Doingbusiness in 2006 Creating Jobs

1
Doingbusiness in 2006Creating Jobs

• Desmond Dodd
• International Finance Corporation
• Kuala Lumpur, Malaysia
• Feburary 28, 2005

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Doingbusiness indicators
2005
2004
2006

• Business Licensing
• Taxation
• Trade Infrastructure
• Transport
• Customs
• Standards
• Updates of 04 and 05

• Corporate Governance
• Property registration
• Updates of 04 topics

• Regulation of Entry
• Labor Regulations
• Contract Enforcement
• Credit Markets
• Credit information
• Collateral
• Bankruptcy

Products Report, academic papers, country
summaries, website database www.doingbusiness.org
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Why is Doingbusiness important

• Demonstrate need for reform
• Indicators are a benchmark

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Methodology a time and motion study

1. Follow the entrepreneur from the beginning to the
   end of a basic transaction
2. Record every step of the process, and the
   associated time and cost
3. Gather all the relevant laws, regulations,
   decrees, fee schedules

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Starting a business in Pakistan (Jan. 1st, 2002)
Cost (right axis)
Cost, of per capita income
1. Pay bank fee for procs 2, 3 and 4 2. Check
name for uniqueness 3. Stamp memorandum and
articles 4. Register at Registrar of Companies 5.
Make a company seal 6. Apply for a National Tax
Number 7. Register for sales tax 8. Register for
professional tax 9. Register with Social Security
10. File for old age benefits
Time, days
Time (left axis)
Procedure
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Tracking reform Pakistan (Jan. 1st, 2003)
Cost (right axis)
1. Pay bank fee for procs 2, 3 and 4 2. Check
name for uniqueness 3. Stamp memorandum and
articles at Treasury 4. Register at Registrar of
Companies 5. Make a company seal 6. Apply for a
National Tax Number 7. Register for sales tax 8.
Register for professional tax 9. Register with
the Employee Social Security Institution 10. File
for old age benefits
Cost, of per capita income
Time, days
Time (left axis)
Procedure
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Documenting the process Example, Licensing
Procedures 22 Time 230 days Cost 38.5 per
capita income
Warehouse Project Hong Kong (China) Date
January 2005 City Hong Kong Regulatory
Requirements and Procedures
Procedure 1/22. Obtain planning permission
Time to complete 60 days
Cost to complete free of charge
Comments The company must apply for planning permission under section 16 of the town planning ordinance to ensure project meets zoning regulations. Under the current Town Planning Board Procedure and Practice, all planning applications should be considered by the respective Planning Committee (i.e. the Metro Planning Committee and the Rural and New Town Planning Committee) within two months from the date of receipt of the application and the applicant would be notified the decision shortly after the meeting. 

Procedure 2/22. Obtain building plans approval
Time to complete 45 days
Cost to complete HKD 32,106
Comments The company should submit the following documents for approval building plans (Form BA5, BD24) master layout plan general building plans piling plans hoarding plans site formation plans fire services installation plan (Form FSI/341A) environmental impact assessment report (EPD Form 3) drainage plans. These documents should be submitted to the following entities buildings department, planning department, lands department, fire services department, highways department, drainage service department, water supplies department and environmental protection department. These all government departments, the plans will be centralized by the buildings department, and approved by the corresponding departments. The company simply will contact the Building department for applying for the building permit.
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Registering Property

• Full sequence of procedures necessary when a
  business purchases land and a building to
  transfer the property title from the seller to
  the buyer.
• Assumptions about the business
• Assumptions about the property
• Measurements
• Procedures
• Time
• Cost

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Protecting Investors

• Measures the strength of minority shareholder
  protections against directors misuse of
  corporate assets for personal gain
• Assumptions about the business
• Assumptions about the transaction
• Measurements
• Extent of disclosure index
• Extent of director liability index
• Ease of shareholder suits index
• Strength of investor protection index

10
Enforcing Contracts

• Measures the judicial or administrative system in
  the collection of overdue debt
• Assumptions about the case
• Measurements
• Procedures
• Time
• Cost

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Closing a business

• Studies the time and cost of bankruptcy
  proceedings involving domestic entities
• Assumptions about the business
• Assumptions about the case
• Measurements
• Time
• Cost
• Recovery rate

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Trading across borders
Days to import
Hard infrastructure is only 25
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Strong incentives to evade tax means less revenue
Increase in gross profit from evading 20 of the
tax bill
Tax revenues relative to tax payable
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Top 30 economies on the ease of doing business

1. New Zealand
2. Singapore
3. United States
4. Canada
5. Norway
6. Australia
7. Hong Kong, China
8. Denmark
9. United Kingdom
10. Japan
11. Ireland
12. Iceland
13. Finland
14. Sweden
15. Lithuania

1. Estonia
2. Switzerland
3. Belgium
4. Germany
5. Thailand
6. Malaysia
7. Puerto Rico
8. Mauritius
9. Netherlands
10. Chile
11. Latvia
12. Korea
13. South Africa
14. Israel
15. Spain

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Bottom 30 economies on the ease of doing business

• 155. Congo, Dem. Rep
• 154. Burkina Faso
• 153. Central African Republic
• 152. Chad
• 151. Sudan
• 150. Niger
• 149. Togo
• 148. Congo, Rep.
• 147. Lao PDR
• 146. Mali
• 145. Cote dIvoire
• 144. Guinea
• 143. Burundi
• 142. Timor-Leste
• 141. Egypt

140. Tanzania 139. Rwanda 138. Uzbekistan 137.
Eritrea 136. Sierra Leone 135. Angola 134.
Haiti 133. Cambodia 132. Senegal 131.
Madagascar 130. Cameroon 129. Benin 128.
Algeria 127. Mauritania 126. Zimbabwe
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East Asia and Pacific performs well on the ease
of doing business
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Low reform rate in East Asia in 2004-2005
Percentage of countries with at least one reform
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Top reformers in 2004-2005
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How much more growth?
Reforms to reach the top quartile of countries
would add 2.2 percentage points annual growth
Actual Growth 1994-2004
Bottom quartile
Top quartile
Ease of Doing Business indicator
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How much more employment?
Reforms to reach the top quartile of countries
could cut 3.7 percentage points off unemployment
Implied rate after cut
Bottom quartile
Top quartile
Ease of Doing Business indicator
21
How much less informality?
Reforms to reach the top quartile of countries
could cut 9 percentage points off the share of
informal sector as a of GDP
Implied rate after cut
Bottom quartile
Top quartile
Ease of Doing Business indicator
22
Heavy regulations exclude the vulnerable
Greater Informal Sector to GDP
Lesser Womens Share of Private Employment
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Using Doingbusiness

• Demonstrate need for reform
• All DB data publicly available
• Thailand targeting top 10 spot
• India Committee to improve ranking
• Fiji Discussion accelerated efforts to
  streamline business entry regulations
• China Endorsing impact of company law reform
• Provides focus for reform efforts
• Malaysia strong on getting credit, protecting
  investors weak on licenses and contracts

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Using Doingbusiness

• Indicators are a benchmark
• Evaluating proposed reforms
• Simulate impact of reforms
• Advance demonstration of reform impact can help
  lessen opposition
• Regional reform
• New Zealand DB to promote business environ.
  reform in APEC

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Doing Business

• www.doingbusiness.org
• Regional reports
• East Asia and the Pacific
• South Asia
• International Finance Corporation
• Hong Kong Desmond Dodd, ddodd_at_ifc.org
• World Bank Group, Private Sector Dev., Principal
  Authors
• Washington, DC Simeon Djankov,
  sdjakov_at_worldbank.org
• Washington, DC Caralee McLeish, cmcleish_at_ifc.org