83397 Regional Profile: Asia-Pacific Economic Cooperation (APEC) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 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. 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Cover design: The Word Express Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 12 Dealing with construction permits........................................................................................... 22 Getting electricity ....................................................................................................................... 30 Registering property .................................................................................................................. 38 Getting credit .............................................................................................................................. 45 Protecting investors ................................................................................................................... 51 Paying taxes ................................................................................................................................ 59 Trading across borders .............................................................................................................. 69 Enforcing contracts .................................................................................................................... 79 Resolving insolvency .................................................................................................................. 86 Data notes ................................................................................................................................... 93 Resources on the Doing Business website .............................................................................. 98 Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is South Asia (SA). The data in this report are current as for a local entrepreneur to open and run a small to of June 1, 2013 (except for the paying taxes indicators, medium-size business when complying with relevant which cover the period January–December 2012). regulations. It measures and tracks changes in The Doing Business methodology has limitations. Other regulations affecting 11 areas in the life cycle of a areas important to business—such as an economy’s business: starting a business, dealing with construction proximity to large markets, the quality of its permits, getting electricity, registering property, infrastructure services (other than those related to getting credit, protecting investors, paying taxes, trading across borders and getting electricity), the trading across borders, enforcing contracts, resolving security of property from theft and looting, the insolvency and employing workers. transparency of government procurement, In a series of annual reports Doing Business presents macroeconomic conditions or the underlying strength quantitative indicators on business regulations and the of institutions—are not directly studied by Doing protection of property rights that can be compared Business. The indicators refer to a specific type of across 189 economies, from Afghanistan to Zimbabwe, business, generally a local limited liability company over time. The data set covers 47 economies in Sub- operating in the largest business city. Because Saharan Africa, 33 in Latin America and the Caribbean, standard assumptions are used in the data collection, 25 in East Asia and the Pacific, 25 in Eastern Europe comparisons and benchmarks are valid across and Central Asia, 20 in the Middle East and North economies. The data not only highlight the extent of Africa and 8 in South Asia, as well as 31 OECD high- obstacles to doing business; they also help identify the income economies. The indicators are used to analyze source of those obstacles, supporting policy makers in economic outcomes and identify what reforms have designing regulatory reform. worked, where and why. More information is available in the full report. Doing This regional profile presents the Doing Business Business 2014 presents the indicators, analyzes their indicators for economies in Asia-Pacific Economic relationship with economic outcomes and Cooperation (APEC). It also shows the regional recommends regulatory reforms. The data, along with average, the best performance globally for each information on ordering the Doing Business 2014 indicator and data for the following comparator report, are available on the Doing Business website at regions: East Asia and the Pacific (EAP), European http://www.doingbusiness.org. Union (EU), Latin America, OECD High Income and Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s The ranking on each topic is the simple average of regulatory environment for business, a good place to the percentile rankings on its component start is to find out how it compares with the indicators (see the data notes for more details). regulatory environment in other economies. Doing The aggregate ranking on the ease of doing Business provides an aggregate ranking on the ease business benchmarks each economy’s of doing business based on indicator sets that performance on the indicators against that of all measure and benchmark regulations applying to other economies in the Doing Business sample domestic small to medium-size businesses through (figure 1.1). While this ranking tells much about their life cycle. Economies are ranked from 1 to 189 the business environment in an economy, it does by the ease of doing business index. For each not tell the whole story. The ranking on the ease of economy the index is calculated as the ranking on the doing business, and the underlying indicators, do simple average of its percentile rankings on each of not measure all aspects of the business the 10 topics included in the index in Doing Business environment that matter to firms and investors or 2014: starting a business, dealing with construction that affect the competitiveness of the economy. permits, getting electricity, registering property, Still, a high ranking does mean that the getting credit, protecting investors, paying taxes, government has created a regulatory environment trading across borders, enforcing contracts and conducive to operating a business. resolving insolvency. Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 6 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands regional average (figure 1.2). Another perspective is in the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business index (figure 1.3). other economies in the region and compared with the Figure 1.2 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of doing business *The economy with the best performance globally is included as a benchmark. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 7 THE BUSINESS ENVIRONMENT Figure 1.3 How Asia-Pacific Economic Cooperation (APEC) ranks on Doing Business topics Regional average ranking Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 8 Figure 1.4 How far has Asia-Pacific Economic Cooperation (APEC) come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average a region is from the best performance achieved by any region on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing more significant impact as measured by Doing business tells only part of the story, so do changes in Business. that ranking. Yearly movements in rankings can The absolute values of the indicators tell another part provide some indication of changes in an economy’s of the story (table 1.1). Policy makers can learn much regulatory environment for firms, but they are always by comparing the indicators for their economy with relative. An economy’s ranking might change because those for the lowest- and highest-scoring economies of developments in other economies. An economy that in the region as well as those for the best performers implemented business regulation reforms may fail to globally. These comparisons may reveal unexpected rise in the rankings (or may even drop) if it is passed strengths in an area of business regulation—such as a by others whose business regulation reforms had a regulatory process that can be completed with a small number of procedures in a few days and at a low cost. Table 1.1 Summary of Doing Business indicators for Asia-Pacific Economic Cooperation (APEC) Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 175 (Indonesia) 1 (New Zealand) 66 1 (New Zealand) (rank) Procedures (number) 15 (Philippines)* 1 (New Zealand)* 6 1 (New Zealand)* 101.0 (Brunei Time (days) 1.0 (New Zealand) 21.3 1.0 (New Zealand) Darussalam) Cost (% of income per 20.5 (Indonesia) 0.3 (New Zealand) 7.0 0.0 (Slovenia) capita) Paid-in Min. Capital (% 78.2 (China) 0.0 (17 Economies*) 5.8 0.0 (112 Economies*) of income per capita) Dealing with 1 (Hong Kong SAR, 1 (Hong Kong SAR, Construction Permits 185 (China) 67 China) China) (rank) 6 (Hong Kong SAR, 6 (Hong Kong SAR, Procedures (number) 36 (Russian Federation) 15 China) China) 297.0 (Russian Time (days) 26.0 (Singapore) 137.4 26.0 (Singapore) Federation) Cost (% of income per 353.1 (Mexico) 3.5 (Brunei Darussalam) 78.3 1.1 (Qatar) capita) Getting Electricity 156 (Vietnam) 2 (Korea, Rep.) 56 1 (Iceland) (rank) Procedures (number) 7 (Mexico)* 3 (Japan) 5 3 (10 Economies*) Time (days) 162 (Russian Federation) 18 (Korea, Rep.) 73 17 (Germany) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 10 Lowest regional Best regional Best global Indicator Regional average performance performance performance Cost (% of income per 1,726.4 (Vietnam) 0.0 (Japan) 207.3 0.0 (Japan) capita) Registering Property 150 (Mexico) 2 (New Zealand) 59 1 (Georgia) (rank) Procedures (number) 8 (Philippines) 2 (New Zealand)* 5 1 (4 Economies*) 298.0 (Brunei Time (days) 1.0 (New Zealand) 36.4 1.0 (New Zealand)* Darussalam) Cost (% of property 10.9 (Indonesia) 0.1 (New Zealand) 4.0 0.0 (5 Economies*) value) 109 (Russian Getting Credit (rank) 1 (Malaysia) 43 1 (Malaysia)* Federation)* Strength of legal 3 (Russian Federation) 10 (5 Economies*) 7 10 (10 Economies*) rights index (0-10) Depth of credit 5 (4 Economies*) 6 (7 Economies*) 5 6 (31 Economies*) information index (0-6) Public registry 30.2 (China) 100.0 (Korea, Rep.) 48.9 100.0 (Portugal)* coverage (% of adults) Private bureau 2.8 (Papua New Guinea) 100.0 (7 Economies*) 70.2 100.0 (22 Economies*) coverage (% of adults) Protecting Investors 157 (Vietnam) 1 (New Zealand) 50 1 (New Zealand) (rank) Extent of disclosure 2 (Philippines) 10 (6 Economies*) 8 10 (10 Economies*) index (0-10) Extent of director 1 (Vietnam)* 9 (5 Economies*) 5 10 (Cambodia) liability index (0-10) Ease of shareholder 10 (Hong Kong SAR, 2 (Vietnam) 7 10 (3 Economies*) suits index (0-10) China)* Strength of investor 3.3 (Vietnam) 9.7 (New Zealand) 6.6 9.7 (New Zealand) protection index (0-10) 4 (Hong Kong SAR, Paying Taxes (rank) 149 (Vietnam) 68 1 (United Arab Emirates) China) Payments (number per 3 (Hong Kong SAR, 3 (Hong Kong SAR, 52 (Indonesia) 16 year) China) China)* 78 (Hong Kong SAR, 12 (United Arab Time (hours per year) 872 (Vietnam) 233 China) Emirates) Trading Across 157 (Russian Federation) 1 (Singapore) 44 1 (Singapore) Borders (rank) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance Documents to export 9 (Russian Federation) 3 (6 Economies*) 5 2 (Ireland)* (number) Time to export (days) 23 (Papua New Guinea) 6 (3 Economies*) 13 6 (5 Economies*) Cost to export (US$ per 2,615 (Russian 450 (Malaysia) 920 450 (Malaysia) container) Federation) Documents to import 10 (Russian Federation) 3 (4 Economies*) 6 2 (Ireland)* (number) Time to import (days) 32 (Papua New Guinea) 4 (Singapore) 13 4 (Singapore) Cost to import (US$ 2,810 (Russian 440 (Singapore) 984 440 (Singapore) per container) Federation) Enforcing Contracts 168 (Papua New 2 (Korea, Rep.) 57 1 (Luxembourg) (rank) Guinea) Time (days) 842 (Philippines) 150 (Singapore) 423 150 (Singapore) Cost (% of claim) 139.4 (Indonesia) 10.3 (Korea, Rep.) 33.4 0.1 (Bhutan) Procedures (number) 47 (Brunei Darussalam) 21 (Singapore) 35 21 (Singapore)* Resolving Insolvency 149 (Vietnam) 1 (Japan) 55 1 (Japan) (rank) Time (years) 5.0 (Vietnam) 0.6 (Japan) 2.1 0.4 (Ireland) Cost (% of estate) 36 (Thailand) 3 (Singapore) 12 1 (Norway) Recovery rate (cents on 16.2 (Vietnam) 92.8 (Japan) 56.7 92.8 (Japan) the dollar) * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 12 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for INDICATORS MEASURE business owners and employees. Legal entities 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 Registration in the economy’s largest additional benefit comes with limited liability business city companies. These limit the financial liability of company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. registration, company seal) Where governments make this process easy, more Time required to complete each procedure entrepreneurs start businesses in the formal sector, (calendar days) creating more good jobs and generating more Does not include time spent gathering revenue for the government. information What do the indicators cover? Each procedure starts on a separate day (2 procedures cannot start on the same day). Doing Business measures the ease of starting a Procedures that can be fully completed business in an economy by recording all online are an exception to this rule. procedures officially required or commonly done in practice by an entrepreneur to start up and Procedure considered completed once final document is received formally operate an industrial or commercial business—as well as the time and cost required to No prior contact with officials complete these procedures. It also records the paid-in minimum capital that companies must Cost required to complete each procedure deposit before registration. The ranking on the (% of income per capita) ease of starting a business is the simple average of Official costs only, no bribes the percentile rankings on the 4 component No professional fees unless services required indicators: procedures, time, cost and paid-in by law minimum capital requirement. Paid-in minimum capital (% of income To make the data comparable across economies, per capita) Doing Business uses several assumptions about the business and the procedures. It assumes that all Funds deposited in a bank or with a notary before registration (or within 3 months) information is readily available to the entrepreneur and that there has been no prior contact with • Conducts general commercial or industrial officials. It also assumes that the entrepreneur will activities. pay no bribes. And it assumes that the business: • Has a start-up capital of 10 times income per • Is a 100% domestically owned limited liability capita and has a turnover of at least 100 times company, located in the largest business city. income per capita. • Has between 10 and 50 employees. • Does not qualify for any special benefits. • Does not own real estate. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 13 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Asia- the ease of starting a business suggest an answer Pacific Economic Cooperation (APEC) to start a (figure 2.1). The average ranking of the region and business? The global rankings of these economies on comparator regions provide a useful benchmark. Figure 2.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 14 STARTING A BUSINESS The indicators underlying the rankings may be more cost and the paid-in minimum capital requirement revealing. Data collected by Doing Business show (figure 2.2). Comparing these indicators across the what it takes to start a business in each economy in region and with averages both for the region and for the region: the number of procedures, the time, the comparator regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in Asia-Pacific Economic Cooperation (APEC) Procedures (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 15 STARTING A BUSINESS Time (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 16 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 17 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 18 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making satisfaction and savings and more registered it easier to start a business—streamlining procedures businesses, financial resources and job opportunities. by setting up a one-stop shop, making procedures What business registration reforms has Doing Business simpler or faster by introducing technology, and recorded in Asia-Pacific Economic Cooperation (APEC) reducing or eliminating minimum capital requirements. (table 2.1)? Many have undertaken business registration reforms in stages—and often as part of a larger regulatory reform program. Among the benefits have been greater firm Table 2.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made starting a business easier—or not? By Doing Business report year DB year Economy Reform Australia made starting a business cheaper by slashing the DB2008 Australia registration fee for new businesses. Indonesia made starting a business more complex by DB2008 Indonesia increasing the minimum paid in capital Malaysia sped up the process of starting a business by DB2008 Malaysia implementing internal reforms at the CCM. Philippines made the process of starting a business more DB2008 Philippines difficult by increasing the paid in minimum capital requirement. Registration processes could be completed online in 1 simple DB2009 Canada procedure. DB2009 Indonesia The minimum capital was increased by more than double. Companies act amendments simplified business registration DB2009 Malaysia processes through the introduction of e- lodgment resulting in time reduction. Business start up process ca be completed in one simple DB2009 New Zealand online registration in less than a day. Online start-up process simplification reduced the number of DB2009 Singapore procedures and days. Hong Kong has eased the business start up process through DB2010 Hong Kong SAR, China the simplification of registration formalities and merger of procedures. Taiwan eased business start up process by abolishing the DB2010 Taiwan, China minimum capital requirement, and introducing time limits. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 19 DB year Economy Reform Indonesia eased incorporation and post incorporation processes for new business registration through use of on- DB2010 Indonesia line service, deletion of certain licenses, increasing efficiency at the registry and cutting the company deeds legalization, publication, registration and business license fees. Korea simplified the business start-up process by removing the minimum capital requirement, removing the notary role, DB2010 Korea, Rep. cutting taxes, putting time limits on VAT registration and making registration payment on-line. Malaysia eased business start up with a new one stop shop DB2010 Malaysia service that helped in streamlining the registration process Mexico eased the business start-up process by establishing an electronic platform for company registration, reducing the DB2010 Mexico number of days for registration substantially, and by removing the requirement to register with the statistical office. Peru simplified business start up by allowing submission of DB2010 Peru electronic payroll books online at no cost and making the company forms available on line. Singapore further simplified business start up by making it DB2010 Singapore possible to incorporate the company and register for taxes simultaneously and seamlessly using the same online form. Thailand eased business start up process by merging the DB2010 Thailand registration of memorandum and the application for registration of establishment of company Brunei Darussalam made starting a business easier by DB2011 Brunei Darussalam improving efficiency at the company registrar and implementing an electronic system for name searches. Chile made business start-up easier by introducing an online DB2011 Chile system for registration and for filing the request for publication. Taiwan (China) eased business start-up by reducing the time DB2011 Taiwan, China required to check company names, register retirement plans and apply for health, pension and labor insurance. Indonesia eased business start-up by reducing the cost for company name clearance and reservation and the time DB2011 Indonesia required to reserve the name and approve the deed of incorporation. Malaysia eased business start-up by introducing more online DB2011 Malaysia services. Mexico launched an online one-stop shop for initiating DB2011 Mexico business registration. DB2011 Peru Peru eased business start-up by simplifying the requirements Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 20 DB year Economy Reform for operating licenses and creating an online one-stop shop for business registration. The Philippines eased business startup by setting up a one- DB2011 Philippines stop shop at the municipal level. Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business DB2011 Vietnam license and tax license and by eliminating the need for a seal for company licensing. Chile made business start-up easier by starting to provide an immediate temporary operating license to new companies, eliminating the requirement for an inspection of premises by DB2012 Chile the tax authority before new companies can begin operations and allowing free online publication of the notice of a company’s creation. Hong Kong SAR (China) made starting a business easier by DB2012 Hong Kong SAR, China introducing online electronic services for company and business registration. Taiwan (China) made starting a business easier by DB2012 Taiwan, China implementing an online one-stop shop for business registration. Indonesia made starting a business easier by introducing a simplified application process allowing an applicant to DB2012 Indonesia simultaneously obtain both a general trading license and a business registration certificate. Korea made starting a business easier by introducing a new DB2012 Korea, Rep. online one-stop shop, Start-Biz. Malaysia made starting a business easier by merging company, tax, social security and employment fund DB2012 Malaysia registrations at the one-stop shop and providing same-day registration. Peru made starting a business easier by eliminating the DB2012 Peru requirement for micro and small enterprises to deposit start- up capital in a bank before registration. Thailand made starting a business easier by introducing a DB2012 Thailand one-stop shop. China made starting a business less costly by exempting DB2013 China micro and small companies from paying several administrative fees from January 2012 to December 2014. Mexico made starting a business easier by eliminating the DB2013 Mexico minimum capital requirement for limited liability companies. Thailand made starting a business easier by allowing the DB2013 Thailand registrar at the Department of Business Development to receive the company’s work regulations. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 21 DB year Economy Reform Vietnam made starting a business easier by allowing DB2013 Vietnam companies to use self-printed value added tax invoices. Chile made starting a business easier by creating a new online DB2014 Chile system for business registration. Hong Kong SAR, China, made starting a business less costly DB2014 Hong Kong SAR, China by abolishing the capital duty levied on local companies. Malaysia made starting a business less costly by reducing the DB2014 Malaysia company registration fees. Russia made starting a business easier by abolishing the DB2014 Russian Federation requirement to have the bank signature card notarized before opening a company bank account. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 22 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 (number) time and money, many builders opt out. They may pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, sewerage and a land telephone line Doing Business records the procedures, time and cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a simple completion (if required for use as collateral or commercial warehouse in the economy’s main city, for transfer of warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure completed once final document is Doing Business uses several assumptions about the received business and the warehouse, including the utility No prior contact with officials connections. The business: Cost required to complete each procedure (% of income per capita) • Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city. • Will be connected to water, sewerage (sewage system, septic tank or their • Is domestically owned and operated. equivalent) and a fixed telephone line. • Has 60 builders and other employees. • The connection to each utility network will be The warehouse: 10 meters (32 feet, 10 inches) long. • Is a new construction (there was no • Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions). • Has complete architectural and technical plans prepared by a licensed architect or • Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 23 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in Asia- suggest an answer (figure 3.1). The average ranking of Pacific Economic Cooperation (APEC) to legally build a the region and comparator regions provide a useful warehouse? The global rankings of these economies benchmark. on the ease of dealing with construction permits Figure 3.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 24 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more of procedures, the time and the cost (figure 3.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to comply with formalities to build a averages both for the region and for comparator warehouse in each economy in the region: the number regions can provide useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in Asia-Pacific Economic Cooperation (APEC) Procedures (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 25 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 26 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 27 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while worked on consolidating permitting requirements. making compliance easy and accessible to all. What construction permitting reforms has Doing Coherent and transparent rules, efficient processes and Business recorded in Asia-Pacific Economic adequate allocation of resources are especially Cooperation (APEC) (table 3.1)? important in sectors where safety is at stake. Construction is one of them. In an effort to ensure building safety while keeping compliance costs reasonable, governments around the world have Table 3.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made dealing with construction permits easier—or not? By Doing Business report year DB year Economy Reform Beijing and Shanghai now process applications for construction permits electronically and allow construction DB2008 China companies to apply for safety certificates online, reducing delays. Indonesia made obtaining construction permits easier by implementing a new building regulation which specifically DB2008 Indonesia revoked the provisions on time period to complete building permits. As a result, the time to obtain a building permit decreased from 49 days to 21 days. The Russian Federation made dealing with construction permits more expensive by increasing the cost, and at the DB2008 Russian Federation same time implemented several laws that reduces steps and time to obtain a construction permit. Hong Kong , China, made obtaining construction permits easier by introducing the “Be the Smart Regulator Program”, a large-scale improvement program for business licenses DB2009 Hong Kong SAR, China covering multiple business sectors, which reduced the time to deal with building permits by 36 days and eliminated 8 procedures related to inspections and pre-approvals Singapore made obtaining construction permits easier by DB2009 Singapore improving internal electronic process of data management and processing. Australia made obtaining a construction permit quicker by DB2010 Australia streamlining procedures. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 28 DB year Economy Reform Hong Kong, China established a one-stop center allowing six local departments and two private utility companies to DB2010 Hong Kong SAR, China function under the same roof to expedite the process to obtain a construction permit. Fees related to the construction permitting process were DB2010 New Zealand increased in New Zealand. Singapore has further eased the process of dealing with construction permits with a new Workplace Safety & Health DB2010 Singapore Regulations that allow low risk industries to submit documents on-line. Mexico improved construction permitting by merging and DB2011 Mexico streamlining procedures related to zoning and utilities. Peru streamlined construction permitting by implementing DB2011 Peru administrative reforms. The Philippines made construction permitting more DB2011 Philippines cumbersome through updated electricity connection costs. Russia eased construction permitting by implementing a DB2011 Russian Federation single window for all procedures related to land use. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by DB2011 Vietnam 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Taiwan (China) made dealing with construction permits DB2012 Taiwan, China easier by creating a one-stop center. Japan made dealing with construction permits costlier by DB2012 Japan increasing inspection fees. Mexico made dealing with construction permits faster by DB2012 Mexico consolidating internal administrative procedures. Brunei Darussalam made dealing with construction permits DB2013 Brunei Darussalam easier by creating a one-stop shop for preconstruction approvals. China simplified the process of obtaining a construction DB2013 China permit by streamlining and centralizing preconstruction approvals. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 29 DB year Economy Reform Taiwan, China, made dealing with construction permits easier by introducing a risk-based and self-regulatory inspection DB2013 Taiwan, China system and improving operational features of the one-stop shop for building permits. Malaysia made dealing with construction permits faster by DB2013 Malaysia improving the one-stop center for new buildings and by reducing the time to connect to telephone service. Peru made obtaining a construction permit easier by DB2013 Peru eliminating requirements for several preconstruction approvals. Russia made obtaining a construction permit simpler by DB2013 Russian Federation eliminating requirements for several preconstruction approvals. Malaysia made dealing with construction permits easier by DB2014 Malaysia establishing a one-stop shop. The Philippines made dealing with construction permits DB2014 Philippines easier by eliminating the requirement to obtain a health certificate. Russia made dealing with construction permits easier by eliminating several requirements for project approvals from DB2014 Russian Federation government agencies and by reducing the time required to register a new building. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 30 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 Obtaining external installation works and warehouse, as well as the time and cost to possibly purchasing material for these works complete them. These procedures include Concluding any necessary supply contract and applications and contracts with electricity utilities, obtaining final supply clearances from other agencies and the external and final connection works. The ranking on the Time required to complete each procedure ease of getting electricity is the simple average of (calendar days) the percentile rankings on its component Is at least 1 calendar day indicators: procedures, time and cost. To make the Each procedure starts on a separate day data comparable across economies, several assumptions are used. Does not include time spent gathering information The warehouse: Reflects the time spent in practice, with little • Is located in the economy’s largest follow-up and no prior contact with officials business city, in an area where other Cost required to complete each procedure (% warehouses are located. of income per capita) • Is not in a special economic zone where Official costs only, no bribes the connection would be eligible for subsidization or faster service. Excludes value added tax • Has road access. The connection works 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 • Has 2 stories, both above ground, with a overhead or underground, whichever is more total surface of about 1,300.6 square common in the economy and in the area meters (14,000 square feet), and is built on where the warehouse is located. The length a plot of 929 square meters (10,000 square of any connection in the customer’s private feet). domain is negligible. The electricity connection: • Requires crossing of a 10-meter road but all the works are carried out in a public land, so • Is a 3-phase, 4-wire Y, 140-kilovolt-ampere there is no crossing into other people's (kVA) (subscribed capacity) connection. private property. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 31 • Involves installing one electricity meter. The monthly electricity consumption will be 0.07 gigawatt-hour (GWh). The internal electrical wiring has been completed. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 32 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Asia- an answer (figure 4.1). The average ranking of the Pacific Economic Cooperation (APEC) to connect a region and comparator regions provide a useful warehouse to electricity? The global rankings of these benchmark. economies on the ease of getting electricity suggest Figure 4.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 33 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in Asia-Pacific Economic Cooperation (APEC) Procedures (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 34 GETTING ELECTRICITY Time (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 35 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 36 GETTING ELECTRICITY What are the changes over time? Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic connection costs reasonable, governments around the operations. In many economies the connection world have worked to consolidate requirements for process is complicated by the multiple laws and obtaining an electricity connection. What reforms in regulations involved—covering service quality, general getting electricity has Doing Business recorded in Asia- safety, technical standards, procurement practices and Pacific Economic Cooperation (APEC) (table 4.1)? internal wiring installations. In an effort to ensure Table 4.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made getting electricity easier—or not? By Doing Business report year DB year Economy Reform Brunei Darussalam made getting electricity easier by DB2012 Brunei Darussalam establishing a one-stop shop and reducing the time required to obtain an excavation permit. Hong Kong SAR (China) made getting electricity easier by DB2012 Hong Kong SAR, China increasing the efficiency of public agencies and streamlining the utility’s procedures with other government agencies. Indonesia made getting electricity more difficult by increasing DB2012 Indonesia connection fees. Russian Federation made getting electricity less costly by DB2012 Russian Federation revising the tariffs for connection. Canada made getting an electricity connection easier by DB2013 Canada reducing the time needed for external connection works. Indonesia made getting electricity easier by eliminating the requirement for new customers applying for an electricity DB2013 Indonesia connection to show a neighbor’s electricity bill as a way to help determine their address. Korea made getting electricity less costly by introducing a DB2013 Korea, Rep. new connection fee schedule and an installment payment system. In Mexico the distribution utility made getting electricity easier by streamlining procedures, offering training DB2013 Mexico opportunities to private contractors, using a geographic information system (GIS) to map the electricity distribution network and increasing the stock of materials. Malaysia made getting electricity easier by increasing the DB2014 Malaysia efficiency of internal processes at the utility and improving its communication and dialogue with contractors. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 37 DB year Economy Reform Mexico made getting electricity easier by increasing the efficiency of the utility’s internal processes and by enforcing a DB2014 Mexico “silence is consent” rule for the approval of the feasibility study for a new connection. Russia made getting electricity simpler and less costly by DB2014 Russian Federation setting standard connection tariffs and eliminating many procedures previously required. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 38 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal Procedures to legally transfer title on again. And where property is informal or poorly immovable property (number) administered, it has little chance of being accepted as collateral for loans—limiting access to Preregistration procedures (for example, finance. checking for liens, notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration procedures in the economy’s Doing Business records the full sequence of largest business city procedures necessary for a business to purchase Postregistration procedures (for example, filing property from another business and transfer the title with the municipality) property title to the buyer’s name. The transaction Time required to complete each procedure is considered complete when it is opposable to (calendar days) third parties and when the buyer can use the 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 Each procedure starts on a separate day. rankings on its component indicators: procedures, Procedures that can be fully completed online time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are No prior contact with officials used. Cost required to complete each procedure (% The parties (buyer and seller): of property value) • Are limited liability companies, 100% Official costs only, no bribes domestically and privately owned. No value added or capital gains taxes included • Are located in the periurban area of the economy’s largest business city. • Have 50 employees each, all of whom are nationals. • Has no mortgages attached and has been under the same ownership for the past 10 • Perform general commercial activities. years. The property (fully owned by the seller): • Consists of 557.4 square meters (6,000 square • Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000 square feet). The warehouse is in good • Is registered in the land registry or condition and complies with all safety cadastre, or both, and is free of title standards, building codes and legal disputes. requirements. There is no heating system. The • Is located in a periurban commercial zone, property will be transferred in its entirety. and no rezoning is required. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 39 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in Asia- the ease of registering property suggest an answer Pacific Economic Cooperation (APEC) to transfer (figure 5.1). The average ranking of the region and property? The global rankings of these economies on comparator regions provide a useful benchmark. Figure 5.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of registering property Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 40 REGISTERING PROPERTY The indicators underlying the rankings may be more the time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show indicators across the region and with averages both what it takes to complete a property transfer in each for the region and for comparator regions can economy in the region: the number of procedures, provide useful insights. Figure 5.2 What it takes to register property in economies in Asia-Pacific Economic Cooperation (APEC) Procedures (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 41 REGISTERING PROPERTY Time (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 42 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 43 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such property registration reforms has Doing Business as by computerizing land registries, introducing time recorded in Asia-Pacific Economic Cooperation (APEC) limits for procedures and setting low fixed fees. Many (table 5.1)? have cut the time required substantially—enabling Table 5.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made registering property easier—or not? By Doing Business report year DB year Economy Reform A new notary fee schedule was issued which reduced the DB2008 Mexico costs of registering property. Thailand reduced two taxes, the transfer fee from 2% to 0.01%, and the Specific Business Tax (SBT) from 3.3% to 0.11%. The cost reductions are provisional and valid for one DB2009 Thailand year from March 2008 to allow the Thai government to assess the results of the reform in April 2009. As a result, the cost to transfer a property in Thailand has decreased from 6.3% to 1.13% of property value. In Hong Kong property registration is easier because the DB2010 Hong Kong SAR, China stamp duty for the sale act (Property Assignment) can now be submitted online. Indonesia eased the process of property registration by DB2010 Indonesia introducing time limits for standard operating procedures at the Land Registry Registering property in Peru is now easier with faster electronic processing times, and the tax agency (SAT) is DB2010 Peru connected with notaries through the Internet facilitating the payment of (Alcabala) municipal taxes. The Russian Federation sped up the process of registering property by introducing new documentation requirements DB2010 Russian Federation such as cadastral passports in lieu of inventory documents and cadastral maps. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 44 DB year Economy Reform Singapore eased property registration by improving its DB2010 Singapore computerized system Malaysia’s introduction of online stamping reduced the time DB2011 Malaysia and cost to transfer property. Peru introduced fast-track procedures at the land registry, DB2011 Peru cutting by half the time needed to register property. Thailand made registering property more costly by repealing DB2011 Thailand a 2-year temporary tax reduction for property transfers. Russia made registering property transfers easier by DB2012 Russian Federation eliminating the requirement to obtain cadastral passports on land plots. Thailand made registering property more expensive by DB2012 Thailand increasing the registration fee. Malaysia substantially reduced the number of days it takes to DB2013 Malaysia register property transfers. Hong Kong SAR, China, made transferring property more DB2014 Hong Kong SAR, China costly by increasing the stamp duty. Russia made transferring property easier by streamlining DB2014 Russian Federation procedures and implementing effective time limits for processing transfer applications. Singapore made transferring property easier by introducing DB2014 Singapore an online procedure for property transfers. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 45 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 borrowers and lenders’ rights in collateral and bankruptcy laws. Credit information Strength of legal rights index (0–10) systems enable lenders to view a potential borrower’s financial history (positive or negative)— Protection of rights of borrowers and lenders valuable information to consider when assessing through collateral laws risk. And they permit borrowers to establish a good Protection of secured creditors’ rights through credit history that will allow easier access to credit. bankruptcy laws Sound collateral laws enable businesses to use their assets, especially movable property, as security to Depth of credit information index (0–6) generate capital—while strong creditors’ rights Scope and accessibility of credit information have been associated with higher ratios of private distributed by public credit registries and 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 information index measures rules and practices Private credit bureau coverage (% of adults) affecting the coverage, scope and accessibility of Number of individuals and firms listed in credit information available through a public credit largest private credit bureau as percentage of registry or a private credit bureau. The strength of adult population legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the • Has up to 100 employees. secured transactions system, involving a secured • Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and • Is a private, incorporated, limited liability the strength of legal rights index. company. • Has its headquarters and only base of operations in the largest business city. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 46 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and the ease of getting credit suggest an answer (figure collateral and bankruptcy laws in economies in Asia- 6.1). The average ranking of the region and Pacific Economic Cooperation (APEC) facilitate access comparator regions provide a useful benchmark. to credit? The global rankings of these economies on Figure 6.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 47 GETTING CREDIT Another way to assess how well regulations and particular score on the strength of legal rights index. institutions support lending and borrowing in the Figure 6.3 shows the same thing for the depth of credit region is to look at the distribution of its economies by information index. Higher scores indicate stronger their scores on the getting credit indicators. Figure 6.2 legal rights for borrowers and lenders and more credit shows how many economies in the region received a information. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How extensive—and how accessible—is and lenders in economies in Asia-Pacific Economic credit information in economies in Asia-Pacific Cooperation (APEC)? Economic Cooperation (APEC)? Number of economies in region with each score on strength Number of economies in region with each score on depth of of legal rights index (0–10) credit information index (0–6) Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 48 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders access to credit. What credit reforms has Doing and borrowers under collateral and bankruptcy laws, Business recorded in Asia-Pacific Economic and increase the scope, coverage and accessibility of Cooperation (APEC) (table 6.1)? credit information, they can increase entrepreneurs’ Table 6.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made getting credit easier—or not? By Doing Business report year DB year Economy Reform According to the law, secured creditor is entitled to obtain DB2008 China payment in priority over debtor’s specific asset. The public credit registry of Indonesia lowered the minimum DB2008 Indonesia loan threshold was lowered from 50 million Rupiah (US$ 5,460) to zero. A private bureau, National Bureau of Credit Histories (NBKI), started operations in March 2006. A draft of the law dates DB2008 Russian Federation back to 1992, but only increased consumer lending and the requirement for banks to submit credit data, made the reform possible. Vietnam expanded the range of assets that can be used as DB2008 Vietnam collateral and allowed them to be generically described. In October 2007, China expanded the range of assets that can be used as collateral with its new Property law. It is now DB2009 China possible for entrepreneurs to use accounts receivables and a changing pool of assets to secure a loan. Taiwan, China amended its Civil Code to make secured lending more flexible. As of September 2007, mortgages and DB2009 Taiwan, China pledges can be secured with a line of credit; so that the debt must only be a specified maximum amount. Borrowers have the right to inspect the data stored in the public credit registry, thanks to new regulations from the DB2009 Indonesia Bank of Indonesia. Borrowers can now check their credit information and contribute to improve its quality The public credit registry in Vietnam extended the historical DB2009 Vietnam credit information distributed from 2 to 5 years, partially explaining a 32% increase in coverage to more than 8 million Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 49 DB year Economy Reform individuals and firms. Philippines enhanced access to credit with a new credit DB2010 Philippines information act that regulates the operations and services of a credit information system Operation of a new private credit bureau improved the credit DB2011 Papua New Guinea information system in Papua New Guinea. Singapore improved its credit information system by DB2011 Singapore collecting and distributing information on firms. Vietnam improved its credit information system by allowing DB2011 Vietnam borrowers to examine their own credit report and correct errors. Chile strengthened its secured transactions system by DB2012 Chile implementing a unified collateral registry and a new legal framework for nonpossessory security interests. Mexico strengthened its secured transactions system by DB2012 Mexico implementing a centralized collateral registry with an electronic database that is accessible online. Australia strengthened its secured transactions system by adopting a new national legal regime governing the DB2013 Australia enforceability of security interests in personal property and implementing a unified collateral registry. New Zealand improved access to credit information by DB2013 New Zealand allowing credit bureaus to collect positive information on individuals. Australia improved its credit information system through the Privacy Amendment (Enhancing Privacy Protection) Act 2012, DB2014 Australia which permits credit bureaus to collect account payment history with improved privacy protection. Brunei Darussalam improved access to credit information by DB2014 Brunei Darussalam establishing a public credit registry. China improved its credit information system by introducing DB2014 China credit information industry regulations, which guarantee borrowers’ right to inspect their data. DB2014 Indonesia Indonesia improved its credit information system through a new regulation setting up a legal framework for establishing Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 50 DB year Economy Reform credit bureaus. Korea strengthened its secured transactions system by DB2014 Korea, Rep. creating new types of security rights that can be publicized through registration. The Philippines improved access to credit information by beginning to distribute both positive and negative DB2014 Philippines information and by enacting a data privacy act that guarantees borrowers’ right to access their data. Singapore improved its credit information system by DB2014 Singapore guaranteeing by law borrowers’ right to inspect their own data. Vietnam improved its credit information system through a DB2014 Vietnam decree setting up a legal framework for the establishment of private credit bureaus. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 51 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be Extent of disclosure index (0–10) reluctant to provide funding to companies through the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor Available legal remedies (damages, protections: transparency of related-party disgorgement of profits, fines, imprisonment transactions (extent of disclosure index), liability for and rescission of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during (ease of shareholder suits index). The ranking Access to internal corporate documents on the strength of investor protection index is the (directly or through a government inspector) simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of • Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). • The price is higher than the going price for used trucks, but the transaction goes forward. • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of • All required approvals are obtained, and all Buyer where permitted, even if this is not required disclosures made, though the specifically required by law. transaction is prejudicial to Buyer. The transaction involves the following details: • Shareholders sue the interested parties and the members of the board of directors. • Mr. James, a director and the majority shareholder of the company, proposes that the company purchase used trucks from another company he owns. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 52 Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 53 PROTECTING INVESTORS Where do the region’s economies stand today? How strong are investor protections against self- indicator does not measure all aspects related to the dealing in economies in Asia-Pacific Economic protection of minority investors, a higher ranking does Cooperation (APEC)? The global rankings of these indicate that an economy’s regulations offer stronger economies on the strength of investor protection investor protections against self-dealing in the areas index suggest an answer (figure 7.1). While the measured. Figure 7.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 54 PROTECTING INVESTORS But the overall ranking on the strength of investor be revealing (figure 7.2). Higher scores indicate protection index tells only part of the story. Economies stronger investor protections. Comparing the scores may offer strong protections in some areas but not across the region on the strength of investor others. So the number of economies in Asia-Pacific protection index and with averages both for the region Economic Cooperation (APEC) that have a certain score and for comparator regions can provide useful recorded on the extent of disclosure, extent of director insights. liability and ease of shareholder suits indices may also Figure 7.2 How strong are investor protections in economies in Asia-Pacific Economic Cooperation (APEC)? Strength of investor protection index (0–10) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 55 PROTECTING INVESTORS Extent of disclosure index (0–10) Extent of director liability index (0–10) Number of economies in region with each score on extent of Number of economies in region with each score on extent of disclosure index (0–10) director liability index (0–10) Note: Higher scores indicate greater disclosure. Note: Higher scores indicate greater liability of directors. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 56 PROTECTING INVESTORS Ease of shareholder suits index (0–10) Number of economies in region with each score on ease of shareholder suits index (0–10) Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 57 PROTECTING INVESTORS What are the changes over time? Economies with the strongest protections of minority protections may move ahead on different fronts—such investors from self-dealing require detailed disclosure as through new or amended company laws, securities and define clear duties for directors. They also have regulations or revisions to court procedures. What well-functioning courts and up-to-date procedural investor protection reforms has Doing Business rules that give minority shareholders the means to recorded in Asia-Pacific Economic Cooperation (APEC) prove their case and obtain a judgment within a (table 7.1)? reasonable time. So reforms to strengthen investor Table 7.1 How have economies in Asia-Pacific Economic Cooperation (APEC) strengthened investor protections— or not? By Doing Business report year DB year Economy Reform Indonesia strengthened investor protections by deepening DB2008 Indonesia the already high disclosure requirements of the Bapepam (Stock Exchange) regulation. Vietnam strengthened investor protections by increasing DB2008 Vietnam disclosure requirements in regular transactions and in case of related-party transaction. Thailand strengthened investor protections by increasing DB2009 Thailand director duties and remedies in case of related-party transactions. Indonesia increased investors’ protections by increasing its DB2010 Indonesia disclosure requirements in cases of related-party transactions. An amendment to Chile’s securities law strengthened investor protections by requiring greater corporate disclosure and DB2011 Chile regulating the approval of transactions between interested parties. Peru strengthened investor protections through a new law DB2012 Peru allowing minority shareholders to request access to nonconfidential corporate documents. Vietnam strengthened investor protections by requiring DB2012 Vietnam higher standards of accountability for company directors. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 58 DB year Economy Reform Taiwan, China, strengthened investor protections by increasing disclosure requirements for related-party DB2013 Taiwan, China transactions and improving the liability regime for company directors in cases where such transactions are abusive. Korea strengthened investor protections by making it easier DB2013 Korea, Rep. to sue directors in cases of prejudicial related-party transactions. Peru strengthened investor protections through a new law regulating the approval of related-party transactions and DB2013 Peru making it easier to sue directors when such transactions are prejudicial. Vietnam strengthened investor protections by introducing DB2014 Vietnam greater disclosure requirements for publicly held companies in cases of related-party transactions. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 59 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic 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, including consumption taxes (value added tax, where businesses pay no taxes at all. 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 the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) 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) payments, time and total tax rate, with a threshold 1 being applied to the total tax rate. To make the Profit or corporate income tax data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes • TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes • The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes and mandatory contributions paid during • Taxes and mandatory contributions include the second year of operation are recorded. corporate income tax, turnover tax and all 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 25.5%. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 60 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with ease of paying taxes offer useful information for taxes in economies in Asia-Pacific Economic assessing the tax compliance burden for businesses Cooperation (APEC)—and how much do firms pay in (figure 8.1). The average ranking of the region and taxes? The global rankings of these economies on the comparator regions provide a useful benchmark. Figure 8.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of paying taxes Note: For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 61 PAYING TAXES The indicators underlying the rankings may be more as well as the total tax rate (figure 8.2). Comparing revealing. Data collected by Doing Business show what these indicators across the region and with averages it takes to comply with tax regulations in each both for the region and for comparator regions can economy in the region—the number of payments per provide useful insights. year and the time required to prepare and file taxes— Figure 8.2 How easy is it to pay taxes in economies in Asia-Pacific Economic Cooperation (APEC)—and what are the total tax rates? Payments (number per year) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 62 PAYING TAXES Time (hours per year) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 63 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 64 PAYING TAXES What are the changes over time? 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. Asia-Pacific Economic Cooperation (APEC) (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made paying taxes easier—or not? By Doing Business report year DB year Economy Reform Malaysia made it easier to pay taxes by diffusing electronic DB2008 Malaysia facilities among taxpayers Mexico reduced the tax burden for companies by reducing DB2008 Mexico the corporate income tax rate The general corporate income tax rate will be reduced to 15% by 2012. Accelerated depreciation will be introduced for DB2009 Canada various assets, the GST rate reduced from 7% to 6% and eventually to 5%, and the small business tax rate to 11% in 2008. Corporate income tax rate will be reduced from 33.3% to DB2009 China 25%. The criteria and accounting methods for tax deductions has been unified. Effective 2008, the corporate income tax rate has been reduced to 26% (previously tiered) and will be further reduced to 25% for year of assessment 2009. Also upcoming DB2009 Malaysia is the introduction of a single-tier tax system, which will exempt dividends from tax. Real property gains tax was abolished on 1 April 2007. A new flat tax was introduced effective January 1, 2008, and the asset tax was abolished as from the same date.A new DB2009 Mexico withholding tax on cash deposit interest will be implemented by July 1, 2008. New reporting rules were introduced in 2007 for VAT. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 65 DB year Economy Reform The corporate income tax rate was reduced from 33% to 30% DB2009 New Zealand with effect 1 January 2008. The government has facilitated e-payments and online filing. Expected tax changes in 2008 include the exemption of companies with taxable income not exceeding THB 1.2 million DB2009 Thailand from corporate income tax and concessionary 25% rates for newly listed companies. The special business tax on property transactions is reduced from 3% to 0.1% and for property transfer and mortgage fees, reduced to 0.01%. Brunei Darussalam eased the burden of taxes on businesses DB2010 Brunei Darussalam by reducing the corporate income tax rate from 30% to 25.5%. Taiwan, China has made it easier to pay taxes by making both DB2010 Taiwan, China e-filing and e-payment applicable to value added tax (VAT). Korea has reduced the burden on business by accelerating its corporate income tax reduction programme from a 5-year DB2010 Korea, Rep. programme to a 3-year programme. The top rate will be cut from 25% to 20% by 2010. Mexico has eased the paying of taxes by introducing DB2010 Mexico electronic payment systems for payroll tax, property tax and social security taxes. Peru has made paying taxes easier with software, freely distributed, for VAT payments. Peru has also eased the DB2010 Peru cashflow of business by reducing the check tax and with new accelerated depreciation. Philippines has eased tax burden on business by reducing DB2010 Philippines corporate income tax rate from 35% to 30%. Russia eased the tax burden on companies by reducing the DB2010 Russian Federation corporate income tax rate from 24% to 20%. Vietnam has relieved the tax bruden on business by reducing DB2010 Vietnam both the corporate income tax and the value added tax, and eliminating the surtax on income from the transfer of land Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 66 DB year Economy Reform use. Brunei Darussalam reduced the corporate income tax rate DB2011 Brunei Darussalam from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. Canada harmonized the Ontario and federal tax returns and DB2011 Canada reduced the corporate and employee tax rates. China’s new corporate income tax law unified the tax regimes for domestic and foreign enterprises and clarified the DB2011 China calculation of taxable income for corporate income tax purposes. DB2011 Hong Kong SAR, China Hong Kong SAR (China) abolished the fuel tax on diesel. Taiwan (China) reduced the corporate income tax rate and DB2011 Taiwan, China simplified tax return forms, rules for assessing corporate income tax and the calculation of interim tax payments. DB2011 Indonesia Indonesia reduced its corporate income tax rate. Mexico increased taxes on companies by raising several tax rates, including the corporate income tax and the rate on DB2011 Mexico cash deposits. At the same time, the administrative burden was reduced slightly with more options for online payment and increased use of accounting software. Thailand temporarily lowered taxes on business by reducing DB2011 Thailand its specific business tax for 12 months. In the United States the introduction of a new tax on payroll DB2011 United States increased taxes on companies operating within the New York City metropolitan commuter transportation district. Canada made paying taxes easier and less costly for DB2012 Canada companies by reducing profit tax rates, eliminating the Ontario capital tax and harmonizing sales taxes. Korea eased the administrative burden of paying taxes for DB2012 Korea, Rep. firms by merging several taxes, allowing 4 labor taxes and contributions to be paid jointly and continuing to increase the Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 67 DB year Economy Reform use of the online tax payment system. Malaysia made paying taxes costlier for firms by reintroducing the real estate capital gains tax—but also made DB2012 Malaysia tax compliance easier by improving electronic systems and the availability of software. Mexico continued to ease the administrative burden of paying taxes for firms by ending the requirement to file a DB2012 Mexico yearly value added tax return and reduced filing requirements for other taxes New Zealand reduced its corporate income tax rate and DB2012 New Zealand fringe benefit tax rate. Peru made paying taxes easier for companies by improving electronic filing and payment of the major taxes and DB2012 Peru promoting the use of the electronic option among the majority of taxpayers. Russia increased the social security contribution rate for DB2012 Russian Federation employers. Brunei Darussalam made paying taxes less costly for DB2013 Brunei Darussalam companies by reducing the profit tax rate. Japan made paying taxes less costly for companies by DB2013 Japan reducing the corporate income tax rate—though it also introduced a restoration surtax for a 3-year period. Korea made paying taxes less costly for companies by DB2013 Korea, Rep. reducing the profit tax rate. Russia eased the administrative burden of taxes for firms by simplifying compliance procedures for value added tax and DB2013 Russian Federation by promoting the use of tax accounting software and electronic services. Thailand made paying taxes less costly for companies by DB2013 Thailand reducing the profit tax rate. DB2014 Philippines The Philippines made paying taxes easier for companies by Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 68 DB year Economy Reform introducing an electronic filing and payment system for social security contributions. Thailand made paying taxes less costly for companies by DB2014 Thailand reducing employers' social security contribution rate. Vietnam made paying taxes more costly for companies by DB2014 Vietnam increasing employers' social security contribution rate. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 69 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 extra costs and delays for exporters and importers, Documents required to export and import stifling trade potential. Research shows that (number) exporters in developing countries gain more from Bank documents a 10% drop in their trading costs than from a Customs clearance documents similar reduction in the tariffs applied to their products in global markets. Port and terminal handling documents What do the indicators cover? Transport documents Doing Business measures the time and cost Time required to export and import (days) (excluding tariffs and the time and cost for sea Obtaining, filling out and submitting all the transport) associated with exporting and documents importing a standard shipment of goods by sea transport, and the number of documents necessary Inland transport and handling to complete the transaction. The indicators cover Customs clearance and inspections procedural requirements such as documentation Port and terminal handling requirements and procedures at customs and other regulatory agencies as well as at the port. They also Does not include sea transport time cover trade logistics, including the time and cost of inland transport to the largest business city. The Cost required to export and import (US$ per container) ranking on the ease of trading across borders is the simple average of the percentile rankings on its All documentation component indicators: documents, time and cost Inland transport and handling to export and import. Customs clearance and inspections To make the data comparable across economies, Port and terminal handling Doing Business uses several assumptions about the business and the traded goods. Official costs only, no bribes The business: • Do not require refrigeration or any other special environment. • Is of medium size and employs 60 people. • Do not require any special phytosanitary or • Is located in the periurban area of the environmental safety standards other than economy’s largest business city. accepted international standards. • Is a private, limited liability company, • Are one of the economy’s leading export or domestically owned, formally registered import products. and operating under commercial laws and regulations of the economy. • Are transported in a dry-cargo, 20-foot full container load. The traded goods: • Are not hazardous nor do they include military items. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 70 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in Asia- on the ease of trading across borders suggest an Pacific Economic Cooperation (APEC) to export and answer (figure 9.1). The average ranking of the region import goods? The global rankings of these economies and comparator regions provide a useful benchmark. Figure 9.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 71 TRADING ACROSS BORDERS The indicators underlying the rankings may be more documents, the time and the cost (figure 9.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to export or import a standard container of averages both for the region and for comparator goods in each economy in the region: the number of regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in Asia-Pacific Economic Cooperation (APEC) Documents to export (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 72 TRADING ACROSS BORDERS Time to export (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 73 TRADING ACROSS BORDERS Cost to export (US$ per container) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 74 TRADING ACROSS BORDERS Documents to import (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 75 TRADING ACROSS BORDERS Time to import (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 76 TRADING ACROSS BORDERS Cost to import (US$ per container) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 77 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their 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 Asia-Pacific Economic risk-based inspections and electronic data interchange Cooperation (APEC) (table 9.1)? Table 9.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made trading across borders easier— or not? By Doing Business report year DB year Economy Reform Thailand made trading across borders speedier by implementing a e-Customs system, allowing customs DB2008 Thailand declarations to be submitted electronically and data to be simultaneously verified by different agencies. Upgrading the EDI system was indicative to a decrease in DB2009 Korea, Rep. export and import. Upgrading the risk management systems and EDI system led DB2009 Philippines to a decrease in import time. Upgrading the EDI system led to a decrease in time and DB2009 Thailand documents for export and import. DB2010 China China eased trade finance by relaxing its trade credit rules. Peru sped up its port and terminal handling activities due to DB2010 Peru additional cranes. Increasing competition in the logistics industry along with application of new customs administration procedures as part DB2010 Vietnam of the WTO membership reform program have reduced delays to trade in Vietnam. The introduction of an electronic customs system in Brunei DB2011 Brunei Darussalam Darussalam made trading easier. DB2011 Indonesia Indonesia reduced the time to export by launching a single- Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 78 DB year Economy Reform window service. Peru made trading easier by implementing a new web-based DB2011 Peru electronic data interchange system, risk-based inspections and payment deferrals. The Philippines reduced the time and cost to trade by improving its electronic customs systems, adding such DB2011 Philippines functions as electronic payments and online submission of declarations. Chile made trading across borders faster by implementing an DB2012 Chile online electronic data interchange system for customs operations. Russia made trading across borders easier by reducing the DB2012 Russian Federation number of documents needed for each export or import transaction and lowering the associated cost. Mexico made trading across borders easier by implementing DB2014 Mexico an electronic single-window system. Russia made trading across borders easier by implementing an electronic system for submitting export and import DB2014 Russian Federation documents and by reducing the number of physical inspections. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 79 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the Steps to enforce the judgment outcome of a long court dispute. What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case: • The seller and buyer are located in the economy’s largest business city. • The dispute on the quality of the goods requires an expert opinion. • The buyer orders custom-made goods, then fails to pay. • The judge decides in favor of the seller; there is no appeal. • The seller sues the buyer before a competent court. • The seller enforces the judgment through a public sale of the buyer’s movable assets. • The value of the claim is 200% of income per capita. • The seller requests a pretrial attachment to secure the claim. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 80 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial suggest an answer (figure 10.1). The average ranking dispute through the courts in economies in Asia-Pacific of the region and comparator regions provide a useful Economic Cooperation (APEC)? The global rankings of benchmark. these economies on the ease of enforcing contracts Figure 10.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 81 ENFORCING CONTRACTS The indicators underlying the rankings may also be procedures, the time and the cost (figure 10.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to enforce a contract through the courts in averages both for the region and for comparator each economy in the region: the number of regions can provide useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in Asia-Pacific Economic Cooperation (APEC) Procedures (number) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 82 ENFORCING CONTRACTS Time (days) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 83 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 84 ENFORCING CONTRACTS What are the changes over time? 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 Asia-Pacific Economic introducing new technology. Lower-income economies Cooperation (APEC) (table 10.1)? often work on reducing backlogs by introducing Table 10.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made enforcing contracts easier—or not? By Doing Business report year DB year Economy Reform China tightened the rules on enforcement of judgments, restricting the ways for judgment debtors to hide assets and DB2009 China escape enforcement. This should lead to more successful enforcements, building trust in dispute resolution by the courts. Increased staff and stricter deadlines have brought about a decrease in case filing time in Malaysia; in addition the DB2010 Malaysia commercial court is being reorganized to dispose of interlocutory matters more swiftly. The specialized commercial track at the National Court of DB2010 Papua New Guinea Papua New Guinea, which was introduced in 2007, has begun to be fully operational improving contract enforcement. Peru has eased contract enforcement by introducing deadlines for filing evidence and for contesting enforcement DB2010 Peru procedures. Further, electronic judicial notices are permissible in lieu of publication in the Official Gazette. Canada increased the efficiency of the courts by expanding DB2011 Canada electronic document submission and streamlining procedures. Reforms implemented in the civil justice system of Hong DB2011 Hong Kong SAR, China Kong SAR (China) will help increase the efficiency and cost- effectiveness of commercial dispute resolution. New Zealand enacted new district court rules that make the DB2011 New Zealand process for enforcing contracts user friendly. Korea made filing a commercial case easier by introducing an DB2012 Korea, Rep. electronic case filing system. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 85 DB year Economy Reform Malaysia continued to improve the computerization of its DB2012 Malaysia courts by introducing a system making it possible to file complaints electronically. Russia made filing a commercial case easier by introducing an DB2012 Russian Federation electronic case filing system. China made enforcing contracts easier by amending its civil DB2014 China procedure code to streamline and speed up all court proceedings. Mexico made enforcing contracts easier by creating small DB2014 Mexico claims courts, with oral proceedings, that can hear both civil and commercial cases. New Zealand made enforcing contracts easier by improving DB2014 New Zealand its case management system to ensure a speedier and less costly adjudication of cases. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 86 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through reorganization, liquidation or debt enforcement Recovery rate for creditors (cents on the (foreclosure) proceedings. The recovery rate is a dollar) function of time, cost and other factors, such as Measures the cents on the dollar recovered lending rate and the likelihood of the company by creditors continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account • Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered • Operates in the economy’s largest business city. • Has 201 employees, 1 main secured • Has a higher value as a going concern—and creditor and 50 unsecured creditors. that the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 87 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies regions provide a useful benchmark for assessing the in Asia-Pacific Economic Cooperation (APEC)? The efficiency of insolvency proceedings. Speed, low costs global rankings of these economies on the ease of and continuation of viable businesses characterize the resolving insolvency suggest an answer (figure 11.1). top-performing economies. The average ranking of the region and comparator Figure 11.1 How economies in Asia-Pacific Economic Cooperation (APEC) rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 88 RESOLVING INSOLVENCY The indicators underlying the rankings may be more Comparing these indicators across the region and with revealing. Data collected by Doing Business show the averages both for the region and for comparator average time and cost required to resolve insolvency regions can provide useful insights. as well as the average recovery rate (figure 11.2). Figure 11.2 How efficient is the insolvency process in economies in Asia-Pacific Economic Cooperation (APEC) Time (years) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 89 RESOLVING INSOLVENCY Cost (% of estate) Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 90 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) * Indicates a “no practice” mark. See the data notes for details. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 91 RESOLVING INSOLVENCY What are the changes over time? 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 Asia-Pacific Economic Cooperation (APEC) even viable businesses are liquidated. This is starting to (table 11.1)? Table 11.1 How have economies in Asia-Pacific Economic Cooperation (APEC) made resolving insolvency easier— or not? By Doing Business report year DB year Economy Reform China adopted a new Enterprise Bankruptcy Law that introduced reorganization procedures; allowed for the DB2008 China formation of creditors' committees; granted rights to secured creditors; and established a role for professional bankruptcy administrators. Hong Kong (China) amended the respective powers and DB2009 Hong Kong SAR, China duties of trustees granting them more power. This is expected to make the liquidation procedure more efficient. Mexico amended its bankruptcy law to make reorganization more accessible. Now debtors and creditors may enter into a DB2009 Mexico reorganization agreement at any stage of the insolvency procedure. New Zealand introduced a reorganization procedure. The aim is to provide an alternative to liquidation and receivership DB2009 New Zealand and maximize a company’s chances of continuing as a going concern. Philippines promoted reorganization procedures by DB2010 Philippines introducing pre-packaged reorganizations and also regulated the receiver profession. The Russian Federation introduced several changes to its DB2010 Russian Federation insolvency law to speed up the liquidation procedure and strengthen the legal status of secured creditors. Japan made it easier to deal with insolvency by establishing a new entity, the Enterprise Turnaround Initiative Corporation, DB2011 Japan to support the revitalization of companies suffering from excessive debt but professionally managed. Korea made it easier to deal with insolvency by introducing DB2011 Korea, Rep. postfiling financing, granting superpriority to the repayment Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 92 DB year Economy Reform of loans given to companies undergoing reorganization. Russia introduced a series of legislative measures in 2009 to DB2011 Russian Federation improve creditor rights and the insolvency system. Australia clarified the priority of claims of unsecured creditors DB2012 Australia over all shareholders’ claims and introduced further regulation of the profession of insolvency practitioners. Malaysia established dedicated commercial courts to handle DB2012 Malaysia foreclosure proceedings. The Philippines adopted a new insolvency law that provides a DB2012 Philippines legal framework for liquidation and reorganization of financially distressed companies. Korea expedited the insolvency process by implementing a DB2013 Korea, Rep. fast track for company rehabilitation. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 93 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information 2 The data for paying taxes refer to January – December 2012. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 94 about what laws and regulations say and allowing reasons the time delays reported in Doing Business multiple interactions with local respondents to clarify 2014 would differ from the recollection of potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation—as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited Changes in what is measured liability company (or its legal equivalent) of a specified size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 95 completed online in just a few hours. This change business and the distance to frontier measure. The affects the time indicator for starting a business, ease of doing business ranking compares economies dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business. 3 For getting electricity the rule that each procedure must take a minimum of 1 day still applies because in practice there are no More complex aggregation methods—such as cases in which procedures can be fully completed online in less than principal components and unobserved components— a day. For example, even though in some cases it is possible to yield a ranking nearly identical to the simple average apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 96 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly identical to that from the simple average method because both since 2003 or the first year the indicator was collected. 5 these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 ASIA-PACIFIC ECONOMIC COOPERATION (APEC) 97 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. RESOURCES ON THE DOING BUSINESS WEBSITE Current features Business reforms News on the Doing Business project Short summaries of DB2014 business reforms, lists http://www.doingbusiness.org of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics /entrepreneurship/ Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/