92113 Doing Business 2015 Romania Economy Profile 2015 Romania Doing Business 2015 Romania 2 © 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 Romania 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 32 Registering property .................................................................................................................. 38 Getting credit .............................................................................................................................. 48 Protecting minority investors ................................................................................................... 55 Paying taxes ................................................................................................................................ 63 Trading across borders .............................................................................................................. 68 Enforcing contracts .................................................................................................................... 72 Resolving insolvency .................................................................................................................. 79 Labor market regulation ........................................................................................................... 84 Distance to frontier and ease of doing business ranking ...................................................... 91 Resources on the Doing Business website .............................................................................. 94 Doing Business 2015 Romania 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for Romania. To allow useful comparison, it information on ordering Doing Business 2015, are also provides data for other selected economies available on the Doing Business website at (comparator economies) for each indicator. The data in http://www.doingbusiness.org. this report are current as of June Doing Business 2015 Romania 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 Romania 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: Europe & Central Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 19,963,581 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 9,060 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 48 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 50* distance to the best performance in each Doing Business Change in rank: 2 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 70.2 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 68.5 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 1.7 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 Romania THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 Romania THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Romania and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Romania 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Romania (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Romania (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Romania 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Romania come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 Romania 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Romania Slovak Republic DB2015 Best performer globally Czech Republic DB2015 Moldova DB2015 Romania DB2015 Romania DB2014 Hungary DB2015 Bulgaria DB2015 Poland DB2015 Indicator DB2015 Starting a Business 38 37 49 110 57 35 85 77 New Zealand (1) (rank) Starting a Business (DTF 91.93 91.76 91.09 82.58 90.04 92.16 85.79 87.02 New Zealand (99.96) Score) Procedures (number) 5.0 5.0 4.0 9.0 4.0 5.0 4.0 7.0 New Zealand (1.0)* Time (days) 8.0 8.5 18.0 19.0 5.0 6.0 30.0 11.5 New Zealand (0.5) Cost (% of income per 2.1 2.4 0.8 8.0 8.3 4.6 12.9 1.5 Slovenia (0.0) capita) Paid-in min. capital (% 0.7 0.7 0.0 0.0 54.0 0.0 12.3 19.2 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 140 139 101 139 103 175 137 110 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 62.17 62.06 69.85 62.91 69.37 48.11 62.97 68.19 China (95.53) (DTF Score) Doing Business 2015 Romania 12 Slovak Republic DB2015 Best performer globally Czech Republic DB2015 Moldova DB2015 Romania DB2015 Romania DB2014 Hungary DB2015 Bulgaria DB2015 Poland DB2015 Indicator DB2015 Hong Kong SAR, Procedures (number) 14.0 14.0 16.0 24.0 23.0 27.0 19.0 10.0 China (5.0) Time (days) 255.0 255.0 110.0 143.0 91.0 247.0 212.0 286.0 Singapore (26.0) Cost (% of warehouse 2.3 2.4 4.5 0.3 0.2 0.8 0.3 0.1 Qatar (0.0)* value) Getting Electricity 171 171 125 123 162 149 64 100 Korea, Rep. (1) (rank) Getting Electricity (DTF 46.03 45.87 65.78 66.52 55.10 59.72 79.19 72.71 Korea, Rep. (99.83) Score) Procedures (number) 7.0 7.0 6.0 6.0 5.0 7.0 3.0 5.0 12 Economies (3.0)* Time (days) 223.0 223.0 130.0 129.0 252.0 118.0 161.0 128.0 Korea, Rep. (18.0)* Cost (% of income per 496.1 533.9 320.4 175.8 111.5 865.1 20.8 56.9 Japan (0.0) capita) Registering Property 63 62 57 31 52 22 39 11 Georgia (1) (rank) Registering Property 74.39 74.24 75.36 81.87 78.04 86.10 80.30 91.88 Georgia (99.88) (DTF Score) Procedures (number) 8.0 8.0 7.0 3.0 4.0 5.0 6.0 3.0 4 Economies (1.0)* Time (days) 19.0 19.0 10.0 24.0 16.5 5.5 33.0 16.5 3 Economies (1.0)* Cost (% of property 1.5 1.6 2.9 4.0 5.0 0.9 0.3 0.0 4 Economies (0.0)* value) Getting Credit (rank) 7 5 23 23 17 23 17 36 New Zealand (1) Getting Credit (DTF 85.00 85.00 70.00 70.00 75.00 70.00 75.00 65.00 New Zealand (100) Score) Strength of legal rights 10 10 9 7 10 8 7 7 3 Economies (12)* index (0-12) Doing Business 2015 Romania 13 Slovak Republic DB2015 Best performer globally Czech Republic DB2015 Moldova DB2015 Romania DB2015 Romania DB2014 Hungary DB2015 Bulgaria DB2015 Poland DB2015 Indicator DB2015 Depth of credit 7 7 5 7 5 6 8 6 23 Economies (8)* information index (0-8) Credit registry coverage 12.3 11.8 62.9 6.4 0.0 0.0 0.0 2.8 Portugal (100.0) (% of adults) Credit bureau coverage 46.6 46.9 0.0 76.6 74.6 8.8 84.3 65.7 23 Economies (100.0)* (% of adults) Protecting Minority 40 40 14 83 110 56 35 100 New Zealand (1) Investors (rank) Protecting Minority 61.67 61.67 68.33 54.17 47.50 58.33 62.50 50.83 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 6.3 6.3 6.3 5.3 4.0 6.3 6.0 4.7 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 6.0 6.0 7.3 5.5 5.5 5.3 6.5 5.5 France (7.8)* 10) Strength of minority investor protection 6.2 6.2 6.8 5.4 4.8 5.8 6.3 5.1 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 52 128 89 119 88 70 87 100 (1)* Paying Taxes (DTF United Arab Emirates 80.09 64.08 73.18 67.66 73.27 76.57 73.51 71.57 Score) (99.44)* Payments (number per Hong Kong SAR, 14.0 39.0 13.0 8.0 11.0 21.0 18.0 20.0 year) China (3.0)* Time (hours per year) 159.0 200.0 454.0 413.0 277.0 185.0 286.0 207.0 Luxembourg (55.0) Trading Across Borders 65 68 57 58 72 152 41 71 Singapore (1) (rank) Trading Across Borders 77.23 76.86 78.34 78.33 76.48 54.97 81.80 76.49 Singapore (96.47) Doing Business 2015 Romania 14 Slovak Republic DB2015 Best performer globally Czech Republic DB2015 Moldova DB2015 Romania DB2015 Romania DB2014 Hungary DB2015 Bulgaria DB2015 Poland DB2015 Indicator DB2015 (DTF Score) Documents to export 5 5 4 4 6 9 5 5 Ireland (2)* (number) Time to export (days) 13.0 13.0 18.0 17.0 17.0 23.0 15.0 16.0 5 Economies (6.0)* Cost to export (US$ per 1,485.0 1,485.0 1,375.0 1,240.0 885.0 1,510.0 1,050.0 1,525.0 Timor-Leste (410.0) container) Cost to export (deflated 1,485.0 1,541.3 1,375.0 1,240.0 885.0 1,510.0 1,050.0 1,525.0 US$ per container) Documents to import 6 6 5 6 6 11 4 5 Ireland (2)* (number) Time to import (days) 13.0 13.0 17.0 17.0 19.0 27.0 14.0 16.0 Singapore (4.0) Cost to import (US$ per 1,495.0 1,495.0 1,365.0 1,215.0 845.0 1,870.0 1,025.0 1,505.0 Singapore (440.0) container) Cost to import (deflated 1,495.0 1,551.6 1,365.0 1,215.0 845.0 1,870.0 1,025.0 1,505.0 US$ per container) Enforcing Contracts 51 52 75 37 20 42 52 55 Singapore (1) (rank) Enforcing Contracts 64.95 64.95 61.27 68.00 73.36 66.68 64.83 64.68 Singapore (89.54) (DTF Score) Time (days) 512.0 512.0 564.0 611.0 395.0 567.0 685.0 545.0 Singapore (150.0) Cost (% of claim) 28.9 28.9 23.8 33.0 15.0 28.6 19.4 30.0 Iceland (9.0) Procedures (number) 34.0 34.0 38.0 27.0 34.0 31.0 33.0 33.0 Singapore (21.0)* Resolving Insolvency 46 45 38 20 64 58 32 31 Finland (1) (rank) Resolving Insolvency 58.70 58.31 64.75 77.50 49.78 53.32 69.73 69.93 Finland (93.85) (DTF Score) Doing Business 2015 Romania 15 Slovak Republic DB2015 Best performer globally Czech Republic DB2015 Moldova DB2015 Romania DB2015 Romania DB2014 Hungary DB2015 Bulgaria DB2015 Poland DB2015 Indicator DB2015 Time (years) 3.3 3.3 2.1 2.0 2.8 3.0 4.0 Ireland (0.4) Cost (% of estate) 10.5 10.5 9.0 17.0 14.5 15.0 15.0 18.0 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 0 0 0 1 0 0 1 1 going concern) Recovery rate (cents on 30.7 30.0 33.2 65.6 40.2 29.4 57.0 54.4 Japan (92.9) the dollar) Strength of insolvency 13.5 13.5 15.0 13.5 9.0 12.0 12.5 13.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 Romania 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Romania 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Romania? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 5.0 procedures, takes 8.0 days, average of the 2 largest business cities. See the chapter costs 2.1% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.7% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Romania - Paid-in minimum capital (% of income per capita): 0.7 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Romania 18 STARTING A BUSINESS Globally, Romania stands at 38 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Romania The rankings for comparator economies and the regional to start a business. Figure 2.2 How Romania and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 Romania 19 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Romania (table 2.1)? Table 2.1 How has Romania made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania made starting a business more difficult by requiring a DB2012 tax clearance certificate for a new company’s headquarters before company registration. Romania made starting a business easier by reducing the time DB2013 required to obtain a clearance certificate from the fiscal administration agency. Romania made starting a business easier by transferring DB2014 responsibility for issuing the headquarters clearance certificate from the Fiscal Administration Office to the Trade Registry. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Romania is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Societate cu rãspundere limitatã - firm. These are identified by Doing Business through Limited Liability Company collaboration with relevant local professionals and the study of laws, regulations and publicly available Paid in minimum capital requirement: RON 200 information on business entry in that economy. City: Bucharest Following is a detailed summary of those procedures, along with the associated time and cost. These Start-up Capital: 10 times GNI per capita procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Romania - Time to No. Procedure Cost to complete complete Evidence of verification of company name availability and reservation thereof According to the Methodological Norms on keeping the trade register, making reservations and release of information: - The reservation of a company name is requested at the trade register office by application and is checked and made at national level so that company names are protected at national level as well. A company name shall not include words like: ”științific”, ”academie”, ”academic”, ”universitate”, ”universitar”, ”școală”, ”școlar” or their Less than one day 1 RON 72 derivatives. (online procedure) - A company name including words like ”național”, ”român”, ”institut” or their derivatives or words or phrases characteristic of the central or local public institutions or authorities may be used only with the approval of the General Secretariat of the Government or the Prefect. Such certificate is valid for a period of 3 months. Agency: Trade Registry Office Deposit funds in a bank and obtain a document confirming bank deposit of sufficient funds The company's administrator or an authorized person must deliver 2 certified copies of: (i) the name availability certificate, (ii) Articles of 1 day no charge Incorporation, (iii) proof of the registered offices and (iv) the power of attorney (if applicable). After the documents are being reviewed by a bank's representative, the deposit is granted and the administrator/authorized person will receive a document confirming the Doing Business 2015 Romania 21 Time to No. Procedure Cost to complete complete deposit of sufficient funds. Agency: Bank Company registration at the Trade Register Office In order to register at the Trade Register, the founders of the company shall have to prepare the articles of incorporation. Within 15 days from the establishment of the articles of incorporation, the founders or their mandates shall be under the obligation to register the company at the trade register in the area of the company's registered office. The articles of incorporation shall include, inter alia, the amount of the capital, which shall be fully subscribed by the founders. The trade register office also obtains electronically the fiscal record certificates. Registration at the trade register office is finalized by issuance of the certificate of incorporation ensures the following: - company incorporation - fiscal registration (for profit, wages, health, pensions, unemployment taxes) by obtaining the unique registration code from the Ministry of Public Finance - authorization, based on statements of own responsibility, in the field of food safety and sanitary-veterinary protection, environment protection and labor protection - publication in the Official Gazette of Romania as legal publicity. see procedure 3 3 days Registration for VAT purposes is made at the Fiscal Administration details Authority directly. Based on Government Emergency Ordinance no. 116/2009 instituting certain measures regarding the activity of registration in the trade register, in order to simplify the registration procedures, the final approval for incorporation is no longer given by a delegated judge, but by the director or the appointed person of the territorial trade register office in the county where the company is incorporated, Bucharest in our case study. Cost details: RON 580.50 = (RON 250 registration fee + 50% liquidation fund fee and 5% insolvency bulletin fee) + RON 31.50 for publication in the Official Gazette of Romania + RON 100 per partner for the fiscal record certificate (20 per partner for the fiscal record certificate) + RON 45 for filling with the Trade Registry (""ascertaining certificate"") + 4 (fiscal stamp fee). Agency: Trade Registry Office Register for VAT 4 A person subject to taxation established in Romania and has or intends 3 days no charge to have an economic activity which implies operations that can be taxed and/or exempted from VAT with deduction rights, must request the Doing Business 2015 Romania 22 Time to No. Procedure Cost to complete complete registration for VAT purpose from the qualified fiscal authority. The registration code for VAT purpose has the RO prefix, in concordance with the International Standard ISO 3166 - alpha 2 and is obtained in 3 days from the moment the documentation is submitted. The company which requests the registration for VAT purpose must submit to the competent fiscal authority the application in the same day with the submission of the file related to the incorporation of the company. In order to be registered for VAT purpose the company must submit to the competent fiscal authority the Registration Form 098. In addition to this, Tax Registration Form 010 must be submitted to the Ministry of Finance within the next 30 days as from the company's registration in order for the new company to register as profit tax and social contributions payer. In some cases the 3 days registration term provided by law is not observed. Agency: Ministry of Public Finance Register the employees contracts with the Territorial Labor Inspectorate (TLI) online Each employer shall be under the obligation to settle an internal general register record of all of his employees, in electronic format, which shall be transmitted to the Territorial Labour Inspectorate in the jurisdiction the employer has its registered office or domicile. Less than one day 5 The registration of the employees' labor contract can be done online, no charge (online procedure) after a representative of the employer obtains a password for operating the online registry from the Territorial Labour inspectorate. This is based on the Government Decision 500/2011 on the general register of employees record, applicable starting with May 27, 2011. Agency: Territorial labor inspectorate * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Romania 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 Romania 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build an economy, except for 11 economies for which the data a warehouse in Romania? According to data collected by are a population-weighted average of the 2 largest Doing Business, dealing with construction permits there business cities. See the chapter on distance to frontier requires 14.0 procedures, takes 255.0 days and costs and ease of doing business ranking at the end of this 2.3% of the warehouse value (figure 3.1). Most indicator profile for more details. sets refer to a case scenario in the largest business city of Figure 3.1 What it takes to comply with formalities to build a warehouse in Romania - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Romania 25 DEALING WITH CONSTRUCTION PERMITS Globally, Romania stands at 140 in the ranking of 189 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Romania to legally build a warehouse. Figure 3.2 How Romania and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 Romania 26 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in Romania (table 3.1)? Table 3.1 How has Romania made dealing with construction permits easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania made dealing with construction permits more costly DB2010 by introducing a new fee. Romania amended regulations related to construction DB2011 permitting to reduce fees and expedite the process. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 27 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Romania are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction RON 1,532,342 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Bucharest service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Romania - Time to No. Procedure Cost to complete complete Obtain urban planning certificate Pursuant to Order No. 839/2009 issued by the Ministry of Regional Development and Housing (“Order 839”), approving the Methodological Norms to the Construction Law, the following urban planning documents are required: • The general urban plan (PUG) and the related local regulation • The (zone) urban plan (PUZ) and the related local regulation • The detailed urban plan (PUD) The urban planning certificate provides information on the ownership, the public utility service availability, the location within (intravilan) and outside (extravilan) the city limits, the urban planning requirements, the land use at the time, the allowed uses, and so forth. From a technical point of view, the certificate shows the percentage of land occupation, the coefficient of land use, the minimum and 1 maximum dimensions of the plots, the allowed built-up area, utilities, 30 days RON 17 and access, necessary parking, alignment of the land and buildings with the adjacent streets, and the maximum and minimum construction height allowed. This certificate does not grant the right to build. Its validity period varies but cannot exceed 12 months. Construction must start during that 12-month period. The urban planning certificate enumerates all the necessary project clearances applicable to the warehouse case considered here. The municipality has the right to decide which project clearances are needed. Agency: Department of Urbanism of the local City Hall Doing Business 2015 Romania 28 Time to No. Procedure Cost to complete complete Obtain project clearance from water supply and sewerage authority (Apa Nova SA) By law, the project clearance from the water supply and sewerage authority (Apa Nova S.A.) must be issued within 15 days, but in practice, 18 days RON 72 2 it can take up to 18 days. Agency: Apa Nova SA * Obtain project clearance from General Inspectorate for Emergency Situations The relevant legal provisions in force are the Methodological Norms for the Endorsement and Permitting regarding Fire Security and Civil Protection, approved by Order No. 80/2009 of the Ministry of Administration and Interior. 3 15 days no charge According to the amendments to the Construction Law, if the 15-day term provided by the law for issuing the clearance is not observed by the General Inspectorate for Emergency Situations, the legal provisions referring to tacit approval shall be applied. Agency: General Inspectorate for Emergency Situations * Obtain project clearance from Bucharest Regional Environmental Protection Agency By law, the legal time limit for this procedure is 10 days, and the associated cost is RON 100.00. However, according to public 4 authorities, the time to complete the procedure in practice is 21 days, 21 days RON 500 and the cost can be up to RON 500.00. Agency: Bucharest Regional Environmental Protection Agency * Obtain project clearance from Health Department By law, the time to complete this procedure is 15 days. To apply for approval at the Bucharest Health Department, several documents must be submitted: - urbanism certificate with annexed plans 5 - technical memorandum drafted by the architect 15 days RON 200 - ownership title - incorporation certificate Agency: Bucharest Health Department * Sign contract with the solid waste authority (REBU SA) Through the certificate of urbanization the municipality requests that a 1 day RON 5,292 6 contract be signed with a waste disposal company to clear construction debris from the construction site. There are two companies that provide services in this area: ROSAL S.A. and REBU S.A. The latter is a larger Doing Business 2015 Romania 29 Time to No. Procedure Cost to complete complete player with a wider network. The fees are RON 93 (RON 75.00 + 24% VAT) per cubic meter of waste (although VAT is not taken into account in the Doing Business case study). Additionally, for the surface of the land in question, a tax of RON 42.00 would also be applicable. The minimum of 35 cubic meters must be contracted according to the requirements of company. Agency: REBU SA * Notarize statement about nonexistence of land disputes The company must notarize a statement (in this case, BuildCo is both the company and the applicant) stating that there are no disputes related to the land. This procedure is not a standard requirement by law but is often requested in practice. 7 Each notary charges a different fee, but the fee cannot exceed RON 1 day RON 15 30.00 (equivalent to USD 10.00), the maximum notary fee established by the National Notaries Union. Agency: Notary Obtain building permit BuildCo must apply for a building permit by submitting the following documents: • City-planning certificate • Property title on the land (there are no requirements as to how recent the title must be) • Technical documentation which replaced former plans for the authorization of construction • Necessary approvals, as required by the city-planning certificate • Environmental approval • Proof of payment of the legally required taxes (receipts from the tax authorities) • Legalized copy of the title to the real estate or the updated cadastral 8 plan and land registry extract for informative purposes 30 days RON 15,323 The building permit is issued by the City Hall. For Bucharest, the construction permit is issued by the General Mayor of Bucharest if the construction is outside the buildable area or if it exceeds a district area; or by the relevant district mayor if the construction is located in one of the six districts of Bucharest. The cost of the building permit is 1% of the value of the construction work. Agency: City Hall Doing Business 2015 Romania 30 Time to No. Procedure Cost to complete complete Receive foundations work inspection The schedule of inspections is described in the building permit. By law, BuildCo must pay 0.1% of the authorized value to the competent territorial inspectorate for construction. In addition, the investors or owners must pay the State Inspectorate for Construction a monthly 1 day RON 12,259 9 payment equivalent to 0.70% of the value of the expenses incurred in that month for the execution of the construction work. Agency: Bucharest Construction Inspectorate Receive frame inspection The examination of the building is performed in all cases through inspection of the building and by analyzing the documents contained 10 in the technical book of the construction. 1 day no charge Agency: State Inspectorate for Construction Obtain final assessment of the construction from the Acceptance Commission BuildCo notifies the local public administration and other relevant authorities of the date of completion of construction so that the Acceptance Commission may be convened. The Acceptance Commission is a body made up of the construction beneficiary (BuildCo), officials from local public administration, and technical experts. It is legally required to meet and determine that the construction meets all applicable legal requirements. 11 The Commission must be convened within 15 days from the date of 90 days RON 350 completion of works. The utility connections would have been made at this stage. The final assessment can take several days and includes an on-site inspection. Within 3 working days from the end of the assessment, the Acceptance Commission must submit the notes and conclusions to the beneficiary of construction and recommend approval (with or without reservations), postponement, or rejection of the construction. Agency: Acceptance Commission * Receive final inspection from the Acceptance Commission 12 1 day RON 150 Agency: Acceptance Commission Doing Business 2015 Romania 31 Time to No. Procedure Cost to complete complete Obtain water and sewage connection (Apa Nova SA) According to the water and sewage authority (Apa Nova S.A.), this procedure takes approximately 2 -- 3 months due to a significant increase in demand and backlog. The associated costs were increased to RON 520.00 for connection fee, RON 62.00 for application fee and 13 64.18% VAT (VAT is not taken into account in the Doing Business case 75 days RON 582 study). Inspections for utilities occur at the same time as the connection. Agency: Apa Nova SA Register the building with the Real Estate Registry The building can be registered once it has been completed and approved. There are two stages of approval, and for that reason, the building can be registered twice. The first stage is after the Acceptance Commission, and the second is when the warranty period has expired, after the approval by the Acceptance Commission. The second approval applies only when the owner and the builder are different entities. Therefore, in the case considered here, it is assumed that only one registration is done. Pursuant to Order No. 186/2009 on the establishment of time frames 7 days RON 480 14 for performing services by the National Agency for Cadastre and Land Registration ("Order 186"), the standard registration time is 21 days but, if the applicant pays an additional fee, the registration time will be reduced to 7 days. According to Order No. 39/2009 on the approval of fees for performing services by the National Agency for Cadastre and Land Registration ("Order 39"), the standard registration fee is RON 120 and the fast-track fee is 4-times the standard fee. Agency: Real Estate Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Romania 32 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 Romania 33 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Romania? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 7.0 procedures, which the data are a population-weighted average of the takes 223.0 days and costs 496.1% of income per capita 2 largest business cities. See the chapter on distance to (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Romania - Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Romania 34 GETTING ELECTRICITY Globally, Romania stands at 171 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Romania to connect The rankings for comparator economies and the regional a warehouse to electricity. Figure 4.2 How Romania and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 Romania 35 GETTING ELECTRICITY What are the details? The indicators reported here for Romania are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— ENEL Distributie Name of utility: identified by Doing Business. Data are collected from the Muntenia distribution utility, then completed and verified by electricity regulatory agencies and independent City: Bucharest professionals such as electrical engineers, electrical The procedures are those that apply to a warehouse and contractors and construction companies. The electricity electricity connection matching the standard distribution utility surveyed is the one serving the area assumptions used by Doing Business in collecting the (or areas) in which warehouses are located. If there is a data (see the section in this chapter on what the choice of distribution utilities, the one serving the largest indicators cover). The procedures, along with the number of customers is selected. associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Romania - Time to No. Procedure Cost to complete complete Submit application with ENELand await letter and technical conditions The customer submits the application with ENEL for technical conditions. In the answer, ENEL writes if the connection is confirmed or not and 21 calendar days RON 128.6 1 recommends doing a technical study. Agency: ENEL Distributie Muntenia Hire electrical design firm to conduct a technical study and get study approved by ENEL The customer has to hire an electrical contractor that will do a technical study. The study could also be done by ENEL. The study will give the different technical options for the connection works. After the study is 2 finished, the electrical contractor goes to ENEL with the study to get the 30 calendar days USD 2,969.57 best technical option approved. ENEL approves the best option and informs the customer about their choice. Agency: Electrical Contractor/ ENEL Distributie Muntenia Submit documents for conclusion of connection contract, receive contract 3 Once ENEL has approved the study, the customer gets the technical 19 calendar days RON 0 connection approval together with the proposal of connection contract. After the conclusion of the connection contract, the customer gets the estimate for the connection cost including the component related to the Doing Business 2015 Romania 36 Time to No. Procedure Cost to complete complete cost of the connection installation (material and labor force), as well as the component corresponding to the work inspection and activation of the installations for use. Agency: ENEL Distributie Muntenia Obtain design of works, get design approved by ENEL and conclude execution contract with ENEL and await end of connection works carried out by electrical contractor The customer hires an electrical contractor (can also be the same firm as under procedure 2) to make the design of the connection. The design needs to be approved by ENEL. After the design has been approved, the customer goes to the municipality to pay 1% of the utility's invoice. This is the fee to obtain the construction permit that the customer has to submit for the connection works. The construction permit can be obtained by the electrical contractor on behalf of the customer. Depending on the municipality, 5-20 permits need to be obtained before at other agencies/stakeholders and then submitted to the municipality in 4 order to obtain the construction permit for the connection works. At 120 calendar days USD 41,943.5 some municipalities, a geodesic assessment has to be submitted as part of the application package. After the construction permit has been obtained, ENEL concludes a contract (execution contract) with the electrical contractor (that was hired by the customer) and the works start. At the same time, the electrical contractor makes a file about the internal wiring of the warehouse that confirms that the internal wiring was done accordingly to safety standards. The customer pays the cost for the connection works directly to ENEL and not to the electrical contractor that he hired. Agency: Electrical Contractor Receive final inspection of works by ENEL At the end of the works, ENEL comes to inspect the works. In the technical study (procedure 2), the whole time plan and different steps of the connection works are laid out. The electrical contractor has to call 5 ENEL towards the end of the works and usually ENEL comes immediately 1 calendar day RON 0 to do the inspection. Agency: ENEL Distributie Muntenia Submit internal wiring file, conclude use of land contract and receive connection certificate 6 30 calendar days RON 0 At the end of the works, the customer submits the internal wiring file to ENEL for verification. The customer has to go with a notary to ENEL to conclude a contract of “use of land” with ENEL. They have to meet the Doing Business 2015 Romania 37 Time to No. Procedure Cost to complete complete director responsible for the grid. This contract is stating that the land is in use by ENEL, but not owned by ENEL. Without this contract, there would be no connection. A connection certificate is also issued by ENEL. Agency: ENEL Distributie Muntenia Supply contract and receive meter installation by ENEL The customer concludes the supply contract with ENEL. 48 hours after the signature of the contract, ENEL comes to the warehouse to install the meter and electricity starts flowing. When the connection to the network 7 is done, the overall grid in the neighborhood needs to be interrupted. 2 calendar days RON 0 This is announced in the newspaper. There is no waiting time. Agency: ENEL Distributie Muntenia * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 Romania 38 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Romania 39 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Romania? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 8.0 procedures, takes which the data are a population-weighted average of the 19.0 days and costs 1.5% of the property value (figure 2 largest business cities. See the chapter on distance to 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Romania - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Romania 40 REGISTERING PROPERTY Globally, Romania stands at 63 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Romania to transfer property. Figure 5.2 How Romania and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 Romania 41 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Romania (table 5.1)? Table 5.1 How has Romania made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania speeded up property registration by introducing DB2010 expedited procedures at the land registry and the cadastre. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 42 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: RON 1,532,342 notaries and property registries. These procedures are those that apply to a transaction matching the City: Bucharest standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Romania Time to No. Procedure Cost to complete complete Obtain information from the Cadastre Time: "Cost: 1. (simultaneous Consultation of The seller obtains information drafted by an authorized expert from the with Procedure 2 archives on the Cadastre and Real Estate Publicity Office. This information includes: and 3) spot - cost: 10 technical memorials, coordination inventory, analytical calculation of the 1. Consultation of RON for 15 land, topographical description, area plan on a scale of 1:500; and on the archives on the minutes. 2. Land scale of 1:2000, description of property, the plan of the real estate, and a spot - time: on property statement regarding the identification of the limits of the Book information the spot. excerpt - cost: 20 measured real estate. The documentation shall include: • Application 2. Land Book RON per property. form • A copy of the property title • A copy of the identification documents of the owner Order no. 186/2009 provides the deadlines for information 3. Certified copies obtaining technical information from the Cadastre which differ by taking excerpt - ordinary of documents into account the relevant requested document and vary between three Procedure: 3 from the (3) days and seven (7) days in the normal Procedure and one (1) day and days; emergency document files two (2) days in the expedited Procedure. Order no. 39/2009 provides the Procedure: 1 day. and land books - relevant taxes to be paid which also vary from RON 15/hour to RON 3. Certified copies cost: 5 RON per 1 30/sheet or even RON 150 for certain technical data. Order no. of documents page (3 pages). 4. 371/2007 was repealed by Order no. 39/2009, starting with April 16, from the Certificate for the 2009, with its subsequent amendments. In addition, any document document files identification of having a public character (e.g., location layouts, cadastral data) can be and land books - obtained by any person and not only by the owner of the property. Cost: the ordinary topographic/cadas 1. Consultation of archives on the spot - cost: 10 RON for 15 minutes. 2. Procedure: 3 tre number and Land Book information excerpt - cost: 20 RON per property. 3. Certified copies of documents from the document files and land books - cost: 5 days; emergency land book number RON per page. 4. Certificate for the identification of the Procedure: 1 day. according to the topographic/cadastre number and land book number according to the 4. Certificate for name of the owner name of the owner - cost: 100 RON per owner/land book office. 5. the identification - cost: 100 RON Cadastre plan excerpts - cost: 15 RON per property Time: 1. of the per owner/land Consultation of archives on the spot - time: on the spot. 2. Land Book topographic/cada book office. 5. information excerpt - ordinary Procedure: 3 days; emergency Procedure: stres number and Cadastre plan 1 day. 3. Certified copies of documents from the document files and land land book excerpts - cost: 15 books - ordinary Procedure: 3 days; emergency Procedure: 1 day. 4. number RON per property" Certificate for the identification of the topographic/cadastres number according to the Doing Business 2015 Romania 43 Time to No. Procedure Cost to complete complete and land book number according to the name of the owner - ordinary name of the Procedure: 7 days; emergency Procedure: 2 days. 5. Cadastre plan owner - ordinary excerpts - ordinary Procedure: 5 days; emergency Procedure: 2 days. Procedure: 7 days; emergency Agency: Cadastre and Real Estate Publicity Office Procedure: 2 days 5. Cadastre plan excerpts - ordinary Procedure: 5 days; emergency Procedure: 2 days. * Obtain a fiscal certificate from the direction for public taxes of the Municipality The Seller obtains a clearance certificate from the direction for public taxes of the Municipality from the district were the real estate is located attesting that the property is not owned by someone else and that there are no unpaid taxes. This fiscal certificate is required for completion of a transfer of ownership. The fiscal certificate is valid for up to 30 days for legal entities. According to the provisions of art. 113 of the Romanian 4 days Fiscal Procedure Code, the validity of a fiscal certificate lasts until the end (simultaneous RON 4 (fiscal 2 of the month within which the certificate is issued. The documentation with Procedure 1 stamp) shall include: • An application from the owner • A copy of the last receipt and 3) with which it is demonstrated that there are no unpaid taxes • A copy of the identification documents of the owner • The last accounting records of the company • The power of attorney for the company's representative • Confirmation of payment of fiscal stamp Agency: Municipality * Obtain a fiscal certificate from Local fiscal authority The fiscal certificate obtained by the Seller represents a clearance attesting that there are no unpaid taxes and fees related to the real estate. The fiscal certificate requirement is mandatory for the valid transfer of the ownership rights over a real estate. The fiscal certificate is 3 days valid for up to 30 days. In order to obtain the certificate the following (simultaneous RON 4 (fiscal 3 documents are required: 1. An application from the owner 3. with Procedure 1 stamp) Confirmation of payment of the fiscal stamp 2. A copy of the and 2) identification documetns of the owner Agency: Local fiscal authority Doing Business 2015 Romania 44 Time to No. Procedure Cost to complete complete Obtain a Land Registry extract (non-encumbrance certificate) from the Land Registry office For the excerpt For the notarization of the transfer deed of an immovable, the notary public requests an authentication excerpt from the Land Registry office (requested by the where the immovable is registered. In this respect, the notary public notary public) the submits to the relevant Land Registry office the application form signed duration is of 2 and stamped by it and the owner of the immovable, along with the business days Authentication payment proof of the issuance fee. The authentication excerpt may only (regular excerpt - 40 RON be obtained by a notary public. The validity of the authentication excerpt Procedure) and in regular is of 10 business days, starting with the day when the request application 1 business day form was registered. During the 10-business days validity period, the Procedure, 200 (expedited Land Registry office clerk is not entitled to register any other operation RON in expedited Procedure) and in the relevant Land Registry, save for the one for which the excerpt was Procedure; 4 for the required; the Land Registry is blocked during the aforementioned period, Information information in order to ensure the security of the real estate transactions. However, if excerpt - 20 RON excerpt the during the validity term, the notarial deed for which the excerpt was in regular requested is submitted to the Cadastre and Real Estate Publicity Office duration is of 3 Procedure, 100 for registration or if the notary public made an express request in this business days RON in expedited sense, the validity of the excerpt expires. The authentication excerpt can (regular Procedure be obtained in 2 business days (regular Procedure, cost RON 40) or in 1 Procedure) and 1 business day (expedited Procedure, cost RON 200). The information business day excerpt can be obtained in 3 business days (regular Procedure, cost RON (expedited 20) or in 1 day (expedited Procedure, cost RON 100). Procedure). Agency: Cadastre and Real Estate Publicity Office The notary authenticates the transfer deed "RON 5,080 + 0,44%, of the The notary public verifies the fiscal certificate and the Land Registry transaction value excerpt and notarizes the sale purchase agreement. Without these exceeding RON documents, the notary public may not notarize the agreement. According to the actual legal provision, the sale purchase agreement 600,001 (notary shall be drafted only by the notary public.The costs related to the fees) For procedure could be paid either directly to the notary public, or via bank transactions with transfer. Though it is not mandatory, a lawyer may conduct a due the value of the diligence before this procedure, by perusing the previous successive transaction (in transfers and owners of the property. The notary public is obliged to RON): • Below 5 verify all encumbrances and relief measures instituted over the 2 days RON 15,000 - the immovable to be sold in the public records and it is liable for the failure fee is 2,2% but no to specify in the notarial deed the encumbrances and the relief measures les than RON 150 • over the immovable - see also 2.1.3., above. The documentation for the From RON 15,001 notarization of the transfer deed includes, among others, the following: to RON 30,000 - the fee is RON (i) the property title in original, 330 + 1,6% for the (ii) the cadastral documents of the property (obtained in Procedure 1), amount exceeding RON 15,001 • (iii) the Fiscal certificate from the local taxes office (obtained in From RON 30,001 Procedure 3), to RON 60,000 - Doing Business 2015 Romania 45 Time to No. Procedure Cost to complete complete the fee is RON (iv) identification certificates/documents for the signatory parties 580 + 1,3% for the (identity cards, passports, registration certificates, etc), amount exceeding RON 30,001 • (v) documents attesting the capacity of the signatories to sign the sale From RON 60,001 purchase agreement (power of attorney, shareholders' decision, articles to RON 300,000 - of incorporation, etc.). the fee is RON The Seller - legal entity has to pay an income tax of 16% applied on the 970 + 0,9% for the profit resulted in the company's balance sheet, including this transaction. amount exceeding RON 60,001 • Agency: Notary Public From RON 300,001 to RON 600,000 - the fee is RON 3,130 + 0,65% for the amount exceeding RON 300,001 • Over RON 600,001 - the fee is RON 5,080 + 0,44% for the amount exceeding RON 600,001" Register title in the Land Registry Office The same public notary applies for registration of the property title at the Land Book Office, by sending the application and the original notary deed, directly or by fax, to the district Land Book Office where the real estate is placed. Therefore, the registration is performed ex officio by the "0.5% of the notary, based on the authenticated sale purchase act. An expedited property value option is available given that an extra fee of 4 times the normal fee will without VAT be added. The extra fee can not be more than RON 5,000. Registration (regular "Regular fees are 0.5% of property value with a minimum of RON 60 according to Procedure); 2% of Order no 39/06.04.2009, for a Procedure that takes 9 days. An expedited procedure - 9 the property value Procedure is available (3 days) for an additional fee of 2% of property business days (9- without VAT value. According to the article 1 paragraph 6 of Order no 39/2009, this 11 calendar days) (expedited 6 additional fee cannot exceed RON 5000. Only when the real estate is Expedited Procedure). registered in the Land Book for the first time a tax of RON 120 should be procedure - 3 Minimum cost paid for this registration. In case the owner registers his/her property business days (3- RON 60. The extra for the first time (i.e. following the reconstitution of the ownership for 4 calendar days)" which the cadastre is made for the first time) the terms for registration fee paid for the are 21 days (regular Procedure) or 7 days (expedited Procedure). The expedited documentation shall include: • Sale-purchase contract (notarized in Procedure cannot Procedure 4) • Fiscal certificate (obtained in Procedure 2) • Cadastre exceed RON certificate (obtained in Procedure 1) • ID of the buyer • A registration 5,000." application • The property title, all the originals, plus a legalized copy from a public notary • Proof of total payment Agency: Land Registry office Doing Business 2015 Romania 46 Time to No. Procedure Cost to complete complete File fiscal declaration of acquiring the property The fiscal declaration concerning the immovable acquisition should be filled in by the purchaser at the Local Tax Department within a 30-day term since the notarization of the transfer deed. The documentation shall include: tax statement for the immovable, the property title, in original 7 and a copy, accounting documents (invoice, analytical balance, balance 1 day RON 10 sheet, etc.), cadastral documents, copy of the registration certificate of the company. Agency: Local Tax Department Registration of the work place with the Trade Register Office The buyer should apply for registration with the Trade Register Office of the work place located at the newly acquired property. If the property is a working unit of the company, it has to be registered, as it is mentioned in the Commercial Registration Law (Law Number 26 1990). The registration includes, among others, environment, sanitary, fire protection, labor approvals from various relevant authorities, all located in a one-stop shop. The registration is not necessary for the transfer of title, but only for making it opposable to third parties and for registration as a place of business. The concrete use of the property as a work place is not required but the evidences necessary for using it as such are needed for obtaining the authorizations within the corporate registration process. Stamp tax and registration fees are lump-sum taxes and do not depend on the property value. The Trade Register tax and fees could be paid either directly to the Trade Register or through special bank RON 350 - RON 8 5 days accounts organized for such purposes. In summary, the total amount to 420 be paid for the registration of a working place is made up of several taxes. When the application is filed only for the establishment of the working place, the taxes are: • Ascertaining certificate: 30 lei • Registration of secondary business place: 30 lei • Registration of the standard-form (regarding the fulfillment of the conditions to perform activities): 30 lei • Liquidation fund (50% of points 1-3): 6 lei • Bulletin fund (10% of points 1-3): 1.5 lei • Judicial stamp duty: 39 lei • Commission for the judge’s mention: 60 lei • Transmission of documents to be published in the Official Gazette: 20 lei • Official Gazette commission (depends on the number of documents, for this example we have counted 5): 50 lei • Publication in the Official Gazette (depends on the number of rows in the document; only the resolution deciding the establishment of the working place is published): 80-150 lei •TOTAL: 350-420 lei. Doing Business 2015 Romania 47 Time to No. Procedure Cost to complete complete Agency: Trade Register Office * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Romania 48 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 Romania 49 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Romania stands at 7 in the ranking of 189 and bankruptcy laws in Romania facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 7 on the depth of rankings for comparator economies and the regional credit information index and a score of 10 on the average ranking provide other useful information for strength of legal rights index (see the summary of assessing how well regulations and institutions in scoring at the end of this chapter for details). Higher Romania support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Romania and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 Romania 50 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Romania and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 Romania 51 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Romania (table 6.1)? Table 6.1 How has Romania made getting credit easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania strengthened its legal framework for secured transactions by allowing the automatic extension of security DB2013 interests to the products, proceeds and replacement of collateral. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 52 GETTING CREDIT What are the details? The getting credit indicators reported here for Romania The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 10 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable Yes assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of Yes movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically Yes to the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's Yes name? Does a notice-based collateral registry exist in which all functional equivalents can be Yes registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is Yes liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by Yes providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2015 Romania 53 Strength of legal rights index (0–12) Index score: 10 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through No public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 7 Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes Yes 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes Yes 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes Yes 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 240,597 Number of individuals 6,500,000 1,475,974 Percent of total 46.6 12.3 Doing Business 2015 Romania 54 Source: Doing Business database. Doing Business 2015 Romania 55 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 Romania 56 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Romania? The economy has a score of 6.2 not measure all aspects related to the protection of on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Romania stands at 40 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Romania and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 Romania 57 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for Romania in 2014. A summary of scoring for minority investors indicators into context is to see where the protecting minority investors indicators at the end of the economy stands in the distribution of scores across this chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 Romania 58 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 Romania 59 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 Romania 60 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 Romania 61 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Romania are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Romania. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Romania Answer Score Extent of disclosure index (0-10) 9.0 Which corporate body can provide legally sufficient Shareholders excluding interested 3 approval for the Buyer-Seller transaction? (0-3) parties Is disclosure by the interested director to the board of Full disclosure of all material facts 2 directors required? (0-2) Is disclosure of the transaction in published periodic filings Disclosure on the transaction and 2 (annual reports) required? (0-2) on the conflict of interest Is immediate disclosure of the transaction to the public Disclosure on the transaction and 2 and/or shareholders required? (0-2) on the conflict of interest Must an external body review the terms of the transaction No 0 before it takes place? (0-1) Extent of director liability index (0-10) 5.0 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1 1) Can shareholders hold the interested director liable for the Liable if negligent 1 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Liable if negligent 1 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0 plaintiff? (0-1) Can both fines and imprisonment be applied against the Yes 1 interested indrector? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 5.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant Any relevant document 3 Doing Business 2015 Romania 62 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and No 0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of No 0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1 the company? (0-2) Strength of minority investor protection index (0-10) 6.2 Extent of conflict of interest regulation index (0-10) 6.3 Extent of shareholder rights index (0-10.5) 10.5 Can shareholders amend company bylaws or statutes with a Yes 1.5 simple majority? Can shareholders owning 10% of the company's share Yes 1.5 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of Yes 1.5 directors before the end of their term. Must a company obtain its shareholders’ approval every Yes 1.5 time it issues new shares? Are shareholders automatically granted subscription rights Yes 1.5 on new shares? Must shareholders approve the election and dismissal of the Yes 1.5 external auditor? Can shareholders freely trade shares prior to a major Yes 1.5 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 2.5 Is the CEO barred from also serving as chair of the board of Yes 1.5 directors? Must the board of directors include independent board No 0 members? Must a company have a separate audit committee? No 0 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected Yes 1.5 shares? Must a potential acquirer make a tender offer to all Yes for listed companies 1 shareholders upon acquiring 50% of a company? Is cross-shareholding between 2 independent companies No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its Yes 1.5 parent company? Extent of corporate transparency index (0-9) 5.0 Must ownership stakes representing 10% be disclosed? Yes 1.5 Must information about board members’ other directorships as well as basic information on their primary employment No 0 be disclosed? Must the compensation of individual managers be No 0 disclosed? Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes for listed companies 1 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes 1.5 Doing Business 2015 Romania 63 auditor? Must audit reports be disclosed to the public? Yes for listed companies 1 Extent of shareholder governance index (0-10) 6.0 Source: Doing Business database. PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paidof by the 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power 0.8. The threshold is defined as and mandatory the total contributions tax rate at the 15th percentilepaid during of the company. overall distribution for all years included in the analysis. It is calculated and adjusted on a the yearly basis. second The thresholdyear of is not operation based are recorded. on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set  range Alower at the end ofstandard of deductions the distribution and of tax rates levied on medium-size  Taxes and mandatory contributions are exemptions enterprises in the manufacturing sector as observed through the paying taxes indicators. are also This reduces recorded. the bias in the indicators toward economies that do not need to levyat measured all levels significant government. ofon taxes companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 Romania 64 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Romania—and how much do firms pay in taxes? frontier and ease of doing business ranking at the end of On average, firms make 14.0 tax payments a year, spend this profile for more details. 159.0 hours a year filing, preparing and paying taxes and Globally, Romania stands at 52 in the ranking of 189 pay total taxes amounting to 43.2% of profit (see the economies on the ease of paying taxes (figure 8.1). The summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Romania. Figure 8.1 How Romania and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 Romania 65 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Romania (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Romania made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania made paying taxes more costly for companies by DB2010 increasing labor taxes. Romania introduced tax changes, including a new minimum tax DB2011 on profit, that made paying taxes more costly for companies. Romania made paying taxes easier for companies by introducing an electronic payment system and a unified return DB2012 for social security contributions. It also abolished the annual minimum tax. Romania made paying taxes easier and less costly for companies by reducing the payment frequency for the firm tax DB2014 from quarterly to twice a year and by reducing the vehicle tax rate. Romania made paying taxes easier for companies, with the DB2015 majority now using the electronic system for filing and paying taxes. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 66 PAYING TAXES What are the details? The indicators reported here for Romania are based LOCATION OF STANDARDIZED COMPANY on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Bucharest chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate gross Social security contributions 1 online filing 80 20.8% 23.5 salaries taxable Corporate income tax 1 online filing 25 16% 10.7 profit Health insurance gross 0 paid jointly 0 5.2% 5.9 contributions salaries building Building tax 2 0 1% 1 value gross Medical leave 0 paid jointly 0 0.85% 1 salaries gross Unemployment contribution 0 paid jointly 0 0.5% 0.6 salaries gross Accident risk fund 0 paid jointly 0 0.15-0.85% 0.3 salaries gross Guarantee fund 0 paid jointly 0 0.25% 0.3 salaries fixed fee depending Vehicle tax 2 0 varies 0 on type of vehicle Doing Business 2015 Romania 67 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate various Land tax 2 0 land area 0 rates A fixed The amount per surface of square Firm tax 2 0 the 0 meter of lighting lighting panel panel Urbanism tax 1 0 surface 0 RON 2 per weight of small Environmental taxes 1 0 kilo of 0 packaging amount packaging included in small Fuel tax 1 0 0 fuel price amount various type of small Stamp duty on contracts 0 as needed 0 0 rates contract amount value not Value added tax (VAT) 1 online filing 54 24% 0 added included Employee paid - Social gross 0 paid jointly 0 16.5% 0 withheld security contributions salaries Totals 14.0 159.0 43.2 Source: Doing Business database. Doing Business 2015 Romania 68 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 Romania 69 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Romania? population-weighted average of the 2 largest business According to data collected by Doing Business, exporting cities. See the chapter on distance to frontier and ease of a standard container of goods requires 5 documents, doing business ranking at the end of this profile for more takes 13.0 days and costs $1485.0. Importing the same details. container of goods requires 6 documents, takes 13.0 Globally, Romania stands at 65 in the ranking of 189 days and costs $1495.0 (see the summary of four economies on the ease of trading across borders (figure predefined stages and documents at the end of this 9.1). The rankings for comparator economies and the chapter for details). Most indicator sets refer to a case regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a Romania to export and import goods. Figure 9.1 How Romania and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 Romania 70 TRADING ACROSS BORDERS What are the details? The indicators reported here for Romania are based LOCATION OF STANDARDIZED COMPANY on a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the indicators Port Name: Costanta cover). Information on the required documents and the time and cost to complete export and import is City: Bucharest collected from local freight forwarders, shipping lines, The predefined stages, and the associated time and cost, customs brokers, port officials and banks. for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Table 9.2 Summary of predefined stages and documents for trading across borders in Romania Stages to export Time (days) Cost (US$) Customs clearance and inspections 1 75 Documents preparation 7 410 Inland transportation and handling 2 700 Ports and terminal handling 3 300 Totals 13 1,485 Stages to import Time (days) Cost (US$) Customs clearance and inspections 1 75 Documents preparation 8 420 Inland transportation and handling 2 700 Ports and terminal handling 2 300 Totals 13 1,495 Doing Business 2015 Romania 71 Documents to export Bill of lading Commercial invoice Convention des Marchandises Routiers - CMR (Transport document) Customs export declaration Packing list Documents to import Bill of lading Certificate of origin Commercial invoice Convention des Marchandises Routiers -- CMR (Transport document) Customs import declaration Packing list Source: Doing Business database. Doing Business 2015 Romania 72 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 Romania 73 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial business cities. See the chapter on distance to frontier dispute through the courts in Romania? According to and ease of doing business ranking at the end of this data collected by Doing Business, contract enforcement profile for more details. takes 512.0 days, costs 28.9% of the value of the claim Globally, Romania stands at 51 in the ranking of 189 and requires 34.0 procedures (see the summary at the economies on the ease of enforcing contracts (figure end of this chapter for details). Most indicator sets refer 10.1). The rankings for comparator economies and the to a case scenario in the largest business city of an regional average ranking provide other useful economy, except for 11 economies for which the data benchmarks for assessing the efficiency of contract are a population-weighted average of the 2 largest enforcement in Romania. Figure 10.1 How Romania and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 Romania 74 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in Romania (table 10.1)? Table 10.1 How has Romania made enforcing contracts easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania made enforcing contracts easier by adopting a new DB2014 civil procedure code that streamlines and speeds up all court proceedings. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 75 ENFORCING CONTRACTS What are the details? The indicators reported here for Romania are based COURT NAME on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on what Claim value: RON 54,402 the indicators cover). These procedures, and the time and cost of completing them, are identified through Bucharest Court of First study of the codes of civil procedure and other court Court name: Instance regulations, as well as through questionnaires completed by local litigation lawyers (and, in a City: Bucharest quarter of the economies covered by Doing Business, by judges as well). Table 10.2 Summary of time, cost and procedures for enforcing a contract in Romania Europe & Central Indicator Romania Asia average Time (days) 512 448 Filing and service 52 Trial and judgment 365 Enforcement of judgment 95 Cost (% of claim) 28.9 25.2 Attorney cost (% of claim) 7.7 Court cost (% of claim) 11.2 Enforcement Cost (% of claim) 10.0 Procedures (number) 34 37 Number of procedures (without bonus points) 35 Specialized commercial courts -1 Total number of procedures (including bonus points) 34 Doing Business 2015 Romania 76 No. Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. Mandatory conciliation or mediation: Plaintiff and Defendant attempt to settle the dispute prior to 2 initiating the lawsuit. Conciliation or mediation is unsuccessful. Attempts at settlement are recorded and the judge is informed of same. 3 Plaintiff hires a lawyer: Plaintiff hires a lawyer. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 4 assigning a reference number to the case). Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 5 formal requirements as a matter of law or standard practice. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 6 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. Attempt at physical delivery: An attempt to physically deliver summons and complaint to Defendant is 7 made. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 8 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Report on pre-judgment attachment: Court enforcement officer or private bailiff issues and delivers a 9 report on the attachment of Defendant’s property to the judge. Trial and judgment: Doing Business 2015 Romania 77 No. Procedures Defendant files preliminary objections.: Defendant presents preliminary objections to the court. * (Preliminary exemptions differ from answers on the merits. Examples of preliminary motions are motions to dismiss on the basis of the statute of limitations or jurisdictional objections, etc.) Checke Plaintiff’s answer to preliminary motions: Plaintiff responds to preliminary motions raised by Defendant. * Checked as ‘yes’ if preliminary motions are commonly raised (step 30) and if Plaintiff responds to them immediately. Judge’s resolution on preliminary objections: Judge decides on preliminary objec tions separately from the 10 merits of the case. Checked as ‘yes’ if preliminary objections are commonly made (step 30) and if judge resolves the question before rendering his decision. Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 11 or defense on the merits of the case (see assumption 4). Deadline for Plaintiff to reply to Defendant's defense or answer: Judge sets a deadline for Plaintiff’s 12 submission of a reply to the Defendant's defense or answer. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 5-b). Delivery of expert report by court-appointed expert: The independent expert, appointed by the court, * delivers his or her expert report to the court (see assumption 5-b). * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court (see assumption 5-a). Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 13 hearing or trial (see assumption 5-a). Adjournments: Court proceedings are delayed because one or both parties request and obtain an 14 adjournment to prepare for the oral hearing or trial as a matter of common practice. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 15 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. 16 Closing of the evidence period: The court makes the formal decision to close the evidence period. Order for submission of final arguments: The judge sets a deadline for the submission of final factual and 17 legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 18 Judgment date: The judge sets a date for delivery of the judgment. 19 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 20 Writing of judgment: The judge produces a written copy of the judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 21 judgment is available at the courthouse. Doing Business 2015 Romania 78 No. Procedures Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 22 in favor of Plaintiff (see assumption 6). Defendant is formally notified of the judgment: Plaintiff or court formally notifies the Defendant of the 23 judgment. The appeal period starts to run from the day the Defendant is formally notified of the judgment. Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 24 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 25 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 26 enforcement officer such as a court bailiff or sheriff, or a private bailiff. 27 Plaintiff advances enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 28 private bailiff requests Defendant to voluntarily comply with the judgment. 29 Plaintiff identifies Defendant's assets for attachment: Plaintiff identifies Defendant's assets for attachment. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 30 assets). Report on execution of attachment: A court enforcement officer or private bailiff delivers a report on the 31 attachment of Defendant's movable goods to the judge. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 32 opposes aspects of the enforcement process before the judge. 33 Sale through public auction: The Defendant’s movable property is sold at publi c auction. Distribution of proceeds: The proceeds of the public auction are distributed to Plaintiff (and, where 34 applicable, to other creditors, according to the rules of priority). Reimbursement of Plaintiff’s enforcement fees: Defendant reimburse s Plaintiff's enforcement fees which 35 Plaintiff had advanced previously. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 Romania 79 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 Romania 80 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, Romania characterize the top-performing economies. How scores 3.0 out of 3 points on the commencement of efficient are insolvency proceedings in Romania? proceedings index, 6.0 out of 6 points on the According to data collected by Doing Business, resolving management of debtor’s assets index, 2.5 out of 3 points insolvency takes 3.3 years on average and costs 10.5% of on the reorganization proceedings index, and 2.0 out of the debtor’s estate, with the most likely outcome being 4 points on the creditor participation index. Romania’s that the company will be sold as piecemeal sale. The total score on the strength of insolvency framework average recovery rate is 30.7 cents on the dollar. Most index is 13.5 out of 16. indicator sets refer to a case scenario in the largest Globally, Romania stands at 46 in the ranking of 189 business city of an economy, except for 11 economies for economies on the ease of resolving insolvency (figure which the data are a population-weighted average of the 11.1). The rankings for comparator economies and the 2 largest business cities. See the chapter on distance to regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in Romania. Figure 11.1 How Romania and comparator economies rank on the ease of resolving insolvency Doing Business 2015 Romania 81 Source: Doing Business database. Doing Business 2015 Romania 82 Figure 11.2 Recovery Rate (0-100) - Romania Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - Romania Source: Doing Business database. Doing Business 2015 Romania 83 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Romania (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Romania made resolving insolvency easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Romania made resolving insolvency more difficult by requiring that a percentage of recovered amounts be transferred to a DB2010 fund for reimbursing the expenses of insolvency administrators in cases where the debtor has no assets. Substantial amendments to Romania’s bankruptcy laws— DB2011 introducing, among other things, a procedure for out-of-court workouts—made dealing with insolvency easier. Romania amended its insolvency law to shorten the duration DB2012 of insolvency proceedings. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Romania 84 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 Romania LABOR MARKET REGULATION Employment laws are needed to protect workers from the past 5 years did so in ways that increased labor arbitrary or unfair treatment and to ensure efficient market flexibility. What changes did Romania adopt that contracting between employers and workers. Many affected the Doing Business indicators on labor market economies that changed their labor market regulation in regulation (table 12.1)? Table 12.1 What changes did Romania make in terms of labor market regulation? DB year Reform Romania increased the maximum duration of fixed-term DB2012 contracts and also decreased the severance pay applicable in case of redundancy dismissal of employees. Source: Doing Business database. Doing Business 2015 Romania 86 LABOR MARKET REGULATION What are the details? The data reported here for Romania are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 36 Maximum length of fixed-term contracts, including renewals (months) 60 Minimum wage applicable to the worker assumed in the case study 251.28 (US$/month) Ratio of minimum wage to value added per worker 0.23 Source: Doing Business database. Doing Business 2015 Romania 87 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Rigidity of hours index Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in workload? Maximum working days per week 5.0 Premium for night work (% of hourly pay) 25% Premium for work on weekly rest day (% of hourly pay) 100% Major restrictions on night work? No Major restrictions on weekly holiday? No Paid annual leave for a worker with 1 year of tenure (in working days) 20.0 Paid annual leave for a worker with 5 years of tenure (in working days) 20.0 Paid annual leave for a worker with 10 years of tenure (in working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 20.0 working days) Source: Doing Business database. Doing Business 2015 Romania 88 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Difficulty of redundancy index Data Maximum length of probationary period (months) 3.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? Yes Source: Doing Business database. Doing Business 2015 Romania 89 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 4.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 4.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 4.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 4.0 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 0.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 0.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 0.0 of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of Doing Business also assesses the mechanisms available unemployment protection schemes as well as data on to resolve labor disputes. More specifically, it collects whether employers are legally required to provide data on what courts would be competent to hear labor health insurance for employees with permanent disputes and whether the competent court is contracts. specialized in resolving labor disputes. Social protection schemes and benefits & Labor disputes indicator Data Availability of unemployment protection scheme? Yes Health insurance existing for permanent employees? Yes Availability of courts or court sections specializing in labor disputes? Yes Source: Doing Business database. Doing Business 2015 Romania 90 Doing Business 2015 Romania 91 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components—yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 Romania 92 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 Romania 93 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 Romania 94 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 Romania 95