73864 Economy Profile: Bosnia and Herzegovina Doing Business 2013 Bosnia and Herzegovina 2 © 2013 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http://creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation . All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Additional copies of all 10 editions of Doing Business may be purchased at www.doingbusiness.org. Cover design: Corporate Visions, Inc. Doing Business 2013 Bosnia and Herzegovina 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 24 Getting electricity ....................................................................................................................... 36 Registering property .................................................................................................................. 43 Getting credit .............................................................................................................................. 54 Protecting investors ................................................................................................................... 61 Paying taxes ................................................................................................................................ 70 Trading across borders .............................................................................................................. 78 Enforcing contracts .................................................................................................................... 87 Resolving insolvency .................................................................................................................. 98 Employing workers .................................................................................................................. 104 Data notes ................................................................................................................................. 111 Resources on the Doing Business website ............................................................................ 116 Doing Business 2013 Bosnia and Herzegovina 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is (except for the paying taxes indicators, which cover the for a local entrepreneur to open and run a small to period January–December 2011). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy‘s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 185 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 46 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 24 in East Asia and the Pacific, 24 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 19 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2013 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Bosnia and Herzegovina. To allow useful business regulatory reforms. The data, along with comparison, it also provides data for other selected information on ordering Doing Business 2013, are economies (comparator economies) for each indicator. available on the Doing Business website at The data in this report are current as of June 1, 2012 http://www.doingbusiness.org. Doing Business 2013 Bosnia and Herzegovina 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy‘s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Eastern Europe & Central Asia business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Upper middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 185 by the ease of Population: 3,752,228 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 4,780 percentile rankings on each of the 10 topics included in the index in Doing Business 2013: starting a business, DB2013 rank: 126 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2012 rank: 127* investors, paying taxes, trading across borders, Change in rank: 1 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the percentile rankings on its component indicators (see * DB2012 ranking shown is not last year‘s published the data notes for more details). The employing workers ranking but a comparable ranking for DB2012 that indicators are not included in this year‘s aggregate ease captures the effects of such factors as data of doing business ranking, but the data are presented corrections and the addition of 2 economies in this year‘s economy profile. (Barbados and Malta) to the sample this year. See the data notes for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy‘s performance on t he indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2013 Bosnia and Herzegovina 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy‘s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Bosnia and Herzegovina and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Bosnia and Herzegovina ranks on Doing Business topics Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business year Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far each economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy since of changes in an economy‘s regulatory environment for 2005 on each indicator in 9 Doing Business indicator sets. firms, but they are always relative. An economy‘s ranking Comparing the measure for an economy at 2 points in might change because of developments in other time allows users to assess how much the economy‘s economies. An economy that implemented business regulatory environment as measured by Doing Business regulation reforms may fail to rise in the rankings (or may has changed over time—how far it has moved toward (or even drop) if it is passed by others whose business away from) the most efficient practices and strongest regulation reforms had a more significant impact as regulations in areas covered by Doing Business (figure 1.4). measured by Doing Business. The results may show that the pace of change varies widely Moreover, year-to-year changes in the overall rankings do across the areas measured. They also may show that an not reflect how the business regulatory environment in an economy is relatively close to the frontier in some areas economy has changed over time—or how it has changed and relatively far from it in others. in different areas. To aid in assessing such changes, last Figure 1.4 How far has Bosnia and Herzegovina come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the 9 indicator sets shown in the figure. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy‘s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Bosnia and Herzegovina Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2013 Montenegro DB2013 Albania DB2013 Croatia DB2013 Greece DB2013 Indicator Serbia DB2013 DB2013 DB2012 DB2013 Starting a Business 162 162 62 80 140 146 58 42 New Zealand (1) (rank) Procedures (number) 11 12 4 6 9 11 6 6 New Zealand (1)* Time (days) 37 40 4 9 20 11 10 12 New Zealand (1) Cost (% of income per 14.9 17.0 22.1 7.3 8.2 20.5 1.6 7.7 Slovenia (0.0) capita) Paid-in Min. Capital (% 29.1 29.4 0.0 13.4 29.7 24.4 0.0 0.0 91 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 163 159 185 143 74 31 176 179 China (1) (rank) no Hong Kong SAR, Procedures (number) 17 17 12 33 15 16 18 practice China (6)* no Time (days) 180 180 317 120 89 267 269 Singapore (26) practice Cost (% of income per 1,102.1 1,111.6 no 573.3 10.5 27.5 1,169.6 1,427.2 Qatar (1.1) Doing Business 2013 Bosnia and Herzegovina 11 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2013 Montenegro DB2013 Albania DB2013 Croatia DB2013 Greece DB2013 Indicator Serbia DB2013 DB2013 DB2012 DB2013 capita) practice Getting Electricity 158 154 154 56 143 59 69 76 Iceland (1) (rank) Procedures (number) 8 8 6 5 6 6 5 4 Germany (3)* Time (days) 125 125 177 70 279 62 71 131 Germany (17) Cost (% of income per 493.3 497.6 573.7 318.7 180.0 62.4 490.3 502.6 Japan (0.0) capita) Registering Property 93 100 121 104 27 150 117 41 Georgia (1) (rank) Procedures (number) 7 7 6 5 3 11 7 6 Georgia (1)* Time (days) 25 33 33 104 24 18 71 11 Portugal (1) Cost (% of property 5.3 5.3 11.4 5.0 3.0 11.8 3.1 2.8 Belarus (0.0)* value) Getting Credit (rank) 70 67 23 40 53 83 4 40 United Kingdom (1)* Strength of legal rights 5 5 9 7 6 4 10 7 Malaysia (10)* index (0-10) Depth of credit 5 5 4 5 5 5 5 5 United Kingdom (6)* information index (0-6) Public registry coverage 36.2 35.3 19.7 0.0 6.1 0.0 25.2 0.0 Portugal (90.7) (% of adults) Private bureau United Kingdom 4.8 39.6 0.0 100.0 98.7 84.0 0.0 100.0 coverage (% of adults) (100.0)* Protecting Investors 100 98 17 139 100 117 32 82 New Zealand (1) (rank) Doing Business 2013 Bosnia and Herzegovina 12 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2013 Montenegro DB2013 Albania DB2013 Croatia DB2013 Greece DB2013 Indicator Serbia DB2013 DB2013 DB2012 DB2013 Extent of disclosure Hong Kong SAR, 3 3 8 1 2 5 5 7 index (0-10) China (10)* Extent of director 6 6 9 5 5 4 8 6 Singapore (9)* liability index (0-10) Ease of shareholder 6 6 5 6 8 5 6 3 New Zealand (10)* suits index (0-10) Strength of investor 5.0 5.0 7.3 4.0 5.0 4.7 6.3 5.3 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 128 137 160 42 120 56 81 149 (1) Payments (number per Hong Kong SAR, 44 55 44 18 8 8 29 66 year) China (3)* United Arab Emirates Time (hours per year) 407 422 357 196 413 202 320 279 (12) Trading Across Borders 103 101 79 105 68 62 42 94 Singapore (1) (rank) Documents to export 8 8 7 7 4 5 6 7 France (2) (number) Time to export (days) 15 15 19 20 16 19 14 12 Singapore (5)* Cost to export (US$ per 1,240 1,240 745 1,300 1,145 1,115 855 1,455 Malaysia (435) container) Documents to import 9 9 8 8 7 6 6 7 France (2) (number) Time to import (days) 13 13 18 16 17 15 14 14 Singapore (4) Cost to import (US$ per 1,200 1,200 730 1,180 1,180 1,135 915 1,660 Malaysia (420) container) Doing Business 2013 Bosnia and Herzegovina 13 Bosnia and Herzegovina Bosnia and Herzegovina Best performer globally Czech Republic DB2013 Montenegro DB2013 Albania DB2013 Croatia DB2013 Greece DB2013 Indicator Serbia DB2013 DB2013 DB2012 DB2013 Enforcing Contracts 120 117 85 52 79 87 135 103 Luxembourg (1) (rank) Time (days) 595 595 390 572 611 819 545 635 Singapore (150) Cost (% of claim) 34.0 34.0 35.7 13.8 33.0 14.4 25.7 31.3 Bhutan (0.1) Procedures (number) 37 37 39 38 27 39 49 36 Ireland (21)* Resolving Insolvency 83 84 66 97 34 50 44 103 Japan (1) (rank) Time (years) 3.3 3.3 2.0 3.1 3.2 2.0 1.4 2.0 Ireland (0.4) Cost (% of estate) 9 9 10 15 17 9 8 20 Singapore (1)* Outcome (0 as piecemeal sale and 1 as 0 0 0 1 0 0 0 going concern) Recovery rate (cents on 35.4 35.0 39.6 30.1 56.3 44.5 48.3 29.1 Japan (92.8) the dollar) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. The ranking methodology for the paying taxes indicators changed in Doing Business 2013; see the data notes for details. For more information on “no practice� marks, see the data notes. Data for the outcome of the resolving insolvency indicator are not available for DB2012. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy‘s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy‘s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures officially required or commonly done in received practice by an entrepreneur to start up and formally operate an industrial or commercial No prior contact with officials business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must deposit before registration (or within 3 months). Official costs only, no bribes The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost and paid-in minimum capital requirement. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Has a start-up capital of 10 times income per and that there has been no prior contact with capita. officials. It also assumes that the entrepreneur will  Has a turnover of at least 100 times income per pay no bribes. And it assumes that the business: capita.  Is a limited liability company, located in the  Does not qualify for any special benefits. largest business city.  Does not own real estate.  Has between 10 and 50 employees.  Is 100% domestically owned.  Conducts general commercial or industrial activities. Doing Business 2013 Bosnia and Herzegovina 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Bosnia and procedures, takes 37 days, costs 14.9% of income per Herzegovina? According to data collected by Doing capita and requires paid-in minimum capital of 29.1% Business, starting a business there requires 11 of income per capita (figure 2.1). Figure 2.1 What it takes to start a business in Bosnia and Herzegovina Paid-in minimum capital (% of income per capita): 29.1 Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 16 STARTING A BUSINESS Globally, Bosnia and Herzegovina stands at 162 in the other useful information for assessing how easy it is for ranking of 185 economies on the ease of starting a an entrepreneur in Bosnia and Herzegovina to start a business (figure 2.2). The rankings for comparator business. economies and the regional average ranking provide Figure 2.2 How Bosnia and Herzegovina and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 17 STARTING A BUSINESS What are the changes over time? While the most recent Doing Business data reflect how of the process have changed—and which have not easy (or difficult) it is to start a business in Bosnia and (table 2.1). That can help identify where the potential Herzegovina today, data over time show which aspects for improvement is greatest. Table 2.1 The ease of starting a business in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 162 162 Procedures 12 12 12 12 12 12 12 12 12 11 (number) Time (days) 68 63 63 63 63 69 69 64 40 37 Cost (% of income per 47.3 45.3 40.1 36.3 30.1 30.8 15.8 17.7 17.0 14.9 capita) Paid-in Min. Capital (% of 339.4 65.0 57.4 52.0 43.0 36.3 29.8 30.5 29.4 29.1 income per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such fa ctors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 18 STARTING A BUSINESS Equally helpful may be the benchmarks provided by what is possible in making it easier to start a business. the economies that over time have had the best And changes in regional averages can show where performance regionally or globally on the procedures, Bosnia and Herzegovina is keeping up—and where it is time, cost or paid-in minimum capital required to start falling behind. a business (figure 2.3). These benchmarks help show Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2013 Bosnia and Herzegovina 19 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety-one economies globally have no paid-in minimum capital requirement. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 20 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Bosnia and Herzegovina (table 2.2)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.2 How has Bosnia and Herzegovina made starting a business easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. Bosnia and Herzegovina made starting a business easier by replacing the required utilization permit with a simple DB2012 notification of commencement of activities and by streamlining the process for obtaining a tax identification number. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Bosnia and Herzegovina is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and City: Sarajevo register a new firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Limited Liability Company professionals and the study of laws, regulations and Paid in Minimum Capital Requirement: BAM publicly available information on business entry in 2,000 that economy. Following is a detailed summary of those procedures, along with the associated time Start-up Capital: 10 times GNI per capita and cost. These procedures are those that apply to a company matching the standard assumptions (the ―standardized company‖) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Bosnia and Herzegovina—and the time and cost Time to No. Procedure Cost to complete complete Stipulate a founding act and have it notarized by a notary The system of Notary was introduced in May 2007: The Law on Enterprises of FBiH; The Law on Notary of FBiH. The amended Law on 1 Enterprise determines that all legal entities are required to harmonize 5 days BAM 400 business activities in accordance with a new Standard Classification of Activity. The Law on Notary requires all documentation needed for registration of a company to be prepared and certified by the public notary. Obtain a statement from commercial bank that full amount of the capital has been paid in; pay the registration fee to the budget account of the cantonal court 2 1 day no charge The founder should pay the amount of the capital to a temporary account at one of the local banks, to be subsequently transferred to the company transaction account after its opening. Obtain the statement of tax authorities that the founders have no tax debts 3 1 day BAM 15 Statement of tax authorities is required which confirms that the enterpreneur does not have any unpaid pecuniary fines and it costs BAM 15. Court registration with Municipal Courts BAM 405 (registration 4 By law, regulated forms must be completed. These forms may be 10 days fee) + BAM 150 purchased at a stationery shop or at the court (BAM 15), to be prepared (publishing fee) according to the regulations on registering legal entities in the court Doing Business 2013 Bosnia and Herzegovina 22 Time to No. Procedure Cost to complete complete register. After the court registration of the new company, the court informs the Official Gazette to announce the prepared notice. Companies are automatically registered for membership in the chambers of economy at the state, entity, canton, and regional levels. Since 2004, membership in the Chamber of Economy of the Federation of Bosnia and Herzegovina and the Chamber of Economy of the Republic of Srpska is voluntary. Buy a company stamp 5 The electronic version of the forms is available on the website of some 1 day BAM 40 of the competent courts, for i.e. for the Municipal Court in Sarajevo, the forms are available on the web site www.oss.ba. Request and obtain municipal approval on intended activities The 4 municipalities making up the City of Sarajevo have reduced the cost for this procedure to BAM 10. The Company founder goes to the municipality, fills out a request form 10 days BAM 10 6 and attachs all required documents (proof of company's court registration, statement confirming that all business premises fulfill conditions mandated by the law, and notification about the date when the company will start with operations) and the proof of payment of the administrative fee. Then, the time necessary to obtain the resolution on intended activities takes about 10 days Notify the commencement of the business activities to the Cantonal Inspection Authority The company submits the notification on commencement of business activities to the Cantonal Inspection Authority and the inspectors may subsequently make supervision in terms of fulfillment of all conditions for conducting of business activities. 7 1 day no charge New Law on Internal Trade (Official Gazette of FB&H, no.40/10) is enforced. It regulates that the notification on commencement of business activities should be submited by the company no later than 5 days before starting to work. The following document should be submitted: court resolution on registration in the registry, statement that the company meets all legal requirements for performing trade activities and notice of the date of commencement of work. Apply for company identification number with the competent tax office When filing an application for statistical and taxpayer numbers 5 days no charge 8 simultaneously with the competent tax authorities (according to Regulations on Obtaining ID Numbers [Official Gazette No. 39/02]), the newly incorporated company must submit with the application form a photocopy of the court resolution (registration) and the contract on the Doing Business 2013 Bosnia and Herzegovina 23 Time to No. Procedure Cost to complete complete lease of the business premises, resolution of the competent municipality on the intended activities (this resolution must confirm that certain activities may be exercised at a certain address), and a copy of the Director of the company's ID card. Newly adopted Rulebook (as published in the OG FBiH 02/10) regulates new tax registration procedures that streamlines the process for legal entities. In accordance with the new Article 8a of this Rulebook, respective court and tax administration initiate tax registration by mutual official correspondence and legal entities are only obliged to submit required documents (copy of court registry, 2 copies of application form including company's stamp, and copies of ID cards) after the court registration is completed. This Rulebook does not require submission of following documents (as previously requested: 1) contract on the lease of the business premises and 2) resolution of the competent municipality on the intended activities. Open a company account with commercial bank 9 1 day no charge Enroll the employees in health insurance with Health Insurance Institute and in the pension insurance Law on Unified System of Registration, Control and Collection of Contributions (Official Gazzete of FB&H, no. 42/09) regulates 10 completely new system of registration. In accordance with the Article 14 1 day BAM 1 of this Law, the company is obliged to submit the application for registration for every new employee, within seven (7) days from the date of commencement of work. The following document should be submitted: court resolution on registration in the registry, Certificate of the Identification and Statistic number and Form JS 3100. Adopt and publish a rule book on matters of salary, work organization, discipline, and other employee regulations. 11 1 day no charge The procedure applies to employers who hire more than 15 workers. The company‘s body authorized to issue internal regulations shall pass these rulebooks and does not have to submit them anywhere. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 24 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Completing all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy‘s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it Time required to complete each procedure can be used as collateral or transferred to another (calendar days) entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day percentile rankings on its component indicators: procedures, time and cost. Procedure completed once final document is received To make the data comparable across economies, Doing Business uses several assumptions about the No prior contact with officials business and the warehouse, including the utility Cost required to complete each procedure (% connections. of income per capita) The business: Official costs only, no bribes  Is a limited liability company operating in  Will be connected to water, sewerage the construction business and located in (sewage system, septic tank or their the largest business city. equivalent) and a fixed telephone line. The  Is domestically owned and operated. connection to each utility network will be 10 meters (32 feet, 10 inches) long.  Has 60 builders and other employees.  Will be used for general storage, such as of The warehouse: books or stationery (not for goods requiring  Is a new construction (there was no special conditions). previous construction on the land).  Will take 30 weeks to construct (excluding all  Has complete architectural and technical delays due to administrative and regulatory plans prepared by a licensed architect. requirements). Doing Business 2013 Bosnia and Herzegovina 25 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to with construction permits there requires 17 build a warehouse in Bosnia and Herzegovina? procedures, takes 180 days and costs 1102.1% of According to data collected by Doing Business, dealing income per capita (figure 3.1). Figure 3.1 What it takes to comply with formalities to build a warehouse in Bosnia and Herzegovina Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 26 DEALING WITH CONSTRUCTION PERMITS Globally, Bosnia and Herzegovina stands at 163 in the ranking provide other useful information for assessing ranking of 185 economies on the ease of dealing with how easy it is for an entrepreneur in Bosnia and construction permits (figure 3.2). The rankings for Herzegovina to legally build a warehouse. comparator economies and the regional average Figure 3.2 How Bosnia and Herzegovina and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 27 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? While the most recent Doing Business data reflect how which aspects of the process have changed—and easy (or difficult) it is to deal with construction permits which have not (table 3.1). That can help identify where in Bosnia and Herzegovina today, data over time show the potential for improvement is greatest. Table 3.1 The ease of dealing with construction permits in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 159 163 Procedures (number) 14 14 14 17 17 17 17 17 Time (days) 481 466 465 297 254 254 180 180 Cost (% of income 1,051.8 953.2 787.1 1,364.8 1,127.0 1,153.7 1,111.6 1,102.1 per capita) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 28 DEALING WITH CONSTRUCTION PERMITS Equally helpful may be the benchmarks provided by possible in making it easier to deal with construction the economies that over time have had the best permits. And changes in regional averages can show performance regionally or globally on the procedures, where Bosnia and Herzegovina is keeping up—and time or cost required to deal with construction permits where it is falling behind. (figure 3.3). These benchmarks help show what is Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2013 Bosnia and Herzegovina 29 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 30 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Bosnia and Herzegovina (table Construction is one of them. In an effort to ensure 3.2)? Table 3.2 How has Bosnia and Herzegovina made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. An administrative reform in obtaining cadastre and land book registry led to overall time reduction by 171 days. Costs for DB2009 new telephone connection was reduced by Telecom provider by BAM 15. Bosnia and Herzegovina improved its building permitting DB2010 system by reducing the time to register a new building at the courts and land cadastre. DB2011 No reform as measured by Doing Business. Bosnia and Herzegovina made dealing with construction DB2012 permits easier by fully digitizing and revamping its land registry and cadastre. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 31 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Bosnia and BUILDING A WAREHOUSE Herzegovina are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified City : Sarajevo by Doing Business through information collected from experts in construction licensing, including Estimated architects, construction lawyers, construction firms, BAM 1,013,350 Warehouse Value : utility service providers and public officials who deal with building regulations. These procedures The procedures, along with the associated time and are those that apply to a company and structure cost, are summarized below. matching the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Bosnia and Herzegovina —and the time and cost Time to No. Procedure Cost to complete complete Obtain excerpt from the cadastre plan showing status of the land plot at the municipal Cadastre Department 1 To obtain a copy of the cadastre plan, BuildCo must submit a request 1 day BAM 15 on a form available at the municipality. Due to internal reorganization and automatization of the process in cadastre office of Municipality the process can be completed in 1 day. * Obtain excerpt from the land registry book showing proper registration from the municipal Land Registry Department The excerpt is available from the Land Registry Department of the 1 day BAM 4 2 Municipal Court. The company representative must take a queue number at the office counter in the morning and make a written or oral request. The excerpt will be provided on the same day (usually within 1 hour). Obtain urban planning consent from the municipal Department for Spatial Planning, Urbanism and Communal Matters BuildCo submits a request to the municipality for an urban planning consent with the following required documents: • Reason for the request, including the project data and documentation 3 required for the Urban Planning Department‘s assessment 30 days BAM 30 • Program sketch • Preliminary (or first draft) project design, two examples (or depending on the level of construction complexity, project proposal or program sketch) • General schemes for power installations, heating installations, fire prevention and security systems, water supply and sewage systems • Excerpt from the cadastre plan, showing right to build and ownership Doing Business 2013 Bosnia and Herzegovina 32 Time to No. Procedure Cost to complete complete of plot (not older than 6 months) • Excerpt from the land registry book, showing proper registration • Environmental consent, if requested • Other data, if requested • For insurance purposes, consent for fire and explosion protection, issued by a competent company • Consent for the heating installations, issued by a competent company Once issued, the urban planning consent is effective for a year, during which time BuildCo may submit a construction permit request. UNDP training and governmental administrative reform has reduced the time required. Obtain preliminary verification of water supply and sewage system projects from Vodovod i Kanalizacije 4 28 days BAM 117 BuildCo must submit the description of the main project plan to the municipal water and sewage authority (Vodovod i Kanalizacija). * Obtain preliminary verification of the telecommunication installations from BH Telekom 5 15 days BAM 21 BuildCo must submit electronically the description of the main project plan to the Public Institute for Fire Protection, an independent agency. * Obtain preliminary verification of Study on Fire and Explosion Prevention from the Public Institute for Fire Protection BuildCo must undergo a technical audit, showing that the project was designed in compliance with the urban permit and the provisions of the Law on Spatial Planning. The auditing entity must have at least one 4 days BAM 150 6 engineer who passed the state exam and has 5 years of experience. The signature of an authorized auditor is required to confirm that the project has been revised in its entirety. The total fee for technical audits varies across municipalities, according to municipal decisions on the fee schedule for the technical audit of construction. The above-stated fee applies to the Sarajevo municipality. Obtain validation of the technical audit of the main project from the auditing entity The company must submit a request to the Department for Spatial Planning, Urbanism and Communal Matters with the following documents: • Valid urban planning consent • Cadastre excerpt: land plot and proof of right to build 5 days BAM 28,180 7 • Proof of payment for purchase of the construction land • Proof of rent payments for the paid rent compensation • Consents obtained during the issuing of the urban planning permit • Consent for stated building; any other enclosures as requested by the authorities • Verified development project (two copies) and consents for the project documentations (Project Books 1 and 2, including the preliminary verifications applied for in Procedures 4 to 7) Doing Business 2013 Bosnia and Herzegovina 33 Time to No. Procedure Cost to complete complete There is no fee associated with the application. * Pay the rent fee and shelter construction fee at a commercial bank The rent fee and shelter construction fee are paid at a commercial bank on the account of Department for Spatial Planning, Urbanism and 8 Communal Matters. The request for marking out the land plot must be 1 day BAM 38,487 submitted to the municipal construction department with the construction permit and the urban planning consent. The municipal authorities mark out the land plot. The request fee depends on the yearly municipal pricing decisions and on the on-site assessment. An average price is BAM 10.00. Apply for building permit with the municipal Department for Spatial Planning, Urbanism and Communal Matters 9 30 days no charge BuildCo must notify the municipal construction department of the start of construction no later than 8 days before work begins. Request marking out of the land plot at the municipal Department for Spatial Planning, Urbanism and Communal Matters 10 BuildCo must contact the BH Telecom to obtain a phone line 7 days BAM 15 connection. The request should include the preliminary verification of the phone installation and Project Books 1 and 2. BH Telecom reduced its connection fee to Bam 70.20 to make the service more competitive. Notify the municipality about the commencement of works at the Department for Spatial Planning, Urbanism and Communal Matters 11 1 day no charge BuildCo must contact the municipal water and sewage authority (Vodovod i Kanalizacije) to obtain water and sewage connection. The request should include the preliminary verification and Project Books 1 and 2. Request telephone line connection at BH Telekom 12 13 days BAM 60 * Request water and sewage connection at Vodovod i Kanalizacije After the technical review of completed construction, BuildCo must submit a request for the building usage permit, including the following documents: • Building permit (copy) 13 • Cadastre plan (copy), including an exact plan of the marked final 30 days BAM 500 building position • Written statements from each contractor, stating the work has been properly performed according to the project design and future maintenance plans • A written report (by the construction supervisor) that all materials were of standard quality (certified as such by the suppliers) Doing Business 2013 Bosnia and Herzegovina 34 Time to No. Procedure Cost to complete complete BuildCo submits these documents to the construction department of the relevant municipality (the same municipal department that issued the building permit). The building usage permit is issued upon completion of technical inspection. It is only after the issuance of such permit that the building may be used. Request issuance of the building usage permit from the municipal Department for Spatial Planning, Urbanism and Communal Matters Registration of the building in cadastre books can last anywhere between 15 days up to 30 days due to administrative reforms inside the cadastre office. But the procedure is not nearly as lengthy as was before when it would take on average 6 months to 1 year. Documents that 14 need to be submitted are: application sheet available from the 30 days BAM 7,804 municipality; copy of the cadastre plan; construction permit; and excerpt from the regulation plan. After the cadastre registry the applicant needs to register the ownership status of the newly finished warehouse. The procedure until this year took on average anywhere between 6 months to 1 year. Administrative reforms under broader land reform registry have made it possible to obtain the registry in 2 months. * Receive technical inspection from the municipal Department for Spatial Planning, Urbanism and Communal Matters No later than the inspection date, BuildCo must present the following documentation to the board: • Excerpt from the Commercial Court Register, showing that BuildCo is properly registered • Details on the each work phase of the construction • Building permit (copy) • Performance reports verified by the designer of the main project plan to validate compliance with the main project plan as well as terms and conditions specified in the building permit • Construction diary and construction book • Proof of testing the quality of materials and equipment received from 1 day no charge 15 suppliers at the time of purchase • Construction mark-out plan and minutes on the performed mark out • Construction-site organization scheme • Decision on the appointed construction engineers and the supervisors • Cadastre plan The relevant municipal department must appoint an independent professional inspection board for a technical inspection within 8 days of receiving the duly submitted request for issuance of a building usage permit. The number of board members appointed depends on the type and the complexity of the building; the board will consist of one professional for each type of construction work to be inspected (architectural/engineering, electrical, mechanical, water and sewage system, and so forth). Doing Business 2013 Bosnia and Herzegovina 35 Time to No. Procedure Cost to complete complete Register the building into cadastre books at the municipal Cadastre Department BuildCo must submit a request to register the building in the cadastre books at the municipal cadastre office. Along with the request, BuildCo must submit the building usage permit, the building permit, the certificate proving the marking out of the property construction site and other documents showing ownership over the property. 16 15 days BAM 180 During the technical review of the completed construction, the designated authority checks whether there have been any additional changes in the construction and whether the construction was built in accordance with the urban planning consent. If there were any changes, it is necessary to obtain a new geodetic image of the plot. Upon registration of the property in the cadastre records, the cadastre forwards an extract to the Land Registry, which will serve for having the property registered in the land registry books. Register the building into land registry books with the Land Registry Department at the District Court Sarajevo BuildCo must submit a request to register the warehouse in the land registry books. The request form can be found in the Land Registry office. Other required documents include: 17 • Purchasing agreement or other document as a proof of building and 1 day BAM 60 land ownership • Building usage permit • Rent and shelter fee payment certificate • Payment of BAM 60.00 for administrative expenses The Land Registry office will register the property upon receiving the excerpt from the cadastre. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 36 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy‘s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is 150 meters long.  Is a new construction being connected to  Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either overhead  Has 2 stories, both above ground, with a or underground, whichever is more common in total surface of about 1,300.6 square the economy and in the area where the meters (14,000 square feet), and is built on warehouse is located. The length of any a plot of 929 square meters (10,000 square connection in the customer‘s private domain is feet). negligible. The electricity connection:  Involves installing one electricity meter. The monthly electricity consumption will be 0.07  Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2013 Bosnia and Herzegovina 37 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity there requires 8 procedures, takes 125 days and costs connection in Bosnia and Herzegovina? According to 493.3% of income per capita (figure 4.1). data collected by Doing Business, getting electricity Figure 4.1 What it takes to obtain an electricity connection in Bosnia and Herzegovina Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 38 GETTING ELECTRICITY Globally, Bosnia and Herzegovina stands at 158 in the another perspective in assessing how easy it is for an ranking of 185 economies on the ease of getting entrepreneur in Bosnia and Herzegovina to connect a electricity (figure 4.2). The rankings for comparator warehouse to electricity. economies and the regional average ranking provide Figure 4.2 How Bosnia and Herzegovina and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 39 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Bosnia and Herzegovina Bosnia and Bosnia and Best performer in Best performer Indicator Herzegovina Herzegovina Eastern Europe & globally DB2013 DB2013 DB2012 Central Asia DB2013 Rank 158 154 Georgia (50) Iceland (1) Procedures (number) 8 8 Georgia (4) Germany (3)* Time (days) 125 125 Kosovo (48) Germany (17) Cost (% of income per capita) 493.3 497.6 Lithuania (55.4) Japan (0.0) Note: DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 40 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Bosnia and Herzegovina (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Bosnia and Herzegovina made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 41 GETTING ELECTRICITY What are the details? The indicators reported here for Bosnia and OBTAINING AN ELECTRICITY CONNECTION Herzegovina are based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity City: Sarajevo by the local distribution utility—identified by Doing Business. Data are collected from the distribution Name of Utility: Elektroprivreda BiH utility, then completed and verified by electricity regulatory agencies and independent professionals The procedures are those that apply to a warehouse such as electrical engineers, electrical contractors and and electricity connection matching the standard construction companies. The electricity distribution assumptions used by Doing Business in collecting the utility surveyed is the one serving the area (or areas) in data (see the section in this chapter on what the which warehouses are located. If there is a choice of indicators cover). The procedures, along with the distribution utilities, the one serving the largest associated time and cost, are summarized below. number of customers is selected. Summary of procedures for getting electricity in Bosnia and Herzegovina—and the time and cost Time to No. Procedure Cost to complete complete Obtain initial electric power permit from Elektroprivreda BiH The customer has to go to the utility and request the issuance of initial 1 electric power permit which are basic technical conditions to check if the 30 calendar days BAM 30.0 requested capacity is available and if there is a possible collision with existing users. Documents required are: cadastre extract, urban planning consent in certified copies and a rough design. Request issuance of electro-energetic consent from Elektroprivreda BiH 2 The customer has to request the issuance of electro-energetic consent at 23 calendar days BAM 50.0 the utility. The purpose is to specify more detailed technical conditions for the electricity connection. Documents required are: Building permit, company registration and schemes of electrical installation (project plan). * Elektroprivreda BiH carries out external visit of the site An authorized person of the customer has to be present during the site 10 calendar days no charge 3 inspection to agree with the utility on the location of the facilities (cables etc). After the site visit, the electro-energetic consent and the estimate of costs are sent to the customer. Receive electro-energetic consent and go to utility's main building to submit application for connection, pay estimate and sign contract 4 30 calendar days no charge The client has to go to the utility's main building to submit the application for connection after having received the electro-energetic consent. The client pays the estimate and signs the connection contract. Await and receive external connection works by Elektroprivreda BiH 31 calendar days BAM 31,220.0 5 Doing Business 2013 Bosnia and Herzegovina 42 Time to No. Procedure Cost to complete complete The utility is planning and executing the external connection works. Once the works are completed, the utility will energize the connection and install the meter. The utility needs to request an excavation permit from the municipality to execute the external works. Hire specialized electrician to issue a certificate of compliance for the internal wiring 6 8 calendar days BAM 2,550.0 After the external connection works, the client hires a specialized electrician to issue a certificate of compliance for the internal wiring of the warehouse. * Receive site visit by a technical commission of the municipality The municipality is putting together a commission that will do a site visit. This procedure is not applicable to low-voltage cables, but for medium- voltage cases it is required. After the site visit, the commission drafts a protocol. A cost is levied which is charged depending on the estimated 7 value of the facility of the external connection. The land surveyor of the 1 calendar day no charge municipality who is part of the commission will ask to see the certificate issued by the Institute for Construction of the Canton Sarajevo proving that the cables have been recorded in the cadastre. He/she will also ask to see the elaboration of implemented surveying works produced by the private land surveying company. The customer should be present during this visit. Elektroprivreda BiH comes to the warehouse to energize the connection Once the works are completed and after the site visit of the commission 3 calendar days no charge 8 of the municipality, authorized persons from the utility will come and energize the connection. At this point the meter that was installed by the electrical contractor that was hired by the utility is also inspected and sealed. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 43 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy‘s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer‘s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is received To make the data comparable across economies, several assumptions about the parties to the No prior contact with officials transaction, the property and the procedures are Cost required to complete each procedure used. (% of property value) The parties (buyer and seller): Official costs only, no bribes  Are limited liability companies, 100% No value added or capital gains taxes included domestically and privately owned.  Are located in the periurban area of the economy‘s largest business city.  Has no mortgages attached and has been under the same ownership for the past 10  Have 50 employees each, all of whom are years. nationals.  Consists of 557.4 square meters (6,000 square  Perform general commercial activities. feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value. condition and complies with all safety standards, building codes and legal  Is registered in the land registry or requirements. The property will be transferred cadastre, or both, and is free of title in its entirety. disputes.  Is located in a periurban commercial zone, and no rezoning is required. Doing Business 2013 Bosnia and Herzegovina 44 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in 7 procedures, takes 25 days and costs 5.3% of the Bosnia and Herzegovina? According to data collected property value (figure 5.1). by Doing Business, registering property there requires Figure 5.1 What it takes to register property in Bosnia and Herzegovina Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 45 REGISTERING PROPERTY Globally, Bosnia and Herzegovina stands at 93 in the other useful information for assessing how easy it is for ranking of 185 economies on the ease of registering an entrepreneur in Bosnia and Herzegovina to transfer property (figure 5.2). The rankings for comparator property. economies and the regional average ranking provide Figure 5.2 How Bosnia and Herzegovina and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 46 REGISTERING PROPERTY What are the changes over time? While the most recent Doing Business data reflect how of the process have changed—and which have not easy (or difficult) it is to register property in Bosnia and (table 5.1). That can help identify where the potential Herzegovina today, data over time show which aspects for improvement is greatest. Table 5.1 The ease of registering property in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 100 93 Procedures (number) 7 7 7 7 7 7 7 7 7 Time (days) 331 331 331 331 128 84 33 33 25 Cost (% of property value) 6.0 6.0 5.0 5.0 5.2 5.2 5.3 5.3 5.3 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. For more information on ―no practice‖ marks, see the data notes. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 47 REGISTERING PROPERTY Equally helpful may be the benchmarks provided by possible in making it easier to register property. And the economies that over time have had the best changes in regional averages can show where Bosnia performance regionally or globally on the procedures, and Herzegovina is keeping up—and where it is falling time or cost required to complete a property transfer behind. (figure 5.3). These benchmarks help show what is Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2013 Bosnia and Herzegovina 48 REGISTERING PROPERTY Cost (% of property value) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 49 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Bosnia and Herzegovina (table 5.2)? Table 5.2 How has Bosnia and Herzegovina made registering property easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. The computerization of files at the Land Registry in Sarajevo has sped the process of registration. As a result, the time to DB2009 register a title now ranges between 1 month and 6 months, down from 308. DB2010 No reform as measured by Doing Business. Bosnia and Herzegovina reduced delays in property DB2011 registration at the land registry in Sarajevo. DB2012 No reform as measured by Doing Business. Bosnia and Herzegovina made it easier to transfer property DB2013 between companies by computerizing the commercial registry. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 50 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer‘s name—identified by Doing Business City: Sarajevo through information collected from local property Property Value: BAM 343,091 lawyers, notaries and property registries. These procedures are those that apply to a transaction The procedures, along with the associated time and matching the standard assumptions used by Doing cost, are summarized below. Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for registering property in Bosnia and Herzegovina—and the time and cost Time to No. Procedure Cost to complete complete * Obtain a land registry extract as proof of ownership The seller requests and obtains the land registry excerpt from a competent court land registry office as the proof of ownership and to check the property against encumbrances. In practice, the excerpt must be obtained by the seller before starting the transaction formally. This information can also be obtained online but need to be obtained in hard 1 day BAM 10 1 copy and be sealed to have legal validity. The seller may hire a lawyer to perform this task. The lawyer fee would be about BAM 90. The Court Tax is BAM 10. Typically, an extract for a property with no encumbrances would have 3 pages, one of which would describe the property and the land plot number, second one would have the information on ownership and third on encumbrances. * Parties obtain the court extract certifying the person authorized to act on behalf of each company Both the seller and the buyer submit the request for obtaining the court extract certifying the person authorized to act on behalf of each BAM 5 (each company to the court that keeps the Registry of Commercial Companies. 5 days request) + BAM 10 They may hire a lawyer to perform this task. (simultaneous with per page (Court 2 The parties have to provide the set of registration documents, which Procedure 1) Extract, about 4-5 prove that the person who will sign on behalf of the company is pages each) authorized to do it. The Court tax is BAM 5.00 for the Request + BAM 10.00 per page. Each Court Extract contains approximately 4-5 pages. The lawyer fee would be about BAM 90.00. Notarization of the sale-purchase agreement 3 1 day 700 BAM The law on Notary of the Federal Republic of Bosnia & Herzegovina that passed in 2002 and became applicable in May 2007 prescribes notaries Doing Business 2013 Bosnia and Herzegovina 51 Time to No. Procedure Cost to complete complete as the competent authority in the process of transferring a real estate or acquiring the ownership rights over the same or other real rights. According to the law, the purchase agreement of the real estate must be prepared as a notary deed. The cost of the Procedure of notarization of the sale-purchase agreement depends on the value of the real estate at the time of purchase. Parties provide the notary with the land registry excerpt (obtained in Procedure 1) and well as with a court excerpt (obtained in Procedure 2). The presence of both parties is necessary at the notary's office or verification of the signatures should be based on a special power of notary. The notary needs to be provided with the following documents: 1. The land registry excerpt as well as the copy of the cadastre plan proving the ownership over the property; 2. the extract from the company‘s court registry certifying the person is authorized to act on behalf on the company and to sign the purchase agreement; 3. the approval of the founder (e.g. the General Assembly or Supervisory Board if applicable) for selling the property in case that the value of the property exceeds the amount of 1/3 of the company‘s book value. The notary fee depends on the value of the property and are set in the Federation of B&H Official Gazzete no. 71/07) as follows: The value of point is 0,50 BAM + 17% VAT Value of property (min) | Value of property (max) | Notary Fees (BAM) | 0 | 1,000 | 120 | 1,001 | 2,500 | 180 | 2,501 | 5,000 | 250 | 5,001 | 10,000 | 300 | 10,001 | 20,000 | 400 | 20,001 | 30,000 | 500 | 30,001 | 40,000 | 550 | 40,100 | 50,001 | 600 | 50,001 | 60,000 | 650 | 60,001 | 80,000 | 700 | 80,001 | 10,000 | 750 | 10,001 | 150,000 | 850 | 150,001 | 200,000 | 900 | 200,001 | 250,000 | 1,000 | 250,001 | 300,000 | 1,200 | 300,001 | 400,000 | 1,400 | 400,001 | 500,000 | 1,600 | Doing Business 2013 Bosnia and Herzegovina 52 Time to No. Procedure Cost to complete complete 500,001 | 750,000 | 2,000 | 750,001 | 1.000,000 | 2,500 | Submit a request for evaluation of the property regarding tax payments Parties file the request for the evaluation of the real estate regarding the payment of the tax for the transfer of the ownership on real estates at the competent municipal Tax Authority. 4 The deadline for filing the request is 15 days from the verification of 1 day no cost signatures on the sale agreement. This Procedure can be done by a lawyer or by the buyer and/or the seller. The documentation shall include a copy of sale contract (obtained after Procedure 3). On-site inspection of the property Upon submission of the purchase agreement the tax office commission 5 performs on-site inspection of the real estate and takes notes from that 5-15 days no cost inspection. Based on the notes, the tax office adopts an official decision on tax duty of the tax payer (in practice it is always the buyer). Payment of the transfer tax at a commercial bank The transfer tax is paid, usually by the buyer, at a commercial bank in favor of the municipal budget. Following an amendment to the Law on Transfer Tax of the Real Estates and Rights as published in the Official 5% of property value 6 Gazette of Canton Sarajevo on March 31st, 2005, the transfer tax of 5% 1 day (transfer tax) came into effect on April 8th, 2005. The tax has to be paid according to the tax authority's instructions within 15 days from receiving payment instructions from the tax authority. Apply for registration at the Land Registry Parties submit the application and other documentation for the transfer of the ownership to the competent court land registry office. The registration of the transfer of ownership is handled by the authorized court officer. Time length of the Procedure is not prescribed by the law. BAM 10 on request 7 However, the Procedure can last less than indicated above in case the 3-9 days + BAM 50 (court tax) party sends the urgency letter, especially in case of larger investments, explaining the grounds for such urgency, which happens often in practice. Computerization efforts at the Municipal Court in the past years have significantly sped up the process of registration. Registry is now completely computerized and all data on companies are now stored in electronic form, so issuing of the court extract requires only printing of Doing Business 2013 Bosnia and Herzegovina 53 Time to No. Procedure Cost to complete complete already stored data on concrete company. The land registry will forward information to the Cadastre. The documentation shall include: (1) Purchase agreement (2) Certificate of tax payment (obtained in Procedure 6) * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 54 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower‘s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors‘ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors‘ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, limited liability company. the strength of legal rights index.  Has its headquarters and only base of operations in the largest business city. Doing Business 2013 Bosnia and Herzegovina 55 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Bosnia and Herzegovina stands at 70 in the collateral and bankruptcy laws in Bosnia and ranking of 185 economies on the ease of getting credit Herzegovina facilitate access to credit? The economy (figure 6.1). The rankings for comparator economies has a score of 5 on the depth of credit information and the regional average ranking provide other useful index and a score of 5 on the strength of legal rights information for assessing how well regulations and index (see the summary of scoring at the end of this institutions in Bosnia and Herzegovina support lending chapter for details). Higher scores indicate more credit and borrowing. information and stronger legal rights for borrowers and lenders. Figure 6.1 How Bosnia and Herzegovina and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 56 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how show where institutions and regulations have been well the credit information system and collateral and strengthened—and where they have not (table 6.1). bankruptcy laws in Bosnia and Herzegovina support That can help identify where the potential for lending and borrowing today, data over time can help improvement is greatest. Table 6.1 The ease of getting credit in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. 67 70 Strength of legal rights 3 5 5 5 5 5 5 5 5 index (0-10) Depth of credit 5 5 5 5 5 5 5 5 5 information index (0-6) Public registry 0.0 0.0 0.0 0.0 0.0 23.2 30.2 35.3 36.2 coverage (% of adults) Private bureau 15.6 19.3 22.9 63.7 69.2 64.3 47.2 39.6 4.8 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effec ts of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 57 GETTING CREDIT One way to put an economy‘s score on the getting Herzegovina in 2012 and shows the number of credit indicators into context is to see where the economies with this score in 2012 as well as the economy stands in the distribution of scores across regional average score. Figure 6.3 shows the same economies. Figure 6.2 highlights the score on the thing for the depth of credit information index. strength of legal rights index for Bosnia and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2012 information index (0–6), 2012 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a public credit registry or a private Source: Doing Business database. credit bureau, to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 58 GETTING CREDIT 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 Bosnia and Herzegovina (table and increase the scope, coverage and accessibility of 6.2)? credit information, they can increase entrepreneurs‘ Table 6.2 How has Bosnia and Herzegovina made getting credit easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. Bosnia and Herzegovina made access to credit information DB2013 more difficult by stopping the private credit bureau‘s collection of credit information on individuals. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 59 GETTING CREDIT What are the details? The getting credit indicators reported here for Bosnia The data on the legal rights of borrowers and lenders and Herzegovina are based on detailed information are gathered through a survey of financial lawyers and collected in that economy. The data on credit verified through analysis of laws and regulations as information sharing are collected through a survey of a well as public sources of information on collateral and public credit registry or private credit bureau (if one bankruptcy laws. For the strength of legal rights index, exists). To construct the depth of credit information a score of 1 is assigned for each of 8 aspects related to index, a score of 1 is assigned for each of 6 features of legal rights in collateral law and 2 aspects in the public credit registry or private credit bureau (see bankruptcy law. summary of scoring below). Summary of scoring for the getting credit indicators in Bosnia and Herzegovina Eastern Europe & Bosnia and OECD high income Indicator Central Asia Herzegovina average average Strength of legal rights index (0-10) 5 7 7 Depth of credit information index (0-6) 5 5 5 Public registry coverage (% of adults) 36.2 31.9 31.5 Private bureau coverage (% of adults) 4.8 44.8 74.6 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no public registry or private bureau. Regional averages for the public registry coverage exclude economies with no public registry. Regional averages for the private bureau coverage exclude economies with no private bureau. Strength of legal rights index (0–10) Index score: 5 Can any business use movable assets as collateral while keeping possession of the assets; Yes and any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category Yes of movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend No automatically to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's names? Doing Business 2013 Bosnia and Herzegovina 60 Strength of legal rights index (0–10) Index score: 5 Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No debtor defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before general tax claims and employee claims) when a No business is liquidated? Are secured creditors either not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure, or the law No provides secured creditors with grounds for relief from an automatic stay or Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Private credit Public credit Depth of credit information index (0–6) Index score: 5 bureau registry Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? Yes Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well Yes No 1 as financial institutions? Are more than 2 years of historical credit information Yes Yes 1 distributed? Is data on all loans below 1% of income per capita Yes Yes 1 distributed? Is it guaranteed by law that borrowers can inspect No No 0 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Coverage Private credit bureau Public credit registry Number of firms 128,000 28,459 Number of individuals 0 936,912 Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 61 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority Available legal remedies (damages, repayment shareholder protections against directors‘ use of of profits, fines, imprisonment and rescission corporate assets for personal gain—or self-dealing. of the transaction) The indicators distinguish 3 dimensions of investor protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and Ease of shareholder suits index (0–10) shareholders‘ ability to sue officers and directors for Access to internal corporate documents misconduct (ease of shareholder suits index). The (directly or through a government inspector) ranking on the strength of investor protection index is the simple average of the percentile rankings on Documents and information available during these 3 indices. To make the data comparable across trial economies, a case study uses several assumptions Strength of investor protection index (0–10) about the business and the transaction. Simple average of the extent of disclosure, The business (Buyer): extent of director liability and ease of shareholder suits indices  Is a publicly traded corporation listed on the economy‘s most important stock exchange (or at least a large private company with multiple the company purchase used trucks from another shareholders). company he owns.  Has a board of directors and a chief executive  The price is higher than the going price for used officer (CEO) who may legally act on behalf of trucks, but the transaction goes forward. Buyer where permitted, even if this is not specifically required by law.  All required approvals are obtained, and all required disclosures made, though the transaction The transaction involves the following details: is prejudicial to Buyer.  Mr. James, a director and the majority  Shareholders sue the interested parties and the shareholder of the company, proposes that members of the board of directors. Doing Business 2013 Bosnia and Herzegovina 62 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections in Bosnia and protection index (figure 7.1). While the indicator does Herzegovina? The economy has a score of 5.0 on the not measure all aspects related to the protection of strength of investor protection index, with a higher minority investors, a higher ranking does indicate that score indicating stronger protections (see the an economy‘s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Bosnia and Herzegovina stands at 100 in the ranking of 185 economies on the strength of investor Figure 7.1 How Bosnia and Herzegovina and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 63 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how And the global ranking on the strength of investor well regulations in Bosnia and Herzegovina protect protection index over time shows whether the minority investors today, data over time show whether economy is slipping behind other economies in the protections have been strengthened (table 7.1). investor protections—or surpassing them. Table 7.1 The strength of investor protections in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 98 100 Extent of disclosure 3 3 3 3 3 3 3 3 index (0-10) Extent of director liability index (0- 6 6 6 6 6 6 6 6 10) Ease of shareholder 6 6 6 6 6 6 6 6 suits index (0-10) Strength of investor protection 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 index (0-10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 64 PROTECTING INVESTORS One way to put an economy‘s scores on the protecting in 2012 and shows the number of economies with this investors indicators into context is to see where the score in 2012 as well as the regional average score. economy stands in the distribution of scores across Figure 7.3 shows the same thing for the extent of economies. Figure 7.2 highlights the score on the director liability index, and figure 7.4 for the ease of extent of disclosure index for Bosnia and Herzegovina shareholder suits index. Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on extent of Number of economies with each score on extent of director liability index (0–10), 2012 disclosure index (0–10), 2012 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. No economy receives a score of 10 on the extent of Source: Doing Business database. director liability index. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 65 PROTECTING INVESTORS Figure 7.4 How easy is access to internal corporate documents? Number of economies with each score on ease of shareholder suits index (0–10), 2012 Note: Higher scores indicate greater powers of shareholders to challenge the transaction. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 66 PROTECTING INVESTORS The scores recorded over time for Bosnia and interesting may be the changes over time in the Herzegovina on the strength of investor protection regional average score on this index. index may also be revealing (figure 7.5). Equally Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the investor protections. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 67 PROTECTING INVESTORS Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or civil procedure well-functioning courts and up-to-date procedural rules. What investor protection reforms has Doing rules that give minority investors the means to prove Business recorded in Bosnia and Herzegovina (table their case and obtain a judgment within a reasonable 7.2)? Table 7.2 How has Bosnia and Herzegovina strengthened investor protections—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 68 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for assigned for each of a range of conditions relating to Bosnia and Herzegovina are based on detailed disclosure, director liability and shareholder suits in a information collected through a survey of corporate standard case study transaction (see the notes at the and securities lawyers as well as on securities end of this chapter). The summary below shows the regulations, company laws and court rules of evidence. details underlying the scores for Bosnia and To construct the extent of disclosure, extent of director Herzegovina. liability and ease of shareholder suits indices, a score is Summary of scoring for the protecting investors indicators in Bosnia and Herzegovina Eastern Europe & Bosnia and OECD high income Indicator Central Asia Herzegovina average average Extent of disclosure index (0-10) 3 7 6 Extent of director liability index (0-10) 6 5 5 Ease of shareholder suits index (0-10) 6 6 7 Strength of investor protection index (0-10) 5.0 5.9 6.1 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 3 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. Existence of a conflict without any 1 James to the board of directors is required? specifics Whether immediate disclosure of the transaction to 0 No disclosure obligation the public and/or shareholders is required? Whether disclosure of the transaction in published 0 No disclosure obligation periodic filings (annual reports) is required? Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 6 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 0 No causes to the company? Doing Business 2013 Bosnia and Herzegovina 69 Score Score description Whether shareholders can hold Mr. James liable for Liable for negligence or influencing the damage that the Buyer-Seller transaction causes 1 the approval of the transaction to the company? Whether shareholders can hold members of the Liable for unfair/oppressive approving body liable for the damage that the Buyer- 2 transaction or prejudicial to minority Seller transaction causes to the company? shareholders Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 1 Yes shareholder plaintiff? Whether fines and imprisonment can be applied 1 Yes against Mr. James? Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 1 Yes filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 1 Yes transaction? Whether the plaintiff can obtain any documents from Any information that is relevant to the 3 the defendant and witnesses during trial? subject matter of the claim Whether the plaintiff can request categories of documents from the defendant without identifying 1 Yes specific ones? Whether the plaintiff can directly question the 0 No defendant and witnesses during trial? Whether the level of proof required for civil suits is 0 No lower than that of criminal cases? Strength of investor protection index (0-10) 5.0 Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 70 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2011 (number per year adjusted for Doing Business data, in economies where it is more electronic or joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2010. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an ―optimal tax rate‖ that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year‘s threshold is 25.7%. Doing Business 2013 Bosnia and Herzegovina 71 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Bosnia and Herzegovina stands at 128 in the taxes in Bosnia and Herzegovina—and how much do ranking of 185 economies on the ease of paying taxes firms pay in taxes? On average, firms make 44 tax (figure 8.1). The rankings for comparator economies payments a year, spend 407 hours a year filing, and the regional average ranking provide other useful preparing and paying taxes and pay total taxes information for assessing the tax compliance burden amounting to 24.1% of profit (see the summary at the for businesses in Bosnia and Herzegovina. end of this chapter for details). Figure 8.1 How Bosnia and Herzegovina and comparator economies rank on the ease of paying taxes Note: DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 72 PAYING TAXES What are the changes over time? While the most recent Doing Business data reflect how aspects of the process have changed — and which easy (or difficult) it is to comply with tax rules in Bosnia have not (table 8.1). That can help identify where the and Herzegovina today, data over time show which potential for easing tax compliance is greatest. Table 8.1 The ease of paying taxes in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 137 128 Payments (number per 55 55 55 55 55 55 55 44 year) Time (hours per year) 368 368 368 428 422 422 422 407 Total tax rate (% profit) 43.2 43.1 43.2 43.7 26.1 22.7 24.1 24.1 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such f actors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.7% applied in DB2013, the total tax rate is set at 25.7% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 73 PAYING TAXES Equally helpful may be the benchmarks provided by possible in easing the administrative burden of tax the economies that over time have had the best compliance. And changes in regional averages can performance regionally or globally on the number of show where Bosnia and Herzegovina is keeping up— payments or the time required to prepare and file and where it is falling behind. taxes (figure 8.2). These benchmarks help show what is Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2013 Bosnia and Herzegovina 74 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 75 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Bosnia and Herzegovina (table 8.2)? Many have lowered tax rates. Changes have brought Table 8.2 How has Bosnia and Herzegovina made paying taxes easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. Corporate income tax rate has been reduced from 30% to 10%, effective January 1, 2008. Profit distribution (including DB2009 dividends) is now tax-exempt. Tax losses can now be carried forward for 5 years. DB2010 No reform as measured by Doing Business. Bosnia and Herzegovina simplified its labor tax processes, DB2011 reduced employer contribution rates for social security and abolished its payroll tax. DB2012 No reform as measured by Doing Business. Bosnia and Herzegovina eased the administrative burden of DB2013 filing and paying social security contributions by implementing electronic filing and payment systems. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 76 PAYING TAXES What are the details? The indicators reported here for Bosnia and LOCATION OF STANDARDIZED COMPANY Herzegovina are based on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in City: Sarajevo collecting the data (see the section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the The taxes and contributions paid are listed in the company completed during the year. Respondents summary below, along with the associated number of are asked how much in taxes and mandatory payments, time and tax rate. contributions the business must pay and what the process is for doing so. Summary of tax rates and administrative burden in Bosnia and Herzegovina Eastern Europe & Bosnia and OECD high income Indicator Central Asia Herzegovina average average Payments (number per year) 44 28 12 Time (hours per year) 407 260 176 Profit tax (%) 7.2 9.1 15.2 Labor tax and contributions (%) 12.6 22.1 23.8 Other taxes (%) 4.3 9.3 3.7 Total tax rate (% profit) 24.1 40.5 42.7 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) gross Social security contributions 1 online filing 81 11% 11.8 salaries taxable Corporate income tax 12 68 10% 7.2 profit per square Local property tax 1 0 4 BAM 1.6 meter Forestry fee 4 0 0% revenue 1.2 Doing Business 2013 Bosnia and Herzegovina 77 Total tax Tax or mandatory Payments Notes on Time Statutory Notes on Tax base rate (% of contribution (number) payments (hours) tax rate total tax rate profit) Tourist community fee 12 0 0% revenue 0.9 Contribution for protection against natural and other 0 paid jointly 0 1% net salaries 0.4 disasters Water protection 0 paid jointly 0 1% net salaries 0.4 Fuel tax 1 0 0.3 BAM per liter 0.4 Signage fee 1 0 300 BAM 0.1 Value added tax (VAT) 12 258 17% value added 0 not included Totals 44 407 24.1 Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 78 TRADING ACROSS BORDERS In today‘s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business:  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy‘s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy‘s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include military items. Doing Business 2013 Bosnia and Herzegovina 79 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Bosnia and Globally, Bosnia and Herzegovina stands at 103 in the Herzegovina? According to data collected by Doing ranking of 185 economies on the ease of trading Business, exporting a standard container of goods across borders (figure 9.1). The rankings for requires 8 documents, takes 15 days and costs $1240. comparator economies and the regional average Importing the same container of goods requires 9 ranking provide other useful information for assessing documents, takes 13 days and costs $1200 (see the how easy it is for a business in Bosnia and Herzegovina summary of procedures and documents at the end of to export and import goods. this chapter for details). Figure 9.1 How Bosnia and Herzegovina and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 80 TRADING ACROSS BORDERS What are the changes over time? While the most recent Doing Business data reflect how of the process have changed—and which have not easy (or difficult) it is to export or import in Bosnia and (table 9.1). That can help identify where the potential Herzegovina today, data over time show which aspects for improvement is greatest. Table 9.1 The ease of trading across borders in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. 101 103 Documents to export 6 6 8 8 8 8 8 8 (number) Time to export (days) 22 22 19 16 16 16 15 15 Cost to export (US$ per 1,150 1,150 1,030 1,070 1,125 1,240 1,240 1,240 container) Documents to import 8 8 9 9 9 9 9 9 (number) Time to import (days) 25 25 15 13 13 13 13 13 Cost to import (US$ per 1,150 1,150 985 1,035 1,090 1,200 1,200 1,200 container) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 81 TRADING ACROSS BORDERS Equally helpful may be the benchmarks provided by making it easier to trade across borders. And changes the economies that over time have had the best in regional averages can show where Bosnia and performance regionally or globally on the documents, Herzegovina is keeping up—and where it is falling time or cost required to export or import (figure 9.2). behind. These benchmarks help show what is possible in Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2013 Bosnia and Herzegovina 82 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2013 Bosnia and Herzegovina 83 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 84 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms‘ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Bosnia and Herzegovina (table risk-based inspections and electronic data interchange 9.2)? Table 9.2 How has Bosnia and Herzegovina made trading across borders easier—or not? By Doing Business report year DB year Reform Bosnia and Herzegovina eased trade due to implementation of a comprehensive customs reforms project involving the DB2008 enacting of a new customs law and establishing a new customs administration. In addition, an EDI system has been implemented. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 85 TRADING ACROSS BORDERS What are the details? The indicators reported here for Bosnia and LOCATION OF STANDARDIZED COMPANY Herzegovina are based on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the City: Sarajevo section in this chapter on what the indicators cover). Information on the procedures as well as the required documents and the time and cost to The procedural requirements, and the associated time complete each procedure is collected from local and cost, for exporting and importing a standard freight forwarders, shipping lines, customs brokers, shipment of goods are listed in the summary below, port officials and banks. along with the required documents. Summary of procedures and documents for trading across borders in Bosnia and Herzegovina Eastern Europe & Bosnia and OECD high income Indicator Central Asia Herzegovina average average Documents to export (number) 8 7 4 Time to export (days) 15 26 10 Cost to export (US$ per container) 1,240 2,134 1,028 Documents to import (number) 9 8 5 Time to import (days) 13 29 10 Cost to import (US$ per container) 1,200 2,349 1,080 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 6 240 Customs clearance and technical control 2 100 Ports and terminal handling 4 200 Inland transportation and handling 3 700 Totals 15 1,240 Procedures to import Time (days) Cost (US$) Documents preparation 5 200 Doing Business 2013 Bosnia and Herzegovina 86 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 2 100 Ports and terminal handling 3 200 Inland transportation and handling 3 700 Totals 13 1,200 Documents to export Documents to import Bill of Lading Bill of lading Commercial Invoice Certificate of Origin Convention des Marchandises Routiers - CMR Commercial Invoice (Transport document) Convention des Marchandises Routiers -- CMR Customs export declaration (Transport document) Customs transit declaration Customs import declaration Inspection report Customs transit document Packing List Inspection report Terminal handling receipts Packing list Source: Doing Business database. Terminal handling receipts Doing Business 2013 Bosnia and Herzegovina 87 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and the judge or court officer What do the indicators cover? Steps to file and serve the case Doing Business measures the efficiency of the judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects Time required to complete procedures data relating to the time, cost and procedural (calendar days) complexity of resolving a commercial lawsuit. The ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its Time for trial and obtaining judgment component indicators: procedures, time and cost. Time to enforce the judgment The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This No bribes distinguishes the case from simple debt Average attorney fees enforcement. To make the data comparable across economies, Doing Business uses several Court costs assumptions about the case: Enforcement costs  The seller and buyer are located in the economy‘s largest business city.  The buyer orders custom-made goods,  The dispute on the quality of the goods then fails to pay. requires an expert opinion.  The seller sues the buyer before a  The judge decides in favor of the seller; there competent court. is no appeal.  The value of the claim is 200% of income  The seller enforces the judgment through a per capita. public sale of the buyer‘s movable assets.  The seller requests a pretrial attachment to secure the claim. Doing Business 2013 Bosnia and Herzegovina 88 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Bosnia and Herzegovina stands at 120 in the dispute through the courts in Bosnia and Herzegovina? ranking of 185 economies on the ease of enforcing According to data collected by Doing Business, contracts (figure 10.1). The rankings for comparator enforcing a contract takes 595 days, costs 34.0% of the economies and the regional average ranking provide value of the claim and requires 37 procedures (see the other useful benchmarks for assessing the efficiency of summary at the end of this chapter for details). contract enforcement in Bosnia and Herzegovina. Figure 10.1 How Bosnia and Herzegovina and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 89 ENFORCING CONTRACTS What are the changes over time? While the most recent Doing Business data reflect how indicators over time help identify which areas have easy (or difficult) it is to enforce a contract in Bosnia changed and where the potential for improvement is and Herzegovina today, data on the underlying greatest (table 10.1). Table 10.1 The ease of enforcing contracts in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 117 120 Time (days) 895 595 595 595 595 595 595 595 595 595 Cost (% of claim) 32.0 32.0 32.0 32.0 32.0 32.0 32.0 34.0 34.0 34.0 Procedures (number) 41 38 38 37 37 37 37 37 37 37 Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that capture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 90 ENFORCING CONTRACTS Equally helpful may be the benchmarks provided by help show what is possible in improving the efficiency the economies that over time have had the best of contract enforcement. And changes in regional performance regionally or globally on the number of averages can show where Bosnia and Herzegovina is steps, time or cost required to enforce a contract keeping up—and where it is falling behind. through the courts (figure 10.2). These benchmarks Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2013 Bosnia and Herzegovina 91 ENFORCING CONTRACTS Procedures (number) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 92 ENFORCING CONTRACTS Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in Bosnia and introducing new technology. Lower-income economies Herzegovina (table 10.2)? often work on reducing backlogs by introducing Table 10.2 How has Bosnia and Herzegovina made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 93 ENFORCING CONTRACTS What are the details? The indicators reported here for Bosnia and COMPETENT COURT Herzegovina are based on a set of specific procedural steps required to resolve a standardized commercial dispute through the City: Sarajevo courts (see the section in this chapter on what the indicators cover). These procedures, and the time The procedures for resolving a commercial lawsuit, and and cost of completing them, are identified the associated time and cost, are listed in the summary through study of the codes of civil procedure and below. other court regulations, as well as through surveys completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Summary of procedures for enforcing a contract in Bosnia and Herzegovina—and the time and cost Eastern Europe & Bosnia and OECD high income Indicator Central Asia Herzegovina average average Time (days) 595 414 510 Filing and service 30 Trial and judgment 385 Enforcement of judgment 180 Cost (% of claim) 34.0 25.8 20.1 Attorney cost (% of claim) 25.0 Court cost (% of claim) 6.0 Enforcement Cost (% of claim) 3.0 Procedures (number) 37 37 31 Note: In cases where an economy‘s regional classification is ―OECD high income,‖ regional averages above are only displayed once. Doing Business 2013 Bosnia and Herzegovina 94 ENFORCING CONTRACTS No. Procedure Filing and service: 1 Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the contract. 2 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally or in * writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes assigning a 3 reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random procedure, * automated system, ruling of an administrative judge, court officer, etc. Court scrutiny of summons and complaint: A judge examines Plaintiff's summons and complaint for formal 4 requirements. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons and * complaint to Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to Defendant is 5 successful in the majority of cases. Second attempt at physical delivery: If a first attempt was not successful, a second attempt to physically deliver 6 the summons and complaint to Defendant is required by law or standard practice. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff‘s request for pre-judgment * attachment of Defendant‘s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either physical or 7 achieved by registering, marking, debiting or separating assets. (see assumption 5) Trial and judgment: Defendant’s filing of preliminary exemptions: Defendant presents preliminary exemptions to the court. * Preliminary exemptions differ from answers on the merits of the claim. Examples of preliminary exemptions are statute of limitations, jurisdictions, etc. Plaintiff’s answer to preliminary exemptions: Plaintiff responds to the preliminary exemptions raised by * Defendant. Judge’s resolution on preliminary exemptions: Judge decides on preliminary exemptions separately from the 8 merits of the case. Doing Business 2013 Bosnia and Herzegovina 95 No. Procedure Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his 9 defense or answer on the merits of the case. Defendant's written answer may or may not include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Plaintiff’s written response to Defendant's defense or answer: Plaintiff responds to Defendant‘s defense or 10 answer with a written pleading. Plaintiff's answer may or may not include a witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an adjournment to 11 submit written pleadings. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own initiative, * an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Notification of court-appointment of independent expert: The court notifies both parties that the court is 12 appointing an independent expert. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court delivers his * or her expert report to the court. (see assumption 6-b of this case) * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Preliminary hearing aimed at preparing for the oral hearing: The judge meets the parties to make practical 13 arrangements for the oral hearing on the merits of the case. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral hearing 14 or trial. (see assumption 6-a) Adjournments: Court proceedings are delayed because one or both parties request and obtain an adjournment to 15 prepare for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the judge. 16 Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Order for submission of final arguments: The judge sets the deadline for the submission of final factual and legal 17 arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral presentation * or by a written submission. 18 Writing of judgment: The judge produces a written copy of the judgment. 19 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. The 20 appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in the law. 21 Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse Plaintiff for 22 the court fees Plaintiff has advanced, because Defendant has lost the case. Doing Business 2013 Bosnia and Herzegovina 96 No. Procedure Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by a * lawyer during the enforcement of judgment phase. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order ('seal' on * judgment). 23 Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‗seal‘) to the 24 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer or a * (private) bailiff. Plaintiff’s request for physical enforcement: As Plaintiff fears that Defendant might physically resist the * attachment of its movable goods, Plaintiff addresses a request to the judge or to the police authorities to obtain police assistance during the attachment of Defendant's movable goods. Judge's order for physical enforcement: The judge orders the police to assist with the physical enforcement of the 25 attachment of Defendant's movable goods. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a (private) 26 bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court enforcement 27 officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. Plaintiff’s identification of Defendant's assets for attachment: Plaintiff identifies Defendant's assets for 28 attachment. 29 Attachment: Defendant‘s movable goods are attached (physically or by registering, marking or separating assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report on the 30 attachment of Defendant's movable goods to the judge. Valuation or appraisal of attached movable goods: The court or court appointed valuation expert evaluates the 31 attached goods. Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant opposes 32 aspects of the enforcement process before the judge. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 33 newspapers. 34 Sale through public auction: The Defendant‘s movable property is sold at public auction. 35 Judge's decision on bids: The judge determines the adequacy of the bids presented at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 36 Plaintiff), according to the rules of priority. Doing Business 2013 Bosnia and Herzegovina 97 No. Procedure Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which Plaintiff 37 had advanced previously. 38 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 98 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers‘ fees proceedings of individuals and financial Assessors‘ and auctioneers‘ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Recovery rate for creditors (cents on the well as public information on bankruptcy systems. dollar) The ranking on the ease of resolving insolvency is Measures the cents on the dollar recovered based on the recovery rate, which is recorded as by creditors cents on the dollar recouped by creditors through Present value of debt recovered reorganization, liquidation or debt enforcement Official costs of the insolvency proceedings (foreclosure) proceedings. The recovery rate is a are deducted function of time, cost and other factors, such as lending rate and the likelihood of the company Depreciation of furniture is taken into continuing to operate. account To make the data comparable across economies, Outcome for the business (survival or not) Doing Business uses several assumptions about the affects the maximum value that can be recovered business and the case. It assumes that the company:  Is a domestically owned, limited liability company operating a hotel.  Has 201 employees, 1 main secured creditor  Operates in the economy‘s largest business and 50 unsecured creditors. city.  Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2013 Bosnia and Herzegovina 99 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses sold as piecemeal sale. The average recovery rate is characterize the top-performing economies. How 35.4 cents on the dollar. efficient are insolvency proceedings in Bosnia and Globally, Bosnia and Herzegovina stands at 83 in the Herzegovina? According to data collected by Doing ranking of 185 economies on the ease of resolving Business, resolving insolvency takes 3.3 years on insolvency (figure 11.1). The rankings for comparator average and costs 9% of the debtor‘s estate, with the economies and the regional average ranking provide most likely outcome being that the company will be other useful benchmarks for assessing the efficiency of insolvency proceedings in Bosnia and Herzegovina. Figure 11.1 How Bosnia and Herzegovina and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 100 RESOLVING INSOLVENCY What are the changes over time? While the most recent Doing Business data reflect the efficiency has changed—and where it has not (table efficiency of insolvency proceedings in Bosnia and 11.1). That can help identify where the potential for Herzegovina today, data over time show where the improvement is greatest. Table 11.1 The ease of resolving insolvency in Bosnia and Herzegovina over time By Doing Business report year Indicator DB2004 DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 Rank .. .. .. .. .. .. .. .. 84 83 Time (years) 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 Cost (% of estate) 8 8 9 9 9 9 9 9 9 9 Recovery rate (cents on the 32.7 32.7 32.6 34.3 35.5 35.9 35.9 34.7 35.0 35.4 dollar) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2012 rankings shown are not last year‘s published rankings but comparable rankings for DB2012 that c apture the effects of such factors as data corrections and the addition of 2 economies (Barbados and Malta) to the sample this year. ―No practice‖ indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for ―no practice‖ economies is 0. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 101 RESOLVING INSOLVENCY Equally helpful may be the benchmarks provided by possible in improving the efficiency of insolvency the economies that over time have had the best proceedings. And changes in regional averages can performance regionally or globally on the time or cost show where Bosnia and Herzegovina is keeping up— of insolvency proceedings or on the recovery rate and where it is falling behind. (figure 11.2). These benchmarks help show what is Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2013 Bosnia and Herzegovina 102 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: Regional averages on time and cost exclude economies with a “no practice� mark. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 103 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Bosnia and Herzegovina (table 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Bosnia and Herzegovina made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2008 No reform as measured by Doing Business. Bosnia and Herzegovina strengthened professional DB2009 requirements for trustees. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 104 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of Particular data for Bosnia and Herzegovina are employment, specifically as it affects the hiring and presented here without scoring. redundancy of workers and the rigidity of working hours. From 2007 to 2011 improvements were made to To make the data on employing workers comparable align the methodology for the employing workers across economies, several assumptions about the indicators with the letter and spirit of the International worker and the business are used. Labour Organization (ILO) conventions. Only 4 of the 188 ILO conventions cover areas measured by Doing The worker: Business: employee termination, weekend work, holiday with pay and night work. The Doing Business  Earns a salary plus benefits equal to the methodology is fully consistent with these 4 economy‘s average wage during the entire conventions. The ILO conventions covering areas period of his employment. related to the employing workers indicators do not  Has a pay period that is the most common for include the ILO core labor standards—8 conventions workers in the economy. covering the right to collective bargaining, the  Is a lawful citizen who belongs to the same elimination of forced labor, the abolition of child labor race and religion as the majority of the and equitable treatment in employment practices. economy‘s population.  Resides in the economy‘s largest business city. Between 2009 and 2011 the World Bank Group worked  Is not a member of a labor union, unless with a consultative group—including labor lawyers, membership is mandatory. employer and employee representatives, and experts from the ILO, the Organisation for Economic Co- The business: operation and Development, civil society and the private sector—to review the employing workers  Is a limited liability company. methodology and explore future areas of research.  Operates in the economy‘s largest business city. A full report with the conclusions of the consultative  Is 100% domestically owned. group is available at http://www.doingbusiness.org/  Operates in the manufacturing sector. methodology/employing-workers.  Has 60 employees.  Is subject to collective bargaining agreements Doing Business 2013 does not present rankings of in economies where such agreements cover economies on the employing workers indicators or more than half the manufacturing sector and include the topic in the aggregate ranking on the ease apply even to firms not party to them. of doing business. The report does present the data on  Abides by every law and regulation but does the employing workers indicators in an annex. Detailed not grant workers more benefits than data collected on labor regulations are available on the mandated by law, regulation or (if applicable) Doing Business website (http://www.doing business.org). collective bargaining agreement. Doing Business 2013 Bosnia and Herzegovina 105 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Bosnia and other things, the minimum wage for a 19-year-old Herzegovina (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 106 EMPLOYING WORKERS Employment laws are needed to protect workers from past 4 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Bosnia and Herzegovina contracting between employers and workers. Many adopt that affected the Doing Business indicators on economies that changed their labor regulations in the employing workers (table 12.1)? Table 12.1 What changes did Bosnia and Herzegovina make in employing workers in 2012? Reform No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 107 EMPLOYING WORKERS What are the details? The data on employing workers reported here for by local lawyers and public officials. Employment laws Bosnia and Herzegovina are based on a detailed and regulations as well as secondary sources are survey of employment regulations that is completed reviewed to ensure accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy‘s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 24 (Art. 19, Labor Law of FBiH) Maximum length of fixed-term contracts, including renewals (months) 24 Minimum wage for a 19-year old worker or an apprentice (US$/month) 393.6 Ratio of minimum wage to value added per worker 0.70 Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 108 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 6.0 Premium for night work (% of hourly pay) in case of continuous 30% operations Premium for work on weekly rest day (% of hourly pay) in case of 20% continuous operations Major restrictions on night work in case of continuous operations? No Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 18.0 Paid annual leave for a worker with 5 years of tenure (in working days) 18.0 Paid annual leave for a worker with 10 years of tenure (in working days) 18.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 18.0 working days) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 109 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? No Priority rules for reemployment? Yes Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 110 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 2.0 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 2.0 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 2.0 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 2.0 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 0.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 7.2 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 14.4 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 7.2 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2013 Bosnia and Herzegovina 111 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the ECONOMY CHARACTERISTICS protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of Gross national income per capita regulation, such as the number of procedures to start a business or to register and transfer commercial Doing Business 2013 reports 2011 income per capita property. Second, they gauge the time and cost of as published in the World Bank‘s World Development achieving a regulatory goal or complying with Indicators 2012. Income is calculated using the Atlas method (current US$). For cost indicators expressed regulation, such as the time and cost to enforce a as a percentage of income per capita, 2011 gross contract, go through bankruptcy or trade across national income (GNI) in U.S. dollars is used as the borders. Third, they measure the extent of legal denominator. GNI data were not available from the protections of property, for example, the protections World Bank for Afghanistan; Australia; The Bahamas; of investors against looting by company directors or Bahrain; Barbados; Brunei Darussalam; Cyprus; the range of assets that can be used as collateral Djibouti; Guyana; the Islamic Republic of Iran; according to secured transactions laws. Fourth, a set of Kuwait; Malta; New Zealand; Oman; Puerto Rico indicators documents the tax burden on businesses. (territory of the United States); Sudan; Suriname; the Finally, a set of data covers different aspects of Syrian Arab Republic; Timor-Leste; West Bank and employment regulation. Gaza; and the Republic of Yemen. In these cases GDP or GNP per capita data and growth rates from The data for all sets of indicators in Doing Business the International Monetary Fund‘s World Economic 2 2013 are for June 2012. Outlook database and the Economist Intelligence Unit were used. Region and income group Methodology Doing Business uses the World Bank regional and The Doing Business data are collected in a income group classifications, available at standardized way. To start, the Doing Business team, http://data.worldbank.org/about/country- with academic advisers, designs a questionnaire. The classifications. The World Bank does not assign questionnaire uses a simple business case to ensure regional classifications to high-income economies. comparability across economies and over time —with For the purpose of the Doing Business report, high- assumptions about the legal form of the business, its income OECD economies are assigned the ―regional‖ size, its location and the nature of its operations. classification OECD high income. Figures and tables Questionnaires are administered through more than presenting regional averages include economies 9,600 local experts, including lawyers, business from all income groups (low, lower middle, upper consultants, accountants, freight forwarders, middle and high income). government officials and other professionals routinely Population administering or advising on legal and regulatory Doing Business 2013 reports midyear 2011 requirements. These experts have several rounds of population statistics as published in World interaction with the Doing Business team, involving Development Indicators 2012. conference calls, written correspondence and visits by the team. For Doing Business 2013 team members visited 24 economies to verify data and recruit The Doing Business methodology offers several respondents. The data from questionnaires are advantages. It is transparent, using factual information subjected to numerous rounds of verification, leading about what laws and regulations say and allowing to revisions or expansions of the information collected. multiple interactions with local respondents to clarify potential misinterpretations of questions. Having 2 The data for paying taxes refer to January – December 2011. Doing Business 2013 Bosnia and Herzegovina 112 representative samples of respondents is not an issue; 2013 would differ from the recollection of Doing Business is not a statistical survey, and the texts entrepreneurs reported in the World Bank Enterprise of the relevant laws and regulations are collected and Surveys or other perception surveys. answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because Subnational Doing Business indicators standard assumptions are used in the data collection, This year Doing Business completed subnational comparisons and benchmarks are valid across studies for Indonesia, Kenya, Mexico, the Russian economies. Finally, the data not only highlight the Federation and the United Arab Emirates. Each of extent of specific regulatory obstacles to business but these countries had already asked to have subnational also identify their source and point to what might be data in the past, and this year Doing Business updated reformed. the indicators, measured improvements over time and Information on the methodology for each Doing expanded geographic coverage to additional cities or Business topic can be found on the Doing Business added additional indicators. Doing Business also website at http://www.doingbusiness.org/methodology/. published regional studies for the Arab world, the East African Community and member states of the Organization for the Harmonization of Business Law in Limits to what is measured Africa (OHADA). The Doing Business methodology has 5 limitations that The subnational studies point to differences in should be considered when interpreting the data. First, business regulation and its implementation —as well as the collected data refer to businesses in the economy‘s in the pace of regulatory reform—across cities in the largest business city (which in some economies differs same economy. For several economies subnational from the capital) and may not be representative of studies are now periodically updated to measure regulation in other parts of the economy. To address change over time or to expand geographic coverage this limitation, subnational Doing Business indicators to additional cities. This year that is the case for all the were created (see the section on subnational Doing subnational studies published. Business indicators). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified size — Changes in what is measured and may not be representative of the regulation on The ranking methodology for paying taxes was other businesses, for example, sole proprietorships. updated this year. The threshold for the total tax rate Third, transactions described in a standardized case introduced last year for the purpose of calculating the scenario refer to a specific set of issues and may not ranking on the ease of paying taxes was updated. All represent the full set of issues a business encounters. economies with a total tax rate below the threshold Fourth, the measures of time involve an element of (which is calculated and adjusted on a yearly basis) judgment by the expert respondents. When sources receive the same ranking on the total tax rate indicate different estimates, the time indicators indicator. The threshold is not based on any economic reported in Doing Business represent the median theory of an ―optimal tax rate‖ that minimizes values of several responses given under the distortions or maximizes efficiency in the tax system of assumptions of the standardized case. an economy overall. Instead, it is mainly empirical in Finally, the methodology assumes that a business has nature, set at the lower end of the distribution of tax full information on what is required and does not rates levied on medium-size enterprises in the waste time when completing procedures. In practice, manufacturing sector as observed through the paying completing a procedure may take longer if the taxes indicators. This reduces the bias in the indicators business lacks information or is unable to follow up toward economies that do not need to levy significant promptly. Alternatively, the business may choose to taxes on companies like the Doing Business disregard some burdensome procedures. For both standardized case study company because they raise reasons the time delays reported in Doing Business public revenue in other ways—for example, through Doing Business 2013 Bosnia and Herzegovina 113 taxes on foreign companies, through taxes on sectors investors, paying taxes, trading across borders, other than manufacturing or from natural resources enforcing contracts, and resolving insolvency. The (all of which are outside the scope of the employing workers indicators are not included in this methodology). Giving the same ranking to all year‘s aggregate ease of doing business ranking. In economies whose total tax rate is below the threshold addition to this year‘s ranking, Doing Business presents avoids awarding economies in the scoring for having a comparable ranking for the previous year, adjusted an unusually low total tax rate, often for reasons for any changes in methodology as well as additions of 3 unrelated to government policies toward enterprises. economies or topics. For example, economies that are very small or that are Construction of the ease of doing business index rich in natural resources do not need to levy broad- based taxes. Here is one example of how the ease of doing business index is constructed. In Finland it takes 3 procedures, 14 days and 4% of annual income per capita in fees to Data challenges and revisions register a property. On these 3 indicators Finland ranks in the 6th, 16th and 39th percentiles. So on average Most laws and regulations underlying the Doing Finland ranks in the 20th percentile on the ease of Business data are available on the Doing Business registering property. It ranks in the 30th percentile on website at http://www.doingbusiness.org. All the th starting a business, 28 percentile on getting credit, sample questionnaires and the details underlying the 24th percentile on paying taxes, 13th percentile on indicators are also published on the website. Questions enforcing contracts, 5th percentile on trading across on the methodology and challenges to data can be borders and so on. Higher rankings indicate simpler submitted through the website‘s ―Ask a Question‖ regulation and stronger protection of property rights. function at http://www.doingbusiness.org. The simple average of Finland‘s percentile rankings on all topics is 21st. When all economies are ordered by Ease of doing business and distance to their average percentile rankings, Finland stands at 11 frontier in the aggregate ranking on the ease of doing business. Doing Business 2013 presents results for 2 aggregate measures: the aggregate ranking on the ease of doing More complex aggregation methods—such as business and the distance to frontier measure. The principal components and unobserved components— ease of doing business ranking compares economies yield a ranking nearly identical to the simple average 4 with one another, while the distance to frontier used by Doing Business. Thus, Doing Business uses measure benchmarks economies to the frontier in the simplest method: weighting all topics equally and, regulatory practice, measuring the absolute distance to the best performance on each indicator. Both measures can be used for comparisons over time. 3 In case of revisions to the methodology or corrections to the underlying data, the data are back-calculated to provide a When compared across years, the distance to frontier comparable time series since the year the relevant economy or topic measure shows how much the regulatory environment was first included in the data set. The time series is available on the for local entrepreneurs in each economy has changed Doing Business website (http://www.doingbusiness.org). Six topics over time in absolute terms, while the ease of doing and more than 50 economies have been added since the inception business ranking can show only relative change. of the project. Earlier rankings on the ease of doing business are therefore not comparable. Ease of doing business 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, ―Doing Business Indicators: Why Aggregate, and How to The ease of doing business index ranks economies Do It‖ (World Bank, Washington, DC, 2005). Principal components from 1 to 185. For each economy the ranking is and unobserved components methods yield a ranking nearly calculated as the simple average of the percentile identical to that from the simple average method because both rankings on each of the 10 topics included in the index these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An in Doing Business 2013: starting a business, dealing alternative to the simple average method is to give different weights with construction permits, getting electricity, to the topics, depending on which are considered of more or less registering property, getting credit, protecting importance in the context of a specific economy. Doing Business 2013 Bosnia and Herzegovina 114 within each topic, giving equal weight to each of the ability of different government agencies to deliver 5 topic components. tangible results in their area of responsibility. If an economy has no laws or regulations covering a Economies that improved the most across 3 or more specific area—for example, insolvency—it receives a Doing Business topics in 2011/12 ―no practice‖ mark. Similarly, an economy receives a Doing Business 2013 uses a simple method to calculate ―no practice‖ or ―not possible‖ mark if regulation exists which economies improved the most in the ease of but is never used in practice or if a competing doing business. First, it selects the economies that in regulation prohibits such practice. Either way, a ―no 2011/12 implemented regulatory reforms making it practice‖ mark puts the economy at the bottom of the easier to do business in 3 or more of the 10 topics ranking on the relevant indicator. 6 included in this year‘s ease of doing business ranking. The ease of doing business index is limited in scope. It Twenty-three economies meet this criterion: Benin, does not account for an economy‘s proximity to large Burundi, Costa Rica, the Czech Republic, Georgia, markets, the quality of its infrastructure services (other Greece, Guinea, Kazakhstan, Korea, the Lao People‘s than services related to trading across borders and Democratic Republic, Liberia, Mongolia, the getting electricity), the strength of its financial system, Netherlands, Panama, Poland, Portugal, Serbia, the the security of property from theft and looting, Slovak Republic, Slovenia, Sri Lanka, Ukraine, the macroeconomic conditions or the strength of United Arab Emirates and Uzbekistan. Second, Doing underlying institutions. Business ranks these economies on the increase in their ranking on the ease of doing business from the Variability of economies‘ rankings across topics previous year using comparable rankings. Each indicator set measures a different aspect of the Selecting the economies that implemented regulatory business regulatory environment. The rankings of an reforms in at least 3 topics and improved the most in economy can vary, sometimes significantly, across the aggregate ranking is intended to highlight indicator sets. The average correlation coefficient economies with ongoing, broad-based reform between the 10 indicator sets included in the programs. aggregate ranking is 0.37, and the coefficients between any 2 sets of indicators range from 0.19 Distance to frontier measure (between dealing with construction permits and A drawback of the ease of doing business ranking is getting credit) to 0.60 (between starting a business that it can measure the regulatory performance of and protecting investors). These correlations suggest economies only relative to the performance of others. that economies rarely score universally well or It does not provide information on how the absolute universally badly on the indicators. quality of the regulatory environment is improving Consider the example of Canada. It stands at 17 in the over time. Nor does it provide information on how aggregate ranking on the ease of doing business. Its large the gaps are between economies at a single ranking is 3 on starting a business, and 4 on both point in time. resolving insolvency and protecting investors. But its The distance to frontier measure is designed to ranking is only 62 on enforcing contracts, 69 on address both shortcomings, complementing the ease dealing with construction permits and 152 on getting of doing business ranking. This measure illustrates the electricity. distance of an economy to the ―frontier,‖ and the Variation in performance across the indicator sets is change in the measure over time shows the extent to not at all unusual. It reflects differences in the degree which the economy has closed this gap. The frontier is of priority that government authorities give to a score derived from the most efficient practice or particular areas of business regulation reform and the highest score achieved on each of the component indicators in 9 Doing Business indicator sets (excluding 5 6 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2013 Bosnia and Herzegovina 115 the employing workers and getting electricity The maximum (max) and minimum (min) observed indicators) by any economy since 2005. In starting a values are computed for the 174 economies included business, for example, New Zealand has achieved the in the Doing Business sample since 2005 and for all highest performance on the time (1 day), Canada and years (from 2005 to 2012). The year 2005 was chosen New Zealand on the number of procedures required as the baseline for the economy sample because it was (1), Slovenia on the cost (0% of income per capita) and the first year in which data were available for the Australia and 90 other economies on the paid-in majority of economies (a total of 174) and for all 9 minimum capital requirement (0% of income per indicator sets included in the measure. To mitigate the capita). Calculating the distance to frontier for each effects of extreme outliers in the distributions of the economy involves 2 main steps. First, individual rescaled data (very few economies need 694 days to indicator scores are normalized to a common unit: complete the procedures to start a business, but many th except for the total tax rate. To do so, each of the 28 need 9 days), the maximum (max) is defined as the 95 component indicators y is rescaled to (max − y)/(max percentile of the pooled data for all economies and all − min), with the minimum value (min) representing the years for each indicator. The exceptions are the getting frontier—the highest performance on that indicator credit, protecting investors and resolving insolvency across all economies since 2005. For the total tax rate, indicators, whose construction precludes outliers. consistent with the calculation of the rankings, the Take Ghana, which has a score of 67 on the distance to frontier is defined as the total tax rate corresponding th frontier measure for 2012. This score indicates that the to the 15 percentile based on the overall distribution economy is 33 percentage points away from the of total tax rates for all years. Second, for each frontier constructed from the best performances economy the scores obtained for individual indicators across all economies and all years. Ghana was further are aggregated through simple averaging into one from the frontier in 2005, with a score of 54. The distance to frontier score. An economy‘s distance to difference between the scores shows an improvement frontier is indicated on a scale from 0 to 100, where 0 over time. represents the lowest performance and 100 the frontier. The distance to frontier measure can also be used for comparisons across economies in the same year, The difference between an economy‘s distance to complementing the ease of doing business ranking. frontier score in 2005 and its score in 2012 illustrates For example, Ghana stands at 64 this year in the ease the extent to which the economy has closed the gap to of doing business ranking, while Peru, which is 29 the frontier over time. And in any given year the score percentage points from the frontier, stands at 43. measures how far an economy is from the highest performance at that time. Doing Business 2013 Bosnia and Herzegovina 116 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2013 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 185 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 185 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 9,600 specialists in 185 economies who profiles participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers NEW! Entrepreneurship data underlying Doing Business Data on business density for 130 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and More to come related policy issues Coming soon—information on good practices and http://www.doingbusiness.org/research/ data on transparency and on the distance to frontier Doing Business 2013 Bosnia and Herzegovina 117