DOING BUSINESS 2015
GOING BEYOND EFFICIENCY
Global Indicators Group
DEVELOPMENT ECONOMICS
Frederic Meunier, Private Sector Specialist
Washington, D.C.
December 6th 2014
What does Doing Business measure?
Doing Business indicators:
 Focus on regulations relevant to the life
cycle of a small to medium-sized domestic
business.
 Are built on standardized case scenarios.
 Are measured for the most populous city in
each country.
 Are focused on the formal sector.
DOES NOT measure all aspects of the business environment such as
macroeconomic stability, corruption, level of labor skills, proximity
to markets, or of regulation specific to foreign investment or
financial markets.
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The 11 areas of business regulation measured by Doing
Business affect firms throughout their life cycle
At start-up
• Starting a business
• Labor market
regulation
When things go wrong
• Enforcing contracts
• Resolving
insolvency
In daily operations
• Paying taxes
• Trading across
borders
In getting financing
• Getting credit
• Protecting minority
investors
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In getting a location
• Dealing with
construction permits
• Getting electricity
• Registering property
Doing Business indicators reflect on some of the most
important obstacles firms face
•
Based on Enterprise
Surveys in 135
countries around the
world
•
Direct responses from
representative
samples of the private
sector
Percent of firms identifying the problem as the main
obstacle to their business activity
Access to finance
16.7%
Practices of the informal sector
12.2%
Tax rates
12.0%
Political instability
10.3%
Electricity
10.0%
Inadequately educated workforce
7.5%
Corruption
•
Access to finance,
and tax rates are the
top obstacles across
the developing world
6.7%
Crime, theft and disorder
4.5%
Access to land
3.5%
Business licensing and permits
2.7%
0%
2%
4%
6%
Source: Enterprise Surveys database
3
8%
10% 12% 14% 16% 18%
What are the advantages and limitations of the Doing
Business methodology?
4
a. In economies with a population of more than 100 million, Doing Business covers business regulation in both the largest business
city and the second largest one.
How does Doing Business collect and verify data?
5
5
How many experts does Doing Business consult?
These organizations supported the Doing
Business project on a global scale:
• Advocates for International Development
• Allen & Overy LLP
• American Bar Association, Section of International Law
• Baker & Mckenzie
• Cleary Gottlieb Steen & Hamilton LLP
• Deloitte
• DLA Piper
• Ernst & Young
• IUS Laboris, Alliance of Labor, Employment, Benefits and
Pensions law firms
• KPMG
• Law Society of England and Wales
• Lex Mundi, Association of Independent Law Firms
• Mayer Brown
• Panalpina
• PWC
• Russel Bedford International
• SDV International Logistics
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6
Where is it easier to do business?
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Share of economies implementing at least one reform
making it easier to do business in 2013/2014
OECD high
Income
85%
Europe and
Central Asia
65%
55%
Middle East and
North Africa
50%
Latin
America &
the
Caribbean
50%
74%
60%
East Asia and
Pacific
South Asia
Sub-Saharan
Africa
Worldwide, 123 economies implemented 230 reforms in 2013/2014, with 145 reforms aimed at reducing
the complexity and cost of complying with business regulation, and 85 reforms aimed at strengthening
legal institutions.
8
Narrowing distance to frontier from 2013 to 2014 (percentage points)
9
60
55
25
0
New Zealand
Hong Kong SAR, China
Ireland
Taiwan, China
Malaysia
Switzerland
United Arab Emirates
Macedonia, FYR
Spain
France
South Africa
Montenegro
Czech Republic
Rwanda
Armenia
Romania
Bahrain
Colombia
Panama
Belarus
Hungary
Luxembourg
Cyprus
Russian Federation
Greece
Croatia
Morocco
Ghana
Mongolia
Guatemala
Vanuatu
Kazakhstan
Kosovo
Moldova
Dominican Republic
Jamaica
Seychelles
Azerbaijan
Trinidad and Tobago
Paraguay
China
Solomon Islands
Sri Lanka
Albania
Ukraine
Indonesia
Nicaragua
Lesotho
Iran, Islamic Rep.
Marshall Islands
India
Sierra Leone
Mozambique
Gambia, the
Micronesia, Fed. Sts.
Uzbekistan
Burundi
Uganda
Djibouti
Lao PDR
Côte d'Ivoire
São Tomé and Principe
Equatorial Guinea
Malawi
Togo
Niger
Benin
Senegal
Zimbabwe
Timor-Leste
Nigeria
Tajikistan
Myanmar
Congo, Rep.
Haiti
Venezuela, RB
Congo, Dem. Rep.
Chad
Central African Republic
South Sudan
The metric on “distance to frontier”: tracking economies’
progress over time
95
2013
90
85
80
Colombia
75
Jamaica
70
2014
65
South Africa
Albania
Mozambique
Benin
Tajikistan
50
45
40
35
30
20
Central African Republic
15
10
5
Strong convergence across economies since 2005
Averages by group
Time to start a business (days)
Worst quartile
Time to pay taxes (hours per year)
Best 3 quartiles
Worst quartile
140
120
800
700
600
500
400
300
200
100
0
116
100
80
60
40
44
29
20
15
0
695
499
216
199
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Time to register property (days)
Time to export (days)
Worst quartile
60
Worst quartile
Best 3 quartiles
250
52
50
Best 3 quartiles
235
200
40
40
150
30
20
Best 3 quartiles
20
94
100
16
10
50
42
33
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Note: Economies are ranked in quartiles by performance in 2005 on the indicator shown. The data refer to the 174 economies included in Doing Business 2006 (2005).
Fifteen economies were added in subsequent years.
Source: Doing Business database.
Following Doing Business best practices would
significantly decrease the time to start a business
•
In the 107 economies covered by both Doing
Business and the World Bank’s
Entrepreneurship Database, an estimated 3.1
million limited liability companies were newly
registered in 2012 alone.
Days to start a business (millions)
40.7
•
Assuming that they followed the rules and
regulations for company incorporation in their
home economy as measured by Doing
Business, these 3.1 million firms together
spent 40.7 million days to get incorporated.
•
Because not all economies followed best
practice, entrepreneurs spent an extra 39.2
million days satisfying bureaucratic
requirements (this figure was 45.4 million days
in 2013).
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1.5
Not following best practices
Following best practices
Source: World Bank’s Entrepreneurship Database; Doing Business database.
Reforms making it easier to start a business were once again most
common in 2013/14 – and show results over time in reduced delays…
2005
It was possible to start a business in
less than 20 days in only 41
economies, mostly in North America
and Northern and Central Europe
2014*
Now, the time to start a business is
less than 20 days for entrepreneurs
in 127 economies
*Based on samples of 174 economies in 2005 and 189
economies in 2014
Development impact: Countries that regulate entry more heavily have greater corruption and
larger unofficial economies, but not better quality of public or private goods. (Quarterly Journal
12 of Economics, February 2002, Djankov, La Porta, Lopez de Silanes, Shleifer.)
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Following Doing Business best practices would also
significantly decrease the time to pay taxes
•
•
•
In the 93 economies covered by both Doing
Business and the World Bank’s
Entrepreneurship Database, an estimated 28.6
million limited liability companies were in
operation in 2012.
Assuming that they followed the rules and
regulations for paying taxes in their home
economy as measured by Doing Business,
these firms together spent 1.1 billion days to
file their taxes.
Time saved if economies followed the best
practices in paying taxes  751 million days
Days to pay taxes (billions)
1.2
1.1
1.0
0.8
0.6
0.4
0.3
0.2
0.0
Not following best practices
Following best practices
Source: World Bank’s Entrepreneurship Database ; Doing Business database.
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Time and motion indicators focus on the process
Example: The complexity and time it takes to register property varies significantly among economies
Registering property in Belgium requires 8 procedures, takes 64 days and
costs 12.7% of the property value.
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•
•
•
•
Measure procedural efficiency of the regulatory process
Follow the entrepreneur from the beginning to the end of a basic transaction
Record every step of the process, and the associated time and cost
Gather all the relevant laws, regulations, decrees and fee schedules
Time and motion indicators focus on the process
Example: The complexity and time it takes to register property varies significantly among economies
Registering property in Peru requires 4 procedures, takes 6.5 days and
costs 3.3% of the property value.
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Registering Property – Methodology
What does the indicator measure?
How is the indicator constructed?
The transfer of a commercial warehouse
between two domestic companies
Through three sub-indicators: Procedures, Time
and Cost
The indicator does not measure:
•Legal security offered by registration or overall value of registering for citizens
• Overall use of the formal registration system vs. informal
• Equity of land policies, including registration policies and practices.
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Registering Property - Methodology
What procedures of the transfer do we measure?
Conducting due diligence
(title search, encumbrance checking,
cadastral map)
Signing of sales contract
All legally required procedures
• Starting Point: Seller decides to buyer and found the buyer, price already
defined
• End point: All procedures complete so buyer can use the property, resell
it, or use as collateral. Transaction opposable to third parties
Assumptions
• About the transfer:
• Transfer of existing title of land and building – ie. not initial registration
• in the economy’s largest business city (peri-urban area, within city limits)
Payment of Stamp duty,
transfer tax and registration tax
Registration at the
land/property registry
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• About the buyer and seller:
• 100% domestic limited liability SMEs
• The seller has owned the warehouse for 10 years
• About the property:
• Fixed property value (50xGNI per capita)
• Property is registered in the land registry/cadastre and is free of title
disputes/mortgages
Registering Property reforms in 2013/14
21 economies made it easier for businesses to register property
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Feature
Economies
Some highlights
Combined or
reduced procedures
Colombia; Greece;
Mozambique; Russian
Federation; Senegal
Colombia eliminated the requirement for provisional registration. Greece removed
the requirement for the municipal tax clearance certificate. The Russian
Federation eliminated the requirement for the notarization of corporate
documents.
Increased
administrative
efficiency
Guinea; United Arab
Emirates
Guinea reorganized the records at the land registry reducing the time to register
property by 15 days. The United Arab Emirates increased the number of service
centers cutting time by 3 days.
Computerized
procedures
Albania; Azerbaijan; Côte
Albania extended the use of the electronic registry system saving 11 days. Côte
d'Ivoire; Ireland; Korea, Rep.; d'Ivoire and Vanuatu digitized their land registries. Sweden introduced a new
Poland; Sweden; Vanuatu
electronic system for property registration reducing time by 14 days.
Introduced fast-track Kazakhstan; Sierra Leone
procedures
Sierra Leone introduced a new fast-track procedure for property registration
reducing cutting time by 11 days.
Set up effective time
limits
Kazakhstan
Kazakhstan introduced time limits for issuing non-encumbrance certificates
saving 12 days.
Reduced taxes or
fees
Bahrain; Côte d'Ivoire;
Greece; Guinea; Poland;
Togo; San Marino; Spain
Greece reduced the property transfer tax from 10% to 3% of the property value.
Togo lowered the property registration tax rate from 8% to 6% of the property
value.
In 2013/14 Greece made the biggest improvement on the
ease of registering property
 In December 2013
Greece established a
new property transfer tax
of 3% of the property
value, substantially lower
than the previous one of
10%.
 In addition, it simplified
property transfers by
eliminating the need to
submit a tax clearance
certificate from the
municipality before
signing the sale
agreement.
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Note: In 2014 procedures 3, 4 and 5 occur simultaneously with procedure 2 (although procedures may take place
simultaneously, they cannot start on the same day). Procedure 6 starts after procedure 2.
Source: Doing Business database.
How to measure the overall quality of land management
systems?
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How to provide reliable information?
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How transparent is the land management system?
Fee schedules
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Accountability mechanisms
Where is coverage complete?
How to deal with land disputes?
Presentation Title
THANK YOU!
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