73908 Economy Profile: Egypt, Arab Rep. Doing Business 2013 Egypt, Arab Rep. 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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Doing Business 2013 Egypt, Arab Rep. 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 24 Getting electricity ....................................................................................................................... 35 Registering property .................................................................................................................. 43 Getting credit .............................................................................................................................. 52 Protecting investors ................................................................................................................... 59 Paying taxes ................................................................................................................................ 68 Trading across borders .............................................................................................................. 76 Enforcing contracts .................................................................................................................... 85 Resolving insolvency .................................................................................................................. 96 Employing workers .................................................................................................................. 102 Data notes ................................................................................................................................. 109 Resources on the Doing Business website ............................................................................ 114 Doing Business 2013 Egypt, Arab Rep. 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is (except for the paying taxes indicators, which cover the for a local entrepreneur to open and run a small to period January–December 2011). 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 185 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 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 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 19 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 2013 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Egypt, Arab Rep.. To allow useful business regulatory reforms. The data, along with comparison, it also provides data for other selected information on ordering Doing Business 2013, are economies (comparator economies) for each indicator. available on the Doing Business website at The data in this report are current as of June 1, 2012 http://www.doingbusiness.org. Doing Business 2013 Egypt, Arab Rep. 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: Middle East & North Africa 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 185 by the ease of Population: 82,536,770 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 2,600 percentile rankings on each of the 10 topics included in the index in Doing Business 2013: starting a business, DB2013 rank: 109 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2012 rank: 110* investors, paying taxes, trading across borders, Change in rank: 1 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see * DB2012 ranking shown is not last year‘s published the data notes for more details). The employing workers ranking but a comparable ranking for DB2012 that indicators are not included in this year‘s aggregate ease captures the effects of such factors as data of doing business ranking, but the data are presented corrections and the addition of 2 economies in this year‘s economy profile. (Barbados and Malta) to the sample this year. See the data notes for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy‘s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2013 Egypt, Arab Rep. 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 2013 Egypt, Arab Rep. 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 Egypt, Arab Rep. and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Egypt, Arab Rep. ranks on Doing Business topics Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business year 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 each economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy since of changes in an economy‘s regulatory environment for 2005 on each indicator in 9 Doing Business indicator sets. firms, but they are always relative. An economy‘s ranking Comparing the measure for an economy at 2 points in might change because of developments in other time allows users to assess how much the economy‘s economies. An economy that implemented business regulatory environment as measured by Doing Business regulation reforms may fail to rise in the rankings (or may has changed over time—how far it has moved toward (or even drop) if it is passed by others whose business away from) the most efficient practices and strongest regulation reforms had a more significant impact as regulations in areas covered by Doing Business (figure 1.4). measured by Doing Business. The results may show that the pace of change varies widely Moreover, year-to-year changes in the overall rankings do across the areas measured. They also may show that an not reflect how the business regulatory environment in an economy is relatively close to the frontier in some areas economy has changed over time—or how it has changed and relatively far from it in others. in different areas. To aid in assessing such changes, last Figure 1.4 How far has Egypt, Arab Rep. 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. 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 9 indicator sets shown in the figure. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 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 Egypt, Arab Rep. Egypt, Arab Rep. DB2013 Egypt, Arab Rep. DB2012 Best performer globally United Arab Emirates Saudi Arabia DB2013 Syrian Arab Republic Lebanon DB2013 Turkey DB2013 Jordan DB2013 Indicator DB2013 DB2013 DB2013 Starting a Business 26 23 103 114 78 132 72 22 New Zealand (1) (rank) Procedures (number) 6 6 7 5 9 7 6 6 New Zealand (1)* Time (days) 7 7 12 9 21 13 6 8 New Zealand (1) Cost (% of income per 10.2 10.2 13.8 67.0 5.0 15.6 10.5 6.0 Slovenia (0.0) capita) Paid-in Min. Capital (% 0.0 0.0 0.0 35.2 0.0 122.6 7.2 0.0 91 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 165 158 102 172 32 134 142 13 China (1) (rank) Hong Kong SAR, Procedures (number) 22 22 17 19 14 23 20 14 China (6)* Time (days) 218 218 70 219 103 104 180 46 Singapore (26) Cost (% of income per 135.0 155.3 529.8 301.8 24.7 483.9 164.3 9.2 Qatar (1.1) capita) Doing Business 2013 Egypt, Arab Rep. 11 Egypt, Arab Rep. DB2013 Egypt, Arab Rep. DB2012 Best performer globally United Arab Emirates Saudi Arabia DB2013 Syrian Arab Republic Lebanon DB2013 Turkey DB2013 Jordan DB2013 Indicator DB2013 DB2013 DB2013 Getting Electricity 99 98 38 47 12 84 68 7 Iceland (1) (rank) Procedures (number) 7 7 5 5 4 5 5 4 Germany (3)* Time (days) 54 54 47 75 61 71 70 40 Germany (17) Cost (% of income per 396.0 455.5 292.3 99.5 31.5 902.9 517.9 19.3 Japan (0.0) capita) Registering Property 95 92 102 108 12 84 42 12 Georgia (1) (rank) Procedures (number) 7 7 7 8 5 4 6 2 Georgia (1)* Time (days) 72 72 21 25 8 19 6 10 Portugal (1) Cost (% of property 0.7 0.8 7.5 5.8 0.0 27.8 3.3 2.3 Belarus (0.0)* value) Getting Credit (rank) 83 80 167 104 53 176 83 83 United Kingdom (1)* Strength of legal rights 3 3 2 3 5 1 4 4 Malaysia (10)* index (0-10) Depth of credit 6 6 2 5 6 2 5 5 United Kingdom (6)* information index (0-6) Public registry coverage 4.3 3.5 1.9 18.6 0.0 4.9 23.5 5.9 Portugal (90.7) (% of adults) Private bureau United Kingdom 16.4 13.7 0.0 0.0 33.3 0.0 63.0 31.7 coverage (% of adults) (100.0)* Protecting Investors 82 79 128 100 19 117 70 128 New Zealand (1) (rank) Extent of disclosure 8 8 5 9 9 7 9 4 Hong Kong SAR, Doing Business 2013 Egypt, Arab Rep. 12 Egypt, Arab Rep. DB2013 Egypt, Arab Rep. DB2012 Best performer globally United Arab Emirates Saudi Arabia DB2013 Syrian Arab Republic Lebanon DB2013 Turkey DB2013 Jordan DB2013 Indicator DB2013 DB2013 DB2013 index (0-10) China (10)* Extent of director 3 3 4 1 8 5 4 7 Singapore (9)* liability index (0-10) Ease of shareholder 5 5 4 5 4 2 4 2 New Zealand (10)* suits index (0-10) Strength of investor 5.3 5.3 4.3 5.0 7.0 4.7 5.7 4.3 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 145 143 35 37 3 111 80 1 (1) Payments (number per Hong Kong SAR, 29 29 25 19 3 19 15 4 year) China (3)* United Arab Emirates Time (hours per year) 392 433 151 180 72 336 223 12 (12) Trading Across Borders 70 64 52 95 36 125 78 5 Singapore (1) (rank) Documents to export 8 8 5 5 5 8 7 4 France (2) (number) Time to export (days) 12 12 13 22 13 15 13 7 Singapore (5)* Cost to export (US$ per 625 613 825 1,080 935 1,190 990 630 Malaysia (435) container) Documents to import 9 9 7 7 5 9 7 5 France (2) (number) Time to import (days) 13 13 15 30 17 21 14 7 Singapore (4) Cost to import (US$ per 755 755 1,335 1,365 1,054 1,625 1,235 590 Malaysia (420) container) Doing Business 2013 Egypt, Arab Rep. 13 Egypt, Arab Rep. DB2013 Egypt, Arab Rep. DB2012 Best performer globally United Arab Emirates Saudi Arabia DB2013 Syrian Arab Republic Lebanon DB2013 Turkey DB2013 Jordan DB2013 Indicator DB2013 DB2013 DB2013 Enforcing Contracts 152 152 129 121 124 176 40 104 Luxembourg (1) (rank) Time (days) 1,010 1,010 689 721 635 872 420 524 Singapore (150) Cost (% of claim) 26.2 26.2 31.2 30.8 27.5 29.3 24.9 19.5 Bhutan (0.1) Procedures (number) 42 42 38 37 40 55 36 49 Ireland (21)* Resolving Insolvency 139 140 112 131 107 111 124 101 Japan (1) (rank) Time (years) 4.2 4.2 4.3 4.0 2.8 4.1 3.3 3.2 Ireland (0.4) Cost (% of estate) 22 22 9 22 22 9 15 20 Singapore (1)* Outcome (0 as piecemeal sale and 1 as 0 0 0 0 0 0 0 going concern) Recovery rate (cents on 17.6 17.7 27.4 20.9 28.0 27.5 23.6 29.4 Japan (92.8) the dollar) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. The ranking methodology for the paying taxes indicators changed in Doing Business 2013; see the data notes for details. For more information on “no practice� marks, see the data notes. Data for the outcome of the resolving insolvency indicator are not available for DB2012. * 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 2013 Egypt, Arab Rep. 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 business in an economy by recording all Procedure completed once final document is procedures officially required or commonly done in received practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that the entrepreneur will  Has a turnover of at least 100 times income per pay no bribes. And it assumes that the business: capita.  Is a limited liability company, located in the  Does not qualify for any special benefits. largest business city.  Does not own real estate.  Has between 10 and 50 employees.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2013 Egypt, Arab Rep. 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Egypt, Arab days, costs 10.2% of income per capita and requires Rep.? According to data collected by Doing Business, paid-in minimum capital of 0.0% of income per capita starting a business there requires 6 procedures, takes 7 (figure 2.1). Figure 2.1 What it takes to start a business in Egypt, Arab Rep. Paid-in minimum capital (% of income per capita): 0.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. 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 2013 Egypt, Arab Rep. 16 STARTING A BUSINESS Globally, Egypt, Arab Rep. stands at 26 in the ranking and the regional average ranking provide other useful of 185 economies on the ease of starting a business information for assessing how easy it is for an (figure 2.2). The rankings for comparator economies entrepreneur in Egypt, Arab Rep. to start a business. Figure 2.2 How Egypt, Arab Rep. and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how process have changed—and which have not (table 2.1). easy (or difficult) it is to start a business in Egypt, Arab That can help identify where the potential for Rep. today, data over time show which aspects of the improvement is greatest. Table 2.1 The ease of starting a business in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 23 26 Procedures 13 13 10 10 7 6 6 6 6 6 (number) Time (days) 37 37 22 19 9 7 7 7 7 7 Cost (% of income per 65.6 63.0 104.9 68.8 28.6 22.4 20.4 10.7 10.2 10.2 capita) Paid-in Min. Capital (% of 855.4 815.6 739.8 694.7 12.9 2.0 0.0 0.0 0.0 0.0 income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by what is possible in making it easier to start a business. the economies that over time have had the best And changes in regional averages can show where performance regionally or globally on the procedures, Egypt, Arab Rep. is keeping up—and where it is falling time, cost or paid-in minimum capital required to start behind. a business (figure 2.3). These benchmarks help show Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2013 Egypt, Arab Rep. 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety-one economies globally have no paid-in minimum capital requirement. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 20 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 Egypt, Arab Rep. (table 2.2)? 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 2.2 How has Egypt, Arab Rep. made starting a business easier—or not? By Doing Business report year DB year Reform The minimum capital required to start a business was cut from DB2008 EGP 50,000 to EGP 1,000, and halved start-up time and cost. Paid in minimum capital was reduced by 20%, and cost was DB2009 reduced as a result of bar association fees‘ abolishment and time was cut due to tax registration automation. Egypt has eased the business start- up process by abolishing DB2010 the minimum capital requirement. DB2011 Egypt reduced the cost to start a business. DB2012 No reform as measured by Doing Business. DB2013 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 2013 Egypt, Arab Rep. 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Egypt, Arab Rep. is a set of specific procedures— the bureaucratic and legal steps that an entrepreneur must complete to incorporate and City: Cairo register a new firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Sharikat that Massouliyyah professionals and the study of laws, regulations and Mahdoodah publicly available information on business entry in Paid in Minimum Capital Requirement: None that economy. Following is a detailed summary of those procedures, along with the associated time Start-up Capital: 10 times GNI per capita 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 Egypt, Arab Rep.—and the time and cost Time to No. Procedure Cost to complete complete Obtain a certificate from an authorized bank The Bank of Alexandria branch at the General Authority for Free Zones 1 and Investment (GAFI) issues and delivers the certificate in 1–2 days. 1 day EGP 300-500 The bank certificate cost between EGP 300 to EGP 500, depending on the bank. This certificate can be obtained also from other authorized banks. Submit documents to the Department of Companies and obtain invoice The founder deposits the company documents at the reception desk, where they are reviewed immediately by a lawyer. A registry employee reviews the documents, and issues a detailed invoice for all fees associated with the company's establishment. Fees for company establishment: 2 1 day see comment • Notary public fee: 0.25% of capital ( minimum of EGP 10 and a maximum of EGP 1,000 ) • Establishment fees: 0.1% of capital (minimum of EGP 100 and maximum of EGP 1,000 according to Article 17 (d) of the Companies Law) • Commercial Syndicate fee: EGP 125 (for capital less than or equal to EGP 500,000) or EGP 250 (for capital more than EGP 500,000) • Publication fee: EGP 150 (for a limited liability company in Arabic) or EGP 300 (for a limited liability company in Arabic and English) • Chamber of Commerce fees: 0.2% of capital (minimum of EGP 24 and Doing Business 2013 Egypt, Arab Rep. 22 Time to No. Procedure Cost to complete complete maximum of EGP 2,000) • Commercial registration: EGP 56 • Issuance of operation certificate: EGP 29 Notarize company’s contract The articles of association must be registered and certain documents deposited at with the Investment Notarization Office at GAFI in the one-stop shop, these documents are: 1. Original certificate of non confusion. 2. Original certificate of an authorized bank. 3. A copy of the powers of attorney from the founders to their represantative. included in procedure 3 1 day 4. A copy of the founders' I.D. cards or passports. 2 5. Security clearances for foreign partners. 6. Original certificate indicating that the company's auidtor is listed at the Registry of accountants and auditors. 7. The application provided by GAFI. 8. Stamped articles of association. No stamp duty is levied, according to the amendments (published on July 1, 2006) to the Stamp Duty Law (No. 111 of 1980). Required are the original copies of the articles of association and the powers of attorney. Obtain the notification of incorporation When the articles of association are submitted, the competent authority must ratify them and issue a decree approving the establishment of the company. This decree is issued within 24 hours. Further, the applicant obtains the approval of the Chamber of Commerce and fills an 1 day no charge 4 application in order to obtain an exract of the commercial registry. After the lapse of 15 days the company assumes legal responsibility and judicial personality. Within the 15 days if the comptent authority has no objection, the Department of Companies is thereafter responsible for publishing the notice of incorporation in the Investment Gazette at the company's expense. Register for taxes Upon incorporation, the company can complete tax registration and obtain the tax card at the one-stop shop‘s tax counter. Upon obtaining the card, the company may choose to register for sales tax, provided that they have started production. Companies are obliged to register for sales tax only once they reach at least EGP 54,000 in sales for 1 day no charge 5 industrial activities and EGP 150,000 in sales for commercial activities. The required documents include the articles of association and the powers of attorney, the bank signature authentication (to be issued to the appropriate person by the manager having the power to sign on behalf of the company), the tax card, an original extract from the company‘s commercial register, and the original copy of the company‘s lease agreement for its premises. A new reform took place recently that Doing Business 2013 Egypt, Arab Rep. 23 Time to No. Procedure Cost to complete complete will further reduce the time for this procedure a result of automation of the tax office at the OSS and the tax authority. Register employees with the National Authority of Social Insurance Social insurance provides compensation for disability, retirement (pension), unemployment, and work-related injuries. By law, employers are required to subscribe to the social insurance system. Otherwise, they may be subject to sanctions. The employer must submit a fully completed, authority-issued 2 days no charge 6 application (Nos. 1 and 2) and the following documents to the competent authority‘s office: • Employer‘s lease agreement for company premises. • Employer‘s tax card. • Employee‘s identification card and birth certificate (copy). • Employee‘s and employer‘s graduation certificate. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 24 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 Completing 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 fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy‘s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) 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, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2013 Egypt, Arab Rep. 25 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to construction permits there requires 22 procedures, build a warehouse in Egypt, Arab Rep.? According to takes 218 days and costs 135.0% of income per capita data collected by Doing Business, dealing with (figure 3.1). Figure 3.1 What it takes to comply with formalities to build a warehouse in Egypt, Arab Rep. Note: Time shown in the figure above may not reflect simultaneity of procedures. 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 2013 Egypt, Arab Rep. 26 DEALING WITH CONSTRUCTION PERMITS Globally, Egypt, Arab Rep. stands at 165 in the ranking ranking provide other useful information for assessing of 185 economies on the ease of dealing with how easy it is for an entrepreneur in Egypt, Arab Rep. construction permits (figure 3.2). The rankings for to legally build a warehouse. comparator economies and the regional average Figure 3.2 How Egypt, Arab Rep. and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 27 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how aspects of the process have changed—and which have easy (or difficult) it is to deal with construction permits not (table 3.1). That can help identify where the in Egypt, Arab Rep. today, data over time show which potential for improvement is greatest. Table 3.1 The ease of dealing with construction permits in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 158 165 Procedures (number) 25 25 25 25 22 22 22 22 Time (days) 249 249 249 249 218 218 218 218 Cost (% of income 932.3 775.0 281.5 223.4 196.2 173.8 155.3 135.0 per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 28 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by possible in making it easier to deal with construction the economies that over time have had the best permits. And changes in regional averages can show performance regionally or globally on the procedures, where Egypt, Arab Rep. is keeping up—and where it is time or cost required to deal with construction permits falling behind. (figure 3.3). These benchmarks help show what is Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2013 Egypt, Arab Rep. 29 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 30 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 Egypt, Arab Rep. (table 3.2)? Construction is one of them. In an effort to ensure Table 3.2 How has Egypt, Arab Rep. made dealing with construction permits easier—or not? By Doing Business report year DB year Reform Egypt made obtaining construction permits less expensive by DB2008 reducing the fee for building registration. Egypt passed a new building code in 2008 that aims to DB2009 establish a single window for processing construction related approvals and reduce procedures and time. Egypt continued to ease the process of dealing with construction permits with the issuance of the Executive Articles DB2010 of the 2008 Construction Law, and eliminating most pre- approvals for construction permits. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 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 2013 Egypt, Arab Rep. 31 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Egypt, Arab Rep. BUILDING A WAREHOUSE are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business City : Cairo through information collected from experts in construction licensing, including architects, Estimated construction lawyers, construction firms, utility EGP 1,000,000 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 Egypt, Arab Rep. —and the time and cost Time to No. Procedure Cost to complete complete Apply and obtain the Site Validity Certificate The licensed Architect/Engineer must submit the ownership certificate to the Municipality to obtain the Site Validity Certificate. An inspector from the Municipality will visit the construction site to verify that (i) there is no pre-existing building or illegal demolition on the plot of 7 days EGP 200 1 land; (ii) check the ownership and encumbrances of the plot of land. The Site Validity Certificate will be issued after the site visit. The cost of EGP 200.00 is set in Ministerial Decree number 188 of 2010 (Art. 1.1) Obtain Execution Supervision Certificate from the Syndicate of Licensed Engineers The Architect/Engineer must obtain an Execution Supervision Certificate 2 days EGP 1,682 2 from the Syndicate of Licensed Engineers. This document will be the proof that the Architect/Engineer is licensed and authorize to supervise this construction. This certificate is submitted along with the Construction permit request. * Obtain project clearance from electricity authority 3 30 days no charge * Obtain clearance from Civil Defense and Fire Fighting Authority BuildCo needs to visit the Electricity Authority to obtain a project clearance before submitting the application for the building permit. The 30 days no charge 4 Electricity Authority has to check the building plans in order to make sure that the electric system of the warehouse itself will be in line with the electricity network. Doing Business 2013 Egypt, Arab Rep. 32 Time to No. Procedure Cost to complete complete Submit building permit application to municipal authority To obtain a building permit, BuildCo must file with the District Department the following documents, along with the ones described in the previous procedures: • Original ownership contract of the plot of land (notarized) • Measurement specification statement from the Survey Department • Survey plan (aerial photography) specifying the location. That survey plan must be approved by an accredited syndicate engineer • Alignment license, issued by the Urban Planning Department of Cairo Governorate. • Probe estimation, approved by a syndicated engineer • Execution supervision certificate, issued by a syndicate engineer or consultant engineer, if the building value is more than EGP 1 million • A receipt attesting the payment of fees for the duty for examination of the drawings and details -- A general drawing of the site (scale minimum 1:1,000) that indicates (1) the boundaries and dimensions of the land for which the permit is required, together with the total land area; and (2) the part on which construction is requested, as well as the facing roads and their widths 5 1 day EGP 7 BuildCo must submit a file containing (1) a copy of the architectural drawings for the horizontal projections of floors and facades; (2) a vertical section, indicating the building height and the road's zero level and the structural drawings of the foundations, columns, and the enforced ceilings, together with copies of the structural calculation notes. All drawings must be signed by an accredited engineer. Also to be filed is a report from a structural engineer that confirms the structural skeleton and the foundations of the building (1) will tolerate the required licensed construction work and (2) are in compliance with safety provisions and will resist natural disasters according to Egyptian construction standards. The report must illustrate the soil composition at the site. If the building is elevated or modified, BuildCo must submit a report from a construction consultant (accredited for not less than 25 years), attesting that upon inspection and study of the existing buildings, the consultant has obtained proof of tolerance to the applicable loads subject to the license. Receive inspection prior to permit issuance from muncipality 6 1 day no charge Obtain building permit The Construction Law establishes a 30-day statutory time limit for 30 days EGP 2,000 7 issuing building permits. These 30 days are counted only after all preliminary approvals are obtained. Law 4 of 2006 reduced the fee to obtain a building permit from 1% of construction cost to 0.2%. Receive on-site inspection from the municipality - I 8 1 day no charge The municipality will inspect the construction site on a regular basis. Doing Business 2013 Egypt, Arab Rep. 33 Time to No. Procedure Cost to complete complete Each inspection takes a day at most. Receive on-site inspection from the municipality - II 9 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - III 10 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - IV 11 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - V 12 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - VI 13 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - VII 14 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - VIII 15 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Receive on-site inspection from the municipality - IX 16 1 day no charge The municipality will inspect the construction site on a regular basis. Each inspection takes a day at most. Obtain approval of Certificate of supervision from the Syndicate of Licensed Engineers 17 The supervising engineer has to submit a certificate stating that the 1 day no charge building has been built in accordance with the relevant laws and regulations. This certificate must be signed by the supervising engineer and approved by the Syndicate of Licensed Engineers. Submit certificate obtained from the Syndicate of Licensed Engineers and receive final inspection from the Municipal Authority 18 15 days no charge After receiving the certificate from the Supervising Engineer at completion of work, the municipality makes a final inspection to certify that the warehouse conforms to the specifications outlined in the building permit. Obtain letters from Municipality about water and sewage 19 connection 2 days no charge Doing Business 2013 Egypt, Arab Rep. 34 Time to No. Procedure Cost to complete complete After the inspection, the Municipality will issue some letters that will allow the connection to the utilities. Register the building with the real estate registry The company must submit a building registration form, the building 20 permit for the warehouse, and the primary purchase contract of the 60 days EGP 2,000 land on which the warehouse had been built. Law 83 of 2006 amended Decree No. 70 (1964) to decrease registration fees, which are now a flat fee of EGP 2,000.00 rather than a percentage of building value. Obtain water and sewerage connection To obtain water and sewage connection, the company must submit the letters obtained from the Municipality certifying that the building was 21 built according to plan. Then the company submits an application to 60 days EGP 15,000 the competent water authority, along with the original license and a copy of the building permit. Fees include about EPG 10,000.00 for the water connection and EPG 5,000.00 for the sewerage connection. * Obtain phone connection To obtain a phone connection, the company must submit the following documents: 22 • Title deed for the unit, or lease contract, if not owned by the applicant 18 days EGP 850 • Copy of applicant‘s identification • Operators license for factories, stores, commercial stores, and workshops * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 35 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 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer‘s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2013 Egypt, Arab Rep. 36 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity requires 7 procedures, takes 54 days and costs 396.0% connection in Egypt, Arab Rep.? According to data of income per capita (figure 4.1). collected by Doing Business, getting electricity there Figure 4.1 What it takes to obtain an electricity connection in Egypt, Arab Rep. 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 2013 Egypt, Arab Rep. 37 GETTING ELECTRICITY Globally, Egypt, Arab Rep. stands at 99 in the ranking perspective in assessing how easy it is for an of 185 economies on the ease of getting electricity entrepreneur in Egypt, Arab Rep. to connect a (figure 4.2). The rankings for comparator economies warehouse to electricity. and the regional average ranking provide another Figure 4.2 How Egypt, Arab Rep. and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 38 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 Egypt, Arab Rep. Best performer in Egypt, Arab Rep. Egypt, Arab Rep. Best performer Indicator Middle East & North DB2013 DB2012 globally DB2013 Africa DB2013 Rank United Arab Emirates 99 98 Iceland (1) (7) Procedures United Arab Emirates (number) 7 7 Germany (3)* (4) Time (days) United Arab Emirates 54 54 Germany (17) (40) Cost (% of income per capita) 396.0 455.5 Qatar (3.9) Japan (0.0) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) 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 2013 Egypt, Arab Rep. 39 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 Egypt, Arab Rep. (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Egypt, Arab Rep. 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. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 40 GETTING ELECTRICITY What are the details? The indicators reported here for Egypt, Arab Rep. are OBTAINING AN ELECTRICITY CONNECTION based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Cairo utility—identified by Doing Business. Data are collected from the distribution utility, then completed and South Cairo Electricity verified by electricity regulatory agencies and Name of Utility: Distribution Company independent professionals such as electrical engineers, (SCEDC) electrical contractors and construction companies. The The procedures are those that apply to a warehouse electricity distribution utility surveyed is the one and electricity connection matching the standard serving the area (or areas) in which warehouses are assumptions used by Doing Business in collecting the located. If there is a choice of distribution utilities, the data (see the section in this chapter on what the one serving the largest number of customers is indicators cover). The procedures, along with the selected. associated time and cost, are summarized below. Summary of procedures for getting electricity in Egypt, Arab Rep.—and the time and cost Time to No. Procedure Cost to complete complete The client obtains clearance/ certificate from the district or municipality stating that building is conforming to conditions in building permit 1 1 calendar day no charge The client needs a certificate from the district or local municipality (unit) stating that a building permit was issued and that the construction was completed accordingly. This is necessary to obtain a new connection to the utilities. The client submits application for electricity connection and awaits estimate of connection fees from South Cairo Electricity Distribution Company (SCEDC) The client must submit the following documents to formally request an electricity connection: • Copy of the national ID • Copy of the tax card (for commercial and industrial activities) • Trade License • Copy of lease agreement (or ownership document) 18 calendar days no charge 2 • Copy of the property title (proof of ownership of the land) • Copy of the building permit • Ground floor designs of building • Letter from district office clearing electrical connection • Excavation permit • Copy of the business incorporation decision from the General Authority for Investment and Free Zones (GAFI) Technicians review the request and determine which distribution network is closest to the warehouse. After the utility has determined the nearest Doing Business 2013 Egypt, Arab Rep. 41 Time to No. Procedure Cost to complete complete network and paid the fees, the client will need to apply for an excavation permit at the district. * The client obtains external inspection by South Cairo Electricity Distribution Company (SCEDC) and estimate of the connection fees A SCEDC electrical engineer will inspect the site. If the review concludes that a special room is needed for an electrical generator, it is the client‘s responsibility to build such a room. The purpose of the inspection is to check whether there is enough capacity to provide the power needed 3 and whether the property has any specific requirements. The client does 1 calendar day no charge not have to be present at the inspection. Following that, the inspector prepares a report with an estimate of the connection fees. No inspection of the entire internal wiring is carried out during the process. The client must pay the estimated fees within one month, after which the estimate offer expires. The client obtains excavation permit from the district In order for the district to issue the excavation permit, the customer must first obtain an approval from the Greater Cairo Utility Data Center and 12 calendar days no charge 4 pay the corresponding fees. The client needs to also submit a copy of the building permit, a copy of the ID card, and a tax statement. * The client obtains approval of the Greater Cairo Utility Data Center 5 10 calendar days EGP 1,750.0 This approval is needed to obtain excavation permit only for buildings located in Greater Cairo. The client obtains external works from South Cairo Electricity Distribution Company (SCEDC) External works can start when the client has paid the connection fees at the utility‘s cashier and submitted the excavation permit to the utility. For loads below 500 kVA, the customer does not need to buy or pay for 17 calendar days EGP 61,000.0 6 any material required for the external works or connection. Thus, whether an upgrade of the system (transformer is replaced with one of higher capacity) is needed or not will not affect the total cost. However, if a substation is needed, the customer will be asked to build the room . A substation in this case is not needed. External works in this case consist of laying out underground cables to the closest point of supply. The client signs supply contract and obtains meter installation from South Cairo Electricity Distribution Company (SCEDC) 7 To request meter installation, the customer must fill out a separate 6 calendar days EGP 1,028.5 application form with the South Cairo Electricity Distribution Company (SCEDC). The application form must be accompanied by a copy of the national ID, the property details, and identification number of the Doing Business 2013 Egypt, Arab Rep. 42 Time to No. Procedure Cost to complete complete metallic board. When the external works have been completed, the client signs a supply contract. The utility then installs the meter. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 43 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. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy‘s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2013 Egypt, Arab Rep. 44 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 72 days and costs 0.7% of the Egypt, Arab Rep.? According to data collected by property value (figure 5.1). Doing Business, registering property there requires 7 Figure 5.1 What it takes to register property in Egypt, Arab Rep. Note: Time shown in the figure above may not reflect simultaneity of procedures. 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 2013 Egypt, Arab Rep. 45 REGISTERING PROPERTY Globally, Egypt, Arab Rep. stands at 95 in the ranking and the regional average ranking provide other useful of 185 economies on the ease of registering property information for assessing how easy it is for an (figure 5.2). The rankings for comparator economies entrepreneur in Egypt, Arab Rep. to transfer property. Figure 5.2 How Egypt, Arab Rep. and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 46 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to register property in Egypt, 5.1). That can help identify where the potential for Arab Rep. today, data over time show which aspects of improvement is greatest. Table 5.1 The ease of registering property in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 92 95 Procedures (number) 7 7 7 7 7 7 7 7 7 Time (days) 193 193 193 193 72 72 72 72 72 Cost (% of property value) 6.8 5.1 5.9 1.0 0.9 0.9 0.8 0.8 0.7 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 47 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by possible in making it easier to register property. And the economies that over time have had the best changes in regional averages can show where Egypt, performance regionally or globally on the procedures, Arab Rep. is keeping up—and where it is falling time or cost required to complete a property transfer behind. (figure 5.3). These benchmarks help show what is Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2013 Egypt, Arab Rep. 48 REGISTERING PROPERTY Cost (% of property value) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 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 Egypt, Arab Rep. (table 5.2)? Table 5.2 How has Egypt, Arab Rep. made registering property easier—or not? By Doing Business report year DB year Reform The cost of registering property was reduced from 3% of the DB2008 property value to a low fixed fee. Egypt simplified administrative procedures, reorganized the business workflow between the real estate registry and the DB2009 Egyptian Surveying Authority (ESA) and introduced time limits in several procedures. These reforms decreased the time to transfer a property in Cairo from 193 to 72 days. 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. 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 2013 Egypt, Arab Rep. 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 City: Cairo through information collected from local property Property Value: EGP 805,315 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Egypt, Arab Rep.—and the time and cost Time to No. Procedure Cost to complete complete Request for registration presented by the buyer to the Real Estate Registry Following negotiations and an agreement on all material terms of the contract, the buyer pays the seller the requested price, and the buyer EGP 2000 1 5 days subsequently goes to the Real Estate Registry to request registration. At (registration fee) this juncture, the buyer pays the 2.000 EGP registration fee. The request is subsequently internally transferred to the Egyptian Surveying Authority to complete a survey of the land. Site inspection by the Egyptian Surveying Authority The Egyptian Surveying Authority inspects the property, conducts a 15 days no cost 2 survey, and prepares a report of its findings. The report is subsequently delivered to the Measurement Department. Obtaining the Measurement Department’s approval of the inspection report and the Real Estate Registry’s acceptance of the request for registration Following the Egyptian Surveying Authority‘s inspection, the report produced (called Kashf Tahdeed) must be approved by the Measurement Department. The entire report is then internally transferred to the Real 3 Estate Registry for acceptance of (1) the inspection report and (2) the 21 days no cost request for registration. The Real Estate Registry also conducts an engineering and legal review of the request and grants approval by stamping the documents ―approved to be authenticated‖ (Maqbul Lelnashar). The approved documents are then released to the parties. At this stage, the parties also obtain a special, stamped form from the Real Estate Registry, on which they will subsequently print their contract. Doing Business 2013 Egypt, Arab Rep. 51 Time to No. Procedure Cost to complete complete The final contract is presented to the lawyer’s syndicate for verification/ratification The parties‘ lawyer drafts contract (called Mashroaa Mohrar) on the special form obtained from the Real Estate Registry. The parties/their 0.5% property value 4 lawyer subsequently deliver(s) the contract to the lawyers syndicate for 26 days (but no more than verification: the lawyer who drafts the contract ascribes his syndicate EGP 5000) identification number to the form, and the lawyers‘ syndicate must verify/certify that the involved lawyer is indeed registered with the syndicate. Obtaining the Real Estate Registry’s approval of the contract (Mashroaa Mohrar) After collecting the contract from the Lawyer‘s Syndicate, the parties 2 days no cost 5 then deliver the contract (Mashroaa Mohrar) to the Real Estate Registry for review and if it accepted, the documents will be stamped by the Real Estate Registry as ―approved to be registered.‖ Authentication before the Notary Public After receiving the contract (Mashroaa Mohrar) stamped ―approved to 2 days no cost 6 be registered‖ by the Real Estate Registry, the parties proceed before the competent Notary Public to sign and authenticate the contract. The buyer delivers the contract to the Real Estate Registry for “legalization of the contract� and the registration number is delivered The buyer delivers the contract to the Real Estate Registry for review of 7 the notarized contract. The Real Estate Registry will make a final decision 1 day no cost as to the ―legalization of the contract,‖ because the Registry retains the authority to suspend the contract notwithstanding its notarization. Once the Registry has granted its approval, a registration number is issued and the registration process is complete. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 52 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 the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower‘s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors‘ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors‘ rights have been associated with distributed by public credit registries and higher ratios of private sector credit 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 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, limited liability company. the strength of legal rights index.  Has its headquarters and only base of operations in the largest business city. Doing Business 2013 Egypt, Arab Rep. 53 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Egypt, Arab Rep. stands at 83 in the ranking collateral and bankruptcy laws in Egypt, Arab Rep. of 185 economies on the ease of getting credit (figure facilitate access to credit? The economy has a score of 6.1). The rankings for comparator economies and the 6 on the depth of credit information index and a score regional average ranking provide other useful of 3 on the strength of legal rights index (see the information for assessing how well regulations and summary of scoring at the end of this chapter for institutions in Egypt, Arab Rep. support lending and details). Higher scores indicate more credit information borrowing. and stronger legal rights for borrowers and lenders. Figure 6.1 How Egypt, Arab Rep. and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 54 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how where institutions and regulations have been well the credit information system and collateral and strengthened—and where they have not (table 6.1). bankruptcy laws in Egypt, Arab Rep. support lending That can help identify where the potential for and borrowing today, data over time can help show improvement is greatest. Table 6.1 The ease of getting credit in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 80 83 Strength of legal rights 3 3 3 3 3 3 3 3 3 index (0-10) Depth of credit 2 2 2 4 5 6 6 6 6 information index (0-6) Public registry 1.0 1.2 1.5 1.7 2.2 2.5 2.9 3.5 4.3 coverage (% of adults) Private bureau 0.0 0.0 0.0 n.a. 4.7 8.2 10.3 13.7 16.4 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 55 GETTING CREDIT One way to put an economy‘s score on the getting 2012 and shows the number of economies with this credit indicators into context is to see where the score in 2012 as well as the regional average score. economy stands in the distribution of scores across Figure 6.3 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 Egypt, Arab Rep. in 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), 2012 information index (0–6), 2012 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 public credit registry or a private Source: Doing Business database. credit bureau, to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 56 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 Egypt, Arab Rep. (table 6.2)? Table 6.2 How has Egypt, Arab Rep. made getting credit easier—or not? By Doing Business report year DB year Reform Egypt eased the access to credit information by creating a new private credit bureau. The new credit bureau will distribute DB2008 negative data about consumers and firms. It is guaranteed by law that borrowers can access the credit information stored in the private bureau. Borrowers have the right to inspect the data stored in the private credit bureau, thanks to new regulations from the DB2009 Central Bank of Egypt. Allowing borrowers to check their data helps improve the quality and accuracy of credit information in Egypt. Access to credit information in Egypt has expanded with the DB2010 addition of retailers to the database of the private credit bureau, I-score. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 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 2013 Egypt, Arab Rep. 57 GETTING CREDIT What are the details? The getting credit indicators reported here for Egypt, The data on the legal rights of borrowers and lenders Arab Rep. 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 public well as public sources of information on collateral and credit registry or private credit bureau (if one exists). bankruptcy laws. For the strength of legal rights index, To 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 public credit registry or private credit bureau (see bankruptcy law. summary of scoring below). Summary of scoring for the getting credit indicators in Egypt, Arab Rep. Middle East & OECD high income Indicator Egypt, Arab Rep. North Africa average average Strength of legal rights index (0-10) 3 3 7 Depth of credit information index (0-6) 6 4 5 Public registry coverage (% of adults) 4.3 12.6 31.5 Private bureau coverage (% of adults) 16.4 26.4 74.6 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 public registry or private bureau. Regional averages for the public registry coverage exclude economies with no public registry. Regional averages for the private bureau coverage exclude economies with no private bureau. Strength of legal rights index (0–10) Index score: 3 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category No of 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 No automatically 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 No electronic database indexed by debtor's names? Doing Business 2013 Egypt, Arab Rep. 58 Strength of legal rights index (0–10) Index score: 3 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No debtor defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law No provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 6 bureau registry Are data on both firms and individuals distributed? Yes Yes 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 Yes No 1 as 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. Coverage Private credit bureau Public credit registry Number of firms 91,085 81,064 Number of individuals 8,532,921 2,159,173 Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 59 PROTECTING INVESTORS Investor protections matter 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 provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors‘ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders‘ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy‘s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2013 Egypt, Arab Rep. 60 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Egypt, Arab protection index (figure 7.1). While the indicator does Rep.? The economy has a score of 5.3 on the strength not measure all aspects related to the protection of of investor protection index, with a higher score minority investors, a higher ranking does indicate that indicating stronger protections (see the summary of an economy‘s regulations offer stronger investor scoring at the end of this chapter for details). protections against self-dealing in the areas measured. Globally, Egypt, Arab Rep. stands at 82 in the ranking of 185 economies on the strength of investor Figure 7.1 How Egypt, Arab Rep. and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 61 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how the global ranking on the strength of investor well regulations in Egypt, Arab Rep. protect minority protection index over time shows whether the investors today, data over time show whether the economy is slipping behind other economies in protections have been strengthened (table 7.1). And investor protections—or surpassing them. Table 7.1 The strength of investor protections in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 79 82 Extent of disclosure 7 7 7 8 8 8 8 8 index (0-10) Extent of director liability index (0- 3 3 3 3 3 3 3 3 10) Ease of shareholder 5 5 5 5 5 5 5 5 suits index (0-10) Strength of investor protection 5.0 5.0 5.0 5.3 5.3 5.3 5.3 5.3 index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 62 PROTECTING INVESTORS One way to put an economy‘s scores on the protecting and shows the number of economies with this score in investors indicators into context is to see where the 2012 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across shows the same thing for the extent of director liability economies. Figure 7.2 highlights the score on the index, and figure 7.4 for the ease of shareholder suits extent of disclosure index for Egypt, Arab Rep. in 2012 index. 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 extent of Number of economies with each score on extent of director liability index (0–10), 2012 disclosure index (0–10), 2012 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. No economy receives a score of 10 on the extent of Source: Doing Business database. director liability index. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 63 PROTECTING INVESTORS Figure 7.4 How easy is access to internal corporate documents? Number of economies with each score on ease of shareholder suits index (0–10), 2012 Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 64 PROTECTING INVESTORS The scores recorded over time for Egypt, Arab Rep. on changes over time in the regional average score on the 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 investor protections. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 65 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Egypt, Arab Rep. (table 7.2)? their case and obtain a judgment within a reasonable Table 7.2 How has Egypt, Arab Rep. strengthened investor protections—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. Egypt strengthened investor protections by requiring that an DB2009 independent body (auditor) assess transactions between interested parties as a prior step to approval. 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. 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 2013 Egypt, Arab Rep. 66 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, a score is assigned Egypt, Arab Rep. are based on detailed information for each of a range of conditions relating to disclosure, collected through a survey of corporate and securities director liability and shareholder suits in a standard lawyers as well as on securities regulations, company case study transaction (see the notes at the end of this laws and court rules of evidence. To construct the chapter). The summary below shows the details extent of disclosure, extent of director liability and underlying the scores for Egypt, Arab Rep.. Summary of scoring for the protecting investors indicators in Egypt, Arab Rep. Middle East & OECD high income Indicator Egypt, Arab Rep. North Africa average average Extent of disclosure index (0-10) 8 6 6 Extent of director liability index (0-10) 3 5 5 Ease of shareholder suits index (0-10) 5 4 7 Strength of investor protection index (0-10) 5.3 5.0 6.1 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) 8 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. 2 Full disclosure of all material facts James to the board of directors is required? Whether immediate disclosure of the transaction to Disclosure on the transaction and Mr. 2 the public and/or shareholders is required? James' conflict of interest 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? Doing Business 2013 Egypt, Arab Rep. 67 Score Score description 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? 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) 5 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 1 Yes 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 0 No 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 2013 Egypt, Arab Rep. 68 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 2011 (number per year adjusted for Doing Business data, in economies where it is more electronic or 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, 2010. 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 maximizes 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 25.7%. Doing Business 2013 Egypt, Arab Rep. 69 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Egypt, Arab Rep. stands at 145 in the ranking taxes in Egypt, Arab Rep.—and how much do firms pay of 185 economies on the ease of paying taxes (figure in taxes? On average, firms make 29 tax payments a 8.1). The rankings for comparator economies and the year, spend 392 hours a year filing, preparing and regional average ranking provide other useful paying taxes and pay total taxes amounting to 42.6% information for assessing the tax compliance burden of profit (see the summary at the end of this chapter for businesses in Egypt, Arab Rep.. for details). Figure 8.1 How Egypt, Arab Rep. and comparator economies rank on the ease of paying taxes Note: DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 70 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how the process have changed — and which have not easy (or difficult) it is to comply with tax rules in Egypt, (table 8.1). That can help identify where the potential Arab Rep. today, data over time show which aspects of for easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 143 145 Payments (number per 42 41 36 29 29 29 29 29 year) Time (hours per year) 504 596 711 711 480 433 433 392 Total tax rate (% profit) 54.3 46.4 45.1 44.0 43.0 42.6 43.6 42.6 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 71 PAYING TAXES Equally helpful may be the benchmarks provided by possible in easing the administrative burden of tax the economies that over time have had the best compliance. And changes in regional averages can performance regionally or globally on the number of show where Egypt, Arab Rep. is keeping up—and payments or the time required to prepare and file where it is falling behind. taxes (figure 8.2). These benchmarks help show what is Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2013 Egypt, Arab Rep. 72 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 73 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. Egypt, Arab Rep. (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Egypt, Arab Rep. made paying taxes easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. 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. 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 2013 Egypt, Arab Rep. 74 PAYING TAXES What are the details? The indicators reported here for Egypt, Arab Rep. LOCATION OF STANDARDIZED COMPANY are based on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the City: Cairo data (see the 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 The taxes and contributions paid are listed in the completed during the year. Respondents are asked summary below, along with the associated number of how much in taxes and mandatory contributions payments, time and tax rate. the business must pay and what the process is for doing so. Summary of tax rates and administrative burden in Egypt, Arab Rep. Middle East & OECD high income Indicator Egypt, Arab Rep. North Africa average average Payments (number per year) 29 19 12 Time (hours per year) 392 184 176 Profit tax (%) 13.2 11.9 15.2 Labor tax and contributions (%) 25.8 16.5 23.8 Other taxes (%) 3.6 3.9 3.7 Total tax rate (% profit) 42.6 32.3 42.7 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) 23% on basic Employer paid - Social salary, 21% gross 12 165 25.8 insurance contributions on variable salaries salary taxable Corporate income tax 1 69 20% 13.2 profit advertiseme Stamp duty on advertisements 1 0 15% 2.7 nt value Doing Business 2013 Egypt, Arab Rep. 75 Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) monthly Property tax 1 0 0.8 rental value insurance Tax on insurance contracts 1 0 1% and 10% 0.1 premium Value added tax (VAT) 12 158 10% value added 0 not included consumptio Fuel tax 1 0 0 small amount n Totals 29 392 42.6 Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 76 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:  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 military items. Doing Business 2013 Egypt, Arab Rep. 77 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Egypt, Arab Globally, Egypt, Arab Rep. stands at 70 in the ranking Rep.? According to data collected by Doing Business, of 185 economies on the ease of trading across exporting a standard container of goods requires 8 borders (figure 9.1). The rankings for comparator documents, takes 12 days and costs $625. Importing economies and the regional average ranking provide the same container of goods requires 9 documents, other useful information for assessing how easy it is for takes 13 days and costs $755 (see the summary of a business in Egypt, Arab Rep. to export and import procedures and documents at the end of this chapter goods. for details). Figure 9.1 How Egypt, Arab Rep. and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 78 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how the process have changed—and which have not (table easy (or difficult) it is to export or import in Egypt, 9.1). That can help identify where the potential for Arab Rep. today, data over time show which aspects of improvement is greatest. Table 9.1 The ease of trading across borders in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 64 70 Documents to export 8 8 8 8 8 8 8 8 (number) Time to export (days) 27 20 15 14 14 12 12 12 Cost to export (US$ per 1,014 1,014 714 737 737 613 613 625 container) Documents to import 10 9 9 9 9 9 9 9 (number) Time to import (days) 30 26 19 16 16 13 13 13 Cost to import (US$ per 1,106 1,106 786 880 880 755 755 755 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 79 TRADING ACROSS BORDERS Equally helpful may be the benchmarks provided by These benchmarks help show what is possible in the economies that over time have had the best making it easier to trade across borders. And changes performance regionally or globally on the documents, in regional averages can show where Egypt, Arab Rep. time or cost required to export or import (figure 9.2). is keeping up—and where it is falling behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2013 Egypt, Arab Rep. 80 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2013 Egypt, Arab Rep. 81 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 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 Egypt, Arab Rep. (table 9.2)? risk-based inspections and electronic data interchange Table 9.2 How has Egypt, Arab Rep. made trading across borders easier—or not? By Doing Business report year DB year Reform DB2008 Egypt eased trade by improving customs administration. Egypt upgraded port facilities at Alexandria and speeded up DB2009 customs clearance and greater competition in the banking sector led to a reduction in the time to open a letter of credit. DB2010 No reform as measured by Doing Business. Egypt made trading easier by introducing an electronic system DB2011 for submitting export and import documents. DB2012 No reform as measured by Doing Business. DB2013 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 2013 Egypt, Arab Rep. 83 TRADING ACROSS BORDERS What are the details? The indicators reported here for Egypt, Arab Rep. LOCATION OF STANDARDIZED COMPANY are based on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this City: Cairo chapter on what the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each The procedural requirements, and the associated time procedure is collected from local freight forwarders, and cost, for exporting and importing a standard shipping lines, customs brokers, port officials and shipment of goods are listed in the summary below, banks. along with the required documents. Summary of procedures and documents for trading across borders in Egypt, Arab Rep. Middle East & OECD high income Indicator Egypt, Arab Rep. North Africa average average Documents to export (number) 8 6 4 Time to export (days) 12 19 10 Cost to export (US$ per container) 625 1,083 1,028 Documents to import (number) 9 8 5 Time to import (days) 13 22 10 Cost to import (US$ per container) 755 1,275 1,080 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$) Documents preparation 7 90 Customs clearance and technical control 1 180 Ports and terminal handling 2 170 Inland transportation and handling 2 185 Totals 12 625 Procedures to import Time (days) Cost (US$) Documents preparation 8 215 Doing Business 2013 Egypt, Arab Rep. 84 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 1 90 Ports and terminal handling 2 220 Inland transportation and handling 2 230 Totals 13 755 Documents to export Documents to import Bill of Lading Bill of lading Certificate of origin Certificate of Origin Commercial invoice Commercial invoice Customs export declaration Customs import declaration Customs procedural certificate Customs procedural certificate Export statistical form Delivery Order Packing list Form of Annex 4 (imports for trading or production purposes) Technical standard certificate Inspection report Source: Doing Business database. Packing list Doing Business 2013 Egypt, Arab Rep. 85 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects Time required to complete procedures data relating to the time, cost and procedural (calendar days) complexity of resolving a commercial lawsuit. The ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs assumptions about the case: Enforcement costs  The seller and buyer are located in the economy‘s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer‘s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2013 Egypt, Arab Rep. 86 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Egypt, Arab Rep. stands at 152 in the ranking dispute through the courts in Egypt, Arab Rep.? of 185 economies on the ease of enforcing contracts According to data collected by Doing Business, (figure 10.1). The rankings for comparator economies enforcing a contract takes 1010 days, costs 26.2% of and the regional average ranking provide other useful the value of the claim and requires 42 procedures (see benchmarks for assessing the efficiency of contract the summary at the end of this chapter for details). enforcement in Egypt, Arab Rep.. Figure 10.1 How Egypt, Arab Rep. and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 87 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how over time help identify which areas have changed and easy (or difficult) it is to enforce a contract in Egypt, where the potential for improvement is greatest (table Arab Rep. today, data on the underlying indicators 10.1). Table 10.1 The ease of enforcing contracts in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 152 152 Time (days) 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010 Cost (% of claim) 26.2 26.2 26.2 26.2 26.2 26.2 26.2 26.2 26.2 26.2 Procedures (number) 42 42 42 42 42 42 42 42 42 42 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 88 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by help show what is possible in improving the efficiency the economies that over time have had the best of contract enforcement. And changes in regional performance regionally or globally on the number of averages can show where Egypt, Arab Rep. is keeping steps, time or cost required to enforce a contract up—and where it is falling behind. through the courts (figure 10.2). These benchmarks Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2013 Egypt, Arab Rep. 89 ENFORCING CONTRACTS Procedures (number) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 90 ENFORCING CONTRACTS Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in Egypt, Arab Rep. (table introducing new technology. Lower-income economies 10.2)? often work on reducing backlogs by introducing Table 10.2 How has Egypt, Arab Rep. made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. Egypt eased the process of enforcing contracts by creating DB2010 commercial courts. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 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 2013 Egypt, Arab Rep. 91 ENFORCING CONTRACTS What are the details? The indicators reported here for Egypt, Arab Rep. COMPETENT COURT are based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this City: Cairo chapter on what the indicators cover). These procedures, and the time and cost of completing The procedures for resolving a commercial lawsuit, and them, are identified through study of the codes of the associated time and cost, are listed in the summary civil procedure and other court regulations, as well below. as through surveys completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Summary of procedures for enforcing a contract in Egypt, Arab Rep.—and the time and cost Middle East & OECD high income Indicator Egypt, Arab Rep. North Africa average average Time (days) 1,010 652 510 Filing and service 20 Trial and judgment 720 Enforcement of judgment 270 Cost (% of claim) 26.2 23.9 20.1 Attorney cost (% of claim) 18.0 Court cost (% of claim) 1.3 Enforcement Cost (% of claim) 6.9 Procedures (number) 42 44 31 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Doing Business 2013 Egypt, Arab Rep. 92 ENFORCING CONTRACTS No. Procedure Filing and service: 1 Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 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 assigning a 3 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 formal 4 requirements. 5 Court order for service: Upon Plaintiff‘s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: The 6 judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to Defendant is 7 successful in the majority of cases. * Proof of service: Plaintiff submits proof of service to court. 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 physical or 8 achieved by registering, marking, debiting or separating assets. (see assumption 5) Trial and judgment: Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his 9 defense or answer on the merits of the case. Defendant's written answer may or may not include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Deadline for Plaintiff to answer Defendant's defense or answer: Judge sets the deadline by which Plaintiff will be 10 allowed to answer Defendant's defense or answer. Doing Business 2013 Egypt, Arab Rep. 93 No. Procedure Plaintiff’s written response to Defendant's defense or answer: Plaintiff responds to Defendant‘s defense or 11 answer with a written pleading. Plaintiff's answer may or may not include a witness statements or expert (witness) statements. Filing of pleadings: Plaintiff and Defendant file written pleadings and submissions with the court and transmit 12 copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an adjournment to 13 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 14 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. * 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 hearing 15 or trial. (see assumption 6-a) Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment to 16 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 judge. 17 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 adjournment 18 during the oral hearing or trial, resulting in an additional or later trial or hearing date. Order for submission of final arguments: The judge sets the deadline for the submission of final factual and legal 19 arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral presentation * or by a written submission. 20 Judgment date: The judge sets a date for delivery of the judgment. 21 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 22 Writing of judgment: The judge produces a written copy of the judgment. 23 Registration of judgment: The court office registers the judgment after receiving a written copy of the judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 24 judgment is available at the courthouse. 25 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Doing Business 2013 Egypt, Arab Rep. 94 No. Procedure Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. The 26 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 the law. 27 Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse Plaintiff for 28 the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by a * lawyer during the enforcement of judgment phase. Plaintiff's approaching of court enforcement officer or (private) bailiff to enforce the judgment: To enforce 29 the judgment, Plaintiff approaches a court enforcement officer such as a court bailiff or sheriff, or a private bailiff. 30 Publication of judgment: The judgment must be published in an official journal, gazette or local newspaper. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order ('seal' on * judgment). Attachment of enforcement order to judgment: The judge attaches the enforcement order (‗seal‘) to the 31 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 (private) 32 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 enforcement 33 officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. 34 Attachment: Defendant‘s movable goods are attached (physically or by registering, marking or separating assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report on the 35 attachment of Defendant's movable goods to the judge. Valuation or appraisal of attached movable goods: The court or court appointed valuation expert evaluates the 36 attached goods. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant opposes 37 aspects of the enforcement process before the judge. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 38 newspapers. 39 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 40 Plaintiff), according to the rules of priority. Doing Business 2013 Egypt, Arab Rep. 95 No. Procedure Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which Plaintiff 41 had advanced previously. 42 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 96 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 Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement Official costs of the insolvency proceedings (foreclosure) proceedings. The recovery rate is a are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be recovered business and the case. It assumes that the company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy‘s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2013 Egypt, Arab Rep. 97 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 17.6 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Egypt, Arab Globally, Egypt, Arab Rep. stands at 139 in the ranking Rep.? According to data collected by Doing Business, of 185 economies on the ease of resolving insolvency resolving insolvency takes 4.2 years on average and (figure 11.1). The rankings for comparator economies costs 22% of the debtor‘s estate, with the most likely and the regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Egypt, Arab Rep.. Figure 11.1 How Egypt, Arab Rep. and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 98 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the has changed—and where it has not (table 11.1). That efficiency of insolvency proceedings in Egypt, Arab can help identify where the potential for improvement Rep. today, data over time show where the efficiency is greatest. Table 11.1 The ease of resolving insolvency in Egypt, Arab Rep. over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 140 139 Time (years) 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 Cost (% of estate) 22 22 22 22 22 22 22 22 22 22 Recovery rate (cents on the 15.9 16.0 16.1 16.6 16.6 16.8 16.8 17.4 17.7 17.6 dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) 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. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 99 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by possible in improving the efficiency of insolvency the economies that over time have had the best proceedings. And changes in regional averages can performance regionally or globally on the time or cost show where Egypt, Arab Rep. is keeping up—and of insolvency proceedings or on the recovery rate where it is falling behind. (figure 11.2). These benchmarks help show what is Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2013 Egypt, Arab Rep. 100 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: Regional averages on time and cost exclude economies with a “no practice� mark . Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 101 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 Egypt, Arab Rep. (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Egypt, Arab Rep. made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. 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. 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 2013 Egypt, Arab Rep. 102 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of Particular data for Egypt, Arab Rep. are presented here employment, specifically as it affects the hiring and without scoring. redundancy of workers and the rigidity of working hours. From 2007 to 2011 improvements were made to To make the data on employing workers comparable align the methodology for the employing workers across economies, several assumptions about the indicators with the letter and spirit of the International worker and the business are used. Labour Organization (ILO) conventions. Only 4 of the 188 ILO conventions cover areas measured by Doing The worker: Business: employee termination, weekend work, holiday with pay and night work. The Doing Business  Earns a salary plus benefits equal to the methodology is fully consistent with these 4 economy‘s average wage during the entire conventions. The ILO conventions covering areas period of his employment. related to the employing workers indicators do not  Has a pay period that is the most common for include the ILO core labor standards—8 conventions workers in the economy. covering the right to collective bargaining, the  Is a lawful citizen who belongs to the same elimination of forced labor, the abolition of child labor race and religion as the majority of the and equitable treatment in employment practices. economy‘s population.  Resides in the economy‘s largest business city. Between 2009 and 2011 the World Bank Group worked  Is not a member of a labor union, unless with a consultative group—including labor lawyers, membership is mandatory. employer and employee representatives, and experts from the ILO, the Organisation for Economic Co- The business: operation and Development, civil society and the private sector—to review the employing workers  Is a limited liability company. methodology and explore future areas of research.  Operates in the economy‘s largest business city. A full report with the conclusions of the consultative  Is 100% domestically owned. group is available at http://www.doingbusiness.org/  Operates in the manufacturing sector. methodology/employing-workers.  Has 60 employees.  Is subject to collective bargaining agreements Doing Business 2013 does not present rankings of in economies where such agreements cover economies on the employing workers indicators or more than half the manufacturing sector and include the topic in the aggregate ranking on the ease apply even to firms not party to them. of doing business. The report does present the data on  Abides by every law and regulation but does the employing workers indicators in an annex. Detailed not grant workers more benefits than data collected on labor regulations are available on the mandated by law, regulation or (if applicable) Doing Business website (http://www.doing business.org). collective bargaining agreement. Doing Business 2013 Egypt, Arab Rep. 103 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 Egypt, Arab other things, the minimum wage for a 19-year-old Rep. (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 2013 Egypt, Arab Rep. 104 EMPLOYING WORKERS Employment laws are needed to protect workers from past 4 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Egypt, Arab Rep. adopt contracting between employers and workers. Many that affected the Doing Business indicators on economies that changed their labor regulations in the employing workers (table 12.1)? Table 12.1 What changes did Egypt, Arab Rep. make in employing workers in 2012? Reform No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 105 EMPLOYING WORKERS What are the details? The data on employing workers reported here for lawyers and public officials. Employment laws and Egypt, Arab Rep. 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? No No limit, but employee may terminate Maximum length of a single fixed-term contract (months) after 5 years (Art. 104 Labor Law) Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage for a 19-year old worker or an apprentice (US$/month) 113.0 Ratio of minimum wage to value added per worker 0.33 Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 106 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 0% operations Premium for work on weekly rest day (% of hourly pay) in case of 0% continuous operations Major restrictions on night work in case of continuous operations? No Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 21.0 Paid annual leave for a worker with 5 years of tenure (in working days) 21.0 Paid annual leave for a worker with 10 years of tenure (in working days) 30.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 24.0 working days) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 107 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? Yes Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? Yes Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? No Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 108 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 13.0 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 10.1 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 4.3 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 21.7 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 54.2 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 26.7 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2013 Egypt, Arab Rep. 109 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2013 reports 2011 income per capita property. Second, they gauge the time and cost of as published in the World Bank‘s World Development achieving a regulatory goal or complying with Indicators 2012. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2011 gross contract, go through bankruptcy or trade across national income (GNI) in U.S. dollars is used as the borders. Third, they measure the extent of legal denominator. GNI data were not available from the protections of property, for example, the protections World Bank for Afghanistan; Australia; The Bahamas; of investors against looting by company directors or Bahrain; Barbados; Brunei Darussalam; Cyprus; the range of assets that can be used as collateral Djibouti; Guyana; the Islamic Republic of Iran; according to secured transactions laws. Fourth, a set of Kuwait; Malta; New Zealand; Oman; Puerto Rico indicators documents the tax burden on businesses. (territory of the United States); Sudan; Suriname; the Finally, a set of data covers different aspects of Syrian Arab Republic; Timor-Leste; West Bank and employment regulation. Gaza; and the Republic of Yemen. In these cases GDP or GNP per capita data and growth rates from The data for all sets of indicators in Doing Business the International Monetary Fund‘s World Economic 2 2013 are for June 2012. Outlook database and the Economist Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and The Doing Business data are collected in a income group classifications, available at standardized way. To start, the Doing Business team, http://data.worldbank.org/about/country- with academic advisers, designs a questionnaire. The classifications. The World Bank does not assign questionnaire uses a simple business case to ensure regional classifications to high-income economies. comparability across economies and over time —with For the purpose of the Doing Business report, high- assumptions about the legal form of the business, its income OECD economies are assigned the ―regional‖ size, its location and the nature of its operations. classification OECD high income. Figures and tables Questionnaires are administered through more than presenting regional averages include economies 9,600 local experts, including lawyers, business from all income groups (low, lower middle, upper consultants, accountants, freight forwarders, middle and high income). government officials and other professionals routinely Population administering or advising on legal and regulatory Doing Business 2013 reports midyear 2011 requirements. These experts have several rounds of population statistics as published in World interaction with the Doing Business team, involving Development Indicators 2012. conference calls, written correspondence and visits by the team. For Doing Business 2013 team members visited 24 economies to verify data and recruit The Doing Business methodology offers several respondents. The data from questionnaires are advantages. It is transparent, using factual information subjected to numerous rounds of verification, leading about what laws and regulations say and allowing to revisions or expansions of the information collected. multiple interactions with local respondents to clarify potential misinterpretations of questions. Having 2 The data for paying taxes refer to January – December 2011. Doing Business 2013 Egypt, Arab Rep. 110 representative samples of respondents is not an issue; 2013 would differ from the recollection of Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business completed subnational comparisons and benchmarks are valid across studies for Indonesia, Kenya, Mexico, the Russian economies. Finally, the data not only highlight the Federation and the United Arab Emirates. Each of extent of specific regulatory obstacles to business but these countries had already asked to have subnational also identify their source and point to what might be data in the past, and this year Doing Business updated reformed. the indicators, measured improvements over time and Information on the methodology for each Doing expanded geographic coverage to additional cities or Business topic can be found on the Doing Business added additional indicators. Doing Business also website at http://www.doingbusiness.org/methodology/. published regional studies for the Arab world, the East African Community and member states of the Organization for the Harmonization of Business Law in Limits to what is measured Africa (OHADA). The Doing Business methodology has 5 limitations that The subnational studies point to differences in should be considered when interpreting the data. First, business regulation and its implementation —as well as the collected data refer to businesses in the economy‘s in the pace of regulatory reform—across cities in the largest business city (which in some economies differs same economy. For several economies subnational from the capital) and may not be representative of studies are now periodically updated to measure regulation in other parts of the economy. To address change over time or to expand geographic coverage this limitation, subnational Doing Business indicators to additional cities. This year that is the case for all the were created (see the section on subnational Doing subnational studies published. Business indicators). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified size — Changes in what is measured and may not be representative of the regulation on The ranking methodology for paying taxes was other businesses, for example, sole proprietorships. updated this year. The threshold for the total tax rate Third, transactions described in a standardized case introduced last year for the purpose of calculating the scenario refer to a specific set of issues and may not ranking on the ease of paying taxes was updated. All represent the full set of issues a business encounters. economies with a total tax rate below the threshold Fourth, the measures of time involve an element of (which is calculated and adjusted on a yearly basis) judgment by the expert respondents. When sources receive the same ranking on the total tax rate indicate different estimates, the time indicators indicator. The threshold is not based on any economic reported in Doing Business represent the median theory of an ―optimal tax rate‖ that minimizes values of several responses given under the distortions or maximizes efficiency in the tax system of assumptions of the standardized case. an economy overall. Instead, it is mainly empirical in Finally, the methodology assumes that a business has nature, set at the lower end of the distribution of tax full information on what is required and does not rates levied on medium-size enterprises in the waste time when completing procedures. In practice, manufacturing sector as observed through the paying completing a procedure may take longer if the taxes indicators. This reduces the bias in the indicators business lacks information or is unable to follow up toward economies that do not need to levy significant promptly. Alternatively, the business may choose to taxes on companies like the Doing Business disregard some burdensome procedures. For both standardized case study company because they raise reasons the time delays reported in Doing Business public revenue in other ways—for example, through Doing Business 2013 Egypt, Arab Rep. 111 taxes on foreign companies, through taxes on sectors investors, paying taxes, trading across borders, other than manufacturing or from natural resources enforcing contracts, and resolving insolvency. The (all of which are outside the scope of the employing workers indicators are not included in this methodology). Giving the same ranking to all year‘s aggregate ease of doing business ranking. In economies whose total tax rate is below the threshold addition to this year‘s ranking, Doing Business presents avoids awarding economies in the scoring for having a comparable ranking for the previous year, adjusted an unusually low total tax rate, often for reasons for any changes in methodology as well as additions of 3 unrelated to government policies toward enterprises. economies or topics. For example, economies that are very small or that are Construction of the ease of doing business index rich in natural resources do not need to levy broad- based taxes. Here is one example of how the ease of doing business index is constructed. In Finland it takes 3 procedures, 14 days and 4% of annual income per capita in fees to Data challenges and revisions register a property. On these 3 indicators Finland ranks in the 6th, 16th and 39th percentiles. So on average Most laws and regulations underlying the Doing Finland ranks in the 20th percentile on the ease of Business data are available on the Doing Business registering property. It ranks in the 30th percentile on website at http://www.doingbusiness.org. All the th starting a business, 28 percentile on getting credit, sample questionnaires and the details underlying the 24th percentile on paying taxes, 13th percentile on indicators are also published on the website. Questions enforcing contracts, 5th percentile on trading across on the methodology and challenges to data can be borders and so on. Higher rankings indicate simpler submitted through the website‘s ―Ask a Question‖ regulation and stronger protection of property rights. function at http://www.doingbusiness.org. The simple average of Finland‘s percentile rankings on all topics is 21st. When all economies are ordered by Ease of doing business and distance to their average percentile rankings, Finland stands at 11 frontier in the aggregate ranking on the ease of doing business. Doing Business 2013 presents results for 2 aggregate measures: the aggregate ranking on the ease of doing More complex aggregation methods—such as business and the distance to frontier measure. The principal components and unobserved components— ease of doing business ranking compares economies yield a ranking nearly identical to the simple average 4 with one another, while the distance to frontier used by Doing Business. Thus, Doing Business uses measure benchmarks economies to the frontier in the simplest method: weighting all topics equally and, regulatory practice, measuring the absolute distance to the best performance on each indicator. Both measures can be used for comparisons over time. 3 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a When compared across years, the distance to frontier comparable time series since the year the relevant economy or topic measure shows how much the regulatory environment was first included in the data set. The time series is available on the for local entrepreneurs in each economy has changed Doing Business website (http://www.doingbusiness.org). Six topics over time in absolute terms, while the ease of doing and more than 50 economies have been added since the inception business ranking can show only relative change. of the project. Earlier rankings on the ease of doing business are therefore not comparable. Ease of doing business 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to The ease of doing business index ranks economies Do It‖ (World Bank, Washington, DC, 2005). Principal components from 1 to 185. For each economy the ranking is and unobserved components methods yield a ranking nearly calculated as the simple average of the percentile identical to that from the simple average method because both rankings on each of the 10 topics included in the index these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An in Doing Business 2013: starting a business, dealing alternative to the simple average method is to give different weights with construction permits, getting electricity, to the topics, depending on which are considered of more or less registering property, getting credit, protecting importance in the context of a specific economy. Doing Business 2013 Egypt, Arab Rep. 112 within each topic, giving equal weight to each of the ability of different government agencies to deliver 5 topic components. tangible results in their area of responsibility. If an economy has no laws or regulations covering a Economies that improved the most across 3 or more specific area—for example, insolvency—it receives a Doing Business topics in 2011/12 ―no practice‖ mark. Similarly, an economy receives a Doing Business 2013 uses a simple method to calculate ―no practice‖ or ―not possible‖ mark if regulation exists which economies improved the most in the ease of but is never used in practice or if a competing doing business. First, it selects the economies that in regulation prohibits such practice. Either way, a ―no 2011/12 implemented regulatory reforms making it practice‖ mark puts the economy at the bottom of the easier to do business in 3 or more of the 10 topics ranking on the relevant indicator. 6 included in this year‘s ease of doing business ranking. The ease of doing business index is limited in scope. It Twenty-three economies meet this criterion: Benin, does not account for an economy‘s proximity to large Burundi, Costa Rica, the Czech Republic, Georgia, markets, the quality of its infrastructure services (other Greece, Guinea, Kazakhstan, Korea, the Lao People‘s than services related to trading across borders and Democratic Republic, Liberia, Mongolia, the getting electricity), the strength of its financial system, Netherlands, Panama, Poland, Portugal, Serbia, the the security of property from theft and looting, Slovak Republic, Slovenia, Sri Lanka, Ukraine, the macroeconomic conditions or the strength of United Arab Emirates and Uzbekistan. Second, Doing underlying institutions. Business ranks these economies on the increase in their ranking on the ease of doing business from the Variability of economies‘ rankings across topics previous year using comparable rankings. Each indicator set measures a different aspect of the Selecting the economies that implemented regulatory business regulatory environment. The rankings of an reforms in at least 3 topics and improved the most in economy can vary, sometimes significantly, across the aggregate ranking is intended to highlight indicator sets. The average correlation coefficient economies with ongoing, broad-based reform between the 10 indicator sets included in the programs. aggregate ranking is 0.37, and the coefficients between any 2 sets of indicators range from 0.19 Distance to frontier measure (between dealing with construction permits and A drawback of the ease of doing business ranking is getting credit) to 0.60 (between starting a business that it can measure the regulatory performance of and protecting investors). These correlations suggest economies only relative to the performance of others. that economies rarely score universally well or It does not provide information on how the absolute universally badly on the indicators. quality of the regulatory environment is improving Consider the example of Canada. It stands at 17 in the over time. Nor does it provide information on how aggregate ranking on the ease of doing business. Its large the gaps are between economies at a single ranking is 3 on starting a business, and 4 on both point in time. resolving insolvency and protecting investors. But its The distance to frontier measure is designed to ranking is only 62 on enforcing contracts, 69 on address both shortcomings, complementing the ease dealing with construction permits and 152 on getting of doing business ranking. This measure illustrates the electricity. distance of an economy to the ―frontier,‖ and the Variation in performance across the indicator sets is change in the measure over time shows the extent to not at all unusual. It reflects differences in the degree which the economy has closed this gap. The frontier is of priority that government authorities give to a score derived from the most efficient practice or particular areas of business regulation reform and the highest score achieved on each of the component indicators in 9 Doing Business indicator sets (excluding 5 6 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2013 Egypt, Arab Rep. 113 the employing workers and getting electricity The maximum (max) and minimum (min) observed indicators) by any economy since 2005. In starting a values are computed for the 174 economies included business, for example, New Zealand has achieved the in the Doing Business sample since 2005 and for all highest performance on the time (1 day), Canada and years (from 2005 to 2012). The year 2005 was chosen New Zealand on the number of procedures required as the baseline for the economy sample because it was (1), Slovenia on the cost (0% of income per capita) and the first year in which data were available for the Australia and 90 other economies on the paid-in majority of economies (a total of 174) and for all 9 minimum capital requirement (0% of income per indicator sets included in the measure. To mitigate the capita). Calculating the distance to frontier for each effects of extreme outliers in the distributions of the economy involves 2 main steps. First, individual rescaled data (very few economies need 694 days to indicator scores are normalized to a common unit: complete the procedures to start a business, but many th except for the total tax rate. To do so, each of the 28 need 9 days), the maximum (max) is defined as the 95 component indicators y is rescaled to (max − y)/(max percentile of the pooled data for all economies and all − min), with the minimum value (min) representing the years for each indicator. The exceptions are the getting frontier—the highest performance on that indicator credit, protecting investors and resolving insolvency across all economies since 2005. For the total tax rate, indicators, whose construction precludes outliers. consistent with the calculation of the rankings, the Take Ghana, which has a score of 67 on the distance to frontier is defined as the total tax rate corresponding th frontier measure for 2012. This score indicates that the to the 15 percentile based on the overall distribution economy is 33 percentage points away from the of total tax rates for all years. Second, for each frontier constructed from the best performances economy the scores obtained for individual indicators across all economies and all years. Ghana was further are aggregated through simple averaging into one from the frontier in 2005, with a score of 54. The distance to frontier score. An economy‘s distance to difference between the scores shows an improvement frontier is indicated on a scale from 0 to 100, where 0 over time. represents the lowest performance and 100 the frontier. The distance to frontier measure can also be used for comparisons across economies in the same year, The difference between an economy‘s distance to complementing the ease of doing business ranking. frontier score in 2005 and its score in 2012 illustrates For example, Ghana stands at 64 this year in the ease the extent to which the economy has closed the gap to of doing business ranking, while Peru, which is 29 the frontier over time. And in any given year the score percentage points from the frontier, stands at 43. measures how far an economy is from the highest performance at that time. Doing Business 2013 Egypt, Arab Rep. 114 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2013 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 185 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 185 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 9,600 specialists in 185 economies who profiles participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers NEW! Entrepreneurship data underlying Doing Business Data on business density for 130 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and More to come related policy issues Coming soon—information on good practices and http://www.doingbusiness.org/research/ data on transparency and on the distance to frontier Doing Business 2013 Egypt, Arab Rep. 115