal Abu-Ghazaleh Legal Husham Mustafa Ahmed International Legal Business Mena City Lawyers(TAG-Legal) Al Asfar Co. Commercial Consultations Reema Ali Chadia El Meouchi agencies Tayseer Ismail Ali & Partners Badri and Salim El MeouchiHadeel Al JanabiMena Associates, member of Ammar Naji East Echo Co. Akusa Batwala Law Firm, member ofAmereller Rechtsanwalte Al-Furat for Legal and ASAR-Al Ruwayeh & Partners Interleges Zeina Jaradat Business Consultancy LLC Dania GeorgeAhmad Al Jannabi PricewaterhouseCoopers Nada BourahmahMena Associates, member of Auday Najim Ali The Law Offices of Mishari PricewaterhouseCoopers Youssef S. KhaliliehAmereller Rechtsanwalte Ashour International Bank Al-Ghazali Abdallah Hayek Rajai Dajani & AssociatesTariq Al Jibori Riadh Raouf Al Heeti Law Office Tim Bullock Hayek GroupAl -Wahda Municipality Talal Sabeeh Shawqy Ameen Enad Khirfan Deloitte Walid HoneinMohamed Al Kawaz Ministry of Labor & Social Ali Sharif Zu’bi, Advocates & Mary Carmel Byrne Badri and Salim El Meouchi Affairs Legal Consultants, member Law Firm, member ofAl Rafan Co. For General Al Markaz Law FirmTrading Issam Saied Khalil Al Ani of Lex Mundi Interleges Paul DayOmar Al Nemer Issam Al Ani Law Office Rasha Laswi Maher Hoteit ASAR-Al Ruwayeh & PartnersTalal Abu-Ghazaleh Legal Ahmed Salih Al-Janabi Zalloum & Laswi Law Firm Mena City Lawyers(TAG-Legal) Sam Habbas Mena Associates, member of Emad Majid Mahdi Husseini Amereller Rechtsanwalte ASAR-Al Ruwayeh & PartnersLuay Al-Kayssi PricewaterhouseCoopers Badri and Salim El MeouchiIraqi Association of Haider Salman Chirine Krayem Moujaes Law Firm, member of Rola Makhadmeh The Law Offices of Mishari InterlegesSecurities Dealers Bait Al Hikma for Legal Khalifeh & Partners Al-GhazaliMustafa Alshawi Services and Consultancy Fady Jamaleddine LLC Firas Malhas Medhat Mubarak Mena City LawyersIraqi Institute for EconomicReform Hider Salman International Business Legal Al Markaz Law Firm Associates Elie KachouhMunther B. Hamoudi Haider Salman Al-Jnabi Law Amer Nabulsi ELC Transport Services SAL office Ridha Nasair DLA PiperAl Attar Real- Estate Office Georges Kadige Mohamed Shareef Ali Law Gate Attorneys orgAli Baker Anupama Nair Kadige & Kadige Law Firm Mohamed Shareef Law Office Mustafa Nasereddin Abdullah Kh. Al-Ayoub &Al-Furat for Legal and Michel KadigeBusiness Consultancy LLC Yasir Yahya Al Mana Talal Abu-Ghazaleh Legal Associates, member of Lex (TAG-Legal) Jordan Amman Mundi Kadige & Kadige Law FirmDuraid Basil Khaled Yaseen Claudine Karaki Khaldoun Nazer Mohamed OmarIraqi Institute for Economic Iraqi National Investment Ministry of FinanceReform Commission Khalifeh & Partners Al Markaz Law Firm Mutasem Nsair Mohammed Ramadan Najib KhattarMajed Butrous Ahmed Dawood Khalifeh & Partners Al Markaz Law Firm Khattar AssociatesAl -Wahda Municipality Ahmad Quandour Albert LahamHassan Dhiaa Khalifeh & Partners Law Office of Albert LahamHassan Dhiaa Law office
96. ACKNOWLEDGMENTS 91Sader Makram Ahmed Salem Ould Jamal Rahal Justine Harding Mohamed FouadAssociation of Banks in Bouhoubeyni Experian Denton Wilde Sapte & Co Sultan Al-Abdulla &Lebanon (ABL) Cabinet Bouhoubeyni Partners Nesrine Roudane Robert KenedyGeorges Mallat Brahim Ould Daddah Nero Boutique Law Firm Curtis Mallet - Prevost, Colt Samar A. IsmailHyam G. Mallat Law Firm Cabinet Daddah Conseils & Mosle LLP Khatib & Alami Mehdi Salmouni-ZerhouniNabil Mallat Aliou Sall Salmouni-Zerhouni Law Firm Salim Khairulla Milan JoshiHyam G. Mallat Law Firm Assurim Consulting Oman Flour Mills Bin Yousef Cargo Express Houcine Sefrioui W.L.LFadi Moghaizel Ndeye Khar Sarr Etude de notariat moderne Ziad KhattabMoghaizel Law Firm, member BSD & Associes Talal Abu-Ghazaleh Legal Upuli Kasturiarachchiof Lex Mundi Abdeselam Tazi (TAG-Legal) PricewaterhouseCoopers Dominique Taty Area sarlMario Mohanna FIDAFRICA / P.E. Lalachen MJ Sajid KhanPatrimoine Conseil SARL Marc Veuillot Independent Consultant PricewaterhouseCoopers PricewaterhouseCoopers Alleance advisory MarocMirvat Mostafa Jose Madukakuzhy Sujani NisansalaMena City Lawyers M ORO C C O Chigar Zineb Khimji Ramdas PricewaterhouseCoopers Etude de notariat modernRania Mrad Samir Agoumi Pushpa Malani Fadi SabsabiKhattar Associates Dar Alkhibra OM A N PricewaterhouseCoopers Al Tamimi & Company Lamya Alami Advocates & LegalPierre Nehme Hamad Al Abri Mansoor Jamal Malik ConsultantsBureau d’Etudes Pierre Younes Anibar Al Busaidy, Mansoor Jamal Muscat Electricity David SaltNehme Cabinet Younes Anibar Distribution Company & Co. Clyde & Co. LegalToufic Nehme Linda Oumama Benali Zahir Abdulla Al Abri Tufol Mehdi ConsultantsLaw Office of Albert Laham Cabinet Notaire Muscat Electricity Muscat Municipality Aarij WastiElias Rammouz Khalid Boumichi Distribution Company Yashpal Mehta Denton Wilde Sapte & CoMena City Lawyers Tecnomar Zubaida Fakir Mohamed Al BDO Jawad Habib Terence G.C. WitzmannMireille Richa Richard Cantin Balushi Subha Mohan HSBCTyan & Zgheib Law Firm Juristructures – Project Central Bank of Oman Curtis Mallet - Prevost, Colt Management & Legal Ahmed Al Barwani & Mosle LLP S AU DI A R A B IAJihane Rizk Khattar Advisory Services LLPKhattar Associates Denton Wilde Sapte & Co Ahmed Naveed Farooqui Sylvain Da Fonseca Oman Cables Industry (SAOG) Asad AbediJihad Rizkallah Salman Ali Al Hattali The Allaince of Abbas F. Alleance advisory MarocBadri and Salim El Meouchi Muscat Electricity Bruce Palmer Ghazzawi & Co. and Hammad,Law Firm, member of Mohssin El Makoudi Distribution Company Curtis Mallet - Prevost, Colt Al-Mehdar & Co.Interleges Dar Alkhibra Said bin Saad Al Shahry & Mosle LLP Danya AboalolaElias A. Saade Nadia Fajr Said Al Shahry Law Office Raghavendra Pangala Bafakih & NassiefMoghaizel Law Firm, member Fatima Zohra Gouttaya Zuhaira Al Sulaimani Semac & Partners LLCof Lex Mundi Anas Akel Etude de notariat moderne Al Busaidy, Mansoor Jamal Dali Rahmattala Habboub Bafakih & NassiefRached Sarkis Nicolas Granier & Co. Denton Wilde Sapte & CoRached Sarkis Office Naim Al Chami Alleance advisory Maroc Majid Al Toky Paul Sheridan Talal Abu-Ghazaleh LegalAntoine Sfeir Amin Hajji Trowers & Hamlins Denton Wilde Sapte & Co (TAG-Legal)Badri and Salim El Meouchi Amin Hajji & Associes - Hussain Al ZadjaliLaw Firm, member of Rajshekhar Singh Ahmed Al Jaber Association d’Avocats Bank MuscatInterleges Bank Muscat EMDAD Arriyadh Zohra Hasnaoui Khalid Khamis Al-HashmiGeorge Tannous Ganesan Sridhar Fayez Aldebs Hasnaoui Law Firm Muscat MunicipalityBeirut International Movers Bank Muscat Al Juraid & Company / Ahmad Hussein Leyan Al-Mawali PricewaterhouseCoopersBassel Tohme Sridhar Sridharan Talal Abu-Ghazaleh Legal Trowers & Hamlins Ali. R. Al-EdreesMena City Lawyers (TAG-Legal) Ernst & Young Hilal Almayahi Al-BassamHala Tyan Bahya Ibn Khaldoun Paul SuddabyMoghaizel Law Firm, member Muscat Municipality PricewaterhouseCoopers Nasser Alfaraj Universite Mohamed Vof Lex Mundi Ahmed al-Mukhaini Baker & McKenzie Bahrain Naoual Jellouli Yasser Taqi ManamaNady Tyan Said Al Shahry Law Office Curtis Mallet - Prevost, Colt Ministere de l’economie et Nader AlharbiTyan & Zgheib Law Firm des finances Mohamed Alrashdi & Mosle LLP Al-Jadaan & Partners LawRania Yazbeck Mehdi Kettani Muscat Municipality Mathai Thomas FirmTyan & Zgheib Law Firm Kettani & Associes Russell Aycock Trowers & Hamlins Abdullah Al-Hashim PricewaterhouseCoopersM AU R I TA N IA Nadia Kettani QATA R Al-Jadaan & Partners Law Kettani & Associes David Ball FirmIshagh Ahmed Miske Said Al Shahry Law Office Abdelmoniem Abutiffa Karine Lasne Hesham Al-HomoudCabinet Ishagh Miske Qatar International Law Landwell & Associes – Richard L. Baltimore III Firm The Law Firm of Dr. HeshamRodolphe Kadoukpe Akoto PricewaterhouseCoopers Said Al Shahry Law Office Al-HomoudMaersk Mauritania Legal Services Ahmad Anani Mahmoud Bilal Abdulrahman Al-IbrahimNouadhibou Branch Al Tamimi & Company Wilfried Le Bihan Said Al Shahry Law Office Advocates & Legal Electricity & Co-GenerationEsteit Mohamedou Amane CMS Bureau Francis Lefebvre Consultants Regulatory Authority Francis D’SouzaMauritanienne de Medhi Lebady Ahmed AljabrConstruction et BDO Jawad Habib Nisrine Boutros Cabinet d’Architecture International Legal Advanced Elements Estd’Equipements (MCE) Lebady Precilla D’Souza Consultants LLC Mohammed Al-JadaanTidiane Bal Al Tamimi & Company Anis Mahfoud Advocates & Legal Ian Clay Al-Jadaan & Partners LawBSD & Associes Abouakil & Benjelloun Firm Consultants PricewaterhouseCoopersFatoumata Diarra Avocats - AB AVOCATS Nabil Abdullah Al-Mubarak Mehreen B. Elahi Michel DailletBSD & Associes Abdelaziz Messaoudi Saudi Credit Bureau - SIMAH Al Busaidy, Mansoor Jamal International LegalMine Ould Abdoullah Ministere de l’economie et & Co. Consultants LLC Fayez Al-NemerPrivate Practice des finances Zareen George Hasan El Shafiey Talal Bin Naif Al-Harbi LawAbdallahi Ould Ahmed Baba Aboulfadl Najat Al Busaidy, Mansoor Jamal Nadoury & Nahas Law FirmAtelier d’Architecture et Etude de notariat moderne & Co. Offices Ayedh Al-OtaibiDesign Hicham Oughza Hind Hadi Saudi Arabian General Dalal K. Farhat Dar Alkhibra Al Busaidy, Mansoor Jamal Arab Engineering Bureau Investment Authority & Co.
97. 92 DOING BUSINESS IN THE ARAB WORLD 2011Mohammed Al-Soaib Mohamed Ibrahim Adam Hend Ben Achour Radhi Meddeb Anthea FernandesAl-Soaib Law Firm Dr. Adam & Associates Adly Bellagha & Associates Comete Engineering Shalakany Law Office, member of Lex MundiWicki Andersen Eihab Babiker Olfa Ben Aicha-Saidi Faouzi MiliBaker Botts LLP Eihab Babiker & Associates - PricewaterhouseCoopers Mili and Associates Laetitia Fernandes Advocates Legal Services Helene Mathieu LegalAbdul Moeen Arnous Ben Afia Mohamed Salah ConsultantsLaw Office of Hassan Elmugtaba Bannaga Othman Ben Arfa Orga Audit, memberMahassni Elkarib and Medani Societe Tunisienne de of Russell Bedford Laetitia Fernandez l’Elecricite et du Gaz (STEG) International Helene Mathieu LegalKhalid Asitani Tagwa Bashir ConsultantsEMDAD Arriyadh SDV Transintra Sudan Ismail Ben Farhat Mohamed Taieb Mrabet Adly Bellagha & Associates Banque Centrale de Tunisie Rohit GhaiWael Bafakieh Amani Ejami Al Jabha GroupBafakih & Nassief El Karib & Medani Advocates Wassim Ben Mahmoud Imen Nouira Architect Conservation Fonciere Mona HammadiMahmoud Yahya Fallatah Tariq Mohmoud Elsheikh Tunisia Baker Botts LLPNational Water Company Omer Miriam Ben Rejeb Mahmoud Elsheikh Omer & PricewaterhouseCoopers Habiba Raouadi Samer HamzehMajed Mohammed Garoub Legal Services Chafter Raouadi Law Firm Trowers & Hamlins Associates AdvocatesLaw Firm of Majed M. Garoub Ahmed Mahdi Abdelfetah Benahji Rachid Tmar Omar HegazyImad El-Dine Ghazi Ferchiou & Associes PricewaterhouseCoopers Shalakany Law Office, Mahmoud Elsheikh Omer &Law Office of Hassan Associates Advocates Legal Services member of Lex MundiMahassni Manel Bondi Amel M. Sharif PricewaterhouseCoopers Sydene HelwickRahu Goswami UNITED ARAB Mahmoud Elsheikh Omer & Al Tamimi & CompanyLaw Office of Hassan Elyes Chafter E M I R AT E S Advocates & Legal Associates AdvocatesMahassni Chafter Raouadi Law Firm Consultants Abdel Gadir Warsama Karim AbazaShadi Haroon Zine el Abidine Chafter Shalakany Law Office, Ashiq Hussain Dr. Abdel Gadir WarsamaLaw Office of Mohanned Ghalib & Associates Legal Chafter Raouadi Law Firm member of Lex Mundi Dubai TradeBin Saud Al-Rasheed in Firmassociation with Baker Kmar Chaibi Moutaz Abddullat Zaid KamhawiBotts LLP Banque Centrale de Tunisie Talal Abu-Ghazaleh Emcredit SY R IA N A R A B Legal(TAG-Legal)Jochen Hundt REPUBLIC Faouzi Cheikh Salim Ahmed KhanAl-Soaib Law Firm Banque Centrale de Tunisie Yakub Ahmed Dubai Trade Boulos Al Ashhab Abdelmalek Dahmani Orchid Paper TradingZaid Mahayni Auditing Consulting Shahid M. KhanLaw Office of Hassan Dahmani Transit Obaid Saif Atiq Al Falasi Busit Al Roken & Associates Accounting Center InternationalMahassni Dubai Electricity and Water Mouazza Al Ashhab Authority Vipul KothariAhmed Mekkawy Mohamed Derbel Kothari Auditors & Auditing Consulting BDO Tunisie Alya Hussain Al HammadiBafakih & Nassief Accounting Center Accountants Mohamed Lotfi El Ajeri Dubai TradeAbdulrahman M. Al Mohizai Rawaa Al Midani B.S. Krishna MoorthyElectricity & Co-Generation Avocat a la Cour et Essam Al Tamimi Landmark group Ministry of Trade & Economy mediateur agree par leRegulatory Authority Al Tamimi & Company Bisher Al-Houssami B.B.MC Advocates & Legal Ravi KumarFadi Obaidat AL-ISRAA Int’l Freight Consultants Dubai TradeTalal Abu Gazaleh Legal Yassine El Hafi Forwarder Adly Bellagha & Associates Mahmood Albastaki Senthil Kumar(TAG-Legal) Abdul Raouf Hamwi Dubai Trade GLG ShippingMustafa Saleh Abderrahmen Fendri Civil Engineering Office PricewaterhouseCoopers Saeed Al-Hamiz Charles S. LaubachEMDAD Arriyadh Bashir Haza Central Bank of the UAE Afridi & Angell, member ofFiras` Sawaf Yessine Ferah Lex Mundi Director: Directorate of F & A Law Firm Wicki AndersenLaw Office of Hassan internal trade. Ministry ofMahassni Baker Botts LLP Gagan Malhotra Trade & Economy Amel Ferchichi Dubai TradeGeorge Sayen Yaser Hmedan Gide Loyrette Nouel, member Wicki AndersenBaker & McKenzie Bahrain of Lex Mundi Baker Botts LLP Helene Mathieu Yaser I. Hmedan’s Law Firm Helene Mathieu LegalManama Noureddine Ferchiou T Sureh Babu Mazen Ibrahim ConsultantsAbdul Shakoor Ferchiou & Associes Landmark group Ibrahim & Alousy Law Firm Ravi NandiGlobe Marine Services Co. Slim Gargouri Piyush Bhandari Fadi Kardous BASF ChemicalsWisam Sindi CPA Proteam Consulting Private Kardous Law Office Yasser OmarThe Alliance of Abbas F. Anis Jabnoun LimitedGhazzawi & Co. and Hammad, Mazen N. Khaddour Shalakany Law Office, Gide Loyrette Nouel, member Prakash Bhanushali member of Lex MundiAl-Mehdar & Co. International Legal Bureau of Lex Mundi Alsahm Al Saree TransportPeter Stansfield Loubna Khoury & Clearing Vijendra Vikram Singh Paul Badis Jedidi Talal Abu-Ghazaleh LegalAl-Jadaan & Partners Law Auditing Consulting Gide Loyrette Nouel, member Hiten BhatiaFirm Accounting Center (TAG-Legal) of Lex Mundi Silver Line Shipping &Sameh M. Toban Saad Kurdy Clearing V. Prakash Sami Kallel Al Tajir Glass IndustriesToban, Attorneys at law & Elsaad Pharma Kallel & Associates Jennifer BibbingsLegal Advisors Yusuf Rafiudeen Zena Nahat Amina Larbi Trowers & HamlinsNatasha Zahid Kardous Law Office Dubai Electricity and Water Gide Loyrette Nouel, member Mazen Boustany AuthorityBaker Botts LLP of Lex Mundi Gabriel Oussi Habib Al Mulla & Co.Abdul Aziz Zaibag Oussi Law Firm Dorai Raj Mabrouk Maalaoui R Chandran Goldline Worldwide Inc.Alzaibag Consultants PricewaterhouseCoopers Housam Safadi Sea Bridge Shipping Co. LLCSoudki Zawaydeh Safadi Bureau Dean Rolfe Dina Magroun Lisa Dale PricewaterhouseCoopersAl Juraid & Company / Avocat a la Cour et Al Tamimi & CompanyPricewaterhouseCoopers T U N I SIA mediateur agree par le Advocates & Legal Shoeb Saher B.B.MC Consultants Habib Al Mulla & Co.SU DA N Abdelmonem Achour Cabinet Achour Mohamed Ali Masmoudi Indira Deepa Khalid Mohamed SalehAbdullah Abozaid PricewaterhouseCoopers PricewaterhouseCoopers Dubai MunicipalityLaw Office of Abdullah A. Mohamed Moncef Barouni Legal ServicesAbozaid ACR Mohammad A. El-Ghul Mohammed Ahmed Saleh Sarah Mebazaa Habib Al Mulla & Co. Dubai MunicipalityAbdalla Abuzeid Adly Bellagha Comete EngineeringLaw Office of Abdalla A. Adly Bellagha & Associates Gorashi Elsheikh Herbert SchroderAbuzeid Dubai Municipality Emcredit
98. ACKNOWLEDGMENTS 93M. Vivekanand Shetty Maysa SirhanEros Group Palestinian Monetary AuthoritySurendar SinghIAL Logistics Emirates LLC Y E M E N , R E P.Arvind SinhaBusiness Advisors Group Tariq Abdullah Law Offices of Sheikh TariqSreekumar Sivasankaran AbdullahGlobelink West Star ShippingL.L.C. Khaled Al Buraihi Khaled Al Buraihi forDouglas Smith Advocacy & Legal ServicesHabib Al Mulla & Co. Yaser Al-AdimiRachel Storr Abdul Gabar A. Al-Adimi forGates Engineering & Services Construction & TradeMohammed Thani Adel AldhahabDubai Land Department Alsanabani & Aldhahab Law OfficeRaju V. VargheseAl Yousuf L.L.C Mohamed Taha Hamood Al-HashimiRobyn Waller Mohamed Taha Hamood & Co.Trowers & Hamlins Abdulkadir AL-HebshiGary Watts ALCO - Advocacy and LegalAl Tamimi & Company Consultatians OfficeAdvocates & LegalConsultants Rashad Khalid Al-HowiadiRania Yousseph Central Bank of YemenHabib Al Mulla & Co. Ismail Ahmed AlwazirNatasha Zahid Alwazir Consultants, Advocates & Legal ResearchBaker Botts LLP Randall CameronW E ST BA N K A N D KPMGGAZA Abdulla Farouk LuqmanHani Sobhi Abd Jildeh Luqman Legal Advocates &Jerusalem District Legal ConsultantsElectricity Company (JDECo) Nowar M. MejanniAta Al Biary KPMGJerusalem District Esam NadeeshElectricity Company (JDECo) ALCO - Advocacy and LigalSharhabeel Al-Zaeem Consultatians OfficeSharhabeel Al-Zaeem and Khaled Mohammed Salem AliAssociates Luqman Legal Advocates &Haytham L. Al-Zu’bi Legal ConsultantsAl-Zu’bi Law Office,Advocates & LegalConsultantsMohammed AmarnehThe Democracy and WorkersRights CenterMoayad AmouriPricewaterhouseCoopersNada AtrashArchitecture & DesignAli FarounPalestinian MonetaryAuthoritySamir HuleilehPADICOHiba I. HusseiniHusseini & HusseiniNabil IsifanNetham, DPK Consulting, aDivision of ARDFadi KattanTransjordanian EngineeringLtd.Mohamed KhaderLausanne TradingConsultantsMichael F. OrfalyPricewaterhouseCoopersWael Sa’adiPricewaterhouseCoopersSamir SahharOffice of Samir Sahhar