Frederic Meunier, Private Sector Specialist

Washington, D.C.December 6th 2014

Global Indicators GroupDEVELOPMENT ECONOMICS

DOING BUSINESS 2015GOING BEYOND EFFICIENCY

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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.

What does Doing Business measure?

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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

In daily operations• Paying taxes• Trading across

borders

In getting financing• Getting credit• Protecting minority

investors

In getting a location• Dealing with

construction permits• Getting electricity• Registering property

When things go wrong• Enforcing contracts• Resolving

insolvency

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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

• Access to finance, and tax rates are the top obstacles across the developing world

Source: Enterprise Surveys database

Business licensing and permits

Access to land

Crime, theft and disorder

Corruption

Inadequately educated workforce

Electricity

Political instability

Tax rates

Practices of the informal sector

Access to finance

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

2.7%

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16.7%

Percent of firms identifying the problem as the main obstacle to their business activity

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What are the advantages and limitations of the Doing Business methodology?

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.

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How does Doing Business collect and verify data?

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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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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

Europe and Central Asia

Middle East and North

Africa

South Asia

East Asia and Pacific

Sub-Saharan Africa

Latin America &

the Caribbean

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.

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The metric on “distance to frontier”: tracking economies’ progress over time

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Strong convergence across economies since 2005 Averages by group

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.

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

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Time to start a business (days)

Worst quartile Best 3 quartiles

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

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Time to pay taxes (hours per year)

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2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

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Time to export (days)

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Time to register property (days)

Worst quartile Best 3 quartiles

Following Doing Business best practices would significantly decrease the time to start a business

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• 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.

• 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).

Not following best practices Following best practices

40.7

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Days to start a business (millions)

Source: World Bank’s Entrepreneurship Database; Doing Business database.

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

Now, the time to start a business is less than 20 days for entrepreneurs in 127 economies

2005

2014*

*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 of Economics, February 2002, Djankov, La Porta, Lopez de Silanes, Shleifer.) 4

Reforms making it easier to start a business were once again most common in 2013/14 – and show results over time in reduced delays…

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Following Doing Business best practices would also significantly decrease the time to pay taxes

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• 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

Not following best practices Following best practices0.0

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Days to pay taxes (billions)

Source: World Bank’s Entrepreneurship Database ; Doing Business database.

1.1

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Time and motion indicators focus on the processExample: 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.

• 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

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Time and motion indicators focus on the processExample: 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?

The transfer of a commercial warehouse between two domestic companies

How is the indicator constructed?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 - MethodologyWhat procedures of the transfer do we measure?

Conducting due diligence(title search, encumbrance checking,

cadastral map)

Signing of sales contract

Payment of Stamp duty, transfer tax and registration tax

Registration at the land/property registry

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)

• 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

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Registering Property reforms in 2013/1421 economies made it easier for businesses to register property

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 d'Ivoire; Ireland; Korea, Rep.; Poland; Sweden; Vanuatu

Albania extended the use of the electronic registry system saving 11 days. Côte d'Ivoire and Vanuatu digitized their land registries. Sweden introduced a new electronic system for property registration reducing time by 14 days.

Introduced fast-track procedures

Kazakhstan; Sierra Leone 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.

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In 2013/14 Greece made the biggest improvement on the ease of registering property

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.

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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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 Accountability mechanisms

Where is coverage complete?

How to deal with land disputes?

Presentation Title

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THANK YOU!