2004 2013 2008 2007 2011 2006 2010 COMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 185 ECONOMIES 10TH EDITION DOING BUSINESS 2013 Smarter Regulations for Small and Medium-Size Enterprises c.Cover_DB2013_cxs.indd 1 10/3/12 1:50 PM © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Some rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the sta of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an o cial World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the O ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Additional copies of all 10 editions of Doing Business may be purchased at www.doingbusiness.org. ISBN (paper): 978-0-8213-9615-5 ISBN (electronic): 978-0-8213-9624-7 DOI: 10.1596/978-0-8213-9615-5 ISSN: 1729-2638 Design and Layout: Corporate Visions, Inc. c.Cover_DB2013_cxs.indd 2 10/11/12 12:37 PM A COPUBLICATION OF THE WORLD BANK AND THE INTERNATIONAL FINANCE CORPORATION COMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 185 ECONOMIES 2013 Smarter Regulations for Small and Medium-Size Enterprises c.i-vi.indd i 10/4/12 11:18 AM RESOURCES ON THE DOING BUSINESS WEBSITE Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank—from 1 to 185 http://www.doingbusiness.org/rankings/ Data All the data for 185 economies—topic rankings, indicator values, lists of regulatory procedures and details underlying indicators http://www.doingbusiness.org/data/ Reports Access to Doing Business reports as well as subnational and regional reports, reform case studies and customized economy and regional profi les http://www.doingbusiness.org/reports/ Methodology The methodologies and research papers underlying Doing Business http://www.doingbusiness.org/methodology/ Research Abstracts of papers on Doing Business topics and related policy issues http://www.doingbusiness.org/research/ Doing Business reforms Short summaries of DB2013 business regulation reforms, lists of reforms since DB2008 and a ranking simulation tool http://www.doingbusiness.org/reforms/ Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Law library Online collection of business laws and regulations relating to business and gender issues http://www.doingbusiness.org/law-library/ http://wbl.worldbank.org/ Contributors More than 9,600 specialists in 185 economies who participate in Doing Business http://www.doingbusiness.org/contributors/ doing-business/ NEW! Entrepreneurship data Data on business density for 130 economies http://www.doingbusiness.org/data/exploretopics/ entrepreneurship/ More to come Coming soon—information on good practices and data on transparency and on the distance tofrontier c.i-vi.indd ii 10/4/12 11:18 AM Contents v Preface 1 Executive summary 15 About Doing Business: measuring for impact Case studies 26 Colombia: sustaining reforms over time 32 Latvia: maintaining a reform state of mind 37 Rwanda: fostering prosperity by promoting entrepreneurship 42 APEC: sharing goals and experience 47 Does Doing Business matter for foreign direct investment? 51 How transparent is business regulation around the world? Topic notes 56 Starting a business 60 Dealing with construction permits 64 Getting electricity 68 Registering property 72 Getting credit 77 Protecting investors 81 Paying taxes 86 Trading across borders 90 Enforcing contracts 94 Resolving insolvency 98 Annex: employing workers 101 References 106 Data notes 131 Ease of doing business and distance to frontier 135 Summaries of Doing Business reforms in 2011/12 145 Country tables 207 Employing workers data 216 Acknowledgments Doing Business 2013 is the 10th in a series of annual reports investigating the regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 185 economies—from Afghanistan to Zimbabwe—and over time. Regulations a ecting 11 areas of the life of a business are covered: starting a busi- ness, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and em- ploying workers. The employing workers data are not included in this year’s ranking on the ease of doing business. Data in Doing Business 2013 are current as of June1, 2012. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why. c.i-vi.indd iii 10/4/12 11:18 AM c.i-vi.indd iv 10/4/12 11:18 AM This is the 10th edition of the Doing Business report. First published in 2003 with 5 indicator sets measuring business regulation in 133 economies, the report has grown into an annual publication covering 11 indicator sets and 185 economies. In these 10 years Doing Business has recorded nearly 2,000 business regulation reforms in the ar- eas covered by the indicators. And researchers have produced well over 1,000 articles in peer-reviewed journals using the data published by Doing Business—work that helps explore many of the key development questions of our time. Doing Business 2013 holds new information to inspire policy makers and research- ers. One fi nding is that Poland improved the most in the Doing Business measures in 2011/12, while Singapore maintains its top spot in the overall ranking. Another fi nding is that European economies in fi scal distress are making e orts to improve the business climate, and this is beginning to be refl ected in the indicators tracked by Doing Business, with Greece being among the 10 economies that improved the most in the Doing Business measures in the past year. Part of the solution to high debt is the recovery of economic growth, and there is broad recognition that creating a friendlier environment for entrepreneurs is central to this goal. But perhaps the most exciting fi nding is that of a steady march from 2003 to 2012 toward better business regulation across the wide range of economies included. With a handful of exceptions, every economy covered by Doing Business has narrowed the gap in business regulatory practice with the top global performance in the areas measured by the indicators. This is a welcome race to the top. Collecting the more than 57,000 unique Doing Business data points each year and placing them in a broader context of economic policy and development is a major undertaking. We thank the team and the Doing Business contributors for their e orts. Data collection and analysis for Doing Business 2013 were conducted through the Global Indicators and Analysis Department under the general direction of Augusto Lopez- Claros. The project was managed by Sylvia Solf and Rita Ramalho, with the support of Carolin Geginat and Adrian Gonzalez. Other team members included Beatriz Mejia Asserias, Andres Baquero Franco, Karim O. Belayachi, Iryna Bilotserkivska, Mariana Carvalho, Hayane Chang Dahmen, Rong Chen, Maya Choueiri, Dariga Chukmaitova, Santiago Croci Downes, Fernando Dancausa Diaz, Marie Lily Delion, Raian Divanbeigi, Alejandro Espinosa-Wang, Margherita Fabbri, Caroline Frontigny, Betina Hennig, Sarah Holmberg, Hussam Hussein, Joyce Ibrahim, Ludmila Jantuan, Nan Jiang, Hervé Kaddoura, Paweł Kopko, Jean Michel Lobet, Jean-Philippe Lodugnon-Harding, Frédéric Meunier, Robert Murillo, Joanna Nasr, Marie-Jeanne Ndiaye, Nuria de Oca, Mikiko Imai Ollison, Nina Paustian, Galina Rudenko, Valentina Saltane, Lucas Seabra, Paula Garcia Serna, Anastasia Shegay, Jayashree Srinivasan, Susanne Szymanski, Moussa Traoré, Tea Trumbic, Marina Turlakova, Julien Vilquin, Yasmin Zand and Yucheng Zheng. More than 9,600 lawyers and other professionals generously donated their time to provide the legal assessments that underpin the data. We thank in particular the global contributors: Advocates for International Development; Allen & Overy LLP; American Preface v c.i-vi_cx.indd v 10/8/12 7:50 PM Bar Association, Section of International Law; Baker & McKenzie; Cleary Gottlieb Steen & Hamilton LLP; Ernst & Young; Ius Laboris, Alliance of Labor, Employment, Benefi ts and Pensions Law Firms; KPMG; the Law Society of England and Wales; Lex Mundi, Association of Independent Law Firms; Panalpina; PwC; Raposo Bernardo & Associados; Russell Bedford International; SDV International Logistics; and Security Cargo Network. The e orts of all these contributors help maintain the distinctive voice of Doing Business and its annual contribution to business regulation reform. Ten years marks a good time to take stock of where the world has moved in business regulatory practices and what challenges remain. We welcome you to give feedback on the Doing Business website (http://www.doingbusiness.org) and join the conversation as we shape the project in the years to come. Sincerely, Janamitra Devan Vice President and Head of Network Financial & Private Sector Development World Bank Group DOING BUSINESS 2013vi c.i-vi.indd vi 10/4/12 11:18 AM 1 Executive summary This 10th edition of the Doing Business report marks a good time to take stock— to look at how far the world has come in business regulatory practices and what challenges remain. In the fi rst report one of the main fi ndings was that low-income economies had very cumbersome regula- tory systems. Ten years later it is appar- ent that business regulatory practices in these economies have been gradually but noticeably converging toward the more e cient practices common in higher- income economies (box 1.1). How much has the gap narrowed? Did some regions close the regulatory gap more rapidly than others? This year’s report tells that story. It points to important trends in regulatory reform and identifi es the re- gions and economies making the biggest improvements for local entrepreneurs. And it highlights both the areas of busi- ness regulation that have received the most attention and those where more progress remains to be made. The report also reviews research on which regulatory reforms have worked and how. After 10 years of data tracking reforms and regulatory practices around the world, more evidence is available to address these questions. The report sum- marizes just some of the main fi ndings. Among the highlights: Smarter business regulation supports economic growth. Simpler business registration promotes greater entrepreneurship and fi rm pro- ductivity, while lower-cost registration improves formal employment opportuni- ties. An e ective regulatory environment boosts trade performance. And sound MAIN FINDINGS IN 2011/12  Worldwide, 108 economies implemented 201 regulatory reforms in 2011/12 making it easier to do business as measured by Doing Business.  Poland improved the most in the ease of doing business, through 4 reforms—making it easier to register property, pay taxes, enforce contracts and resolve insolvency as measured by Doing Business.  Eastern Europe and Central Asia once again had the largest share of economies implementing regulatory reforms—88% of its economies reformed in at least one of the areas measured by Doing Business.  European economies in fi scal distress are working to improve the business climate, and this is beginning to be refl ected in the indicators tracked by Doing Business. Greece is one of the 10 most improved globally in 2011/12.  Reform efforts globally have focused on making it easier to start a new business, increasing the effi ciency of tax administration and facilitating trade across international borders. Of the 201 regulatory reforms recorded in the past year, 44% focused on these 3 policy areas alone. BOX 1.1 MAIN FINDINGS SINCE 2003 AND THE FIRST DOING BUSINESS REPORT • Over these 10 years 180 economies implemented close to 2,000 business regula- tory reforms as measured by Doing Business. • Eastern Europe and Central Asia improved the most, overtaking East Asia and the Pacifi c as the world’s second most business-friendly region according to Doing Business indicators. OECD high-income economies continue to have the most business-friendly environment. • Business regulatory practices have been slowly converging as economies with initially poor performance narrow the gap with better performers. Among the 50 economies with the biggest improvements since 2005, the largest share—a third— are in Sub-Saharan Africa. • Among the categories of business regulatory practices measured by Doing Business, there has been more convergence in those that relate to the complexity and cost of regulatory processes (business start-up, property registration, construction per- mitting, electricity connections, tax payment and trade procedures) than in those that relate to the strength of legal institutions (contract enforcement, insolvency regimes, credit information, legal rights of borrowers and lenders and the protection of minority shareholders). • Two-thirds of the nearly 2,000 reforms recorded by Doing Business were focused on reducing the complexity and cost of regulatory processes. • A growing body of research has traced out the e ects of simpler business regulation on a range of economic outcomes, such as faster job growth and an accelerated pace of new business creation. c.p001-014.indd 1 10/4/12 11:21 AM DOING BUSINESS 20132 fi nancial market infrastructure—courts, creditor and insolvency laws, and credit and collateral registries—improves ac- cess to credit (see the chapter “About Doing Business”). WHAT ARE SMART RULES FOR BUSINESSES? Just as good rules are needed to allow tra c to fl ow in a city, they are also es- sential to allow business transactions to fl ow. Good business regulations enable the private sector to thrive and businesses to expand their transactions network. But regulations put in place to safeguard economic activity and facilitate business operations, if poorly designed, can become obstacles to doing business. They can be like tra c lights put up to prevent gridlock—ine ective if a red light lasts for an hour. Most people would run the red light, just as most businesses facing burdensome regulations will try to circumvent them to stay afl oat. Striking the right balance in business regulation can be a challenge. It becomes an even greater challenge in a changing world, where regulations must continu- ally adapt to new realities. Just as tra c systems have to adjust when a new road is being constructed, regulations need to adapt to new demands from the market and to changes in technology (such as the growing use of information and communication technology in business processes). This challenge is one focus of this report. Through indicators benchmarking 185 economies, Doing Business measures and tracks changes in the regulations applying to domestic small and medium- size companies in 11 areas in their life cycle. This year’s aggregate ranking on the ease of doing business is based on indicator sets that measure and bench- mark regulations a ecting 10 of those areas: starting a business, dealing with construction permits, getting electric- ity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also documents regulations on employing workers, which are not included in this year’s aggregate ranking or in the count of reforms. The economies that rank highest on the ease of doing business are not those where there is no regulation—but those where governments have managed to create rules that facilitate interactions in the marketplace without needlessly hindering the development of the private sector. In essence, Doing Business is about SMART business regulations— Streamlined, Meaningful, Adaptable, Relevant, Transparent—not necessarily fewer regulations (see fi gure 2.1 in the chapter “About Doing Business”). Doing Business encompasses 2 types of in- dicators: indicators relating to the strength of legal institutions relevant to business regulation and indicators relating to the complexity and cost of regulatory processes. Those in the fi rst group focus on the legal and regulatory framework for getting credit, protecting investors, enforcing contracts and resolving insolvency. Those in the second focus on the cost and ef- fi ciency of regulatory processes for start- ing a business, dealing with construction permits, getting electricity, registering property, paying taxes and trading across borders. Based on time-and-motion case studies from the perspective of the busi- ness, these indicators measure the proce- dures, time and cost required to complete a transaction in accordance with relevant regulations. (For a detailed explanation of the Doing Business methodology, see the data notes and the chapter “About Doing Business.”) Economies that rank high on the ease of doing business tend to combine e cient regulatory processes with strong legal in- stitutions that protect property and inves- tor rights (fi gure 1.1). OECD high-income economies have, by a large margin, the most business-friendly regulatory envi- ronment on both dimensions. Regions such as East Asia and the Pacifi c and the Middle East and North Africa have relatively e cient regulatory processes but still lag in the strength of legal insti- tutions relevant to business regulation. Good practices around the world provide insights into how governments have improved the regulatory environment in the past in the areas measured by Doing Business (see table 1.4 at the end of the executive summary). WHO NARROWED THE REGULATORY GAP IN 2011/12? As refl ected in the ranking on the ease of doing business, the 10 economies with the most business-friendly regulation are Singapore; Hong Kong SAR, China; New Zealand; the United States; Denmark; Norway; the United Kingdom; the Republic of Korea; Georgia; and Australia (table 1.1). Singapore tops the global rank- ing for the seventh consecutive year. A number 1 ranking on the ease of doing business does not mean that an economy ranks number 1 across all 10 regulatory areas included in this aggregate measure. Indeed, Singapore’s rankings range from 1 in trading across borders to 36 in registering property. Its top 3 rankings (on trading across borders, dealing with construction permits and protecting investors) average 2, while its lowest 3 (on registering property, getting credit and enforcing contracts) average 20. Similarly, Guatemala’s top 3 (on getting credit, registering property and getting electricity) average 22, and its bottom 3 (on paying taxes, protecting investors and starting a business) average 151. So while the ease of doing business ranking is a useful aggregate measure, analysis based on this measure should also take into account the dispersion of regulatory e ciency across the areas measured by Doing Business (fi gure 1.2). In the past year 58% of economies cov- ered by Doing Business implemented at least 1 institutional or regulatory reform making it easier to do business in the ar- eas measured, and 23 undertook reforms in 3 or more areas. Of these 23 econo- mies, 10 stand out as having jumped c.p001-014.indd 2 10/4/12 11:21 AM [...]... the Doing Business data as a tool and common language to set an agenda for business regulation reform 1 These are reforms for which Doing Business is aware that information provided by the Doing Business report was used in shaping the reform agenda Doing Business respondents Over the past 10 years more than 18,000 professionals in 185 economies have assisted in providing the data that inform the Doing. .. able to increase doingbusiness.org/contributors/ doing- business 52 All background papers are available on the Doing Business website (http://www doingbusiness.org) 53 For more details, see the chapter on the ease of doing business and distance to frontier 54 A technical note on the different aggregation and weighting methods is available on the Doing Business website (http://www.doingbusiness.org) 25... improve on regulations that protect investor and property rights Many also tend to streamline existing regulations and prune outdated ones One finding of Doing Business is that dynamic and growing economies continually reform and update their business regulations and the implementation of those regulations, while many poor economies still work with regulatory systems dating to the late 1800s For reform-minded... aggregate ranking on the ease of doing business Figure is for illustrative purposes only; it does not include all 185 economies covered by this year’s report See the country tables for rankings on the ease of doing business and each Doing Business topic for all economies Source: Doing Business database for company incorporation Sri Lanka computerized and expedited the process for registering employees Burundi... 0 -3 -2 -1 0 Years before reform 1 2 3 Years after reform Note: All 6 economies implemented a reform making it easier to start a business as measured by Doing Business The reform year varies by economy and is represented by the vertical line in the figure For Bangladesh and Rwanda it is 2009; for Chile, 2011; for Kenya, 2007; for Morocco, 2006; and for Sweden, 2010 Source: World Bank Group Entrepreneurship... METHODOLOGY AND DATA The Doing Business data are based on domestic laws and regulations as well as administrative requirements The data cover 185 economies—including small economies and some of the poorest economies, for which little or no data are available in other data sets (For a detailed explanation of the Doing Business methodology, see the data notes.) ABOUT DOING BUSINESS: MEASURING FOR IMPACT... USED DOING BUSINESS IN REGULATORY REFORM PROGRAMS To ensure the coordination of efforts across agencies, such economies as Brunei Darussalam, Colombia and Rwanda have formed regulatory reform committees, reporting directly to the president These committees use the Doing Business indicators as one input to inform their programs for improving the business environment More than 35 other economies have formed... topics and 185 economies 16 DOING BUSINESS 2013 Ten topics are included in the aggregate ranking on the ease of doing business, and 9 in the distance to frontier measure.4 The project has benefited from feedback from governments, academics, practitioners and reviewers.5 The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business WHAT DOING. .. economies reforming business regulation in 2011/12 Share of economies with at least 2 Doing Business reforms making it easier to do business (%) reforms on average and those in East Asia and the Pacific, Latin America and the Caribbean and South Asia about 8 With its faster pace of improvement, 100 98 89 88 88 100 Eastern Europe and Central Asia overtook 88 East Asia and the Pacific as the second most business- friendly... to the formal sector ness form in many economies around The Doing Business indicators assume the world Second, this choice reflects that entrepreneurs have knowledge of the focus of Doing Business on expand- and comply with applicable regulations ing opportunities for entrepreneurship: In practice, entrepreneurs may not know BOX 2.1 COMPARING REGULATIONS AT THE LOCAL LEVEL: SUBNATIONAL DOING BUSINESS . CORPORATION COMPARING BUSINESS REGULATIONS FOR DOMESTIC FIRMS IN 185 ECONOMIES 2013 Smarter Regulations for Small and Medium-Size Enterprises c.i-vi.indd. cite the work as follows: World Bank. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group.