82910 Economy Profile: Moldova Doing Business 2014 Moldova 2 © 2013 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 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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. 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Cover design: The Word Express Doing Business 2014 Moldova 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 36 Registering property .................................................................................................................. 44 Getting credit .............................................................................................................................. 54 Protecting investors ................................................................................................................... 61 Paying taxes ................................................................................................................................ 70 Trading across borders .............................................................................................................. 77 Enforcing contracts .................................................................................................................... 85 Resolving insolvency .................................................................................................................. 94 Employing workers .................................................................................................................... 99 Data notes ................................................................................................................................. 106 Resources on the Doing Business website ............................................................................ 112 Doing Business 2014 Moldova 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2012). 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, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Moldova. To allow useful comparison, it business regulatory reforms. The data, along with also provides data for other selected economies information on ordering Doing Business 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 Moldova 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start 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 Region: Europe & Central Asia business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Lower middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of Population: 3,559,541 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 2,070 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 78 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 86* investors, paying taxes, trading across borders, Change in rank: 8 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 64.51 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 62.3 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: 2.21 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. 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 2014 Moldova 6 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 2014 Moldova 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy’s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Moldova and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Moldova 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Moldova ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Moldova 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Moldova come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 Moldova 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Moldova Slovak Republic DB2014 Best performer globally Czech Republic DB2014 Moldova DB2014 Moldova DB2013 Romania DB2014 Hungary DB2014 Bulgaria DB2014 Poland DB2014 Indicator DB2014 Starting a Business 81 93 65 146 59 116 60 108 New Zealand (1) (rank) Procedures (number) 6 7 4 9 4 4 5 7 New Zealand (1)* Time (days) 7.0 9.0 18.0 19.5 5.0 30.0 8.5 18.5 New Zealand (0.5) Cost (% of income per 5.4 5.7 1.0 8.2 8.6 14.3 2.4 1.5 Slovenia (0.0) capita) Paid-in Min. Capital (% 8.1 8.7 0.0 29.5 9.4 12.6 0.7 19.3 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 174 175 118 86 47 88 136 53 China (1) (rank) Hong Kong SAR, Procedures (number) 26 26 18 33 24 18 15 11 China (6) Time (days) 291.0 291.0 104.0 120.0 79.0 161.0 287.0 286.0 Singapore (26.0) Doing Business 2014 Moldova 11 Slovak Republic DB2014 Best performer globally Czech Republic DB2014 Moldova DB2014 Moldova DB2013 Romania DB2014 Hungary DB2014 Bulgaria DB2014 Poland DB2014 Indicator DB2014 Cost (% of income per 65.0 69.3 222.9 10.5 9.2 10.6 71.2 6.6 Qatar (1.1) capita) Getting Electricity 165 164 135 146 112 137 174 65 Iceland (1) (rank) Procedures (number) 7 7 6 6 5 6 7 5 10 Economies (3)* Time (days) 140 140 130 279 252 161 223 158 Germany (17) Cost (% of income per 542.1 578.0 320.0 179.0 116.4 205.2 534.0 10.6 Japan (0.0) capita) Registering Property 19 16 62 37 45 54 70 11 Georgia (1) (rank) Procedures (number) 5 5 7 3 4 6 8 3 4 Economies (1)* Time (days) 6.0 6.0 14.0 24.0 16.5 35.0 20.0 16.5 New Zealand (1.0)* Cost (% of property 0.9 0.9 2.9 4.0 5.0 0.4 1.6 0.0 5 Economies (0.0)* value) Getting Credit (rank) 13 40 28 55 55 3 13 42 Malaysia (1)* Strength of legal rights 9 8 9 6 7 9 9 8 10 Economies (10)* index (0-10) Depth of credit 5 4 4 5 4 6 5 4 31 Economies (6)* information index (0-6) Public registry coverage 0.0 0.0 61.0 6.4 0.0 0.0 11.8 2.7 Portugal (100.0)* (% of adults) Private bureau 4.5 3.9 0.0 76.0 73.2 82.8 46.9 61.6 22 Economies (100.0)* coverage (% of adults) Protecting Investors 80 80 52 98 128 52 52 115 New Zealand (1) (rank) Extent of disclosure 7 7 10 2 2 7 9 3 10 Economies (10)* Doing Business 2014 Moldova 12 Slovak Republic DB2014 Best performer globally Czech Republic DB2014 Moldova DB2014 Moldova DB2013 Romania DB2014 Hungary DB2014 Bulgaria DB2014 Poland DB2014 Indicator DB2014 index (0-10) Extent of director 3 3 2 5 4 2 5 4 Cambodia (10) liability index (0-10) Ease of shareholder 6 6 6 8 7 9 4 7 3 Economies (10)* suits index (0-10) Strength of investor 5.3 5.3 6.0 5.0 4.3 6.0 6.0 4.7 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 95 116 81 122 124 113 134 102 (1) Payments (number per Hong Kong SAR, 31 48 13 8 12 18 39 20 year) China (3)* United Arab Emirates Time (hours per year) 181 220 454 413 277 286 200 207 (12) Trading Across Borders 150 149 79 68 70 49 76 108 Singapore (1) (rank) Documents to export 7 7 4 4 6 5 5 7 Ireland (2)* (number) Time to export (days) 32 32 20 17 17 17 13 17 5 Economies (6)* Cost to export (US$ per 1,545 1,545 1,375 1,215 885 1,050 1,485 1,500 Malaysia (450) container) Documents to import 8 8 5 6 6 4 6 6 Ireland (2)* (number) Time to import (days) 35 35 17 17 19 14 13 16 Singapore (4) Cost to import (US$ per 1,870 1,870 1,365 1,190 845 1,025 1,495 1,480 Singapore (440) container) Enforcing Contracts 23 23 79 75 15 55 53 65 Luxembourg (1) (rank) Doing Business 2014 Moldova 13 Slovak Republic DB2014 Best performer globally Czech Republic DB2014 Moldova DB2014 Moldova DB2013 Romania DB2014 Hungary DB2014 Bulgaria DB2014 Poland DB2014 Indicator DB2014 Time (days) 337 327 564 611 395 685 512 545 Singapore (150) Cost (% of claim) 28.6 28.6 23.8 33.0 15.0 19.0 28.9 30.0 Bhutan (0.1) Procedures (number) 31 31 38 27 35 33 32 32 Singapore (21)* Resolving Insolvency 91 89 92 29 70 37 99 38 Japan (1) (rank) Time (years) 2.8 2.8 3.3 2.1 2.0 3.0 3.3 4.0 Ireland (0.4) Cost (% of estate) 9 9 9 17 15 15 11 18 Norway (1) Outcome (0 as piecemeal sale and 1 as 0 0 0 1 0 1 0 1 going concern) Recovery rate (cents on 32.8 32.0 32.6 65.0 38.3 54.8 30.0 54.1 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * 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 2014 Moldova 14 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 Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. 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:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Moldova 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Moldova? costs 5.4% of income per capita and requires paid-in According to data collected by Doing Business, starting minimum capital of 8.1% of income per capita (figure a business there requires 6 procedures, takes 7.0 days, 2.1). Figure 2.1 What it takes to start a business in Moldova Paid-in minimum capital (% of income per capita): 8.1 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 2014 Moldova 16 STARTING A BUSINESS Globally, Moldova stands at 81 in the ranking of 189 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Moldova to start a business. Figure 2.2 How Moldova and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 Moldova 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Moldova is keeping up—and where it minimum capital required to start a business (figure is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Moldova 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Moldova 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Moldova (table 2.1)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.1 How has Moldova made starting a business easier—or not? By Doing Business report year DB year Reform New laws on LLC and registration simplified the business DB2009 registration requirement resulting in time reduction by half. Moldova eased the business start up process by implementing an expedited company registration service and made the DB2010 process of authentication of specimens of signatures when opening a corporate bank account optional. DB2011 No reform as measured by Doing Business. Moldova made starting a business easier by implementing a DB2012 one-stop shop. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Moldova is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Chisinau firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Limited Liability Company professionals and the study of laws, regulations and Paid in Minimum Capital Requirement: MDL 2,160 publicly available information on business entry in that economy. Following is a detailed summary of Start-up Capital: 10 times GNI per capita those procedures, along with the associated time and cost. These 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). Summary of procedures for starting a business in Moldova—and the time and cost Time to No. Procedure Cost to complete complete File all the documents with the State Registration Chamber for the registration of the company; obtain IDNO number; reserve company name Under the Law on the state registration of the legal entities and individual entrepreneurs (No. 220 of 19.10.2007, in force from 30.05.2008) the term for registration of the company is 5 working days. The SRC provides options for expedited services in which company registration can be completed within 4 hours (same day) or 24 hours (1 day). However, the "4 hours option" is not enforceable, since in practice SRC fails to register a business within 4 hours. The fees for registering companies with the SRC under the expedited about MDL 1,424 term are as follows: 2 days (registration cost + 1 - State registration: MDL 500 (24hours)/MDL 1000(4 hours); stamp fee) - Incorporation document preparation (editing): MDL 216 (24hours)/MDL 432 (4 hours); - Name verification: MDL 78 (24 hours)/MDL432 (4 hours) ; - Certification of signatures by the State Registrar: MDL 30 ; - Certification of the statutory documents-MDL 80 (constant); - Publication: MDL 54 (constant); - Extract (for permanent bank account): MDL 252 (constant); - Notary fees -MDL 11. Apart from the registration cost, the applicant shall order a stamp, the cost of which may vary between MDL 180 and MDL 400. Although the Law on registration of legal entities does not provide since 2010 the obligation to submit the "Document confirming Doing Business 2014 Moldova 21 Time to No. Procedure Cost to complete complete payment of share capital", the SRC registrars still require this document (as it results from the provisions of the Civil Code). In addition, copies of the Company's founders IDs are requested. In accordance with the Law, the following documents must be submitted to the State Registration Chamber (SRC) in order to register a limited liability company: (a) Filled application form (template provided by the SRC); (b) Decision on incorporation of the company approved by founder/s; (c) Incorporation documents; (d) Document confirming payment of share capital; (e) Document confirming payment of applicable registration fees. In practice the SRC also requests submittal of documents confirming the legal address of the company. Also as a matter of practice, the SRC drafts the incorporation documents and a founder decision in a special form that is supplementary to the decision provided by the founder. A unique state identification number is attributed to each legal entity at the date of its registration. It is inserted in the Registration Certificate and in the constitutive act. The Law on State Registration of Legal Entities and Individual Entrepreneurs No. 220 of 19.10.2007 allows the booking of the name, under which a person or entity intends to register a company, for a term up to 6 months. In such a way, no other third party will be allowed to register a company under the same name during the booking period. * Open a temporary bank account and deposit at least 40% of the registered capital of the company; pay the registration fee 1 day, At registration, at least 40% of each founder’s declared contribution to simultaneous with no charge 2 company capital should be paid in. The other 60% must be paid in previous within 6 months of registration. procedure * Obtain an official stamp from the Ministry of Information Technologies and Communication; and obtain statistical codes The company files the bank certificate with the Registrar, confirming the no additional founders’ transfer of their capital contributions into the temporary bank 1 day, charge the costs account. While submitting the registration documents, the company simultaneous with 3 are covered by the submits the company stamp order. After registering the company, the previous charges listed in Registrar will issue the stamp along with the registration certificate and procedure Procedure 1 other documents. SCR issues the company's statistics codes upon issuing constitutive acts. Doing Business 2014 Moldova 22 Time to No. Procedure Cost to complete complete Register with the Territorial State Fiscal Inspectorate Newly registered companies should register with the Tax Inspectorate. Only companies that intend to sell VAT-taxable goods and services for 1-3 days no charge 4 an amount exceeding MDL 600,000 during 12 consecutive months must obtain a VAT code by registering with the local fiscal inspectorate. Convert the company’s temporary bank account to a permanent one To convert the company’s temporary bank account to a permanent account, the founder must present to the bank the incorporation documents; the excerpt for the bank, confirming the name and address of the director; the notarized signature cards; and the company seal. As of December 7, 2012, the registration certificate was excluded from the category of statutory documents of a legal entity. The decision on registration of the legal entity shall replace the registration certificate 5 for case represented at letter (a); 1 day no charge Apart from the above mentioned documents, the banks require an application form regarding anti-money laundering. Under this form, the company's director shall provide the information on the final beneficiary of the company (natural person), as well as whether the final beneficiary and/or director is related to politically exposed persons. The signature cards may be certified either in front of the notary, or in front of the bank officer. In case certification of signatures at the bank, the bank retains about MDL 150 from the Company's account. Register the company with the Social Security Fund Every company should receive an individual social security number for each employee. The Law of the Republic of Moldova No. 383-XV (of November 11, 2004), "On the State Social Security Budget 2005," states that the company must complete a questionnaire for each employee 1 day no charge 6 and to present it, along with the copy of the employee’s passport, to the National Social Security Fund within 10 days of registration or the signing of the labor contract. Later, the company should present the report every 3 months to the National Social Security Fund. * 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 2014 Moldova 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 PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Moldova 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 26 procedures, takes 291.0 days build a warehouse in Moldova? According to data and costs 65.0% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Moldova 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 2014 Moldova 25 DEALING WITH CONSTRUCTION PERMITS Globally, Moldova stands at 174 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Moldova to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Moldova and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 Moldova 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Moldova is keeping up—and deal with construction permits (figure 3.3) help show where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Moldova 27 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Moldova 28 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Moldova (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Moldova made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 29 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Moldova are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through City : Chisinau information collected from experts in construction licensing, including architects, civil engineers, Estimated construction lawyers, construction firms, utility MDL 6,519,887 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Moldova —and the time and cost Time to No. Procedure Cost to complete complete Request and obtain project according to city planning documentation from Design Institute of Moldova on Engineering and Research Works. BuildCo hires a licensed design institute to prepare a complete, relevant 1 day MDL 1,500 1 set of city planning documents. It should obtain technical conditions from many agencies (the price is negotiable), then submit them to the design institute for incorporation into the design documents. * Request and obtain location clearance from Fire Authorities BuildCo must receive approval from the Fire Department, which is then considered by the design institute in developing the city planning documentation. This procedure is the first in a series of initial 2 procedures that could run in parallel. 7 days MDL 250 Although Cabinet Decision No. 920, dated August 30, 2005, states that this process is free of charge, in practice, a cost is incurred. * Request and obtain location clearance from Sanitary Authorities BuildCo must receive approval from the sanitary authorities, which is then considered by the design institute in developing the city planning documentation. Officially, this procedure should take no more than 10 30 days MDL 500 3 days. However, in practice, it takes on average 30 days. The cost is not provided by any law or cabinet decision. In practice, the authorities charge internal fees. Doing Business 2014 Moldova 30 Time to No. Procedure Cost to complete complete The Law on Basic Principles for Entrepreneurial Activity, which took effect on July 11, 2007 officially, eliminated this charge. The law states that all payments should be stated in a law. * Request and obtain location clearance from Ecological Services BuildCo must receive approval from the Ecological Services, which is then considered by the design institute in developing the city planning 4 documentation. Although Cabinet Decision No. 920, dated August 30, 14 days MDL 500 2005, stipulates a statutory time limit of 10 days, in practice, the process takes 14 days. * Request and obtain technical conditions for electricity connection from street lighting service provider Lumteh (public lighting provider) Lumteh sometimes imposes additional costs for designing a public 30 days MDL 300 5 utility lighting network in the nearby area. The costs of this procedure could amount to up to 30% of the total design costs of a project. This procedure applies to both private and public projects. * Request and obtain technical conditions for water and industrial sewage from Apa Canal After the application is submitted, it takes a week for it to be 14 days MDL 343 6 considered and another week for BuildCo to receive an answer. Technical conditions for water and sewerage are obtained at this stage. * Request and obtain technical conditions for sewage system from Exdrupo 7 A separate specification is obtained from Exdrupo (the urban roads and 7 days MDL 200 bridges management authority) on rainwater drainage. * Request and obtain technical conditions for telephone connection from MoldTelecom This procedure takes 7 -- 30 days depending on the district where the plot is located. The technical conditions are valid for a year. Since 2006, 7 days MDL 136 8 MoldTelecom has started installing wireless telephone service under CDMA 2000. Many companies opt for this because of the low cost and speed of obtaining service. * Request and obtain technical conditions for heating services from Termokom 9 14 days MDL 832 The Department of Verification and Expertise will not issue its approval of the project without obtaining the conditions from Termokom. This Doing Business 2014 Moldova 31 Time to No. Procedure Cost to complete complete procedure is linked to fire safety regulations in effect during winter. * Request and obtain clearance from zoning and road construction division of Municipality (Directia General Cai de Transport si Comunicatii) BuildCo must contact the State Road Inspectorate if the building is less 18 days MDL 600 10 than 10 meters from an existing road. This authority has discretionary power and often requires other documents in addition to the ones publicly listed. * Request and obtain expertise clearance from Fire Department The Fire Department must approve the completed set of designs and drawings after the conditions have been assigned. The company must 8 days no charge 11 visit the Fire Department to obtain the expertise consultation rather than go through the Department of Verification and Expertise. * Request and obtain expertise clearance from Health Department The Health Department must approve the completed set of designs and drawings after the conditions have been assigned. The company 21 days MDL 300 12 must visit the Health Department to obtain the expertise consultation rather than go through the Department of Verification and Expertise. * Request and obtain expertise clearance from Environmental Protection Agency The Environmental Protection Agency will not issue any clearance 30 days MDL 250 13 unless the Health and Fire Departments have previously issue their clearances. By law, this takes 30 days. Request and obtain City Planning Certificate Under Government Resolution No. 360 (changes of 2006), to obtain the city planning certificate, the applicant must pay a fee for a standard form at the local municipality and submit it to the local registrar along with a confirmation of payment. The local architectural authorities define the amount to be paid, based 45 days MDL 23 14 on the size of the plot declared by the applicant. In the case considered here, the cost is MDL 10.00 + MDL 0.01 per square meter, which is a total of MDL 23.00. The City Planning certificate is filled out in accordance with all necessary requirements agreed upon with the chief architect of the city and district, and taking into consideration the following: • The application is properly addressed to the relevant authority. Doing Business 2014 Moldova 32 Time to No. Procedure Cost to complete complete • The form is properly filled out. • The information on the plot is sufficient and comprehensive. If there are discrepancies or mistakes on the form, the application is returned to the applicant within 10 days from the registration date. The fees are not reimbursed. The time limit, as specified by Cabinet Decision No. 360, dated April 18, 1997, is 30 days. However, this takes on average 2 to 3 months. The certificate is valid for a period extending from 3 to 24 months, depending on the planning zones of the city. At the applicant’s request, it can be extended for another maximum term of 12 months. It is expected that, as of the end of 2007, according to the draft Law on Authorizing Execution of Works in Construction, the certificate will be issued within 15 days at a cost of MDL 10.00 plus MDL 0.01 for each square meter. Request and obtain expertise of project documents at the State Service for Verification and Expertise of Projects in Construction The State Service for Verification and Expertise of Projects in 15 Construction was reformed in September 2006, giving it responsibility 14 days MDL 3,000 for undertaking an internal verification of technical conditions with all the utilities authorities. Request and obtain construction permit from the local City Planning Services Agency (Municipality) The applicant, under Government Resolution on Construction Certificates and Permits No. 360 (changes of 2006), submits the following documents to the local authority: • An application for issuance of the building permit • A standard form obtained for a fee at the local government (one copy if the permit is issued by Pimeria, the local district level) • Documents requesting a permit (two copies), consisting of a city planning certificate, proof of land ownership, a construction permit (проекта для разрешения на строительство (ПРС)), a technical expertise consultation performed by the relevant authorities, a project of execution of works (проект организации выполнения работ 45 days MDL 6,000 16 (ПОР); this can be done internally), relevant clearances specified by the city planning certificate • Proof of payment; документ • A construction management plan (проект организации строительства (ПОС)) that contains all the works required by the project (within its limits and outside), including the areas that are occupied temporarily (all on a scale defined by a professional). This documentation is required for all types of projects. The construction management plan can be prepared by BuildCo. For small projects, it is combined with the situation layout; for large projects, it is submitted on a separate sheet. If a construction management plan is not submitted, a separate request/application is submitted to obtain a building permit The building permit is valid for 12 months from the date it is issued. If Doing Business 2014 Moldova 33 Time to No. Procedure Cost to complete complete construction does not begin during that time, the permit ceases to be valid. The permit may be extended once, for another year at the most. The permit is issued either directly to the applicant or sent via regular mail within 30 days from the date it is registered internally. This time line is not respected in practice, however, and often averages 45 days. The building permit is signed in the following order by: • The chairperson/secretary of the local region, chief architect for investment • The secretary, chief architect of the municipality for investment • The secretary, responsible people of the prefecture The signed permit must be registered internally at the State Inspectorate of Construction. The company also receives the technical passport along with the building permit. The cost is MDL 6,000.00, according to a formula established by the Government Resolution on City Planning Certificate and Construction Permit No. 1245, dated October 30, 2006. Notify construction authorities about the beginning of construction At least 5 days before starting construction, the company must notify the authority (the State Inspectorate of Construction) in writing. The written notification is submitted in person and must be also filed with the State Inspectorate of Construction no less than 30 days prior to the start of construction. If construction begins without prior written 1 day no charge 17 notification, certain sanctions would be applied against the company. The construction period begins the day the permit is issued. Relevant authorities and ministries may require the company to provide valid proof of the legality of the start of construction work. Receive inspection on foundation works by State Construction Inspectorate (1) 18 1 day no charge Receive inspection on structure works by State Construction Inspectorate (2) 19 1 day no charge Doing Business 2014 Moldova 34 Time to No. Procedure Cost to complete complete Receive inspection on roof works by State Construction Inspectorate (3) 20 1 day no charge Request and connect to water and sewage services BuildCo requests a connection from the utilities. BuildCo must extend the pipelines to the connection points (10 meters). The inspector visits 22 days MDL 1,056 21 the site, approves the connection by sealing it, and opens the water shafts. * Request and connect to phone services Telephone service installation could take as long as 6 months if the company wants an E1 connection, which consists of 32 lines. This delay 22 happens because the incumbent operator. Small companies in remote 30 days MDL 900 areas, where MoldTelecom has no wires, would actually have to pay the cost of installing a minimum of 10 lines, even if they need only one. Receive final inspection by State Construction Inspectorate and sign the Act of completion of construction 23 1 day no charge Request and obtain the Act of completion of construction works by Working Commission After the completion of construction, the company convenes the Working Commission, consisting of representatives from the water and sewage authority, the sanitary services, power services, and fire safety. The final approval is made by the chair of commission, according to Cabinet Decision No. 285, dated May 23, 1996; the investor’s 24 representative; and the local authority’s representative (in the case of 31 days no charge the municipality of Chisinau, the representative of the LPA is the chair of the commission). According to the same cabinet decision, the commission is to be created within 15 days. However, that time limit is not respected in practice. Request and receive the Act of completion of construction works by State Commission The main authority in charge of issuing the occupancy permit is the Ministry of Construction; the chief architect has the definitive word on 60 days MDL 330 25 the decision. The other authorities that must sign the occupancy permit are the sanitary services, the Bureau of Technical Inventory (BTI), and the fire safety services, among others. As a rule, the commission does not meet. Instead, the company must Doing Business 2014 Moldova 35 Time to No. Procedure Cost to complete complete request the signatures on an individual basis. The agencies that issue technical conditions must also give their approval. According to Cabinet Decision No. 285, final approval is completed within 15 days of the guaranteed term provided in the contract, which could be 5 days or 60. On average, it takes 60 days to obtain the occupancy permit. Register the building at Bureau of Technical Inventory (BTI) Seals are put on six copies of the blueprints; the company is given one 18 days MDL 250 26 copy. * 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 2014 Moldova 36 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a 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 Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Moldova 37 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 140 days and costs 542.1% of connection in Moldova? According to data collected income per capita (figure 4.1). by Doing Business, getting electricity there requires 7 Figure 4.1 What it takes to obtain an electricity connection in Moldova 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 2014 Moldova 38 GETTING ELECTRICITY Globally, Moldova stands at 165 in the ranking of 189 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in 4.2). The rankings for comparator economies and the Moldova to connect a warehouse to electricity. Figure 4.2 How Moldova and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 Moldova 39 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Moldova Best performer in Best performer Indicator Moldova DB2014 Moldova DB2013 Europe & Central globally DB2014 Asia DB2014 Rank 165 164 San Marino (10) Iceland (1) Procedures (number) 7 7 San Marino (3) 10 Economies* (3) Time (days) 140 140 San Marino (45) Germany (17) Cost (% of income per capita) 542.1 578.0 Lithuania (48.1) Japan (0.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings fo r DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Moldova 40 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Moldova (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Moldova made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Moldova 41 GETTING ELECTRICITY What are the details? The indicators reported here for Moldova are based on OBTAINING AN ELECTRICITY CONNECTION a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Chisinau utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: ICS RED Union Fenosa verified by electricity regulatory agencies and S.A. independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Moldova—and the time and cost Time to No. Procedure Cost to complete complete Submit an application for an electricity connection to ICS RED Union Fenosa S.A. and await issuance of technical conditions The application for an electricity connection is submitted in person. Currently, it is not possible to submit an online application. The following information and documents are required: Name of the company and its address; business sector; required load; level of supply reliability; nominal voltage at the connection point; ownership certificate or certificate of the 19 calendar days no charge 1 right to use; certification of absence of outstanding electricity bills for other properties. If the required load is above 50 kW then the utility also requires calculation of the load where it is specified for what purposes the load will be used. Await and obtain review of the location relative to the distribution grid from ICS RED Union Fenosa S.A. ICS RED Union Fenosa S.A. carries out an external inspection of the site before issuing technical conditions. In practice, a representative of the customer is present, but this is not a requirement. It is most likely that 1 calendar day no charge 2 there will be only one inspection at this point. In rare cases there is a second inspection in case all the details were not figured out during the first inspection. Doing Business 2014 Moldova 42 Time to No. Procedure Cost to complete complete Await completion of the external connection design by a private design company Given the assumed load a project design of the external connection is required. After the technical conditions are issued the electrical design company prepares the design of the external connection and obtains 3 from various government organizations documents certifying 25 calendar days MDL 12,500.0 compliance of the project. If there is a crossing of the road during the project design stage the hired company gets the approval of the project in 1 to 10 organizations including communications, water, gas depending on what is required. Obtain an excavation permit at the Department of Transport The hired electrical contractor before completing the excavation works 5 calendar days MDL 1,100.0 4 obtains the permit . Await completion of external works, including meter installation by an electrical contractor Before the works can start it is required to receive a permit for turn off the power. It takes 10-20 days to receive the permit and the electricity users are notified that the power will be turned off. After the design is approved an electrical contract carries out external connection works according to the technical conditions and the design. The electrical contractor purchases all the materials, including the meter. 75 calendar days MDL 130,000.0 5 The materials can be purchased from any retailer. The meter has to be bought at ICS RED Union Fenosa S.A. and certified by ICS RED Union Fenosa S.A. The meter is installed by the electrical contractor. At the end of the external works two electrical engineers fill out documents certifying compliance with technical conditions. One of the electrical engineers is in charge of testing the installed equipment and the other one is in charge of filling out documents necessary to receive operation permit. Obtain an operation permit from the State Energy Inspectorate After the external connection works are finished, the electrical contractor submits documents to the State Energy Inspectorate for the inspection of works, starting from the point of connection and ending at the 11 calendar days no charge 6 internal wiring. State Energy Inspectorate completes the inspection and given that the works are consistent with the technical conditions, project and technical norms issues an Act for Admittance to Operation. Doing Business 2014 Moldova 43 Time to No. Procedure Cost to complete complete Sign a supply contract and a contract assigning responsibilities for repair and maintenance of the electrical line and await final connection The customer submits the operation permit to ICS RED Union Fenosa S.A. and signs a supply contract on the same day and electricity starts flowing. On the basis of this Act ICS RED Union Fenosa SA prepares a 5 calendar days MDL 500.0 7 document dividing responsibilities for maintenance of the cable, which acts as a supplement to the supply contract and prepares supply contract. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 Moldova 44 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 immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day. time and cost. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Moldova 45 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 6.0 days and costs 0.9% of the Moldova? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 5 Figure 5.1 What it takes to register property in Moldova 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 2014 Moldova 46 REGISTERING PROPERTY Globally, Moldova stands at 19 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 Moldova to transfer property. Figure 5.2 How Moldova and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2014 Moldova 47 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Moldova is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Moldova 48 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Moldova 49 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Moldova (table 5.1)? Table 5.1 How has Moldova made registering property easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Moldova made it easier to register property by removing the DB2010 requirement of cadastral sketch leading to a reduction in procedures from 6 to 5 and days from 48 to 5. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 50 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 City: Chisinau lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: MDL 1,329,018 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. Summary of procedures for registering property in Moldova—and the time and cost Time to No. Procedure Cost to complete complete * Obtain the non-encumbrance certificate and certificate on the immovables value from the Cadastre The non-encumbrance certificate from the Territorial Cadastre Office is locally known as the excerpt from Real estate register for the purpose of transactions. The validity of the certificate is two months as of the date of its issuance. The property transfer operation has to be performed within Less than a day the stated validity period of the certificate. The certificate can be (online Cost for each of requested only either by the owner of the concrete real estate or a procedure); the certificates is: person duly empowered by the respective owner.
MDL 51 (regular expedited option service) to be Additionally, the notary to authenticate the property transfer transaction - 1 business day; issued within 7 1 demands a certificate concerning the value of property put on sale. If the
business days; or Real estate register does not contain the value of the property, such standard option - MDL 255 value has to be calculated pursuant to the Methodology approved by 3 business days (expedited service) the Law 393/2006. In particular cases the value of the property can also be determinted on basis of value included in the insurance policy issued (simultaneous to be issued within in respect of the property or the valuation issued by a licensed person with procedures 2 3 business day (art. 3 Law 271/2003 on the Methodology for calculating notary fees). & 3) Also, the certificate on absence of debts on any taxes with regard to the Real estate to be sold is required. Such tax clearence certificate is issued by the Territorial Tax Office. * Obtain the excerpt from the State Register of Legal Entities 3 business days MDL 63 the (standard option) excerpt to be The following have to be presented by the Seller and the Buyer of the or 3 calendar issued within 3 2 Real estate for the purpose of the authentication of the sale-purchase days (faster business days; agreement: option) or 1 MDL 126 the - Buyer's and the Seller's registration certificates / decisions on business day excerpt to be Doing Business 2014 Moldova 51 Time to No. Procedure Cost to complete complete registration of the companies (original); (faster option) or issued within 2 - valid excerpt from the Real estate register for the purpose of 1 holiday / non- calendar day or 1 transactions in respect of the transferred property (original); business day, business day; - original excerpts from the State Register of companies for both the within 4 business MDL 252 the Seller and the Buyer; hours or 1 excerpt to be - originals of their respective constitutive documents, including all business hour issued within 1 performed amendments or legalized copies thereof; - competent bodies' protocols / decisions (in original) approving the sale (the fastest holiday / non- by the Seller and purchase by the Buyer of the property (should the options)
business day or consitutive documents or the legislation require);
within 4 business - identification cards of the persons executing the sale-purchase (simultaneous hours; agreement, also the authenticated empowerments in original (should the with procedures 1 MDL 378 the case be); & 3) excerpt to be - documents proving the Seller's ownership right over the property sold; issued in 1 - evaluation certificate issued by the Territorial Cadastral Office; business hour. - tax clearence certificate obtained by the Seller as per Procedure 3. Please note that In particular cases the notary can require that the parties produce / bank commissions legalize copies of their corresponding constitutive documents to be kept can apply (e.g. in the notary's file and used for the purpose of registering the transfer MDL 1 / excerpt). with the Cadastre. * Obtain the tax clearance certificate from the Tax Office 2 days The tax clearance certificate from the Tax Office should be produced to (simultaneous 3 confirm the existence or absence of unpaid taxes for the real estate no cost with procedures 1 involved in the transaction. No fees are charged for this document. & 2) Execution of the transfer deed by a public notary MDL 0.5% of the All types of land sale and certain types of construction / building sales agreement price are to be compulsory executed in the authenticated form. Although Moldovan legislation leaves margin for interpretation that certain types (state tax) + of real estate transactions (i.e. sales of certain constructions / buildings, Notary’s fees donations of land, etc.) do not require authenticated form, in order to according to the avoid lenghty court proceedings (e.g. with the Cadastre) it is highly values determined recommendable to execute all real estate sales transactions (property in the following transfer deeds) in authenticated form. A real estate sale transaction is table: 4 subject to a state tax equal to 0.5% (Art. 3(9)c) Law 1216/1992) of the 1 day agreement price, but not less than 0.5% of the value of property as indicated in the Cadastre. The notary fee varies and depends on the transaction value; can constitute between 1.3% (but not less than MDL Value of property | 120) and 0.1% of the agreement price (with a rate of 0.5 in case the Notary’s fees | agreement price is less than MDL 800,000) (Art. 8 Law 271/2003). For certain transactions separate state fees are applicable: e.g. MDL 5 for sale of agricultural land, etc. All fees / taxes in connection with a title transfer are bared by the Buyer, unless otherwise agreed by the parties. Up to MDL 20,000 | 1,3 %, but not less than MDL 180 Doing Business 2014 Moldova 52 Time to No. Procedure Cost to complete complete | From MDL 20,001 to 50,000 | 1.0% | From MDL 50,001 to 100,000 | 0.9% | From MDL 100,001 to 200,000 | 0.8% | From MDL 200,001 to 400,000 | 0.6% | From MDL 400,001 to 600,000 | 0.5% | From MDL 600,001 to 800,000 | 0.3% | From MDL 800,001 to 1,000,000 | 0.2% | More than MDL 1,000,001 | 0.1% | Submit the application for registration to the Cadastre 7 business days MDL 748 for (standard registration within The Cadastre Office (http://www.cadastre.md/?lang=en&menu_id=217) option);
3 business days will examine the documentation filed and register it in the Immovable 3 business days (standard option); Asset Register. The registration of title is conducted by applying a stamp 5 (faster option); MDL 2,244 for on all originals or notary-certified copies of the title documents. A transfer of property is usually registered within 7 business days (10 or
registration within calendar days). 1 business day business days (fastest (faster option); and Registration of transfer of ownership over the property (warehouse and option)
MDL 3,740 for Doing Business 2014 Moldova 53 Time to No. Procedure Cost to complete complete land) with the Registry of Immovable Property, within 7 business days (10 registration within calendar days) costs MDL 0,17% of the land price (but not less than MDL 1 business day 83 and not more than MDL 415) + 0,06% of the warehouse price (but not (fastest option). less than MDL 267 and not more than MDL 1335). It takes either 3 or 5 times more to get the property registered under the expedited options - The size of fee is within 3, and respectively 1 business day. calculated on the Territorial Cadastre Office in Chisinau also provides registration services basis of the (under the Law) within 3 business days (4 calendar days) in which case it transaction price. charges a fee of 5 times the regular amount, or 400 MDL. As soon as the sale-purchase transaction is completed the seller must pay VAT which is currently equal to 20% to the state budget. The documentation shall include: Executed transfer deed, confirming the transfer of the right of ownership (obtained in Procedure 3) Where the application is submitted by an agent he must attach power of attorney or other document conforming powers. * 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 2014 Moldova 54 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 lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has up to 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Moldova 55 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Moldova stands at 13 in the ranking of 189 collateral and bankruptcy laws in Moldova facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 5 on the The rankings for comparator economies and the depth of credit information index and a score of 9 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Moldova support lending and scores indicate more credit information and stronger borrowing. legal rights for borrowers and lenders. Figure 6.1 How Moldova and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 Moldova 56 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened — well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Moldova support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Moldova over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 40 13 Strength of legal rights 8 8 8 8 8 8 8 8 8 9 index (0-10) Depth of credit 0 0 0 0 0 0 0 4 4 5 information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (% of adults) Private bureau 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 3.9 4.5 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Moldova 57 GETTING CREDIT One way to put an economy’s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2013 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Moldova in 2013 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 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. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Moldova 58 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Moldova (table 6.2)? Table 6.2 How has Moldova made getting credit easier—or not? By Doing Business report year DB year Reform IMoldova approved a new credit bureau law to facilitate the creation of a private credit bureau. The bureau will distribute DB2009 credit information that banks can use to evaluate the creditworthiness of potential borrowers. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. Moldova improved its credit information system by establishing DB2012 its first private credit bureau. DB2013 No reform as measured by Doing Business. Moldova strengthened its secured transactions system by DB2014 introducing new grounds for relief from an automatic stay during insolvency and restructuring 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 2014 Moldova 59 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders Moldova are based on detailed information collected are gathered through a survey of financial lawyers and in that economy. The data on credit information verified through analysis of laws and regulations as sharing are collected through a survey of a credit well as public sources of information on collateral and registry and/or credit bureau (if one exists). To bankruptcy laws. For the strength of legal rights index, construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in credit registry or credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Moldova Europe & Central OECD high income Indicator Moldova Asia average average Strength of legal rights index (0-10) 9 7 7 Depth of credit information index (0-6) 5 5 5 Public registry coverage (% of adults) 0.0 33.9 42.9 Private bureau coverage (% of adults) 4.5 48.2 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 9 Can any business use movable assets as collateral while keeping possession of the assets; and Yes any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No 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, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's names? Doing Business 2014 Moldova 60 Strength of legal rights index (0–10) Index score: 9 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 either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured Yes creditors with grounds for relief from an automatic stay or/and sets a time limit to it? Does the law allow parties to agree in a collateral agreement that the lender may enforce its Yes security right out of court, at the time a security interest is created? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 5 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative data distributed? Yes No 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as No No 0 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes No 1 distributed? Is it guaranteed by law that borrowers can inspect Yes No 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 6,064 0 Number of individuals 109,441 0 Source: Doing Business database. Doing Business 2014 Moldova 61 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Moldova 62 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Moldova? The economy has a score of 5.3 measure all aspects related to the protection of on the strength of investor protection index, with a minority investors, a higher ranking does indicate that higher score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Moldova stands at 80 in the ranking of 189 economies on the strength of investor protection Figure 7.1 How Moldova and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 Moldova 63 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Moldova protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Moldova over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. 80 80 Extent of disclosure 7 7 7 7 7 7 7 7 7 index (0-10) Extent of director 1 1 1 1 1 1 1 3 3 liability index (0-10) Ease of shareholder 6 6 6 6 6 6 6 6 6 suits index (0-10) Strength of investor protection index (0- 4.7 4.7 4.7 4.7 4.7 4.7 4.7 5.3 5.3 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Moldova 64 PROTECTING INVESTORS One way to put an economy’s scores on the protecting shows the number of economies with this score in investors indicators into context is to see where the 2013 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across applies to the extent of director liability index, and economies. Figure 7.2 highlights the score on the figure 7.4 to the ease of shareholder suits index. extent of disclosure index for Moldova in 2013 and Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Moldova 65 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Moldova 66 PROTECTING INVESTORS The scores recorded over time for Moldova on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Moldova 67 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Moldova (table 7.2)? Table 7.2 How has Moldova strengthened investor protections—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. Moldova strengthened investor protections by allowing the DB2013 rescission of prejudicial related-party transactions. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 68 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Moldova are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the scores for Moldova. Summary of scoring for the protecting investors indicators in Moldova Europe & Central OECD high income Indicator Moldova Asia average average Extent of disclosure index (0-10) 7 6 7 Extent of director liability index (0-10) 3 5 5 Ease of shareholder suits index (0-10) 6 6 7 Strength of investor protection index (0-10) 5.3 5.7 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 7 What corporate body provides legally sufficient Shareholders meeting and Mr. James 3 approval for the transaction? is not allowed to vote Whether disclosure of the conflict of interest by Mr. Existence of a conflict without any 1 James to the board of directors is required? specifics Whether immediate disclosure of the transaction to 1 Disclosure on the transaction only the public and/or shareholders is required? Whether disclosure of the transaction in published 1 Disclosure on the transaction only periodic filings (annual reports) is required? Whether an external body must review the terms of 1 Yes the transaction before it takes place? Extent of director liability index (0-10) 3 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes 0 Not liable to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 0 Not liable Seller transaction causes to the company? Doing Business 2014 Moldova 69 Score Score description Whether a court can void the transaction upon a Possible when the transaction is unfair 2 successful claim by a shareholder plaintiff? or entails a conflict of interest Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 0 No the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 No filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 1 Yes transaction? Whether the plaintiff can obtain any documents from Any information that is relevant to the 3 the defendant and witnesses during trial? subject matter of the claim Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 2 Yes, without approval from the judge defendant and witnesses during trial? Whether the level of proof required for civil suits is 0 No lower than that of criminal cases? Strength of investor protection index (0-10) 5.3 Source: Doing Business database. Doing Business 2014 Moldova 70 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maxim izes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on 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 25.5%. Doing Business 2014 Moldova 71 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Moldova stands at 95 in the ranking of 189 taxes in Moldova—and how much do firms pay in economies on the ease of paying taxes (figure 8.1). The taxes? On average, firms make 31 tax payments a year, rankings for comparator economies and the regional spend 181 hours a year filing, preparing and paying average ranking provide other useful information for taxes and pay total taxes amounting to 40.4% of profit assessing the tax compliance burden for businesses in (see the summary at the end of this chapter for Moldova. details). Figure 8.1 How Moldova and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2014 Moldova 72 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Moldova is keeping up—and required to prepare and file taxes (figure 8.2) help where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Moldova 73 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Moldova 74 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 consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Moldova (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Moldova made paying taxes easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Moldova has eased the burden of taxes on business reducing DB2010 the social security taxes as paid by the employer Moldova reduced employer contribution rates for social DB2011 security. DB2012 No reform as measured by Doing Business. Moldova made paying taxes more costly for companies by reintroducing the corporate income tax—but also made tax DB2013 compliance easier by encouraging electronic filing and payment. Moldova made paying taxes easier for companies by introducing an electronic filing and payment system for the DB2014 value added tax, corporate income tax, land improvement tax and tax on immovable property. 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 2014 Moldova 75 PAYING TAXES What are the details? The indicators reported here for Moldova are based LOCATION OF STANDARDIZED COMPANY on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see the City: Chisinau section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Moldova Europe & Central OECD high income Indicator Moldova Asia average average Payments (number per year) 31 26 12 Time (hours per year) 181 246 175 Profit tax (%) 9.6 9.0 16.1 Labor tax and contributions (%) 30.6 22.6 23.1 Other taxes (%) 0.2 7.0 2.0 Total tax rate (% profit) 40.4 38.7 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. 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 Social security gross 12 94 23% 25.9 contributions salaries taxable Corporate income tax 1 online filing 42 12% 9.6 profit Health insurance gross 12 0 3.5% 3.9 contribution salaries Doing Business 2014 Moldova 76 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 MDL 80 number Land improvement tax 1 online filing 0 per of 0.7 employee employees book Tax on immovable property 1 online filing 0 0.1% value of 0.1 property MDL 120 weight of Road tax 1 online filing 0 0.1 per tonne vehicle property MDL 30 area for per 100 Land tax 1 online filing 0 non 0 square evaluated meters property included small Fuel tax 1 0 in fuel 0 amount price value not Value added tax (VAT) 1 online filing 45 20% 0 added included Totals 31 181 40.4 Source: Doing Business database. Doing Business 2014 Moldova 77 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 Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in 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 Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: military items.  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy’s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy’s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include Doing Business 2014 Moldova 78 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Moldova? Globally, Moldova stands at 150 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 7 (figure 9.1). The rankings for comparator economies documents, takes 32 days and costs $1545. Importing and the regional average ranking provide other useful the same container of goods requires 8 documents, information for assessing how easy it is for a business takes 35 days and costs $1870 (see the summary of in Moldova to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Moldova and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Moldova 79 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Moldova is keeping up—and where it is falling behind. export or import (figure 9.2) help show what is Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Moldova 80 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Moldova 81 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Moldova 82 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Moldova (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Moldova made trading across borders easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 83 TRADING ACROSS BORDERS What are the details? The indicators reported here for Moldova are based LOCATION OF STANDARDIZED COMPANY on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Chisinau the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Moldova Europe & Central OECD high income Indicator Moldova Asia average average Documents to export (number) 7 7 4 Time to export (days) 32 25 11 Cost to export (US$ per container) 1,545 2,109 1,070 Documents to import (number) 8 8 4 Time to import (days) 35 26 10 Cost to import (US$ per container) 1,870 2,339 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 20 115 Customs clearance and technical control 3 50 Ports and terminal handling 5 430 Inland transportation and handling 4 950 Totals 32 1,545 Procedures to import Time (days) Cost (US$) Documents preparation 21 200 Doing Business 2014 Moldova 84 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 6 120 Ports and terminal handling 5 600 Inland transportation and handling 3 950 Totals 35 1,870 Documents to export Documents to import Bill of lading Bill of lading Certificate of origin Certificate of origin Commercial invoice Commercial invoice Convention des Marchandises Routiers -- CMR Convention des Marchandises Routiers -- CMR Customs export declaration Customs import declaration Packing list Delivery order TIR Carnet/ Customs transit declaration Packing list Source: Doing Business database. TIR Carnet/ Customs transit declaration Doing Business 2014 Moldova 85 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 Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The 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.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Moldova 86 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Moldova stands at 23 in the ranking of 189 dispute through the courts in Moldova? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 337 days, costs 28.6% of the value of the claim regional average ranking provide other useful and requires 31 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Moldova. Figure 10.1 How Moldova and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Moldova 87 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Moldova is keeping up—and to enforce a contract through the courts (figure 10.2) where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Moldova 88 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Moldova 89 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Moldova (table 10.1)? Table 10.1 How has Moldova made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. Moldova made enforcement of judgments more efficient by DB2012 introducing private bailiffs. Moldova made the process of enforcing a contract more DB2013 difficult by abolishing the specialized economic court. DB2014 No reform as measured by Doing Business. 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 2014 Moldova 90 ENFORCING CONTRACTS What are the details? The indicators reported here for Moldova are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this City: Chisinau chapter on what the indicators cover). These procedures, and the time and cost of completing Claim Value LCU: 49866 them, are identified through study of the codes of civil procedure and other court regulations, as well Chişinău Court of First as through surveys completed by local litigation Court Name: Instance lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). The procedures for resolving a commercial lawsuit, and the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Moldova—and the time and cost Europe & Central OECD high income Indicator Moldova Asia average average Time (days) 337 441 529 Filing and service 42 Trial and judgment 190 Enforcement of judgment 105 Cost (% of claim) 28.6 25.3 21.0 Attorney cost (% of claim) 10.6 Court cost (% of claim) 6.0 Enforcement Cost (% of claim) 12.0 Procedures (number) 31 37 31 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Moldova 91 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 3 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Court scrutiny of summons and complaint: A judge examines Plaintiff's summons and complaint for 4 formal requirements. Judge admits summons and complaint: After verifying the formal requirements, the judge decides to * admit Plaintiff’s summons and complaint. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 5 Defendant is successful in the majority of cases. Second attempt at physical delivery: If a first attempt was not successful, a second attempt to physically 6 deliver the summons and complaint to Defendant is required by law or standard practice. Substituted service: Substituted service is accomplished by publication in newspapers, by affixing a notice 7 in court or on public bulletin boards, etc. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 8 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Trial and judgment: Doing Business 2014 Moldova 92 No. Procedure Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 9 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Adjournments: Court procedure is delayed because one or both parties request and obtain an 10 adjournment to submit written pleadings. 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 6-b of this case) Notification of court-appointment of independent expert: The court notifies both parties that the court is 11 appointing an independent expert. (see assumption 6-b of this case) 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 6-b of this case) * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Preliminary hearing aimed at preparing for the oral hearing: The judge meets the parties to make practical 12 arrangements for the oral hearing on the merits of the case. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 13 hearing or trial. (see assumption 6-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. 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. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 16 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. 17 Closing of the evidence period: The court makes the formal decision to close the evidence period. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 18 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 19 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 20 judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. 21 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 22 the law. Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Doing Business 2014 Moldova 93 No. Procedure Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse 23 Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff's approaching of court enforcement officer or (private) bailiff to enforce the judgment: To enforce 24 the judgment, Plaintiff approaches a court enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement orde r * ('seal' on judgment). Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the 25 judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 26 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a (private) bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 27 (private) bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court 28 enforcement officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 29 assets). 30 Sale through public auction: The Defendant’s movable property is sold at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 31 Plaintiff), according to the rules of priority. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Moldova 94 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and 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 Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Moldova 95 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 32.8 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Moldova? Globally, Moldova stands at 91 in the ranking of 189 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 2.8 years on average and 11.1). The rankings for comparator economies and the costs 9% of the debtor’s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Moldova. Figure 11.1 How Moldova and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Moldova 96 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Moldova is keeping up—and where it is or on the recovery rate (figure 11.2) help show what is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Moldova 97 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. “No practice” indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for “no practice” economies is 0. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Moldova 98 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 Moldova (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Moldova made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. Moldova amended its insolvency law to grant priority to DB2012 secured creditors. Moldova strengthened its insolvency process by extending the DB2013 duration of the reorganization proceeding and refining the qualification requirements for insolvency administrators. Moldova made resolving insolvency easier by introducing new restructuring mechanisms, reducing opportunities for appeals, DB2014 adding moratorium provisions and establishing strict statutory periods for several stages of the insolvency proceeding. 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 2014 Moldova 99 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Moldova 100 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Moldova other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Moldova 101 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Moldova adopt that contracting between employers and workers. Many affected the Doing Business indicators on employing economies that changed their labor regulations in the workers (table 12.1)? Table 12.1 What changes did Moldova make in employing workers in 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Moldova 102 EMPLOYING WORKERS What are the details? The data on employing workers reported here for lawyers and public officials. Employment laws and Moldova are based on a detailed survey of regulations as well as secondary sources are reviewed employment regulations that is completed by local to ensure accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy’s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 60 Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage for a 19-year old worker or an apprentice (US$/month) 101.2 Ratio of minimum wage to value added per worker 0.42 Source: Doing Business database. Doing Business 2014 Moldova 103 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 6.0 Premium for night work (% of hourly pay) in case of continuous 50% operations Premium for work on weekly rest day (% of hourly pay) in case of 100% continuous operations Major restrictions on night work in case of continuous operations? Yes Major restrictions on weekly holiday in case of continuous operations? Yes 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 2014 Moldova 104 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? Yes 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? No Source: Doing Business database. Doing Business 2014 Moldova 105 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 8.7 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 8.7 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 8.7 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 8.7 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 9.6 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 13.6 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 18.6 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 13.9 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Moldova 106 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Moldova 107 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Moldova 108 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Moldova 109 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Moldova 110 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Moldova 112 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Moldova 113