Doing Business
in Russia 2012
Augusto Lopez-Claros
Director, Global Indicators & Analysis
World Bank-IFC
Saint Petersburg International Economic Forum
June 21, 2012
Doing Business indicators reflect on some of the
most important obstacles firms face
Percent of firms identifying the problem as the main
obstacle to their business activity
• Based on Enterprise
Surveys in 118 countries
around the world
• Direct responses from
representative samples
of the private sector
• Access to finance,
electricity, informality
and tax rates are the top
obstacles across the
developing world
2
The Doing Business indicators have a strong
theoretical foundation
•The Regulation of Entry by Djankov and others, Quarterly Journal of Economics, Feb 2002.
Countries that regulate entry more heavily have greater corruption and larger unofficial economies, but not
better quality of public or private goods
•Private Credit in 129 Countries by Djankov, McLiesh and Shleifer, Journal of Financial Economics, May 2007.
Creditor protection through the legal system and information sharing institutions such as credit bureaus are
associated with higher ratios of private credit to GDP. Credit rises after improvements in creditor rights and in
information sharing
•Trading on Time by Djankov and others, Review of Economics and Statistics, Nov 2008.
Each additional day that a product is delayed prior to being shipped reduces trade by more than one percent
•Courts by Djankov and others, Quarterly Journal of Economics, May 2003.
Procedural formalism is associated with higher expected duration of judicial proceedings, more corruption,
less consistency, less honesty, less fairness in judicial decisions, and inferior access to justice
•The Regulation of Labor by Botero and others, Quarterly Journal of Economics, June 2004.
Heavier regulation of labor is associated with a larger unofficial economy, lower labor force participation,
and higher unemployment, especially of the young
•The Effect of Corporate Taxes on Investment and Entrepreneurship, by Djankov and others, American Economic
Journal: Macroeconomics, July 2010.
 The corporate tax rate has a large adverse impact on aggregate investment, FDI, and entrepreneurial
activity. It is also correlated with investment in manufacturing as well as with the size of the informal economy.
3
Doing Business indicators – 11 areas of business
regulation (10 included in the ranking)
Start-up
 Starting a
business
Minimum capital
requirement,
procedures, time
and cost
Expansion
Operations
 Registering property
 Dealing with
construction permits
Procedures, time and cost
Procedures, time and
cost
 Getting credit
Credit information
systems
 Paying taxes
Payments, time and Total
Tax Rate
Movable collateral laws
 Protecting investors
Insolvency
 Resolving
insolvency
(formerly
Closing a
business)
Time, cost and
recovery rate
 Trading across
Disclosure and liability in
related party
transactions
borders
Documents, time and
cost
 Enforcing contracts
 Getting electricity
Procedures, time and cost
to resolve a commercial
dispute
Procedures, time and
cost
 Employing workers
(annex)
Entry
4
Property rights
Investor protection
Access to credit
Administrative burden
Flexibility in hiring
4
Recovery rate
Reallocation of
assets
How does Doing Business measure
the ease of doing business?
1
Singapore
Top ranked countries in DB2012
 The overall ease of doing business:
2
Honk Kong SAR, China
3
New Zealand
(2) Dealing with construction permits
4
United States
(3) Getting electricity
5
Denmark
(1) Starting a business
(4) Registering property
(5) Paying taxes
6
Norway
7
United Kingdom
(7) Enforcing contracts
8
Korea, Rep.
(8) Protecting investors
9
Iceland
(6) Trading across borders
(9) Getting credit
(10) Resolving insolvency
10
5
Ireland
New metric on ‘distance to the frontier’: tracking
economies’ progress over time
SGP
USA
CAN
FIN
ISL
DEU
BEL
MYS
ISR
PRI
THA
CHL
ATG
NAM
HUN
BLZ
BGR
MNG
VCT
SVN
WSM
ARM
KNA
MDV
KIR
SYC
VNM
PNG
GRC
SWZ
KAZ
MAR
TZA
PRY
NIC
GTM
URY
AZE
UGA
LSO
DZA
BOL
BRA
BTN
ZWE
MOZ
KHM
SUR
VEN
CMR
RWA
GIN
STP
CIV
AGO
GNB
BFA
TMP
Distance to Frontier, 2005-2011
0.00
Narrowing the Distance to the Frontier from 2005 to 2011
(percentage points)
2005
0.10
Georgia
0.20
Colombia
2011
Rwanda
0.30
China
0.40
India
Burkina
Faso
0.50
0.60
0.70
Zimbabwe
Venezuela
0.80
…captures the absolute improvement that countries have made over time, and
…also provides information on how far countries have been away from the “frontier” – a measure
based on the most efficient business regulatory practices observed by the Doing Business Project
across countries and over time.
6
New metric on ‘distance to the frontier’:
tracking Russia’s progress over time
7
10
20
30
Percentage points
Narrowing the Distance to the Frontier from 2006 to 2011
0 HIGHEST PERFORMANCE GLOBALLY
DB2012
40
DB2006
50
60
70
80
90
100
Registering
property
Starting a
business
Enforcing
contracts
Paying taxes
Closing a
business
Protecting
investors
Trading
across
borders
Getting credit Dealing with
construction
permits
Subnational Doing Business (SNDB) –
How does Russia benefit from it?
• Creates baseline and captures local difference in regulations
• Pinpoints bottlenecks and provides information on good
practices within the same country that can easily be replicated
• Captures reforms
1
Diagnostic
Tool
2
Reform
Instrument
3
• Allows locations to compete
locally and globally
Monitoring
Device
• Measures progress over time through
repeated benchmarking
• Creates an incentive to maintain reform
effort even when governments change
8
• Promotes peer to peer learning
• Initiates a reform process by
engaging local governments and
reforms stakeholders
What is new in Doing Business in Russia in 2012?
Doing Business in Russia 2012
• Covers 30 cities
• Updates data and tracks reforms for the 10
cities measured in the Doing Business in
Russia 2009 in 3 topics
• Data is current as of November 2011
• Surveys administered through over 600
contributors
The report covers 4 indicators
• Starting a business
• Dealing with construction permits
• Getting electricity
• Registering property
9
Doing Business in Russia 2012
benchmarks 30 locations
Round 1 locations
Round 2 locations
St.Peterburg
Petrozavodsk
Vyborg
Murmansk
Kaliningrad
MOSCOW
Tver
Yaroslavl
Kaluga
Yakutsk
Saransk
Voronezh
Rostovon-Don
Surgut
Khabarovsk
Tomsk
Stavropol
Samara
Ulyanovsk
Kazan
Vladikavkaz
Volgograd
Irkutsk
Kirov
Kemerovo
Novosibirsk
10
Vladivostok
Ekaterinburg
Perm
Omsk
What are the key findings?
• No city outperforms the others in all areas
• Average start up costs are among the least expensive in the world
• Registering property is inexpensive and easy across Russian cities
• All 10 cities measured for the second time have improved in at least two of
the 3 areas measured twice
• Numerous procedures take a long time and carry a high cost in the areas
of dealing with construction permits and getting electricity
 Overall, it is easier to start a business, deal with construction permits, get
electricity and register property in Ulyanovsk and Saransk
11
Construction
permits
Getting
electricity
Registering
property
Aggregate
Rank
Starting a
business
Construction
permits
Getting
electricity
Registering
property
1
3
4
5
8
Volgograd
16
2
27
26
4
Saransk
2
20
8
1
8
Voronezh
17
15
28
16
8
Vladikavkaz
3
27
11
2
2
Tver
18
21
25
14
8
Rostov-on-Don
4
26
15
3
4
Kaliningrad
19
11
3
22
22
Kazan
5
4
14
17
4
Tomsk
20
15
6
10
25
Kaluga
6
17
9
15
1
Samara
21
22
24
28
8
Stavropol
7
4
2
9
19
St. Petersburg
22
1
9
24
27
Yaroslavl
8
7
17
6
16
Khabarovsk
23
24
29
8
17
Surgut
9
30
1
19
8
Yekaterinburg
24
29
13
19
20
Irkutsk
10
8
6
10
18
Perm
25
13
12
18
27
Petrozavodsk
11
6
16
21
8
Murmansk
26
12
19
27
23
Kirov
12
13
5
4
20
Kemerovo
27
28
21
7
29
Omsk
13
19
20
13
4
Yakutsk
28
8
26
25
30
Vyborg
14
10
23
12
8
Novosibirsk
29
23
18
29
24
Vladivostok
15
18
22
23
3
Moscow
30
25
30
30
26
12
City
Starting a
business
Ulyanovsk
City
Aggregate
Rank
No city outperforms
the others in more than one area
It is easier now to do business in all
10 cities measured twice
Starting a
business
Dealing with
construction permits
Registering
property
√
√
√
Kazan
√
√
Moscow
√
√
City
Irkutsk
Perm
√
√
√
Petrozavodsk
√
√
√
Rostov-on-Don
√
√
√
St. Petersburg
√
√
√
Tomsk
√
√
√
√
√
√
√
Tver
Voronzeh
√
Doing Business reforms making it easier do to business
13
Compared globally, starting a business is
inexpensive in all cities
46.8
Cost (% of income per capita)
17.9
10.6
0.4
14
1.3
1.7
2
2.3
3
3.5
4.68
5.4
11.2
More efficient one-stop shops and better
coordination speeds up start up in some cities
One-stop shop in Saint
Petersburg (ranks 1st in
Starting a business)
One-stop shop in
Saransk (ranks 20th in
Starting a business)
15
Construction permit requirements vary significantly
across cities—especially before construction
16
Cities are improving the construction permitting
process, but challenges remain
Reduced time for
processing permit
applications
Streamlined
procedures
Irkutsk



Moscow



Kazan



Perm



Petrozavodsk



Rostov-on-Don



St. Petersburg




Tomsk




Tver




Voronezh



City
17
Adopted new Introduced riskbuilding
based
regulations
approvals



Getting electricity: Fewer procedures do not
necessarily shorten delays
18
Property registration is
easy and inexpensive in Russia
Procedures, time and cost to register property
Brazil
Eastern Europe
& Central Asia, Japan, Turkey
India, Germany,
OECD high income,
Kemerovo, St. Petersburg
13
6
60
Yakutsk
7.3
45
44
Kemerovo
St. Petersburg
5.7
5.2
Japan
40
39
Germany, Kazakhstan
4.4
4.0
3.6
3.3
OECD high income
Finland
2.8
2.3
Eastern Europe & Central Asia
35
5
Russia Average, Yakutsk
China, Kazakhstan
4
Finland, Vladivostok,
Vladikavkaz, Kaluga
3
33
31
29
26
Saudi Arabia
19
Brazil
Russia average
Eastern Europe & Central Asia
OECD high income
Germany
China
Turkey
Brazil
China
Vladivostok, Vladikavkaz
19
14
Kaluga
6
1
Turkey
1
India
0.59
0.23
Finland, Japan
0.1
0
Saudi Arabia
Yakutsk
Russia average
Kazakhstan
Saudi Arabia
Procedures
Time
Cost
(number)
(days)
(% of income per capita)
Property registration is faster in the
10 cities studied in 2008
20
Russian cities can learn from each other
Doing
Business
indicator
Global Rank DB 2012*
Sub-Indicator
Best practice in Russia
Value
Rank
(1-183)
Value
Rank
(1-183)
Cost (% income per capita)
2
28
1.7
21
Kazan
Procedures (number)
9
124
7
86
Kirov, Murmansk, Perm, Petrozavodsk,
St. Petersburg, Stavropol, Yakutsk and
Yaroslavl
Time (days)
30
126
16
87
Kaliningrad
Dealing with Cost (% income per capita)
construction
Procedures (number)
permits
183.8
113
40.0
46
Kazan
51
181
16
103
Murmansk
Time (days)
423
173
150
78
Surgut
1852.4
140
112.2
47
Omsk
Procedures (number)
10
182
6
121
Kemerovo, Perm, Rostov-on-Don,
Samara and Yakutsk
Time (days)
281
178
120
120
Vladikavkaz
Cost (% of property value)
0.2
9
0.2
9
16 cities including Kaluga, Kazan and
Surgut
Procedures (number)
5
49
3
12
18 cities including Irkutsk, Rostov-onDon and Tver
Time (days)
43
104
13
28
Khabarovsk
Starting a
business
Cost (% income per capita)
Getting
electricity
Registering
property
Source: Doing Business database
21
City
Why does it matter?
Starting a business
Countries that regulate entry more heavily have greater corruption
and larger unofficial economies, but not better quality of public and
private goods.
Dealing with
construction permits
A recent study in the United States shows that accelerating permit
approvals by 3 months in a 22-month project cycle could increase
construction spending by 5.7% and property tax revenue by 16%.
Getting electricity
Managers in 109 economies consider electricity to be among the
biggest constraints to their business; they estimated losses due to
power outages at an average 5.1% of annual sales.
Registering property
Following a land titling project in Thailand, property increased in
value by 75–197% after being registered.
22
Good business regulations and governance
In countries where business regulation is efficient and information on
documentation requirements and fee schedules is easily accessible, the
costs to start a business are much lower.
23
Economies that score higher on the ease of doing
business, tend to receive higher FDI inflows
Average Ease
of Doing
Business rank
FDI inflows per capita, 2010 (US$)
3,000
2,500
6
$ 2,734
2,000
45
1,500
96
1,000
500
$ 379
$ 129
group A
group B
0
DB top 10
Denmark, Finland, Iceland,
Ireland, Korea, Rep., New
Zealand, Norway, Singapore,
United Kingdom, United States
24
Chile, Colombia, Kazakhstan,
Oman, Peru, Rwanda, Slovak
Republic, Spain, Tunisia
Belize, China, Greece,
Guatemala, Jordan, Morocco,
Serbia, Vietnam, Yemen
www.doingbusiness.org/russia